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 811-02851
Van Kampen High Income Corporate Bond Fund
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
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(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: 8/31/04
Item 1. Reports 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 High
Income 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, 2004.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. 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 A MUTUAL FUND WILL ACHIEVE ITS
INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE
POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL
DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT
YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS
FUND.
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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Performance Summary as of 8/31/04
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the J.P. Morgan Global
High Yield Index and the Lipper High Yield Bond Index from 8/31/1994 through
8/31/2004. Class A shares, adjusted for sales charge.
(LINE GRAPH)
VAN KAMPEN HIGH INCOME J.P. MORGAN GLOBAL HIGH LIPPER HIGH YIELD BOND
CORPORATE BOND FUND YIELD INDEX FUND INDEX
---------------------- ----------------------- ----------------------
8/94 9518 10000 10000
9467 9999 10008
12/94 9361 9983 9878
9802 10577 10359
10268 11204 10905
10668 11560 11282
12/95 10993 11933 11594
11342 12193 11891
11646 12415 12088
12127 12983 12660
12/96 12494 13487 13099
12668 13602 13160
13251 14231 13857
13868 14909 14604
12/97 14023 15157 14825
14713 15666 15477
14844 15799 15535
13626 14885 14362
12/98 14088 15303 14814
14479 15597 15287
14436 15764 15386
14343 15497 15116
12/99 14638 15817 15523
14577 15549 15287
14705 15627 15226
14605 15678 15107
12/00 13434 14895 14015
13870 15668 14495
13345 15535 14034
12546 14847 13178
12/01 13079 15715 13870
12733 16066 13928
11840 15670 13148
11217 15194 12756
12/02 11847 16050 13536
12543 17109 14371
13580 18739 15666
13923 19322 16137
12/03 14710 20462 17103
14928 21016 17410
14945 20927 17341
8/04 15460 21547 17765
A SHARES B SHARES C SHARES
since 10/2/78 since 7/2/92 since 7/6/93
--------------------------------------------------------------------------------------------
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
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception 7.48% 7.28% 5.35% 5.35% 4.03% 4.03%
10-year 4.97 4.45 4.46 4.46 4.13 4.13
5-year 1.44 0.47 0.67 0.48 0.64 0.64
1-year 14.02 8.64 12.79 8.79 12.98 11.98
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30-Day SEC Yield 6.53% 6.08% 6.16%
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 years one and two and
declining to zero after year five), a contingent deferred sales charge of 1.00
percent for Class C shares in year one and combined Rule 12b-1 fees and service
fees of up to 0.25 percent for Class A shares and 1.00 percent for Class B and C
shares. The since inception and 10-year returns for Class B shares reflect the
conversion of Class B shares into Class A shares six years after purchase. The
since inception returns for Class C shares reflect the conversion of Class C
shares into Class A shares 10 years after purchase. See footnote 3 in the Notes
to Financial Statements for additional information. Figures shown above assume
reinvestment of all dividends and capital gains. SEC yield is a calculation for
determining the amount of portfolio income, excluding non-income items as
prescribed by the SEC. Yields are subject to change.
J.P. Morgan Global High Yield Index is a broad-based index that reflects the
general performance of the global high-yield corporate debt market. Lipper High
Yield Bond Fund Index is an index of funds with similar return objectives as
this fund. Indexes do not include any expenses, fees or sales charges, which
would lower performance. Indexes are unmanaged and should not be considered an
investment. Source: Lipper Inc.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2004
Van Kampen High Income Corporate Bond Fund is managed by the Adviser's Taxable
Fixed Income team. Members of the team include Sheila A. Finnerty, Managing
Director of the Adviser; Gordon Loery, Executive Director of the Adviser; and
Joshua Givelber and Chad Liu, Vice Presidents of the Adviser.(1)
MARKET CONDITIONS
The 12 months ended August 31, 2004 incorporated two distinct periods of
performance for the high-yield bond market. From September 2003 through the end
of January 2004, high-yield continued to stage a tremendous rally, fueled by
solid U.S. economic data, positive earnings by high-yield companies and a
declining default rate for high-yield bonds. The market was also buoyed by
strong demand for yield and by investors' willingness to assume additional
credit risk.
Beginning in February 2004, however, the market's technical situation changed.
Though fundamental factors such as strong earnings and lower default rates
remained as strong as they had been during the prior 15-month rally, demand
receded as market participants grew concerned over the lack of job creation in
the U.S. economy. Investors began to take profits and became more risk-averse.
Then in early April, significant interest-rate increases caused even greater
outflows of money from income-oriented mutual funds and the fixed-income markets
in general. In addition, because of the long-term rally that had previously
taken place, many high-yield bonds were priced above par (at a premium). In a
sense, the high-yield market had run out of room to rally. At the same time, the
high-yield market's new-issue calendar continued to be robust, which had a
negative impact on the market's technical (i.e., supply/demand) situation.
Despite all the difficulties in its technical environment, high-yield bonds
managed to post solid performance for the period based on favorable fundamentals
such as a reduction in the default rate. In August 2004, the 12-month default
rate for high-yield bond issuers was 2.3 percent, down from 6 percent in August
2003.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
For the 12-months ended August 31, 2004, the fund's Class A shares returned
14.02 percent (unadjusted for sales charges), outperforming its benchmarks, the
J.P. Morgan Global High Yield Index and the Lipper High Yield Bond Fund Index.
(See table below.)
During the period, three strategic decisions helped the fund's performance.
First, the fund enjoyed favorable security selection within the housing sector.
Going back to late 2003, the portfolio had held several homebuilding issues that
had performed well, while building products companies had lagged. The
homebuilding bonds subsequently became overpriced, and based on our analyst's
recommendation, we sold those bonds and selected several building products
issues that performed extremely well over the remainder of the period. Two
examples of top-performing building-products holdings were Nortek and Associated
Materials. Both issues were purchased at low cost and both companies posted
solid earnings after their purchase. Second, two metals companies that we held
during the period performed well for the fund. One such company was Doe Run, a
metals firm that despite its need to restructure, posted gains based on rising
commodity prices. Third, the fund benefited from its lack of participation in
airlines issues. Airlines were the worst-performing sector within the high-yield
market during the 12-month period.
Two holdings that detracted from performance over the period were Pegasus, a
satellite TV company that was forced to restructure based on disappointing
financial performance (and is no longer held in the portfolio), and cable TV
provider Charter Communications, which posted results below analysts'
expectations.
On an ongoing basis, we generally seek to maintain a balanced and well-
diversified portfolio. The fund's portfolio consists of approximately 150
issuers. This diversifies the fund's credit risk, yet it also allows for
sufficient average security size for strategic overweights. We continue to
maintain an average credit quality of high single B, which is very close to that
of the benchmarks. Late in 2003, we reduced the fund's allocation in BBB and BB
credits. Many of these higher-rated credits had performed well as interest rates
declined and Treasury bonds and other fixed-income issues rallied. Because BBB
and BB bonds are more highly correlated with Treasury performance, we sold
several of
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2004
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J.P. MORGAN GLOBAL LIPPER HIGH YIELD
CLASS A CLASS B CLASS C HIGH YIELD INDEX BOND FUND INDEX
14.02% 12.79% 12.98% 13.81% 12.76%
--------------------------------------------------------------------------------
The performance for the three 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.
3
these bonds as interest rates spiked and Treasuries were negatively affected. In
their place, we purchased lower-quality credits, which historically have
performed better than BBB- and BB-rated bonds in a rising interest-rate
environment. In terms of issuer size, we focus on larger companies because of
their financial flexibility, their ability to withstand less-favorable financial
markets and their superior access to capital markets.
As we've stated, the fundamentals of the high-yield market remain positive, with
favorable earnings, lower default rates and modestly tightening high-yield
credit spreads. Many of these positive factors have already been priced into the
market during the past two years, however, and high-yield bonds currently appear
to us to be fairly valued. As has been the case since last February, high-yield
returns should continue to be driven primarily by coupon income rather than
price appreciation. We look for the fund's holdings to earn their coupon in the
coming months and for market fundamentals to remain favorable through the end of
2005. We believe that the fund remains a suitable vehicle for investors seeking
high current income from an actively managed, well-diversified portfolio.
4
RATINGS ALLOCATIONS AS OF 8/31/04
BBB/Baa 2.6%
BB/Ba 25.0
B/B 56.0
CCC/Caa 12.2
CC/Ca 1.5
Non-Rated 2.7
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 8/31/04
Utility 8.8%
Energy 8.1
Diversified Media 7.9
Chemicals 7.1
Forest Products 6.9
Cable 5.9
Housing 5.2
Health Care 5.0
Gaming & Leisure 4.8
Wireless Communications 4.5
Transportation 3.8
Manufacturing 3.4
Services 3.2
Telecommunications 2.9
Food & Tobacco 2.7
Metals 2.7
Broadcasting 2.5
Consumer Products 2.5
Food & Drug 2.2
Information Technology 2.2
Retail 1.0
Financial 0.8
Aerospace 0.3
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Total Long-Term Investments 94.4%
Short-Term Investments 3.8
Other Assets in Excess of Liabilities 1.8
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Total 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 corporate debt obligations. 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 by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. 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 1-202-942-8090. 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.
In addition to filing a complete schedule of portfolio holdings with the
SEC each fiscal quarter, each Van Kampen fund makes portfolio holdings
information available by periodically providing the information on its
public web site, www.vankampen.com. Each Van Kampen fund provides a
complete schedule of portfolio holdings on the public web site on a
calendar-quarter basis approximately 30 days after the close of the
calendar quarter. Furthermore, each Van Kampen open-end fund provides
partial lists of its portfolio holdings (such as top 10 or top 15 fund
holdings) to the public web site each month with a delay of approximately
15 days.
You may obtain copies of a fund's fiscal quarter filings, or its monthly
or calendar-quarter web site postings, by contacting Van Kampen Client
Relations at 1-800-847-2424.
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 1-800-341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve month period ended June 30 is available without charge,
upon request, by calling 1-800-847-2424 or 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 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 cost (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 3/1/04 - 8/31/04.
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
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. Therefore, the second line of the table is useful in
comparing ongoing costs, and will not help you determine the relative total
costs of owning different funds that have transactional costs, such as sales
charges (loads), and redemption fees, or exchange fees.
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
3/1/04 8/31/04 3/1/04-8/31/04
Class A
Actual...................................... $1,000.00 $1,041.69 $5.39
Hypothetical................................ 1,000.00 1,019.84 5.33
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,037.54 9.27
Hypothetical................................ 1,000.00 1,016.04 9.17
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,038.13 9.17
Hypothetical................................ 1,000.00 1,016.14 9.07
(5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 1.05%, 1.81%,
and 1.79% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Assumes all dividends and distributions were reinvested.
8
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
CORPORATE BONDS 92.2%
AEROSPACE 0.3%
$1,644 Dunlop Stand Aero Holdings, 144A-- Private
Placement (United Kingdom) (a)............. 11.875% 05/15/09 $ 1,750,860
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BROADCASTING 1.8%
1,190 Granite Broadcasting Corp. ................ 9.750 12/01/10 1,127,525
2,755 Interep National Radio Sales, Inc., Ser
B.......................................... 10.000 07/01/08 2,166,119
1,165 Salem Communications Corp. ................ 7.750 12/15/10 1,217,425
5,555 TV Azteca SA de CV, Ser B (Mexico)......... 10.500 02/15/07 5,749,425
------------
10,260,494
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CABLE 5.9%
756 Avalon Cable LLC........................... 11.875 12/01/08 801,627
4,540 Cablecom Luxembourg SCA, 144A-- Private
Placement (Luxembourg) (a)................. 9.375 04/15/14 5,655,765
1,425 Cablevision Systems Corp., 144A-- Private
Placement (Variable Rate Coupon) (a)....... 5.670 04/01/09 1,467,750
1,145 Charter Communications Holdings LLC........ 10.750 10/01/09 967,525
4,100 Charter Communications Holdings LLC........ 9.625 11/15/09 3,331,250
1,100 Charter Communications Holdings LLC (b).... 0/11.750 01/15/10 891,000
1,035 DirecTV Holdings/Finance LLC............... 8.375 03/15/13 1,182,487
1,500 Echostar DBS Corp. ........................ 6.375 10/01/11 1,511,250
3,730 Kabel Deutschland GmbH, 144A-- Private
Placement (Germany) (a).................... 10.625 07/01/14 3,841,900
3,425 Net Servicos de Comunicacao SA, Ser B
(Brazil) (c)............................... 12.625 06/18/04 3,716,125
1,655 PanAmSat Corp., 144A-- Private Placement
(a)........................................ 9.000 08/15/14 1,733,612
1,570 Renaissance Media Group.................... 10.000 04/15/08 1,624,950
5,895 Satelites Mexicanos SA, Ser B (Mexico)
(c)........................................ 10.125 11/01/04 3,271,725
2,075 Telenet Communication NV, 144A-- Private
Placement (Belgium) (a).................... 9.000 12/15/13 2,654,481
2,515 Telenet Group Holding NV, 144A-- Private
Placement (Belgium) (a) (b)................ 0/11.500 06/15/14 1,741,637
------------
34,393,084
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CHEMICALS 7.1%
1,762 Avecia Group PLC (United Kingdom).......... 11.000 07/01/09 1,418,410
2,980 Cognis Deutschland GmbH & Co., 144A--
Private Placement (Euro) (Germany)
(Variable Rate Coupon) (a)................. 6.897 11/15/13 3,794,065
3,343 Equistar Chemicals LP...................... 10.125 09/01/08 3,735,802
1,564 FMC Corp. ................................. 10.250 11/01/09 1,827,925
1,475 Huntsman Advanced Materials LLC, 144A--
Private Placement (a)...................... 11.000 07/15/10 1,688,875
794 Huntsman International, LLC................ 10.125 07/01/09 821,790
2,800 Huntsman International, LLC................ 10.125 07/01/09 3,479,608
See Notes to Financial Statements 9
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
CHEMICALS (CONTINUED)
$1,740 Innophos, Inc.,144A--Private Placement
(a)........................................ 8.875% 08/15/14 $ 1,818,300
1,280 ISP Chemco, Inc., Ser B.................... 10.250 07/01/11 1,430,400
3,930 ISP Holdings, Inc., Ser B.................. 10.625 12/15/09 4,342,650
1,000 Koppers, Inc. ............................. 9.875 10/15/13 1,105,000
2,700 Millennium America, Inc. .................. 7.000 11/15/06 2,787,750
775 Millennium America, Inc. .................. 9.250 06/15/08 848,625
1,120 Nalco Co., 144A-- Private Placement (a).... 7.750 11/15/11 1,198,400
3,940 Nalco Co., 144A-- Private Placement (a).... 8.875 11/15/13 4,269,975
3,565 Rhodia SA (France)......................... 8.875 06/01/11 3,030,250
2,540 Rockwood Specialties Group, Inc. .......... 10.625 05/15/11 2,781,300
965 Westlake Chemical Corp. ................... 8.750 07/15/11 1,078,387
------------
41,457,512
------------
CONSUMER PRODUCTS 2.5%
1,840 Amscan Holdings, Inc., 144A-- Private
Placement (a).............................. 8.750 05/01/14 1,842,300
1,660 Leiner Health Products, Inc., 144A--
Private Placement (a)...................... 11.000 06/01/12 1,743,000
1,555 Oxford Industrials, Inc., 144A-- Private
Placement (a).............................. 8.875 06/01/11 1,671,625
615 Prestige Brands, Inc., 144A-- Private
Placement (a).............................. 9.250 04/15/12 615,000
2,220 Rayovac Corp. ............................. 8.500 10/01/13 2,386,500
3,560 Safilo Capital International SA, 144A--
Private Placement (Euro) (Luxembourg)
(a)........................................ 9.625 05/15/13 4,142,147
4,000 Sleepmaster LLC, Ser B (c) (d) (e)......... 11.000 05/15/09 880,000
1,082 Tempur Pedic, Inc. ........................ 10.250 08/15/10 1,222,660
------------
14,503,232
------------
DIVERSIFIED MEDIA 7.9%
820 Advanstar Communications, Inc. ............ 10.750 08/15/10 908,150
4,188 Advanstar Communications, Inc. (Variable
Rate Coupon)............................... 9.220 08/15/08 4,349,973
3,250 Alliance Atlantis Communications, Inc.
(Canada)................................... 13.000 12/15/09 3,558,750
1,195 Cinemark, Inc. (b)......................... 0/9.750 03/15/14 829,031
1,518 Dex Media East/Finance Corp. LLC........... 12.125 11/15/12 1,878,525
2,417 Dex Media West/Finance Corp. LLC, Ser B.... 9.875 08/15/13 2,791,635
4,500 Dex Media, Inc., 144A-- Private Placement
(a) (b).................................... 0/9.000 11/15/13 3,318,750
4,721 Hollinger Participation Trust, 144A--
Private Placement (a) (f).................. 12.125 11/15/10 5,346,064
3,875 Houghton Mifflin Co. ...................... 9.875 02/01/13 4,063,906
770 Houghton Mifflin Co. (b)................... 0/11.500 10/15/13 459,112
2,200 Lighthouse International Co. SA, 144A--
Private Placement (Luxembourg) (a)......... 8.000 04/30/14 2,640,165
10 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA (CONTINUED)
$ 620 Marquee, Inc., 144A--Private Placement
(a)........................................ 8.625% 08/15/12 $ 651,000
2,075 Marquee, Inc., 144A--Private Placement
(Variable Rate Coupon) (a)................. 5.970 08/15/10 2,126,875
490 Muzak LLC.................................. 10.000 02/15/09 438,550
3,102 Muzak LLC.................................. 9.875 03/15/09 2,233,440
2,725 Nebraska Book Co., Inc. ................... 8.625 03/15/12 2,725,000
1,026 PEI Holdings, Inc. ........................ 11.000 03/15/10 1,195,290
4,245 Primedia, Inc. ............................ 8.875 05/15/11 4,181,325
2,205 Vertis, Inc., 144A--Private Placement
(a)........................................ 13.500 12/07/09 2,240,831
------------
45,936,372
------------
ENERGY 8.1%
2,211 BRL Universal Equipment.................... 8.875 02/15/08 2,371,297
3,455 CHC Helicopter Corp., 144A-- Private
Placement (Canada) (a)..................... 7.375 05/01/14 3,511,144
2,875 Chesapeake Energy Corp. ................... 7.500 09/15/13 3,105,000
1,635 Citgo Petroleum Corp. ..................... 11.375 02/01/11 1,917,037
5,710 El Paso Production Holding Co. ............ 7.750 06/01/13 5,638,625
1,929 Gulfterra Energy Partners LP............... 10.625 12/01/12 2,440,185
723 Gulfterra Energy Partners LP, Ser B........ 8.500 06/01/10 848,621
2,465 Hanover Compressor Co. .................... 8.625 12/15/10 2,637,550
620 Hanover Compressor Co. .................... 9.000 06/01/14 668,050
2,004 Hanover Equipment Trust, Ser B............. 8.750 09/01/11 2,174,340
3,890 Hilcorp Energy/Finance Corp., 144A--
Private Placement (a)...................... 10.500 09/01/10 4,327,625
2,370 Husky Oil Ltd. (Variable Rate Coupon)
(Canada)................................... 8.900 08/15/28 2,768,982
1,296 Magnum Hunter Resources, Inc. ............. 9.600 03/15/12 1,467,720
2,325 Pacific Energy Partners, 144A-- Private
Placement (a).............................. 7.125 06/15/14 2,470,312
1,730 Plains E & P Co., 144A-- Private Placement
(a)........................................ 7.125 06/15/14 1,842,450
2,377 Port Arthur Finance Corp., Ser A........... 12.500 01/15/09 2,793,257
1,954 Tesoro Petroleum Corp. .................... 9.625 04/01/12 2,247,100
3,792 Vintage Petroleum, Inc. ................... 7.875 05/15/11 3,981,600
------------
47,210,895
------------
FINANCIAL 0.8%
4,475 RefcoFinance Holdings LLC, 144A-- Private
Placement (a).............................. 9.000 08/01/12 4,654,000
------------
FOOD & DRUG 2.2%
2,605 Delhaize America, Inc. .................... 8.125 04/15/11 2,976,541
985 Jean Coutu Group (PJC), Inc., 144A--
Private Placement (Canada) (a)............. 7.625 08/01/12 1,019,475
2,450 Jean Coutu Group (PJC), Inc., 144A--
Private Placement (Canada) (a)............. 8.500 08/01/14 2,480,625
See Notes to Financial Statements 11
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
FOOD & DRUG (CONTINUED)
$1,200 Jitney-Jungle Stores America, Inc. (c) (d)
(e)........................................ 12.000% 03/01/06 $ 0
2,991 Kroger Co., 144A--Private Placement (a).... 8.500 07/15/17 3,399,496
2,070 Rite Aid Corp. ............................ 7.125 01/15/07 2,121,750
755 Rite Aid Corp. ............................ 8.125 05/01/10 796,525
------------
12,794,412
------------
FOOD & TOBACCO 2.7%
2,360 Michael Foods, Inc. ....................... 8.000 11/15/13 2,483,900
5,400 Pilgrim's Pride Corp. ..................... 9.625 09/15/11 6,061,500
3,800 Smithfield Foods, Inc. .................... 7.625 02/15/08 4,056,500
2,260 Smithfield Foods, Inc., 144A-- Private
Placement (a).............................. 7.000 08/01/11 2,350,400
600 Smithfield Foods, Inc., Ser B.............. 8.000 10/15/09 655,500
------------
15,607,800
------------
FOREST PRODUCTS 6.9%
3,505 Abitibi-Consolidated, Inc. (Canada)........ 6.000 06/20/13 3,233,362
985 Abitibi-Consolidated, Inc., 144A-- Private
Placement (Canada) (a)..................... 7.750 06/15/11 1,012,087
4,525 Georgia-Pacific Corp. ..................... 8.875 02/01/10 5,328,187
3,405 Graphic Packaging International, Inc. ..... 9.500 08/15/13 3,830,625
3,075 JSG Funding PLC (Euro) (Ireland)........... 10.125 10/01/12 4,195,998
1,785 Norampac, Inc. (Canada).................... 6.750 06/01/13 1,851,937
1,710 Owens-Illinois, Inc. ...................... 7.350 05/15/08 1,769,850
6,225 Owens-Illinois, Inc. ...................... 7.500 05/15/10 6,380,625
1,585 Pliant Corp. .............................. 13.000 06/01/10 1,466,125
2,419 Pliant Corp. .............................. 13.000 06/01/10 2,237,575
740 Tekni-Plex, Inc., 144A-- Private Placement
(a)........................................ 8.750 11/15/13 714,100
3,355 Tekni-Plex, Inc., Ser B.................... 12.750 06/15/10 3,254,350
4,800 Tembec Industries, Inc. (Canada)........... 7.750 03/15/12 4,872,000
------------
40,146,821
------------
GAMING & LEISURE 4.8%
993 Ceasars Entertainment...................... 8.875 09/15/08 1,127,055
1,570 Global Cash Access LLC, 144A-- Private
Placement (a).............................. 8.750 03/15/12 1,660,275
241 Hilton Hotels Corp. ....................... 7.950 04/15/07 266,908
2,925 Hilton Hotels Corp. ....................... 7.625 12/01/12 3,356,438
591 HMH Properties, Inc., Ser B................ 7.875 08/01/08 611,685
3,115 Isle of Capri Casinos, Inc. ............... 7.000 03/01/14 3,099,425
4,605 MGM Mirage, Inc. .......................... 6.000 10/01/09 4,697,100
4,100 MGM Mirage, Inc., 144A-- Private Placement
(a)........................................ 5.875 02/27/14 3,884,750
884 Starwood Hotels & Resorts Worldwide,
Inc. ...................................... 7.375 05/01/07 950,300
12 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
GAMING & LEISURE (CONTINUED)
$2,576 Starwood Hotels & Resorts Worldwide,
Inc. ...................................... 7.875% 05/01/12 $ 2,898,000
285 Station Casinos, Inc. ..................... 6.000 04/01/12 287,138
2,500 Station Casinos, Inc. ..................... 6.500 02/01/14 2,512,500
2,280 Venetian Casino Resort LLC................. 11.000 06/15/10 2,607,750
------------
27,959,324
------------
HEALTHCARE 5.0%
418 AmerisourceBergen Corp. ................... 8.125 09/01/08 460,845
3,775 AmerisourceBergen Corp. ................... 7.250 11/15/12 4,058,125
1,507 Fisher Scientific International, Inc. ..... 8.125 05/01/12 1,680,305
2,300 Fisher Scientific International,
Inc.,144A--Private Placement (a)........... 6.750 08/15/14 2,386,250
4,790 Fresenius Medical Care Capital Trust IV.... 7.875 06/15/11 5,245,050
3,095 HCA, Inc. ................................. 6.300 10/01/12 3,212,687
1,590 Medcath Holdings Corp., 144A-- Private
Placement (a).............................. 9.875 07/15/12 1,669,500
565 National Nephrology Associates, Inc.,
144A--Private Placement (a)................ 9.000 11/01/11 656,106
2,670 Team Health, Inc., 144A-- Private Placement
(a)........................................ 9.000 04/01/12 2,616,600
720 Tenet Healthcare Corp. .................... 6.500 06/01/12 640,800
2,525 Tenet Healthcare Corp. .................... 7.375 02/01/13 2,348,250
1,110 Tenet Healthcare Corp., 144A-- Private
Placement (a).............................. 9.875 07/01/14 1,162,725
1,330 VWR International, Inc., 144A-- Private
Placement (a).............................. 6.875 04/15/12 1,366,575
1,640 VWR International, Inc., 144A-- Private
Placement (a).............................. 8.000 04/15/14 1,701,500
------------
29,205,318
------------
HOUSING 5.2%
8,145 Associated Materials, Inc., 144A-- Private
Placement (a) (b).......................... 0/11.250 03/01/14 5,803,313
1,460 Building Materials Corp. of America, 144A--
Private Placement (a)...................... 7.750 08/01/14 1,430,800
686 CB Richard Ellis Service, Inc. ............ 9.750 05/15/10 764,890
3,622 CB Richard Ellis Service, Inc. ............ 11.250 06/15/11 4,183,410
765 Interface, Inc. ........................... 7.300 04/01/08 761,175
955 Interface, Inc. ........................... 10.375 02/01/10 1,079,150
3,005 Interface, Inc., Ser B..................... 9.500 02/01/14 3,095,150
1,720 LNR Property Corp. ........................ 7.625 07/15/13 1,831,800
4,045 Nortek, Inc., 144A--Private Placement
(a)........................................ 8.500 09/01/14 4,237,138
1,466 Technical Olympic USA, Inc. ............... 9.000 07/01/10 1,561,290
1,805 Technical Olympic USA, Inc. ............... 9.000 07/01/10 1,922,325
See Notes to Financial Statements 13
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
HOUSING (CONTINUED)
$2,003 Technical Olympic USA, Inc. ............... 10.375% 07/01/12 $ 2,188,278
1,325 WII Components, Inc., 144A-- Private
Placement (a).............................. 10.000 02/15/12 1,318,375
------------
30,177,094
------------
INFORMATION TECHNOLOGY 1.8%
1,650 Iron Mountain, Inc. ....................... 8.625 04/01/13 1,790,250
2,340 Iron Mountain, Inc. ....................... 7.750 01/15/15 2,445,300
1,970 Nortel Networks Ltd (Canada)............... 6.125 02/15/06 2,009,400
3,780 Xerox Corp. ............................... 7.125 06/15/10 4,025,700
------------
10,270,650
------------
MANUFACTURING 3.4%
1,490 Brand Services, Inc. ...................... 12.000 10/15/12 1,706,050
990 Flowserve Corp. ........................... 12.250 08/15/10 1,128,600
1,377 Johnsondiversey, Inc. (Euro)
(Luxembourg)............................... 9.625 05/15/12 1,862,212
3,021 Johnsondiversey, Inc., Ser B............... 9.625 05/15/12 3,398,625
2,615 Manitowoc, Inc. ........................... 10.500 08/01/12 2,994,175
3,279 NMHG Holdings Co. ......................... 10.000 05/15/09 3,623,295
4,814 Trimas Corp. .............................. 9.875 06/15/12 5,126,910
------------
19,839,867
------------
METALS 2.7%
6,407 Doe Run Resources Corp. (Acquired 03/06/98,
Cost $7,363,774) (f) (g)................... 11.750 11/01/08 4,837,025
910 Foundation PA Coal Co., 144A-- Private
Placement (a).............................. 7.250 08/01/14 962,325
1,460 General Cable Corp. ....................... 9.500 11/15/10 1,620,600
6,655 GS Technologies Operating, Inc. (c) (d)
(e)........................................ 12.000 09/01/04 666
1,635 Sgl Carbon Luxembourg SA, 144A-- Private
Placement (Euro) (Luxembourg) (a).......... 8.500 02/01/12 2,051,763
2,798 Ucar Finance, Inc. ........................ 10.250 02/15/12 3,189,720
2,523 United States Steel Corp. ................. 9.750 05/15/10 2,850,990
------------
15,513,089
------------
RETAIL 1.0%
1,197 Big 5 Corp., Ser B......................... 10.875 11/15/07 1,240,691
2,015 General Nutrition Center, Inc., 144A--
Private Placement (a)...................... 8.500 12/01/10 2,025,075
2,675 Petro Stopping Center/Financial............ 9.000 02/15/12 2,795,375
------------
6,061,141
------------
SERVICES 3.2%
1,750 Allied Waste North America, Inc. .......... 7.875 04/15/13 1,855,000
1,645 Allied Waste North America, Inc., Ser B.... 9.250 09/01/12 1,854,738
3,255 Buhrmann US, Inc., 144A-- Private Placement
(a)........................................ 8.250 07/01/14 3,279,413
2,450 Hydrochem Industrial Services, Inc., Ser
B.......................................... 10.375 08/01/07 2,480,625
2,735 MSW Energy Holdings LLC, Ser B............. 7.375 09/01/10 2,858,075
650 MSW Energy Holdings/Finance................ 8.500 09/01/10 711,750
14 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
SERVICES (CONTINUED)
$2,875 United Rentals North America, Inc. ........ 6.500% 02/15/12 $ 2,745,625
2,900 United Rentals North America, Inc. ........ 7.750 11/15/13 2,711,500
------------
18,496,726
------------
TELECOMMUNICATIONS 2.9%
4,290 Axtel SA (Mexico).......................... 11.000 12/15/13 4,375,800
4,210 Exodus Communications, Inc. (c) (d) (e).... 11.250 07/01/08 0
330 Exodus Communications, Inc. (c) (d) (e).... 11.625 07/15/10 0
2,750 Exodus Communications, Inc. (Euro) (c) (d)
(e)........................................ 11.375 07/15/08 0
5,305 GST Network Funding, Inc. (c) (d) (e)...... 10.500 05/01/08 531
3,031 Knology, Inc., 144A-- Private Placement (a)
(f)........................................ 12.000 11/30/09 2,886,892
3,000 Park N View, Inc., Ser B (c) (d) (e)....... 13.000 05/15/08 0
4,705 Primus Telecommunications Holdings......... 8.000 01/15/14 3,622,850
2,955 Qwest Communications International, Inc.,
144A--Private Placement (Variable Rate
Coupon) (a)................................ 5.211 02/15/09 2,762,925
665 Qwest Corp. ............................... 5.625 11/15/08 651,700
2,050 Qwest Services Corp., 144A-- Private
Placement (a) (b).......................... 13.250/13.500 12/15/07 2,331,875
------------
16,632,573
------------
TRANSPORTATION 3.7%
2,815 Amsted Industries, Inc., 144A-- Private
Placement (a).............................. 10.250 10/15/11 3,054,275
3,260 Autonation, Inc. .......................... 9.000 08/01/08 3,740,850
4,040 Laidlaw International, Inc., 144A-- Private
Placement (a).............................. 10.750 06/15/11 4,625,800
3,080 Sonic Automotive, Inc., Ser B.............. 8.625 08/15/13 3,249,400
2,695 Tenneco Automotive, Inc., Ser B............ 11.625 10/15/09 2,890,388
3,667 TRW Automotive, Inc. ...................... 9.375 02/15/13 4,244,553
------------
21,805,266
------------
UTILITY 7.8%
508 AES Corp. ................................. 9.375 09/15/10 567,690
360 AES Corp. ................................. 8.875 02/15/11 396,000
600 AES Corp. ................................. 7.750 03/01/14 607,500
2,925 AES Corp., 144A--Private Placement (a)..... 9.000 05/15/15 3,268,688
1,695 Allegheny Energy, Inc. .................... 7.750 08/01/05 1,769,156
4,460 Calpine Corp., 144A--Private Placement
(a)........................................ 8.500 07/15/10 3,523,400
775 CMS Energy Corp. .......................... 7.500 01/15/09 813,750
2,780 CMS Energy Corp. .......................... 8.500 04/15/11 3,030,200
3,480 Dynegy Holdings, Inc. ..................... 6.875 04/01/11 3,253,800
2,460 Dynegy Holdings, Inc., 144A-- Private
Placement (a).............................. 9.875 07/15/10 2,755,200
925 IPALCO Enterprises, Inc. .................. 8.625 11/14/11 1,031,375
3,220 Monongahela Power Co. ..................... 5.000 10/01/06 3,318,593
See Notes to Financial Statements 15
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
---------------------------------------------------------------------------------------------
UTILITY (CONTINUED)
$2,550 Nevada Power Co. .......................... 9.000% 08/15/13 $ 2,868,750
1,970 Nevada Power Co., Ser A.................... 8.250 06/01/11 2,157,150
695 Northwest Pipeline Corp. .................. 8.125 03/01/10 786,219
5,134 Ormat Funding Corp., 144A-- Private
Placement (a).............................. 8.250 12/30/20 4,903,138
1,625 PG & E Corp. .............................. 6.875 07/15/08 1,771,250
840 PSEG Energy Holdings, Inc. ................ 7.750 04/16/07 896,700
1,949 PSEG Energy Holdings, Inc. ................ 8.625 02/15/08 2,143,900
1,345 Southern Natural Gas Co. .................. 8.875 03/15/10 1,519,850
1,225 Trans Continental Gas Pipe Line Corp., Ser
B.......................................... 8.875 07/15/12 1,491,438
2,150 Williams Cos., Inc. ....................... 7.875 09/01/21 2,340,813
------------
45,214,560
------------
WIRELESS COMMUNICATIONS 4.5%
3,000 American Tower Corp. ...................... 9.375 02/01/09 3,217,500
3,125 American Tower Corp., 144A-- Private
Placement (a).............................. 7.500 05/01/12 3,171,875
4,115 Centennial Communications, 144A-- Private
Placement (a) (b).......................... 8.125/8.625 02/01/14 3,837,238
3,355 Metropcs, Inc. ............................ 10.750 10/01/11 3,589,850
1,720 Rural Cellular Corp., 144A--Private
Placement (Variable Rate Coupon) (a)....... 6.380 03/15/10 1,754,400
4,722 SBA Communications Corp. .................. 10.250 02/01/09 4,993,515
2,080 SBA Communications Corp. (b)............... 0/9.750 12/15/11 1,632,800
1,030 UbiquiTel Operating Co. (b)................ 0/14.000 04/15/10 1,060,900
2,765 US Unwired, Inc., Ser B.................... 10.000 06/15/12 2,847,950
------------
26,106,028
------------
TOTAL CORPORATE BONDS 92.2%.................................................. 535,997,118
------------
CONVERTIBLE CORPORATE OBLIGATION 0.5%
INFORMATION TECHNOLOGY 0.5%
2,890 Nortel Networks Corp. (Canada)............. 4.250 09/01/08 2,799,687
------------
EQUITIES 1.7%
DecisionOne Corp. (14,661 Common Shares) (e) (h)............................. 0
DecisionOne Corp. (8,219 Common Stock Warrants Class A) (e) (h).............. 0
DecisionOne Corp. (14,162 Common Stock Warrants Class B) (e) (h)............. 0
DecisionOne Corp. (8,400 Common Stock Warrants Class C) (e) (h).............. 0
Doe Run Resources Corp. (21 Common Stock Warrants) (e) (h)................... 0
HF Holdings, Inc. (36,820 Common Stock Warrants) (e) (h)..................... 0
Jazztel, PLC, 144A--Private Placement (3,450 Common Stock Warrants) (United
Kingdom) (a) (e) (h)....................................................... 0
Optel, Inc. (3,275 Common Shares) (e) (h).................................... 0
Park N View, Inc., 144A--Private Placement (3,000 Common Stock Warrants) (a)
(d) (e) (h)................................................................ 0
16 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
DESCRIPTION VALUE
--------------------------------------------------------------------------------------------
EQUITIES (CONTINUED)
Paxon Communications Corp. (50,400 Preferred Shares) (f)..................... $ 4,195,800
Republic Technologies International, Inc., 144A--Private Placement (7,525
Common Stock Warrants) (a) (e) (h)......................................... 0
Reunion Industries, Inc. (107,947 Common Stock Warrants) (h)................. 1,079
TNP Enterprises, Inc. (48,470 Preferred Shares, Ser D) (f)................... 5,804,283
UIH Australia/Pacific, Inc. (5,000 Common Stock Warrants) (e) (h)............ 0
Viatel Holding Bermuda Ltd. (4,809 common shares) (United Kingdom)........... 3,366
VS Holdings, Inc. (568,177 Common Shares) (e) (h)............................ 106,079
------------
TOTAL EQUITIES 1.7%......................................................... 10,110,607
------------
TOTAL LONG-TERM INVESTMENTS 94.4%
(Cost $561,090,714)........................................................ 548,907,412
REPURCHASE AGREEMENT 3.8%
Bank of America Securities LLC ($22,320,000 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 1.53%,
dated 08/31/04, to be sold on 09/01/04 at $22,320,949) (Cost
$22,320,000)............................................................... 22,320,000
------------
TOTAL INVESTMENTS 98.2%
(Cost $583,410,714)........................................................ 571,227,412
OTHER ASSETS IN EXCESS OF LIABILITIES 1.8%.................................. 10,387,138
------------
NET ASSETS 100.0%........................................................... $581,614,550
============
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) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) This corporate bond is non-income producing as security is in default.
(d) This borrower has filed for protection in federal bankruptcy court.
(e) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(f) Payment-in-kind security.
(g) This security is restricted and may be resold only in transactions exempt
from registration which are normally those transactions with qualified
institutional buyers. Restricted securities comprise 0.8% of net assets.
(h) Non-income producing security as this stock or warrant currently does not
declare dividends.
See Notes to Financial Statements 17
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2004
ASSETS:
Total Investments (Cost $583,410,714)....................... $ 571,227,412
Cash........................................................ 2,140
Receivables:
Interest.................................................. 10,276,430
Investments Sold.......................................... 2,019,566
Fund Shares Sold.......................................... 860,457
Forward Foreign Currency Contracts.......................... 234,501
Other....................................................... 163,322
-------------
Total Assets............................................ 584,783,828
-------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 1,141,714
Income Distributions...................................... 859,815
Distributor and Affiliates................................ 466,656
Investment Advisory Fee................................... 265,432
Trustees' Deferred Compensation and Retirement Plans........ 229,709
Accrued Expenses............................................ 205,952
-------------
Total Liabilities....................................... 3,169,278
-------------
NET ASSETS.................................................. $ 581,614,550
=============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $ 994,126,418
Accumulated Undistributed Net Investment Income............. (4,885,475)
Net Unrealized Depreciation................................. (11,947,945)
Accumulated Net Realized Loss............................... (395,678,448)
-------------
NET ASSETS.................................................. $ 581,614,550
=============
MAX OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $379,502,483 and 104,264,054 shares of
beneficial interest issued and outstanding)............. $ 3.64
Maximum sales charge (4.75%* of offering price)......... .18
-------------
Maximum offering price to public........................ $ 3.82
=============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $160,667,116 and 43,959,293 shares of
beneficial interest issued and outstanding)............. $ 3.65
=============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $41,444,951 and 11,465,211 shares of
beneficial interest issued and outstanding)............. $ 3.61
=============
* On sales of $100,000 or more, the sales charge will be reduced.
18 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended August 31, 2004
INVESTMENT INCOME:
Interest.................................................... $ 48,399,617
Dividends................................................... 1,705,422
Other....................................................... 366,340
------------
Total Income............................................ 50,471,379
------------
EXPENSES:
Investment Advisory Fee..................................... 3,225,783
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $908,066, $1,727,368 and $421,807,
respectively)............................................. 3,057,241
Shareholder Services........................................ 1,156,121
Custody..................................................... 71,906
Trustees' Fees and Related Expenses......................... 32,883
Legal....................................................... 26,231
Other....................................................... 372,330
------------
Total Expenses.......................................... 7,942,495
Less Credits Earned on Cash Balances.................... 9,415
------------
Net Expenses............................................ 7,933,080
------------
NET INVESTMENT INCOME....................................... $ 42,538,299
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(37,386,457)
Forward Foreign Currency Contracts........................ (241)
Foreign Currency Transactions............................. (372,646)
------------
Net Realized Loss........................................... (37,759,344)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (83,359,848)
------------
End of the Period:
Investments............................................. (12,183,302)
Forward Foreign Currency Contracts...................... 234,501
Foreign Currency Translation............................ 856
------------
(11,947,945)
------------
Net Unrealized Appreciation During the Period............... 71,411,903
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 33,652,559
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 76,190,858
============
See Notes to Financial Statements 19
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 42,538,299 $ 45,868,203
Net Realized Loss........................................ (37,759,344) (158,773,118)
Net Unrealized Appreciation During the Period............ 71,411,903 214,331,303
------------- -------------
Change in Net Assets from Operations..................... 76,190,858 101,426,388
------------- -------------
Distributions from Net Investment Income:
Class A Shares......................................... (26,354,660) (24,666,719)
Class B Shares......................................... (10,773,678) (11,156,188)
Class C Shares......................................... (2,702,792) (2,557,102)
------------- -------------
(39,831,130) (38,380,009)
------------- -------------
Return of Capital Distribution:
Class A Shares......................................... (889,262) (7,393,542)
Class B Shares......................................... (358,702) (3,119,852)
Class C Shares......................................... (90,962) (735,655)
------------- -------------
(1,338,926) (11,249,049)
------------- -------------
Total Distributions...................................... (41,170,056) (49,629,058)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 35,020,802 51,797,330
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 187,187,625 407,546,505
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 29,609,310 33,579,035
Cost of Shares Repurchased............................... (295,963,620) (381,177,393)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... (79,166,685) 59,948,147
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS.................... (44,145,883) 111,745,477
NET ASSETS:
Beginning of the Period.................................. 625,760,433 514,014,956
------------- -------------
End of the Period (Including accumulated undistributed
net investment income of ($4,885,475) and ($8,122,163),
respectively).......................................... $ 581,614,550 $ 625,760,433
============= =============
20 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME 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 ------------------------------------------------
2004 2003 2002 (a) 2001 2000
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $ 3.43 $ 3.15 $ 4.23 $ 5.24 $ 5.68
------ ------ ------- ------ ------
Net Investment Income................... .26 .29 .39 .51 .59
Net Realized and Unrealized Gain/Loss... .21 .29 (1.01) (.96) (.43)
------ ------ ------- ------ ------
Total from Investment Operations.......... .47 .58 (.62) (.45) .16
------ ------ ------- ------ ------
Less:
Distributions from Net Investment
Income................................ .25 .24 .43 .55 .60
Return of Capital Distributions......... .01 .06 .03 .01 -0-
------ ------ ------- ------ ------
Total Distributions....................... .26 .30 .46 .56 .60
------ ------ ------- ------ ------
NET ASSET VALUE, END OF THE PERIOD........ $ 3.64 $ 3.43 $ 3.15 $ 4.23 $ 5.24
====== ====== ======= ====== ======
Total Return (b).......................... 14.02% 19.26% -15.75% -9.04% 3.09%
Net Assets at End of the Period (In
millions)............................... $379.5 $408.7 $ 308.5 $394.4 $465.0
Ratio of Expenses to Average Net Assets... 1.06% 1.12% 1.08% 1.05% 1.03%
Ratio of Net Investment Income to Average
Net Assets.............................. 7.45% 8.36% 10.39% 10.93% 10.90%
Portfolio Turnover........................ 88% 95% 83% 80% 68%
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset-backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 10.49% to 10.39%. Net investment income per share and net
realized gains and losses per share were unaffected by the adjustments. Per
share, ratios and supplemental data for periods prior to August 31, 2002
have not been restated to reflect this change in presentation.
(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 one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include 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.
See Notes to Financial Statements 21
VAN KAMPEN HIGH INCOME 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 ------------------------------------------------
2004 2003 2002 (a) 2001 2000
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $ 3.44 $ 3.16 $ 4.24 $ 5.25 $ 5.68
------ ------ ------- ------ ------
Net Investment Income................... .23 .25 .35 .48 .55
Net Realized and Unrealized Gain/Loss... .21 .30 (1.01) (.97) (.43)
------ ------ ------- ------ ------
Total from Investment Operations.......... .44 .55 (.66) (.49) .12
------ ------ ------- ------ ------
Less:
Distributions from Net Investment
Income................................ .22 .21 .39 .51 .55
Return of Capital Distributions......... .01 .06 .03 .01 -0-
------ ------ ------- ------ ------
Total Distributions....................... .23 .27 .42 .52 .55
------ ------ ------- ------ ------
NET ASSET VALUE, END OF THE PERIOD........ $ 3.65 $ 3.44 $ 3.16 $ 4.24 $ 5.25
====== ====== ======= ====== ======
Total Return (b).......................... 12.79% 18.27% -16.12% -9.80% 2.43%
Net Assets at End of the Period (In
millions)............................... $160.7 $175.6 $ 168.8 $249.6 $268.7
Ratio of Expenses to Average Net Assets... 1.82% 1.89% 1.84% 1.83% 1.78%
Ratio of Net Investment Income to Average
Net Assets.............................. 6.70% 7.68% 9.67% 10.13% 10.15%
Portfolio Turnover........................ 88% 95% 83% 80% 68%
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset-backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 9.77% to 9.67%. Net investment income per share and net realized
gains and losses per share were unaffected by the adjustments. Per share,
ratios and supplemental data for periods prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(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 year 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 the redemption of Fund shares.
22 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME 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 -----------------------------------------------------
2004 2003 2002 (a) 2001 2000
-----------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................... $ 3.41 $ 3.13 $ 4.20 $ 5.22 $ 5.65
------ ------ ------- ------- ------
Net Investment Income................ .23 .25 .35 .48 .55
Net Realized and Unrealized
Gain/Loss.......................... .20 .30 (1.00) (.98) (.43)
------ ------ ------- ------- ------
Total from Investment Operations....... .43 .55 (.65) (.50) .12
------ ------ ------- ------- ------
Less:
Distributions from Net Investment
Income............................. .22 .21 .39 .51 .55
Return of Capital Distributions...... .01 .06 .03 .01 -0-
------ ------ ------- ------- ------
Total Distributions.................... .23 .27 .42 .52 .55
------ ------ ------- ------- ------
NET ASSET VALUE, END OF THE PERIOD..... $ 3.61 $ 3.41 $ 3.13 $ 4.20 $ 5.22
====== ====== ======= ======= ======
Total Return (b)....................... 12.98%(d) 18.14%(c) -16.04% -10.06% 2.45%
Net Assets at End of the Period (In
millions)............................ $ 41.4 $ 41.5 $ 36.7 $ 58.7 $ 59.4
Ratio of Expenses to Average Net
Assets............................... 1.81%(d) 1.86% 1.84% 1.82% 1.78%
Ratio of Net Investment Income to
Average Net Assets................... 6.71%(d) 7.68%(c) 9.68% 10.12% 10.15%
Portfolio Turnover..................... 88% 95% 83% 80% 68%
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset-backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 9.78% to 9.68%. Net investment income per share and net realized
gains and losses per share were unaffected by the adjustments. Per share,
ratios and supplemental data for periods prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(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) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .01%.
(d) 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 6).
See Notes to Financial Statements 23
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen High Income 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
maximize current income. Capital appreciation is a secondary objective which is
sought only when consistent with the Fund's primary investment objective. The
Fund commenced investment operations on October 2, 1978. The distribution of the
Fund's Class B and Class C Shares commenced on July 2, 1992 and July 6, 1993,
respectively.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with 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 and preferred stock are stated at
value using market quotations or indications of value obtained from an
independent pricing service. Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Equity securities traded on NASDAQ are valued at the NASDAQ Official
Closing Price. Unlisted securities and listed securities for which the last
sales price is not available are valued at the mean of the last reported bid and
asked price. For those securities where quotations or prices are not available,
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Short-term securities with remaining maturities
of 60 days or less are valued at amortized cost, which approximates market
value. Forward foreign currency contracts are valued using quoted foreign
exchange rates.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At August 31, 2004, there were no when-issued or delayed
delivery purchase commitments.
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
24
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
the account of the custodian bank. The seller is required to maintain the value
of the underlying security at not less than the repurchase proceeds due the
Fund.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts on debt
securities are accreted and premiums are amortized over the expected life of
each applicable security. Income and expenses of the Fund are allocated on a pro
rata basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At August 31, 2004, the Fund had an accumulated capital loss carryforward
for tax purposes of $361,788,463, which will expire between August 31, 2007 and
August 31, 2012.
At August 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $584,316,100
============
Gross tax unrealized appreciation........................... $ 35,413,995
Gross tax unrealized depreciation........................... (48,502,683)
------------
Net tax unrealized depreciation on investments.............. $(13,088,688)
============
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 which are included in ordinary income for
tax purposes.
The tax character of distributions paid during the years ended August 31,
2004 and 2003 was as follows:
2004 2003
Distributions paid from:
Ordinary income........................................... $40,015,705 $39,193,541
Long-term capital gain.................................... -0- -0-
Return of capital......................................... 1,338,926 11,249,049
----------- -----------
$41,354,631 $50,442,590
=========== ===========
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. A permanent book
25
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
and tax difference relating to return of capital distributions totaling
$1,338,926 has been reclassified from accumulated undistributed net investment
income to capital. Permanent book and tax differences of $372,887 related to the
recognition of net realized losses on foreign currency transactions have been
reclassified from accumulated net realized loss to accumulated undistributed net
investment income. A permanent book and tax difference related to the portion of
capital loss carry-forward expiring in the current year totaling $9,539,272 has
been reclassified from accumulated net realized loss to capital. Additionally,
permanent book and tax differences of $4,486 relating to the Fund's investment
in other regulated investment companies, $6,605 relating to paydowns on
mortgage-backed securities, $335,030 relating to fee income received on tender
offers and $1,226,345 relating to book to tax amortization differences have been
reclassified from accumulated undistributed net investment income to accumulated
net realized loss.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of post October losses which are not realized for
tax purposes until the first day of the following fiscal year and the deferral
of losses relating to wash sales transactions.
F. EXPENSE REDUCTIONS During the year ended August 31, 2004, the Fund's custody
fee was reduced by $9,415 as a result of credits earned on cash balances.
G. FOREIGN CURRENCY TRANSLATION Asset and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars at the mean of the quoted bid and ask prices of
such currencies against the U.S. dollar. Purchases and sales of portfolio
securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Realized gain and loss on foreign currency
transactions on the Statement of Operations includes the net realized amount
from the sale of foreign currency and the amount realized between trade date and
settlement date on securities transactions. Income and expenses are translated
at rates prevailing when accrued.
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 $150 million.......................................... .625%
Next $150 million........................................... .550%
Over $300 million........................................... .500%
For the year ended August 31, 2004, the Fund recognized expenses of
approximately $26,200 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
Under an Accounting Services Agreement, the Adviser provides accounting
services to the Fund. The Adviser allocates the cost of such services to each
fund. For the year ended August 31, 2004, the Fund recognized expenses of
approximately $35,600 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing accounting services to
the Fund which are reported as part of "Other" expenses in the Statement of
Operations.
26
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
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, 2004, the Fund recognized expenses of approximately $962,700
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 $120,805 are included in
"Other" assets on the Statement of Assets and Liabilities at August 31, 2004.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At August 31, 2004, capital aggregated $709,335,080, $226,435,317 and
$58,356,021 for Classes A, B and C, respectively. For the year ended August 31,
2004, transactions were as follows:
SHARES VALUE
Sales:
Class A................................................... 42,743,427 $ 152,677,314
Class B................................................... 6,551,925 23,512,637
Class C................................................... 3,096,714 10,997,674
----------- -------------
Total Sales................................................. 52,392,066 $ 187,187,625
=========== =============
Dividend Reinvestment:
Class A................................................... 5,607,636 $ 20,120,077
Class B................................................... 2,113,467 7,614,931
Class C................................................... 525,673 1,874,302
----------- -------------
Total Dividend Reinvestment................................. 8,246,776 $ 29,609,310
=========== =============
Repurchases:
Class A................................................... (63,202,465) $(224,432,571)
Class B................................................... (15,674,574) (56,222,037)
Class C................................................... (4,315,074) (15,309,012)
----------- -------------
Total Repurchases........................................... (83,192,113) $(295,963,620)
=========== =============
27
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
At August 31, 2003, capital aggregated $768,068,266, $254,534,815, and
$61,568,220 for Classes A, B and C, respectively. For the year ended August 31,
2003, transactions were as follows:
SHARES VALUE
Sales:
Class A.................................................. 108,069,332 $ 354,101,454
Class B.................................................. 11,775,025 38,249,429
Class C.................................................. 4,650,091 15,195,622
------------ -------------
Total Sales................................................ 124,494,448 $ 407,546,505
============ =============
Dividend Reinvestment:
Class A.................................................. 6,823,287 $ 22,296,985
Class B.................................................. 2,819,580 9,226,196
Class C.................................................. 633,008 2,055,854
------------ -------------
Total Dividend Reinvestment................................ 10,275,875 $ 33,579,035
============ =============
Repurchases:
Class A.................................................. (93,634,941) $(310,107,293)
Class B.................................................. (16,965,322) (55,230,999)
Class C.................................................. (4,850,611) (15,839,101)
------------ -------------
Total Repurchases.......................................... (115,450,874) $(381,177,393)
============ =============
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received thereon, automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received thereon, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the years ended August 31, 2004 and 2003,
1,296,337 and 1,038,020 Class B Shares automatically converted to Class A
Shares, respectively, and are shown in the above table as sales of Class A
Shares and repurchases of Class B Shares. Class C Shares purchased before
January 1, 1997, and any dividend reinvestment plan Class C Shares received on
such shares, automatically convert to Class A Shares ten years after the end of
the calendar month in which such shares were purchased. Class C Shares purchased
on or after January 1, 1997 do not possess a conversion feature. For the years
ended August 31, 2004 and 2003, 9,894 and 0 Class C Shares converted to Class A
Shares, respectively, and are shown in the above table as sales of Class A
Shares and repurchases of Class C Shares. Class B and C Shares are offered
without a front end sales charge, but are subject to a contingent deferred sales
charge (CDSC). The CDSC will be imposed on most
28
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
redemptions made within five years of the purchase for Class B Shares and one
year of the purchase for Class C Shares as detailed in the following schedule.
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 4.00% None
Third....................................................... 3.00% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth and Thereafter........................................ None None
For the year ended August 31, 2004, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A Shares of approximately
$120,500 and CDSC on redeemed shares of approximately $285,000. Sales charges do
not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $504,091,772 and $573,326,164,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the Fund's effective yield, foreign currency exposure,
maturity and duration or generate potential gain. All of the Fund's holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when taking delivery of
a security underlying a forward commitment. In this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
forward commitment.
Purchasing securities on a forward commitment involves a risk that the
market value at the time of delivery may be lower than the agreed upon purchase
price resulting in an unrealized loss. Selling securities on a forward
commitment involves different risks and can result in losses more significant
than those arising from the purchase of such securities. Risks may arise as a
result of the potential inability of the counterparties to meet the terms of
their contracts.
A forward foreign currency contract is a commitment to purchase or sell a
foreign currency at a future date at a negotiated forward rate. Upon the
settlement of the contract, a realized gain or loss is recognized and is
included as a component of realized gain/loss on forward foreign currency
contracts. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.
29
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
The following forward foreign currency contracts were outstanding as of
August 31, 2004:
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
LONG CONTRACTS:
Euro Currency,
1,665,000 expiring 10/26/04............................... $ 2,027,302 $ 23,058
----------- --------
SHORT CONTRACTS:
Euro Currency,
12,715,000 expiring 10/26/04.............................. 15,481,770 106,820
5,975,000 expiring 10/26/04............................... 7,275,153 50,197
450,000 expiring 10/26/04................................. 547,919 3,691
6,855,000 expiring 10/26/04............................... 8,346,640 50,735
----------- --------
31,651,482 211,443
----------- --------
$33,678,784 $234,501
=========== ========
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and maintenance of shareholder accounts
with respect to such classes of shares.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and 1.00% each for Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A Shares are paid quarterly and the
annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $4,118,600 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, any excess 12b-1 fees will be
refunded to the Fund on a quarterly basis.
Included in the fees for the year ended August 31, 2004 are payments
retained by Van Kampen of approximately $1,356,200 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $148,600.
7. 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.
8. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, certain officers of such
affiliates and certain investment companies advised by the Adviser or its
affiliates, including the Fund, are named
30
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
as defendants in a number of similar class action complaints which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the named investment companies advised by
affiliates of the Adviser; the complaint does not, however, name the individual
Trustees of any Van Kampen funds. The consolidated amended complaint generally
alleges that defendants violated their statutory disclosure obligations and
fiduciary duties by failing properly to disclose (i) that the Adviser and
certain affiliates of the Adviser allegedly offered economic incentives to
brokers and others to recommend the funds advised by the Adviser or its
affiliates to investors rather than funds managed by other companies, and (ii)
that the funds advised by the Adviser or its affiliates, including the Fund,
allegedly paid excessive commissions to brokers in return for their efforts to
recommend these funds to investors. The complaint seeks, among other things,
unspecified compensatory damages, rescissionary damages, fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley DW Inc. in connection with the
sales of the funds. The complaint seeks, among other things, the removal of the
current Trustees of the Van Kampen funds, rescission of the management contracts
for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary
damages. This complaint has been coordinated with the consolidated complaint.
The defendants have moved to dismiss these actions and intend to otherwise
vigorously defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
31
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen High Income Corporate
Bond Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen High Income Corporate Bond Fund (the "Fund"), including the portfolio of
investments, as of August 31, 2004, 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.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of August 31, 2004, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen High Income Corporate Bond Fund at August 31, 2004, 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 7, 2004
32
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
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
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
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
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
August 31, 2004. For corporate shareholders, 4% of the distributions qualify
for the dividends received deduction. Certain dividends paid by the Fund may
be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up
to a maximum of $1,705,423 as taxed at a maximum of 15%. In January, the Fund
provides tax information to shareholders for the preceding calendar year.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
33
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
TRUSTEES AND OFFICERS 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
Inc. ("Van Kampen Investments"), Van Kampen Asset Management (the "Adviser"),
Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen
Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The
term "Fund Complex" includes each of the investment companies advised by the
Adviser or its affiliates as of the date of this Statement of Additional
Information. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (58) Trustee Trustee Chairman and Chief 85 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
Manufacturer's
Association.
J. Miles Branagan (71) Trustee Trustee Private investor. 83 Trustee/Director/Managing
1632 Morning Mountain Road since 1991 Co-founder, and prior to General Partner of funds
Raleigh, NC 27614 August 1996, Chairman, in the Fund Complex.
Chief Executive Officer
and President, MDT
Corporation (now known as
Getinge/Castle, Inc., a
subsidiary of Getinge
Industrier AB), a company
which develops,
manufactures, markets and
services medical and
scientific equipment.
34
VAN KAMPEN HIGH INCOME 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
Jerry D. Choate (66) Trustee Trustee Prior to January 1999, 83 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
Rod Dammeyer (63) Trustee Trustee President of CAC, L.L.C., 85 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 Stericycle,
San Diego, CA 92122-6223 advisory services. Prior Inc., GATX Corporation,
to February 2001, Vice and Trustee of The
Chairman and Director of Scripps Research
Anixter International, Institute and the
Inc., a global University of Chicago
distributor of wire, Hospitals and Health
cable and communications Systems. Prior to January
connectivity products, 2004, Director of
and IMC Global Inc., an TeleTech Holdings Inc.
international company and Arris Group, Inc.
that mines, manufactures Prior to May 2002,
and sells essential crop Director of Peregrine
nutrients and feed Systems Inc. Prior to
ingredients to farmers. July 2000, Director of
Prior to July 2000, Allied Riser
Managing Partner of Communications Corp.,
Equity Group Corporate Matria Healthcare Inc.,
Investment (EGI), a Transmedia Networks,
company that makes Inc., CNA Surety, Corp.
private investments in and Grupo Azcarero Mexico
other companies. (GAM).
35
VAN KAMPEN HIGH INCOME 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 (56) Trustee Trustee Managing Partner of 83 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1992, Executive Vice
President of La Salle
National Bank.
R. Craig Kennedy (52) Trustee Trustee Director and President of 83 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 (68) Trustee Trustee Prior to 1998, President 85 Trustee/Director/Managing
736 North Western Avenue since 2003 and Chief Executive General Partner of funds
P.O. Box 317 Officer of Pocklington in the Fund Complex.
Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
36
VAN KAMPEN HIGH INCOME 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 (68) Trustee Trustee President of Nelson 83 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 (63) Trustee Trustee President Emeritus and 85 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 Previously Chief 83 Trustee/Director/Managing
(62) since 1999 Communications Officer of General Partner of funds
815 Cumberstone Road the National 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.
37
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED 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 INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Mitchell M. Merin* (51) Trustee, Trustee President and Chief 83 Trustee/Director/Managing
1221 Avenue of the Americas President since Executive Officer of General Partner of funds
New York, NY 10020 and Chief 1999; funds in the Fund in the Fund Complex.
Executive President Complex. Chairman,
Officer and Chief President, Chief
Executive Executive Officer and
Officer Director of the Adviser
since 2002 and Van Kampen Advisors
Inc. since December 2002.
Chairman, President and
Chief Executive Officer
of Van Kampen Investments
since December 2002.
Director of Van Kampen
Investments since
December 1999. Chairman
and Director of Van
Kampen Funds Inc. since
December 2002. President,
Director and Chief
Operating Officer of
Morgan Stanley Investment
Management since December
1998. President and
Director since April 1997
and Chief Executive
Officer since June 1998
of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc.
Chairman, Chief Executive
Officer and Director of
Morgan Stanley
Distributors Inc. since
June 1998. Chairman since
June 1998, and Director
since January 1998 of
Morgan Stanley Trust.
Director of various
Morgan Stanley
subsidiaries. President
of the Morgan Stanley
Funds since May 1999.
Previously Chief
Executive Officer of Van
Kampen Funds Inc. from
December 2002 to July
2003, Chief Strategic
Officer of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc. and
Executive Vice President
of Morgan Stanley
Distributors Inc. from
April 1997 to June 1998.
Chief Executive Officer
from September 2002 to
April 2003 and Vice
President from May 1997
to April 1999 of the
Morgan Stanley Funds.
38
VAN KAMPEN HIGH INCOME 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
Richard F. Powers, III* (58) Trustee Trustee Advisory Director of 85 Trustee/Director/Managing
1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds
P.O. Box 5555 December 2002, Chairman, in the Fund Complex.
Oakbrook Terrace, IL 60181 Director, President,
Chief Executive Officer
and Managing Director of
Van Kampen Investments
and its investment
advisory, distribution
and other subsidiaries.
Prior to December 2002,
President and Chief
Executive Officer of
funds in the Fund
Complex. Prior to May
1998, Executive Vice
President and Director of
Marketing at Morgan
Stanley and Director of
Dean Witter, Discover &
Co. and Dean Witter
Realty. Prior to 1996,
Director of Dean Witter
Reynolds Inc.
Wayne W. Whalen* (65) Trustee Trustee Partner in the law firm 85 Trustee/Director/Managing
333 West Wacker Drive since 1995 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the
Fund Complex.
* Such trustee is an "interested person" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain
funds in the Fund Complex by reason of his firm currently acting as legal
counsel to such funds in the Fund Complex. Messrs. Merin and Powers are
interested persons of funds in the Fund Complex and the Adviser by reason of
their current or former positions with Morgan Stanley or its affiliates.
39
VAN KAMPEN HIGH INCOME 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
Stefanie V. Chang (37) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Secretary since 2003 Vice President of funds in the Fund Complex.
New York, NY 10020
Amy Doberman (42) 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 Advisers 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 as of August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeitus Investment Management,
Inc from January 1997 to July 2000.
James M. Dykas (38) Chief Financial Officer Officer Executive Director of Van Kampen Asset Management and Morgan
1 Parkview Plaza and Treasurer since 1999 Stanley Investment Management. Chief Financial Officer and
Oakbrook Terrace, IL 60181 Treasurer of funds in the Fund Complex. Prior to August
2004, Assistant Treasurer of funds in the Fund Complex.
Joseph J. McAlinden (61) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment
New York, NY 10020 Investment Officer Management Inc. and Morgan Stanley Investments LP and
Director of Morgan Stanley Trust for over 5 years. Executive
Vice President and Chief Investment Officer of funds in the
Fund Complex. Managing Director and Chief Investment Officer
of Van Kampen Investments, the Adviser and Van Kampen
Advisors Inc. since December 2002.
40
VAN KAMPEN HIGH INCOME 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
Ronald E. Robison (65) Executive Vice Officer Principal Executive Officer--office of the Funds (since
1221 Avenue of the Americas President and since 2003 November 2003). Chief Executive Officer and Chairman of
New York, NY 10020 Principal Executive Investor Services. Executive Vice President and Principal
Officer Executive Officer of funds in the Fund Complex. Managing
Director of Morgan Stanley. Chief Administrative Officer,
Managing Director and Director of Morgan Stanley Investment
Advisors Inc., Morgan Stanley Services Company Inc. and
Managing Director and Director of Morgan Stanley
Distributors 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 and Managing Director of
Morgan Stanley Investment Management Inc.
John L. Sullivan (49) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Director and Managing Director of Van Kampen
Oakbrook Terrace, IL 60181 Investments, the Adviser, Van Kampen Advisors Inc. and
certain other subsidiaries of Van Kampen Investments. Prior
August 2004, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management. Prior
to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
41
VAN KAMPEN
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.
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,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
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 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
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 28, 128, 228
HYI ANR
10/04 RN04-02226P-Y08/04
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) Due to personnel changes at the Adviser, the list of Covered Officers
set forth in Exhibit B and the General Counsel designee to whom questions about
the application of the Code should be referred in Exhibit C have been amended.
(d) The Fund has not granted a waiver or an implicit waiver from a
provision of its Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit 11A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: J. Miles Branagan, Jerry Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2004
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES......................... $41,500 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES....... $0 $159,500(2)
TAX FEES................. $2,000(3) $42,141(4)
ALL OTHER FEES........... $0 $222,168(5)
TOTAL NON-AUDIT FEES............... $2,000 $423,809
TOTAL.............................. $43,500 $423,809
2003
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES......................... $37,630 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES....... $0 $88,000(2)
TAX FEES................. $1,370(3) $70,314(4)
ALL OTHER FEES........... $0 $331,980(6)
TOTAL NON-AUDIT FEES............... $1,370 $490,294
TOTAL.............................. $39,000 $490,294
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.
(6) All Other Fees represent attestation services provided in
connection with performance presentation standards, general
industry education seminars provided, and a regulatory review
project performed.
(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(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).
--------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval
Policy and Procedures (the "Policy"), adopted as of the date above, supercedes
and replaces all prior versions that may have been adopted 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 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.
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 following Audit services. All
other Audit services not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
o Statutory audits or financial audits for the Fund
o Services associated with SEC registration statements (including new
funds), periodic reports and other documents filed with the SEC or
other documents issued in connection with securities offerings (e.g.,
comfort letters for closed-end fund offerings, consents), and
assistance in responding to SEC comment letters
o Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or standard
setting
bodies (Note: Under SEC rules, some consultations may be "audit
related" services rather than "audit" services)
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 following Audit-related
services. All other Audit-related services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
o Attest procedures not required by statute or regulation (including
agreed upon procedures related to the Closed-End Fund asset coverage
tests required by the rating agencies and/or lenders)
o Due diligence services pertaining to potential fund mergers
o Issuance of SAS-70 reports on internal controls of Morgan Stanley Trust
Co. and MSIM Trade Operations
o Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or
standard-setting bodies (Note: Under SEC rules, some consultations may
be "audit" services rather than "audit-related" services)
o Information systems reviews not performed in connection with the audit
(e.g., application data center and technical reviews)
o General assistance with implementation of the requirements of SEC rules
or listing standards promulgated pursuant to the Sarbanes-Oxley Act
o Audit of record keeping services performed by Morgan Stanley Trust Fund
related to the New Jersey State Retirement Plan
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 following Tax Services. All Tax services involving large and
complex transactions not listed below 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):
o U.S. federal, state and local tax planning and advice
o U.S. federal, state and local tax compliance
o International tax planning and advice
o International tax compliance
o Review of federal, state, local and international income, franchise,
and other tax returns
o Identification of Passive Foreign Investment Companies
o Review of closed-end funds pro rata allocation of taxable income and
capital gains to common and preferred shares.
o Domestic and foreign tax planning, compliance, and advice
o Assistance with tax audits and appeals before the IRS and similar
state, local and foreign agencies
o Tax advice and assistance regarding statutory, regulatory or
administrative developments (e.g., excise tax reviews, evaluation of
Fund's tax compliance function)
o Review the calculations of taxable income from corporate actions
including reorganizations related to bankruptcy filings and provide
guidance related to the foregoing
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 following All Other services.
Permissible All Other services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
o Risk management advisory services, e.g., assessment and testing of
security infrastructure controls
The following is a list of the SEC's prohibited non-audit services. 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:
o Bookkeeping or other services related to the accounting records or
financial statements of the audit client
o Financial information systems design and implementation
o Appraisal or valuation services, fairness opinions or
contribution-in-kind reports
o Actuarial services
o Internal audit outsourcing services
o Management functions
o Human resources
o Broker-dealer, investment adviser or investment banking services
o Legal services
o Expert services unrelated to the audit
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. 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:
o Van Kampen Investments, Inc.
o Van Kampen Investment Advisory Corporation
o Van Kampen Asset Management Inc.
o Van Kampen Advisors Inc.
o Van Kampen Funds Inc.
o Van Kampen Trust Company
o Van Kampen Investor Services Inc.
o Van Kampen Management Inc.
o Morgan Stanley Investment Management Inc.
o Morgan Stanley Investments LP
o Morgan Stanley Trust Company
(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 (attached hereto).
(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.
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. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. 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 registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) 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 High Income Corporate Bond Fund
By: /s/ Ronald E. Robison
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2004
By: /s/ James M. Dykas
----------------------
Name: James M. Dykas
Title: Principal Financial Officer
Date: October 20, 2004