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 Yield Fund
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 8/31
Date of reporting period: 8/31/06
Item 1. 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
Yield Fund performed during the annual period. The portfolio management
team will provide an overview of the market conditions and discuss some
of the factors that affected investment performance during the reporting
period. In addition, this report includes the fund's financial statements
and a list of fund investments as of August 31, 2006.
THIS PIECE MUST BE PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS. THE
PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE READ THE PROSPECTUS
CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND,
THEREFORE, THE VALUE OF THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID
FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. PLEASE
SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT RISKS.
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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
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the J.P. Morgan Global
High Yield Index(R), the Lipper High Yield Bond Fund and the Lehman Brothers
U.S. Corporate High Yield 2% Issuer Cap(R) from 8/31/96 through 8/31/06. Class A
shares, adjusted for sales charges.
(LINE GRAPH)
LEHMAN BROTHERS US
VAN KAMPEN HIGH J.P. MORGAN GLOBAL LIPPER HIGH YIELD CORP HIGH YIELD 2%
YIELD FUND HIGH YIELD INDEX BOND FUND INDEX ISSUER CAP INDEX
--------------- ------------------ ----------------- ------------------
8/96 9531 10000 10000 10000
9756 10237 10261 10240
9817 10332 10310 10316
9940 10522 10488 10519
10052 10634 10617 10597
10161 10718 10722 10701
10319 10902 10902 10878
10192 10725 10665 10717
10256 10825 10756 10830
10498 11075 11041 11062
10661 11220 11230 11215
10874 11519 11530 11522
8/97 10907 11526 11556 11496
11157 11755 11836 11724
11040 11739 11790 11733
11192 11844 11876 11845
11282 11951 12016 11958
11523 12136 12249 12174
11662 12230 12364 12245
11837 12352 12543 12361
11943 12414 12582 12409
11978 12431 12568 12451
11942 12457 12591 12496
12050 12562 12677 12567
8/98 11089 11748 11711 11873
10963 11736 11640 11927
10725 11484 11376 11682
11398 12117 12044 12167
11334 12066 12007 12180
11470 12210 12224 12361
11434 12149 12175 12288
11649 12298 12389 12405
11885 12611 12710 12645
11652 12430 12469 12474
11614 12430 12470 12448
11677 12432 12474 12498
8/99 11578 12308 12348 12359
11540 12219 12251 12270
11542 12152 12216 12189
11669 12350 12431 12333
11777 12471 12580 12471
11821 12424 12518 12418
11904 12473 12607 12441
11728 12260 12389 12180
11703 12258 12335 12199
11568 12084 12115 12075
11830 12322 12339 12321
11894 12430 12361 12415
8/00 11936 12526 12426 12499
11750 12362 12243 12388
11262 11999 11824 11999
10699 11541 11165 11528
10809 11744 11358 11750
11464 12456 12111 12631
11552 12600 12149 12806
11159 12353 11746 12511
10957 12224 11592 12357
11097 12463 11717 12583
10736 12249 11373 12232
10799 12373 11440 12412
8/01 10857 12533 11490 12560
10094 11706 10679 11717
10282 11999 10924 12004
10630 12407 11271 12441
10523 12391 11241 12391
10440 12481 11268 12478
10030 12388 11068 12308
10244 12668 11287 12605
10343 12860 11406 12804
10220 12816 11292 12740
9525 12355 10656 11976
9109 12012 10307 11464
8/02 9147 12122 10484 11767
9025 11980 10338 11616
8930 11894 10273 11497
9456 12510 10865 12197
9531 12655 10970 12362
9668 12984 11212 12760
9835 13174 11363 12924
10091 13490 11647 13289
10564 14159 12219 14075
10669 14356 12364 14218
10926 14775 12697 14630
10807 14680 12599 14484
8/03 10909 14826 12768 14639
11202 15235 13078 15038
11433 15518 13371 15340
11569 15736 13526 15571
11835 16134 13861 15919
11970 16429 14083 16225
11941 16442 14055 16188
12011 16570 14108 16298
12015 16509 14076 16189
11852 16253 13859 15913
12024 16500 14053 16141
12197 16708 14166 16360
8/04 12438 16989 14397 16683
12613 17232 14597 16923
12824 17521 14857 17228
12932 17718 15068 17434
13075 17994 15295 17692
13079 17996 15257 17669
13259 18240 15490 17929
12839 17788 15080 17409
12665 17635 14903 17240
12813 17894 15142 17545
13033 18199 15384 17861
13218 18441 15624 18143
8/05 13296 18553 15699 18200
13153 18397 15597 18038
13011 18256 15469 17877
13126 18383 15610 18017
13242 18551 15753 18182
13359 18781 15957 18399
13477 18955 16091 18579
13520 19069 16157 18657
13601 19204 16250 18773
13565 19222 16215 18748
13489 19124 16124 18643
13609 19300 16246 18804
8/06 13768 19578 16467 19082
A SHARES B SHARES C SHARES I SHARES
since 10/2/78 since 7/2/92 since 7/6/93 since 3/23/05
--------------------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
4.75% 4.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 7.31% 7.13% 5.21% 5.21% 4.21% 4.21% 4.55%
10-year 3.75 3.25 3.09 3.09 2.95 2.95 --
5-year 4.87 3.85 4.10 3.89 4.12 4.12 --
1-year 3.55 -1.34 2.75 -1.10 2.83 1.87 3.82
--------------------------------------------------------------------------------------------------------
30-Day SEC Yield 6.68% 6.20% 6.32% 7.26%
THE PERFORMANCE DATA REPRESENTS PAST PERFORMANCE WHICH, IS NO GUARANTEE OF
FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR MORE UP-TO-DATE INFORMATION, INCLUDING 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. As a result of recent market activity, current performance may vary
from the figures shown. 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 up to 1.00
percent for Class B and C shares. The since inception and ten-year returns for
Class B shares reflect the conversion of Class B shares into Class A shares
eight years after purchase. The since inception returns for Class C shares
reflect the conversion of Class C shares into Class A shares ten years after
purchase. Class I shares are available for purchase exclusively by investors
through (i) tax-exempt retirement plans with assets of at least $1 million
(including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit
sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least $1 million and (iii) institutional clients with assets of at least $1
million. Class I shares are offered without any sales charges on purchases or
sales and do not include combined Rule 12b-1 fees and service fees. Figures
shown above assume reinvestment of all dividends and capital gains. SEC yield is
a calculation for determining the amount of portfolio income, excluding
non-income items as prescribed by the SEC. Yields are subject to change.
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 including
domestic and international issues. Lipper High Yield Bond Fund Index is an index
of funds with similar return investment as this fund. The Lehman Brothers U.S.
Corporate High Yield 2% Issuer Cap Index is generally representative of high
yield securities. 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 for index performance: Lipper Inc.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2006
MARKET CONDITIONS
In the early months of the reporting period, the economy continued to show
resilience, inflation remained in check and the equity market improved.
Together, these factors provided support for the high yield market, helping to
keep returns in positive territory despite a declining appetite for corporate
credit risk and rising interest rates.
In the first quarter of 2006, the high yield market benefited from a rekindled
investor interest in adding risk, which was fueled by continued solid economic
growth and a briskly rising equity market. The healthy gains in high yield came
despite declining Treasury prices, tight credit spreads, moderate new issuance
and outflows from mutual funds. Against this backdrop, the riskiest segment of
the bond market--securities rated CCC and below--had the best showing,
outperforming higher-quality issues.
Although returns dipped in the second quarter, the high yield market still fared
better than most other asset classes, including equities. The low positive
returns of high yield came despite robust new issuance, increased market
volatility and lower Treasury prices. Lower-rated bonds continued to outperform
their higher-rated counterparts, with CCC-rated securities turning in the best
returns.
In the last months of the reporting period, high yield prices rebounded nicely
as investors appeared confident that good economic growth and loose credit
conditions would continue to be positive for high yield credits. High yield
bonds again outpaced equities. However, because of their high correlation to
Treasuries, which rallied in July, higher-quality fixed-income securities posted
better overall returns than lower-rated, high yield bonds. Of note, the Federal
Open Market Committee (the "Fed") finally paused in its two-year long series of
interest-rate increases, electing not to raise the target federal funds rate at
its August meeting.
Industry returns varied considerably across individual sectors, many of which
were significantly influenced by individual companies. For example, the
aerospace sector benefited from a rebound in airline issues, while poor
performance of auto-related companies hindered the transportation sector. In the
second half of the period, however, transportation and manufacturing were the
best performing sectors due to strong gains by the auto industry. In July, the
health care sector was hurt by the announcement that HCA, one of the larger
issuers in high yield, had agreed to be bought out in a highly leveraged
transaction.
2
PERFORMANCE ANALYSIS
The fund returned 3.55 percent for the 12 months ended August 31, 2006 (Class A
shares, unadjusted for sales charges). In comparison, the fund's benchmarks, the
Lehman Brothers U.S. High Yield 2% Issuer Cap Index, the J.P. Morgan Global High
Yield Index and the Lipper High Yield Bond Fund Index, returned 4.82 percent,
5.21 percent and 4.90 percent for the period, respectively.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2006
------------------------------------------------------------------------------------
LEHMAN
BROTHERS
U.S. HIGH J.P. MORGAN LIPPER
YIELD 2% GLOBAL HIGH YIELD
ISSUER CAP HIGH YIELD BOND FUND
CLASS A CLASS B CLASS C CLASS I INDEX INDEX INDEX
3.55% 2.75% 2.83% 3.82% 4.82% 5.21% 4.90%
------------------------------------------------------------------------------------------
The performance for the four share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and
index definitions.
In general, the fund was overweighted versus the benchmark, the Lehman Brothers
U.S. High Yield 2% Issuer Cap Index, in the chemicals and food/tobacco sectors,
and underweighted in utilities throughout the reporting year which detracted
from performance. Early in the period, the fund was also underweight versus the
index in the transportation sector, which was beneficial to performance given
the struggles in the auto industry. From January through August, the fund had an
overweight in transportation companies relative to the index, which helped
performance as the sector rebounded. Strong security selection in the sector, as
well as in the utilities sector, also added to performance. On a less positive
note, security selection in forest products detracted from performance.
In regard to credit risk, the fund's overall average credit quality was in line
with the Lehman Brothers U.S. High Yield 2% Issuer Cap Index early in the period
but its yield-to-maturity was comparatively lower, signifying less relative
credit risk. We began reducing the risk in the portfolio in order to take
advantage of our belief that high yield prices may move lower and that spreads,
which were tighter than historical averages, may widen. We continued this
defensive strategy throughout the duration of the reporting period, which
tempered the fund's returns from February through May, but was additive to
performance over the last three months of the period when higher-rated bonds
outperformed lower-quality issues.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
3
RATINGS ALLOCATIONS AS OF 8/31/06
A/A 0.6%
BBB/Baa 4.4
BB/Ba 33.5
B/B 53.8
CCC/Caa 6.8
Non-Rated 0.9
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 8/31/06
Energy 10.1%
Transportation 8.6
Healthcare 8.3
Utility 7.8
Chemicals 6.9
Gaming & Leisure 6.7
Cable 5.1
Forest Products 5.1
Diversified Media 4.5
Food & Tobacco 4.3
Manufacturing 2.9
Metals 2.9
Telecommunications 2.9
Services 2.7
Housing 2.6
Information Technology 2.5
Consumer Products 2.2
Food & Drug 1.9
Aerospace 1.7
Wireless Communications 1.7
Retail 1.6
Broadcasting 0.8
Financial 0.6
Sovereigns 0.6
Apparel, Accessories & Luxury Goods 0.2
Integrated Telecommunication Services 0.0*
Alternative Carriers 0.0*
Broadcasting & Cable TV 0.0*
IT Consulting & Other Services 0.0*
Wireless Telecommunication Services 0.0*
-----
Total Long-Term Investments 95.2%
Short-Term Investments 3.0
Other Assets in Excess of Liabilities 1.8
-----
Total Net Assets 100.0%
*Amounts are less than 0.1%
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 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.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. You can also request copies of these materials, upon payment of
a duplicating fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
5
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
6
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charges on redemptions of Class B and C Shares;
and redemption fees; and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees; and other Fund expenses. This example is
intended to help you understand your ongoing 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 3/1/06 - 8/31/06.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges or redemption fees.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
3/1/06 8/31/06 3/1/06-8/31/06
Class A
Actual...................................... $1,000.00 $1,021.59 $4.74
Hypothetical................................ 1,000.00 1,020.51 4.74
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,017.62 8.59
Hypothetical................................ 1,000.00 1,016.71 8.59
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,015.21 8.43
Hypothetical................................ 1,000.00 1,016.81 8.44
(5% annual return before expenses)
Class I
Actual...................................... 1,000.00 1,022.87 3.42
Hypothetical................................ 1,000.00 1,021.81 3.41
(5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.93%, 1.69%,
1.66% and 0.67% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 184/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
7
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. Finally, the Board considered materials it had received in
approving a proposed reduction in the advisory fee rate effective June 1, 2005.
The Board of Trustees considered the contract over a period of several months
and the non-management trustees held sessions both with the investment adviser
and separate from the investment adviser in reviewing and considering the
contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees,
8
evaluated all of the foregoing and does not believe any single factor or group
of factors control or dominate the review process, and, after considering all
factors together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The Fund discloses
information about its portfolio management team members and their experience in
its prospectus. The trustees also discuss certain other services which are
provided on a cost-reimbursement basis by the investment adviser or its
affiliates to the Van Kampen funds including certain accounting, administrative
and legal services. The Board has determined that the nature, extent and quality
of the services provided by the investment adviser support its decision to
approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the
9
profitability of the investment adviser. These profitability reports are put
together by the investment adviser with the oversight of the Board. The trustees
discuss with the investment adviser its revenues and expenses, including among
other things, revenues for advisory services, portfolio management-related
expenses, revenue sharing arrangement costs and allocated expenses both on an
aggregate basis and per fund. The Board has determined that the analysis of the
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
10
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
CORPORATE BONDS 93.8%
AEROSPACE 1.7%
$ 4,645 Hexcel Corp. ................................... 6.750% 02/01/15 $ 4,401,137
6,440 K & F Acquisition, Inc. ........................ 7.750 11/15/14 6,440,000
------------
10,841,137
------------
BROADCASTING 0.8%
3,740 Lin Television Corp. ........................... 6.500 05/15/13 3,468,850
1,645 Lin Television Corp., Ser B..................... 6.500 05/15/13 1,525,737
------------
4,994,587
------------
CABLE 5.1%
4,815 Cablecom Luxembourg SCA, (Euro) (Luxembourg)
(a)............................................. 9.375 04/15/14 6,901,272
6,005 Cablevision Systems Corp. (Floating Rate
Coupon)......................................... 9.620 04/01/09 6,432,856
1,839 CCH I, LLC...................................... 11.000 10/01/15 1,641,307
5,320 Echostar DBS Corp. ............................. 6.375 10/01/11 5,193,650
1,290 Echostar DBS Corp. ............................. 6.625 10/01/14 1,243,237
460 Intelsat Subsidiary Holding Co., Ltd.
(Bermuda)....................................... 8.250 01/15/13 461,150
4,315 Intelsat Subsidiary Holding Co., Ltd.
(Bermuda)....................................... 8.625 01/15/15 4,379,725
3,255 Intelsat Subsidiary Holding Co., Ltd. (Floating
Rate Coupon) (Bermuda).......................... 10.484 01/15/12 3,320,100
655 NTL Cable, Plc (United Kingdom)................. 8.750 04/15/14 682,837
360 NTL Cable, Plc (United Kingdom)................. 9.125 08/15/16 374,400
898 PanAmSat Corp. ................................. 9.000 08/15/14 918,205
------------
31,548,739
------------
CHEMICALS 6.9%
2,855 Cognis Deutschland GmbH & Co. (Euro) (Floating
Rate Coupon) (Germany) (a)...................... 7.816 11/15/13 3,749,124
4,950 Equistar Chemicals, LP.......................... 10.125 09/01/08 5,247,000
620 Equistar Chemicals, LP.......................... 10.625 05/01/11 669,600
952 Huntsman International, LLC..................... 10.125 07/01/09 975,800
4,000 Huntsman International, LLC (Euro).............. 10.125 07/01/09 5,252,713
3,345 Innophos Investments Holdings, Inc. (b)......... 13.405 02/15/15 3,478,567
3,245 Innophos, Inc. ................................. 8.875 08/15/14 3,261,225
2,585 Koppers Holdings, Inc. (c)...................... 0/9.875 11/15/14 1,919,362
1,730 Koppers, Inc. .................................. 9.875 10/15/13 1,881,375
1,930 Millennium America, Inc. ....................... 9.250 06/15/08 1,983,075
2,775 Nalco Co. ...................................... 7.750 11/15/11 2,837,437
3,960 Nalco Co. ...................................... 8.875 11/15/13 4,098,600
2,268 Rockwood Specialties Group, Inc. ............... 10.625 05/15/11 2,443,770
1,390 Rockwood Specialties Group, Inc. (Euro) (United
Kingdom) (a).................................... 7.625 11/15/14 1,838,674
2,940 Westlake Chemical Corp. ........................ 6.625 01/15/16 2,807,700
------------
42,444,022
------------
See Notes to Financial Statements 11
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 2.2%
$ 8,210 Levi Strauss & Co. (Floating Rate Coupon)....... 10.258% 04/01/12 $ 8,517,875
2,295 Oxford Industrials, Inc. ....................... 8.875 06/01/11 2,329,425
2,632 Tempur Pedic, Inc. ............................. 10.250 08/15/10 2,770,180
------------
13,617,480
------------
DIVERSIFIED MEDIA 4.5%
1,155 Advanstar Communications, Inc. ................. 10.750 08/15/10 1,253,175
2,840 AMC Entertainment, Inc. (Floating Rate
Coupon)......................................... 9.655 08/15/10 2,939,400
6,187 CanWest Media, Inc. (Canada).................... 8.000 09/15/12 6,016,710
2,282 Dex Media East/Finance Corp., LLC............... 12.125 11/15/12 2,555,840
3,587 Dex Media West/Finance Corp., LLC, Ser B........ 9.875 08/15/13 3,869,476
3,290 Houghton Mifflin Co. ........................... 8.250 02/01/11 3,339,350
2,070 Houghton Mifflin Co. ........................... 9.875 02/01/13 2,152,800
1,525 Nebraska Book Co., Inc. ........................ 8.625 03/15/12 1,399,187
4,290 Quebecor World Capital Corp. (Canada) (a)....... 8.750 03/15/16 4,054,050
------------
27,579,988
------------
ENERGY 10.1%
4,925 Chaparral Energy, Inc. ......................... 8.500 12/01/15 4,986,562
6,870 CHC Helicopter Corp. (Canada)................... 7.375 05/01/14 6,492,150
960 Chesapeake Energy Corp. ........................ 7.625 07/15/13 984,000
4,360 Chesapeake Energy Corp. ........................ 7.500 09/15/13 4,425,400
2,325 Chesapeake Energy Corp. ........................ 6.375 06/15/15 2,220,375
3,200 Chesapeake Energy Corp. ........................ 6.625 01/15/16 3,088,000
1,645 Compagnie Generale de Geophysique SA (France)... 7.500 05/15/15 1,645,000
5,120 El Paso Production Holding Co. ................. 7.750 06/01/13 5,222,400
1,800 Hanover Compressor Co. ......................... 8.625 12/15/10 1,881,000
890 Hanover Compressor Co. ......................... 9.000 06/01/14 947,850
109 Hanover Equipment Trust, Ser A.................. 8.500 09/01/08 111,452
3,042 Hanover Equipment Trust, Ser B.................. 8.750 09/01/11 3,178,890
2,731 Hilcorp Energy/Finance Corp. (a)................ 10.500 09/01/10 2,976,790
5,460 Hilcorp Energy/Finance Corp. (a)................ 7.750 11/01/15 5,391,750
3,460 Husky Oil Ltd. (Canada)......................... 8.900 08/15/28 3,676,856
1,863 Magnum Hunter Resources, Inc. .................. 9.600 03/15/12 1,979,438
6,170 Massey Energy Co. .............................. 6.875 12/15/13 5,753,525
3,450 Pacific Energy Partners......................... 7.125 06/15/14 3,501,750
4,020 Pogo Producing Co. ............................. 6.875 10/01/17 3,849,150
------------
62,312,338
------------
FINANCIAL 0.6%
3,395 Residential Capital Corp. ...................... 6.375 06/30/10 3,427,320
------------
FOOD & DRUG 1.9%
1,025 Albertson's, Inc. .............................. 7.500 02/15/11 1,033,760
3,750 Albertson's, Inc. .............................. 7.250 05/01/13 3,660,638
2,625 Delhaize America, Inc. ......................... 8.125 04/15/11 2,826,143
3,672 Kroger Co. (a).................................. 8.500 07/15/17 3,965,432
------------
11,485,973
------------
12 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
FOOD & TOBACCO 4.3%
$ 3,125 Michael Foods, Inc. ............................ 8.000% 11/15/13 $ 3,203,125
7,095 Pilgrim's Pride Corp. .......................... 9.625 09/15/11 7,467,488
4,720 Pilgrim's Pride Corp. .......................... 9.250 11/15/13 4,767,200
4,595 Reynolds American, Inc. (a)..................... 6.500 07/15/10 4,655,107
4,950 Smithfield Foods, Inc. ......................... 7.000 08/01/11 4,993,313
1,080 Smithfield Foods, Inc., Ser B................... 8.000 10/15/09 1,125,900
450 Smithfield Foods, Inc., Ser B................... 7.750 05/15/13 462,375
------------
26,674,508
------------
FOREST PRODUCTS 5.1%
3,815 Covalence Specialty Materials Corp. (a)......... 10.250 03/01/16 3,681,475
1,490 Crown Americas.................................. 7.625 11/15/13 1,504,900
1,975 Crown European Holdings SA (Euro) (France)...... 6.250 09/01/11 2,675,761
3,840 Graham Packaging Co., Inc. ..................... 8.500 10/15/12 3,734,400
3,965 Graham Packaging Co., Inc. ..................... 9.875 10/15/14 3,836,138
4,870 Graphic Packaging International, Inc. .......... 9.500 08/15/13 4,918,700
1,535 JSG Funding Plc (Euro) (Ireland)................ 10.125 10/01/12 2,165,679
114 Owens-Brockway Glass Containers, Inc. .......... 8.875 02/15/09 117,705
2,100 Owens-Illinois, Inc. ........................... 7.350 05/15/08 2,110,500
5,540 Owens-Illinois, Inc. ........................... 7.500 05/15/10 5,512,300
1,085 P.H. Glatfelter (a)............................. 7.125 05/01/16 1,075,005
------------
31,332,563
------------
GAMING & LEISURE 6.7%
993 Ceasars Entertainment........................... 8.875 09/15/08 1,043,891
475 Ceasars Entertainment........................... 7.000 04/15/13 490,959
4,240 Host Marriott LP................................ 7.125 11/01/13 4,303,600
5,365 Host Marriott LP................................ 6.375 03/15/15 5,177,225
6,935 Isle of Capri Casinos, Inc. .................... 7.000 03/01/14 6,622,925
5,440 Las Vegas Sands Corp. .......................... 6.375 02/15/15 5,086,400
9,470 MGM Mirage, Inc. ............................... 6.000 10/01/09 9,304,275
1,835 Starwood Hotels & Resorts Worldwide, Inc. ...... 7.875 05/01/12 1,995,563
3,005 Station Casinos, Inc. .......................... 6.000 04/01/12 2,888,556
3,795 Station Casinos, Inc. .......................... 6.875 03/01/16 3,534,094
1,085 Station Casinos, Inc. .......................... 7.750 08/15/16 1,124,331
------------
41,571,819
------------
HEALTHCARE 8.3%
3,180 AmerisourceBergen Corp. ........................ 5.625 09/15/12 3,110,339
5,310 Community Health Systems, Inc. ................. 6.500 12/15/12 4,991,400
3,275 DaVita, Inc. ................................... 6.625 03/15/13 3,209,500
4,895 Fisher Scientific International, Inc. .......... 6.125 07/01/15 4,864,406
6,805 Fresenius Medical Care Capital Trust IV......... 7.875 06/15/11 6,975,125
940 HCA, Inc. ...................................... 8.750 09/01/10 949,400
1,205 HCA, Inc. ...................................... 6.300 10/01/12 1,012,200
2,545 HCA, Inc. ...................................... 5.750 03/15/14 1,985,100
3,635 HCA, Inc. ...................................... 6.500 02/15/16 2,880,738
See Notes to Financial Statements 13
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$ 3,980 Medcath Holdings Corp. ......................... 9.875% 07/15/12 $ 4,238,700
2,655 National Mentor Holdings, Inc. (a).............. 11.250 07/01/14 2,747,925
3,680 Omnicare, Inc. ................................. 6.750 12/15/13 3,551,200
1,480 Tenet Healthcare Corp. ......................... 7.375 02/01/13 1,324,600
900 Tenet Healthcare Corp. ......................... 9.875 07/01/14 882,000
4,900 VWR International, Inc. ........................ 6.875 04/15/12 4,802,000
3,975 Warner Chilcott Corp. .......................... 8.750 02/01/15 3,994,875
------------
51,519,508
------------
HOUSING 2.6%
968 Goodman Global Holdings, Inc., Ser B (Floating
Rate Coupon).................................... 8.329 06/15/12 970,420
1,180 Interface, Inc. ................................ 7.300 04/01/08 1,187,375
1,435 Interface, Inc. ................................ 10.375 02/01/10 1,569,531
4,465 Interface, Inc. ................................ 9.500 02/01/14 4,610,113
5,130 Nortek, Inc. ................................... 8.500 09/01/14 4,796,550
1,870 Technical Olympic USA, Inc. .................... 9.000 07/01/10 1,813,900
1,612 Technical Olympic USA, Inc. .................... 10.375 07/01/12 1,450,800
------------
16,398,689
------------
INFORMATION TECHNOLOGY 1.9%
5,045 Iron Mountain, Inc. ............................ 8.625 04/01/13 5,177,431
2,300 Iron Mountain, Inc. ............................ 7.750 01/15/15 2,288,500
525 Iron Mountain, Inc. ............................ 6.625 01/01/16 490,875
3,540 Sungard Data Systems, Inc. ..................... 9.125 08/15/13 3,672,750
320 Sungard Data Systems, Inc. (Floating Rate
Coupon)......................................... 9.973 08/15/13 336,000
------------
11,965,556
------------
MANUFACTURING 2.9%
2,185 General Cable Corp. ............................ 9.500 11/15/10 2,348,875
1,959 JohnsonDiversey, Inc. (Euro) (Luxembourg)....... 9.625 05/15/12 2,622,712
4,463 JohnsonDiversey, Inc., Ser B.................... 9.625 05/15/12 4,418,370
2,574 Manitowoc Co., Inc. ............................ 10.500 08/01/12 2,779,920
2,440 Propex Fabrics, Inc. ........................... 10.000 12/01/12 2,214,300
3,475 RBS Global & Rexnord Corp. (a).................. 9.500 08/01/14 3,509,750
------------
17,893,927
------------
METALS 2.9%
1,340 Foundation PA Coal Co. ......................... 7.250 08/01/14 1,309,850
7,050 Novelis, Inc. (Canada) (a)...................... 8.250 02/15/15 6,732,750
2,445 SGL Carbon Luxembourg SA (Euro) (Luxembourg)
(a)............................................. 8.500 02/01/12 3,414,328
5,992 UCAR Finance, Inc. ............................. 10.250 02/15/12 6,321,560
------------
17,778,488
------------
14 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
RETAIL 1.6%
$ 3,110 Brown Shoe Co., Inc. ........................... 8.750% 05/01/12 $ 3,218,850
5,005 Linens 'n Things, Inc. (Floating Rate Coupon)
(a)............................................. 11.132 01/15/14 4,692,188
2,020 Phillips Van-Heusen Corp. ...................... 7.250 02/15/11 2,025,050
------------
9,936,088
------------
SERVICES 2.7%
5,715 Allied Waste North America, Inc. ............... 6.375 04/15/11 5,572,125
1,850 Allied Waste North America, Inc. ............... 7.875 04/15/13 1,882,375
1,437 Allied Waste North America, Inc., Ser B......... 9.250 09/01/12 1,544,775
1,500 Buhrmann US, Inc. .............................. 8.250 07/01/14 1,507,500
1,590 Buhrmann US, Inc. .............................. 7.875 03/01/15 1,550,250
3,625 MSW Energy Holdings LLC, Ser B.................. 7.375 09/01/10 3,661,250
985 MSW Energy Holdings/Finance..................... 8.500 09/01/10 1,019,475
------------
16,737,750
------------
TELECOMMUNICATIONS 2.9%
3,986 Axtel SA (Mexico)............................... 11.000 12/15/13 4,504,180
6,030 Exodus Communications, Inc. (d) (e) (f)......... 11.250 07/01/08 0
770 Exodus Communications, Inc. (d) (e) (f)......... 11.625 07/15/10 0
4,000 Exodus Communications, Inc. (Euro) (d) (e)
(f)............................................. 11.375 07/15/08 0
8,250 GST Network Funding, Inc. (d) (e) (f)........... 10.500 05/01/08 825
1,320 Nordic Telephone Co. Holdings (Denmark) (a)..... 8.875 05/01/16 1,379,400
4,000 Park N View, Inc., Ser B (d) (e) (f)............ 13.000 05/15/08 0
4,405 Qwest Communications International, Inc.
(Floating Rate Coupon).......................... 8.905 02/15/09 4,493,100
990 Qwest Corp. .................................... 5.625 11/15/08 982,575
1,100 TDC A S (Euro) (Denmark)........................ 6.500 04/19/12 1,437,582
4,480 Wind Acquisition Finance SA (Luxembourg) (a).... 10.750 12/01/15 4,888,800
------------
17,686,462
------------
TRANSPORTATION 8.6%
6,725 Amsted Industries, Inc. (a)..................... 10.250 10/15/11 7,296,625
3,435 Arvinmeritor, Inc. ............................. 8.750 03/01/12 3,366,300
4,800 Ford Motor Co. ................................. 7.450 07/16/31 3,792,000
3,675 Ford Motor Credit Co. .......................... 5.800 01/12/09 3,522,374
4,450 General Motors Acceptance Corp. ................ 4.375 12/10/07 4,329,142
6,220 General Motors Acceptance Corp. ................ 6.875 09/15/11 6,132,348
1,690 General Motors Corp. ........................... 7.125 07/15/13 1,449,175
4,095 General Motors Corp. ........................... 8.375 07/15/33 3,450,038
5,720 Petro Stopping Centers, LP...................... 9.000 02/15/12 5,777,200
8,425 Sonic Automotive, Inc., Ser B................... 8.625 08/15/13 8,403,938
5,471 TRW Automotive, Inc. ........................... 9.375 02/15/13 5,867,648
------------
53,386,788
------------
UTILITY 7.8%
740 AES Corp. ...................................... 9.375 09/15/10 802,900
528 AES Corp. ...................................... 8.875 02/15/11 567,600
925 AES Corp. ...................................... 7.750 03/01/14 957,375
3,035 AES Corp. (a)................................... 9.000 05/15/15 3,289,181
See Notes to Financial Statements 15
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
UTILITY (CONTINUED)
$ 5,930 CMS Energy Corp. ............................... 7.500% 01/15/09 $ 6,122,725
2,825 Colorado Interstate Gas Co. .................... 6.800 11/15/15 2,813,886
2,585 IPALCO Enterprises, Inc. ....................... 8.375 11/14/08 2,681,938
1,355 IPALCO Enterprises, Inc. ....................... 8.625 11/14/11 1,460,013
4,645 Monongahela Power Co. .......................... 5.000 10/01/06 4,642,115
2,945 Nevada Power Co., Ser A......................... 8.250 06/01/11 3,240,766
2,515 Nevada Power Co., Ser G......................... 9.000 08/15/13 2,754,121
995 Northwest Pipeline Corp. ....................... 8.125 03/01/10 1,039,775
5,549 Ormat Funding Corp. ............................ 8.250 12/30/20 5,618,206
4,030 PSEG Energy Holdings............................ 8.625 02/15/08 4,171,050
1,955 Southern Natural Gas Co. ....................... 8.875 03/15/10 2,060,662
6,210 Williams Cos., Inc. ............................ 7.875 09/01/21 6,349,725
------------
48,572,038
------------
WIRELESS COMMUNICATIONS 1.7%
3,085 American Tower Corp. ........................... 7.500 05/01/12 3,154,413
3,090 American Tower Corp. ........................... 7.125 10/15/12 3,144,075
4,040 UbiquiTel Operating Co. ........................ 9.875 03/01/11 4,413,700
------------
10,712,188
------------
TOTAL CORPORATE BONDS 93.8%................................................... 580,417,956
------------
FOREIGN CONVERTIBLE CORPORATE OBLIGATION 0.6%
3,980 Nortel Networks Corp. (Canada).................. 4.250 09/01/08 3,785,975
------------
FOREIGN GOVERNMENT OBLIGATION 0.6%
32,575 Mexico (United Mexican States) (Peso)
(Mexico)........................................ 10.000 12/05/24 3,421,092
------------
DESCRIPTION VALUE
--------------------------------------------------------------------------------------------
EQUITIES 0.2%
DecisionOne Corp. (19,895 Common Shares) (f) (g)............................. 0
Doe Run Resources Corp. (29 Common Stock Warrants) (f) (g)................... 146,515
HCI Direct, Inc. (106,250 Common Shares Class A) (f) (g)..................... 1,275,000
HF Holdings, Inc. (36,820 Common Stock Warrants) (f) (g)..................... 0
Hosiery Corp. of America, Inc. (1,000 Common Shares Class A) (a) (f) (g)..... 0
Jazztel, Plc (5,000 Common Stock Warrants) (Euro) (United Kingdom) (a) (f)
(g)........................................................................ 0
OpTel, Inc. (3,275 Common Shares) (a) (f) (g)................................ 0
Park N View, Inc. (4,000 Common Stock Warrants) (a) (e) (f) (g).............. 0
Reunion Industries, Inc. (107,947 Common Stock Warrants) (f) (g)............. 0
Ventelo, Inc. (73,021 Common Shares) (Euro) (United Kingdom) (a) (f) (g)..... 0
Viatel Holding Bermuda Ltd. (7,852 Common Shares) (Bermuda) (g).............. 216
VS Holdings, Inc. (946,962 Common Shares) (f) (g)............................ 0
XO Holdings, Inc. (3,469 Common Shares) (g).................................. 16,027
16 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
DESCRIPTION VALUE
--------------------------------------------------------------------------------------------
EQUITIES (CONTINUED)
XO Holdings, Inc., Ser A (6,941 Common Stock Warrants) (g)................... $ 6,073
XO Holdings, Inc., Ser B (5,205 Common Stock Warrants) (g)................... 2,993
XO Holdings, Inc., Ser C (5,205 Common Stock Warrants) (g)................... 1,978
------------
TOTAL EQUITIES............................................................... 1,448,802
------------
TOTAL LONG-TERM INVESTMENTS 95.2%
(Cost $624,970,297)........................................................ 589,073,825
REPURCHASE AGREEMENT 3.0%
State Street Bank & Trust Co. ($18,747,000 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.10%,
dated 08/31/06, to be sold on 09/01/06 at $18,749,656)
(Cost $18,747,000)......................................................... 18,747,000
------------
TOTAL INVESTMENTS 98.2%
(Cost $643,717,297)........................................................ 607,820,825
FOREIGN CURRENCY 0.0%
(Cost $1,095).............................................................. 1,094
OTHER ASSETS IN EXCESS OF LIABILITIES 1.8%.................................. 10,977,911
------------
NET ASSETS 100.0%........................................................... $618,799,830
============
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) Payment-in-kind security.
(c) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(d) Non-income producing as security is in default.
(e) This borrower has filed for protection in federal bankruptcy court.
(f) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(g) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements 17
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2006 continued
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AS OF AUGUST 31, 2006:
UNREALIZED
IN EXCHANGE APPRECIATION/
FOR CURRENT VALUE DEPRECIATION
SHORT CONTRACTS:
Euro Currency
11,073,000 expiring 9/27/06.................... US $ $14,209,883 $(254,581)
12,546,000 expiring 9/27/06.................... US $ 16,100,171 (294,469)
---------
$(549,050)
=========
18 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2006
ASSETS:
Total Investments (Cost $643,717,297)....................... $ 607,820,825
Foreign Currency (Cost $1,095).............................. 1,094
Cash........................................................ 103
Receivables:
Interest.................................................. 12,708,082
Fund Shares Sold.......................................... 1,914,208
Other....................................................... 301,612
--------------
Total Assets............................................ 622,745,924
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 1,223,125
Income Distributions...................................... 972,029
Distributor and Affiliates................................ 338,869
Investment Advisory Fee................................... 212,098
Forward Foreign Currency Contracts.......................... 549,050
Trustees' Deferred Compensation and Retirement Plans........ 391,967
Accrued Expenses............................................ 258,956
--------------
Total Liabilities....................................... 3,946,094
--------------
NET ASSETS.................................................. $ 618,799,830
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,225,870,716
Accumulated Undistributed Net Investment Income............. (3,780,148)
Net Unrealized Depreciation................................. (37,098,761)
Accumulated Net Realized Loss............................... (566,191,977)
--------------
NET ASSETS.................................................. $ 618,799,830
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $457,745,028 and 131,307,908 shares of
beneficial interest issued and outstanding)............. $ 3.49
Maximum sales charge (4.75%* of offering price)......... .17
--------------
Maximum offering price to public........................ $ 3.66
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $115,758,717 and 33,021,621 shares of
beneficial interest issued and outstanding)............. $ 3.51
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $43,622,129 and 12,601,990 shares of
beneficial interest issued and outstanding)............. $ 3.46
==============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $1,673,956 and 480,044 shares of
beneficial interest issued and outstanding)............. $ 3.49
==============
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 19
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended August 31, 2006
INVESTMENT INCOME:
Interest.................................................... $ 53,163,828
Dividends................................................... 2,451
Other....................................................... 912,286
------------
Total Income............................................ 54,078,565
------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,170,684, $1,513,622 and $429,390,
respectively)............................................. 3,113,696
Investment Advisory Fee..................................... 2,719,921
Shareholder Services........................................ 1,379,011
Custody..................................................... 61,649
Trustees' Fees and Related Expenses......................... 45,781
Legal....................................................... 19,361
Other....................................................... 390,507
------------
Total Expenses.......................................... 7,729,926
Less Credits Earned on Cash Balances.................... 60,555
------------
Net Expenses............................................ 7,669,371
------------
NET INVESTMENT INCOME....................................... $ 46,409,194
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(10,282,462)
Swap Contracts............................................ 125,670
Foreign Currency Transactions............................. (340,147)
------------
Net Realized Loss........................................... (10,496,939)
------------
Net Unrealized Depreciation During the Period............... (16,043,354)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(26,540,293)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 19,868,901
============
20 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2006 AUGUST 31, 2005
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 46,409,194 $ 51,865,645
Net Realized Gain/Loss................................... (10,496,939) 3,062,032
Net Unrealized Depreciation During the Period............ (16,043,354) (12,909,658)
------------- -------------
Change in Net Assets from Operations..................... 19,868,901 42,018,019
------------- -------------
Distributions from Net Investment Income:
Class A Shares......................................... (35,559,226) (35,174,855)
Class B Shares......................................... (10,076,519) (12,164,487)
Class C Shares......................................... (3,035,788) (3,384,973)
Class I Shares......................................... (481,065) (82,724)
------------- -------------
Total Distributions...................................... (49,152,598) (50,807,039)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... (29,283,697) (8,789,020)
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 137,558,848 489,332,752
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 35,523,788 37,014,423
Cost of Shares Repurchased............................... (325,876,260) (298,295,554)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... (152,793,624) 228,051,621
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS.................... (182,077,321) 219,262,601
NET ASSETS:
Beginning of the Period.................................. 800,877,151 581,614,550
------------- -------------
End of the Period (Including accumulated undistributed
net investment income of $(3,780,148) and $(1,552,606),
respectively).......................................... $ 618,799,830 $ 800,877,151
============= =============
See Notes to Financial Statements 21
VAN KAMPEN HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED AUGUST 31,
CLASS A SHARES -----------------------------------------------
2006 2005 2004 2003 2002
-----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD... $ 3.63 $ 3.64 $ 3.43 $ 3.15 $ 4.23
------ ------ ------ ------ -------
Net Investment Income.................... .25(a) .26 .26 .29 .39
Net Realized and Unrealized Gain/Loss.... (.13) (.02) .21 .29 (1.01)
------ ------ ------ ------ -------
Total from Investment Operations........... .12 .24 .47 .58 (.62)
------ ------ ------ ------ -------
Less:
Distributions from Net Investment
Income................................. .26 .25 .25 .24 .43
Return of Capital Distributions.......... -0- -0- .01 .06 .03
------ ------ ------ ------ -------
Total Distributions........................ .26 .25 .26 .30 .46
------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE PERIOD......... $ 3.49 $ 3.63 $ 3.64 $ 3.43 $ 3.15
====== ====== ====== ====== =======
Total Return (b)........................... 3.55% 6.89% 14.02% 19.26% -15.75%
Net Assets at End of the Period (In
millions)................................ $457.7 $532.0 $379.5 $408.7 $ 308.5
Ratio of Expenses to Average Net Assets
(c)...................................... .92% 1.06% 1.06% 1.12% 1.08%
Ratio of Net Investment Income to Average
Net Assets............................... 7.04% 7.11% 7.45% 8.36% 10.39%
Portfolio Turnover......................... 44% 84% 88% 95% 83%
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. If
the sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended August 31,
2006.
22 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED AUGUST 31,
CLASS B SHARES -----------------------------------------------
2006 2005 2004 2003 2002
-----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD... $ 3.65 $ 3.65 $ 3.44 $ 3.16 $ 4.24
------ ------ ------ ------ -------
Net Investment Income.................... .22(a) .25 .23 .25 .35
Net Realized and Unrealized Gain/Loss.... (.13) (.02) .21 .30 (1.01)
------ ------ ------ ------ -------
Total from Investment Operations........... .09 .23 .44 .55 (.66)
------ ------ ------ ------ -------
Less:
Distributions from Net Investment
Income................................. .23 .23 .22 .21 .39
Return of Capital Distributions.......... -0- -0- .01 .06 .03
------ ------ ------ ------ -------
Total Distributions........................ .23 .23 .23 .27 .42
------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE PERIOD......... $ 3.51 $ 3.65 $ 3.65 $ 3.44 $ 3.16
====== ====== ====== ====== =======
Total Return (b)........................... 2.75% 6.36% 12.79% 18.27% -16.12%
Net Assets at End of the Period (In
millions)................................ $115.8 $191.0 $160.7 $175.6 $ 168.8
Ratio of Expenses to Average Net Assets
(c)...................................... 1.68% 1.83% 1.82% 1.89% 1.84%
Ratio of Net Investment Income to Average
Net Assets............................... 6.28% 6.33% 6.70% 7.68% 9.67%
Portfolio Turnover......................... 44% 84% 88% 95% 83%
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within the first and second 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.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended August 31,
2006.
See Notes to Financial Statements 23
VAN KAMPEN HIGH YIELD FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED AUGUST 31,
CLASS C SHARES ---------------------------------------------
2006 2005 2004 2003 2002
---------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $3.60 $3.61 $ 3.41 $ 3.13 $ 4.20
----- ----- ------ ------ -------
Net Investment Income..................... .22(a) .25 .23 .25 .35
Net Realized and Unrealized Gain/Loss..... (.12) (.03) .20 .30 (1.00)
----- ----- ------ ------ -------
Total from Investment Operations............ .10 .22 .43 .55 (.65)
----- ----- ------ ------ -------
Less:
Distributions from Net Investment
Income.................................. .24 .23 .22 .21 .39
Return of Capital Distributions........... -0- -0- .01 .06 .03
----- ----- ------ ------ -------
Total Distributions......................... .24 .23 .23 .27 .42
----- ----- ------ ------ -------
NET ASSET VALUE, END OF THE PERIOD.......... $3.46 $3.60 $ 3.61 $ 3.41 $ 3.13
===== ===== ====== ====== =======
Total Return (b)............................ 2.83%(d) 6.17%(d) 12.98%(d) 18.14%(e) -16.04%
Net Assets at End of the Period (In
millions)................................. $43.6 $54.5 $ 41.4 $ 41.5 $ 36.7
Ratio of Expenses to Average Net Assets
(c)....................................... 1.64%(d) 1.82%(d) 1.81%(d) 1.86% 1.84%
Ratio of Net Investment Income to Average
Net Assets................................ 6.32%(d) 6.34%(d) 6.71%(d) 7.68%(e) 9.68%
Portfolio Turnover.......................... 44% 84% 88% 95% 83%
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1% charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended August 31,
2006.
(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 7).
(e) 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%.
24 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
MARCH 23, 2005
YEAR ENDED (COMMENCEMENT OF
CLASS I SHARES AUGUST 31, OPERATIONS) TO
2006 AUGUST 31, 2005
------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $3.63 $3.65
----- -----
Net Investment Income..................................... .26(a) .12
Net Realized and Unrealized Loss.......................... (.13) (.02)
----- -----
Total from Investment Operations............................ .13 .10
Less Distributions from Net Investment Income............... .27 .12
----- -----
NET ASSET VALUE, END OF THE PERIOD.......................... $3.49 $3.63
===== =====
Total Return (b)............................................ 3.82% 2.69%*
Net Assets at End of the Period (In millions)............... $ 1.7 $23.3
Ratio of Expenses to Average Net Assets (c)................. .63% .85%
Ratio of Net Investment Income to Average Net Assets........ 7.37% 6.97%
Portfolio Turnover.......................................... 44% 84%
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of expense,
the ratio would decrease by .01% for the year ended August 31, 2006.
See Notes to Financial Statements 25
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen High Yield Fund (the "Fund"), formerly known as Van Kampen High
Income Corporate Bond 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 Fund offers Class A Shares, Class B Shares, Class C Shares
and Class I Shares. Each class of shares differs by its initial sales load,
contingent deferred sales charges, the allocation of class-specific expenses and
voting rights on matters affecting a single class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Fixed income investments 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 last 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 readily
available, valuations are determined in accordance with procedures established
in good faith by the Board of Trustees. Forward foreign currency contracts are
valued using quoted foreign exchange rates. Credit default swaps are valued
using market quotations obtained from brokers. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may 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, 2006, there were no when-issued, delayed
delivery, or forward 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
26
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of the custodian bank. The seller is required to
maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts on debt
securities are accreted and premiums are amortized over the expected life of
each applicable security. Other income is comprised primarily of consent fees.
Consent fees are earned as compensation for agreeing to changes in terms of debt
instruments. Income and expenses of the Fund are allocated on a pro rata basis
to each class of shares, except for distribution and service fees and
incremental transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At August 31, 2006, the Fund had an accumulated capital loss carryforward
for tax purposes of $559,992,005 which will expire according to the following
schedule:
AMOUNT EXPIRATION
$ 15,213,979................................................ August 31, 2007
33,682,013................................................ August 31, 2008
51,935,293................................................ August 31, 2009
138,518,165................................................ August 31, 2010
165,406,856................................................ August 31, 2011
117,018,188................................................ August 31, 2012
32,804,299................................................ August 31, 2013
5,413,212................................................ August 31, 2014
Part of the capital loss carryforward referred to above was acquired due to
a merger with another regulated investment company. Please see Footnote 3 for
details.
At August 31, 2006, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $646,367,161
============
Gross tax unrealized appreciation........................... $ 15,993,008
Gross tax unrealized depreciation........................... (54,539,344)
------------
Net tax unrealized depreciation on investments.............. $(38,546,336)
============
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.
27
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued
The tax character of distributions paid during the years ended August 31,
2006 and 2005 was as follows:
2006 2005
Distributions paid from:
Ordinary income........................................... $49,344,799 $50,502,624
Long-term capital gain.................................... -0- -0-
----------- -----------
$49,344,799 $50,502,624
=========== ===========
Due to inherent differences in the recognition of income, expenses, and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities. Permanent book and tax differences of $894,224
relating to consent fee income received from tender offers and $13,003 relating
to the Fund's investment in other Regulated Investment Companies have been
reclassified from accumulated undistributed net investment income to accumulated
net realized loss. A permanent book and tax difference of $310,452 relating to
net realized losses on foreign currency transactions has been reclassified from
accumulated net realized loss to accumulated undistributed net investment
income. A permanent book and tax difference of $125,671 relating to income from
swap transactions has been reclassified from accumulated net realized loss to
accumulated undistributed net investment income. Permanent book and tax
differences of $935,071 and $660,296 relating to book to tax amortization
differences were reclassified from accumulated undistributed net investment loss
to accumulated net realized loss and net unrealized depreciation, respectively.
Also, a permanent book and tax difference of $12,503 relating to net realized
losses on paydowns of mortgage pool obligations were reclassified from
accumulated undistributed net investment income to accumulated net realized
loss. Finally, a permanent book and tax difference of $6,411,333 relating to the
portion of capital loss carry-forward expiring in the current year has been
reclassified from accumulated net realized loss to capital.
As of August 31, 2006, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income............................... $1,345,993
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of post October losses which are not recognized
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, 2006, the Fund's custody
and accounting fees were reduced by $51,797 and $8,758, respectively, 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
28
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued
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 $500 million.......................................... .420%
Next $250 million........................................... .345
Next $250 million........................................... .295
Next $1 billion............................................. .270
Next $1 billion............................................. .245
Over $3 billion............................................. .220
For the year ended August 31, 2006, the Fund recognized expenses of
approximately $19,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
Under separate Accounting Services and Chief Compliance Officer (CCO)
Employment agreements, the Adviser provides accounting services and the CCO
provides compliance services to the Fund. The costs of these services are
allocated to each fund. For the year ended August 31, 2006, the Fund recognized
expenses of approximately $48,700 representing Van Kampen Investments Inc.'s or
its affiliates' (collectively "Van Kampen") cost of providing accounting
services to the Fund, as well as, the salary, benefits and related costs of the
CCO and related support staff paid by Van Kampen. Services provided pursuant to
the Accounting Services and CCO Employment agreement are reported as part of
"Other" expenses on the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended
August 31, 2006, the Fund recognized expenses of approximately $1,094,600
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 also
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 $262,423 are included in
"Other" assets on the Statement of Assets and Liabilities at August 31, 2006.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a
29
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued
ten-year period and are based upon each trustee's years of service to the Fund.
The maximum annual benefit per trustee under the plan is $2,500.
For the year ended August 31, 2006, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A Shares of approximately
$103,400 and contingent deferred sales charge (CDSC) on redeemed shares of
approximately $274,800. Sales charges do not represent expenses to the Fund.
3. CAPITAL TRANSACTIONS
For the years ended August 31, 2006 and 2005, transactions were as follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2006 AUGUST 31, 2005
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A....................... 29,290,990 $ 103,011,978 86,725,464 $ 320,410,088
Class B....................... 5,193,622 18,355,586 28,208,023 105,232,841
Class C....................... 4,549,191 15,796,883 10,910,339 40,075,471
Class I....................... 115,790 394,401 6,506,107 23,614,352
----------- ------------- ----------- -------------
Total Sales..................... 39,149,593 $ 137,558,848 132,349,933 $ 489,332,752
=========== ============= =========== =============
Dividend Reinvestment:
Class A....................... 7,372,644 $ 25,916,242 7,137,575 $ 26,066,021
Class B....................... 1,998,462 7,065,215 2,331,043 8,551,256
Class C....................... 590,646 2,061,273 637,802 2,314,420
Class I....................... 136,311 481,058 22,802 82,726
----------- ------------- ----------- -------------
Total Dividend Reinvestment..... 10,098,063 $ 35,523,788 10,129,222 $ 37,014,423
=========== ============= =========== =============
Repurchases:
Class A....................... (52,016,777) $(183,438,639) (51,466,042) $(188,120,153)
Class B....................... (26,554,629) (93,925,102) (22,114,193) (81,191,619)
Class C....................... (7,670,401) (26,835,230) (7,880,798) (28,567,020)
Class I....................... (6,186,212) (21,677,289) (114,754) (416,762)
----------- ------------- ----------- -------------
Total Repurchases............... (92,428,019) $(325,876,260) (81,575,787) $(298,295,554)
=========== ============= =========== =============
On December 17, 2004, the Fund acquired all of the assets and liabilities of
the Van Kampen High Yield Fund ("High Yield") through a tax free reorganization
approved by High Yield shareholders on December 7, 2004. The Fund issued
49,903,883, 21,224,359 and 7,028,101 shares of Classes A, B and C valued at
$186,141,484, $79,591,347 and $26,074,256, respectively, in exchange for High
Yield's net assets. The shares of High Yield were converted into Fund shares at
ratios of 1 to 1.515, 1 to 1.514 and 1 to 1.529 for Classes A, B and C,
respectively. Net unrealized appreciation of High Yield as of December 17, 2004
was $3,802,196. The Fund assumed High Yield's book to tax amortization
differences, which resulted in a $660,296 decrease to accumulated undistributed
net investment income and a corresponding increase to net unrealized
appreciation. Shares issued in connection with this reorganization are included
in proceeds from shares sold for the year ended August 31, 2005. Combined net
assets of both funds on the day of reorganization were $893,763,227. Included
30
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued
in these net assets was a capital loss carryforward of $166,397,364, deferred
compensation of $155,071, the deferral of losses related to wash sale
transactions of $290,140, non-accrual interest income of $864,492 and marked to
market $821,478, all carried forward from the High Yield Fund.
4. REDEMPTION FEE
Effective September 26, 2005, the Fund assesses a 2% redemption fee on the
proceeds of Fund shares that are redeemed (either by sales or exchange) within
30 days of purchase. The redemption fee is paid directly to the Fund. For the
year ended August 31, 2006, the Fund received redemption fees of approximately
$21,400, which are reported as part of "Cost of Shares Repurchased" on the
Statement of Changes in Net Assets. The per share impact from redemption fees
paid to the Fund was less than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $287,795,818 and $444,478,411,
respectively.
6. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund may use derivative instruments, to earn income, to facilitate
portfolio management and to mitigate risks. 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 or foreign currency on a forward commitment basis
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 or foreign currency on a forward commitment basis 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.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. FORWARD FOREIGN CURRENCY 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. Risks may
also arise from the unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
B. CREDIT DEFAULT SWAPS The Fund may enter into credit default swap contracts
for hedging purposes or to gain exposure to a credit in which the Fund may
otherwise invest. A credit
31
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued
default swap is an agreement between two parties to exchange the credit risk of
an issuer. A buyer of a credit default swap is said to buy protection by paying
periodic fees in return for a contingent payment from the seller if the issuer
has a credit event such as bankruptcy, a failure to pay outstanding obligations
or deteriorating credit while the swap is outstanding. A seller of a credit
default swap is said to sell protection and thus collects the periodic fees and
profits if the credit of the issuer remains stable or improves while the swap is
outstanding but the seller in a credit default swap contract would be required
to pay an agreed-upon amount, which approximates the notional amount of the swap
to the buyer in the event of an adverse credit event of the issuer. The Fund
accrues for the periodic fees on swap contracts on a daily basis with the net
amount accrued recorded within unrealized appreciation/depreciation of swap
contracts. Upon cash settlement of the periodic fees, the net amount is recorded
as realized gain/loss on swap contracts on the Statement of Operations. Net
unrealized gains are recorded as an asset or net unrealized losses are reported
as a liability on the Statement of Assets and Liabilities. The change in value
of the swaps is reported as unrealized gains or losses on the Statement of
Operations.
Credit default swaps may involve greater risks than if a Fund had invested
in the issuer directly. Credit default swaps are subject to general market risk,
counterparty risk and credit risk. If there is a default by the counterparty,
the Fund will have contractual remedies pursuant to the agreements related to
the transaction.
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees of up to .25% of Class A average daily net assets and up
to 1.00% each of Class B and Class C average daily net assets. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $2,081,100 and $0 for
Class B and Class C Shares, respectively. These amounts may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, the distribution fee is
reduced.
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action which additionally names as defendants certain individual
trustees of certain Van Kampen funds. The named investment companies, including
the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of Van Kampen funds. The complaint
also alleges that the Van Kampen funds paid excessive commissions to Morgan
Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
derivative action was coordinated with a direct action
32
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2006 continued
alleging related violations of defendants' statutory disclosure obligations and
fiduciary duties with respect to the payments described above. In addition, this
derivative action was stayed by agreement of the parties pending rulings on the
motion to dismiss the direct action and the motion to dismiss another derivative
action brought by the same plaintiff that brought this derivative action,
alleging market timing and late trading in the Van Kampen funds. In April 2006,
the court granted defendants' motion to dismiss the direct action. In June 2006,
the court granted defendants' motion to dismiss the market timing action.
Accordingly, the stay on this action was lifted. Plaintiff and defendants have
agreed that this action should be dismissed in light of the rulings dismissing
the two cases discussed above. The Court has approved a notice to shareholders
regarding the dismissal, which is located at the back of this Report.
9. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
10. NEW ACCOUNTING PRONOUNCEMENT
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The impact to the Fund's financial
statements, if any, is currently being assessed.
33
VAN KAMPEN HIGH YIELD FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen High Yield Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen High Yield Fund (the "Fund"), including the portfolio of investments, as
of August 31, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of August 31, 2006, by correspondence with the custodian.
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 Yield Fund at August 31, 2006, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 13, 2006
34
VAN KAMPEN HIGH YIELD FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
35
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
36
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (65) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
37
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 71 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 1995 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (70) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
38
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 1995 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (65) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 71 Trustee/Director/Managing
(64) since 1999 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
39
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE:*
NUMBER OF
FUNDS IN
TERM OF FUND
OFFICE AND COMPLEX
POSITION(S) LENGTH OF OVERSEEN
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) BY OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 71 Trustee/Director/
333 West Wacker Drive since 1995 of Skadden, Arps, Slate, Managing General
Chicago, IL 60606 Meagher & Flom LLP, legal Partner of funds in
counsel to funds in the the Fund Complex.
Fund Complex. Director of the
Abraham Lincoln
Presidential Library
Foundation.
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
40
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
41
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (39) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (37) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Treasurer since 2006 Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020 Institutional Funds since 2002 and of Funds in the Fund
Complex from January 2005 to August 2005 and since September
2006.
42
Notice to Fund Shareholders
As previously disclosed, a derivative action was filed on behalf of the Fund
against the Fund's investment adviser, broker-dealer, distributor, and Trustees.
The complaint alleges that defendants violated federal securities laws and state
laws in connection with certain economic incentive programs. The case is pending
before the Honorable Richard Owen, United States District Judge in the Southern
District of New York. Defendants have filed a motion to dismiss the complaint in
its entirety on numerous grounds, and that motion is still pending.
On April 18, 2006, Judge Owen dismissed a separate lawsuit against Morgan
Stanley and all of the same corporate defendants that are named in the
derivative action. The Morgan Stanley suit related to the same incentive
programs that are at issue in the derivative action, and asserted many of the
same legal claims. In his decision, Judge Owen found that the programs do not
violate federal law, and that defendants had made the appropriate disclosures
concerning the programs. The plaintiffs in the Morgan Stanley suit did not
appeal from the decision, and that decision is now final.
In light of this decision by Judge Owen--as well as several other decisions
by other judges in the Southern District of New York and certain other courts
that have dismissed similar complaints against other investment funds--plaintiff
in the derivative action has determined that the suit would be unsuccessful, if
pursued further. Accordingly, plaintiff has asked Judge Owen to dismiss the
action. No attorneys' fees will be paid by defendants and no consideration will
be paid to the named plaintiff.
All investors in the Fund are hereby provided notice of this proposed
dismissal. If you object to the proposed dismissal, your objection must be
mailed no later than November 29, 2006, in writing, to the Honorable Richard
Owen, United States District Judge, United States Courthouse, Room 640, 500
Pearl Street, New York, NY 10007-1312. Copies of the objection must also be
mailed to Denise Davis Schwartzman, Esquire, Chimicles & Tikellis LLP, 361 West
Lancaster Avenue, Haverford, PA 19041; and Richard A. Rosen, Esquire, Paul,
Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York,
NY 10019-6064.
Van Kampen High Yield Fund
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
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Van Kampen High Yield Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
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Van Kampen High Yield Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
The Statement of Additional Information includes additional information
about Fund trustees and is available, without charge, upon request by
calling 1-800-847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
28, 128, 228
HYI ANR 10/06
(VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-02826P-Y08/06
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit 12A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees : Rod Dammeyer, Jerry D. Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2006
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES ............. $42,400 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES .. $ 0 $ 706,000(2)
TAX FEES ............ $ 2,800(3) $ 75,537(4)
ALL OTHER FEES ...... $ 0 $ 749,041(5)
TOTAL NON-AUDIT FEES ... $ 2,800 $1,530,578
TOTAL .................. $45,200 $1,530,578
2005
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES ............. $41,000 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES... $ 0 $280,000(2)
TAX FEES ............ $ 2,500(3) $ 58,688(4)
ALL OTHER FEES ...... $ 0 $655,125(5)
TOTAL NON-AUDIT FEES ... $ 2,500 $993,813
TOTAL .................. $43,500 $993,813
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any
entity controlling, controlled by or under common control with the Adviser
that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that
are reasonably related to the performance of the audit of the financial
statements of the Covered Entities' and funds advised by the Adviser or its
affiliates, specifically attestation services provided in connection with a
SAS 70 Report.
(3) Tax Fees represent tax advice and compliance services provided in
connection with the review of the Registrant's tax.
(4) Tax Fees represent tax advice services provided to Covered Entities,
including research and identification of PFIC entities.
(5) All Other Fees represent attestation services provided in connection with
performance presentation standards and assistance with compliance policies
and procedures.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider whether
such services are consistent with the SEC's rules on auditor independence. The
Audit Committee will also consider whether the Independent Auditors are best
positioned to provide the most effective and efficient services, for reasons
such as its familiarity with the Fund's business, people, culture, accounting
systems, risk profile and other factors, and whether the service might enhance
the Fund's ability to manage or control risk or improve audit quality. All such
factors will be considered as a whole, and no one factor should necessarily be
determinative.
The Audit Committee is also mindful of the relationship between fees for
audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax and
All Other services that have the general pre-approval of the Audit Committee.
The term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
----------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval Policy
and Procedures (the "Policy"), amended as of the date above, supercedes and
replaces all prior versions that may have been amended from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have the
meanings as defined in the Joint Audit Committee Charter.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1.
All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix
B.2. All other Audit-related services not listed in Appendix B.2 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services. Hence, the Audit Committee believes it may grant
general pre-approval to those Tax services that have historically been provided
by the Independent Auditors, that the Audit Committee has reviewed and believes
would not impair the independence of the Independent Auditors, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the
Independent Auditors in connection with a transaction initially recommended by
the Independent Auditors, the sole business purpose of which may be tax
avoidance and the tax treatment of which may not be supported in the Internal
Revenue Code and related regulations. The Audit Committee will consult with
Director of Tax or outside counsel to determine that the tax planning and
reporting positions are consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the Tax Services in Appendix B.3. All Tax services involving large and complex
transactions not listed in Appendix B.3 must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix B.5. The SEC's rules and relevant guidance should be
consulted to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be rendered. The Fund's Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the Independent Auditors. Requests or applications to provide services that
require specific approval by the Audit Committee will be submitted to the Audit
Committee by both the Independent Auditors and the Fund's Chief Financial
Officer, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. A sample report is included as Appendix
B.7. Both the Fund's Chief Financial Officer and management will immediately
report to the chairman of the Audit Committee any breach of this Policy that
comes to the attention of the Fund's Chief Financial Officer or any member of
management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
- Van Kampen Investments Inc.
- Van Kampen Asset Management
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Investor Services Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Trust Company
- Morgan Stanley Investment Management Ltd.
- Morgan Stanley Investment Management Company
- Morgan Stanley Asset & Investment Trust Management Company Ltd.
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (included herein).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: R.
Craig Kennedy, Jerry D. Choate, Rod Dammeyer.
(b) Not applicable.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen High Yield Fund
By: /s/ Ronald E. Robison
---------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 19, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
---------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 19, 2006
By: /s/ James W. Garrett
---------------------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: October 19, 2006