<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................................................... 1
Performance Results......................................................... 3
Performance Perspective..................................................... 4
Portfolio Management Review................................................. 5
Portfolio of Investments.................................................... 7
Statement of Assets and Liabilities......................................... 10
Statement of Operations..................................................... 11
Statement of Changes in Net Assets.......................................... 12
Financial Highlights........................................................ 13
Notes to Financial Statements............................................... 15
Report of Independent Accountants........................................... 20
</TABLE>
CORP ANR 10/95
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
October 3, 1995
Dear Shareholder:
The first eight months of 1995 have been very positive for most investors.
Both the fixed-income and stock markets have made considerable gains for the
period ended August 31, 1995.
This year serves as a reminder of just how quickly markets can move and how
difficult it can be to predict the timing of those movements. Moreover, this
year reinforces the importance of maintaining a long-term perspective and
reaffirms the principle that it is time--not timing--that leads to investment
success.
ECONOMIC OVERVIEW
Due in large part to the Federal Reserve Board's efforts to tighten monetary
supply in 1994, the economy has slowed significantly this year. Evidence of
this guided slowdown was reflected in gross domestic product for the second
quarter, which grew at an annual rate of 1.3 percent, substantially lower than
its first quarter rate of 2.7 percent and fourth quarter 1994 rate of 5.1
percent. While other key economic data, including unemployment rates and housing
starts, have shown mixed signs during recent months, the general economic
trends for the year continue to support a "soft landing" scenario.
Comfortable with the economy's rate of growth and level of inflation, the Fed
reversed its trend of raising interest rates and lowered short-term rates by
0.25 percent on July 6. Financial markets, perceiving that the Fed's monetary
initiatives had taken hold without driving the economy into a recession, rallied
through much of the year. With slowing growth, interest rates declined and
the value of many fixed-income investments rose (bond yields and prices move in
the opposite direction). For example, the yield on 30-year Treasury securities
fell from 7.88 percent at the end of December to 6.66 percent at the end of
August, while its price rose more than 14 percent.
In a low inflation, low interest rate environment, corporate earnings have
remained quite strong during 1995, helping to push stocks to new highs. The
strongest performance has been in the technology sector of the market and in
stocks of large companies. As the U.S. dollar plunged against several
international currencies earlier in the year, U.S. companies that had
diversified globally were able to capture additional earnings, while technology
stocks benefited from the continued booming growth in computers and
telecommunications throughout the world.
ECONOMIC OUTLOOK
We believe the Fed will move cautiously before it continues to lower short-
term rates, waiting for further signs that the economy has settled into a slow
growth pattern. We anticipate the economy will grow at an annual rate of
between 2 and 3 percent in the second half of the year and that inflation will
run at an annualized rate of between 3.1 and 3.3 percent. Based
1 (Continued on page two)
<PAGE>
upon a generally modest growth and low inflation outlook, we believe fixed-
income markets will continue to make positive gains. We look for stocks to
perform well, particularly those of smaller companies, which tend to be less
cyclical than larger companies. In the near term, we believe domestic markets
will benefit from a strengthening U.S. dollar and increased business activity
driven in part by a number of recently announced strategic reorganizations of
some of the nation's blue chip industry leaders.
This positive outlook is reflected in the public's sentiment toward investing
According to the Van Kampen American Capital Index of Investor Intentions
for September, a total of 61.1 percent of those individuals surveyed, who
described themselves as "knowledgeable" investors, said the next 60-90 days
would be a "good" time to invest. The index, computed from an independently
conducted survey, measures the investment climate (the public's confidence) by
asking 1,000 individuals about what they intend to do with their money over
the next 60-90 days. "Knowledgeable" investors are those respondents who rate
their investment knowledge at five or higher on a seven-point scale and who
own stocks, bonds, or mutual funds. The September index among self-described
"knowledgeable" investors reflected a 27 percent increase from the previous
month, and a 17-month high.
On the following pages, you can read about your Fund's performance for the
period, as well as portfolio management's outlook for the Fund in the coming
months. We hope that you will find the information contained in the question-
and-answer section helpful.
CORPORATE NEWS
The merger of Van Kampen Merritt and American Capital investment management
companies continues to provide opportunities for our newly created company to
increase operating efficiencies and build upon the strengths of each company.
On September 21, shareholders approved the combination of six pairs of funds
having essentially the same investment objectives and policies. By combining
similar funds, we intend to achieve economies of scale and eliminate many of the
costs associated with operating each of the funds separately. More importantly,
the combination of these funds enhances our primary goal: creating and
preserving wealth for investors over time.
Thank you for your continued confidence in your investment with Van Kampen
American Capital and for the privilege of working with you in seeking to reach
your financial goals.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED AUGUST 31, 1995
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV/1/............... 12.71% 11.86% 11.70%
One-year total return/2/............................ 7.35% 7.86% 10.70%
Five-year average annual total return/2/............ 9.01% N/A N/A
Ten-year average annual total return/2/............. 9.00% N/A N/A
Life-of-Fund average annual total return/2/......... 8.41% 5.32% 3.33%
Commencement Date................................... 09/23/71 09/28/92 08/30/93
DISTRIBUTION RATE AND YIELD
Distribution Rate/3/................................ 6.58% 6.22% 6.23%
SEC Yield/4/........................................ 6.35% 5.80% 5.81%
</TABLE>
N/A = Not Applicable
/1/Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (4.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B shares; 1% for C shares).
/2/Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (4.75% for A shares)
or contingent deferred sales charge for the early withdrawal (4% for B shares
and 1% for C shares).
/3/Distribution rate represents the monthly annualized distributions of the Fund
at the end of the period and not the earnings of the Fund.
/4/SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending as shown above.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison
can:
. Reflect the impact of favorable market trends or difficult market
conditions
. Help you evaluate the extent to which your fund's management team has
responded to the opportunities and challenges presented to them over
the period measured
For these reasons, you may find it helpful to review the chart below, which
compares your fund's performance to that of the Lehman Brothers Corporate Bond
Index and the Lipper Corporate BBB-Rated Index over time. These indices are
unmanaged statistical composites, and do not reflect any commissions or fees
which would be incurred by an investor purchasing the securities they represent.
Similarly, their performance does not reflect any sales charges or other
costs which would be applicable to an actively managed portfolio, such as that
of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Corporate Bond Fund vs. Lehman Brothers
Corporate Bond Index and the Lipper Corporate BBB-Rated Index (August 1985
through August 1995)
[LINE GRAPH APPEARS HERE]
-------------------------------
Fund's Total Return
1 Year Avg. Annual = 7.35%
5 Year Avg. Annual = 9.01%
10 Year Avg. Annual = 9.00%
Inception Avg. Annual = 8.41%
-------------------------------
<TABLE>
<CAPTION>
VKAC Corporate Lehman Brothers Corporate Lipper Corporate
Bond Fund Bond Index* BBB-Rated Index
-------------- ------------------------- ----------------
<S> <C> <C> <C>
Aug 1985 9,526 10,000.00 10,000
Dec 1985 10,287 10,861.00 10,810
Dec 1986 11,446 12,655.24 12,293
Dec 1987 12,161 12,977.95 12,598
Dec 1988 13,724 14,175.81 13,766
Dec 1989 14,272 16,176.02 15,207
Dec 1990 15,276 17,318.04 16,222
Dec 1991 17,833 20,525.35 18,969
Dec 1992 19,348 22,309.00 20,556
Dec 1993 21,607 25,024.00 23,188
Dec 1994 20,684 25,231.70 22,124
Aug 1995 23,667 29,046.74 24,888
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions for the period ended August 31,
1995, and includes payment of the maximum sales charge (4.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
*The Lehman Brothers Corporate Bond Index includes all publicly issued fixed-
rate, nonconvertible investment grade dollar-denominated, SEC-registered
Corporate debt and was initially selected as a broad-based benchmark for the
Fund's performance; additionally, the Lipper Corporate BBB-Rated Index was
selected to represent a more narrow-based comparison for the Fund.
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
The following are excerpts from a recent interview with the management team of
Van Kampen American Capital Corporate Bond Fund. The team is led by David R.
Troth, portfolio manager, and Robert C. Peck, Jr., executive vice president
for fixed-income investments.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND HAS
OPERATED DURING THE PAST FISCAL YEAR (THE TWELVE MONTHS ENDED AUGUST 31,
1995)?
A As you may know, one of the key concerns in the fixed-income market is
the trend of interest rates. Therefore, when the bond market was hit
hard by rising interest rates in 1994, the prices on fixed-income securities
in general declined. As a result, the first few months of the fiscal year were
difficult. Fortunately, 1995 has turned out to be a more favorable environment
for fixed-income securities.
I believe the market's expectations--which are always a key driving force
behind the bond market's performance--have positively evolved over the last
twelve months. The consensus seems to be that the Federal Reserve Board's
efforts to quell inflation--without slamming the brakes on economic growth--have
been generally successful. As perceptions shifted, investors first anticipated
that no further tightening by the Federal Reserve was probable, followed by
the realization that an easing of monetary policy was imminent. As a result,
the market rallied significantly through the first half of 1995.
Q HOW HAVE YOU HANDLED THESE CONDITIONS IN MANAGING THE FUND?
A We have been rather consistent in our approach to managing the Fund,
though we did take steps to improve the portfolio during the year's
strong rally. The overall credit quality of the portfolio remains strong, with
31 percent of its net assets in securities rated A or better by the major
rating agencies--up from 22.5 percent at the start of the fiscal year--and well
over 90 percent of its net assets in investment grade securities or cash and
cash equivalents.
One of the initiatives we've undertaken in the past several months has been
to further diversify the portfolio by increasing the number and scope of our
holdings. For example, of all the new positions we've added during the past
fiscal year, all but one involved a name that was new to the portfolio. This is
a subtle shift which--if the economy should begin to slow--should help cushion
the Fund from the consequences of a weaker business climate. Some of the new
names in the portfolio as of August 31, 1995, included Cox Communications Inc.,
Union Pacific Corp., New York Times Co., and Nabisco Inc.
In addition, the Fund's duration (which is a measure of a bond's sensitivity
to changes in interest rates) was extended during the period, to just over 6
years. At the start of the fiscal year when rates were rising, the Fund's
duration was 5.4 years. This initiative helped the Fund to participate more
fully in the benefits of a declining rate environment.
5
<PAGE>
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
----------------------------------------------------------------
Quality Rating of the Portfolio as of August 31, 1995
<S> <C>
A ..................................... 4%
AA .................................... 27%
BAA ................................... 61%
BA .................................... 5%
Cash & Equivalents .................... 3%
-----------------------------------------------------------------
</TABLE>
Q HOW WELL HAS THE FUND PERFORMED?
A The Fund (Class A shares) provided total returns, based on net asset value,
of 14.43 percent/1/ (year-to-date through August) and 12.71 percent/1/
(twelve months ended August 31, 1995). The lower twelve-month result reflects
the market's difficulties in the fourth quarter of last year; nevertheless, the
twelve-month performance compares favorably to the average total return of
11.47 percent for all funds in the "BBB-Rated Bond" category, as tracked by
Lipper Analytical Services, Inc.
Reflecting the Fund's total return performance, the net asset value of the
Fund (Class A shares) increased over the fiscal period from $6.62 per share to
$6.94 per share. In terms of current income, the Fund has maintained a monthly
distribution of 4 cents per share per month for the last twenty-two consecutive
months through the August 31 declaration. (Please refer to the chart on page
three for additional Fund performance.)
Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A We anticipate that the economy will continue to grow, but at a somewhat
subdued pace--in the range of 2 to 3 percent. Inflation seems to be under
control, running at an annualized rate of approximately 3.5 percent, a pace
that we expect to continue for the near term.
For bonds, the environment appears generally favorable for the remainder of
1995, though we expect that the rally has expended most of its energy. We will
continue to "cherry pick" among credits available in the marketplace, seeking
out those which appear to offer attractive yields as well as a high degree of
quality and stability under current market conditions.
/s/ Robert C. Peck, Jr. /s/ David R. Troth
Robert C. Peck, Jr. David R. Troth
Executive Vice President Portfolio Manager
Fixed Income Investments
6 Please see footnotes on page three.
<PAGE>
PORTFOLIO OF INVESTMENTS
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 88.7%
CONSUMER DISTRIBUTION 3.7%
$2,000 Grand Metropolitan Investment Corp.. 8.000% 09/15/22 $ 2,159,100
2,000 Nabisco, Inc........................ 7.550 06/15/15 1,999,600
3,000 Sysco Corp.......................... 6.500 06/15/05 2,962,500
------------
7,121,200
------------
CONSUMER NON-DURABLES 1.2%
2,000 Coca-Cola Enterprises, Inc.......... 8.500 02/01/12 2,248,400
------------
CONSUMER SERVICES 14.6%
6,215 Columbia Pictures Entertainment,
Inc................................. 9.875 02/01/98 6,697,905
5,000 Cox Communications, Inc............. 6.875 06/15/05 4,957,500
1,250 Harcourt General, Inc............... 8.875 06/01/22 1,437,625
1,125 New York Times Co. ................. 8.250 03/15/25 1,217,587
6,000 News America Holdings, Inc.......... 8.875 04/26/23 6,666,600
2,000 News America Holdings, Inc.......... 9.250 02/01/13 2,313,000
2,500 TCI Communications, Inc............. 8.750 08/01/15 2,613,375
2,000 Tele-Communications, Inc............ 9.250 01/15/23 2,093,600
------------
27,997,192
------------
ENERGY 20.1%
6,300 Ashland Oil, Inc.................... 8.800 11/15/12 7,092,540
2,500 Coastal Corp........................ 11.750 06/15/06 2,700,000
9,000 Occidental Petroleum Corp........... 9.625 07/01/99 9,253,800
6,300 PDV America, Inc.................... 7.875 08/01/03 6,189,120
5,000 Phillips Petroleum Co............... 8.860 05/15/22 5,472,500
4,000 Union Oil Co........................ 9.125 02/15/06 4,617,600
3,000 Union Oil Co........................ 9.250 02/01/03 3,410,400
------------
38,735,960
------------
FINANCE 9.6%
33 Bank of America, Mtge. Pass Through
Certificate, Series 1980-1.......... 11.875 04/01/10 33,115
4,924 Beaver Valley II Funding Corp....... 9.000 06/01/17 4,185,400
3,500 First PV Funding Corp., Series 1986-
A................................... 10.300 01/15/14 3,641,575
3,715 PNPP II Funding Corp................ 8.510 11/30/06 3,912,267
4,500 Ryder Systems, Inc.................. 9.250 05/15/01 5,003,550
1,500 United Illuminating Co.............. 10.240 01/02/20 1,629,000
------------
18,404,907
------------
PRODUCER MANUFACTURING 2.8%
5,000 John Deere Credit Corp.............. 9.625 11/01/98 5,444,000
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
RAW MATERIALS/PROCESSING
INDUSTRIES 7.1%
$ 1,000 Carter Holt Harvey, Ltd........... 8.375% 04/15/15 $ 1,087,510
4,000 Crown Cork & Seal Co., Inc........ 8.000 04/15/23 4,070,000
4,000 Federal Paper Board, Inc.......... 8.875 07/01/12 4,484,800
3,000 Georgia-Pacific Corp.............. 9.500 02/15/18 3,171,000
500 James River Corp.................. 8.375 11/15/01 538,680
300 Owens-Corning Fiberglass Corp..... 9.375 06/01/12 350,940
--------------
13,702,930
--------------
TECHNOLOGY 2.7%
5,000 International Business Machines
Corp.............................. 7.500 06/15/13 5,150,000
--------------
TRANSPORTATION 10.7%
3,000 AMR Corp.......................... 9.500 05/15/01 3,324,000
750 CSX Corp.......................... 8.625 05/15/22 842,325
1,500 Kansas City Southern Industries,
Inc............................... 7.875 07/01/02 1,575,000
700 Kansas City Southern Industries,
Inc............................... 8.800 07/01/22 772,240
8,000 Union Pacific Corp................ 8.350 05/01/25 8,410,400
5,000 United Airlines, Pass-through
Certificates, Series 1991-A,
collateralized by equipment....... 10.020 03/22/14 5,720,500
--------------
20,644,465
--------------
UTILITIES 16.2%
1,000 Arizona Public Service Co., 1st
Mtge.............................. 8.750 01/15/24 1,081,210
2,000 Arizona Public Service Co., 1st
Mtge.............................. 9.500 04/15/21 2,234,700
2,300 Cleveland Electric Illuminating
Co., 1st Mtge..................... 10.000 06/01/20 2,377,970
9,800 Commonwealth Edison Co., 1st
Mtge.............................. 8.250 12/01/07 10,162,110
1,440 Connecticut Yankee Atomic Power,
Series-A.......................... 12.000 06/01/00 1,540,800
1,605 Consumers Power Co., 1st Mtge..... 8.875 11/15/99 1,712,535
1,000 Gulf States Utilities............. 8.940 01/01/22 1,053,300
1,000 Long Island Lighting Co........... 9.000 11/01/22 978,750
4,000 Long Island Lighting Co........... 9.750 05/01/21 4,080,000
1,500 Niagra Mohawk Power Corp.......... 8.500 07/15/23 1,521,300
2,500 Texas Utility Electric Co......... 8.875 02/01/22 2,730,750
1,500 Union Electric Co................. 8.000 12/15/22 1,571,940
--------------
31,045,365
--------------
TOTAL CORPORATE OBLIGATIONS (Cost
$158,827,834)..................... 170,494,419
--------------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT OBLIGATIONS 9.3%
$4,000 Province of Newfoundland (Canada).... 9.000% 10/15/21 $ 4,700,400
4,650 Province of Nova Scotia (Canada)..... 8.250 07/30/22 5,086,635
650 Province of Saskatchewan (Canada).... 8.000 02/01/13 694,005
2,000 Province of Saskatchewan (Canada).... 8.500 07/15/22 2,233,940
5,000 United States Treasury Notes......... 6.875 02/28/97 5,075,000
------------
TOTAL GOVERNMENT OBLIGATIONS (Cost
$16,215,540)......................... 17,789,980
------------
REPURCHASE AGREEMENT 0.6%
1,235 SBC Capital Markets, Inc., dated
08/31/95 (collateralized by U.S.
Government obligations in a pooled
cash account) repurchase proceeds
$1,235,202 (Cost $1,235,000)......... 5.875 09/01/95 1,235,000
------------
TOTAL INVESTMENTS 98.6% (Cost $176,278,374)..................... 189,519,399
OTHER ASSETS AND LIABILITIES, NET 1.4%.......................... 2,781,109
------------
NET ASSETS 100%................................................. $192,300,508
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $176,278,374)................. $189,519,399
Cash............................................................. 3,211
Interest receivable.............................................. 3,454,297
Receivable for Fund shares sold.................................. 283,103
Other assets and receivables..................................... 3,718
------------
Total Assets.................................................... 193,263,728
------------
LIABILITIES
Dividends payable................................................ 418,307
Payable for Fund shares redeemed................................. 223,983
Due to Distributor............................................... 82,985
Due to Adviser................................................... 77,538
Due to shareholder service agent................................. 40,400
Deferred Trustees' compensation.................................. 39,664
Accrued expenses................................................. 80,343
------------
Total Liabilities............................................... 963,220
------------
NET ASSETS, equivalent to $6.94 per share for Class A and Class
B, and $6.93 for Class C shares................................. $192,300,508
------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 24,368,476 Class A,
2,764,696 Class B and 592,043 Class C shares outstanding........ $ 277,252
Capital surplus.................................................. 203,541,678
Accumulated net realized loss on securities...................... (24,999,051)
Net unrealized appreciation of securities........................ 13,241,025
Undistributed net investment income.............................. 239,604
------------
NET ASSETS....................................................... $192,300,508
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
STATEMENT OF OPERATIONS
Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................... $15,316,490
Dividends.......................................................... 133,111
-----------
Investment income................................................. 15,449,601
-----------
EXPENSES
Management fees.................................................... 907,960
Shareholder service agent's fees and expenses...................... 573,910
Accounting services................................................ 71,183
Service fees--Class A.............................................. 317,039
Distribution and service fees--Class B............................. 158,553
Distribution and service fees--Class C............................. 30,709
Trustees' fees and expenses........................................ 11,827
Audit fees......................................................... 37,300
Custodian fees..................................................... 6,132
Legal fees......................................................... 9,408
Reports to shareholders............................................ 47,212
Registration and filing fees....................................... 66,446
Miscellaneous...................................................... 8,728
-----------
Total expenses.................................................... 2,246,407
-----------
NET INVESTMENT INCOME.............................................. 13,203,194
-----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities
Investments....................................................... 74,345
Futures contracts................................................. 7,938
Net unrealized appreciation of securities during the period
Investments....................................................... 8,919,658
Futures contracts................................................. 33,688
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... 9,035,629
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $22,238,823
-----------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31
--------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period................... $175,714,857 $199,175,777
------------ ------------
OPERATIONS
Net investment income............................ 13,203,194 13,188,386
Net realized gain on securities.................. 82,283 616,599
Net unrealized appreciation (depreciation) of
securities during the period.................... 8,953,346 (20,913,290)
------------ ------------
Increase (decrease) in net assets resulting from
operations....................................... 22,238,823 (7,108,305)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME
Class A.......................................... (12,019,043) (12,131,907)
Class B.......................................... (1,038,877) (720,427)
Class C.......................................... (203,409) (80,110)
------------ ------------
(13,261,329) (12,932,444)
------------ ------------
NET EQUALIZATION DEBITS (see Note 1H)............. (45,347) (98,274)
------------ ------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A.......................................... 36,830,801 20,186,241
Class B.......................................... 9,273,809 11,819,720
Class C.......................................... 2,130,631 2,728,483
------------ ------------
48,235,241 34,734,444
------------ ------------
Proceeds from shares issued for distributions
reinvested
Class A.......................................... 7,877,976 7,494,419
Class B.......................................... 677,156 495,396
Class C.......................................... 126,732 52,439
------------ ------------
8,681,864 8,042,254
------------ ------------
Costs of shares redeemed
Class A.......................................... (43,542,246) (39,698,456)
Class B.......................................... (5,097,135) (6,040,076)
Class C.......................................... (624,220) (360,063)
------------ ------------
(49,263,601) (46,098,595)
------------ ------------
Increase (decrease) in net assets from capital
transactions..................................... 7,653,504 (3,321,897)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS................ 16,585,651 (23,460,920)
------------ ------------
NET ASSETS, end of period (including undistributed
net investment income of $239,604 and $628,453).. $192,300,508 $175,714,857
------------ ------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------
Year Ended August 31
------------------------------------------
1995 1994 1993(/1/) 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of peri-
od................................ $6.62 $7.36 $6.98 $6.57 $6.34
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income................. .55 .57 .58 .60 .64
Expenses.......................... (.07) (.08) (.07) (.07) (.06)
------ ------ ------ ------ ------
Net investment income.............. .48 .49 .51 .53 .58
Net realized and unrealized gains
or losses on securities........... .32 (.745) .3875 .44 .2425
------ ------ ------ ------ ------
Total from investment operations... .80 (.255) .8975 .97 .8225
------ ------ ------ ------ ------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME............................ (.48) (.485) (.5175) (.56) (.5925)
------ ------ ------ ------ ------
Net asset value, end of period..... $6.94 $6.62 $7.36 $6.98 $6.57
------ ------ ------ ------ ------
TOTAL RETURN (/2/)................. 12.71% (3.55%) 13.48% 15.38% 13.61%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (mil-
lions)............................ $169.0 $160.0 $190.8 $191.8 $184.6
Average net assets (millions)...... $166.2 $175.5 $188.0 $186.5 $189.0
Ratios to average net assets
Expenses.......................... 1.13% 1.09% 1.05% 1.00% 1.00%
Net investment income............. 7.22% 7.06% 7.24% 7.90% 9.03%
Portfolio turnover rate............ 25% 0% 19% 37% 15%
</TABLE>
(1) Based on average month-end shares outstanding.
(2) Total return does not consider the effect of sales charges.
See Notes to Financial Statements
13
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
-------------------------------- -----------------
Year Ended September 28, Year Ended
August 31 1992(/1/) through August 31
------------ August 31, -----------------
1995 1994 1993(/2/) 1995 1994(/2/)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, begin-
ning of period.......... $6.62 $7.36 $7.05 $6.62 $7.36(/3/)
----- ----- ------ ----- ----------
INCOME FROM INVESTMENT
OPERATIONS
Investment income....... .55 .57 .56 .55 .57
Expenses................ (.13) (.13) (.13) (.13) (.13)
----- ----- ------ ----- ----------
Net investment income.... .42 .44 .43 .42 .44
Net realized and
unrealized gains or
losses on securities.... .33 (.755) .3465 .32 (.755)
----- ----- ------ ----- ----------
Total from investment
operations.............. .75 (.315) .7765 .74 (.315)
----- ----- ------ ----- ----------
DISTRIBUTIONS FROM NET
INVESTMENT INCOME....... (.43) (.425) (.4665) (.43) (.425)
----- ----- ------ ----- ----------
Net asset value, end of
period.................. $6.94 $6.62 $7.36 $6.93 $6.62
----- ----- ------ ----- ----------
TOTAL RETURN (/4/)....... 11.86% (4.38%) 11.54% 11.70% (4.51%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).............. $19.2 $13.5 $8.4 $4.1 $2.3
Average net assets
(millions).............. $15.9 $11.5 $3.2 $3.1 $1.2
Ratios to average net as-
sets (annualized)
Expenses................ 1.94% 1.90% 1.96% 1.93% 1.93%
Net investment income... 6.40% 6.29% 6.21% 6.40% 6.49%
Portfolio turnover rate.. 25% 0% 19% 25% 0%
</TABLE>
(1) Commencement of offering of sales
(2) Based on average month-end shares outstanding
(3) Sales of Class C shares commenced on August 30, 1993 at a net asset value
of $7.40 per share. At August 31, 1993, there were 68 Class C shares
outstanding with a per share net asset value of $7.36. The decrease in net
asset value was due principally to a $.0375 dividend, which was declared as
of August 31, 1993. Other financial highlights for the Class C shares for
this short period are not presented as they are not meaningful.
(4) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
See Notes to Financial Statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Corporate Bond Fund (the "Fund", formerly American
Capital Corporate Bond Fund, Inc.) is registered under the Investment Company
Act of 1940, as amended, as a diversified open-end management investment compa-
ny. The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. INVESTMENT VALUATIONS-Securities listed or traded principally on a national
securities exchange are valued at the last sale price. Unlisted securities and
listed securities for which the last sale price is not available are valued at
the mean between the last reported bid and asked prices.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations, until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
B. FUTURES CONTRACTS-Transactions in futures contracts are utilized in strate-
gies to manage the market risk of the Fund's investments. The purchase of a
futures contract increases the impact on net asset value of changes in the mar-
ket price of investments. There is also a risk that the market movement of such
instruments may not be in the direction forecasted.
Upon entering into futures contracts, the Fund maintains, in a segregated ac-
count with its custodian, securities with a value equal to its obligation under
the futures contracts. A portion of these funds is held as collateral in an ac-
count in the name of the broker, the Fund's agent in acquiring the futures po-
sition. During the period the futures contract is open, changes in the value of
the contract ("variation margin") are recognized by marking the contract to
market on a daily basis. As unrealized gains or losses are incurred, variation
margin payments are received from or made to the broker. Upon the closing or
cash settlement of a contract, gains and losses are realized. The cost of secu-
rities acquired through delivery under a contract is adjusted by the unrealized
gain or loss on the contract.
C. 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
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
"Adviser"), the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are collateralized by the underlying debt security. The
Fund makes 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.
D. 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 capital gains to its shareholders. It is anticipated that no distribu-
tions of capital gains will be made until tax basis capital loss carryforwards
expire or are offset by net realized capital gains.
The net realized capital loss carryforward for federal income tax purposes of
approximately $25.0 million at the end of the period may be utilized to offset
future capital gains until expiration in 1997 through 2000. During the period,
approximately $119,000 of net realized capital loss carryforward was utilized.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on invest-
ments are determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily.
F. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may result in dividends or distributions in excess of financial statement
earnings.
G. DEBT DISCOUNT OR PREMIUM-The Fund accounts for discounts and premiums on the
same basis as is used for federal income tax reporting. Accordingly, original
issue discounts on debt securities purchased are amortized over the life of the
security. Premiums on debt securities are not amortized. Market discounts are
recognized at the time of sale as realized gains for book purposes and ordinary
income for tax purposes.
H. EQUALIZATION-At December 1, 1994, the Fund discontinued the accounting prac-
tice of equalization, which it had used since its inception. Equalization is a
practice whereby a portion of the proceeds from sales and costs of redemptions
of Fund shares, equivalent on a per-share
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
basis to the amount of the undistributed net investment income, is charged or
credited to undistributed net investment income.
The balance of equalization included in undistributed net investment income
at the date of change, $285,421, was reclassified to capital surplus. Such re-
classification had no effect on net assets, results of operations, or net as-
set value per share of the Fund.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average daily net assets of the Fund at an annual 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 million.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised by the Adviser. For the period, these
charges included $9,389 as the Fund's share of the employee costs attributable
to the Fund's accounting officers. A portion of the accounting services ex-
pense was paid to the Adviser in reimbursement of personnel, facilities and
equipment costs attributable to the provision of accounting services to the
Fund. The services provided by the Adviser are at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period, the fees for such services were $483,848.
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 $17,539 and $38,004, respectively, as
their portion of the commissions charged on sales of Fund shares during the
period.
Under the Distribution Plans, each class of shares pays up to .25% per annum
of its average daily net assets to reimburse the Distributor for expenses and
service fees incurred. Class B and Class C shares pay an additional fee of up
to .75% per annum of their average net assets to reimburse the Distributor for
its distribution expenses. Actual distribution expenses incurred by the Dis-
tributor for Class B and Class C shares may exceed the amounts reimbursed to
the Distributor by the Fund. At the end of the period, the unreimbursed ex-
penses incurred by the Distributor under the Class B and Class C plans aggre-
gated approximately $707,000 and $34,000, respectively, and may be carried
forward and reimbursed through either the collection of the contingent de-
ferred sales charges from share redemptions or, subject to the annual renewal
of the plans, future Fund reimbursements of distribution fees.
Legal fees of $9,382 were for services rendered by O'Melveny & Myers, coun-
sel for the Fund. Lawrence J. Sheehan, of counsel to that firm, is a trustee
of the Fund.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor, the Retail Dealer and the shareholder service agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the costs of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $61,920,519 and $41,522,767, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period was $176,281,890, net unrealized appreciation of invest-
ments aggregated $13,237,509, gross unrealized appreciation of investments ag-
gregated $14,111,392, and gross unrealized depreciation of investments
aggregated $873,883.
NOTE 4--TRUSTEE COMPENSATION
Fund trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $980 plus a fee of $25 per day for Board and Com-
mittee meetings attended. The Chairman receives additional fees from the Fund
at the annual rate of $370. During the period, such fees aggregated $10,190.
The trustees may participate in a voluntary Deferred Compensation Plan (the
"Plan"). The Plan is not funded and obligations under the Plan 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 Plan by any form of
trust or escrow. Each trustee covered under the Plan elects to be credited
with an earnings component on amounts deferred equal to the income earned by
the Fund on its short-term investments or equal to the total return of the
Fund.
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred ba-
sis (the Class B and Class C shares). All classes of shares have the same
rights, except that Class B and Class C shares bear the cost of distribution
fees and certain other class specific expenses. Realized and unrealized gains
or losses, investment income and expenses (other than class specific expenses)
are allocated daily to each class of shares based upon the relative proportion
of net assets of each class. Class B and Class C shares automatically convert
to Class A shares six years and ten years after purchase, respectively, sub-
ject to certain conditions.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Fund has an unlimited number of shares of each class of $.01 par value
beneficial interest authorized. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
Year Ended August 31
----------------------
1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A................................................. 5,657,020 2,874,913
Class B................................................. 1,394,371 1,679,847
Class C................................................. 322,086 391,322
---------- ----------
7,373,477 4,946,082
---------- ----------
Shares issued for distributions reinvested
Class A................................................. 1,192,850 1,081,127
Class B................................................. 102,002 71,673
Class C................................................. 19,080 7,742
---------- ----------
1,313,932 1,160,542
---------- ----------
Shares redeemed
Class A................................................. (6,655,261) (5,704,287)
Class B................................................. (766,395) (861,542)
Class C................................................. (94,193) (54,062)
---------- ----------
(7,515,849) (6,619,891)
---------- ----------
Increase (decrease) in Fund shares outstanding......... 1,171,560 (513,267)
---------- ----------
</TABLE>
NOTE 6--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 August 5,
1995, the reorganization became effective.
NOTE 7--SUBSEQUENT DIVIDEND
The Board of Trustees of the Fund declared a dividend of $.04 per share for
Class A and $.036 per share for Class B and Class C shares from net investment
income, payable October 16, 1995 to shareholders of record on September 29,
1995.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND 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 Corporate
Bond Fund at August 31, 1995, the results of its operations, the changes in its
net assets and the financial highlights for each of the fiscal periods present-
ed, in conformity with generally accepted accounting principles. These finan-
cial statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibil-
ity is to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with gener-
ally accepted auditing standards which require that we plan and perform the au-
dit 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 man-
agement, and evaluating the overall financial statement presentation. We be-
lieve that our audits, which included confirmation of securities at August 31,
1995 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
October 19, 1995
20
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
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
Limited 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 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
21
<PAGE>
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
PHILIP G. GAUGHAN
LINDA H. HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DONALD C. MILLER
JACK E. NELSON
DON G. POWELL
DAVID REES
JEROME L. ROBINSON
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President
CURTIS W. MORELL
Vice President and Treasurer
DENNIS J. MCDONNELL
RONALD A. NYBERG
ROBERT C. PECK, JR.
DAVID R. TROTH
PAUL R. WOLKENBERG
Vice Presidents
TANYA M. LODEN
Vice President and Controller
NORI L. GABERT
Vice President and Secretary
J. DAVID WISE
Vice President and Assistant Secretary
PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers
HUEY P. FALGOUT, JR.
Assistant Secretary
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd. Houston, Texas 77056
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street Boston, Massachusetts 02110
COUNSEL
O'MELVENY & MYERS
400 South Hope Street Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 LouisianaHouston, Texas 77002
(C) Van Kampen American Capital Distributors, Inc., 1995
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 12/31/95, this annual report must be accompanied by a Van
Kampen American Capital Corporate Bond Fund, Inc. performance data update for
the most recent quarter.
22
<PAGE>
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
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23
<PAGE>
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
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24
