-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sqjt89eCjFlMyXWOGvOuTcAoPLvWC5sN6PJ84gSL3tya2ntIIpEAmzm+y8rfN6Ph islh3hRvodUCMWtOCgIoaQ== 0000950137-06-011572.txt : 20061030 0000950137-06-011572.hdr.sgml : 20061030 20061030130415 ACCESSION NUMBER: 0000950137-06-011572 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060831 FILED AS OF DATE: 20061030 DATE AS OF CHANGE: 20061030 EFFECTIVENESS DATE: 20061030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN CORPORATE BOND FUND CENTRAL INDEX KEY: 0000109488 IRS NUMBER: 066056470 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02423 FILM NUMBER: 061171241 BUSINESS ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC. STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2127625441 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC. STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND / DATE OF NAME CHANGE: 19951219 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CAPITAL CORPORATE BOND FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL CAPITAL BOND FUND INC DATE OF NAME CHANGE: 19830925 0000109488 S000002324 VAN KAMPEN CORPORATE BOND FUND C000006084 Class A Shares ACCBX C000006085 Class B Shares ACCDX C000006086 Class C Shares ACCEX C000006087 Class I Shares ACCHX N-CSR 1 c08290nvcsr.txt CERTIFIED SHAREHOLDER REPORT 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: 8/31/06 Item 1. Report to Shareholders. The Fund's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: 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, 2006. THIS PIECE MUST BE PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 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 OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 8/31/06 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 8/31/96 through 8/31/06. Class A shares, adjusted for sales charges. (LINE GRAPH)
VAN KAMPEN CORPORATE LEHMAN BROTHERS CORPORATE LIPPER CORPORATE BBB- BOND FUND BOND INDEX RATED INDEX -------------------- ------------------------- --------------------- 8/96 9527 10000 10000 9713 10212 10200 9959 10491 10445 10177 10715 10678 10091 10567 10574 10135 10582 10608 10166 10627 10668 10018 10461 10504 10183 10620 10660 10319 10740 10782 10456 10892 10943 10882 11291 11321 8/97 10714 11124 11172 10900 11319 11369 11024 11462 11485 11087 11527 11541 11166 11649 11664 11324 11787 11814 11309 11784 11809 11374 11827 11869 11422 11902 11920 11552 12044 12022 11630 12133 12109 11628 12122 12100 8/98 11560 12179 12011 11755 12573 12259 11719 12380 12108 11966 12612 12332 11976 12649 12363 12037 12774 12470 11692 12471 12201 11804 12560 12336 11849 12596 12425 11619 12428 12257 11526 12363 12193 11484 12295 12132 8/99 11442 12266 12087 11555 12399 12191 11599 12456 12215 11624 12470 12244 11579 12404 12225 11551 12360 12189 11631 12475 12339 11712 12581 12453 11520 12471 12302 11418 12425 12209 11739 12736 12517 11877 12891 12571 8/00 12015 13052 12800 12099 13123 12836 12088 13126 12795 12210 13282 12914 12486 13529 13184 12726 13916 13503 12833 14035 13636 12901 14120 13628 12854 14074 13553 12942 14199 13675 13012 14270 13692 13339 14657 14002 8/01 13469 14847 14170 13458 14797 14050 13667 15161 14348 13696 15032 14255 13661 14924 14168 13687 15050 14246 13713 15150 14314 13451 14868 14126 13498 15055 14343 13649 15268 14456 13509 15269 14388 13368 15214 14316 8/02 13542 15617 14605 13696 15916 14737 13510 15702 14632 13794 15947 14843 14123 16434 15189 14193 16503 15289 14438 16841 15546 14422 16848 15572 14802 17185 15887 15138 17741 16303 15097 17701 16324 14654 16932 15767 8/03 14787 17073 15892 15236 17684 16381 15189 17499 16316 15302 17588 16429 15505 17788 16668 15618 17975 16820 15732 18200 16968 15846 18371 17085 15498 17794 16649 15357 17666 16523 15421 17744 16620 15580 17964 16795 8/04 15904 18391 17136 16016 18505 17242 16177 18686 17413 16051 18496 17355 16285 18749 17553 16399 18899 17646 16369 18786 17618 16120 18536 17421 16280 18777 17564 16489 19034 17746 16699 19190 17897 16614 19000 17815 8/05 16825 19291 18036 16591 18980 17855 16430 18760 17700 16519 18871 17772 16683 19062 17947 16672 19022 18011 16736 19107 18094 16547 18838 17897 16485 18772 17886 16473 18740 17843 16513 18764 17845 16734 19038 18091 8/06 16981 19392 18422
A SHARES B SHARES C SHARES I SHARES since 9/23/71 since 9/28/92 since 8/30/93 since 8/12/05 - ----------------------------------------------------------------------------------------------------- W/MAX W/MAX W/MAX 4.75% 4.00% 1.00% AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES Since Inception 7.67% 7.52% 5.46% 5.46% 4.81% 4.81% 2.33% 10-year 5.95 5.44 5.30 5.30 5.16 5.16 -- 5-year 4.74 3.72 3.96 3.71 3.96 3.96 -- 1-year 0.93 -3.89 0.30 -3.55 0.16 -0.81 1.33 - ----------------------------------------------------------------------------------------------------- 30-Day SEC Yield 4.63% 4.13% 4.20% 5.12%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS 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. Performance of share classes will vary due to differences in sales charges and expenses. 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 up to 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 eight years after purchase. The since inception returns for Class C shares reflect the conversion of Class C shares into Class A shares ten years after purchase. Class I shares are available for purchase exclusively by investors through (i) tax-exempt retirement plans with assets of at least $1 million (including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase plans, defined benefit plans and non-qualified deferred compensation plans), (ii) fee-based investment programs with assets of at least $1 million and (iii) institutional clients with assets of at least $1 million. Class I shares are offered without any sales charges on purchases or sales and do not include combined Rule 12b-1 fees and service fees. 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. The 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. Source: Lipper Inc. 1 Fund Report FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2006 MARKET CONDITIONS Several events shaped trends in the fixed-income markets during the 12-month review period. The series of natural disasters that struck the U.S. in mid-2005, combined with sharply rising energy prices, generated concern regarding their effect on economic growth. As the months progressed, however, it became apparent that the impact on the economy would be less than anticipated. In fact, the economy demonstrated considerable resilience and real gross domestic product (GDP) growth averaged near 4 percent throughout 2005. The first months of 2006 provided few surprises in the bond market. To virtually no one's surprise, the Federal Open Market Committee (the "Fed") continued to raise the target federal funds rate by 25 basis points at each of its meetings during the first half of the year, bringing the rate to 5.25 percent at the end of June. Also as expected, comments made by Fed members after their May and June meetings indicated that they will rely heavily on economic data in making future decisions concerning the direction of interest rates. Based on these comments, it appears that the Fed will be driven by the weight of the economic data more so now than perhaps at anytime over the past few years. During the last months of the period, in response to the expectation of a pause in the Fed's tightening campaign, the U.S. bond market enjoyed the best three-month run of positive returns since the Fed began its tightening cycle in 2004. In fact, despite negative returns in the first half of 2006, all fixed-income asset classes ended August with positive year-to-date returns. As anticipated, the Fed did finally pause at its August meeting, following a run of 17 consecutive increases in the target federal funds rate. Due mainly to concerns over inflation and increased risk in the corporate market, the credit sector had trouble keeping pace with other fixed-income sectors. Within the investment-grade portion of the market, higher-rated issues outperformed lower-rated issues. Improving economic conditions boosted the financials sector, leading it to outpace both utilities and industrials. 2 PERFORMANCE ANALYSIS The fund returned 0.93 percent for the 12 months ended August 31, 2006 (Class A shares, unadjusted for sales charges). In comparison, the fund's benchmarks, the Lehman Brothers Corporate Bond Index and the Lipper Corporate BBB-Rated Index, returned 0.53 percent and 2.15 percent for the period, respectively. TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2006
- -------------------------------------------------------------------------------------- LEHMAN BROTHERS LIPPER CORPORATE CORPORATE BOND BBB-RATED CLASS A CLASS B CLASS C CLASS I INDEX INDEX 0.93% 0.30% 0.16% 1.33% 0.53% 2.15% - --------------------------------------------------------------------------------------
The performance for the four share classes varies because each has different expenses. The fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information and index definitions. During the period, we kept the fund's overall duration (a measure of interest rate sensitivity) well below that of the benchmark. This posture was beneficial to performance as interest rates rose across the market, especially in the short- and intermediate-portions of the yield curve. Within the credit portion of the portfolio, we continued to employ a defensive strategy with a focus on higher-quality securities, which benefited the fund's relative performance. Additionally, strong security selection--particularly in the paper and forest products, financial and automotive sectors--contributed positively to performance. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the fund in the future. 3
RATINGS ALLOCATIONS AS OF 08/31/06 AAA/Aaa 11.7% AA/Aa 14.9 A/A 26.4 BBB/Baa 41.1 BB/Ba 3.3 B/B 2.6 SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 08/31/06 Banking 10.9% Electric 9.9 U.S. Government Agency Obligations 8.7 Wireline Communications 6.8 Noncaptive-Consumer Finance 5.5 Life Insurance 4.3 Food/Beverage 3.5 Noncaptive-Diversified Finance 3.4 Property & Casualty Insurance 3.2 Diversified Manufacturing 3.0 Automotive 2.5 Natural Gas Pipelines 2.4 Healthcare 2.1 Railroads 1.8 Construction Machinery 1.7 Media-Cable 1.7 Media-Noncable 1.6 Technology 1.5 Retail 1.3 Paper 1.3 Gaming 1.2 Transportation Services 1.0 Natural Gas Distributors 0.9 Supermarkets 0.9 Integrated Energy 0.9 Environmental & Facilities Services 0.8 Textiles 0.8 Wireless Communications 0.8 Consumer Products 0.6
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4
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 08/31/06 (continued from previous page) Brokerage 0.6 Other Utilities 0.6 Oil Field Services 0.6 Aerospace & Defense 0.6 Entertainment 0.6 Lodging 0.5 Building Materials 0.4 Independent Energy 0.4 Chemicals 0.3 Real Estate Management & Development 0.3 Tobacco 0.2 ----- Total Long-Term Investments 90.1% Short-Term Investments 10.8 Liabilities in Excess of Other Assets (0.9) ----- Net Assets 100.0%
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the industries shown above. Ratings allocations are as a percentage of long-term investments. Industry allocations are as a percentage of net assets. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Ratings allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 5 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen also delivers the semiannual and annual reports to fund shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each fund files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a fund's fiscal quarter filings by contacting Van Kampen Client Relations at (800) 847-2424. 6 HOUSEHOLDING NOTICE To reduce fund 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 prospectuses 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 POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 7 Expense Example As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments of Class A Shares and contingent deferred sales charges on redemptions of Class B and C Shares; and redemption fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 3/1/06 - 8/31/06. ACTUAL EXPENSE The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* ---------------------------------------------- 3/1/06 8/31/06 3/1/06-8/31/06 Class A Actual...................................... $1,000.00 $1,014.62 $4.98 Hypothetical................................ 1,000.00 1,020.31 4.99 (5% annual return before expenses) Class B Actual...................................... 1,000.00 1,012.34 8.77 Hypothetical................................ 1,000.00 1,016.41 8.79 (5% annual return before expenses) Class C Actual...................................... 1,000.00 1,010.80 8.72 Hypothetical................................ 1,000.00 1,016.51 8.74 (5% annual return before expenses) Class I Actual...................................... 1,000.00 1,017.41 3.71 Hypothetical................................ 1,000.00 1,021.51 3.72 (5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.98%, 1.73%, 1.72% and 0.73% for Class A, B, C and I Shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Assumes all dividends and distributions were reinvested. 8 Investment Advisory Agreement Approval Both the Investment Company Act of 1940 and the terms of the Fund's investment advisory agreement require that the investment advisory agreement between the Fund and its investment adviser be approved annually both by a majority of the Board of Trustees and by a majority of the independent trustees voting separately. On May 22, 2006, the Board of Trustees, and the independent trustees voting separately, determined that the terms of the investment advisory agreement are fair and reasonable and approved the continuance of the investment advisory contract as being in the best interests of the Fund and its shareholders. In making its determination, the Board of Trustees considered materials that were specifically prepared by the investment adviser at the request of the Board and Fund counsel, and by an independent provider of investment company data contracted to assist the Board, relating to the contract review process. The Board also considered information received periodically about the portfolio, performance, the investment strategy, portfolio management team and fees and expenses of the Fund. The Board of Trustees considered the contract over a period of several months and the non-management trustees held sessions both with the investment adviser and separate from the investment adviser in reviewing and considering the contract. In approving the investment advisory agreement, the Board of Trustees considered, among other things, the nature, extent and quality of the services provided by the investment adviser, the performance, fees and expenses of the Fund compared to other similar funds and other products, the investment adviser's expenses in providing the services and the profitability of the investment adviser and its affiliated companies. The Board of Trustees considered the extent to which any economies of scale experienced by the investment adviser are shared with the Fund's shareholders, and the propriety of existing and alternative breakpoints in the Fund's investment advisory fee schedule. The Board of Trustees considered comparative advisory fees of the Fund and other investment companies and/or other products at different asset levels, and considered the trends in the industry versus historical and projected assets of the Fund. The Board of Trustees evaluated other benefits the investment adviser and its affiliates derive from their relationship with the Fund. The Board of Trustees reviewed information about the foregoing factors and considered changes, if any, in such information since its previous approval. The Board of Trustees discussed the financial strength of the investment adviser and its affiliated companies and the capability of the personnel of the investment adviser, and specifically the strength and background of its portfolio management personnel. The Board of Trustees reviewed the statutory and regulatory requirements for approval and disclosure of investment advisory agreements. The Board of Trustees, including the independent trustees, evaluated all of the foregoing and does not believe any single factor or group of factors control or dominate the review process, and, after considering all factors 9 together, has determined, in the exercise of its business judgment, that approval of the investment advisory agreement is in the best interests of the Fund and its shareholders. The following summary provides more detail on certain matters considered but does not detail all matters considered. Nature, Extent and Quality of the Services Provided. On a regular basis, the Board of Trustees considers the roles and responsibilities of the investment adviser as a whole and for those specific portfolio management, support and trading functions servicing the Fund. The trustees discuss with the investment adviser the resources available and used in managing the Fund. The Fund discloses information about its portfolio management team members and their experience in its prospectus. The trustees also discuss certain other services which are provided on a cost-reimbursement basis by the investment adviser or its affiliates to the Van Kampen funds including certain accounting, administrative and legal services. The Board has determined that the nature, extent and quality of the services provided by the investment adviser support its decision to approve the investment advisory contract. Performance, Fees and Expenses of the Fund. On a regular basis, the Board of Trustees reviews the performance, fees and expenses of the Fund compared to its peers and to appropriate benchmarks. In addition, the Board spends more focused time on the performance of the Fund and other funds in the Van Kampen complex, paying specific attention to underperforming funds. The trustees discuss with the investment adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the trustees and the investment adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance with special attention to three-year performance) and, when a fund's weighted performance is under the fund's benchmark, they discuss the causes and where necessary seek to make specific changes to investment strategy or investment personnel. The Fund discloses more information about its performance elsewhere in this report and in the Fund's prospectus. The trustees discuss with the investment adviser the level of advisory fees for this Fund relative to comparable funds and other products advised by the adviser and others in the marketplace. The trustees review not only the advisory fees but other fees and expenses (whether paid to the adviser, its affiliates or others) and the Fund's overall expense ratio. The Fund discloses more information about its fees and expenses in its prospectus. The Board has determined that the performance, fees and expenses of the Fund support its decision to approve the investment advisory contract. Investment Adviser's Expenses in Providing the Service and Profitability. At least annually, the trustees review the investment adviser's expenses in providing services to the Fund and other funds advised by the investment adviser and the profitability of the investment adviser. These profitability reports are put together by the investment adviser with the oversight of the Board. The trustees discuss with the investment adviser its revenues and expenses, including among 10 other things, revenues for advisory services, portfolio management-related expenses, revenue sharing arrangement costs and allocated expenses both on an aggregate basis and per fund. The Board has determined that the analysis of the investment adviser's expenses and profitability support its decision to approve the investment advisory contract. Economies of Scale. On a regular basis, the Board of Trustees considers the size and growth prospects of the Fund and how that relates to the Fund's expense ratio and particularly the Fund's advisory fee rate. In conjunction with its review of the investment adviser's profitability, the trustees discuss with the investment adviser how more (or less) assets can affect the efficiency or effectiveness of managing the Fund's portfolio and whether the advisory fee level is appropriate relative to current and projected asset levels and/or whether the advisory fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and potential economies of scale of the Fund support its decision to approve the investment advisory contract. Other Benefits of the Relationship. On a regular basis, the Board of Trustees considers other benefits to the investment adviser and its affiliates derived from its relationship with the Fund and other funds advised by the investment adviser. These benefits include, among other things, fees for transfer agency services provided to the funds, in certain cases research received by the adviser generated from commission dollars spent on funds' portfolio trading, and in certain cases distribution or service related fees related to funds' sales. The trustees review with the investment adviser each of these arrangements and the reasonableness of its costs relative to the services performed. The Board has determined that the other benefits received by the investment adviser or its affiliates support its decision to approve the investment advisory contract. 11 VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- CORPORATE BONDS 81.0% AEROSPACE & DEFENSE 0.6% $ 992 Raytheon Co. ................................... 4.500% 11/15/07 $ 980,042 3,310 Raytheon Co. ................................... 6.150 11/01/08 3,367,971 ------------ 4,348,013 ------------ AUTOMOTIVE 2.5% 2,915 DaimlerChrysler NA Holding Corp. ............... 8.500 01/18/31 3,510,427 6,205 General Motors Acceptance Corp. ................ 6.875 09/15/11 6,117,559 10,950 General Motors Corp. ........................... 8.375 07/15/33 9,225,375 ------------ 18,853,361 ------------ BANKING 10.9% 5,120 Bank of America Corp. .......................... 3.375 02/17/09 4,913,690 6,000 Bank of Scotland (United Kingdom) (a)........... 3.500 11/30/07 5,875,344 160 Citigroup, Inc. ................................ 6.625 06/15/32 174,016 5,355 JPMorgan Chase & Co. ........................... 6.750 02/01/11 5,651,881 6,010 Marshall & Ilsley Bank.......................... 3.800 02/08/08 5,888,682 4,475 MBNA Corp. (Floating Rate Coupon)............... 5.910 05/05/08 4,509,440 6,160 National City Bank.............................. 3.375 10/15/07 6,015,437 2,695 Popular North America, Inc. .................... 5.650 04/15/09 2,701,403 5,855 SunTrust Banks, Inc. ........................... 5.050 07/01/07 5,840,878 6,000 U.S. Bancorp.................................... 3.950 08/23/07 5,900,286 3,650 USB Capital IX (Variable Rate Coupon)........... 6.189 03/29/49 3,668,896 3,100 Wachovia Corp. ................................. 3.625 02/17/09 2,988,282 2,890 Wachovia Corp. ................................. 4.950 11/01/06 2,887,061 15,155 Wachovia Capital Trust III (Variable Rate Coupon)......................................... 5.800 08/29/49 15,102,382 1,690 Washington Mutual Bank FA....................... 5.500 01/15/13 1,680,708 2,960 Washington Mutual, Inc. ........................ 8.250 04/01/10 3,211,085 5,820 Wells Fargo & Co. .............................. 5.125 02/15/07 5,812,434 ------------ 82,821,905 ------------ BROKERAGE 0.3% 2,000 Lehman Brothers Holdings, Inc. ................. 8.500 05/01/07 2,039,976 ------------ BUILDING MATERIALS 0.4% 3,380 Masco Corp. .................................... 4.625 08/15/07 3,342,026 ------------ CHEMICALS 0.3% 2,435 Sealed Air Corp. (a)............................ 5.625 07/15/13 2,381,072 ------------
12 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY 1.7% $ 5,460 Caterpillar Financial Services Corp., Ser F..... 3.625% 11/15/07 $ 5,349,146 7,350 John Deere Capital Corp. (Floating Rate Coupon)......................................... 5.557 04/15/08 7,360,334 ------------ 12,709,480 ------------ CONSUMER PRODUCTS 0.6% 4,725 Clorox Co. (Floating Rate Coupon)............... 5.444 12/14/07 4,734,252 ------------ DIVERSIFIED MANUFACTURING 3.0% 3,935 Brascan Corp. (Canada).......................... 7.125 06/15/12 4,190,071 195 Brascan Corp. (Canada).......................... 8.125 12/15/08 205,521 2,260 Cooper Industries, Inc. ........................ 5.250 07/01/07 2,247,950 3,790 Cooper Industries, Inc. ........................ 5.250 11/15/12 3,750,455 1,450 Hutchison Whampoa International Ltd. (Cayman Islands) (a)............................ 5.450 11/24/10 1,447,012 1,880 Hutchison Whampoa International Ltd. (Cayman Islands) (a)............................ 6.500 02/13/13 1,957,840 3,000 Textron Financial Corp. ........................ 2.690 10/03/06 2,993,952 6,200 Tyco International Group SA (Luxembourg)........ 6.125 11/01/08 6,287,854 ------------ 23,080,655 ------------ ELECTRIC 9.9% 5,660 Ameren Corp. ................................... 4.263 05/15/07 5,613,713 4,995 Arizona Public Service Co. ..................... 5.800 06/30/14 4,961,743 2,325 Arizona Public Service Co. ..................... 6.750 11/15/06 2,329,673 1,375 Baltimore Gas & Electric Co. ................... 6.625 03/15/08 1,398,831 2,155 Carolina Power & Light Co. ..................... 6.800 08/15/07 2,180,782 5,151 CC Funding Trust I.............................. 6.900 02/16/07 5,181,350 2,070 Cincinnati Gas & Electric Co. .................. 5.700 09/15/12 2,077,487 2,685 Detroit Edison Co. ............................. 6.125 10/01/10 2,754,354 2,690 Duquesne Light Co., Ser O....................... 6.700 04/15/12 2,829,745 320 Duquesne Light Co., Ser Q....................... 5.700 05/15/14 318,868 2,265 Entergy Gulf States, Inc. ...................... 3.600 06/01/08 2,188,645 4,395 Entergy Gulf States, Inc. (Floating Rate Coupon)......................................... 5.631 12/01/09 4,392,064 1,965 Entergy Gulf States, Inc. (Floating Rate Coupon) (a)............................................. 6.020 12/08/08 1,969,394 3,835 Exelon Corp. ................................... 6.750 05/01/11 4,011,813 560 Indianapolis Power & Light Co. (a).............. 6.300 07/01/13 575,656 3,585 MidAmerican Energy Holdings Co. ................ 4.625 10/01/07 3,555,492 1,930 Monongahela Power Co. .......................... 5.000 10/01/06 1,928,801 5,550 NiSource Finance Corp. (Floating Rate Coupon)... 5.968 11/23/09 5,557,753 4,500 Ohio Power Co., Ser K........................... 6.000 06/01/16 4,590,580 5,700 Oncor Electric Delivery Co. .................... 5.000 09/01/07 5,671,660
See Notes to Financial Statements 13 VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- ELECTRIC (CONTINUED) $ 1,400 PSEG Energy Holdings............................ 8.625% 02/15/08 $ 1,449,000 4,465 Texas-New Mexico Power Co. ..................... 6.125 06/01/08 4,484,021 5,000 Wisconsin Electric Power........................ 3.500 12/01/07 4,894,900 ------------ 74,916,325 ------------ ENTERTAINMENT 0.6% 4,237 Time Warner, Inc. .............................. 6.150 05/01/07 4,254,211 ------------ ENVIRONMENTAL & FACILITIES SERVICES 0.8% 3,223 Waste Management, Inc. ......................... 6.875 05/15/09 3,342,548 1,220 Waste Management, Inc. ......................... 7.000 10/15/06 1,221,814 1,745 Waste Management, Inc. ......................... 7.375 08/01/10 1,862,383 ------------ 6,426,745 ------------ FOOD/BEVERAGE 3.5% 2,235 ConAgra, Inc. .................................. 7.000 10/01/28 2,396,351 1,870 ConAgra, Inc. .................................. 8.250 09/15/30 2,276,933 4,655 FBG Finance, Ltd. (Australia) (a)............... 5.125 06/15/15 4,411,422 4,000 General Mills, Inc. ............................ 3.875 11/30/07 3,915,508 3,145 Kraft Foods, Inc. .............................. 5.625 11/01/11 3,168,484 7,445 Miller Brewing Co. (a).......................... 4.250 08/15/08 7,284,583 655 Pilgrim's Pride Corp. .......................... 9.625 09/15/11 689,387 1,845 YUM! Brands, Inc. .............................. 8.875 04/15/11 2,081,291 ------------ 26,223,959 ------------ GAMING 1.2% 7,040 Harrahs Operating Co., Inc. .................... 5.625 06/01/15 6,600,049 2,420 Harrahs Operating Co., Inc. .................... 6.500 06/01/16 2,405,122 ------------ 9,005,171 ------------ HEALTHCARE 2.1% 4,420 Baxter Finance Co. (Netherlands)................ 4.750 10/15/10 4,323,105 1,840 UnitedHealth Group, Inc. ....................... 5.200 01/17/07 1,838,300 6,000 UnitedHealth Group, Inc. (Floating Rate Coupon)......................................... 5.318 03/02/09 5,997,174 2,410 Wellpoint, Inc. ................................ 3.750 12/14/07 2,360,525 1,510 Wellpoint, Inc. ................................ 4.250 12/15/09 1,461,296 ------------ 15,980,400 ------------ INDEPENDENT ENERGY 0.4% 1,550 Kerr-McGee Corp. ............................... 5.875 09/15/06 1,549,798 1,540 Kerr-McGee Corp. ............................... 6.625 10/15/07 1,563,394 ------------ 3,113,192 ------------ INTEGRATED ENERGY 0.9% 1,000 Consumers Energy Co., Ser A..................... 6.375 02/01/08 1,011,269 1,880 Consumers Energy Co., Ser F..................... 4.000 05/15/10 1,785,126 2,035 Consumers Energy Co., Ser H..................... 4.800 02/17/09 2,003,508 1,905 Petro-Canada (Canada)........................... 5.350 07/15/33 1,666,768 ------------ 6,466,671 ------------
14 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- LIFE INSURANCE 4.3% $ 2,085 AXA Financial, Inc. ............................ 6.500% 04/01/08 $ 2,119,663 5,155 Marsh & McLennan Cos., Inc. .................... 5.875 08/01/33 4,666,131 190 Metlife, Inc. .................................. 6.125 12/01/11 196,341 2,730 Monumental Global Funding II (a)................ 3.850 03/03/08 2,670,715 920 Nationwide Financial Services, Inc. ............ 6.250 11/15/11 952,040 3,495 Platinum Underwriters Finance Inc., Ser B....... 7.500 06/01/17 3,539,341 3,055 Platinum Underwriters Holdings Ltd. (Bermuda)... 6.371 11/16/07 3,035,124 6,400 Principal Life Global Funding I (a)............. 5.125 06/28/07 6,383,443 3,400 Prudential Funding LLC (a)...................... 6.600 05/15/08 3,469,748 6,095 Xlliac Global Funding (a)....................... 4.800 08/10/10 5,954,657 ------------ 32,987,203 ------------ LODGING 0.5% 2,755 Hyatt Equities, LLC (a)......................... 6.875 06/15/07 2,774,202 1,005 Starwood Hotels & Resorts Worldwide, Inc. ...... 7.375 05/01/07 1,018,819 ------------ 3,793,021 ------------ MEDIA-CABLE 1.7% 2,625 Comcast Cable Communications, Inc. ............. 6.750 01/30/11 2,747,548 1,570 Comcast Cable Communications, Inc. ............. 7.125 06/15/13 1,680,818 4,455 Comcast Cable Communications, Inc. ............. 8.375 05/01/07 4,538,834 2,495 Echostar DBS Corp. ............................. 6.375 10/01/11 2,435,744 1,205 Echostar DBS Corp. ............................. 6.625 10/01/14 1,161,319 ------------ 12,564,263 ------------ MEDIA-NONCABLE 1.6% 2,415 Interpublic Group of Cos., Inc. ................ 5.400 11/15/09 2,227,837 2,600 News America Holdings, Inc. .................... 8.875 04/26/23 3,152,113 510 News America, Inc. ............................. 7.125 04/08/28 527,399 900 News America, Inc. ............................. 7.280 06/30/28 951,322 795 News America, Inc. ............................. 7.300 04/30/28 839,190 4,730 Viacom, Inc. (a)................................ 6.875 04/30/36 4,654,188 ------------ 12,352,049 ------------ NATURAL GAS DISTRIBUTORS 0.9% 1,470 KeySpan Corp. .................................. 4.900 05/16/08 1,459,944 5,163 Sempra Energy................................... 4.621 05/17/07 5,133,008 ------------ 6,592,952 ------------ NATURAL GAS PIPELINES 2.4% 2,230 Consolidated Natural Gas Co., Ser A............. 5.000 12/01/14 2,106,469 3,975 Consolidated Natural Gas Co., Ser C............. 6.250 11/01/11 4,083,903 1,575 Kinder Morgan Energy Partners................... 5.125 11/15/14 1,490,104 4,780 Kinder Morgan Finance Corp. (Canada)............ 5.700 01/05/16 4,357,094 3,325 Texas Eastern Transmission Corp. ............... 5.250 07/15/07 3,309,632 2,515 Texas Eastern Transmission Corp. ............... 7.000 07/15/32 2,770,592 ------------ 18,117,794 ------------
See Notes to Financial Statements 15 VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NONCAPTIVE-CONSUMER FINANCE 5.4% $ 4,660 American Express Co. ........................... 5.500% 09/12/06 $ 4,660,140 1,920 American General Finance Corp. ................. 4.625 05/15/09 1,886,108 4,500 American General Finance Corp. ................. 4.625 09/01/10 4,383,526 6,920 Countrywide Home Loans, Inc. ................... 3.250 05/21/08 6,691,135 800 HSBC Finance Corp. ............................. 4.125 12/15/08 780,673 1,175 HSBC Finance Corp. ............................. 4.125 11/16/09 1,134,696 1,790 HSBC Finance Corp. ............................. 6.375 10/15/11 1,864,595 4,700 HSBC Finance Corp. ............................. 6.750 05/15/11 4,966,814 1,000 HSBC Finance Corp. ............................. 7.875 03/01/07 1,011,674 8,785 Residential Capital Corp. ...................... 6.375 06/30/10 8,868,633 4,660 SLM Corp. ...................................... 4.000 01/15/10 4,475,245 1,000 SLM Corp. (Floating Rate Coupon)................ 5.665 07/26/10 1,000,947 ------------ 41,724,186 ------------ NONCAPTIVE-DIVERSIFIED FINANCE 3.4% 940 CIT Group, Inc. ................................ 3.650 11/23/07 919,777 1,545 CIT Group, Inc. ................................ 4.750 08/15/08 1,530,094 1,165 CIT Group, Inc. ................................ 7.375 04/02/07 1,178,083 6,000 General Electric Capital Corp., Ser A........... 4.250 01/15/08 5,923,692 2,235 General Electric Capital Corp., Ser A........... 4.750 09/15/14 2,149,817 5,440 General Electric Capital Corp., Ser A........... 5.875 02/15/12 5,590,498 1,020 International Lease Finance Corp. .............. 3.750 08/01/07 1,003,964 7,785 Nationwide Building Society (United Kingdom) (a)............................ 4.250 02/01/10 7,529,652 ------------ 25,825,577 ------------ OIL FIELD SERVICES 0.6% 4,460 Panhandle Eastern Pipe Line Co., Ser B.......... 2.750 03/15/07 4,395,223 ------------ OTHER UTILITIES 0.6% 4,555 Plains All American Pipeline (a)................ 6.700 05/15/36 4,701,065 ------------ PAPER 1.3% 1,340 Abitibi-Consolidated, Inc. (Canada)............. 8.850 08/01/30 1,149,050 7,590 Bowater Canada Finance (Canada)................. 7.950 11/15/11 7,324,350 1,515 Sappi Papier Holding AG (Austria) (a)........... 6.750 06/15/12 1,448,263 ------------ 9,921,663 ------------ PROPERTY & CASUALTY INSURANCE 3.2% 4,160 AIG Sunamerica Global Financial (a)............. 6.300 05/10/11 4,330,414 4,710 Farmers Exchange Capital (a).................... 7.050 07/15/28 4,744,270 2,721 Farmers Insurance Exchange Surplus (a).......... 8.625 05/01/24 3,124,552 4,610 Mantis Reef Ltd. (Australia) (a)................ 4.692 11/14/08 4,517,307 4,140 St. Paul Travelers Cos., Inc. .................. 5.010 08/16/07 4,106,520 3,315 Two-Rock Pass Through Trust (Floating Rate Coupon) (Bermuda)............................... 6.344 02/11/49 3,265,839 ------------ 24,088,902 ------------
16 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- RAILROADS 1.8% $ 3,240 Burlington Northern Santa Fe Corp. ............. 6.125% 03/15/09 $ 3,303,190 1,500 CSX Corp. ...................................... 6.750 03/15/11 1,580,002 1,649 Norfolk Southern Corp. ......................... 7.350 05/15/07 1,669,055 7,375 Union Pacific Corp. ............................ 6.625 02/01/08 7,491,282 ------------ 14,043,529 ------------ REAL ESTATE MANAGEMENT & DEVELOPMENT 0.3% 1,945 Reckson Operating Partnership LP................ 5.150 01/15/11 1,909,307 ------------ RETAIL 1.3% 800 CVS Corp. ...................................... 3.875 11/01/07 785,631 1,335 CVS Corp. ...................................... 5.750 08/15/11 1,348,357 1,500 Federated Department Stores, Inc. .............. 6.300 04/01/09 1,531,858 2,000 Federated Department Stores, Inc. .............. 6.625 09/01/08 2,044,612 1,315 Limited Brands, Inc. ........................... 6.950 03/01/33 1,306,321 2,970 May Department Stores Co. ...................... 5.950 11/01/08 2,998,064 ------------ 10,014,843 ------------ SUPERMARKETS 0.9% 1,660 Delhaize America, Inc. ......................... 9.000 04/15/31 1,950,449 2,595 Fred Meyer, Inc. ............................... 7.450 03/01/08 2,665,683 1,800 Kroger Co. ..................................... 7.250 06/01/09 1,879,965 ------------ 6,496,097 ------------ TECHNOLOGY 1.5% 4,870 Hewlett-Packard Co. (Floating Rate Coupon)...... 5.524 05/22/09 4,877,899 3,450 Hewlett-Packard Co. ............................ 5.750 12/15/06 3,452,812 2,995 LG Electronics, Inc. (South Korea) (a).......... 5.000 06/17/10 2,895,440 ------------ 11,226,151 ------------ TEXTILES 0.8% 2,845 Mohawk Industries, Inc., Ser C.................. 6.500 04/15/07 2,859,714 3,245 Mohawk Industries, Inc., Ser D.................. 7.200 04/15/12 3,400,364 ------------ 6,260,078 ------------ TOBACCO 0.2% 1,805 Reynolds American, Inc. (a)..................... 7.250 06/01/13 1,857,950 ------------ TRANSPORTATION SERVICES 1.0% 2,300 FedEx Corp. .................................... 2.650 04/01/07 2,260,872 5,000 FedEx Corp. .................................... 5.500 08/15/09 5,029,050 ------------ 7,289,922 ------------ WIRELESS COMMUNICATIONS 0.8% 6,000 Verizon Wireless Capital LLC.................... 5.375 12/15/06 5,998,134 ------------ WIRELINE COMMUNICATIONS 6.8% 5,650 AT&T Corp. ..................................... 8.000 11/15/31 6,770,327 7,200 Bellsouth Corp. (Floating Rate Coupon).......... 5.530 11/15/07 7,210,699 4,865 France Telecom SA (France)...................... 8.500 03/01/31 6,226,037 6,000 SBC Communications, Inc. ....................... 4.125 09/15/09 5,795,022
See Notes to Financial Statements 17 VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- WIRELINE COMMUNICATIONS (CONTINUED) $ 3,155 SBC Communications, Inc. ....................... 6.150% 09/15/34 $ 3,016,066 6,650 Sprint Capital Corp. ........................... 6.125 11/15/08 6,741,737 2,080 Sprint Capital Corp. ........................... 8.750 03/15/32 2,529,340 1,900 Telecom Italia Capital (Luxembourg)............. 4.000 11/15/08 1,842,010 4,240 Telecom Italia Capital (Luxembourg)............. 4.000 01/15/10 4,031,812 5,210 Telefonica Europe BV (Netherlands).............. 8.250 09/15/30 6,158,553 1,000 Verizon Communications, Inc. ................... 7.510 04/01/09 1,048,641 265 Verizon New England, Inc. ...................... 6.500 09/15/11 270,577 ------------ 51,640,821 ------------ TOTAL CORPORATE BONDS 81.0%................................................. 614,498,144 ------------ MORTGAGE BACKED SECURITIES 0.3% 1,818 World Financial Property (a).................... 6.910 09/01/13 1,903,633 732 World Financial Property (a).................... 6.950 09/01/13 767,261 ------------ TOTAL MORTGAGE BACKED SECURITIES............................................. 2,670,894 ------------ GOVERNMENT OBLIGATIONS 8.8% 6,550 United States Treasury Bonds.................... 6.125 08/15/29 7,616,425 24,900 United States Treasury Bonds.................... 6.375 08/15/27 29,516,236 500 United States Treasury Bonds.................... 8.125 08/15/21 666,992 10,685 United States Treasury Notes (c)................ 4.250 08/15/13 10,392,840 8,500 United States Treasury Notes.................... 4.250 11/15/13 8,257,623 10,125 United States Treasury Notes.................... 4.500 02/28/11 10,049,073 ------------ TOTAL GOVERNMENT OBLIGATIONS................................................. 66,499,189 ------------ TOTAL LONG-TERM INVESTMENTS 90.1% (Cost $686,584,732)........................................................ 683,668,227 ============ SHORT-TERM INVESTMENTS 10.8% REPURCHASE AGREEMENT 10.6% State Street Bank & Trust Co. ($80,755,000 par collateralized by U.S. Government obligations in a pooled cash account, interest rate of 5.10%, dated 08/31/06, to be sold on 09/01/06 at $80,766,440)..................... 80,755,000
18 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
DESCRIPTION VALUE - ----------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS 0.2% United States Treasury Bills ($1,400,000 par, yielding 4.914%, 01/11/07 maturity) (b)................................................................. $ 1,375,242 ------------ TOTAL SHORT-TERM INVESTMENTS 10.8% (Cost $82,124,931)............................................................ 82,130,242 ------------ TOTAL INVESTMENTS 100.9% (Cost $768,709,663)........................................................... 765,798,469 LIABILITIES IN EXCESS OF OTHER ASSETS (0.9%)................................... (6,988,363) ------------ NET ASSETS 100.0%.............................................................. $758,810,106 ============
Percentages are calculated as a percentage of net assets. (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. (b) All or a portion of this security has been physically segregated in connection with open futures contracts. (c) Security purchased on a when-issued or delayed delivery basis. FUTURES CONTRACTS OUTSTANDING AS OF AUGUST 31, 2006:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION LONG CONTRACTS: U.S. Treasury Bonds Futures, December 2006 (Current Notional Value of $111,063 per contract)......... 828 $ 660,663 U.S. Treasury Notes 10-Year Futures, December 2006 (Current Notional Value of $107,375 per contract)......... 435 214,277 U.S. Treasury Notes 5-Year Futures, December 2006 (Current Notional Value of $105,109 per contract)......... 558 217,716 ----- --------- SHORT CONTRACTS: U.S. Treasury Notes 2-Year Futures, December 2006 (Current Notional Value of $204,344 per contract)......... 445 (160,214) ----- --------- 2,266 $ 932,442 ===== =========
See Notes to Financial Statements 19 VAN KAMPEN CORPORATE BOND FUND PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued SWAP AGREEMENTS OUTSTANDING AS OF AUGUST 31, 2006: CREDIT DEFAULT SWAPS
PAY/ RECEIVE NOTIONAL UNREALIZED BUY/SELL FIXED EXPIRATION AMOUNT APPRECIATION/ COUNTERPARTY REFERENCE ENTITY PROTECTION RATE DATE (000) DEPRECIATION JP Morgan Chase Bank, N.A. .............. Tyco International., Ltd. Buy 0.65% 03/20/11 $3,500 $(26,296) Goldman Sachs Capital Markets............ Tyco International., Ltd. Buy 0.80 03/20/11 2,100 (29,052) -------- $(55,348) ========
20 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND FINANCIAL STATEMENTS Statement of Assets and Liabilities August 31, 2006 ASSETS: Total Investments, including repurchase agreements of $80,755,000 (Cost $768,709,663)............................ $765,798,469 Cash........................................................ 806 Receivables: Interest................................................... 9,122,168 Investments Sold........................................... 4,014,209 Fund Shares Sold........................................... 1,325,589 Variation Margin on Futures................................ 385,881 Other....................................................... 134,168 ------------ Total Assets............................................. 780,781,290 ------------ LIABILITIES: Payables: Investments Purchased...................................... 18,828,309 Fund Shares Repurchased.................................... 1,745,702 Distributor and Affiliates................................. 407,395 Investment Advisory Fee.................................... 252,527 Income Distributions....................................... 223,185 Accrued Expenses............................................ 259,947 Trustees' Deferred Compensation and Retirement Plans........ 198,771 Swap Contracts.............................................. 55,348 ------------ Total Liabilities........................................ 21,971,184 ------------ NET ASSETS.................................................. $758,810,106 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized)............................... $773,732,133 Accumulated Undistributed Net Investment Income............. (4,258,122) Net Unrealized Depreciation................................. (2,034,100) Accumulated Net Realized Loss............................... (8,629,805) ------------ NET ASSETS.................................................. $758,810,106 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value and redemption price per share (Based on net assets of $591,178,884 and 90,488,187 shares of beneficial interest issued and outstanding).............. $ 6.53 Maximum sales charge (4.75%* of offering price).......... .33 ------------ Maximum offering price to public......................... $ 6.86 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $100,226,789 and 15,374,933 shares of beneficial interest issued and outstanding).............. $ 6.52 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $28,567,775 and 4,379,764 shares of beneficial interest issued and outstanding).............. $ 6.52 ============ Class I Shares: Net asset value and offering price per share (Based on net assets of $38,836,658 and 5,939,638 shares of beneficial interest issued and outstanding).............. $ 6.54 ============
* On sales of $100,000 or more, the sales charge will be reduced. See Notes to Financial Statements 21 VAN KAMPEN CORPORATE BOND FUND FINANCIAL STATEMENTS continued Statement of Operations For the Year Ended August 31, 2006 INVESTMENT INCOME: Interest.................................................... $ 37,637,230 Other....................................................... 204,563 ------------ Total Income............................................ 37,841,793 ------------ EXPENSES: Investment Advisory Fee..................................... 2,854,462 Distribution (12b-1) and Service Fees (Attributed to Classes A, B, and C $1,351,769, $1,122,872 and $284,042, respectively)............................................. 2,758,683 Shareholder Services........................................ 1,599,009 Custody..................................................... 67,656 Trustees' Fees and Related Expenses......................... 46,789 Legal....................................................... 19,135 Other....................................................... 528,251 ------------ Total Expenses.......................................... 7,873,985 Less Credits Earned on Cash Balances.................... 39,808 ------------ Net Expenses............................................ 7,834,177 ------------ NET INVESTMENT INCOME....................................... $ 30,007,616 ============ REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 24,964 Futures................................................... (620,721) Swap Contracts............................................ (174,047) ------------ Net Realized Loss........................................... (769,804) ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 19,627,619 ------------ End of the Period: Investments............................................. (2,911,194) Futures................................................. 932,442 Swap Contracts.......................................... (55,348) ------------ (2,034,100) ------------ Net Unrealized Depreciation During the Period............... (21,661,719) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(22,431,523) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 7,576,093 ============
22 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND FINANCIAL STATEMENTS continued Statements of Changes in Net Assets
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2006 AUGUST 31, 2005 ---------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................... $ 30,007,616 $ 24,710,301 Net Realized Gain/Loss................................... (769,804) 12,900,218 Net Unrealized Depreciation During the Period............ (21,661,719) (4,503,856) ------------- ------------- Change in Net Assets from Operations..................... 7,576,093 33,106,663 ------------- ------------- Distributions from Net Investment Income: Class A Shares......................................... (25,558,482) (21,278,452) Class B Shares......................................... (4,399,602) (4,977,341) Class C Shares......................................... (1,121,886) (1,142,953) Class I Shares......................................... (1,435,264) (62,399) ------------- ------------- Total Distributions...................................... (32,515,234) (27,461,145) ------------- ------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... (24,939,141) 5,645,518 ------------- ------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold................................ 274,997,260 283,286,242 Net Asset Value of Shares Issued Through Dividend Reinvestment........................................... 29,576,525 24,492,761 Cost of Shares Repurchased............................... (204,876,191) (179,215,837) ------------- ------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 99,697,594 128,563,166 ------------- ------------- TOTAL INCREASE IN NET ASSETS............................. 74,758,453 134,208,684 NET ASSETS: Beginning of the Period.................................. 684,051,653 549,842,969 ------------- ------------- End of the Period (Including accumulated undistributed net investment income of ($4,258,122) and ($3,236,929), respectively).......................................... $ 758,810,106 $ 684,051,653 ============= =============
See Notes to Financial Statements 23 VAN KAMPEN CORPORATE BOND FUND FINANCIAL HIGHLIGHTS THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED AUGUST 31, CLASS A SHARES ---------------------------------------------- 2006 2005 2004 2003 2002 ---------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.... $ 6.78 $ 6.72 $ 6.58 $ 6.39 $ 6.75 ------ ------ ------ ------ ------ Net Investment Income..................... .28(a) .29 .33 .33(a) .37 Net Realized and Unrealized Gain/Loss..... (.22) .09 .16 .25 (.33) ------ ------ ------ ------ ------ Total from Investment Operations............ .06 .38 .49 .58 .04 ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.................................. .31 .32 .35 .39 .40 Return of Capital Distributions........... -0- -0- -0-(c) -0- -0- ------ ------ ------ ------ ------ Total Distributions......................... .31 .32 .35 .39 .40 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......... $ 6.53 $ 6.78 $ 6.72 $ 6.58 $ 6.39 ====== ====== ====== ====== ====== Total Return (b)............................ .93% 5.79% 7.55% 9.20% .54% Net Assets at End of the Period (In millions)................................. $591.2 $502.6 $394.7 $318.4 $246.5 Ratio of Expenses to Average Net Assets..... .96% .99% .98% 1.01% 1.03% Ratio of Net Investment Income to Average Net Assets................................ 4.33% 4.29% 4.80% 4.98% 5.48% Portfolio Turnover.......................... 45% 61% 38% 46% 82%
(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 1% may be imposed on certain redemptions made within eighteen months of purchase. If the sales charges were included, total returns would be lower. These returns include combined Rule 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) Amount is less than $.01. 24 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND FINANCIAL HIGHLIGHTS continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED AUGUST 31, CLASS B SHARES ---------------------------------------------- 2006 2005 2004 2003 2002 ---------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.... $ 6.76 $ 6.70 $ 6.57 $ 6.38 $ 6.74 ------ ------ ------ ------ ------ Net Investment Income..................... .23(a) .24 .26 .28(a) .32 Net Realized and Unrealized Gain/Loss..... (.21) .09 .16 .25 (.33) ------ ------ ------ ------ ------ Total from Investment Operations............ .02 .33 .42 .53 (.01) ------ ------ ------ ------ ------ Less: Distributions from Net Investment Income.................................. .26 .27 .29 .34 .35 Return of Capital Distributions........... -0- -0- -0-(c) -0- -0- ------ ------ ------ ------ ------ Total Distributions......................... .26 .27 .29 .34 .35 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD.......... $ 6.52 $ 6.76 $ 6.70 $ 6.57 $ 6.38 ====== ====== ====== ====== ====== Total Return (b)............................ .30% 5.01% 6.59% 8.38% -.22% Net Assets at End of the Period (In millions)................................. $100.2 $123.6 $126.5 $135.6 $112.3 Ratio of Expenses to Average Net Assets..... 1.72% 1.75% 1.75% 1.77% 1.78% Ratio of Net Investment Income to Average Net Assets................................ 3.57% 3.55% 4.06% 4.23% 4.73% Portfolio Turnover.......................... 45% 61% 38% 46% 82%
(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 up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. (c) Amount is less than $.01. See Notes to Financial Statements 25 VAN KAMPEN CORPORATE BOND FUND FINANCIAL HIGHLIGHTS continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED AUGUST 31, CLASS C SHARES -------------------------------------------------- 2006 2005 2004 2003 2002 -------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD... $6.76 $6.71 $6.57 $6.38 $ 6.74 ----- ----- ----- ----- ------ Net Investment Income.................... .23(a) .24 .27 .28(a) .32 Net Realized and Unrealized Gain/Loss.... (.21) .08 .16 .25 (.33) ----- ----- ----- ----- ------ Total from Investment Operations........... .02 .32 .43 .53 (.01) ----- ----- ----- ----- ------ Less: Distributions from Net Investment Income................................. .26 .27 .29 .34 .35 Return of Capital Distributions.......... -0- -0- -0-(d) -0- -0- ----- ----- ----- ----- ------ Total Distributions........................ .26 .27 .29 .34 .35 ----- ----- ----- ----- ------ NET ASSET VALUE, END OF THE PERIOD......... $6.52 $6.76 $6.71 $6.57 $ 6.38 ===== ===== ===== ===== ====== Total Return (b)........................... .16%(c) 5.17%(c) 6.59%(c) 8.38% -.22% Net Assets at End of the Period (In millions)................................ $28.6 $29.2 $28.6 $29.6 $ 23.4 Ratio of Expenses to Average Net Assets.... 1.71%(c) 1.71%(c) 1.73%(c) 1.77% 1.78% Ratio of Net Investment Income to Average Net Assets............................... 3.58%(c) 3.59%(c) 4.07%(c) 4.22% 4.73% Portfolio Turnover......................... 45% 61% 38% 46% 82%
(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 up to 1% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (c) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net Investment Income to Average Net Assets reflect actual 12b-1 fees of less than 1% (See Footnote 7). (d) Amount is less than $.01. 26 See Notes to Financial Statements VAN KAMPEN CORPORATE BOND FUND FINANCIAL HIGHLIGHTS continued THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
AUGUST 12, 2005 (COMMENCEMENT OF CLASS I SHARES YEAR ENDED OPERATIONS) TO AUGUST 31, 2006 AUGUST 31, 2005 ----------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................. $6.78 $6.72 ----- ----- Net Investment Income.................................. .29(a) .03 Net Realized and Unrealized Gain/Loss.................. (.21) .06 ----- ----- Total from Investment Operations......................... .08 .09 Less Distributions from Net Investment Income............ .32 .03 ----- ----- NET ASSET VALUE, END OF THE PERIOD....................... $6.54 $6.78 ===== ===== Total Return (b)......................................... 1.33% 1.11%* Net Assets at End of the Period (In millions)............ $38.8 $28.7 Ratio of Expenses to Average Net Assets.................. .72% .86% Ratio of Net Investment Income to Average Net Assets..... 4.59% 4.32% Portfolio Turnover....................................... 45% 61%
(a) Based on average shares outstanding. (b) Assumes reinvestment of all distributions for the period. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. * Non-Annualized See Notes to Financial Statements 27 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Corporate Bond Fund (the "Fund") is organized as a Delaware statutory 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 Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares differs by its initial sales load, contingent deferred sales charges, the allocation of class specific expenses and voting rights on matters affecting a single class. 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Fixed income investments are stated at value using market quotations or indications of value obtained from an independent pricing service. Investments in securities listed on a securities exchange are valued at their last sale price as of the close of such securities exchange. 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. Credit default swaps are valued using market quotations from brokers. 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 may invest in repurchase agreements, which are short-term investments in which the Fund acquires ownership of a debt security and the seller agrees to repurchase the security at a future time and specified price. The Fund may invest independently in repurchase agreements, or transfer uninvested cash balances into a pooled cash account along with other investment companies advised by Van Kampen Asset Management (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. The Fund may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Fund will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase 28 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued commitments until payment is made. At August 31, 2006, the Fund had $14,295,462 of when-issued or delayed delivery purchase commitments. 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. Other income is comprised primarily of consent fees. Consent fees are earned as compensation for agreeing to changes in the terms of debt instruments. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, except for distribution and service fees and incremental 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 Subchapter M 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, 2006, the Fund had an accumulated capital loss carryforward for tax purposes of $6,357,540, which will expire according to the following schedule:
AMOUNT EXPIRATION $5,560,726.................................................. August 31, 2011 436,571................................................... August 31, 2012 360,243................................................... August 31, 2014
At August 31, 2006, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $772,869,853 ============ Gross tax unrealized appreciation........................... $ 6,070,061 Gross tax unrealized depreciation........................... (13,141,445) ------------ Net tax unrealized depreciation on investments.............. $ (7,071,384) ============
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 futures transactions. All short-term capital gains and a portion of futures gains are included in ordinary income for tax purposes. 29 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued The tax character of distributions paid during the years ended August 31, 2006 and 2005 was follows:
2006 2005 Distributions paid from: Ordinary Income........................................... $32,525,490 $27,486,058 Long-term capital gain.................................... -0- -0- ----------- ----------- $32,525,490 $27,486,058 =========== ===========
Due to inherent differences in the recognition of income, expenses and realized gains/losses under U.S. generally accepted accounting principles 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 $5,563 related to the Fund's investments in other regulated investment companies and $198,750 related to consent fee income received from tender offers were reclassified from accumulated undistributed net investment income to accumulated net realized loss. A permanent book and tax difference of $23,682 related to the recognition of net realized losses on paydowns of mortgage pool obligations and $1,847,024 related to book to tax amortization differences were reclassified from accumulated undistributed net investment income to accumulated net realized loss. Additionally, permanent book to tax differences of $179,968 and $1,925 relating to income from swap transactions were reclassified from accumulated net realized loss to accumulated undistributed net investment income and capital, respectively. As of August 31, 2006 the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $294,973
Net realized gains or losses may differ for financial reporting and tax purposes as a result of gains or losses recognized for tax purposes on open futures transactions at August 31, 2006 and post October losses of $1,347,670 which are not recognized for tax purposes until the first day of the following fiscal year. F. EXPENSE REDUCTIONS During the year ended August 31, 2006, the Fund's custody fee was reduced by $39,808 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:
AVERAGE DAILY NET ASSETS % PER ANNUM First $500 million.......................................... 0.42% Next $750 million........................................... 0.35 Over $1.250 billion......................................... 0.22
30 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued For the year ended August 31, 2006, the Fund recognized expenses of approximately $19,000 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a Trustee of the Fund is a partner of such firm and he and his law firm provide legal services as legal counsel to the Fund. Under separate Accounting Services and Chief Compliance Officer (CCO) Employment agreements, the Adviser provides accounting services and the CCO provides compliance services to the Fund. The costs of these services are allocated to each fund. For the year ended August 31, 2006, the Fund recognized expenses of approximately $51,400 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting services to the Fund, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on 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, 2006, the Fund recognized expenses of approximately $1,395,400 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, 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 $89,500 are included in "Other" assets on the Statement of Assets and Liabilities at August 31, 2006. 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. For the year ended August 31, 2006, Van Kampen, as Distributor for the Fund, received commissions on sales of the Fund's Class A Shares of approximately $691,900 and contingent deferred sales charge (CDSC) on redeemed shares of approximately $251,300. Sales charges do not represent expenses of the Fund. 31 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued 3. CAPITAL TRANSACTIONS For the years ended August 31, 2006 and 2005, transactions were as follows:
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2006 AUGUST 31, 2005 ---------------------------- ---------------------------- SHARES VALUE SHARES VALUE Sales: Class A....................... 33,673,853 $ 220,273,129 32,548,636 $ 218,937,427 Class B....................... 4,260,898 27,860,021 4,094,787 27,489,442 Class C....................... 1,353,140 8,843,562 1,210,343 8,129,287 Class I....................... 2,782,444 18,020,548 4,275,162 28,730,086 ----------- ------------- ----------- ------------- Total Sales..................... 42,070,335 $ 274,997,260 42,128,928 $ 283,286,242 =========== ============= =========== ============= Dividend Reinvestment: Class A....................... 3,594,502 $ 23,444,306 2,871,301 $ 19,334,322 Class B....................... 589,962 3,840,743 631,406 4,241,852 Class C....................... 131,477 856,217 127,119 854,183 Class I....................... 219,719 1,435,259 9,204 62,404 ----------- ------------- ----------- ------------- Total Dividend Reinvestment..... 4,535,660 $ 29,576,525 3,639,030 $ 24,492,761 =========== ============= =========== ============= Repurchases: Class A....................... (20,947,743) $(136,661,300) (19,990,174) $(134,416,986) Class B....................... (7,755,242) (50,546,695) (5,319,881) (35,708,060) Class C....................... (1,419,885) (9,258,547) (1,294,715) (8,693,560) Class I....................... (1,288,016) (8,409,649) (58,875) (397,231) ----------- ------------- ----------- ------------- Total Repurchases............... (31,410,886) $(204,876,191) (26,663,645) $(179,215,837) =========== ============= =========== =============
4. REDEMPTION FEE Effective September 26, 2005, the Fund assesses a 2% redemption fee on the proceeds of Fund shares that are redeemed (either by sale or exchange) within seven days of purchase. The redemption fee is paid directly to the Fund. For the period ended August 31, 2006, the Fund received redemption fees of approximately $2,800, which are reported as part of "Cost of Shares Repurchased" in the Statement of Changes in Net Assets. The per share impact from redemption fees paid to the Fund was less than $0.01. 5. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $375,011,406 and $304,164,116, respectively. 6. 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 may use derivative instruments for a variety of reasons, such as to attempt to protect the Fund against possible changes in the market value of its portfolio or to 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 32 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. Summarized below are the specific types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS 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 Bonds or Notes. 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 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, 2006, were as follows:
CONTRACTS Outstanding at August 31, 2005.............................. 2,335 Futures Opened.............................................. 14,355 Futures Closed.............................................. (14,424) ------- Outstanding at August 31, 2006.............................. 2,266 =======
B. CREDIT DEFAULT SWAPS The Fund may enter into credit default swap contracts for hedging purposes or to gain exposure to a credit in which the Fund may otherwise invest. A credit default swap is an agreement between two parties to exchange the credit risk of an issuer. A buyer of a credit default swap is said to buy protection by paying periodic fees in return for a contingent payment from the seller if the issuer has a credit event such as bankruptcy, a failure to pay outstanding obligations or deteriorating credit while the swap is outstanding. A seller of a credit default swap is said to sell protection and thus collects the periodic fees and profits if the credit of the issuer remains stable or improves while the swap is outstanding but the seller in a credit default swap contract would be required to pay an agreed-upon amount, which approximates the notional amount of the swap as disclosed in the table following the Portfolio of Investments, to the buyer in the event of an adverse credit event of the issuer. The Fund accrues for the periodic fees on swap contracts on a daily basis with the net amount accrued recorded within unrealized appreciation/depreciation of swap contracts. Upon cash settlement of the periodic fees, the net amount is recorded as realized gain/loss on swap contracts on the Statements of Operations. Net unrealized gains are recorded as an asset or net unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in value of the swap contracts is reported as unrealized gains or losses in the Statement of Operations. 33 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued Credit default swaps may involve greater risks than if a Fund had invested in the issuer directly. Credit default swaps are subject to general market risk, counterparty risk and credit risk. If there is a default by the counterparty, the Fund will have contractual remedies pursuant to the agreements related to the transaction. 7. DISTRIBUTION AND SERVICE PLANS Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate the Distributor for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to .25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets. These fees are accrued daily and paid to the Distributor monthly. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed receivable") was approximately $1,154,400 and $0 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed receivable has been fully recovered, the distribution fee is reduced. 8. LEGAL MATTERS The Adviser and certain affiliates of the Adviser are named as defendants in a derivative action which additionally names as defendants certain individual trustees of certain Van Kampen funds. The named investment companies, including the Fund, are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of Van Kampen funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This derivative action was coordinated with a direct action alleging related violations of defendants' statutory disclosure obligations and fiduciary duties with respect to the payments described above. In addition, this derivative action was stayed by agreement of the parties pending rulings on the motion to dismiss the direct action and the motion to dismiss another derivative action brought by the same plaintiff that brought this derivative action, alleging market timing and late trading in the Van Kampen funds. In April 2006, the court granted defendants' motion to dismiss the direct action. In June 2006, the court granted defendants' motion to dismiss the market timing action. Accordingly, the stay on this action was lifted. Plaintiff and defendants have agreed that this action should be dismissed in light of the rulings dismissing the two cases discussed above. The Court has approved a notice to shareholders regarding the dismissal, which is located at the back of this Report. 34 VAN KAMPEN CORPORATE BOND FUND NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued 9. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 10. NEW ACCOUNTING PRONOUNCEMENT In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. The impact to the Fund's financial statements, if any, is currently being assessed. 35 VAN KAMPEN CORPORATE BOND FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2006, 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 five 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. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2006, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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, 2006, 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 five years in the period then ended in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois October 13, 2006 36 VAN KAMPEN CORPORATE BOND FUND BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR JACK E. NELSON HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS RONALD E. ROBISON President and Principal Executive Officer DENNIS SHEA Vice President J. DAVID GERMANY Vice President AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRETT Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1221 Avenue of the Americas New York, New York 10020 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 One Lincoln Street Boston, Massachusetts 02111 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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. 37 VAN KAMPEN CORPORATE BOND FUND TRUSTEE AND OFFICER INFORMATION 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, the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Investor Services. The term "Fund Complex" includes each of the investment companies advised by the Adviser as of the date of this Annual Report. 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:
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 (61) Trustee Trustee Chairman and Chief 71 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. Director of the Heartland Alliance, a nonprofit organization serving human needs based in Chicago. Director of St. Vincent de Paul Center, a Chicago based day care facility serving the children of low income families. Board member of the Illinois Manufacturers' Association. Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 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.
38
VAN KAMPEN CORPORATE BOND FUND TRUSTEE AND OFFICER INFORMATION continued 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 Rod Dammeyer (65) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing CAC, L.L.C. since 2003 a private company General Partner of funds 4350 LaJolla Village Drive offering capital in the Fund Complex. Suite 980 investment and management Director of Quidel San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle, to February 2001, Vice Inc., Ventana Medical Chairman and Director of Systems, Inc., and GATX Anixter International, Corporation, and Trustee Inc., a global of The Scripps Research distributor of wire, Institute. Prior to cable and communications January 2005, Trustee of connectivity products. the University of Chicago Prior to July 2000, Hospitals and Health Managing Partner of Systems. Prior to April Equity Group Corporate 2004, Director of Investment (EGI), a TheraSense, Inc. Prior to company that makes January 2004, Director of private investments in TeleTech Holdings Inc. other companies. and Arris Group, Inc. Prior to May 2002, Director of Peregrine Systems Inc. Prior to February 2001, Director of 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).
39
VAN KAMPEN CORPORATE BOND FUND TRUSTEE AND OFFICER INFORMATION continued 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 (58) Trustee Trustee Managing Partner of 71 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 1990, Executive Vice President of The Exchange National Bank. R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing 1744 R Street, NW since 1995 the German Marshall Fund General Partner of funds Washington, DC 20009 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 (70) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing 14 Huron Trace since 2003 and Chief Executive General Partner of funds Galena, IL 61036 Officer of Pocklington in the Fund Complex. Corporation, Inc., an Director of the Lake investment holding Forest Bank & Trust. company. Director of the Marrow Foundation.
40
VAN KAMPEN CORPORATE BOND FUND TRUSTEE AND OFFICER INFORMATION continued 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 (70) Trustee Trustee President of Nelson 71 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 (65) Trustee Trustee President Emeritus and 71 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, Ph.D. Trustee Trustee Chief Communications 71 Trustee/Director/Managing (64) since 1999 Officer of the National General Partner of funds 815 Cumberstone Road Academy of in the Fund Complex. Harwood, MD 20776 Sciences/National Director of Fluor Corp., Research Council, an an engineering, independent, federally procurement and chartered policy construction institution, from 2001 to organization, since November 2003 and Chief January 2004 and Director Operating Officer from of Neurogen Corporation, 1993 to 2001. Director of a pharmaceutical company, the Institute for Defense since January 1998. Analyses, a federally funded research and development center, Director of the German Marshall Fund of the United States, Director of the Rocky Mountain Institute 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.
41 VAN KAMPEN CORPORATE BOND FUND TRUSTEE AND OFFICER INFORMATION continued INTERESTED TRUSTEE:*
NUMBER OF FUNDS IN TERM OF FUND OFFICE AND COMPLEX POSITION(S) LENGTH OF OVERSEEN NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) BY OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS TRUSTEE Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm of Skadden, Arps, Slate, Meagher & 71 333 West Wacker Drive since 1995 Flom LLP, legal counsel to funds in the Fund Complex. Chicago, IL 60606 NAME, AGE AND ADDRESS OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE HELD BY TRUSTEE Wayne W. Whalen* (67) Trustee/Director/ 333 West Wacker Drive Managing General Chicago, IL 60606 Partner of funds in the Fund Complex. Director of the Abraham Lincoln Presidential Library Foundation.
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act) of certain funds in the Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such funds in the Fund Complex. 42 VAN KAMPEN CORPORATE BOND FUND TRUSTEE AND OFFICER INFORMATION continued OFFICERS:
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 Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005 1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors Inc. since June 2003. Director of Investor Services since September 2002. Director of the Adviser, Van Kampen Investments and Van Kampen Exchange Corp. since January 2005. Managing Director of Morgan Stanley and Morgan Stanley & Co. Incorporated. Managing Director and Director of Morgan Stanley Investment Management Inc. Chief Administrative Officer, Managing Director and Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Managing Director and Director of Morgan Stanley Distributors Inc. and Morgan Stanley Distribution Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Executive Vice President and Principal Executive Officer of the Institutional and Retail Morgan Stanley Funds. Director of Morgan Stanley SICAV. Previously, Chief Global Operations Officer of Morgan Stanley Investment Management Inc. and Executive Vice President of funds in the Fund Complex from May 2003 to September 2005. Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors 1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global Equity of the same entities since February 2006. Vice President of Morgan Stanley Institutional and Retail Funds since February 2006. Vice President of funds in the Fund Complex since March 2006. Previously, Managing Director and Director of Global Equity Research at Morgan Stanley from April 2000 to February 2006. J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors 25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer - London, GBR E14 4QA Global Fixed Income of the same entities since December 2005. Managing Director and Director of Morgan Stanley Investment Management Ltd. Director of Morgan Stanley Investment Management (ACD) Limited since December 2003. Vice President of Morgan Stanley Institutional and Retail Funds since February 2006. Vice President of funds in the Fund Complex since March 2006.
43
VAN KAMPEN CORPORATE BOND FUND TRUSTEE AND OFFICER INFORMATION continued 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 Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment 1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and the Adviser. Vice President of the Morgan Stanley Institutional and Retail Funds since July 2004 and Vice President of funds in the Fund Complex since August 2004. Previously, Managing Director and General Counsel of Americas, UBS Global Asset Management from July 2000 to July 2004 and General Counsel of Aeltus Investment Management, Inc. from January 1997 to July 2000. Stefanie V. Chang (39) Vice President Officer Executive Director of Morgan Stanley Investment Management 1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund New York, NY 10020 Complex. John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since 1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen Advisors Inc. and certain other subsidiaries of Van Kampen Investments, Vice President, Chief Financial Officer and Treasurer of funds in the Fund Complex and head of Fund Accounting for Morgan Stanley Investment Management Inc. Prior to December 2002, Executive Director of Van Kampen Investments, the Adviser and Van Kampen Advisors Inc. James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund Complex from January 2005 to August 2005 and since September 2006.
44 Notice to Fund Shareholders As previously disclosed, a derivative action was filed on behalf of the Fund against the Fund's investment adviser, broker-dealer, distributor, and Trustees. The complaint alleges that defendants violated federal securities laws and state laws in connection with certain economic incentive programs. The case is pending before the Honorable Richard Owen, United States District Judge in the Southern District of New York. Defendants have filed a motion to dismiss the complaint in its entirety on numerous grounds, and that motion is still pending. On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan Stanley and all of the same corporate defendants that are named in the derivative action. The Morgan Stanley suit related to the same incentive programs that are at issue in the derivative action, and asserted many of the same legal claims. In his decision, Judge Owen found that the programs do not violate federal law, and that defendants had made the appropriate disclosures concerning the programs. The plaintiffs in the Morgan Stanley suit did not appeal from the decision, and that decision is now final. In light of this decision by Judge Owen -- as well as several other decisions by other judges in the Southern District of New York and certain other courts that have dismissed similar complaints against other investment funds -- plaintiff in the derivative action has determined that the suit would be unsuccessful, if pursued further. Accordingly, plaintiff has asked Judge Owen to dismiss the action. No attorneys' fees will be paid by defendants and no consideration will be paid to the named plaintiff. All investors in the Fund are hereby provided notice of this proposed dismissal. If you object to the proposed dismissal, your objection must be mailed no later than November 29, 2006, in writing, to the Honorable Richard Owen, United States District Judge, United States Courthouse, Room 640, 500 Pearl Street, New York, NY 10007-1312. Copies of the objection must also be mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, NY 10019-6064. Van Kampen Corporate Bond Fund An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen Corporate Bond Fund An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen Corporate Bond Fund An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. The Statement of Additional Information includes additional information about Fund trustees and is available, without charge, upon request by calling 1-800-847-2424. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2006 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 17, 117, 217 CORP ANR 10/06 (VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-02888P-Y08/06 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) Not applicable. (d) Not applicable. (e) Not applicable. (f) (1) The Fund's Code of Ethics is attached hereto as Exhibit 12A. (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 : Rod Dammeyer, Jerry D. 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. (a)(b)(c)(d) and (g). Based on fees billed for the periods shown: 2006
REGISTRANT COVERED ENTITIES(1) AUDIT FEES...................... $26,100 N/A NON-AUDIT FEES AUDIT-RELATED FEES.... $0 $706,000(2) TAX FEES.............. $2,800(3) $75,537(4) ALL OTHER FEES........ $0 $749,041(5) TOTAL NON-AUDIT FEES............ $2,800 $1,530,578 TOTAL........................... $28,900 $1,530,578
2005
REGISTRANT COVERED ENTITIES(1) AUDIT FEES...................... $25,200 N/A NON-AUDIT FEES AUDIT-RELATED FEES.... $0 $280,000(2) TAX FEES.............. $2,500(3) $58,688(4) ALL OTHER FEES........ $0 $655,125(5) TOTAL NON-AUDIT FEES............ $2,500 $993,813 TOTAL........................... $27,700 $993,813
N/A- Not applicable, as not required by Item 4. (1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant. (2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by the Adviser or its affiliates, specifically attestation services provided in connection with a SAS 70 Report. (3) Tax Fees represent tax advice and compliance services provided in connection with the review of the Registrant's tax. (4) Tax Fees represent tax advice services provided to Covered Entities, including research and identification of PFIC entities. (5) All Other Fees represent attestation services provided in connection with performance presentation standards and assistance with compliance policies and procedures. (e)(1) The audit committee's pre-approval policies and procedures are as follows: JOINT AUDIT COMMITTEE AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY AND PROCEDURES OF THE VAN KAMPEN FUNDS AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1) 1. STATEMENT OF PRINCIPLES The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor's independence from the Fund.(2) The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee's administration of the engagement of the independent auditor. The SEC's rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee ("general pre-approval"); or require the specific pre-approval of the Audit Committee ("specific pre-approval"). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC's rules on auditor independence. The Audit Committee will also consider whether the Independent Auditors are best positioned to provide the most effective and efficient services, for reasons such as its familiarity with the Fund's business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Fund's ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative. The Audit Committee is also mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services and may determine for each fiscal year, the appropriate ratio between the total amount of fees for Audit, Audit-related and Tax services for the Fund (including any Audit-related or Tax service fees for Covered Entities that were subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Fund (including any such services for Covered Entities subject to pre-approval). The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the Independent Auditors to management. - ------------------ (1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the "Policy"), amended as of the date above, supercedes and replaces all prior versions that may have been amended from time to time. (2) Terms used in this Policy and not otherwise defined herein shall have the meanings as defined in the Joint Audit Committee Charter. The Fund's Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors' independence. 2. DELEGATION As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. 3. AUDIT SERVICES The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will monitor the Audit services engagement as necessary, but no less than on a quarterly basis, and will also approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 4. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements or, to the extent they are Covered Services, the Covered Entities' financial statements, or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR. The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 5. TAX SERVICES The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the Independent Auditors may provide such services. Hence, the Audit Committee believes it may grant general pre-approval to those Tax services that have historically been provided by the Independent Auditors, that the Audit Committee has reviewed and believes would not impair the independence of the Independent Auditors, and that are consistent with the SEC's rules on auditor independence. The Audit Committee will not permit the retention of the Independent Auditors in connection with a transaction initially recommended by the Independent Auditors, the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with Director of Tax or outside counsel to determine that the tax planning and reporting positions are consistent with this policy. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services involving large and complex transactions not listed in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated), including tax services proposed to be provided by the Independent Auditors to any executive officer or trustee/director/managing general partner of the Fund, in his or her individual capacity, where such services are paid for by the Fund (generally applicable only to internally managed investment companies). 6. ALL OTHER SERVICES The Audit Committee believes, based on the SEC's rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). A list of the SEC's prohibited non-audit services is attached to this policy as Appendix B.5. The SEC's rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions. 7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. For each fiscal year, the Audit Committee may determine the appropriate ratio between the total amount of fees for Audit, Audit-related, and Tax services for the Fund (including any Audit-related or Tax services fees for Covered Entities subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Fund (including any such services for Covered Entities subject to pre-approval). 8. PROCEDURES All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund's Chief Financial Officer and must include a detailed description of the services to be rendered. The Fund's Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund's Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Fund's Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund's Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. A sample report is included as Appendix B.7. Both the Fund's Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund's Chief Financial Officer or any member of management. 9. ADDITIONAL REQUIREMENTS The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor's independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence. 10. COVERED ENTITIES Covered Entities include the Fund's investment adviser(s) and any entity controlling, controlled by or under common control with the Fund's investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund's audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include: - Van Kampen Investments Inc. - Van Kampen Asset Management - Van Kampen Advisors Inc. - Van Kampen Funds Inc. - Van Kampen Investor Services Inc. - Morgan Stanley Investment Management Inc. - Morgan Stanley Trust Company - Morgan Stanley Investment Management Ltd. - Morgan Stanley Investment Management Company - Morgan Stanley Asset & Investment Trust Management Company Ltd. (e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee's pre-approval policies and procedures (included herein). (f) Not applicable. (g) See table above. (h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors' independence in performing audit services. Item 5. Audit Committee of Listed Registrants. (a) The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: R. Craig Kennedy, Jerry D. Choate, Rod Dammeyer. (b) Not applicable. Item 6. Schedule of Investments. Please refer to Item #1. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not applicable. Item 11. 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. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (1) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (2)(a) A certification for the Principal Executive Officer of the registrant is attached hereto as part of EX-99.CERT. (2)(b) A certification for the Principal Financial Officer of the registrant is 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 19, 2006 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 19, 2006 By: /s/ James W. Garrett -------------------- Name: James W. Garrett Title: Principal Financial Officer Date: October 19, 2006 EX-99.CODE 2 c08290exv99wcode.txt CODE OF ETHICS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS ADOPTED JULY 23, 2003, AS AMENDED AUGUST 10, 2005 AND SEPTEMBER 22, 2005 I. This Code of Ethics (the "Code") for the investment companies within the Van Kampen complex identified in Exhibit A (collectively, "Funds" and each, a "Fund") applies to each Fund's Principal Executive Officer, President, Principal Financial Officer and Treasurer (or persons performing similar functions) ("Covered Officers" each of whom are set forth in Exhibit B) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. - full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; - compliance with applicable laws and governmental rules and regulations; - prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Any question about the application of the Code should be referred to the General Counsel or his/her designee (who is set forth in Exhibit C). II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes, or appears to interfere, with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" (as defined in the Investment Company Act) of the Fund. The Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside the parameters of this Code, unless or until the General Counsel determines that any violation of such programs and procedures is also a violation of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Fund and its investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Fund and its investment adviser. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors/Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. Each Covered Officer must not: - use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly); - cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or - use material non-public knowledge of portfolio transactions made or contemplated for, or actions proposed to be taken by, the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. Each Covered Officer must, at the time of signing this Code, report to the General Counsel all affiliations or significant business relationships outside the Morgan Stanley complex and must update the report annually. Conflict of interest situations should always be approved by the General Counsel and communicated to the relevant Fund or Fund's Board. Any activity or relationship that would present such a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if an immediate member of the Covered Officer's family living in the same household engages in such an activity or has such a relationship. Examples of these include: - service or significant business relationships as a director on the board of any public or private company; - accepting directly or indirectly, anything of value, including gifts and gratuities in excess of $100 per year from any person or entity with which the Fund has current or prospective business dealings, not including occasional meals or tickets for theatre or sporting events or other similar entertainment; provided it is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, principal underwriter, or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer should familiarize himself/herself with the disclosure and compliance requirements generally applicable to the Funds; - each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Directors/Trustees and auditors, or to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and their investment advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he has received, read and understands the Code; - annually thereafter affirm to the Boards that he has complied with the requirements of the Code; - not retaliate against any other Covered Officer, other officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and - notify the General Counsel promptly if he/she knows or suspects of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers(3) sought by a Covered Officer must be considered by the Board of the relevant Fund or Funds. The Funds will follow these procedures in investigating and enforcing this Code: - the General Counsel will take all appropriate action to investigate any potential violations reported to him; - if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; - any matter that the General Counsel believes is a violation will be reported to the relevant Fund's Audit Committee; - if the directors/trustees/managing general partners who are not "interested persons" as defined by the Investment Company Act (the "Independent Directors/Trustees/Managing General Partners") of the relevant Fund concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer or other appropriate disciplinary actions; - the Independent Directors/Trustees/Managing General Partners of the relevant Fund will be responsible for granting waivers of this Code, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code unless any provision of this Code conflicts with any applicable federal or state law, in which case the requirements of such law will govern. The Funds' and their investment advisers' and principal underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and Morgan Stanley's Code of Ethics are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibits A, B or C, must be approved or ratified by a majority vote of the Board of each Fund, including a majority of Independent Directors/Trustees/Managing General Partners. VII. CONFIDENTIALITY - ------------------ (3) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics." All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Independent Directors/Trustees/Managing General Partners of the relevant Fund or Funds and their counsel, the relevant Fund or Funds and their counsel and the relevant investment adviser and its counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion I have read and understand the terms of the above Code. I recognize the responsibilities and obligations incurred by me as a result of my being subject to the Code. I hereby agree to abide by the above Code. - ------------------------- Date: -------------------- EXHIBIT B COVERED OFFICERS Ronald E. Robison -- President and Principal Executive Officer Phillip G. Goff -- Chief Financial Officer and Treasurer EXHIBIT C GENERAL COUNSEL'S DESIGNEE Amy Doberman EX-99.CERT 3 c08290exv99wcert.txt CERTIFICATIONS I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Corporate Bond Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: October 19, 2006 /s/ Ronald E. Robison --------------------------- Principal Executive Officer I, James W. Garrett, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Corporate Bond Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: October 19, 2006 /s/ James W. Garrett --------------------------- Principal Financial Officer EX-99.906CERT 4 c08290exv99w906cert.txt SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Corporate Bond Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended August 31, 2006 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: October 19, 2006 /s/ Ronald E. Robison --------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Corporate Bond Fund and will be retained by Van Kampen Corporate Bond Fund and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this Report, but not being filed as part of this Report. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Corporate Bond Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended August 31, 2006 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: October 19, 2006 /s/ James W. Garrett --------------------- James W. Garrett Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Corporate Bond Fund and will be retained by Van Kampen Corporate Bond Fund and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this Report, but not being filed as part of this Report. -----END PRIVACY-ENHANCED MESSAGE-----