UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02423
Van Kampen Corporate Bond Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 8/31
Date of reporting period: 8/31/03
Item 1. Report to Shareholders
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Corporate Bond Fund performed during the annual period. The portfolio
management team will provide an overview of the market conditions and
discuss some of the factors that affected investment performance during
the reporting period. In addition, this report includes the fund's
financial statements and a list of fund investments as of August 31,
2003.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the fund will achieve its investment
objective. The fund is subject to market risk, which is the possibility
that the market values of securities owned by the fund will decline and,
therefore, the value of the fund shares may be less than what you paid
for them. Accordingly, you can lose money investing in this fund. Please
see the prospectus for more complete information on investment risks.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
Performance Summary
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lehman Brothers
Corporate Bond Index and the Lipper Corporate BBB-Rated Index from 8/31/93
through 8/31/03. Class A shares, adjusted for sales charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN CORPORATE LEHMAN BROTHERS CORPORATE LIPPER CORPORATE
BOND FUND BOND INDEX BBB-RATED INDEX
-------------------- ------------------------- ----------------
8/93 10000.00 10000.00 10000.00
10017.00 10044.40 10029.00
12/93 9924.00 10066.20 10049.70
9670.00 9791.41 9716.16
9443.00 9715.46 9534.70
9485.00 9815.21 9601.56
12/94 9500.00 9798.70 9593.15
9981.00 10320.70 10048.90
10715.00 10967.80 10751.40
10996.00 11193.20 11011.60
12/95 11519.00 11660.10 11528.40
11148.00 11497.40 11293.20
11198.00 11553.00 11342.00
11383.00 11778.30 11591.80
12/96 11825.00 12122.40 12017.30
11740.00 12072.70 11937.10
12253.00 12492.20 12434.80
12773.00 12887.80 12917.70
12/97 13085.00 13135.60 13253.30
13329.00 13356.90 13485.60
13630.00 13622.80 13759.40
13775.00 14167.40 13930.20
12/98 14035.00 14224.90 14047.60
13833.00 14226.00 14017.70
13507.00 14110.30 13854.60
13542.00 14209.40 13851.80
12/99 13569.00 14247.80 13890.10
13725.00 14424.30 14148.90
13757.00 14633.30 14221.90
14178.00 15102.60 14584.80
12/00 14632.00 15596.20 14979.70
15119.00 16215.50 15483.90
15249.00 16379.70 15556.00
15771.00 17060.10 15962.00
12/01 16009.00 17119.80 16096.10
15763.00 17090.30 16048.30
15831.00 17633.40 16345.40
16050.00 18372.30 16741.80
12/02 16550.00 18855.10 17254.40
16902.00 19280.50 17691.20
17692.00 20055.00 18545.00
8/03 16500.00 19498.90 18054.40
</Table>
Source: Confluence Technologies, Inc. and Lipper Inc.
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 09/23/71 since 09/28/92 since 08/30/93
- ---------------------------------------------------------------------------------------------
AVERAGE ANNUAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 7.95% 7.79% 5.83% 5.83% 4.83% 4.83%
10-year 5.65 5.14 5.14 5.14 4.83 4.83
5-year 5.05 4.03 4.28 4.04 4.28 4.28
1-year 9.20 3.99 8.38 4.38 8.38 7.38
- ---------------------------------------------------------------------------------------------
30-Day SEC Yield 4.40 3.87 3.87
</Table>
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and fund shares, when redeemed, may be worth
more or less than their original cost. The returns shown in this report do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
As a result of recent market activity, current performance may vary from the
figures shown. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor. Average annual total return with sales
charges includes payment of the maximum sales charge of 4.75 percent for Class A
shares, a contingent deferred sales charge of 4.00 percent for Class B shares
(in year one and declining to zero after year five), a contingent deferred sales
charge of 1.00 percent for Class C shares in year one, and combined Rule 12b-1
fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent
for Class B and C shares. The since inception and 10-year returns for Class B
shares reflect the conversion of Class B shares into Class A shares six years
after purchase. See footnote 3 in the Notes to Financial Statements for
additional information. Figures shown above assume reinvestment of all dividends
and capital gains. SEC yield is a calculation for determining the amount of
portfolio income, excluding non-income items as prescribed by the SEC. Yields
are subject to change. Distribution rate represents the monthly annualized
distributions of the fund at the end of the period and not the earnings of the
fund.
Lehman Brothers Corporate Bond Index is a market-weighted index of
investment-grade corporate fixed-rate debt issues with maturities of one year or
more. Lipper Corporate BBB-Rated Index is an index of funds with similar
investment objectives as this fund. Indexes are unmanaged and do not include any
sales charges or fees. Such costs would lower performance. It is not possible to
invest directly in an index.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2003
Van Kampen Corporate Bond Fund is managed by the adviser's Taxable Fixed
Income team. Members of the team include Gordon W. Loery, Executive
Director, and David S. Horowitz, Vice President.(1) The following
discussion reflects their views on the fund's performance.
Q. BEFORE YOU DISCUSS HOW THE FUND PERFORMED, PLEASE DESCRIBE THE
OVERALL MARKET ENVIRONMENT.
A. The environment for U.S. investment-grade corporate bonds during the
period was favorable. Investors were drawn to the sector by valuations
that, as measured by the yield advantage over Treasuries, were near
record levels. Expectations of economic recovery and signs of improvement
in corporate earnings also contributed to growing demand for corporate
bonds. Strong performance resulted across the ratings spectrum, with
lower-quality issues posting particularly robust results.
Perhaps the greatest driver of corporate bond performance was the decline
in interest rates. The Federal Reserve Board lowered rates throughout the
period in an attempt to stimulate a stronger economic recovery. These
rate reductions, coupled with a general flight to quality, reduced yields
on government debt across the yield curve. Consequently, the relatively
higher yields available from corporate debt grew more attractive to
investors.
The strongest returns during the course of the period were earned by
sectors and securities that were most heavily out of favor during the
preceding years. Wireless communications, utilities, telecommunications
and cable all soared after performing dismally in early 2002. These
sectors benefited from a combination of low valuations, perceived
improvement in corporate governance and financial results that exceeded
cautious investor expectations.
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. The fund outperformed its benchmark indexes
-- The fund returned 9.20 percent for the 12 months that ended August
31, 2003. Performance figures are for Class A shares, and assume the
reinvestment of all distributions but do not reflect the deduction
of any applicable sales charges. If sales charges were included,
performance would be lower. Past performance is no guarantee of
future results.
(1)Team members may change at any time without notice.
2
-- The fund's benchmarks, the Lehman Brothers Corporate Bond Index and
the Lipper Corporate BBB-Rated Index, returned 8.13 and 8.81
percent, respectively.
-- The fund's monthly dividend of $0.0295 translated to a distribution
rate of 5.12 percent based on the fund's maximum offering price on
August 31, 2003 (Class A shares adjusted for sales charges).
See Performance Summary for additional information and index definitions.
Q. WHAT HELPED PERFORMANCE DURING THE REPORTING PERIOD?
A. The portfolio benefited from its exposure to the information-technology,
telecommunications, and wireless-communications sectors, all of which
gained from expectations of faster economic growth. The fund's holdings
in the gaming and leisure industry also performed well, reflecting
optimism that higher levels of consumer confidence would translate into
additional spending in these areas.
We kept the fund's duration (price sensitivity to changes in
interest-rate levels) lower than that of its benchmarks as a defensive
measure against the potential effects of rising interest rates. As a
result, the fund was not impacted as severely when interest rates rose
significantly toward the end of the period.
We limited the fund's exposure to the five- to ten-year part of the yield
curve because we believed this area to be prohibitively expensive. This
strategy proved beneficial as securities in this maturity range
underperformed the market during the reporting period.
Q. WHAT FACTORS HINDERED PERFORMANCE?
A. The fund's positions in the transportation, energy and health-care
sectors held back performance. While each of these areas earned positive
returns during the 12-month period, they lagged the broader
<Table>
TOP 5 INDUSTRIES AS OF 8/31/03 RATING ALLOCATION AS OF 8/31/03
Captive Finance 7.3% AAA/Aaa 4.0%
Life Insurance 7.3 AA/Aa 4.4
Electric 6.6 A/A 27.2
Telecommunications 5.6 BBB/Baa 55.2
Paper 5.5 BB/Ba 8.7
B/B 0.5
</Table>
Subject to change daily. All percentages are as a percentage of long-term
investments. Provided for informational purposes only and should not be deemed
as a recommendation to buy securities in the industries shown above. Rating
allocations based upon ratings as issued by Standard and Poor's and Moody's,
respectively. Morgan Stanley is a full-service securities firm engaged in
securities trading and brokerage activities, investment banking, research and
analysis, financing and financial advisory services.
3
market. Underperformance by these sectors resulted from disparate
factors, namely lingering concerns over the trading of energy contracts,
perceived compressed margins on the health-care side, and valuations in
the transportation sector that appeared higher than warranted.
Until the middle of June, the portfolio's lower duration dampened returns
as interest rates continued to fall. After that point, however, with
interest rates on the rise, the fund's more conservative stance towards
rising rates began to pay off.
Q. PLEASE WALK US THROUGH HOW YOU POSITIONED THE FUND, HIGHLIGHTING
KEY ISSUES.
A. It became clear to us during the period that the best values were to be
found among lower-rated debt. After conducting intensive credit analysis,
our analysts identified several suitable opportunities among BBB rated
bonds. Consequently, we moved assets out of higher-quality issues to
increase the fund's exposure to BBB paper.
In addition, we positioned the fund to potentially benefit from an
economic recovery, with concentrations relative to the benchmarks in the
industrial and consumer-cyclical sectors--areas that typically prosper
during periods of economic improvement.
Q. NOW THAT YOU'VE PROVIDED AN OVERVIEW FOR THE FUND, DO YOU HAVE ANY
CLOSING THOUGHTS?
A. We are continuing to maintain a defensive posture regarding interest
rates, which we believe are too low given current economic and market
conditions. Should the economy continue to improve, we would expect rates
to increase. Regardless of where rates may be headed, however, we will
continue with our disciplined investment approach, monitoring the market
closely for opportunities.
4
ANNUAL HOUSEHOLDING NOTICE
To reduce expenses, the fund attempts to eliminate duplicate mailings to
the same address. The fund delivers a single copy of certain shareholder
documents to investors who share an address, even if the accounts are
registered under different names. The fund's prospectus and shareholder
reports (including annual privacy notices) will be delivered to you in
this manner indefinitely unless you instruct us otherwise. You can
request multiple copies of these documents by either calling (800)
341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza,
P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has
received your instructions, we will begin sending individual copies for
each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the fund's policies and procedures with respect to the
voting of proxies relating to the Fund's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
August 31, 2003
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
CORPORATE BONDS 89.6%
AEROSPACE & DEFENSE 2.7%
$ 2,065 Boeing Capital Corp. ...................... 5.800% 01/15/13 $ 2,073,097
265 Boeing Capital Corp. ...................... 6.500 02/15/12 279,626
1,775 Boeing Capital Corp. ...................... 6.100 03/01/11 1,845,116
345 Boeing Co. ................................ 6.625 02/15/38 341,291
1,090 Goodrich Corp. ............................ 7.625 12/15/12 1,191,375
1,000 Lockheed Martin Corp. ..................... 8.200 12/01/09 1,196,844
3,225 Lockheed Martin Corp. ..................... 8.500 12/01/29 4,107,147
1,960 Raytheon Co. .............................. 8.300 03/01/10 2,315,144
------------
13,349,640
------------
AUTOMOTIVE 3.2%
735 Arvinmeritor, Inc. ........................ 6.625 06/15/07 731,325
1,280 Arvinmeritor, Inc. ........................ 8.750 03/01/12 1,331,200
2,915 Daimler Chrysler NA Holding................ 8.500 01/18/31 3,286,718
900 Delphi Corp. .............................. 6.125 05/01/04 918,111
8,305 Ford Motor Co. ............................ 7.450 07/16/31 7,398,709
1,380 General Motors Acceptance Corp. ........... 4.500 07/15/06 1,383,649
305 Hertz Corp. ............................... 7.625 08/15/07 323,917
------------
15,373,629
------------
BANKING 4.2%
1,145 Citigroup, Inc. ........................... 6.000 02/21/12 1,222,162
3,820 Citigroup, Inc. ........................... 5.625 08/27/12 3,950,613
160 Citigroup, Inc. ........................... 6.625 06/15/32 169,167
5,355 JP Morgan Chase & Co. ..................... 6.750 02/01/11 5,937,753
700 MBNA American Bank NA...................... 7.125 11/15/12 776,751
3,460 MBNA Corp. ................................ 6.125 03/01/13 3,569,056
2,470 UFJ Finance Aruba AEC (Aruba).............. 6.750 07/15/13 2,449,200
1,690 Washington Mutual Bank FA.................. 5.500 01/15/13 1,701,081
275 Washington Mutual, Inc. ................... 8.250 04/01/10 330,137
------------
20,105,920
------------
BEVERAGE 0.5%
2,200 Miller Brewing Co., 144A -Private Placement
(a)........................................ 4.250 08/15/08 2,195,574
------------
BROKERAGE 1.7%
2,715 Goldman Sachs Group, Inc. ................. 6.875 01/15/11 3,022,425
380 Goldman Sachs Group, Inc. ................. 6.600 01/15/12 414,382
1,160 Goldman Sachs Group, Inc. ................. 6.125 02/15/33 1,126,919
</Table>
6 See Notes to Financial Statements
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
BROKERAGE (CONTINUED)
$ 2,000 Lehman Brothers Holdings, Inc. ............ 8.500% 05/01/07 $ 2,316,236
1,355 Lehman Brothers Holdings, Inc. ............ 6.625 01/18/12 1,487,936
------------
8,367,898
------------
BUILDING MATERIALS 0.6%
1,335 Centex Corp. .............................. 7.500 01/15/12 1,491,559
1,160 Mohawk Industries, Inc., Ser D............. 7.200 04/15/12 1,278,290
------------
2,769,849
------------
CAPTIVE FINANCE 6.9%
4,305 Countrywide Home Loans, Inc. .............. 3.250 05/21/08 4,114,620
555 Ford Motor Credit Co. ..................... 7.375 10/28/09 573,712
8,330 Ford Motor Credit Co. ..................... 7.250 10/25/11 8,430,035
5,100 General Electric Capital Corp. ............ 6.750 03/15/32 5,469,439
2,985 General Motors Acceptance Corp. ........... 6.875 09/15/11 2,990,660
7,280 General Motors Acceptance Corp. ........... 8.000 11/01/31 7,023,096
2,000 Heller Financial, Inc. .................... 6.375 03/15/06 2,183,452
2,500 International Lease Finance Corp. ......... 8.375 12/15/04 2,706,247
------------
33,491,261
------------
CHEMICALS 0.0%
120 FMC Corp. ................................. 10.250 11/01/09 136,200
------------
CONGLOMERATES 2.2%
2,260 Cooper Industries, Inc. ................... 5.250 07/01/07 2,376,433
4,370 Honeywell International, Inc. ............. 6.125 11/01/11 4,709,361
1,890 Hutchison Whampoa International Ltd.,
144A-Private Placement (United Kingdom)
(a)........................................ 6.500 02/13/13 1,873,137
475 Tyco International Group SA (Luxembourg)... 5.800 08/01/06 487,469
140 Tyco International Group SA (Luxembourg)... 6.750 02/15/11 143,150
1,275 Tyco International Group SA (Luxembourg)... 6.375 10/15/11 1,282,969
------------
10,872,519
------------
CONSTRUCTION MACHINERY 0.6%
2,915 Kennametal, Inc. .......................... 7.200 06/15/12 3,025,024
------------
ELECTRIC 6.2%
1,595 Appalachian Power Co., Ser H............... 5.950 05/15/33 1,427,011
1,140 Cincinnati Gas & Electric Co. ............. 5.700 09/15/12 1,169,409
910 Cincinnati Gas & Electric Co., Ser A....... 5.400 06/15/33 789,182
1,030 Cincinnati Gas & Electric Co., Ser B....... 5.375 06/15/33 889,844
1,705 Columbus Southern Power Co., Ser B,
144A-Private Placement (a)................. 6.600 03/01/33 1,716,040
475 Consumers Energy Co., Ser B, 144A-Private
Placement (a).............................. 5.375 04/15/13 452,518
1,675 Consumers Energy Co., Ser E, 144A-Private
Placement (a).............................. 4.000 05/15/10 1,560,185
</Table>
See Notes to Financial Statements 7
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
ELECTRIC (CONTINUED)
$ 510 Consumers Energy Co., Ser G, 144A-Private
Placement (a).............................. 4.800% 02/17/09 $ 506,773
1,495 Detroit Edison Co. ........................ 6.125 10/01/10 1,605,454
1,640 Duquesne Light Co., Ser O.................. 6.700 04/15/12 1,793,307
1,365 El Paso Energy Partners LP, 144A-Private
Placement (a).............................. 8.500 06/01/10 1,453,725
1,070 Exelon Corp. .............................. 6.750 05/01/11 1,168,354
1,930 First Energy Corp., Ser B.................. 6.450 11/15/11 1,893,280
1,190 First Energy Corp., Ser C.................. 7.375 11/15/31 1,128,964
605 Florida Power & Light...................... 4.850 02/01/13 599,024
560 Indianapolis Power & Light Co.,
144A-Private Placement (a)................. 6.300 07/01/13 554,306
965 Monongahela Power Co. ..................... 5.000 10/01/06 954,144
2,457 Niagara Mohawk Power Corp., Ser F.......... 7.625 10/01/05 2,698,924
1,450 Nisource Financial Corp. .................. 7.625 11/15/05 1,594,055
1,990 Ohio Edison Co., 144A-Private Placement
(a)........................................ 5.450 05/01/15 1,831,616
250 Ohio Power Co., Ser E, 144A-Private
Placement (a).............................. 6.600 02/15/33 251,294
1,970 PSEG Energy Holdings....................... 9.125 02/10/04 1,989,952
1,400 PSEG Energy Holdings....................... 8.625 02/15/08 1,401,526
140 Wisconsin Electric Power................... 5.625 05/15/33 132,075
645 Wisconsin Energy Corp. .................... 6.200 04/01/33 636,612
------------
30,197,574
------------
ENVIRONMENTAL SERVICES 1.8%
810 Allied Waste North America, Inc., Ser B.... 8.500 12/01/08 864,675
1,185 Republic Services, Inc. ................... 6.750 08/15/11 1,281,867
1,220 Waste Management, Inc. .................... 7.000 10/15/06 1,338,367
1,745 Waste Management, Inc. .................... 7.375 08/01/10 1,962,319
2,600 Waste Management, Inc. .................... 7.000 07/15/28 2,691,902
315 Waste Management, Inc. .................... 7.375 05/15/29 337,816
------------
8,476,946
------------
FOOD 1.1%
2,000 ConAgra Foods, Inc. ....................... 7.500 09/15/05 2,197,524
295 Smithfield Foods, Inc., 144A-Private
Placement (a).............................. 7.750 05/15/13 305,325
2,470 Smithfield Foods, Inc., Ser B.............. 8.000 10/15/09 2,605,850
------------
5,108,699
------------
GAMING 2.0%
4,040 Harrahs Operating Co., Inc. ............... 8.000 02/01/11 4,628,507
2,555 MGM Mirage, Inc. .......................... 8.500 09/15/10 2,880,762
1,385 Park Place Entertainment Corp. ............ 7.500 09/01/09 1,481,950
620 Station Casinos, Inc. ..................... 8.375 02/15/08 661,850
------------
9,653,069
------------
</Table>
8 See Notes to Financial Statements
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
HEALTHCARE 4.1%
$ 4,835 Aetna, Inc. ............................... 7.375% 03/01/06 $ 5,329,529
250 Aetna, Inc. ............................... 7.875 03/01/11 288,672
1,085 AmerisourceBergen Corp. ................... 8.125 09/01/08 1,152,812
2,000 HCA, Inc. ................................. 6.910 06/15/05 2,088,718
2,055 HCA, Inc. ................................. 6.300 10/01/12 1,994,893
365 HCA, Inc. ................................. 9.000 12/15/14 408,553
1,010 HCA, Inc. ................................. 7.190 11/15/15 1,002,177
455 Medco Health Solutions, Inc. .............. 7.250 08/15/13 471,756
590 Omnicare, Inc. ............................ 6.125 06/01/13 566,400
1,590 Tenet Healthcare Corp. .................... 7.375 02/01/13 1,570,125
3,565 Tenet Healthcare Corp. .................... 6.875 11/15/31 3,137,200
1,840 Unitedhealth Group, Inc. .................. 5.200 01/17/07 1,950,783
------------
19,961,618
------------
HOME CONSTRUCTION 1.2%
1,260 D.R. Horton, Inc. ......................... 6.875 05/01/13 1,222,200
830 M.D.C. Holdings, Inc. ..................... 7.000 12/01/12 863,934
2,185 Pulte Homes, Inc. ......................... 7.875 08/01/11 2,489,200
1,465 Pulte Homes, Inc. ......................... 6.375 05/15/33 1,318,327
------------
5,893,661
------------
INTEGRATED ENERGY 4.3%
4,740 Conoco, Inc. .............................. 6.950 04/15/29 5,215,678
2,345 Constellation Energy Group................. 7.600 04/01/32 2,594,203
125 Devon Financing Corp ULC................... 6.875 09/30/11 138,311
540 Kerr-McGee Corp. .......................... 5.875 09/15/06 574,654
945 Kerr-McGee Corp. .......................... 6.875 09/15/11 1,037,091
200 Kerr-McGee Corp. .......................... 7.875 09/15/31 223,628
2,325 Marathon Oil Corp. ........................ 6.800 03/15/32 2,404,150
3,410 Pemex Project Funding Master Trust......... 8.000 11/15/11 3,733,950
1,035 Pemex Project Funding Master Trust......... 8.625 02/01/22 1,099,687
995 Pemex Project, Inc. ....................... 9.125 10/13/10 1,164,150
150 Petro-Canada (Canada)...................... 4.000 07/15/13 135,226
1,905 Petro-Canada (Canada)...................... 5.350 07/15/33 1,663,332
890 Sempra Energy.............................. 6.000 02/01/13 916,692
------------
20,900,752
------------
LIFE INSURANCE 6.9%
175 AIG Sunamerica Global Financial,
144A-Private Placement (a)................. 6.900 03/15/32 192,672
4,420 Anthem Insurance Cos. Inc., 144A-Private
Placement (a).............................. 9.125 04/01/10 5,303,836
1,385 Cigna Corp. ............................... 6.375 10/15/11 1,427,917
575 Hartford Financial Services Group.......... 2.375 06/01/06 565,133
330 Hartford Life, Inc. ....................... 7.650 06/15/27 377,117
2,790 Hartford Life, Inc. ....................... 7.375 03/01/31 3,102,770
4,040 Health Net, Inc. .......................... 8.375 04/15/11 4,658,189
</Table>
See Notes to Financial Statements 9
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
LIFE INSURANCE (CONTINUED)
$ 5,670 John Hancock Co., 144A-Private Placement
(a)........................................ 7.375% 02/15/24 $ 6,094,434
190 Metlife, Inc. ............................. 6.125 12/01/11 201,378
275 Metropolitan Life Insurance Co.,
144A-Private Placement (a)................. 7.450 11/01/23 287,166
920 Nationwide Financial Services, Inc. ....... 6.250 11/15/11 967,603
1,150 Nationwide Mutual Insurance Co.,
144A-Private Placement (a)................. 7.500 02/15/24 1,184,278
845 Nationwide Mutual Insurance Co.,
144A-Private Placement (a)................. 8.250 12/01/31 966,632
1,740 Prudential Hldgs, LLC, Ser B, 144A-Private
Placement (a).............................. 7.245 12/18/23 1,899,203
5,165 Prudential Hldgs, LLC, Ser C, 144A-Private
Placement (a).............................. 8.695 12/18/23 6,132,038
------------
33,360,366
------------
LODGING 2.2%
1,950 Hilton Hotels Corp. ....................... 7.625 12/01/12 2,067,000
2,360 Hyatt Equities LLC, 144A-Private Placement
(a)........................................ 6.875 06/15/07 2,438,484
1,080 Marriott International, Ser D.............. 8.125 04/01/05 1,174,793
1,085 Marriott International, Ser E.............. 7.000 01/15/08 1,192,891
1,005 Starwood Hotels & Resorts Worldwide,
Inc. ...................................... 7.375 05/01/07 1,057,762
2,610 Starwood Hotels & Resorts Worldwide,
Inc. ...................................... 7.875 05/01/12 2,740,500
------------
10,671,430
------------
MEDIA-CABLE 2.9%
1,540 AOL Time Warner, Inc. ..................... 7.700 05/01/32 1,695,465
1,000 Comcast Cable Communications, Inc. ........ 8.125 05/01/04 1,040,446
1,805 Comcast Cable Communications, Inc. ........ 8.375 05/01/07 2,067,487
465 Comcast Cable Communications, Inc. ........ 6.750 01/30/11 506,005
240 Comcast Cable Communications, Inc. ........ 7.125 06/15/13 264,510
3,610 Comcast Corp. ............................. 6.500 01/15/15 3,795,124
2,360 Cox Communications, Inc. .................. 7.125 10/01/12 2,630,085
1,705 Echostar DBS Corp. ........................ 9.375 02/01/09 1,822,219
------------
13,821,341
------------
MEDIA-NONCABLE 3.4%
400 AOL Time Warner, Inc. ..................... 6.875 05/01/12 435,606
2,650 AOL Time Warner, Inc. ..................... 7.625 04/15/31 2,879,461
2,500 Clear Channel Communications, Inc. ........ 7.250 10/15/27 2,711,405
2,660 Liberty Media Corp. ....................... 5.700 05/15/13 2,564,995
3,000 News America Hldg, Inc. ................... 8.875 04/26/23 3,698,193
1,735 News America, Inc. ........................ 7.300 04/30/28 1,858,452
</Table>
10 See Notes to Financial Statements
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
MEDIA-NONCABLE (CONTINUED)
$ 1,650 News America, Inc. ........................ 7.280% 06/30/28 $ 1,763,743
650 Time Warner, Inc. ......................... 6.625 05/15/29 631,047
------------
16,542,902
------------
METALS 0.9%
1,330 Inco Ltd. (Canada)......................... 7.750 05/15/12 1,482,419
2,880 Inco Ltd. (Canada)......................... 7.200 09/15/32 2,931,180
------------
4,413,599
------------
NATURAL GAS DISTRIBUTORS 0.5%
2,050 Consolidated Natural Gas Co., Ser C........ 6.250 11/01/11 2,200,794
------------
NATURAL GAS PIPELINES 0.3%
1,485 Gulfterra Energy Partners LP, 144A-Private
Placement (a).............................. 6.250 06/01/10 1,455,300
------------
NONCAPTIVE-CONSUMER FINANCE 2.6%
4,660 American Express Co. ...................... 5.500 09/12/06 5,005,693
1,000 Household Finance Corp. ................... 7.875 03/01/07 1,142,977
4,040 Household Finance Corp. ................... 6.750 05/15/11 4,439,811
1,980 Newcourt Credit Group, Ser B (Canada)...... 6.875 02/16/05 2,108,900
------------
12,697,381
------------
OIL FIELD SERVICES 0.2%
855 Key Energy Services, Inc. ................. 6.375 05/14/13 816,525
------------
PACKAGING 0.4%
1,985 Sealed Air Corp., 144A-Private Placement
(a)........................................ 5.625 07/15/13 1,919,185
------------
PAPER 5.2%
3,020 Abitibi-Consolidated, Inc. (Canada)........ 8.550 08/01/10 3,209,230
1,810 Abitibi-Consolidated, Inc. (Canada)........ 8.850 08/01/30 1,791,978
5,050 Bowater Canada Finance (Canada)............ 7.950 11/15/11 5,026,921
1,010 Celulosa Arauco y Constitucion,
144A-Private Placement (Chile) (a)......... 5.125 07/09/13 953,527
2,115 International Paper Co. ................... 5.850 10/30/12 2,159,125
2,170 International Paper Co. ................... 5.300 04/01/15 2,053,942
1,675 Meadwestvaco Corp. ........................ 6.850 04/01/12 1,819,397
800 Owens Brockway Glass Containers............ 8.750 11/15/12 844,000
1,115 Owens Brockway Glass Containers,
144A-Private Placement (a)................. 7.750 05/15/11 1,120,575
1,285 Packaging Corp of America, 144A-Private
Placement (a).............................. 5.750 08/01/13 1,250,395
</Table>
See Notes to Financial Statements 11
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
PAPER (CONTINUED)
$ 1,310 Sappi Papier Hldg AG, 144A-Private
Placement (Austria) (a).................... 6.750% 06/15/12 $ 1,398,806
3,510 Weyerhaeuser Co. .......................... 6.750 03/15/12 3,751,172
------------
25,379,068
------------
PHARMACEUTICALS 0.9%
2,000 Abbott Laboratories........................ 5.625 07/01/06 2,160,360
2,000 Eli Lilly & Co. ........................... 5.500 07/15/06 2,155,042
------------
4,315,402
------------
PROPERTY & CASUALTY 1.1%
3,535 Farmers Exchange Capital, 144A-Private
Placement (a).............................. 7.050 07/15/28 2,958,703
2,471 Farmers Insurance Exchange Surplus,
144A-Private Placement (a)................. 8.625 05/01/24 2,354,018
------------
5,312,721
------------
RAILROADS 1.3%
1,500 CSX Corp. ................................. 6.750 03/15/11 1,650,704
4,000 Union Pacific Corp. ....................... 8.350 05/01/25 4,473,528
------------
6,124,232
------------
REAL ESTATE INVESTMENT TRUSTS 2.7%
4,035 EOP Operating LP........................... 7.500 04/19/29 4,295,863
420 Istar Financial, Inc. ..................... 7.000 03/15/08 431,550
1,495 Istar Financial, Inc. ..................... 8.750 08/15/08 1,649,434
3,455 Simon Property Group LP.................... 6.375 11/15/07 3,742,356
960 Simon Property Group LP.................... 6.350 08/28/12 1,012,002
1,725 Vornado Realty............................. 5.625 06/15/07 1,796,696
------------
12,927,901
------------
REFINING 1.1%
3,815 Amerada Hess Corp. ........................ 7.875 10/01/29 4,199,995
895 Ashland, Inc. ............................. 7.830 08/15/05 963,791
250 Vintage Petroleum, Inc. ................... 7.875 05/15/11 253,750
------------
5,417,536
------------
RETAIL 3.4%
2,360 CVS Corp. ................................. 5.500 02/15/04 2,402,782
465 CVS Corp. ................................. 5.625 03/15/06 498,863
800 CVS Corp. ................................. 3.875 11/01/07 797,232
2,000 Federated Department Stores, Inc. ......... 6.625 09/01/08 2,212,756
1,500 Federated Department Stores, Inc. ......... 6.300 04/01/09 1,619,775
1,165 Gap, Inc. ................................. 10.550 12/15/08 1,393,631
870 Lowe's Companies, Inc. .................... 6.875 02/15/28 942,808
1,710 Lowe's Companies, Inc. .................... 6.500 03/15/29 1,786,440
2,970 May Department Stores Co. ................. 5.950 11/01/08 3,121,048
</Table>
12 See Notes to Financial Statements
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
RETAIL (CONTINUED)
$ 620 May Department Stores Co. ................. 6.700% 09/15/28 $ 621,067
929 May Department Stores Co. ................. 7.875 03/01/30 1,050,869
------------
16,447,271
------------
SERVICES 1.3%
2,210 Cendant Corp. ............................. 7.375 01/15/13 2,441,067
1,960 Cendant Corp. ............................. 7.125 03/15/15 2,112,092
1,157 Iron Mountain, Inc. ....................... 7.750 01/15/15 1,185,925
685 Iron Mountain, Inc. ....................... 6.625 01/01/16 645,613
------------
6,384,697
------------
SUPERMARKETS 1.7%
1,755 Albertson's, Inc. ......................... 7.500 02/15/11 1,960,302
930 Albertson's, Inc. ......................... 7.450 08/01/29 979,065
4,910 Kroger Co. ................................ 7.500 04/01/31 5,437,216
------------
8,376,583
------------
TECHNOLOGY 1.1%
2,085 Arrow Electronics, Inc. ................... 6.875 07/01/13 2,004,275
465 Arrow Electronics, Inc. ................... 6.875 06/01/18 428,964
1,090 Electronic Data Systems Corp. ............. 7.125 10/15/09 1,124,360
1,675 Electronic Data Systems Corp., 144A-Private
Placement (a).............................. 6.000 08/01/13 1,559,544
------------
5,117,143
------------
TELECOMMUNICATIONS 5.3%
425 AT&T Corp. (b)............................. 7.300/7.800 11/15/11 476,698
3,900 AT&T Corp. (b)............................. 8.000/8.500 11/15/31 4,415,206
2,850 AT&T Wireless Services, Inc. .............. 7.875 03/01/11 3,224,801
325 AT&T Wireless Services, Inc. .............. 8.750 03/01/31 386,421
3,085 Deutsche Telekom International Finance BV
(Netherlands).............................. 8.750 06/15/30 3,717,573
1,500 Sprint Capital Corp. ...................... 7.125 01/30/06 1,613,481
1,000 Sprint Capital Corp. ...................... 6.125 11/15/08 1,039,948
1,000 Verizon Communications, Inc. .............. 7.510 04/01/09 1,142,677
5,570 Verizon Communications, Inc. .............. 6.940 04/15/28 5,765,863
3,295 Verizon Global Funding Corp. .............. 7.750 12/01/30 3,795,244
165 Verizon New England, Inc. ................. 6.500 09/15/11 179,791
------------
25,757,703
------------
</Table>
See Notes to Financial Statements 13
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
TOBACCO 0.9%
$ 1,970 Altria Group, Inc. ........................ 7.750% 01/15/27 $ 1,863,230
1,225 Kraft Foods, Inc. ......................... 5.625 11/01/11 1,233,656
1,015 Kraft Foods, Inc. ......................... 6.250 06/01/12 1,061,077
------------
4,157,963
------------
TOTAL CORPORATE BONDS 89.6%................................................... 433,496,876
------------
CONVERTIBLE CORPORATE OBLIGATION 0.0%
TECHNOLOGY 0.0%
600 Solectron Corp. (Convertible into 7,072
common shares) LYON........................ * 11/20/20 340,500
------------
MORTGAGE BACKED SECURITIES 0.8%
1,237 Government National Mortgage Association
Pool....................................... 7.000 05/15/31 1,308,482
1,508 World Financial Property, 144A-Private
Placement (a).............................. 6.910 09/01/13 1,647,914
711 World Financial Property, 144A-Private
Placement (a).............................. 6.950 09/01/13 778,946
------------
TOTAL MORTGAGE BACKED SECURITIES............................................... 3,735,342
------------
GOVERNMENT OBLIGATIONS 3.5%
1,345 Republic of Columbia (Columbia)............ 10.750 01/15/13 1,516,487
2,000 United Mexican States (Mexico)............. 10.375 02/17/09 2,505,000
2,665 United Mexican States (Mexico)............. 8.375 01/14/11 3,074,077
560 United Mexican States (Mexico)............. 8.000 09/24/22 586,600
2,000 United Mexican States (Mexico)............. 8.300 08/15/31 2,145,000
1,500 United States Treasury Bill................ 0.000 01/15/04 1,494,543
1,470 United States Treasury Notes (STRIPS)
(c)........................................ 0.000 02/15/24 455,541
3,665 United States Treasury Notes (STRIPS)
(c)........................................ 0.000 05/15/24 1,117,356
3,665 United States Treasury Notes (STRIPS)
(c)........................................ 0.000 08/15/24 1,101,446
8,260 United States Treasury Notes (STRIPS)
(c)........................................ 0.000 11/15/24 2,477,480
1,470 United States Treasury Notes (STRIPS)
(c)........................................ 0.000 02/15/25 431,982
------------
TOTAL GOVERNMENT OBLIGATIONS................................................... 16,905,512
------------
ASSET BACKED SECURITIES 0.7%
616 Continental Airlines, Inc. ................ 6.545 08/02/20 577,099
174 Continental Airlines, Inc. ................ 6.648 03/15/19 161,147
</Table>
14 See Notes to Financial Statements
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
ASSET BACKED SECURITIES (CONTINUED)
$ 2,031 Continental Airlines, Inc. ................ 6.900% 01/02/18 $ 1,890,127
565 Ras Laffan Liquefied Natural Gas Co. Ltd.,
144A-Private Placement (a)................. 8.294 03/15/14 639,919
------------
TOTAL ASSET BACKED SECURITIES.................................................. 3,268,292
------------
</Table>
<Table>
<Caption>
SHARES
COMMON STOCK 0.0%
OTHER UTILITIES 0.0%
McLeodUSA, Inc. (Warrants of Class A expiring 04/16/07) (d)......... 970 359
------------
CONVERTIBLE PREFERRED STOCK 0.0%
TELECOMMUNICATIONS 0.0%
McLeodUSA, Inc., Ser A-Convertible Preferred (d).................... 438 2,479
------------
TOTAL LONG-TERM INVESTMENTS 94.6%
(Cost $443,910,179)........................................................ 457,749,360
------------
SHORT-TERM INVESTMENTS 4.0%
REPURCHASE AGREEMENT 3.9%
BankAmerica ($18,636,000 par collateralized by U.S. Government obligations in
a pooled cash account, dated 08/29/03, to be sold on 09/02/03 at
$18,638,050)................................................................. 18,636,000
------------
U.S. TREASURY OBLIGATIONS 0.1%
United States Treasury Bill ($600,000 par, yielding 1.098%, 09/25/03
maturity).................................................................... 599,561
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $19,235,561)......................................................... 19,235,561
------------
TOTAL INVESTMENTS 98.6%
(Cost $463,145,740)........................................................ 476,984,921
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%.................................. 6,551,961
------------
NET ASSETS 100.0%........................................................... $483,536,882
============
</Table>
* Zero coupon bond
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
See Notes to Financial Statements 15
YOUR FUND'S INVESTMENTS
August 31, 2003
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) Interest only strip.
(d) Non-income producing security.
LYON--Liquid Yield Option Note
16 See Notes to Financial Statements
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2003
<Table>
ASSETS:
Total Investments (Cost $463,145,740)....................... $476,984,921
Receivables:
Interest.................................................. 8,413,209
Fund Shares Sold.......................................... 1,876,739
Investments Sold.......................................... 502,242
Variation Margin on Futures............................... 180,557
Other....................................................... 107,936
------------
Total Assets............................................ 488,065,604
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,724,914
Fund Shares Repurchased................................... 1,636,758
Distributor and Affiliates................................ 337,558
Income Distributions...................................... 328,707
Investment Advisory Fee................................... 175,185
Custodian Bank............................................ 25,527
Trustees' Deferred Compensation and Retirement Plans........ 156,682
Accrued Expenses............................................ 143,391
------------
Total Liabilities....................................... 4,528,722
------------
NET ASSETS.................................................. $483,536,882
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $489,585,061
Net Unrealized Appreciation................................. 19,889,383
Accumulated Undistributed Net Investment Income............. (1,337,620)
Accumulated Net Realized Loss............................... (24,599,942)
------------
NET ASSETS.................................................. $483,536,882
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $318,370,594 and 48,363,424 shares of
beneficial interest issued and outstanding)............. $ 6.58
Maximum sales charge (4.75%* of offering price)......... .33
------------
Maximum offering price to public........................ $ 6.91
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $135,593,078 and 20,642,901 shares of
beneficial interest issued and outstanding)............. $ 6.57
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $29,573,210 and 4,502,458 shares of
beneficial interest issued and outstanding)............. $ 6.57
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 17
Statement of Operations
For the Year Ended August 31, 2003
<Table>
INVESTMENT INCOME:
Interest.................................................... $26,141,487
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $689,210, $1,279,065 and $271,043,
respectively)............................................. 2,239,318
Investment Advisory Fee..................................... 1,904,170
Shareholder Services........................................ 1,027,480
Custody..................................................... 51,294
Trustees' Fees and Related Expenses......................... 26,750
Legal....................................................... 12,991
Other....................................................... 328,124
-----------
Total Expenses.......................................... 5,590,127
Less Credits Earned on Cash Balances.................... 7,484
-----------
Net Expenses............................................ 5,582,643
-----------
NET INVESTMENT INCOME....................................... $20,558,844
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 2,627,420
Futures................................................... (3,097,960)
-----------
Net Realized Loss........................................... (470,540)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 4,415,201
-----------
End of the Period:
Investments............................................. 13,839,181
Futures................................................. 6,050,202
-----------
19,889,383
-----------
Net Unrealized Appreciation During the Period............... 15,474,182
-----------
NET REALIZED AND UNREALIZED GAIN............................ $15,003,642
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $35,562,486
===========
</Table>
18 See Notes to Financial Statements
Statements of Changes in Net Assets
<Table>
<Caption>
YEAR ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................................... $ 20,558,844 $ 18,922,120
Net Realized Loss......................................... (470,540) (12,195,843)
Net Unrealized Appreciation/Depreciation During the
Period.................................................. 15,474,182 (6,002,818)
------------- -------------
Change in Net Assets from Operations...................... 35,562,486 723,459
------------- -------------
Distributions from Net Investment Income:
Class A Shares.......................................... (16,543,987) (14,216,903)
Class B Shares.......................................... (6,542,723) (5,593,096)
Class C Shares.......................................... (1,386,369) (1,108,399)
------------- -------------
Total Distributions....................................... (24,473,079) (20,918,398)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....... 11,089,407 (20,194,939)
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................. 295,935,507 191,497,372
Net Asset Value of Shares Issued Through Dividend
Reinvestment............................................ 20,028,626 16,451,045
Cost of Shares Repurchased................................ (225,767,690) (139,588,118)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........ 90,196,443 68,360,299
------------- -------------
TOTAL INCREASE IN NET ASSETS.............................. 101,285,850 48,165,360
NET ASSETS:
Beginning of the Period................................... 382,251,032 334,085,672
------------- -------------
End of the Period (Including accumulated undistributed net
investment income of ($1,337,620) and ($2,131,370)
respectively............................................ $ 483,536,882 $ 382,251,032
============= =============
</Table>
See Notes to Financial Statements 19
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS A SHARES ------------------------------------------------
2003 (a) 2002 (c) 2001 2000 (a) 1999
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD....... $ 6.39 $ 6.75 $ 6.43 $ 6.53 $ 7.03
------ ------ ------ ------ ------
Net Investment Income........................ .33 .37 .41 .43 .43
Net Realized and Unrealized Gain/Loss........ .25 (.33) .33 (.12) (.49)
------ ------ ------ ------ ------
Total from Investment Operations............... .58 .04 .74 .31 (.06)
Less Distributions from Net Investment
Income....................................... .39 .40 .42 .41 .44
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD............. $ 6.58 $ 6.39 $ 6.75 $ 6.43 $ 6.53
====== ====== ====== ====== ======
Total Return (b)............................... 9.20% 0.54% 12.10% 5.01% -1.02%
Net Assets at End of the Period (In
millions).................................... $318.4 $246.5 $221.4 $167.7 $172.9
Ratio of Expenses to Average Net Assets (c).... 1.01% 1.03% 1.07% 1.15% 1.08%
Ratio of Net Investment Income to Average Net
Assets (c)................................... 4.98% 5.48% 6.56% 6.80% 6.26%
Portfolio Turnover............................. 46% 82% 112% 94% 43%
</Table>
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 4% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include combined Rules 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities. The effect of this
change for the year ended August 31, 2002, was to decrease net investment
income per share by $.03, increase net realized and unrealized gains and
losses per share by $.03 and decrease the Ratio of Net Investment Income to
Average Net Assets from 6.00% to 5.48%. Per share, ratios and supplemental
data for periods prior to August 31, 2002, have not been restated to reflect
this change in presentation.
20 See Notes to Financial Statements
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS B SHARES ------------------------------------------------
2003 (a) 2002 (c) 2001 2000 (a) 1999
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD....... $ 6.38 $ 6.74 $ 6.42 $6.51 $ 7.01
------ ------ ------ ----- ------
Net Investment Income........................ .28 .32 .37 .39 .38
Net Realized and Unrealized Gain/Loss........ .25 (.33) .32 (.12) (.49)
------ ------ ------ ----- ------
Total from Investment Operations............... .53 (.01) .69 .27 (.11)
Less Distributions from Net Investment
Income....................................... .34 .35 .37 .36 .39
------ ------ ------ ----- ------
NET ASSET VALUE, END OF THE PERIOD............. $ 6.57 $ 6.38 $ 6.74 $6.42 $ 6.51
====== ====== ====== ===== ======
Total Return (b)............................... 8.38% -0.22% 11.28% 4.34% -1.78%
Net Assets at End of the Period (In
millions).................................... $135.6 $112.3 $ 93.8 $54.5 $ 54.0
Ratio of Expenses to Average Net Assets (c).... 1.77% 1.78% 1.82% 1.92% 1.86%
Ratio of Net Investment Income to Average Net
Assets (c)................................... 4.23% 4.73% 5.81% 6.03% 5.47%
Portfolio Turnover............................. 46% 82% 112% 94% 43%
</Table>
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within the first and second years of purchase and declining to 0% after
the fifth year. If the sales charge was included, total returns would be
lower. These returns include combined Rule 12b-1 fees and service fees of 1%
and do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or redemption of Fund shares.
(c) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities. The effect of this
change for the year ended August 21, 2002, was to decrease net investment
income per share by $.03, increase net realized and unrealized gains and
losses per share by $.03 and decrease the Ratio of Net Investment Income to
Average Net Assets from 5.25% to 4.73%. Per share, ratios and supplemental
data for periods prior to August 31, 2002, have not been restated to reflect
this change in presentation.
See Notes to Financial Statements 21
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS C SHARES ------------------------------------------------
2003 (a) 2002 (c) 2001 2000 (a) 1999
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD....... $6.38 $ 6.74 $ 6.42 $6.51 $ 7.01
----- ------ ------ ----- ------
Net Investment Income........................ .28 .32 .37 .39 .39
Net Realized and Unrealized Gain/Loss........ .25 (.33) .32 (.12) (.50)
----- ------ ------ ----- ------
Total from Investment Operations............... .53 (.01) .69 .27 (.11)
Less Distributions from Net Investment
Income....................................... .34 .35 .37 .36 .39
----- ------ ------ ----- ------
NET ASSET VALUE, END OF THE PERIOD............. $6.57 $ 6.38 $ 6.74 $6.42 $ 6.51
===== ====== ====== ===== ======
Total Return (b)............................... 8.38% -0.22% 11.28% 4.34% -1.78%
Net Assets at End of the Period (In
millions).................................... $29.6 $ 23.4 $ 18.9 $12.0 $ 14.3
Ratio of Expenses to Average Net Assets (c).... 1.77% 1.78% 1.84% 1.92% 1.86%
Ratio of Net Investment Income to Average Net
Assets (c)................................... 4.22% 4.73% 5.79% 6.03% 5.47%
Portfolio Turnover............................. 46% 82% 112% 94% 43%
</Table>
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities. The effect of this
change for the year ended August 31, 2002, was to decrease net investment
income per share by $.03, increase net realized and unrealized gains and
losses per share by $.03 and decrease the Ratio of Net Investment Income to
Average Net Assets from 5.25% to 4.73%. Per share, ratios and supplemental
data for periods prior to August 31, 2002, have not been restated to reflect
this change in presentation.
22 See Notes to Financial Statements
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 (the "1940 Act"), as amended. The
Fund's primary investment objective is to seek to provide current income with
preservation of capital. 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 accounting principles
generally accepted in the United States of America 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 or indications of value obtained from an independent pricing service.
Investments in securities listed on a securities exchange are valued at their
sale price as of the close of such securities exchange. Equity securities traded
on NASDAQ are valued at the NASDAQ Official Closing Price. Listed and unlisted
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 as noted above, valuations are determined in accordance
with procedures established in good faith by the Board of Trustees. Futures
contracts are valued at the settlement price established each day on the
exchange in which they are traded. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
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 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 Asset Management Inc. (the "Adviser") or its affiliates,
the daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. The Fund
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is required
to maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis.
Discounts on debt securities purchased are accreted and premiums are amortized
over the expected life of each applicable security. Income and expenses of the
Fund are allocated on a pro rata basis to
23
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
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, 2003, the Fund had an accumulated capital loss carryforward
for tax purposes of $18,503,503 which will expire between August 31, 2008 and
August 31, 2011.
At August 31, 2003, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $464,350,513
============
Gross tax unrealized appreciation........................... $ 18,848,566
Gross tax unrealized depreciation........................... (6,214,158)
------------
Net tax unrealized appreciation on investments.............. $ 12,634,408
============
</Table>
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 future transactions. All
short-term capital gains and a portion of future gains are included in ordinary
income for tax purposes.
The tax character of distributions paid during 2003 and 2002 was as follows:
<Table>
<Caption>
2003 2002
Distribution paid from:
Ordinary Income........................................... $24,512,386 $20,898,347
Long-term capital gain.................................... -- --
----------- -----------
$24,512,386 $20,898,347
=========== ===========
</Table>
Due to inherent differences in the recognition of income, expenses and
realized gains/ losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. Permanent book and tax
differences of $25,521 related to the recognition of net realized losses on
paydowns of mortgage pool obligations and $2,736 related to investments in other
regulated investment companies were reclassified from accumulated net realized
loss to accumulated undistributed net investment income. Additionally, a
permanent book and tax
24
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
difference of $4,679,728 related to book to tax amortization differences were
reclassified from accumulated undistributed net investment income to accumulated
net realized loss.
As of August 31, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $288,566
</Table>
Net realized gains or losses may differ for financial and tax reporting
purposes as a result of gains recognized for tax purposes on open futures
contracts and the deferral of losses relating to wash sale transactions.
F. EXPENSE REDUCTIONS During the year ended August 31, 2003, the Fund's custody
fee was reduced by $7,484 as a result of credits earned on cash balances.
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:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $150 million.......................................... .50%
Next $100 million........................................... .45%
Next $100 million........................................... .40%
Over $350 million........................................... .35%
</Table>
For the year ended August 31, 2003, the Fund recognized expenses of
approximately $13,000 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.
Under an Accounting Services agreement, the Adviser provides accounting
services to the Fund. The Adviser allocates the cost of such services to each
fund. For the year ended August 31, 2003, the Fund recognized expenses of
approximately $40,000 representing Van Kampen Investments Inc.'s or its
affiliates (collectively "Van Kampen") cost of providing accounting services to
the Fund, which are reported as part of "Other" expenses in the Statement of
Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended
August 31, 2003, the Fund recognized expenses of approximately $883,400
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation.
Amounts deferred are retained by the Fund and,
25
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
to the extent permitted by the 1940 Act, as amended, may be invested in the
common shares of those funds selected by the trustees. Investments in such funds
of approximately $68,200 are included in "Other" assets on the Statement of
Assets and Liabilities at August 31, 2003. Appreciation/depreciation and
distributions received from these investments are recorded with an offsetting
increase/decrease in the deferred compensation obligation and do not affect the
net asset value of the Fund. Benefits under the retirement plan are payable upon
retirement for a ten-year period and are based upon each trustee's years of
service to the Fund. The maximum annual benefit per trustee under the plan is
$2,500.
3. CAPITAL TRANSACTIONS
At August 31, 2003, capital aggregated $324,864,449, $135,041,913 and
$29,678,699 for Classes A, B and C, respectively. For the year ended August 31,
2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 33,860,873 $ 223,054,574
Class B................................................... 8,733,393 57,165,431
Class C................................................... 2,395,255 15,715,502
----------- -------------
Total Sales................................................. 44,989,521 $ 295,935,507
=========== =============
Dividend Reinvestment:
Class A................................................... 2,118,750 $ 13,930,487
Class B................................................... 775,621 5,088,552
Class C................................................... 153,893 1,009,587
----------- -------------
Total Dividend Reinvestment................................. 3,048,264 $ 20,028,626
=========== =============
Repurchases:
Class A................................................... (26,177,791) $(172,148,255)
Class B................................................... (6,476,025) (42,378,021)
Class C................................................... (1,716,574) (11,241,414)
----------- -------------
Total Repurchases........................................... (34,370,390) $(225,767,690)
=========== =============
</Table>
26
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
At August 31, 2002, capital aggregated $260,027,643, $115,165,951, and
$24,195,024 for Classes A, B and C, respectively. For the year ended August 31,
2002, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 17,230,700 $ 113,453,070
Class B................................................... 9,602,063 63,335,340
Class C................................................... 2,235,298 14,708,962
----------- -------------
Total Sales................................................. 29,068,061 $ 191,497,372
=========== =============
Dividend Reinvestment:
Class A................................................... 1,739,745 $ 11,443,287
Class B................................................... 638,312 4,189,631
Class C................................................... 124,633 818,127
----------- -------------
Total Dividend Reinvestment................................. 2,502,690 $ 16,451,045
=========== =============
Repurchases:
Class A................................................... (13,203,530) $ (86,712,392)
Class B................................................... (6,551,762) (43,000,505)
Class C................................................... (1,501,806) (9,875,221)
----------- -------------
Total Repurchases........................................... (21,257,098) $(139,588,118)
=========== =============
</Table>
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment Class B Shares received on such shares, automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the years ended August 31, 2003 and 2002, 492,903
and 933,528 Class B Shares automatically converted to Class A Shares,
respectively, and are shown in the above tables as sales of Class A Shares and
repurchases of Class B Shares. Class C Shares purchased before January 1, 1997,
and any dividend reinvestment plan Class C Shares received on such shares,
automatically convert to Class A Shares ten years after the end of the calendar
month in which the shares were purchased. Class C Shares purchased on or after
January 1, 1997 do not possess a conversion feature. For the years ended August
31, 2003 and 2002, no Class C Shares converted to Class A Shares. 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
27
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
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
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 4.00% None
Third....................................................... 3.00% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth and Thereafter........................................ None None
</Table>
For the year ended August 31, 2003, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A Shares of approximately
$252,800 and CDSC on redeemed shares of approximately $350,500. 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 $268,950,577 and $192,144,081,
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 unrealized appreciation/ depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when taking delivery of
a security underlying a future contract. In this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
future contract. Risk may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.
During the period, the Fund invested 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 futures on U.S. Treasury Notes. These contracts are
generally used as a substitute for purchasing and selling specific securities.
Upon entering into futures contracts, the Fund maintains an amount of cash or
liquid securities with a value equal to a percentage of the contract amount with
either a futures commission
28
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
merchant pursuant to rules and regulations promulgated under the 1940 Act, as
amended, or with its custodian in an account in the broker's name. This amount
is known as initial margin. 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 risk of loss associated with a
futures contract is in excess of the variation margin reflected on the statement
of Assets and Liabilities.
Transactions in futures contracts for the year ended August 31, 2003, were
as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at August 31, 2002.............................. 641
Futures Opened.............................................. 4,677
Futures Closed.............................................. (4,145)
------
Outstanding at August 31, 2003.............................. 1,173
======
</Table>
The futures contracts outstanding as of August 31, 2003, and the
descriptions and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION
LONG CONTRACTS:
U.S. Treasury Notes 2 Year Futures, December 2003 (Current
Notional Value of $213,047 per contract) 80 $ 23,764
SHORT CONTRACTS:
U.S. Treasury Bonds, December 2003 (Current Notional Value
of $106,000 per contract) 128 11,703
U.S. Treasury Bonds, September 2003 (Current Notional Value
of $107,406 per contract) 361 4,436,367
U.S. Treasury Notes 10 Year Futures, December 2003 (Current
Notional Value of $109,719 per contract) 40 9,460
U.S. Treasury Notes 10 Year Futures, September 2003 (Current
Notional Value of $111,531 per contract) 392 966,188
U.S. Treasury Notes 5 Year Futures, December 2003 (Current
Notional Value of $109,859 per contract) 17 2,795
U.S. Treasury Notes 5 Year Futures, September 2003 (Current
Notional Value of $111,484 per contract) 155 599,925
----- ----------
1,173 $6,050,202
===== ==========
</Table>
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares, and Class C Shares, The Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively, the "Plans").
The Plans govern payments for: the distribution of the Class A Shares, Class B
Shares, and Class C Shares; the provision of
29
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
ongoing shareholder services with respect to such classes of shares; and the
maintenance of shareholder accounts with respect to such classes of shares.
Annual fees under the Plans of up to 0.25% of Class A average daily net
assets and 1.00% each for Class B and Class C average daily net assets are
accrued daily. The amount of distribution expenses incurred by Van Kampen and
not yet reimbursed ("unreimbursed receivable") was approximately $3,044,000 and
$11,300 for Class B and Class C Shares, respectively. This amount may be
recovered from future payments under the distribution plan or CDSC. To the
extent the unreimbursed receivable has been fully recovered, any excess 12b-1
fees will be refunded to the Fund on a quarterly basis.
Included in these fees for the year ended August 31, 2003, are payments
retained by Van Kampen of approximately $1,079,900 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $131,000.
30
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
Van Kampen Corporate Bond Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Corporate Bond Fund (the "Fund"), including the portfolio of investments,
as of August 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights of the Fund for the year ended August 31, 1999
were audited by other auditors whose report dated October 6, 1999 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen Corporate Bond Fund at August 31, 2003, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the four
years in the period then ended in conformity with accounting principles
generally accepted in the United States.
-s- Ernst & Young LLP
Chicago, Illinois
October 8, 2003
31
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN CORPORATE BOND FUND
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
32
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments
Inc. ("Van Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory
Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds
Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp.
and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and
Asset Management sometimes are referred to herein collectively as the
"Advisers." The term "Fund Complex" includes each of the investment companies
advised by the Advisers or their affiliates as of the date of this Statement of
Additional Information. Trustees serve until reaching their retirement age or
until their successors are duly elected and qualified. Officers are annually
elected by the trustees.
INDEPENDENT TRUSTEES
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (58) Trustee Trustee Chairman and Chief 90 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Former
Director of the World
Presidents
Organization-Chicago
Chapter. Director of the
Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago.
J. Miles Branagan (71) Trustee Trustee Private investor. 88 Trustee/Director/Managing
1632 Morning Mountain Road since 1991 Co-founder, and prior to General Partner of funds
Raleigh, NC 27614 August 1996, Chairman, in the Fund Complex.
Chief Executive Officer
and President, MDT
Corporation (now known as
Getinge/Castle, Inc., a
subsidiary of Getinge
Industrier AB), a company
which develops,
manufactures, markets and
services medical and
scientific equipment.
</Table>
33
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jerry D. Choate (65) Trustee Trustee Prior to January 1999, 88 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
Rod Dammeyer (62) Trustee Trustee President of CAC, llc., a 90 Trustee/Director/Managing
CAC, llc. since 2003 private company offering General Partner of funds
4350 LaJolla Village Drive capital investment and in the Fund Complex.
Suite 980 management advisory Director of TeleTech
San Diego, CA 92122-6223 services. Prior to July Holdings Inc.,
2000, Managing Partner of Stericycle, Inc.,
Equity Group Corporate TheraSense, Inc., GATX
Investment (EGI), a Corporation, Arris Group,
company that makes Inc. and Trustee of the
private investments in University of Chicago
other companies. Hospitals and Health
Systems. Prior to May
2002, Director of
Peregrine Systems Inc.
Prior to February 2001,
Vice Chairman and
Director of Anixter
International, Inc. and
IMC Global Inc. Prior to
July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM). Prior to April
1999, Director of Metal
Management, Inc.
</Table>
34
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (55) Trustee Trustee Managing Partner of 88 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1992, Executive Vice
President of La Salle
National Bank.
R. Craig Kennedy (51) Trustee Trustee Director and President of 88 Trustee/Director/Managing
11 DuPont Circle, N.W. since 1995 the German Marshall Fund General Partner of funds
Washington, D.C. 20016 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (67) Trustee Trustee Prior to 1998, President 90 Trustee/Director/Managing
736 North Western Avenue since 2003 and Chief Executive General Partner of funds
P.O. Box 317 Officer of Pocklington in the Fund Complex.
Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation
</Table>
35
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (67) Trustee Trustee President of Nelson 88 Trustee/Director/Managing
423 Country Club Drive since 1995 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (62) Trustee Trustee President Emeritus and 90 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey (61) Trustee Trustee Chief Communications 88 Trustee/Director/Managing
2101 Constitution Ave., N.W. since 1999 Officer of the National General Partner of funds
Room 285 Academy of in the Fund Complex.
Washington, D.C. 20418 Sciences/National Director of Neurogen
Research Council, an Corporation, a
independent, federally pharmaceutical company,
chartered policy since January 1998.
institution, since 2001
and previously Chief
Operating Officer from
1993 to 2001. Director of
the Institute for Defense
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, and
Trustee of Colorado
College. Prior to 1993,
Executive Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
36
INTERESTED TRUSTEES*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Mitchell M. Merin* (50) Trustee, Trustee President and Chief 88 Trustee/Director/Managing
1221 Avenue of the Americas President since 1999 Executive Officer of General Partner of funds
New York, NY 10020 and Chief funds in the Fund in the Fund Complex.
Executive Complex. Chairman,
Officer President, Chief
Executive Officer and
Director of the Advisers
and VK Advisors Inc.
since December 2002.
Chairman, President and
Chief Executive Officer
of Van Kampen Investments
since December 2002.
Director of Van Kampen
Investments since
December 1999. Chairman
and Director of Van
Kampen Funds Inc. since
December 2002. President,
Director and Chief
Operating Officer of
Morgan Stanley Investment
Management since December
1998. President and
Director since April 1997
and Chief Executive
Officer since June 1998
of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc.
Chairman, Chief Executive
Officer and Director of
Morgan Stanley
Distributors Inc. since
June 1998. Chairman since
June 1998, and Director
since January 1998 of
Morgan Stanley Trust.
Director of various
Morgan Stanley
subsidiaries. President
of the Morgan Stanley
Funds since May 1999.
Previously Chief
Executive Officer of Van
Kampen Funds Inc. from
December 2002 to July
2003, Chief Strategic
Officer of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc. and
Executive Vice President
of Morgan Stanley
Distributors Inc. from
April 1997 to June 1998.
Chief Executive Officer
from September 2002 to
April 2003 and Vice
President from May 1997
to April 1999 of the
Morgan Stanley Funds.
</Table>
37
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Richard F. Powers, III* (57) Trustee Trustee Advisory Director of 90 Trustee/Director/Managing
1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds
P.O. Box 5555 December 2002, Chairman, in the Fund Complex.
Oakbrook Terrace, IL 60181 Director, President,
Chief Executive Officer
and Managing Director of
Van Kampen Investments
and its investment
advisory, distribution
and other subsidiaries.
Prior to December 2002,
President and Chief
Executive Officer of
funds in the Fund
Complex. Prior to May
1998, Executive Vice
President and Director of
Marketing at Morgan
Stanley and Director of
Dean Witter, Discover &
Co. and Dean Witter
Realty. Prior to 1996,
Director of Dean Witter
Reynolds Inc.
Wayne W. Whalen* (64) Trustee Trustee Partner in the law firm 90 Trustee/Director/Managing
333 West Wacker Drive since 1995 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom in the Fund Complex.
(Illinois), legal counsel
to funds in the Fund
Complex.
</Table>
* Such trustee is an "interested person" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain
funds in the Fund Complex by reason of his firm currently acting as legal
counsel to such funds in the Fund Complex. Messrs. Merin and Powers are
interested persons of funds in the Fund Complex and the Advisers by reason
of their current or former positions with Morgan Stanley or its affiliates.
38
OFFICERS
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Stephen L. Boyd (62) Vice President Officer Managing Director of Global Research Investment Management.
2800 Post Oak Blvd. since 1998 Vice President of funds in the Fund Complex. Prior to
45th Floor December 2002, Chief Investment Officer of Van Kampen
Houston, TX 77056 Investments and President and Chief Operations Officer of
the Advisers and Van Kampen Advisors Inc. Prior to May 2002,
Executive Vice President and Chief Investment Officer of
funds in the Fund Complex. Prior to May 2001, Managing
Director and Chief Investment Officer of Van Kampen
Investments, and Managing Director and President of the
Advisers and Van Kampen Advisors Inc. Prior to December
2000, Executive Vice President and Chief Investment Officer
of Van Kampen Investments, and President and Chief Operating
Officer of the Advisers. Prior to April 2000, Executive Vice
President and Chief Investment Officer for Equity
Investments of the Advisers. Prior to October 1998, Vice
President and Senior Portfolio Manager with AIM Capital
Management, Inc. Prior to February 1998, Senior Vice
President and Portfolio Manager of Van Kampen American
Capital Asset Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American Capital
Management, Inc.
Stefanie V. Chang (36) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas since 2003 Vice President of funds in the Fund Complex.
New York, NY 10020
Joseph J. McAlinden (60) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment
New York, NY 10020 Investment Officer Management Inc. and Morgan Stanley Investments LP and
Director of Morgan Stanley Trust for over 5 years. Executive
Vice President and Chief Investment Officer of funds in the
Fund Complex. Managing Director and Chief Investment Officer
of Van Kampen Investments, the Advisers and Van Kampen
Advisors Inc. since December 2002.
</Table>
39
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
John R. Reynoldson (50) Vice President Officer Executive Director and Portfolio Specialist of the Advisers
1 Parkview Plaza since 2000 and Van Kampen Advisors Inc. Vice President of funds in the
P.O. Box 5555 Fund Complex. Prior to July 2001, Principal and Co-head of
Oakbrook Terrace, IL 60181 the Fixed Income Department of the Advisers and Van Kampen
Advisors Inc. Prior to December 2000, Senior Vice President
of the Advisers and Van Kampen Advisors Inc. Prior to May
2000, Senior Vice President of the investment grade taxable
group for the Advisers. Prior to June 1999, Senior Vice
President of the government securities bond group for Asset
Management.
Ronald E. Robison (64) Executive Vice Officer Chief Executive Officer and Chairman of Investor Services.
1221 Avenue of the Americas President and since 2003 Executive Vice President and Principal Executive Officer of
New York, NY 10020 Principal Executive funds in the Fund Complex. Chief Global Operations Officer
Officer and Managing Director of Morgan Stanley Investment
Management Inc. Managing Director of Morgan Stanley.
Managing Director and Director of Morgan Stanley Investment
Advisors Inc. and Morgan Stanley Services Company Inc. Chief
Executive Officer and Director of Morgan Stanley Trust. Vice
President of the Morgan Stanley Funds.
A. Thomas Smith III (46) Vice President and Officer Managing Director of Morgan Stanley, Managing Director and
1221 Avenue of the Americas Secretary since 1999 Director of Van Kampen Investments, Director of the
New York, NY 10020 Advisers, Van Kampen Advisors Inc., the Distributor,
Investor Services and certain other subsidiaries of Van
Kampen Investments. Managing Director and General
Counsel-Mutual Funds of Morgan Stanley Investment Advisors,
Inc. Vice President and Secretary of funds in the Fund
Complex. Prior to July 2001, Managing Director, General
Counsel, Secretary and Director of Van Kampen Investments,
the Advisers, the Distributor, Investor Services, and
certain other subsidiaries of Van Kampen Investments. Prior
to December 2000, Executive Vice President, General Counsel,
Secretary and Director of Van Kampen Investments, the
Advisers, Van Kampen Advisors Inc., the Distributor,
Investor Services and certain other subsidiaries of Van
Kampen Investments. Prior to January 1999, Vice President
and Associate General Counsel to New York Life Insurance
Company ("New York Life"), and prior to March 1997,
Associate General Counsel of New York Life. Prior to
December 1993, Assistant General Counsel of The Dreyfus
Corporation. Prior to August 1991, Senior Associate, Willkie
Farr & Gallagher. Prior to January 1989, Staff Attorney at
the Securities and Exchange Commission, Division of
Investment Management, Office of Chief Counsel.
</Table>
40
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
John L. Sullivan (48) Vice President, Chief Officer Director and Managing Director of Van Kampen Investments,
1 Parkview Plaza Financial Officer and since 1996 the Advisers, Van Kampen Advisors Inc. and certain other
P.O. Box 5555 Treasurer subsidiaries of Van Kampen Investments. Vice President,
Oakbrook Terrace, IL 60181 Chief Financial Officer and Treasurer of funds in the Fund
Complex. Head of Fund Accounting for Morgan Stanley
Investment Management. Prior to December 2002, Executive
Director of Van Kampen Investments, the Advisers and Van
Kampen Advisors Inc.
</Table>
41
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc.,
Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many
Van Kampen mutual funds and Van Kampen unit investment trusts.
The Statement of Additional Information includes additional information about
Fund trustees and is available, without charge, upon request by calling (800)
847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2003 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 17, 117, 217
CORP ANR
10/03 12033J03-AP-10/03
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1 hereto
(d) The Fund has granted a waiver or an implicit waiver from a provision of its
Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit 10A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees : J. Miles Branagan, Jerry Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
Applicable only for reports covering fiscal years ending on or after December
15, 2003.
Item 5. Audit Committee of Listed Registrants.
Applicable only for reports covering periods ending on or after the earlier of
(i) the first annual shareholder meeting after January 15, 2004 or (ii) October
31, 2004.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's second fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b) A separate certification for each Principal Executive Officer and Principal
Financial Officer of the registrant are attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Corporate Bond Fund
------------------------------------------------------
By: /s/ Ronald E. Robison
--------------------------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
--------------------------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2003
By: /s/ John L. Sullivan
--------------------------------------------------------------
Name: John L. Sullivan
Title: Principal Financial Officer
Date: October 20, 2003