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
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 8/31
Date of reporting period: 8/31/05
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, 2005.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND,
THEREFORE, THE VALUE OF THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID
FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. PLEASE
SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT RISKS.
<Table>
<Caption>
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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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</Table>
Performance Summary
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Lipper High Yield
Bond Fund Index and the J.P. Morgan Global High Yield Index from 8/31/95 through
8/31/05. Class A shares, adjusted for sales charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN HIGH YIELD J.P. MORGAN GLOBAL HIGH LIPPER HIGH YIELD BOND
FUND YIELD INDEX FUND INDEX
--------------------- ----------------------- ----------------------
8/95 9520 10000 10000
9658 10119 10109
12/95 9952 10446 10404
10268 10673 10699
10543 10867 10912
10979 11364 11416
12/96 11311 11805 11829
11469 11906 11916
11997 12457 12529
12555 13050 13214
12/97 12696 13268 13387
13320 13714 13938
13439 13830 14088
12336 13029 13070
12/98 12754 13396 13412
13108 13653 13786
13069 13800 13881
12986 13568 13665
12/99 13252 13849 14002
13198 13615 13805
13313 13683 13761
13223 13727 13635
12/00 12163 13042 12753
12557 13718 13254
12081 13601 12956
11358 12997 12310
12/01 11841 13756 12958
11528 14064 13089
10719 13718 12469
10155 13303 12030
12/02 10726 14052 12740
11356 14979 13449
12294 16405 14591
12605 16917 14973
12/03 13318 17917 15818
13515 18402 16101
13530 18327 15998
14194 19140 16648
12/04 14713 19988 17377
14448 19759 17104
14666 20215 17419
8/05 14961 20607 17772
</Table>
<Table>
<Caption>
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 7.46% 7.26% 5.46% 5.46% 4.26% 4.26% 2.69%
10-year 4.62 4.11 4.13 4.13 3.80 3.80 n/a
5-year 2.18 1.20 1.43 1.23 1.37 1.37 n/a
1-year 6.89 1.85 6.36 2.36 6.17 5.18 n/a
- -------------------------------------------------------------------------------------------------------------
30 Day SEC Yield 6.10% 5.60% 5.69% 6.65%
</Table>
PAST PERFORMANCE 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 six 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. See
footnote 3 in the Notes to Financial Statements for additional information.
Figures shown above assume reinvestment of all dividends and capital gains.
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 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. Lipper High
Yield Bond Fund Index is an index of funds with similar return objectives as
this fund. Indexes do not include any expenses, fees or sales charges, which
would lower performance. Indexes are unmanaged and should not be considered an
investment.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2005
Van Kampen High Yield Fund is managed by the adviser's Taxable Fixed Income
team. Members of the team include Gordon Loery, Executive Director; Sheila A.
Finnerty, Managing Director; and Joshua Givelber, Vice President.(1)
MARKET CONDITIONS
Good economic growth and corporate earnings, strong underlying company
fundamentals, low default rates and improving credit qualities were among the
factors supporting the high yield market during the 12-month reporting period.
As long-term rates generally declined, investors also rewarded high yield bonds
for their enhanced income potential.
Yet, the period was also defined by significant volatility. After enjoying
particularly robust performance in the final months of 2004, the market
retreated markedly during the first months of 2005. In January, heavy new
issuance contributed to concerns that supply could outpace demand. More
importantly, however, was General Motors' mid-March announcement of production
cuts and poor earnings for the next quarter. The struggles of this bellwether
company exacerbated the woes of the auto industry and called into question the
strength of corporations overall. High yield markets were unsettled by the
prospect that General Motors would move from the high grade to the high yield
universe. Such a move, it was feared, could trigger a sell-off of other high
yield bonds, as investors moved to purchase General Motors debt. Amid these
pressures, the market declined through mid-May.
The reporting period finished with considerably more strength, however. The
market came to terms with inclusion of General Motors and Ford Motor in the high
yield arena, and the pace of new issuance slowed. Investors refocused on
favorable economic data, the overall strength of corporate earnings and company
fundamentals, and the continued low default rate of the high yield universe
overall. That said, the final months were not entirely upbeat, as continued high
oil prices cast doubt on the pace of economic growth and consumer confidence.
The final days of the reporting period brought heightened apprehension as
Hurricane Katrina unleashed catastrophic devastation to the Gulf Coast. While
the long-term economic impact remained immeasurable, the immediate economic
impact was most evident in the energy sector, as gasoline and natural gas prices
soared.
From an industry perspective, wireless communications, telecommunications and
utilities fared the best during the 12-month period, while transportation,
airlines and forest products lagged most significantly.
(1)Team members may change without notice from time to time.
2
PERFORMANCE ANALYSIS
The fund returned 6.89 percent for the 12 months ended August 31, 2005 (Class A
shares, unadjusted for sales charges). In comparison, the JP Morgan Global High
Yield Index, the fund's benchmark, and the Lipper High Yield Bond Fund Index, an
index of funds with similar investment objectives, returned 9.20 percent and
9.04 percent for the period, respectively.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2005
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------
JP MORGAN GLOBAL LIPPER HIGH YIELD
CLASS A CLASS B CLASS C HIGH YIELD INDEX BOND FUND INDEX
6.89% 6.36% 6.17% 9.20% 9.04%
- -------------------------------------------------------------------------------------------------
</Table>
THE PERFORMANCE FOR THE THREE SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT
EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL
DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES.
SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND
INDEX DEFINITIONS.
Led by precipitous declines in the beleaguered auto and airline industries, a
cloud of negative sentiment cloaked the transportation sector as a whole. In
this environment, the fund's relative performance benefited from underweighting
in transportation versus the JP Morgan benchmark. In particular, the fund was
well served by the decision to de-emphasize auto, auto-related and airline
issues, which experienced the brunt of investor disfavor. The fund's wireless
communications securities also contributed positively. Strong fundamentals
combined with broadly favorable trends to support solid gains. Also on the
upside, company-specific results and improving fundamentals boosted consumer
product issues.
In contrast, the fund's pace was slowed by housing securities. Amid concerns of
declines in new home construction, building product securities slipped. These
companies are often highly leveraged, and could be particularly susceptible to a
downturn in the real estate market. Forest product securities lagged due to
company specific reasons. Telecommunications and media securities also clipped
performance.
During the final months of the reporting period, we sought opportunities to
position the portfolio more conservatively by reducing exposures that we believe
to be more risky, such as building products. As a result of individual security
decisions, chemicals, housing, energy and wireless communications issues are
among the more prominent themes in the portfolio. At the close of the reporting
period, the portfolio's average credit quality was B, in-line with the JP Morgan
benchmark, while a lower average yield to maturity reflects our efforts to
reduce relative risk.
3
We believe that many of the fundamental trends that benefited the high yield
market during the annual period remain intact, and will likely continue to
provide support to the market in upcoming months. This optimism is balanced by
our view that the market has already "priced-in" these fundamentals. (In other
words, most securities are already trading at prices that reflect these
positives.) Consequently, we would not be surprised if the returns of high yield
securities were driven primarily by income, rather than price appreciation, in
the months to come.
There is no guarantee that any sectors mentioned will continue to perform well
or that securities in such sectors will be held by the fund in the future.
4
<Table>
<Caption>
RATINGS ALLOCATIONS AS OF 8/31/05
BBB/Baa 3.3%
BB/Ba 29.2
B/B 54.7
CCC/Caa 10.8
CC/Ca 0.5
Non-Rated 1.5
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 8/31/05
Energy 8.6%
Chemicals 7.5
Utility 7.0
Cable 6.4
Forest Products 6.1
Healthcare 5.9
Gaming & Leisure 5.6
Housing 5.0
Diversified Media 4.7
Transportation 4.0
Telecommunications 3.8
Manufacturing 3.6
Metals 3.6
Consumer Products 3.5
Wireless Communications 3.5
Food & Tobacco 3.4
Services 3.2
Information Technology 3.1
Automotive 2.0
Retail 1.6
Food & Drug 1.5
Financial 1.2
Aerospace 0.8
Broadcasting 0.1
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Total Long-Term Investments 95.7%
Short-Term Investments 2.1
Other Assets in Excess of Liabilities 2.2
-----
Total Net Assets 100.0%
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. Ratings allocations are as a
percentage of corporate debt obligations. Industry allocations are as a
percentage of net assets. Van Kampen is a wholly owned subsidiary of a global
securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
Ratings allocations based upon ratings as issued by Standard and Poor's and
Moody's, respectively.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public Web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's Web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-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 1-800-847-2424.
6
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING 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 1-800-847-2424 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 by visiting our Web site at www.vankampen.com. This information
is also available on the Securities and Exchange Commission's Web site at
http://www.sec.gov.
7
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charge on redemptions of Class B and C Shares; 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 3/1/05 - 8/31/05.
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. 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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
-------------------------------------------------
3/1/05 8/31/05 3/1/05-8/31/05
Class A
Actual..................................... $1,000.00 $1,002.76 $5.45
Hypothetical............................... 1,000.00 1,019.71 5.50
(5% annual return before expenses)
Class B
Actual..................................... 1,000.00 1,001.61 9.33
Hypothetical............................... 1,000.00 1,015.91 9.40
(5% annual return before expenses)
Class C
Actual..................................... 1,000.00 999.06 9.37
Hypothetical............................... 1,000.00 1,015.81 9.45
(5% annual return before expenses)
Class I
Actual..................................... 1,000.00 1,026.93 3.80
Hypothetical............................... 1,000.00 1,018.35 4.32
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.08%, 1.85%,
1.86% and 0.85% 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) except for Class I Shares "Actual" information
which reflects the period from Commencement of Operations through August 31,
2005.
Assumes all dividends and distributions were reinvested.
8
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 25, 2005, 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 subject
to implementing a fee rate reduction effective June 1, 2005. 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. Also, the Board considered materials it had received in approving a
reorganization and name of the Fund. Finally, the Board considered materials it
had received in approving a proposed reduction in the advisory fee rate to be
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
9
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
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, a performance committee of 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.
10
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of a special ad hoc
committee 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.
11
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CORPORATE BONDS 94.9%
AEROSPACE 0.8%
$6,625 K & F Acquisition, Inc.......................... 7.750% 11/15/14 $ 6,807,187
------------
AUTOMOTIVE 2.0%
4,050 Ford Motor Credit Co. .......................... 5.625 10/01/08 3,897,659
4,370 Ford Motor Credit Co. .......................... 5.800 01/12/09 4,185,088
4,580 General Motors Acceptance Corp. ................ 4.375 12/10/07 4,358,081
2,920 General Motors Acceptance Corp. ................ 6.875 09/15/11 2,768,516
915 General Motors Acceptance Corp. ................ 6.875 08/28/12 861,324
------------
16,070,668
------------
BROADCASTING 0.1%
1,185 Salem Communications Corp. ..................... 7.750 12/15/10 1,245,731
------------
CABLE 6.4%
4,950 Cablecom Luxembourg SCA, 144A -- Private
Placement (Euro) (Luxembourg) (a)............... 9.375 04/15/14 6,831,998
6,175 Cablevision Systems Corp. (Variable Rate
Coupon)......................................... 7.890 04/01/09 6,406,562
3,525 Charter Communications Holdings LLC............. 9.625 11/15/09 2,930,156
625 Charter Communications Holdings LLC............. 10.750 10/01/09 534,375
3,375 Charter Communications Holdings LLC............. 11.750 01/15/10 2,885,625
2,745 Echostar DBS Corp. ............................. 6.375 10/01/11 2,741,569
1,290 Echostar DBS Corp. ............................. 6.625 10/01/14 1,285,162
460 Intelsat Bermuda Ltd., 144A -- Private Placement
(Bermuda) (a)................................... 8.250 01/15/13 470,350
4,445 Intelsat Bermuda Ltd., 144A -- Private Placement
(Bermuda) (a)................................... 8.625 01/15/15 4,633,912
3,350 Intelsat Bermuda Ltd., 144A -- Private Placement
(Variable Rate Coupon) (Bermuda) (a)............ 8.695 01/15/12 3,425,375
5,670 Kabel Deutschland GmbH, 144A -- Private
Placement (Germany) (a)......................... 10.625 07/01/14 6,364,575
923 PanAmSat Corp. ................................. 9.000 08/15/14 976,072
7,410 PanAmSat Holding Corp. (b) (c).................. 0/10.375 11/01/14 5,131,425
2,360 Renaissance Media Group......................... 10.000 04/15/08 2,351,150
1,645 Satelites Mexicanos SA, Ser B (Mexico) (c)...... 10.125 11/01/04 896,525
3,855 Telenet Group Holding NV, 144A -- Private
Placement (Belgium) (a) (b) (c)................. 0/11.500 06/15/14 3,132,187
------------
50,997,018
------------
CHEMICALS 7.5%
2,935 Cognis Deutschland GmbH & Co., 144A -- Private
Placement (Euro) (Variable Rate Coupon)
(Germany) (a) (c)............................... 6.916 11/15/13 3,738,588
5,090 Equistar Chemicals LP........................... 10.125 09/01/08 5,599,000
620 Equistar Chemicals LP........................... 10.625 05/01/11 691,300
2,230 Huntsman Advanced Materials LLC................. 11.000 07/15/10 2,542,200
952 Huntsman International LLC...................... 10.125 07/01/09 985,320
</Table>
12 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CHEMICALS (CONTINUED)
$4,000 Huntsman International LLC (Euro)............... 10.125% 07/01/09 $ 5,126,022
2,227 Innophos Investments Holdings, Inc., 144A --
Private Placement (Variable Rate Coupon) (a).... 11.790 02/15/15 2,126,542
4,190 Innophos, Inc.,144A -- Private Placement (a).... 8.875 08/15/14 4,331,412
1,280 ISP Chemco, Inc., Ser B......................... 10.250 07/01/11 1,387,200
6,410 ISP Holdings, Inc., Ser B....................... 10.625 12/15/09 6,826,650
1,530 Koppers, Inc. .................................. 9.875 10/15/13 1,705,950
2,700 Millennium America, Inc. ....................... 7.000 11/15/06 2,777,625
1,985 Millennium America, Inc. ....................... 9.250 06/15/08 2,148,762
1,690 Nalco Co. ...................................... 7.750 11/15/11 1,778,725
5,995 Nalco Co. ...................................... 8.875 11/15/13 6,482,094
4,945 Rhodia SA (France).............................. 8.875 06/01/11 4,846,100
1,925 Rhodia SA (Euro) (France)....................... 8.000 06/01/10 2,392,684
2,333 Rockwood Specialties Group, Inc. ............... 10.625 05/15/11 2,577,965
1,390 Rockwood Specialties Group, Inc.,
144A -- Private Placement (Euro) (a)............ 7.625 11/15/14 1,794,154
------------
59,858,293
------------
CONSUMER PRODUCTS 3.3%
2,810 Amscan Holdings, Inc. .......................... 8.750 05/01/14 2,690,575
8,445 Levi Strauss & Co. (Variable Rate Coupon)....... 8.254 04/01/12 8,529,450
2,360 Oxford Industrials, Inc. ....................... 8.875 06/01/11 2,542,900
5,585 Rayovac Corp. .................................. 8.500 10/01/13 5,780,475
5,800 Sleepmaster LLC, Ser B (c) (d) (e).............. 11.000 05/15/09 3,207,400
2,120 Spectrum Brands, Inc. .......................... 7.375 02/01/15 2,051,100
1,667 Tempur Pedic, Inc. ............................. 10.250 08/15/10 1,862,872
------------
26,664,772
------------
DIVERSIFIED MEDIA 4.6%
1,185 Advanstar Communications, Inc. ................. 10.750 08/15/10 1,346,456
2,920 AMC Entertainment, Inc. (Variable Rate
Coupon)......................................... 8.040 08/15/10 3,033,150
6,367 CanWest Media, Inc. (Canada).................... 8.000 09/15/12 6,717,025
2,347 Dex Media East/Finance Corp. LLC................ 12.125 11/15/12 2,787,062
3,692 Dex Media West/Finance Corp. LLC, Ser B......... 9.875 08/15/13 4,195,035
1,925 Houghton Mifflin Co. ........................... 8.250 02/01/11 2,018,844
5,555 Houghton Mifflin Co. ........................... 9.875 02/01/13 6,027,175
4,205 Nebraska Book Co., Inc. ........................ 8.625 03/15/12 4,068,337
6,420 Primedia, Inc. ................................. 8.875 05/15/11 6,757,050
------------
36,950,134
------------
ENERGY 8.6%
5,285 CHC Helicopter Corp. (Canada)................... 7.375 05/01/14 5,397,306
3,100 CHC Helicopter Corp., 144A -- Private Placement
(Canada) (a).................................... 7.375 05/01/14 3,165,875
3,300 Chesapeake Energy Corp. ........................ 6.625 01/15/16 3,399,000
4,165 Chesapeake Energy Corp. ........................ 7.500 09/15/13 4,498,200
6,315 CITGO Petroleum Corp. .......................... 6.000 10/15/11 6,346,575
</Table>
See Notes to Financial Statements 13
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
$1,695 Compagnie Generale de Geophysique SA, 144A --
Private Placement (France) (a).................. 7.500% 05/15/15 $ 1,796,700
7,650 El Paso Production Holding Co. ................. 7.750 06/01/13 8,128,125
3,625 Hanover Compressor Co. ......................... 8.625 12/15/10 3,915,000
920 Hanover Compressor Co. ......................... 9.000 06/01/14 1,018,900
109 Hanover Equipment Trust, Ser A.................. 8.500 09/01/08 114,177
3,042 Hanover Equipment Trust, Ser B.................. 8.750 09/01/11 3,277,755
5,765 Hilcorp Energy/Finance Corp., 144A -- Private
Placement (a)................................... 10.500 09/01/10 6,427,975
3,570 Husky Oil Ltd. (Variable Rate Coupon)
(Canada)........................................ 8.900 08/15/28 3,930,027
1,918 Magnum Hunter Resources, Inc. .................. 9.600 03/15/12 2,119,390
3,550 Pacific Energy Partners......................... 7.125 06/15/14 3,736,375
2,931 Port Arthur Finance Corp., Ser A................ 12.500 01/15/09 3,333,916
2,984 Tesoro Petroleum Corp. ......................... 9.625 04/01/12 3,319,700
4,547 Vintage Petroleum, Inc. ........................ 7.875 05/15/11 4,774,350
------------
68,699,346
------------
FINANCIAL 1.2%
4,950 Dow Jones CDX HY, 144A -- Private Placement
(a)............................................. 8.250 06/29/10 5,033,531
4,397 Refco Finance Holdings LLC...................... 9.000 08/01/12 4,814,715
------------
9,848,246
------------
FOOD & DRUG 1.5%
1,490 Jean Coutu Group (PJC), Inc. (Canada)........... 7.625 08/01/12 1,560,775
2,725 Jean Coutu Group (PJC), Inc. (Canada)........... 8.500 08/01/14 2,806,750
1,700 Jitney-Jungle Stores America, Inc. (c) (d)
(e)............................................. 12.000 03/01/06 0
4,032 Kroger Co., 144A -- Private Placement (a)....... 8.500 07/15/17 4,564,033
3,220 Rite Aid Corp. ................................. 8.125 05/01/10 3,292,450
------------
12,224,008
------------
FOOD & TOBACCO 3.4%
3,215 Michael Foods, Inc. ............................ 8.000 11/15/13 3,319,487
1,845 Pilgrim's Pride Corp. .......................... 9.250 11/15/13 2,047,950
7,450 Pilgrim's Pride Corp. .......................... 9.625 09/15/11 8,101,875
3,960 RJ Reynolds Tobacco Holdings, Inc.,
144A -- Private Placement (a)................... 6.500 07/15/10 3,979,800
7,500 Smithfield Foods, Inc. ......................... 7.000 08/01/11 7,762,500
1,115 Smithfield Foods, Inc. ......................... 8.000 10/15/09 1,193,050
450 Smithfield Foods, Inc., Ser B................... 7.750 05/15/13 486,000
------------
26,890,662
------------
FOREST PRODUCTS 6.1%
4,205 Abitibi-Consolidated, Inc. (Canada)............. 6.000 06/20/13 3,795,012
1,510 Abitibi-Consolidated, Inc. (Canada)............. 7.750 06/15/11 1,510,000
2,030 Crown European Holdings SA (Euro) (France)...... 6.250 09/01/11 2,670,328
6,925 Georgia-Pacific Corp. .......................... 8.875 02/01/10 7,790,625
4,075 Graham Packaging Co., Inc. ..................... 9.875 10/15/14 4,238,000
</Table>
14 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
FOREST PRODUCTS (CONTINUED)
$3,950 Graham Packaging Co., Inc., 144A -- Private
Placement (a)................................... 8.500% 10/15/12 $ 4,088,250
5,540 Graphic Packaging International, Inc. .......... 9.500 08/15/13 5,706,200
2,390 JSG Funding PLC (Euro) (Ireland)................ 10.125 10/01/12 3,247,082
130 Owens-Brockway Glass Containers, Inc. .......... 8.875 02/15/09 138,125
2,160 Owens-Illinois, Inc. ........................... 7.350 05/15/08 2,241,000
5,700 Owens-Illinois, Inc. ........................... 7.500 05/15/10 5,928,000
2,475 Pliant Corp. ................................... 13.000 06/01/10 1,794,375
1,885 Pliant Corp. ................................... 13.000 06/01/10 1,366,625
5,070 Tembec Industries, Inc. (Canada)................ 7.750 03/15/12 3,777,150
400 Tembec Industries, Inc. (Canada)................ 8.500 02/01/11 309,000
------------
48,599,772
------------
GAMING & LEISURE 5.6%
475 Caesars Entertainment........................... 7.000 04/15/13 531,739
993 Caesars Entertainment........................... 8.875 09/15/08 1,094,782
434 HMH Properties, Inc., Ser B..................... 7.875 08/01/08 442,137
5,520 Host Marriott LP................................ 6.375 03/15/15 5,499,300
4,365 Host Marriott LP................................ 7.125 11/01/13 4,583,250
6,145 Isle of Capri Casinos, Inc. .................... 7.000 03/01/14 6,068,187
3,735 Las Vegas Sands Corp. .......................... 6.375 02/15/15 3,622,950
13,620 MGM Mirage, Inc. ............................... 6.000 10/01/09 13,637,025
1,840 Starwood Hotels & Resorts Worldwide, Inc. ...... 7.875 05/01/12 2,047,000
3,090 Station Casinos, Inc. .......................... 6.000 04/01/12 3,128,625
3,905 Station Casinos, Inc., 144A -- Private Placement
(a)............................................. 6.875 03/01/16 4,031,912
------------
44,686,907
------------
HEALTHCARE 5.9%
5,600 AmerisourceBergen Corp. ........................ 7.250 11/15/12 6,510,000
3,305 Community Health Systems, Inc. ................. 6.500 12/15/12 3,358,706
3,370 DaVita, Inc., 144A -- Private Placement (a)..... 6.625 03/15/13 3,437,400
2,830 Fisher Scientific International, Inc. .......... 6.750 08/15/14 2,964,425
530 Fisher Scientific International, Inc.,
144A -- Private Placement (a)................... 6.125 07/01/15 532,650
7,000 Fresenius Medical Care Capital Trust IV......... 7.875 06/15/11 7,525,000
1,525 HCA, Inc. ...................................... 6.300 10/01/12 1,565,007
2,145 HCA, Inc. ...................................... 8.700 02/10/10 2,398,610
970 HCA, Inc. ...................................... 8.750 09/01/10 1,098,818
4,095 Medcath Holdings Corp. ......................... 9.875 07/15/12 4,565,925
875 National Nephrology Associates, Inc., 144A --
Private Placement (a)........................... 9.000 11/01/11 980,000
855 Tenet Healthcare Corp. ......................... 7.375 02/01/13 837,900
2,280 Tenet Healthcare Corp. ......................... 9.875 07/01/14 2,439,600
3,340 VWR International, Inc. ........................ 6.875 04/15/12 3,348,350
</Table>
See Notes to Financial Statements 15
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$1,700 VWR International, Inc. ........................ 8.000% 04/15/14 $ 1,695,750
4,085 Warner Chilcott Corp., 144A -- Private Placement
(a)............................................. 8.750 02/01/15 4,064,575
------------
47,322,716
------------
HOUSING 5.0%
12,315 Associated Materials, Inc. (b).................. 0/11.250 03/01/14 7,265,850
6,000 Goodman Global Holdings, Inc., 144A -- Private
Placement (a)................................... 7.875 12/15/12 5,700,000
1,390 Goodman Global Holdings, Inc., 144A -- Private
Placement (Variable Rate Coupon) (a)............ 6.410 06/15/12 1,390,000
1,180 Interface, Inc. ................................ 7.300 04/01/08 1,209,500
4,590 Interface, Inc. ................................ 9.500 02/01/14 4,704,750
1,475 Interface, Inc. ................................ 10.375 02/01/10 1,640,937
6,085 Nortek, Inc. ................................... 8.500 09/01/14 5,948,088
1,000 Ply Gem Industries, Inc. ....................... 9.000 02/15/12 900,000
2,735 RMCC Acquisition Co., 144A -- Private Placement
(a)............................................. 9.500 11/01/12 2,776,025
860 Technical Olympic USA, Inc. .................... 7.500 01/15/15 801,950
1,596 Technical Olympic USA, Inc. .................... 9.000 07/01/10 1,669,815
2,735 Technical Olympic USA, Inc. .................... 9.000 07/01/10 2,861,494
3,047 Technical Olympic USA, Inc. .................... 10.375 07/01/12 3,267,908
------------
40,136,317
------------
INFORMATION TECHNOLOGY 2.6%
525 Iron Mountain, Inc. ............................ 6.625 01/01/16 500,063
2,365 Iron Mountain, Inc. ............................ 7.750 01/15/15 2,432,994
5,195 Iron Mountain, Inc. ............................ 8.625 04/01/13 5,487,219
3,025 Nortel Networks Ltd. (Canada)................... 6.125 02/15/06 3,047,688
5,335 Sanmina-SCI Corp. .............................. 6.750 03/01/13 5,121,600
3,540 Sungard Data Systems, Inc., 144A -- Private
Placement (a)................................... 9.125 08/15/13 3,734,700
330 Sungard Data Systems, Inc., 144A -- Private
Placement (Variable Rate Coupon) (a)............ 8.525 08/15/13 343,200
------------
20,667,464
------------
MANUFACTURING 3.6%
1,470 Flowserve Corp. ................................ 12.250 08/15/10 1,570,901
3,855 Hexcel Corp. ................................... 6.750 02/01/15 3,883,913
2,014 JohnsonDiversey, Inc. (Euro).................... 9.625 05/15/12 2,571,635
4,588 JohnsonDiversey, Inc., Ser B.................... 9.625 05/15/12 4,714,170
2,574 Manitowoc Co., Inc. ............................ 10.500 08/01/12 2,921,490
55 Manitowoc Co., Inc. (Euro)...................... 10.375 05/15/11 74,639
5,310 NMHG Holdings Co. .............................. 10.000 05/15/09 5,708,250
3,360 Propex Fabrics, Inc. ........................... 10.000 12/01/12 3,259,200
4,407 Trimas Corp. ................................... 9.875 06/15/12 3,790,020
------------
28,494,218
------------
</Table>
16 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
METALS 3.6%
$6,679 Doe Run Resources Corp. (Acquired 9/15/00 to
10/15/04, Cost $6,280,647), 144A -- Private
Placement (a) (f) (g)........................... 8.500% 11/01/08 $ 5,276,115
1,380 Foundation PA Coal Co. ......................... 7.250 08/01/14 1,457,625
2,250 General Cable Corp. ............................ 9.500 11/15/10 2,396,250
7,175 Novelis, Inc., 144A -- Private Placement
(Canada) (a).................................... 7.250 02/15/15 7,228,813
2,515 SGL Carbon Luxembourg SA, 144A -- Private
Placement (Euro) (Luxembourg) (a)............... 8.500 02/01/12 3,424,666
4,238 UCAR Finance, Inc. ............................. 10.250 02/15/12 4,555,850
4,277 United States Steel Corp. ...................... 9.750 05/15/10 4,704,700
------------
29,044,019
------------
RETAIL 1.6%
3,200 Brown Shoe Co., Inc. ........................... 8.750 05/01/12 3,432,000
3,780 General Nutrition Center, Inc. ................. 8.500 12/01/10 3,364,200
5,885 Petro Stopping Center/Financial................. 9.000 02/15/12 6,032,125
------------
12,828,325
------------
SERVICES 3.2%
6,120 Allied Waste North America, Inc. ............... 6.375 04/15/11 5,928,750
1,850 Allied Waste North America, Inc. ............... 7.875 04/15/13 1,914,750
3,775 Allied Waste North America, Inc.,
144A -- Private Placement (a)................... 7.250 03/15/15 3,765,563
1,437 Allied Waste North America, Inc., Ser B......... 9.250 09/01/12 1,577,108
4,950 Buhrmann US, Inc. .............................. 8.250 07/01/14 5,110,875
1,635 Buhrmann US, Inc., 144A -- Private Placement
(a)............................................. 7.875 03/01/15 1,663,613
4,245 MSW Energy Holdings LLC, Ser B.................. 7.375 09/01/10 4,436,025
985 MSW Energy Holdings/Finance..................... 8.500 09/01/10 1,063,800
------------
25,460,484
------------
TELECOMMUNICATIONS 3.8%
6,625 Axtel SA (Mexico)............................... 11.000 12/15/13 7,353,750
6,030 Exodus Communications, Inc. (c) (d) (e)......... 11.250 07/01/08 0
770 Exodus Communications, Inc. (c) (d) (e)......... 11.625 07/15/10 0
4,000 Exodus Communications, Inc. (Euro) (c) (d)
(e)............................................. 11.375 07/15/08 0
8,250 GST Network Funding, Inc. (c) (d) (e)........... 10.500 05/01/08 825
4,000 Park N View, Inc., Ser B (c) (d) (e)............ 13.000 05/15/08 0
4,530 Qwest Communications International, Inc.
(Variable Rate Coupon).......................... 7.290 02/15/09 4,530,000
1,020 Qwest Corp. .................................... 5.625 11/15/08 1,012,350
13,285 Qwest Services Corp. ........................... 13.500 12/15/10 15,377,388
1,480 Qwest Services Corp. ........................... 14.000 12/15/14 1,820,400
------------
30,094,713
------------
</Table>
See Notes to Financial Statements 17
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
TRANSPORTATION 4.0%
$5,990 Amsted Industries, Inc., 144A -- Private
Placement (a)................................... 10.250% 10/15/11 $ 6,618,950
1,815 Arvinmeritor, Inc. ............................. 8.750 03/01/12 1,892,138
1,040 Hertz Corp. .................................... 7.400 03/01/11 1,030,336
2,930 Hertz Corp. .................................... 7.625 06/01/12 2,907,890
3,095 Lear Corp. ..................................... 8.110 05/15/09 3,228,100
2,250 Meritor Automotive, Inc. ....................... 6.800 02/15/09 2,227,500
7,905 Sonic Automotive, Inc., Ser B................... 8.625 08/15/13 8,181,675
5,626 TRW Automotive, Inc. ........................... 9.375 02/15/13 6,272,990
------------
32,359,579
------------
UTILITY 7.0%
950 AES Corp. ...................................... 7.750 03/01/14 1,036,688
543 AES Corp. ...................................... 8.875 02/15/11 604,088
760 AES Corp. ...................................... 9.375 09/15/10 856,900
3,130 AES Corp., 144A -- Private Placement (a)........ 9.000 05/15/15 3,474,300
6,100 CMS Energy Corp. ............................... 7.500 01/15/09 6,466,000
1,795 Dynegy Holdings, Inc. .......................... 6.875 04/01/11 1,786,025
3,940 Dynegy Holdings, Inc., 144A -- Private Placement
(a)............................................. 9.875 07/15/10 4,314,300
1,395 IPALCO Enterprises, Inc. ....................... 8.625 11/14/11 1,576,350
4,775 Monongahela Power Co. .......................... 5.000 10/01/06 4,813,950
2,590 Nevada Power Co. ............................... 9.000 08/15/13 2,920,225
2,945 Nevada Power Co., Ser A......................... 8.250 06/01/11 3,335,213
1,025 Northwest Pipeline Corp. ....................... 8.125 03/01/10 1,104,438
5,792 Ormat Funding Corp. ............................ 8.250 12/30/20 5,878,376
625 PSEG Energy Holdings............................ 7.750 04/16/07 645,313
2,965 PSEG Energy Holdings............................ 8.625 02/15/08 3,142,900
3,595 Reliant Energy, Inc. ........................... 6.750 12/15/14 3,559,050
2,010 Southern Natural Gas Co. ....................... 8.875 03/15/10 2,202,872
7,280 Williams Cos., Inc. ............................ 7.875 09/01/21 8,244,600
------------
55,961,588
------------
WIRELESS COMMUNICATIONS 3.5%
3,180 American Tower Corp. ........................... 7.125 10/15/12 3,346,950
3,175 American Tower Corp. ........................... 7.500 05/01/12 3,373,438
2,945 Rogers Wireless, Inc. (Canada).................. 7.500 03/15/15 3,235,819
2,365 Rural Cellular Corp. ........................... 9.625 05/15/08 2,388,650
3,975 Rural Cellular Corp. (Variable Rate Coupon)..... 7.910 03/15/10 4,134,000
5,245 SBA Communications Corp. (b) (c)................ 0/9.750 12/15/11 4,838,513
1,820 SBA Communications Corp. (c).................... 8.500 12/01/12 1,995,175
4,155 UbiquiTel Operating Co. ........................ 9.875 03/01/11 4,653,600
------------
27,966,145
------------
TOTAL CORPORATE BONDS 94.9%........................................ 759,878,312
------------
FOREIGN CONVERTIBLE CORPORATE OBLIGATION 0.5%
3,980 Nortel Networks Corp. (Canada).................. 4.250 09/01/08 3,800,900
------------
</Table>
18 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
<Table>
<Caption>
DESCRIPTION VALUE
- -------------------------------------------------------------------------------------------------
EQUITIES 0.3%
DecisionOne Corp. (19,895 Common Shares) (e) (h).................................. $ 0
DecisionOne Corp. (10,890 Common Stock Warrants Class A) (e) (h).................. 0
DecisionOne Corp. (18,765 Common Stock Warrants Class B) (e) (h).................. 0
DecisionOne Corp. (11,130 Common Stock Warrants Class C) (e) (h).................. 0
Doe Run Resources Corp. (29 Common Stock Warrants) (e) (h)........................ 0
HCI Direct, Inc. (106,250 Common Shares, Class 1) (e) (h)......................... 1,593,750
HF Holdings, Inc. (36,820 Common Stock Warrants) (e) (h).......................... 0
Hosiery Corp. of America, Inc., 144A -- Private Placement (1,000 Common Shares
Class A) (a) (e) (h).............................................................. 0
Jazztel, PLC, 144A -- Private Placement (5,000 Common Stock Warrants) (Euro)
(United Kingdom) (a) (e) (h)...................................................... 0
OpTel, Inc., 144A -- Private Placement (3,275 Common Shares) (a) (e) (h).......... 0
Park N View, Inc., 144A -- Private Placement (4,000 Common Stock Warrants) (a) (d)
(e) (h)........................................................................... 0
Paxon Communications Corp. (147 Preferred Shares) (f)............................. 999,967
Reunion Industries, Inc. (107,947 Common Stock Warrants) (e) (h).................. 0
Ventelo, Inc., 144A -- Private Placement (73,021 Common Shares) (Euro) (United
Kingdom) (a) (e) (h).............................................................. 0
Viatel Holding Bermuda Ltd. (7,852 Common Shares) (Bermuda) (h)................... 1,963
VS Holdings, Inc. (946,962 Common Shares) (e) (h)................................. 0
------------
TOTAL EQUITIES.................................................................... 2,595,680
------------
TOTAL LONG-TERM INVESTMENTS 95.7%
(Cost $786,174,755)............................................................. 766,274,892
REPURCHASE AGREEMENT 2.1%
State Street Bank & Trust Co. ($17,100,000 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 3.50%, dated 08/31/05, to
be sold on 09/01/05 at $17,101,663)
(Cost $17,100,000).............................................................. 17,100,000
------------
TOTAL INVESTMENTS 97.8%
(Cost $803,274,755)............................................................. 783,374,892
OTHER ASSETS IN EXCESS OF LIABILITIES 2.2%....................................... 17,502,259
------------
NET ASSETS 100.0%................................................................ $800,877,151
============
</Table>
Percentages are calculated as a percentage of net assets.
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
See Notes to Financial Statements 19
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2005 continued
(c) Non-income producing as security is in default.
(d) This borrower has filed for protection in federal bankruptcy court.
(e) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(f) Payment-in-kind security.
(g) This security is restricted and may be resold only in transactions exempt
from registration which are normally those transactions with qualified
institutional buyers. This restricted security comprises 0.7% of net assets.
(h) Non-income producing security as this stock currently does not declare
dividends.
(Euro)--Eurodollar
20 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2005
<Table>
ASSETS:
Total Investments (Cost $803,274,755)....................... $ 783,374,892
Cash........................................................ 951
Receivables:
Interest.................................................. 16,154,619
Investments Sold.......................................... 7,001,172
Fund Shares Sold.......................................... 599,480
Other....................................................... 302,139
--------------
Total Assets............................................ 807,433,253
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 2,660,516
Income Distributions...................................... 1,164,230
Investments Purchased..................................... 698,238
Distributor and Affiliates................................ 491,857
Investment Advisory Fee................................... 264,526
Forward Foreign Currency Contracts.......................... 493,149
Trustees' Deferred Compensation and Retirement Plans........ 373,654
Accrued Expenses............................................ 409,932
--------------
Total Liabilities....................................... 6,556,102
--------------
NET ASSETS.................................................. $ 800,877,151
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,385,075,673
Accumulated Undistributed Net Investment Income............. (1,552,606)
Net Unrealized Depreciation................................. (20,395,111)
Accumulated Net Realized Loss............................... (562,250,805)
--------------
NET ASSETS.................................................. $ 800,877,151
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $532,040,247 and 146,661,051 shares of
beneficial interest issued and outstanding)............. $ 3.63
Maximum sales charge (4.75%* of offering price)......... .18
--------------
Maximum offering price to public........................ $ 3.81
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $191,021,750 and 52,384,166 shares of
beneficial interest issued and outstanding)............. $ 3.65
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $54,533,666 and 15,132,554 shares of
beneficial interest issued and outstanding)............. $ 3.60
==============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $23,281,488 and 6,414,155 shares of
beneficial interest issued and outstanding)............. $ 3.63
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 21
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended August 31, 2005
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 58,445,983
Dividends................................................... 2,369,451
Other....................................................... 960,289
------------
Total Income............................................ 61,775,723
------------
EXPENSES:
Investment Advisory Fee..................................... 3,756,871
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,221,247, $1,967,429 and $537,696,
respectively)............................................. 3,726,372
Shareholder Services........................................ 1,528,945
Custody..................................................... 112,651
Legal....................................................... 63,022
Trustees' Fees and Related Expenses......................... 28,946
Other....................................................... 737,901
------------
Total Expenses.......................................... 9,954,708
Less Credits Earned on Cash Balances.................... 44,630
------------
Net Expenses............................................ 9,910,078
------------
NET INVESTMENT INCOME....................................... $ 51,865,645
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 326,738
Forward Foreign Currency Contracts........................ 53
Foreign Currency Transactions............................. 2,735,241
------------
Net Realized Gain........................................... 3,062,032
------------
Net Unrealized Depreciation During the Period............... (12,909,658)
------------
NET REALIZED AND UNREALIZED LOSS............................ $ (9,847,626)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 42,018,019
============
</Table>
22 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2005 AUGUST 31, 2004
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................................... $ 51,865,645 $ 42,538,299
Net Realized Gain/Loss.................................... 3,062,032 (37,759,344)
Net Unrealized Appreciation/Depreciation During the
Period.................................................. (12,909,658) 71,411,903
------------- -------------
Change in Net Assets from Operations...................... 42,018,019 76,190,858
------------- -------------
Distributions from Net Investment Income:
Class A Shares.......................................... (35,174,855) (26,354,660)
Class B Shares.......................................... (12,164,487) (10,773,678)
Class C Shares.......................................... (3,384,973) (2,702,792)
Class I Shares.......................................... (82,724) -0-
------------- -------------
(50,807,039) (39,831,130)
------------- -------------
Return of Capital Distribution:
Class A Shares.......................................... -0- (889,262)
Class B Shares.......................................... -0- (358,702)
Class C Shares.......................................... -0- (90,962)
Class I Shares.......................................... -0- -0-
------------- -------------
-0- (1,338,926)
------------- -------------
Total Distributions....................................... (50,807,039) (41,170,056)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....... (8,789,020) 35,020,802
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................. 489,332,752 187,187,625
Net Asset Value of Shares Issued Through Dividend
Reinvestment............................................ 37,014,423 29,609,310
Cost of Shares Repurchased................................ (298,295,554) (295,963,620)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........ 228,051,621 (79,166,685)
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS..................... 219,262,601 (44,145,883)
NET ASSETS:
Beginning of the Period................................... 581,614,550 625,760,433
------------- -------------
End of the Period (Including accumulated undistributed net
investment income of $(1,552,606) and $(4,885,475),
respectively)........................................... $ 800,877,151 $ 581,614,550
============= =============
</Table>
See Notes to Financial Statements 23
VAN KAMPEN HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS A SHARES ------------------------------------------------
2005 2004 2003 2002 (a) 2001
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD... $ 3.64 $ 3.43 $ 3.15 $ 4.23 $ 5.24
------ ------ ------ ------- ------
Net Investment Income.................... .26 .26 .29 .39 .51
Net Realized and Unrealized Gain/Loss.... (.02) .21 .29 (1.01) (.96)
------ ------ ------ ------- ------
Total from Investment Operations........... .24 .47 .58 (.62) (.45)
------ ------ ------ ------- ------
Less:
Distributions from Net
Investment Income...................... .25 .25 .24 .43 .55
Return of Capital Distributions.......... -0- .01 .06 .03 .01
------ ------ ------ ------- ------
Total Distributions........................ .25 .26 .30 .46 .56
------ ------ ------ ------- ------
NET ASSET VALUE, END OF THE PERIOD......... $ 3.63 $ 3.64 $ 3.43 $ 3.15 $ 4.23
====== ====== ====== ======= ======
Total Return (b)........................... 6.89% 14.02% 19.26% -15.75% -9.04%
Net Assets at End of the Period
(In millions)............................ $532.0 $379.5 $408.7 $ 308.5 $394.4
Ratio of Expenses to Average Net Assets.... 1.06% 1.06% 1.12% 1.08% 1.05%
Ratio of Net Investment Income to Average
Net Assets............................... 7.11% 7.45% 8.36% 10.39% 10.93%
Portfolio Turnover......................... 84% 88% 95% 83% 80%
</Table>
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset-backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 10.49% to 10.39%. Net investment income per share and net
realized gains and losses per share were unaffected by the adjustments. Per
share, ratios and supplemental data for periods prior to August 31, 2002
have not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. With
respect to shares purchased prior to December 1, 2004, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include Rule 12b-1 fees and service fees of up to .25% and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or
the redemption of Fund shares.
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.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS B SHARES ------------------------------------------------
2005 2004 2003 2002 (a) 2001
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD... $ 3.65 $ 3.44 $ 3.16 $ 4.24 $ 5.25
------ ------ ------ ------- ------
Net Investment Income.................... .25 .23 .25 .35 .48
Net Realized and Unrealized Gain/Loss.... (.02) .21 .30 (1.01) (.97)
------ ------ ------ ------- ------
Total from Investment Operations........... .23 .44 .55 (.66) (.49)
------ ------ ------ ------- ------
Less:
Distributions from Net
Investment Income...................... .23 .22 .21 .39 .51
Return of Capital Distributions.......... -0- .01 .06 .03 .01
------ ------ ------ ------- ------
Total Distributions........................ .23 .23 .27 .42 .52
------ ------ ------ ------- ------
NET ASSET VALUE, END OF THE PERIOD......... $ 3.65 $ 3.65 $ 3.44 $ 3.16 $ 4.24
====== ====== ====== ======= ======
Total Return (b)........................... 6.36% 12.79% 18.27% -16.12% -9.80%
Net Assets at End of the Period
(In millions)............................ $191.0 $160.7 $175.6 $ 168.8 $249.6
Ratio of Expenses to Average Net Assets.... 1.83% 1.82% 1.89% 1.84% 1.83%
Ratio of Net Investment Income to Average
Net Assets............................... 6.33% 6.70% 7.68% 9.67% 10.13%
Portfolio Turnover......................... 84% 88% 95% 83% 80%
</Table>
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset-backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 9.77% to 9.67%. Net investment income per share and net realized
gains and losses per share were unaffected by the adjustments. Per share,
ratios and supplemental data for periods prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within the first and second year of purchase and declining to 0% after
the fifth year. If the sales charge was included, total returns would be
lower. These returns include combined Rule 12b-1 fees and service fees of up
to 1% and do not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares.
See Notes to Financial Statements 25
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.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS C SHARES ------------------------------------------------
2005 2004 2003 2002 (a) 2001
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $3.61 $ 3.41 $ 3.13 $ 4.20 $ 5.22
----- ------ ------ ------- -------
Net Investment Income................... .25 .23 .25 .35 .48
Net Realized and Unrealized
Gain/Loss............................. (.03) .20 .30 (1.00) (.98)
----- ------ ------ ------- -------
Total from Investment Operations.......... .22 .43 .55 (.65) (.50)
----- ------ ------ ------- -------
Less:
Distributions from Net
Investment Income..................... .23 .22 .21 .39 .51
Return of Capital Distributions......... -0- .01 .06 .03 .01
----- ------ ------ ------- -------
Total Distributions....................... .23 .23 .27 .42 .52
----- ------ ------ ------- -------
NET ASSET VALUE, END OF THE PERIOD........ $3.60 $ 3.61 $ 3.41 $ 3.13 $ 4.20
===== ====== ====== ======= =======
Total Return (b).......................... 6.17%(d) 12.98%(d) 18.14%(c) -16.04% -10.06%
Net Assets at End of the Period
(In millions)........................... $54.5 $ 41.4 $ 41.5 $ 36.7 $ 58.7
Ratio of Expenses to Average Net Assets... 1.82%(d) 1.81%(d) 1.86% 1.84% 1.82%
Ratio of Net Investment Income to Average
Net Assets.............................. 6.34%(d) 6.71%(d) 7.68%(c) 9.68% 10.12%
Portfolio Turnover........................ 84% 88% 95% 83% 80%
</Table>
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset-backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 9.78% to 9.68%. Net investment income per share and net realized
gains and losses per share were unaffected by the adjustments. Per share,
ratios and supplemental data for periods prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1% charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .01%.
(d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect actual 12b-1 fees of less
than 1% (See footnote 6).
26 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.
<Table>
<Caption>
CLASS I SHARES
MARCH 23, 2005
(COMMENCEMENT OF
OPERATIONS) TO
AUGUST 31,
2005
----------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $3.65
-----
Net Investment Income..................................... .12
Net Realized and Unrealized Loss.......................... (.02)
-----
Total from Investment Operations............................ .10
Less Distributions from Net Investment Income............... .12
-----
NET ASSET VALUE, END OF THE PERIOD.......................... $3.63
=====
Total Return (a)............................................ 2.69%*
Net Assets at End of the Period (In millions)............... $23.3
Ratio of Expenses to Average Net Assets..................... .85%
Ratio of Net Investment Income to Average Net Assets........ 6.97%
Portfolio Turnover.......................................... 84%
</Table>
* Non-Annualized
(a) Assumes reinvestment of all distributions for the period. Return does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
See Notes to Financial Statements 27
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen High Yield Fund (the "Fund"), formerly 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 distribution of the Fund's Class B, Class C and Class I
Shares commenced on July 2, 1992, July 6, 1993 and March 23, 2005, respectively.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Fixed income investments and preferred stock are stated at
value using market quotations or indications of value obtained from an
independent pricing service. Investments in securities listed on a securities
exchange are valued at their 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 available,
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Short-term securities with remaining maturities
of 60 days or less are valued at amortized cost, which approximates market
value. Forward foreign currency contracts are valued using quoted foreign
exchange rates.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At August 31, 2005, 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 payment for such securities only upon physical delivery or
evidence of book entry transfer to
28
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
the account of the custodian bank. The seller is required to maintain the value
of the underlying security at not less than the repurchase proceeds due the
Fund.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts on debt
securities are accreted and premiums are amortized over the expected life of
each applicable security. Income and expenses of the Fund are allocated on a pro
rata basis to each class of shares, except for distribution and service fees and
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, 2005, the Fund had an accumulated capital loss carryforward
for tax purposes of $560,990,126 which will expire according to the following
schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$ 6,411,333................................................ August 31, 2006
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
</Table>
Part of the capital loss carryforward above was acquired due to a merger
with another regulated investment company, please see Footnote 3 for details.
At August 31, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $805,887,505
============
Gross tax unrealized appreciation........................... $ 37,229,476
Gross tax unrealized depreciation........................... (59,742,089)
------------
Net tax unrealized depreciation on investments.............. $(22,512,613)
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included in ordinary income for
tax purposes.
29
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
The tax character of distributions paid during the years ended August 31,
2005 and 2004 was as follows:
<Table>
<Caption>
2005 2004
Distributions paid from:
Ordinary income........................................... $50,502,624 $40,015,705
Long-term capital gain.................................... -0- -0-
Return of capital......................................... -0- 1,338,926
----------- -----------
$50,502,624 $41,354,631
=========== ===========
</Table>
Due to inherent differences in the recognition of income, expenses, and
realized gains/ losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax basis
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities. A permanent book and tax difference relating to
consent fee income received from tender offers of $896,857 has been reclassified
from accumulated undistributed net investment income to accumulated net realized
loss. Permanent book and tax differences of $2,735,294 related to the
recognition of net realized gains on foreign currency transactions and $4,354
related to the Fund's investment in other regulated investment companies have
been reclassified from accumulated net realized loss to accumulated
undistributed net investment income. A permanent book and tax difference related
to nondeductible merger costs of $185,759 has been reclassified from accumulated
undistributed net investment income to capital. Additionally, permanent book and
tax differences of $7,674 relating to paydowns on mortgage-backed securities and
$1,096,420 relating to book to tax amortization differences were reclassified
from accumulated undistributed net investment income to accumulated net realized
loss.
As of August 31, 2005, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $3,564,658
</Table>
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of post October losses which are not realized for
tax purposes until the first day of the following fiscal year and the deferral
of losses relating to wash sales transactions.
F. EXPENSE REDUCTIONS During the year ended August 31, 2005, the Fund's custody
fee was reduced by $44,630 as a result of credits earned on cash balances.
G. FOREIGN CURRENCY TRANSLATION Asset and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars at the mean of the quoted bid and ask prices of
such currencies against the U.S. dollar. Purchases and sales of portfolio
securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Realized gain and loss on foreign currency
transactions on the Statement of Operations includes the net realized amount
from the sale of foreign currency and the amount realized between trade date and
settlement date on securities transactions. Income and expenses are translated
at rates prevailing when accrued.
30
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .420%
Next $250 million........................................... .345%
Next $250 million........................................... .295%
Next $1 billion............................................. .270%
Next $1 billion............................................. .245%
Over $3 billion............................................. .220%
</Table>
Effective June 1, 2005, the investment advisory fee was reduced from .625%
for the first $150 million, .550% for the next $150 million and .500% for any
average daily net assets greater than $300 million.
For the year ended August 31, 2005, the Fund recognized expenses of
approximately $47,700 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, 2005, the Fund recognized
expenses of approximately $48,600 representing Van Kampen Investment 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, 2005, the Fund recognized expenses of approximately $1,275,300
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 $255,220 are included in
"Other" assets on the Statement of Assets and Liabilities at August 31, 2005.
Appreciation/ depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
31
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
3. CAPITAL TRANSACTIONS
At August 31, 2005, capital aggregated $973,552,423, $303,381,260, $80,015,712
and $28,126,278 for Classes A, B, C and I, respectively. For the year ended
August 31, 2005, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 86,725,464 $ 320,410,088
Class B................................................... 28,208,023 105,232,841
Class C................................................... 10,910,339 40,075,471
Class I................................................... 6,506,107 23,614,352
----------- -------------
Total Sales................................................. 132,349,933 $ 489,332,752
=========== =============
Dividend Reinvestment:
Class A................................................... 7,137,575 $ 26,066,021
Class B................................................... 2,331,043 8,551,256
Class C................................................... 637,802 2,314,420
Class I................................................... 22,802 82,726
----------- -------------
Total Dividend Reinvestment................................. 10,129,222 $ 37,014,423
=========== =============
Repurchases:
Class A................................................... (51,466,042) $(188,120,153)
Class B................................................... (22,114,193) (81,191,619)
Class C................................................... (7,880,798) (28,567,020)
Class I................................................... (114,754) (416,762)
----------- -------------
Total Repurchases........................................... (81,575,787) $(298,295,554)
=========== =============
</Table>
32
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
At August 31, 2004, capital aggregated $709,335,080, $226,435,317, and
$58,356,021 for Classes A, B and C, respectively. For the year ended August 31,
2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 42,743,427 $ 152,677,314
Class B................................................... 6,551,925 23,512,637
Class C................................................... 3,096,714 10,997,674
----------- -------------
Total Sales................................................. 52,392,066 $ 187,187,625
=========== =============
Dividend Reinvestment:
Class A................................................... 5,607,636 $ 20,120,077
Class B................................................... 2,113,467 7,614,931
Class C................................................... 525,673 1,874,302
----------- -------------
Total Dividend Reinvestment................................. 8,246,776 $ 29,609,310
=========== =============
Repurchases:
Class A................................................... (63,202,465) $(224,432,571)
Class B................................................... (15,674,574) (56,222,037)
Class C................................................... (4,315,074) (15,309,012)
----------- -------------
Total Repurchases........................................... (83,192,113) $(295,963,620)
=========== =============
</Table>
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received thereon, automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received thereon, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the years ended August 31, 2005 and 2004,
5,481,366, and 1,296,337 Class B Shares automatically converted to Class A
Shares, respectively, and are shown in the above table as sales of Class A
Shares and repurchases of Class B Shares. Class C Shares purchased before
January 1, 1997, and any dividend reinvestment plan Class C Shares received on
such shares, automatically convert to Class A Shares ten years after the end of
the calendar month in which such shares were purchased. Class C Shares purchased
on or after January 1, 1997 do not possess a conversion feature. For the years
ended August 31, 2005 and 2004, 252,275 and 9,894 Class C Shares converted to
Class A Shares, respectively, and are shown in the above table as sales of Class
A Shares and repurchases of Class C Shares. Class B and C Shares are offered
without a front end sales charge, but are subject to a contingent deferred sales
charge (CDSC). The CDSC will be imposed on most
33
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
redemptions made within five years of the purchase for Class B Shares and one
year of the purchase for Class C Shares as detailed in the following schedule.
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 4.00% None
Third....................................................... 3.00% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth and Thereafter........................................ None None
</Table>
For the year ended August 31, 2005, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A Shares of approximately
$144,400 and CDSC on redeemed shares of approximately $329,800. Sales charges do
not represent expenses of the Fund.
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
a ratio 1 to 1.515, 1 to 1.514 and 1 to 1.529 for Classes A, B and C,
respectively. Net unrealized appreciation on 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 in
these net assets was a capital loss carryforward of $166,397,364 of which
$95,994,761 can be utilized, 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 gains recognized on futures held on December 17, 2004 of
$821,478, all carried forward from the High Yield Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $606,901,243 and $666,413,270,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the
34
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
Fund's effective yield, foreign currency exposure, maturity and duration or
generate potential gain. All of the Fund's holdings, including derivative
instruments, are marked to market each day with the change in value reflected in
unrealized appreciation/depreciation. Upon disposition, a realized gain or loss
is recognized accordingly, except when taking delivery of a security underlying
a forward commitment. In this instance, the recognition of gain or loss is
postponed until the disposal of the security underlying the forward commitment.
Purchasing securities or foreign currency on a forward commitment involves a
risk that the market value at the time of delivery may be lower than the agreed
upon purchase price resulting in an unrealized loss. Selling securities or
foreign currency on a forward commitment involves different risks and can result
in losses more significant than those arising from the purchase of such
securities. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.
A forward foreign currency contract is a commitment to purchase or sell a
foreign currency at a future date at a negotiated forward rate. Upon the
settlement of the contract, a realized gain or loss is recognized and is
included as a component of realized gain/loss on forward foreign currency
contracts. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts. Risks may also arise from
the unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
The following forward foreign currency contracts were outstanding as of
August 31, 2005:
<Table>
<Caption>
IN UNREALIZED
EXCHANGE CURRENT APPRECIATION/
FOR VALUE DEPRECIATION
SHORT CONTRACTS:
Euro Currency,
11,673,000 Expiring 10/26/05...................... US $ $14,437,129 $(218,948)
12,725,000 Expiring 10/26/05...................... US $ 15,738,240 (260,568)
675,000 Expiring 10/26/05...................... US $ 834,838 (13,633)
----------- ---------
$31,010,207 $(493,149)
=========== =========
</Table>
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and maintenance of shareholder accounts
with respect to such classes of shares.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and up to 1.00% each for Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A Shares are paid quarterly and the
annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $3,745,800 and $0 for
Class B and Class C Shares, respectively. These amounts may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be
refunded to the Fund on a quarterly basis.
35
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
Included in the fees for the year ended August 31, 2005 are payments
retained by Van Kampen of approximately $1,566,900 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $198,900.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, and certain investment companies
advised by the Adviser or its affiliates, including the Fund, are named as
defendants in a number of similar class action complaints which were recently
consolidated. The consolidated action also names as defendants certain
individual Trustees and Directors of certain investment companies advised by
affiliates of the Adviser; the complaint does not, however, name the individual
Trustees of any Van Kampen funds. The consolidated amended complaint generally
alleges that defendants violated their statutory disclosure obligations and
fiduciary duties by failing properly to disclose (i) that the Adviser and
certain affiliates of the Adviser allegedly offered economic incentives to
brokers and others to steer investors to the funds advised by the Adviser or its
affiliates rather than funds managed by other companies, and (ii) that the funds
advised by the Adviser or its affiliates, including the Fund, allegedly paid
excessive commissions to brokers in return for their alleged efforts to steer
investors to these funds. The complaint seeks, among other things, unspecified
compensatory damages, rescissionary damages, fees and costs. Plaintiffs have
filed a Motion for Leave to file a Supplemental Pleading that would, among other
things, expand the allegations and alleged class.
The Adviser and certain affiliates of the Adviser are also named as
defendants in a derivative suit 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 proprietary mutual 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
complaint has been coordinated with the consolidated complaint described in the
preceding paragraph. Plaintiff has sought leave to file a second amended
derivative compliant that alleges that the Adviser permitted or recklessly
disregarded market timing and late trading in its proprietary mutual funds in
order to increase assets under management and fees. However, pursuant to an
agreement between the parties, the plaintiff's proposed second amended
derivative complaint was withdrawn and the allegations regarding market timing
and late trading asserted therein were filed in a separate complaint and
coordinated with other cases related to market timing that have been centralized
in a federal court.
The defendants have moved to dismiss each of these actions and otherwise
intend to defend them vigorously. While the defendants believe that they have
meritorious defenses, the ultimate outcome of these matters is not presently
determinable at this early stage of litigation, and no provision has been made
in the Fund's financial statements for the effect, if any, of these matters.
36
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2005 continued
8. 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.
37
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 (formerly the Van Kampen High Income Corporate Bond Fund)
(the "Fund"), including the portfolio of investments, as of August 31, 2005, 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, 2005, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Van Kampen High Yield Fund at August 31, 2005, 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 12, 2005
38
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
JOSEPH J. MCALINDEN
Executive Vice President and
Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
PHILLIP G. GOFF
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
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
August 31, 2005. For corporate shareholders, 4% of the distributions qualify
for the dividends received deduction. Certain dividends paid by the Fund may
be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up
to a maximum of $2,369,451 as taxed at a maximum of 15%. In January, the Fund
provides tax information to shareholders for the preceding calendar year.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
39
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments
Inc. ("Van Kampen Investments"), Van Kampen Asset Management (the "Adviser"),
Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen
Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The
term "Fund Complex" includes each of the investment companies advised by the
Adviser 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
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (60) Trustee Trustee Chairman and Chief 78 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of
1800 Swift Drive Blistex Inc., a consumer funds in the Fund
Oak Brook, IL 60523 health care products Complex.
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 (67) Trustee Trustee Prior to January 1999, 76 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of
Suite 130 Executive Officer of the funds in the Fund
Dana Point, CA 92629 Allstate Corporation Complex. Director of
("Allstate") and Allstate Amgen Inc., a
Insurance Company. Prior biotechnological
to January 1995, company, and Director
President and Chief of Valero Energy
Executive Officer of Corporation, an
Allstate. Prior to August independent refining
1994, various management company.
positions at Allstate.
</Table>
40
<Table>
<Caption>
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 (64) Trustee Trustee President of CAC, L.L.C., 78 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of
4350 LaJolla Village Drive offering capital funds in the Fund
Suite 980 investment and management Complex. Director of
San Diego, CA 92122-6223 advisory services. Prior Stericycle, Inc.,
to February 2001, Vice Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and
Inc., a global Trustee of The Scripps
distributor of wire, Research Institute.
cable and communications Prior to January 2005,
connectivity products. Trustee of the
Prior to July 2000, University of Chicago
Managing Partner of Hospitals and Health
Equity Group Corporate Systems. Prior to April
Investment (EGI), a 2004, Director of
company that makes TheraSense, Inc. Prior
private investments in to January 2004,
other companies. Director of TeleTech
Holdings Inc. 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).
</Table>
41
<Table>
<Caption>
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 (57) Trustee Trustee Managing Partner of 76 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of
233 South Wacker Drive executive search firm. funds in the Fund
Suite 7000 Trustee on the University Complex.
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 (53) Trustee Trustee Director and President of 76 Trustee/Director/Managing
1744 R Street, NW since 1995 the German Marshall Fund General Partner of
Washington, DC 20009 of the United States, an funds in the Fund
independent U.S. Complex.
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 (69) Trustee Trustee Prior to 1998, President 78 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of
Galena, IL 61036 Officer of Pocklington funds in the Fund
Corporation, Inc., an Complex. Director of
investment holding the Lake Forest Bank &
company. Director of the Trust.
Marrow Foundation.
</Table>
42
<Table>
<Caption>
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 (69) Trustee Trustee President of Nelson 76 Trustee/Director/Managing
423 Country Club Drive since 1995 Investment Planning General Partner of
Winter Park, FL 32789 Services, Inc., a funds in the Fund
financial planning Complex.
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 (64) Trustee Trustee President Emeritus and 78 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of
Chicago, IL 60637 University of Chicago and funds in the Fund
the Adam Smith Complex. Director of
Distinguished Service Winston Laboratories,
Professor in the Inc.
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. (63) Trustee Trustee Chief Communications 76 Trustee/Director/Managing
815 Cumberstone Road since 1999 Officer of the National General Partner of
Harwood, MD 20776 Academy of funds in the Fund
Sciences/National Complex. Director of
Research Council, an Fluor Corp., an
independent, federally engineering,
chartered policy procurement and
institution, from 2001 to construction
November 2003 and Chief organization, since
Operating Officer from January 2004 and
1993 to 2001. Director of Director of Neurogen
the Institute for Defense Corporation, a
Analyses, a federally pharmaceutical company,
funded research and since January 1998.
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.
</Table>
43
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEE*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (66) Trustee Trustee Partner in the law firm 78 Trustee/Director/Managing
333 West Wacker Drive since 1995 of Skadden, Arps, Slate, General Partner of
Chicago, IL 60606 Meagher & Flom LLP, legal funds in the Fund
counsel to funds in the Complex. Director of
Fund Complex. the Abraham Lincoln
Presidential Library
Foundation.
</Table>
* 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.
44
VAN KAMPEN HIGH YIELD FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (66) President and Officer President of funds in the Fund Complex since September 2005,
1221 Avenue of the Americas Principal Executive since 2003 Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since 2003, and previously Executive Vice President of funds
in the Fund Complex from 2003-2005. Managing Director of
Morgan Stanley and Morgan Stanley & Co. Incorporated.
Managing Director of Morgan Stanley Investment Management
Inc. Chief Administrative Officer, Managing Director and
Director of Morgan Stanley Investment Advisors Inc., Morgan
Stanley Services Company Inc. and Managing Director and
Director of Morgan Stanley Distributors Inc. Chief Executive
Officer and Director of Morgan Stanley Trust. Executive Vice
President and Principal Executive Officer of the
Institutional and Retail Morgan Stanley Funds; Director of
Morgan Stanley SICAV; previously Chief Global Operations
Officer of Morgan Stanley Investment Management Inc.
Joseph J. McAlinden (62) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., and Morgan Stanley
New York, NY 10020 Investment Officer Investment Management Inc. and Director of Morgan Stanley
Trust for over 5 years. Executive Vice President and Chief
Investment Officer of funds in the Fund Complex. Managing
Director and Chief Investment Officer of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc. since
December 2002.
Amy R. Doberman (43) Vice President Officer Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management, Inc., Morgan Stanley Investment Advisers Inc.
and the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex 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 (38) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Secretary since 2003 Vice President and Secretary of funds in the Fund Complex.
New York, NY 10020
</Table>
45
<Table>
<Caption>
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
John L. Sullivan (50) 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. Prior
to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
Phillip G. Goff (41) Chief Financial Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza Officer and since 2005 since June 2005. Chief Financial Officer and Treasurer of
Oakbrook Terrace, IL 60181 Treasurer funds in the Fund Complex since August 2005. Prior to June
2005, Vice President and Chief Financial Officer of
Enterprise Capital Management, Inc., an investment holding
company.
</Table>
46
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.
(continued on next page)
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
(continued on back)
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)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
28, 128, 228
HYI ANR 10/05
(VAN KAMPEN INVESTMENTS SHINE LOGO) RN05-02477P-Y08/05
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the Fund or a
third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by
the shareholder report presented in Item 1 hereto to delete from the end of the
following paragraph on page 2 of the Code the phrase "to the detriment of the
Fund.":
"Each Covered Officer must not use his personal influence or personal
relationship improperly to influence investment decisions or financial reporting
by the Fund whereby the Covered Officer would benefit personally (directly or
indirectly)."
Further, due to personnel changes at the Adviser, the list of Covered Officers
set forth in Exhibit B and the General Counsel designee to whom questions about
the application of the Code should be referred in Exhibit C were amended during
the period. Exhibit B was then amended again in March 2005 and a third time in
August 2005 and a fourth time in September 2005. All four editions of Exhibit B
are attached. Additionally, Exhibit B was amended to remove Mitchell M. Merin as
a covered officer.
(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 two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees : Jerry Choate and R. Craig Kennedy. Under applicable
securities laws, a person who is determined to be an audit committee financial
expert will not be deemed an "expert" for any purpose, including without
limitation for the purposes of Section 11 of the Securities Act of 1933, as a
result of being designated or identified as an audit committee financial expert.
The designation or identification of a person as an audit committee financial
expert does not impose on such person any duties, obligations, or liabilities
that are greater than the duties, obligations, and liabilities imposed on such
person as a member of the audit committee and Board of Trustees in the absence
of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
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
2004
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES................ $41,500 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES... $0 $159,500(2)
TAX FEES............. $2,000(3) $42,141(4)
ALL OTHER FEES....... $0 $222,168(6)
TOTAL NON-AUDIT FEES...... $2,000 $423,809
TOTAL..................... $43,500 $423,809
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.
(6) All Other Fees represent attestation services provided in
connection with performance presentation standards, general
industry education seminars provided, and a regulatory review
project performed.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003 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 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 registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen High Yield Fund
By: /s/ Ronald E. Robison
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2005
By: /s/ Phillip G. Goff
----------------------
Name: Phillip G. Goff
Title: Principal Financial Officer
Date: October 20, 2005