<PAGE>
Van Kampen American Capital
_____________________
CORPORATE
BOND FUND
_____________________
SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
[PHOTO APPEARS HERE]
-- A Wealth of Knowledge . A Knowledge of Wealth --
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Performance Results................................................... 3
Glossary of Terms..................................................... 4
Portfolio Management Review........................................... 5
Portfolio Highlights.................................................. 8
Portfolio of Investments.............................................. 9
Statement of Assets and Liabilities................................... 13
Statement of Operations............................................... 14
Statement of Changes in Net Assets.................................... 15
Financial Highlights.................................................. 16
Notes to Financial Statements......................................... 19
</TABLE>
<PAGE>
Letter to Shareholders
March 27, 1998
Dear Shareholder,
We have begun what promises to [PHOTO APPEARS HERE]
be an exciting and challenging year
for investors. The Taxpayer Relief
Act of 1997, signed into law by
President Clinton in August, creates
many new opportunities for you and
your family to take a more
active role in achieving your
long-term financial goals. DENNIS J. MCDONNELL AND DON G POWELL
Most Americans will benefit from the bill's $95 billion in tax cuts over
five years. The so-called Kiddie Credit gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses through the new Education IRA. The bill
also cuts capital gains tax rates for the first time in over a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature is the new Roth IRA, which allows investment earnings to grow
tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll work with you to locate the many benefits hidden among the
changing tax landscape.
ECONOMIC OVERVIEW
The nation's economic report card continues to register nearly perfect
grades. Growth is strong, unemployment is low, the budget is headed for surplus,
and the dollar is rising around the world. With the economy running on all
cylinders, consumer confidence soared to a 30-year high in February.
Despite the strength in the economy, inflation remained under control. The
producer price index actually fell by 1.6 percent during the 12 months through
February. Inflation at the consumer level also was virtually nonexistent, with
the consumer price index rising by only 1.4 percent during the same period. A
strong dollar and significant productivity gains helped offset inflationary
pressures caused by rising wages.
The Federal Reserve Board left monetary policy unchanged during the six-
month reporting period. In addition to signs that the economy was slowing
modestly from its breakneck pace of early 1997, Fed policy-makers were concerned
about the impact that higher U.S. interest rates might have on the struggling
economies of Southeast Asia. Generally, higher U.S. interest rates cause the
dollar to rise relative to other currencies. With nearly all Asian currencies
already down significantly, a hike in U.S. rates would force monetary
authorities in Asia to choose between letting their currencies decline further
or matching the rate increase, thereby slowing their already-sluggish economies.
As the reporting period ended, there was little evidence that the Asian
crisis had negatively impacted the U.S. economy. The nation's total output of
goods and services (gross domestic product) grew at a rate of 3.9 percent in the
fourth quarter of 1997, and corporate profits remained strong. A modest pickup
in bond yields in mid-January indicated that global investors were increasingly
confident that the U.S. economy would escape significant damage from the
slowdown in Asia.
1
<PAGE>
MARKET OVERVIEW
Aided by benign inflation at home and an economic crisis overseas, all
sectors of the fixed-income market posted solid returns. In particular, a global
"flight to quality" amid the turmoil in Asia pushed long-term interest rates
sharply lower during the later stages of the reporting period. In the six months
through February, the Merrill Lynch Domestic Master Index gained 5.77 percent.
The yield on the Treasury's benchmark 30-year bond declined from 6.60
percent at the end of August to 5.66 percent in mid-January as global investors
sought safety in the highly-liquid Treasury market. Demand for fixed-income
securities also increased as investors believed that fallout from the Asian
crisis would slow the U.S. economy enough to keep inflation from rising. But as
evidence indicated that economic growth remained strong, yields on long-term
Treasury bonds rebounded to close the reporting period at 5.91 percent.
Favorable news about inflation and concerns about Asia combined to make
high-quality long-term bonds the top-performing sector of the fixed-income
market during the reporting period. Long-term Treasury securities gained 10.86
percent for the six months ended in February, compared to 8.04 percent for long-
term corporate issues. Meanwhile, worries that the Asian crisis could lead to an
economic slump in the United States caused modest underperformance among high-
yield bonds, especially during the last quarter of 1997.
OUTLOOK
We believe that reduced demand for American exports to Asia and intense
price competition from imports will exert a mild drag on the U.S. economy in
coming months. But while corporate profits could suffer in the near term, slower
economic growth should help to mitigate the inflationary pressures caused by the
tight domestic labor market. That scenario is good for fixed-income investments.
However, if bond yields continue to drift lower, economic growth in the
U.S. could reaccelerate later in 1998. In recent years, each significant decline
in long-term interest rates has ignited economic growth by making houses, cars,
and other big-ticket consumer goods more affordable. We believe the Federal
Reserve would respond to any significant pickup in economic activity with a
modest increase in short-term interest rates. We also expect the healthy economy
to keep credit spreads relatively tight in coming months.
As we noted earlier, the Taxpayer Relief Act of 1997 provides attractive
new vehicles through which investors can save for a variety of goals, including
higher education and retirement. We encourage you to work with your financial
adviser to consider how the tax changes can work to your benefit.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to serve you through our diverse menu of
quality investments.
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 February 28, 1998
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Total Returns
Six-month total return based on NAV/1/................. 5.55% 5.17% 5.17%
Six-month total return/2/.............................. .50% 1.17% 4.17%
One-year total return/2/............................... 5.99% 6.43% 9.44%
Five-year average annual total return/2/............... 6.46% 6.42% N/A
Ten-year average annual total return/2/................ 7.83% N/A N/A
Life-of-Fund average annual total return/2/............ 8.39% 6.77% 5.61%
Commencement date...................................... 09/23/71 09/28/92 08/30/93
Distribution Rate and Yield
Distribution Rate/3/................................... 6.51% 6.10% 6.10%
SEC Yield/4/........................................... 5.34% 4.87% 4.89%
</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 and 1% for C shares).
/2/Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and 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 February 28, 1998.
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.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
Glossary of Terms
BASIS POINT:
A measure used in quoting yields on bonds. One hundred basis points is
equal to one percent. For example, if a bond's yield changes from 7.00 to
6.65 percent, it is a 35 basis point move. Sometimes referred to as a
percentage point.
CREDIT SPREAD:
Also called quality spread, the difference in yield between higher-quality
issues (such as Treasury securities) and lower-quality issues. Under normal
circumstances, lower-quality issues provide higher yields in order to
compensate investors for the additional credit risk.
DURATION:
A measure of a bond's sensitivity to changes in interest rates, expressed
in years. The longer a fund's duration, the greater the effect of interest
rate movements on net asset value. Typically, funds with shorter durations
have performed better in rising rate environments, while funds with longer
durations have performed better when rates decline.
FEDERAL FUNDS RATE:
The interest rate charged by one institution lending federal funds to
another. This overnight rate is used to meet banks' daily reserve
requirements. The Federal Reserve Board uses the federal funds rate to
affect the direction of interest rates.
FEDERAL RESERVE BOARD (FED):
A seven-member group that oversees the operations of the Federal Reserve
System, the central bank system of the United States. Currently led by
Chairman Alan Greenspan, the Fed meets eight times a year to establish
monetary policy and monitor the country's economic pulse.
INFLATION:
An economic state in which the amount of money supply and business activity
dramatically increases, accompanied by sharply rising prices. Inflation is
widely measured by the Consumer Price Index, a leading economic indicator
that measures the change in the cost of purchased goods and services.
NET ASSET VALUE (NAV):
The value of a mutual fund share, calculated by deducting a fund's
liabilities from its total assets and dividing this amount by the number of
shares outstanding. The NAV does not include any initial or contingent
deferred sales charge.
PREMIUM REDEMPTION:
The redemption of a bond at a dollar amount above a stated par value, or
the redemption of a bond by the issuer prior to its maturity date.
YANKEE BONDS:
U.S. dollar-denominated bonds issued in the United States by foreign
governments, banks, and corporations.
YIELD:
The annual rate of return on an investment, expressed as a percentage. For
bonds and notes, the yield is the annual interest divided by the market
price.
YIELD CURVE:
A result of viewing the yields of U.S. Treasury securities maturing in 1,
5, 10, and 30 years, grouped together, which often reflects a pattern of
increasing yield as maturity extends. This pattern creates an upward
sloping "curve." A "flat" yield curve represents little difference between
short- and long-term interest rates.
YIELD SPREAD:
The difference in yields between low-quality fixed-income investments and
high-quality fixed-income investments. To compensate investors for the
added risk, low-quality fixed-income securities typically offer investors
higher yields than high-quality fixed-income securities. The resulting
spread is commonly expressed in basis points.
4
<PAGE>
Portfolio Management Review
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
We recently spoke with the management team of the Van Kampen American Capital
Corporate Bond Fund about the key events and economic forces that shaped the
markets during the past six months. The team includes David R. Troth, portfolio
manager, and Peter W. Hegel, chief investment officer for fixed-income
investments. The following excerpts reflect their views on the Fund's
performance during the six-month period ended February 28, 1998.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND
OPERATED DURING THE PAST SIX MONTHS?
A In the past six months, the bond market was most significantly affected by a
single event: the Asian currency crisis. Although Southeast Asian markets
began to show weakness in August, currency volatility reached a point of chaos
in late October. This situation negatively affected emerging market debt, caused
domestic yields to fall, and widened the spread between long-and short-term
bonds. By the end of 1997, the market had bounced back somewhat. However,
spreads remained wider than they had been in August, due to lingering concerns
about the full impact of Asian markets on the U.S. economy. In the first few
months of 1998, a bond market rally compressed spreads to comfortable levels.
For the six-month period ended February 28, 1998, the yield of the benchmark
10-year Treasury declined 63 basis points, ending the period with a 5.62 percent
yield. At the same time, the three-month Treasury yield actually increased from
5.22 percent on August 31, 1997, to 5.31 percent on February 28, 1998. This
produced a considerable flattening of the yield curve--a narrowing of the
difference between long- and short-term bond yields. This often occurs when
market sentiment believes that interest rates could fall, which in this case was
a response to the potential for a U.S. economic slowdown resulting from the
Asian crisis.
Against this backdrop of volatility, corporate bonds reached a record level
of new issuance by the end of the reporting period, with nearly $25 billion in
corporate bonds sold in the first month of 1998 alone. This increase can be
attributed to the attractive level of prevailing interest rates, which persuaded
corporations to refinance their debts.
Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A We continued to diversify the Fund, adding seven new issuers to the
portfolio. The Fund's average maturity lengthened to 14.6 years, as did the
duration to 6.5 years. This lengthening reflects the fact that all of the newly
acquired securities in the Fund's portfolio are non-callable paper. In addition
to having longer durations, non-callable securities display favorable convexity,
which measures how closely they move in unison with the market's ups and downs.
At the end of 1997, 84 percent of the portfolio was comprised of non-callable
paper, and this has contributed to the Fund's improved return.
We continued to increase the Fund's exposure to foreign securities, and
approximately 15 percent of the Fund's total assets are invested in non-domestic
issues. By expanding the Fund's exposure to overseas markets, we added
diversification and increased the Fund's potential for yield. In the current
environment, interest rates overseas tend to be higher than those offered by
domestic
5
<PAGE>
securities. Our overseas investments are limited to "Yankee bonds," or foreign
issuers who pay interest and principal in U.S. dollars. Positions include
Mexican state obligations, an Argentinian issue, a British electric utility
company, and two new Asian issues that were added to the portfolio in late 1997.
These Asian securities, a Hong Kong conglomerate and a state-owned Malaysian oil
company, offered attractive yields and carried an investment grade rating of A
by Moody's and Standard & Poor's.
During the period, we reinforced the Fund's position in the consumer services
sector, which currently accounts for 21 percent of the Fund's portfolio. Among
this sector, we added new holdings in Cablevision and Royal Caribbean Cruise
Lines. Consumer services securities are attractive given high employment rates
and the affluency of the general population. Other new holdings included Baxter
International, a biomedical technology company, and Beckman Coulter, a medical
services company. Medical companies enjoy some consistency of earnings and are
less affected by economic conditions than cyclical companies. Finally, we
maintained the Fund's presence in the utility industry, with a slightly
increased percentage.
Q WHAT WAS THE STRUCTURE OF THE FUND'S PORTFOLIO AT THE END OF THE REPORTING
PERIOD?
A The Fund's credit profile is relatively unchanged from six months ago. As of
February 28, approximately 58 percent of the Fund's long-term investments
were rated BBB, which is the lowest credit rating within the investment-grade
category, and 15 percent of long-term investments were rated BB, the highest
rating within the noninvestment-grade category. Noninvestment-grade bonds tend
to generate higher yields than investment-grade bonds and have performed better
than high-quality securities when interest rates rise, due to the fact that
investors are compensated for the additional credit risk. The additional income
these bonds generate should help compensate for some of the decline in principal
value they incur due to rising rates. At the same time, when economic growth
accelerates, prospects for credit upgrades may improve, which would also help
performance. On the other end of the ratings spectrum, the Fund holds 25 percent
of its long-term investments in securities rated A and just over 2 percent in
AAA-rated securities. For additional Fund portfolio highlights, please refer to
page eight.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund posted a total return of 5.55 percent1 (Class A shares at net asset
value) for the six-month period ended February 28, 1998. For the same period,
the average return for all funds in the Lipper Corporate Debt BBB category was
5.57 percent. By comparison, the Lehman Brothers Corporate Bond Index and the
Lehman Brothers Baa Corporate Bond Index produced total returns of 5.93 percent
and 5.91 percent, respectively. These broad-based indices reflect the
performance of all publicly issued, fixed-rate, non-convertible investment grade
corporate debt. Please keep in mind that these indices do not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities they represent. Please refer to the chart on page three for
additional Fund performance results.
6
<PAGE>
Q WHAT IS YOUR OUTLOOK FOR THE MARKET OVER THE COMING MONTHS?
A We continue to look to the strength of the economy for clues as to the
market's future direction. If economic growth begins to slow down against a
backdrop of continuing benign inflation--and if we are insulated from any
negative shocks from the global markets--then it's possible that interest rates
will fall. In this scenario, the corporate bond market should benefit from
higher bond prices. On the other hand, we question the duration of the current
"Goldilocks" environment, which is characterized by continuing moderate growth
with no signs of increasing inflation, and which has continued relatively
uninterrupted for a long period of time. Meanwhile, market participants remain
on the lookout for any signs of action from the Federal Reserve Board, which has
not imposed a rate change since March 1997. As current consensus has swayed away
from the possibility of a rate decrease, we do not expect any movement at all
before the fourth quarter of 1998.
In managing the Fund through the remainder of the year, we will continue to
look for opportunities to diversify by increasing overseas exposure. In adding
new Yankee bonds to the portfolio, we must be comfortable with the credit
profile and convinced that we are being compensated for risk in the face of
improved value. Finally, we plan to maintain the Fund's credit profile and
duration, as we feel its current position is most appropriate.
/s/ Peter W. Hegal /s/ David R. Troth
Peter W. Hegel David R. Troth
Chief Investment Officer Portfolio Manager
Fixed Income Investments
7
<PAGE>
Portfolio Highlights
Van Kampen American Capital Corporate Bond Fund
Top Ten Holdings as a Percentage of Long-Term Investments
<TABLE>
<CAPTION>
As of
February 28, 1998
<S> <C>
Ashland Oil, Inc. ................................. 3.59%
News America Holdings, Inc......................... 3.36%
PDV America, Inc................................... 3.07%
United Airlines, Inc............................... 2.99%
Phillips Petroleum Co.............................. 2.69%
International Business Machines Corp............... 2.60%
Cox Communications, Inc............................ 2.46%
Providence of Newfoundland (Canada)................ 2.41%
ITT Corp........................................... 2.39%
Republic of South Africa........................... 2.38%
</TABLE>
Credit Quality as a Percentage of Long-Term Investments
<TABLE>
<CAPTION>
As of February 28, 1998
<S> <C> <C>
[ ] AAA.......... 2.4% [PIE CHART APPEARS HERE]
[ ] A............ 25.0%
[ ] BBB.......... 57.6%
[ ] BB........... 15.0%
</TABLE>
<TABLE>
<CAPTION>
As of August 31, 1997
<S> <C> <C>
[ ] A............ 25.1% [PIE CHART APPEARS HERE]
[ ] BBB.......... 60.2%
[ ] BB........... 14.7%
</TABLE>
Based upon the highest credit quality ratings as determined by Standard & Poor's
or Moody's.
Top Five Portfolio Sectors as a Percentage of Long-Term Investments
<TABLE>
<CAPTION>
As of February 28, 1998 As of August 31, 1997
<S> <C> <C> <C>
Consumer Services......................... 20.9% Consumer Services................................. 22.8%
Energy.................................... 13.9% Energy............................................ 14.3%
Raw Materials/Processing Industries....... 12.0% Finance........................................... 9.7%
Finance................................... 9.5% Transportation.................................... 9.7%
Utilities................................. 9.1% Raw Materials/Processing Industries............... 9.2%
</TABLE>
Duration
As of February 28, 1998 As of August 31, 1997
Duration 6.5 years 6.2 years
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS 81.8%
CONSUMER DISTRIBUTION 0.9%
$ 2,000 Nabisco, Inc.......................................... 7.550% 06/15/15 $ 2,125,200
-----------
CONSUMER DURABLES 0.8%
750 Brunswick Corp........................................ 7.125 08/01/27 763,463
1,000 Chrysler Corp......................................... 7.450 03/01/27 1,077,750
-----------
1,841,213
-----------
CONSUMER NON-DURABLES 1.8%
2,000 Coca Cola Enterprises, Inc............................ 8.500 02/01/12 2,415,600
750 Dimon, Inc............................................ 8.875 06/01/06 799,125
750 Smithfield Foods, Inc.,
144A - Private Placement (a).......................... 7.625 02/15/08 749,062
-----------
3,963,787
-----------
CONSUMER SERVICES 21.3%
1,250 Belo A H Corp......................................... 7.125 06/01/07 1,321,250
1,250 Cablevision Systems Corp.............................. 7.875 12/15/07 1,289,187
2,500 Cablevision Systems Corp.............................. 7.875 02/15/18 2,459,375
1,000 Circus Circus Enterprises, Inc........................ 6.450 02/01/06 976,700
2,500 Clear Channel Communications, Inc..................... 7.250 10/15/27 2,568,375
5,000 Cox Communications, Inc............................... 6.875 06/15/05 5,208,000
3,000 Cox Communications, Inc............................... 7.250 11/15/15 3,130,200
1,000 Harcourt General, Inc................................. 7.200 08/01/27 1,027,200
1,250 Harcourt General, Inc................................. 8.875 06/01/22 1,544,750
5,000 ITT Corp.............................................. 6.750 11/15/05 5,063,000
6,000 News America Holdings, Inc............................ 8.875 04/26/23 7,134,000
2,000 News America Holdings, Inc............................ 9.250 02/01/13 2,426,300
2,500 Royal Caribbean Cruises Ltd........................... 7.500 10/15/27 2,568,750
2,500 TCI Communications, Inc............................... 8.750 08/01/15 2,906,250
3,000 Tele Communications, Inc.............................. 6.875 02/15/06 3,063,300
2,000 Tele Communications, Inc.............................. 9.250 01/15/23 2,224,440
3,000 Viacom, Inc........................................... 7.750 06/01/05 3,171,900
-----------
48,082,477
-----------
</TABLE>
9 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY 13.1%
$ 6,300 Ashland Oil, Inc..................................... 8.800% 11/15/12 $ 7,608,510
750 Barrett Resources Corp............................... 7.550 02/01/07 770,812
1,605 Consumers Energy Co.................................. 8.875 11/15/99 1,679,681
1,000 Lyondell Petrochemical Co............................ 6.500 02/15/06 991,100
6,300 PDV America, Inc..................................... 7.875 08/01/03 6,514,200
1,500 Petroliam Nasional Berhad
144A - Private Placement (a)......................... 7.625 10/15/26 1,358,250
5,000 Phillips Petroleum Co................................ 8.860 05/15/22 5,704,500
4,000 Union Oil Co......................................... 9.125 02/15/06 4,764,400
-----------
29,391,453
-----------
FINANCE 8.9%
3,000 Cez Fin B V.......................................... 7.125 07/15/07 2,914,800
2,395 First PV Funding Corp................................ 10.300 01/15/14 2,544,688
3,500 Hutchison Whampoa Finance
144A - Private Placement (a)......................... 7.500 08/01/27 3,170,300
3,294 PNPP II Funding Corp................................. 8.510 11/30/06 3,549,219
3,000 Royal Bank Scotland Group............................ 6.375 02/01/11 2,942,700
4,500 Ryder Systems, Inc................................... 9.250 05/15/01 4,940,100
-----------
20,061,807
-----------
HEALTHCARE 5.8%
2,000 Aetna Services, Inc.................................. 7.125 08/15/06 2,081,120
1,000 Allegiance Corp...................................... 7.800 10/15/16 1,076,310
4,000 Baxter International, Inc............................ 6.625 02/15/28 3,919,640
1,500 Beckman Coulter, Inc.,
144A - Private Placement (a)......................... 7.450 03/04/08 1,521,330
500 Manor Care, Inc...................................... 7.500 06/15/06 519,250
3,500 Tenet Healthcare Corp................................ 10.125 03/01/05 3,850,000
-----------
12,967,650
-----------
OIL & GAS 0.5%
1,000 Transcontinental Gas Pipeline Corp................... 7.250 12/01/26 1,012,335
-----------
PRODUCER MANUFACTURING 1.1%
2,500 Rubbermaid, Inc...................................... 6.600 11/15/06 2,554,600
-----------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 7.9%
$1,000 Carter Holt Harvey Ltd.................... 8.375% 04/15/15 $ 1,144,000
4,000 Crown Cork & Seal, Inc.................... 8.000 04/15/23 4,282,000
4,000 Federal Paper Board, Inc.................. 8.875 07/01/12 4,909,200
1,750 Idex Corp................................. 6.875 02/15/08 1,738,520
4,000 IMC Global, Inc........................... 6.875 07/15/07 4,070,880
1,000 IMC Global, Inc........................... 7.300 01/15/28 992,900
300 Owens Corning Fiberglass Corp............. 9.375 06/01/12 368,199
250 Pride Petroleum Services, Inc............. 9.375 05/01/07 270,980
-----------
17,776,679
-----------
TECHNOLOGY 2.7%
5,000 International Business Machines Corp...... 7.500 06/15/13 5,519,500
500 Raytheon Co............................... 7.200 08/15/27 524,500
-----------
6,044,000
-----------
TRANSPORTATION 8.5%
3,000 AMR Corp.................................. 9.500 05/15/01 3,305,700
750 CSX Corp.................................. 8.625 05/15/22 911,925
2,000 Delta Airlines, Inc....................... 9.750 05/15/21 2,575,200
1,500 Kansas City Southern Industries, Inc...... 7.875 07/01/02 1,584,495
4,000 Union Pacific Corp........................ 8.350 05/01/25 4,391,600
5,000 United Airlines, Inc...................... 10.020 03/22/14 6,342,500
-----------
19,111,420
-----------
UTILITIES 8.5%
1,000 360 Communications Co..................... 7.125 03/01/03 1,035,180
1,000 AES Corp.................................. 10.250 07/15/06 1,103,750
1,000 Arizona Public Service Co................. 8.750 01/15/24 1,102,860
2,000 Arizona Public Service Co................. 9.500 04/15/21 2,210,290
1,000 Gulf States Utilities Co.................. 8.940 01/01/22 1,076,940
1,000 Long Island Lighting Co................... 9.000 11/01/22 1,139,000
4,000 Long Island Lighting Co................... 9.750 05/01/21 4,149,880
2,500 Texas Utilities Electric Co............... 8.875 02/01/22 2,885,500
500 UtiliCorp United, Inc..................... 6.700 10/15/06 513,580
</TABLE>
11 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES (CONTINUED)
$ 4,000 Yorkshire Power Finance Ltd.
144A - Private Placement (a)............ 6.496% 02/25/08 $ 3,995,560
------------
19,212,540
------------
TOTAL CORPORATE BONDS 81.8%.................................. 184,145,661
------------
GOVERNMENT OBLIGATIONS 12.3%
4,000 Providence of Newfoundland (Canada)..... 9.000 10/15/21 5,102,800
650 Providence of Saskatchewan (Canada)..... 8.000 02/01/13 745,672
1,000 Republic of Argentina................... 11.375 01/30/17 1,141,250
5,000 Republic of South Africa................ 8.375 10/17/06 5,050,500
3,500 Republic of South Africa................ 8.500 06/28/17 3,315,410
2,500 United Mexican States (Mexico).......... 9.875 01/15/07 2,728,125
4,000 United Mexican States (Mexico).......... 11.375 09/15/16 4,770,000
5,000 United States Treasury Notes............ 5.750 10/31/02 5,025,950
------------
TOTAL GOVERNMENT OBLIGATIONS.................................. 27,879,707
------------
TOTAL LONG-TERM INVESTMENTS 94.1%
(Cost $195,564,485)......................................................... 212,025,368
REPURCHASE AGREEMENT 5.6%
SBC Warburg ($12,490,000 par collateralized by U.S. Government obligations
in a pooled cash account, dated 2/27/98, to be sold on 3/02/98 at $12,495,829)
(Cost $12,490,000).......................................................... 12,490,000
------------
TOTAL INVESTMENTS 99.7%
(Cost $208,054,485)......................................................... 224,515,368
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%.................................... 717,609
------------
NET ASSETS 100.0%............................................................ $225,232,977
------------
</TABLE>
(a) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may be resold only in
transactions exempt from registration which are normally those transactions
with qualified institutional buyers.
12 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Total Investments (Cost $208,054,485)................................. $224,515,368
Cash.................................................................. 918
Receivables:
Interest............................................................ 3,786,228
Fund Shares Sold.................................................... 368,391
Other................................................................. 56,427
------------
TOTAL ASSETS..................................................... 228,727,332
------------
LIABILITIES:
Payables:
Investments Purchased................................................. 1,499,580
Fund Shares Repurchased............................................. 1,087,233
Income Distributions................................................ 452,384
Distributor and Affiliates.......................................... 121,497
Investment Advisory Fee............................................. 83,308
Accrued Expenses...................................................... 131,793
Trustees' Deferred Compensation and Retirement Plans.................. 118,560
------------
Total Liabilities................................................... 3,494,355
------------
NET ASSETS............................................................ $225,232,977
------------
NET ASSETS CONSIST OF:
Capital............................................................... $231,724,936
Net Unrealized Appreciation........................................... 16,460,883
Accumulated Undistributed Net Investment Income....................... (62,636)
Accumulated Net Realized Loss......................................... (22,890,206)
------------
NET ASSETS............................................................ $225,232,977
------------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$179,062,729 and 25,175,766 shares of beneficial interest issued and
outstanding).......................................................... $ 7.11
Maximum sales charge (4.75%* of offering price)..................... .35
------------
Maximum offering price to public.................................... $ 7.46
------------
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$40,826,837 and 5,751,150 shares of beneficial interest issued and
outstanding).......................................................... $ 7.10
------------
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$5,343,411 and 752,667 shares of beneficial interest issued and
outstanding).......................................................... $ 7.10
------------
*On sales of $100,000 or more, the sales charge will be reduced.
</TABLE>
13 See Notes to Financial Statements
<PAGE>
Statement of Operations
For the Six Months Ended February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest................................................................... $ 7,934,488
Other...................................................................... 18,000
-----------
Total Income............................................................. 7,952,488
-----------
EXPENSES:
Investment Advisory Fee.................................................... 508,467
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of
$184,213, $185,516 and $25,150, respectively).............................. 394,879
Shareholder Services....................................................... 240,424
Trustees' Fees and Expenses................................................ 12,138
Legal...................................................................... 6,933
Custody.................................................................... 6,539
Other...................................................................... 135,181
-----------
Total Expenses........................................................ 1,304,561
-----------
NET INVESTMENT INCOME...................................................... $ 6,647,927
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain.......................................................... $ 551,031
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period.................................................. 12,431,314
End of the Period........................................................ 16,460,883
-----------
Net Unrealized Appreciation During the Period.............................. 4,029,569
-----------
NET REALIZED AND UNREALIZED GAIN........................................... $ 4,580,600
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................................. $11,228,527
===========
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended February 28, 1998
and the Year Ended August 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
February 28, 1998 August 31, 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................................... $ 6,647,927 $ 13,877,118
Net Realized Gain/Loss.................................................. 551,031 (177,546)
Net Unrealized Appreciation During the Period........................... 4,029,569 9,169,489
------------ ------------
Change in Net Assets from Operations.................................... 11,228,527 22,869,061
------------ ------------
Distributions from Net Investment Income*............................... (7,025,549) (13,688,097)
Distributions in Excess of Net Investment Income*....................... (62,636) 0
------------ ------------
Total Distributions..................................................... (7,088,185) (13,688,097)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..................... 4,140,342 9,180,964
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................................... 34,543,093 36,820,373
Net Asset Value of Shares Issued
Through Dividend Reinvestment......................................... 4,742,965 9,046,389
Cost of Shares Repurchased.............................................. (18,224,589) (50,822,539)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 21,061,469 (4,955,777)
------------ ------------
TOTAL INCREASE IN NET ASSETS............................................ 25,201,811 4,225,187
NET ASSETS:
Beginning of the Period................................................. 200,031,166 195,805,979
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $(62,636) and $377,622,
respectively)......................................................... $225,232,977 $200,031,166
============ ============
Six Months Ended Year Ended
*Distributions by Class: February 28, 1998 August 31, 1997
- ----------------------------------------------------------------------------------------------------------------
Distributions from and in Excess of Net Investment Income:
Class A Shares........................................................ $ (5,788,497) $(11,405,905)
Class B Shares........................................................ (1,144,469) (1,925,295)
Class C Shares........................................................ (155,219) (356,897)
------------ ------------
$ (7,088,185) $(13,688,097)
------------ ------------
</TABLE>
15 See Notes to Financial Statements
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended August 31,
---------------------------------------------
Class A Shares February 28, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................... $ 6.967 $ 6.650 $ 6.94 $ 6.62 $ 7.36
------- ------- ------ ------ ------
Net Investment Income.................................... .227 .494 .479 .48 .49
Net Realized and Unrealized Gain/Loss.................... .162 .309 (.289) .32 (.745)
------- ------- ------ ------ ------
Total from Investment Operations........................... .389 .803 .190 .80 (.255)
Less Distributions from Net Investment Income.............. .243 .486 .480 .48 .485
------- ------- ------ ------ ------
Net Asset Value, End of the Period......................... $ 7.113 $ 6.967 $6.650 $ 6.94 $ 6.62
======= ======= ====== ====== ======
Total Return (a)........................................... 5.55%* 12.46% 2.71% 12.71% (3.55%)
Net Assets at End of the Period (In millions).............. $ 179.1 $160.9 $162.9 $169.0 $160.0
Ratio of Expenses to Average Net Assets (b)................ 1.09% 1.13% 1.10% 1.13% 1.09%
Ratio of Net Investment Income to Average Net
Assets (b)................................................. 6.50% 7.16% 6.90% 7.22% 7.06%
Portfolio Turnover......................................... 8%* 18% 34% 25% 0%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of expenses was less than 0.01%.
*Non-Annualized
16
<PAGE>
Financial Highlights(Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
February 28, Year Ended August 31,
-------------------------------
Class B Shares 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period......................... $ 6.955 $ 6.642 $ 6.94 $ 6.62 $ 7.36
------- ------- ------ ------ ------
Net Investment Income................. .205 .438 .424 .42 .44
Net Realized and Unrealized
Gain/Loss........................... .156 .308 (.290) .33 (.755)
------- ------- ------ ------ ------
Total from Investment Operations........ .361 .746 .134 .75 (.315)
Less Distributions from Net
Investment Income..................... .217 .433 .432 .43 .425
------- ------- ------ ------ ------
Net Asset Value, End of the Period...... $ 7.099 $ 6.955 $ 6.642 $ 6.94 $ 6.62
======= ======= ======= ====== ======
Total Return (a)........................ 5.17%* 12.19% 1.85% 11.86% (4.38%)
Net Assets at End of the Period
(In millions)......................... $ 40.8 $ 34.0 $ 26.9 $ 19.2 $ 13.5
Ratio of Expenses to Average
Net Assets (b)........................ 1.87% 1.91% 1.90% 1.94% 1.90%
Ratio of Net Investment Income
to Average Net Assets (b)............. 5.70% 6.37% 6.12% 6.40% 6.29%
Portfolio Turnover...................... 8%* 18% 34% 25% 0%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of expenses was less than 0.01%.
*Non-Annualized
17 See Notes to Financial Statements
<PAGE>
Financial Highlights(Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended August 31,
------------------------------------
Class C Shares February 28, 1998 1997 1996 1995 1994 (a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $ 6.956 $6.639 $ 6.93 $ 6.62 $ 7.36
------- ------ ------ ------ ------
Net Investment Income......................... .202 .434 .426 .42 .44
Net Realized and Unrealized Gain/Loss......... .158 .316 (.285) .32 (.755)
------- ------ ------ ------ ------
Total from Investment Operations................ .360 .750 .141 .74 (.315)
Less Distributions from
Net Investment Income......................... .217 .433 .432 .43 .425
------- ------ ------ ------ ------
Net Asset Value, End of the Period.............. $ 7.099 $6.956 $6.639 $ 6.93 $ 6.62
======= ====== ====== ====== ======
Total Return (b)................................ 5.17%* 11.63% 2.00% 11.70% (4.51%)
Net Assets at End of the Period
(In millions)................................. $ 5.3 $ 5.1 $ 5.9 $ 4.1 $ 2.3
Ratio of Expenses to
Average Net Assets (c)........................ 1.87% 1.92% 1.90% 1.93% 1.93%
Ratio of Net Investment Income to
Average Net Assets (c)........................ 5.70% 6.38% 6.14% 6.40% 6.49%
Portfolio Turnover.............................. 8%* 18% 34% 25% 0%
</TABLE>
*Non-Annualized
(a) This class of shares commenced distribution on August 30, 1993. Therefore,
no information is presented for the 1993 fiscal year.
(b) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC's reimbursement of expenses was less than 0.01%.
18 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
February 28, 1998 (Unaudited)
________________________________________________________________________________
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Corporate Bond Fund (the "Fund'') is organized as a
Delaware business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to provide current income with preservation of
capital through investing primarily in a diversified portfolio of corporate debt
securities. The Fund commenced investment operations on September 23, 1971. The
distribution of the Fund's Class B and Class C shares commenced on September 28,
1992 and August 30, 1993, respectively.
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-Fixed income investments are stated at value using market
quotations. Investments in securities listed on a securities exchange are valued
at their last sale price. Unlisted securities and listed securities for which
the last sales price is not available are valued at the mean of the bid and
asked prices. For those securities where quotations or prices are not available,
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Short-term securities with remaining maturities
of 60 days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued'' or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At February 28, 1998, there were no
when issued or delayed delivery purchase commitments.
The Fund invests 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
19
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
________________________________________________________________________________
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. INCOME AND EXPENSES-Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Original issue discount is
amortized over the expected life of each applicable security. Premiums on debt
securities are not amortized. Expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. 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 to its shareholders.
Therefore, no provision for federal income taxes is required.
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 these losses against any future realized capital
gains. At August 31, 1997, the Fund had an accumulated capital loss carryforward
for tax purposes of $23,353,863 which will expire between August 31, 1998 and
August 31, 2005. Of this amount, $7,599,874 will expire on August 31,1998. Net
realized loss differs for financial and tax reporting purposes primarily as a
result of gains or losses recognized for tax purposes on open futures positions.
At February 28, 1998, for federal income tax purposes the cost of long- and
short-term investments is $208,054,485; the aggregate gross unrealized
appreciation is $16,935,471 and the aggregate gross unrealized depreciation is
$474,588, resulting in net unrealized appreciation of $16,460,883.
E. DISTRIBUTION OF INCOME AND GAINS-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included in ordinary income for tax purposes.
20
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
________________________________________________________________________________
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities 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 six months ended February 28, 1998, the Fund recognized expenses of
approximately $6,200 representing legal services provided by Skadden, Arps,
Slate, Meagher &Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended February 28, 1998, the Fund recognized expenses of
approximately $18,800 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 28, 1998, the Fund recognized expenses of approximately $158,000,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund provides deferred compensation and retirement plans for its trustees
who are not officers of VKAC. Under the deferred compensation plan, trustees may
elect to defer all or a portion of their compensation to a later date. Benefits
under the retirement plan are payable for a ten-year period and are based upon
each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is equal to $2,500.
21
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At February 28, 1998, capital aggregated $186,534,727, $39,970,062 and
$5,220,147 for Classes A, B and C, respectively. For the six months ended
February 28, 1998, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A....................................... 3,337,836 $ 23,743,665
Class B....................................... 1,318,842 9,345,482
Class C....................................... 204,598 1,453,946
--------- ------------
Total Sales..................................... 4,861,276 $ 34,543,093
========= ============
Dividend Reinvestment:
Class A....................................... 555,466 $ 3,944,425
Class B....................................... 102,593 727,362
Class C....................................... 10,040 71,178
--------- ------------
Total Dividend Reinvestment..................... 668,099 $ 4,742,965
========= ============
Repurchases:
Class A....................................... (1,821,067) $(12,904,488)
Class B....................................... (555,093) (3,931,819)
Class C....................................... (195,813) (1,388,282)
--------- ------------
Total Repurchases............................... (2,571,973) $(18,224,589)
========= ============
</TABLE>
22
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- ------------------------------------------------------------------------------
At August 31, 1997, capital aggregated $171,751,125, $33,829,037 and
$5,083,305 for Classes A, B and C, respectively. For the year ended August 31,
1997, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................................ 3,365,902 $ 23,137,035
Class B........................................ 1,831,776 12,527,159
Class C........................................ 168,402 1,156,179
--------- -----------
Total Sales...................................... 5,366,080 $ 36,820,373
========= ===========
Dividend Reinvestment:
Class A........................................ 1,113,282 $ 7,650,477
Class B........................................ 179,988 1,235,230
Class C........................................ 23,436 160,682
--------- -----------
Total Dividend Reinvestment...................... 1,316,706 $ 9,046,389
========= ===========
Repurchases:
Class A........................................ (5,877,398) $(40,312,723)
Class B........................................ (1,182,021) (8,099,925)
Class C........................................ (352,188) (2,409,891)
--------- -----------
Total Repurchases................................ (7,411,607) $(50,822,539)
========= ===========
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
Year of Redemption Class B Class C
- -------------------------------------------------------------------------
<S> <C> <C>
First............................................... 4.00% 1.00%
Second.............................................. 4.00% None
Third............................................... 3.00% None
Fourth.............................................. 2.50% None
Fifth............................................... 1.50% None
Sixth and Thereafter................................ None None
</TABLE>
23
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- ------------------------------------------------------------------------------
For the six months ended February 28, 1998, VKAC, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $18,700 and CDSC on redeemed shares of approximately $36,200.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $31,313,028 and $15,615,470 respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation on securities.
Upon disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
The Fund may invest in futures contracts, a type of derivative. A futures
contract is an agreement involving the delivery of a particular asset on a
specified future date at an agreed upon price. The Fund generally invests in
exchange traded futures contracts on U.S. Treasury Bonds and typically closes
the contract prior to the delivery date. These contracts are generally used to
manage the portfolio's effective maturity and duration.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin). The potential risk of loss associated
with a futures contract could be in excess of the variation margin reflected on
the Statement of Assets and Liabilities.
6. 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 .25% of Class A average net assets and
1.00% each of Class B and Class C average net assets are accrued daily. Included
in these fees for the six months ended February 28, 1998 are payments retained
by VKAC of approximately $157,700.
24
<PAGE>
Van Kampen American Capital Corporate Bond Fund
Board of Trustees Investment Adviser
J. Miles Branagan VAN KAMPEN AMERICAN CAPITAL
Richard M. De Martini* ASSET MANAGEMENT, INC.
Linda Hutton Heagy One Parkview Plaza
Oakbrook Terrace, Illinois 60181
R. Craig Kennedy
Jack E. Nelson Distributor
Phillip B. Rooney VAN KAMPEN AMERICAN CAPITAL
Fernando Sisto DISTRIBUTORS, INC.
Wayne W. Whalen* Chairman One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Officers Shareholder Servicing Agent
Dennis J. McDonnell* ACCESS Investor
President SERVICES, INC.
Ronald A. Nyberg* P.O. Box 418256
Vice President and Secretary Kansas City, Missouri 64141-9256
Edward C. Wood, III*
Vice President and Chief Financial Officer Custodian
Curtis W. Morell* STATE STREET BANK
Vice President and Chief Accounting Officer AND TRUST COMPANY
John L. Sullivan* 225 Franklin Street
Treasurer P.O. Box 1713
Tanya M. Loden* Boston, Massachusetts 02105
Controller
Peter W. Hegel* Legal Counsel
Alan T. Sachtleben* SKADDEN, ARPS, SLATE,
Paul R. Wolkenberg* MEAGHER & FLOM (ILLINOIS)
Vice Presidents 333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
PRICE WATERHOUSE LLP
200 East Randolph Drive
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. After June 30, 1998, the report must be accompanied by a
quarterly performance update, if applicable.
<PAGE>
-----------------
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
-----------------
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> CORPORATE BOND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 208,054,485
<INVESTMENTS-AT-VALUE> 224,515,368
<RECEIVABLES> 4,154,619
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 57,345
<TOTAL-ASSETS> 228,727,332
<PAYABLE-FOR-SECURITIES> 1,499,580
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,994,775
<TOTAL-LIABILITIES> 3,494,355
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 186,534,727
<SHARES-COMMON-STOCK> 25,175,766
<SHARES-COMMON-PRIOR> 23,103,531
<ACCUMULATED-NII-CURRENT> (62,636)
<OVERDISTRIBUTION-NII> 62,636
<ACCUMULATED-NET-GAINS> (22,890,206)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,460,883
<NET-ASSETS> 179,062,729
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,934,488
<OTHER-INCOME> 18,000
<EXPENSES-NET> (1,304,561)
<NET-INVESTMENT-INCOME> 6,647,927
<REALIZED-GAINS-CURRENT> 551,031
<APPREC-INCREASE-CURRENT> 4,029,569
<NET-CHANGE-FROM-OPS> 11,228,527
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,788,497)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,337,836
<NUMBER-OF-SHARES-REDEEMED> (1,821,067)
<SHARES-REINVESTED> 555,466
<NET-CHANGE-IN-ASSETS> 18,111,459
<ACCUMULATED-NII-PRIOR> 377,622
<ACCUMULATED-GAINS-PRIOR> (23,441,237)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 508,467
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,304,561
<AVERAGE-NET-ASSETS> 168,945,789
<PER-SHARE-NAV-BEGIN> 6.967
<PER-SHARE-NII> 0.227
<PER-SHARE-GAIN-APPREC> 0.162
<PER-SHARE-DIVIDEND> (0.243)
<PER-SHARE-DISTRIBUTIONS> 0.000
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<PER-SHARE-NAV-END> 7.113
<EXPENSE-RATIO> 1.09
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> CORPORATE BOND CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 208,054,485
<INVESTMENTS-AT-VALUE> 224,515,368
<RECEIVABLES> 4,154,619
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 57,345
<TOTAL-ASSETS> 228,727,332
<PAYABLE-FOR-SECURITIES> 1,499,580
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,994,775
<TOTAL-LIABILITIES> 3,494,355
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,970,062
<SHARES-COMMON-STOCK> 5,751,150
<SHARES-COMMON-PRIOR> 4,884,808
<ACCUMULATED-NII-CURRENT> (62,636)
<OVERDISTRIBUTION-NII> 62,636
<ACCUMULATED-NET-GAINS> (22,890,206)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,460,883
<NET-ASSETS> 40,826,837
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,934,488
<OTHER-INCOME> 18,000
<EXPENSES-NET> (1,304,561)
<NET-INVESTMENT-INCOME> 6,647,927
<REALIZED-GAINS-CURRENT> 551,031
<APPREC-INCREASE-CURRENT> 4,029,569
<NET-CHANGE-FROM-OPS> 11,228,527
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,144,469)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,318,842
<NUMBER-OF-SHARES-REDEEMED> (555,093)
<SHARES-REINVESTED> 102,593
<NET-CHANGE-IN-ASSETS> 6,851,273
<ACCUMULATED-NII-PRIOR> 377,622
<ACCUMULATED-GAINS-PRIOR> (23,441,237)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 508,467
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,304,561
<AVERAGE-NET-ASSETS> 37,442,853
<PER-SHARE-NAV-BEGIN> 6.955
<PER-SHARE-NII> 0.205
<PER-SHARE-GAIN-APPREC> 0.156
<PER-SHARE-DIVIDEND> (0.217)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.099
<EXPENSE-RATIO> 1.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> CORPORATE BOND CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 208,054,495
<INVESTMENTS-AT-VALUE> 224,515,368
<RECEIVABLES> 4,154,619
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 57,345
<TOTAL-ASSETS> 228,727,332
<PAYABLE-FOR-SECURITIES> 1,499,580
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,994,775
<TOTAL-LIABILITIES> 3,494,355
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,220,147
<SHARES-COMMON-STOCK> 752,667
<SHARES-COMMON-PRIOR> 733,842
<ACCUMULATED-NII-CURRENT> (62,636)
<OVERDISTRIBUTION-NII> 62,636
<ACCUMULATED-NET-GAINS> (22,890,206)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,460,883
<NET-ASSETS> 5,343,411
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,934,488
<OTHER-INCOME> 18,000
<EXPENSES-NET> (1,304,561)
<NET-INVESTMENT-INCOME> 6,647,927
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<NET-CHANGE-FROM-OPS> 11,228,527
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (155,219)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 204,598
<NUMBER-OF-SHARES-REDEEMED> (195,813)
<SHARES-REINVESTED> 10,040
<NET-CHANGE-IN-ASSETS> 239,079
<ACCUMULATED-NII-PRIOR> 377,622
<ACCUMULATED-GAINS-PRIOR> (23,441,237)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 508,467
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<PER-SHARE-NAV-BEGIN> 6.956
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<PER-SHARE-NAV-END> 7.099
<EXPENSE-RATIO> 1.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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