UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02851
Van Kampen High Yield Fund
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)
Ronald Robison
522 Fifth Avenue, New York, New York 10036
(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: 8/31/07
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, 2007.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUSES CONTAIN INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND,
THEREFORE, THE VALUE OF THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID
FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. PLEASE
SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT RISKS.
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
Performance Summary
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 Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap
Index(R) from 8/31/97 through 8/31/07. Class A shares, adjusted for sales
charges.
(LINE GRAPH)
LEHMAN BROTHERS U.S.
VAN KAMPEN HIGH YIELD CORPORATE HIGH YIELD 2% LIPPER HIGH YIELD BOND
FUND ISSUER CAP INDEX FUND INDEX
--------------------- ----------------------- ----------------------
8/97 9520.00 10000.00 10000.00
9738.00 10198.00 10242.20
9636.00 10206.50 10202.00
9769.00 10303.20 10276.10
9847.00 10402.10 10397.30
10058.00 10589.60 10599.30
10179.00 10651.50 10699.20
10332.00 10751.80 10854.20
10424.00 10794.00 10888.10
10455.00 10831.10 10876.10
10424.00 10870.00 10895.20
10518.00 10931.90 10969.50
9679.00 10328.70 10133.60
9569.00 10375.40 10072.80
9361.00 10162.70 9844.13
9948.00 10584.50 10422.20
8/98 9893.00 10596.10 10389.70
10011.00 10753.40 10577.80
9980.00 10690.10 10535.30
10167.00 10792.10 10721.00
10374.00 11001.20 10998.20
10170.00 10852.20 10789.40
10137.00 10829.10 10790.90
10192.00 10872.70 10794.30
10106.00 10752.50 10684.80
10072.00 10675.10 10601.50
10074.00 10604.20 10570.90
10185.00 10728.90 10757.20
8/99 10279.00 10849.60 10886.70
10318.00 10802.90 10833.20
10390.00 10823.40 10910.00
10237.00 10595.90 10721.10
10215.00 10612.80 10674.40
10097.00 10504.30 10484.30
10326.00 10718.80 10678.40
10382.00 10800.70 10697.50
10418.00 10873.80 10753.50
10256.00 10777.00 10595.20
9830.00 10438.40 10233.10
9338.00 10028.00 9661.82
8/00 9434.00 10221.30 9829.44
10006.00 10988.10 10481.60
10083.00 11139.40 10514.70
9740.00 10883.70 10165.90
9563.00 10749.60 10032.60
9686.00 10946.60 10141.10
9371.00 10641.30 9842.48
9426.00 10797.60 9900.16
9476.00 10925.60 9944.03
8810.00 10192.90 9241.88
8975.00 10442.80 9453.26
9279.00 10822.60 9753.52
8/01 9184.00 10779.50 9727.17
9113.00 10854.80 9750.60
8755.00 10706.80 9578.27
8941.00 10965.20 9767.85
9028.00 11138.80 9869.98
8920.00 11082.90 9770.93
8314.00 10417.40 9220.82
7950.00 9972.31 8918.55
7984.00 10236.00 9072.10
7877.00 10105.00 8945.88
7795.00 10001.20 8889.27
8253.00 10610.70 9401.70
8/02 8319.00 10753.50 9493.05
8438.00 11099.90 9702.98
8585.00 11243.20 9833.01
8808.00 11560.70 10078.50
9221.00 12245.00 10573.30
9312.00 12369.20 10699.00
9536.00 12728.10 10987.30
9433.00 12600.30 10902.70
9521.00 12734.90 11049.10
9777.00 13082.00 11317.30
9979.00 13344.80 11571.30
10098.00 13544.80 11705.30
8/03 10330.00 13848.40 11995.20
10447.00 14114.20 12187.70
10422.00 14081.50 12163.80
10483.00 14177.50 12210.20
10487.00 14082.30 12182.40
10345.00 13842.70 11994.20
10495.00 14040.20 12161.90
10646.00 14231.10 12258.90
10857.00 14511.10 12459.00
11009.00 14720.70 12632.00
11193.00 14985.60 12856.70
11287.00 15165.80 13039.20
8/04 11412.00 15390.70 13235.80
11416.00 15370.80 13203.30
11573.00 15596.00 13405.00
11206.00 15143.60 13049.40
11055.00 14996.40 12897.00
11183.00 15262.10 13103.70
11376.00 15536.70 13313.70
11537.00 15782.10 13521.20
11605.00 15831.20 13585.50
11481.00 15690.00 13497.20
11356.00 15550.20 13386.00
11457.00 15670.90 13507.90
8/05 11558.00 15814.90 13632.50
11660.00 16002.30 13808.40
11763.00 16158.40 13924.20
11800.00 16226.20 13981.10
11871.00 16327.40 14061.70
11840.00 16306.00 14030.90
11774.00 16215.00 13952.60
11878.00 16353.80 14059.10
12017.00 16595.40 14250.50
12127.00 16825.20 14408.10
12244.00 17054.30 14616.40
12420.00 17324.10 14868.70
8/06 12493.00 17516.00 15018.80
12600.00 17716.50 15179.50
12779.00 17975.10 15376.40
12829.00 18006.00 15425.30
12962.00 18240.60 15638.40
13012.00 18367.00 15771.50
12834.00 18033.90 15515.40
12544.00 17407.00 15012.40
8/07 12754.00 17667.10 15157.20
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
AVERAGE 4.75% 4.00% 1.00%
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 7.28% 7.10% 5.27% 5.27% 4.35% 4.35% 5.34%
10-year 2.98 2.47 2.33 2.33 2.20 2.20 --
5-year 9.84 8.76 8.97 8.76 9.00 9.00 --
1-year 6.23 1.29 5.41 1.44 5.59 4.60 6.49
------------------------------------------------------------------------------------------------------
30-Day SEC Yield 7.70% 7.27% 7.39% 8.34%
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END
PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL
ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
The returns shown in this report do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Performance of share classes will vary due to differences in sales charges and
expenses. As a result of recent market activity, current performance may vary
from the figures shown. Average annual total return with sales charges includes
payment of the maximum sales charge of 4.75 percent for Class A shares, a
contingent deferred sales charge of 4.00 percent for Class B shares (in years
one and two and declining to zero after year five), a contingent deferred sales
charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1
fees and service fees of up to 0.25 percent for Class A shares and up to 1.00
percent for Class B and C shares. The since inception and ten-year returns for
Class B shares reflect the conversion of Class B shares into Class A shares
eight years after purchase. The since inception returns for Class C shares
reflect the conversion of Class C shares into Class A shares ten years after
purchase. Class I shares are available for purchase exclusively by investors
through (i) tax-exempt retirement plans with assets of at least $1 million
(including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit
sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least $1 million and (iii) institutional clients with assets of at least $1
million. Class I shares are offered without any sales charges on purchases or
sales and do not include combined Rule 12b-1 fees and service fees. Figures
shown above assume reinvestment of all dividends and capital gains. SEC yield is
a calculation
1
for determining the amount of portfolio income, excluding non-income items as
prescribed by the SEC. Yields are subject to change.
The Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index is a
broad-based index that reflects the general performance of the U.S. dollar
denominated, fixed-rate, non-investment grade, taxable corporate bond market.
Issuers are capped at 2% of the index. Lipper High Yield Bond Fund Index is an
index of funds with similar investment 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.
2
Fund Report
FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2007
MARKET CONDITIONS
Strong fundamental and technical factors supported the high yield market for
much of the 12-month reporting period, helping it to outperform Treasuries for
the first nine months. In June, however, a combination of factors including
fears about the contagion effect of the troubled subprime mortgage market on the
broader economy, rising interest rates, increased market volatility, and a heavy
new issue calendar, put pressure on the high yield market, and prices began to
decline. Up until that time, demand for high yield securities had been robust as
loose credit conditions, rising equity prices, and low interest rates fueled
investor confidence in the market and an increasing willingness to assume
greater risk in order to capture potentially higher yields. But as concerns
about the subprime fallout escalated, investor confidence waned, equity
performance fell off, and the market began to reprice risk across the credit
markets. A Treasury market rally ensued in July, resulting in a particularly
difficult month for high yield as investors fled to the relative safety of
high-quality securities. In August, however, the high yield market rebounded,
performing in line with equities but still underperforming Treasuries.
High yield credit spreads tightened throughout much of the period, but widened
considerably in July. Spreads continued to widen in August, but to a much
smaller degree than in the previous month, ending the period 467 basis points
over Treasuries, yet still somewhat tighter than long-term historical averages.
New issue supply was strong overall, particularly in May and June when monthly
issuance reached approximately $25 billion. But the new issue market essentially
closed in July and August when only $5 billion and $3 billion, respectively,
came to market. The lower quality tiers of the high yield market turned in the
best performance through June, with CCC rated bonds outperforming higher-quality
issues. But in the last two months of the period, as investors reduced risk,
higher-quality B and BB rated bonds outperformed. Sector performance varied
considerably throughout the period, but individual industry performance remained
in positive territory until July. The financial sector and sectors related to
the housing market have been particularly hard hit by the recent market troubles
and were among the worst performing sectors in the latter months of the period.
3
PERFORMANCE ANALYSIS
Classes A, B and C shares of Van Kampen High Yield Fund underperformed the
Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index and the Lipper
High Yield Bond Fund Index, while Class I shares outperformed both indices for
the 12 months ended August 31, 2007, assuming no deduction of applicable sales
charges.
TOTAL RETURNS FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2007
----------------------------------------------------------------------------------
LEHMAN BROTHERS LIPPER HIGH
U.S. CORPORATE YIELD
HIGH YIELD 2% BOND FUND
CLASS A CLASS B CLASS C CLASS I ISSUER CAP INDEX INDEX
6.23% 5.41% 5.59% 6.49% 6.46% 6.36%
----------------------------------------------------------------------------------
The performance for the four share classes varies because each has different
expenses. The Fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and
index definitions.
We have long been of the opinion that high yield credit spreads are too tight
and therefore, have continued to position the portfolio defensively in terms of
credit quality. The Fund maintained a higher overall credit quality than that of
the Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index, which was the
primary reason for the Fund's relative underperformance. This emphasis on
higher-rated securities hindered overall performance as the lowest-quality tiers
of the market outperformed higher-quality securities for much of the reporting
period. In the last few months, however, this strategy was beneficial as the
market's flight to quality boosted the performance of higher-rated bonds.
The Fund's interest-rate positioning was also somewhat defensive in that its
duration (a measure of interest rate sensitivity) was below that of the Lehman
Brothers U.S. Corporate High Yield 2% Issuer Cap Index. The Fund's lower
relative sensitivity to interest rate changes had a minimal impact on
performance for most of the first half of the reporting period as interest rates
remained fairly stable. Although this positioning dampened performance somewhat
in the first calendar quarter of the year when rates declined, it was additive
to returns later in the period when rates were rising.
Strong security selection in various sectors, including energy, retail, and
metals/mining added to relative returns. Conversely, security selection in the
financials and chemicals industry, as well as an underweight to the cable
industry, detracted from performance. As of the end of the reporting period, the
Fund's major sector overweights were in the health care and the
food/tobacco/beverage sectors. The largest sector underweights were in retail,
technology, and media.
4
The decline in prices in recent months provided attractive opportunities to add
several positions to the Fund. In our opinion, the spread widening that has
occurred in recent months is overdue and has brought spreads to more realistic
levels. Although it is difficult to predict whether prices will decline further
in the coming months, we believe spreads remain somewhat tight and that higher
volatility and continued risk aversion would likely lead to wider spreads for
the asset class in the coming months. For these reasons, we continue to feel
that it is prudent to maintain the Fund's defensive positioning.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.
5
RATINGS ALLOCATION AS OF 8/31/07
AAA/Aaa 0.3%
AA/Aa 1.2
A/A 0.7
BBB/Baa 6.1
BB/Ba 31.2
B/B 52.3
CCC/Caa 4.6
Non-Rated 3.6
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 8/31/07
Health Care 8.9%
Automotive 6.1
Integrated Energy 6.1
Chemicals 6.0
Gaming 5.3
Media-Cable 5.1
Paper 4.6
Media-Noncable 4.5
Food/Beverage 4.4
Electric 4.4
Technology 3.6
Services 3.4
Pipelines 3.3
Wireline 2.9
Metals 2.7
Oil Field Services 2.7
Diversified Manufacturing 2.5
Retailers 2.3
Home Construction 2.2
Consumer Products 1.9
Packaging 1.9
Supermarkets 1.9
Wireless 1.8
Environmental 1.7
Lodging 1.6
Collateralized Mortgage Obligations 1.6
Utility 1.0
Tobacco 0.6
Finance 0.5
Aerospace & Defense 0.5
Pharmaceuticals 0.5
Sovereigns 0.5
Noncaptive-Diversified Finance 0.2
-----
Total Long-Term Investments 97.2
Total Short-Term Investments 1.1
-----
Total Investments 98.3
Foreign Currency 0.4
Other Assets in Excess of Liabilities 1.3
-----
Net Assets 100.0%
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. Ratings allocations are as a
percentage of debt obligations. Industry allocations are as a percentage of net
assets. Van Kampen is a wholly owned subsidiary of a global securities firm
engaged in a wide range of financial services including, for example, securities
trading and brokerage activities, investment banking, research and analysis,
financing and financial advisory services. Ratings allocations based upon
ratings as issued by Standard and Poor's and Moody's, respectively.
6
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. You can also request copies of these materials, upon payment of
a duplicating fee, by electronic request at the SEC's email address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549 -0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
7
HOUSEHOLDING NOTICE
To reduce Fund expenses, the Fund attempts to eliminate duplicate
mailings to the same address. The Fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The Fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the Fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the Fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
8
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charges on redemptions of Class B and C Shares;
and redemption fees; and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees; and other Fund expenses. This example is
intended to help you understand your ongoing cost (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 3/1/07 - 8/31/07.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges or redemption fees.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
3/1/07 8/31/07 3/1/07-8/31/07
Class A
Actual...................................... $1,000.00 $ 998.04 $4.53
Hypothetical................................ 1,000.00 1,020.67 4.58
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 994.31 8.29
Hypothetical................................ 1,000.00 1,016.89 8.39
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 994.27 8.29
Hypothetical................................ 1,000.00 1,016.89 8.39
(5% annual return before expenses)
Class I
Actual...................................... 1,000.00 999.28 3.28
Hypothetical................................ 1,000.00 1,021.93 3.31
(5% annual return before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 0.90%, 1.65%,
1.65% and 0.65% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 184/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
9
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.
At meetings held on April 17, 2007 and May 30, 2007, the Board of Trustees, and
the independent trustees voting separately, considered and ultimately determined
that the terms of the investment advisory agreement are fair and reasonable and
approved the continuance of the investment advisory agreement as being in the
best interests of the Fund and its shareholders. In making its determination,
the Board of Trustees considered materials that were specifically prepared by
the investment adviser at the request of the Board and Fund counsel, and by an
independent provider of investment company data contracted to assist the Board,
relating to the investment advisory agreement review process. The Board also
considered information received periodically about the portfolio, performance,
the investment strategy, portfolio management team and fees and expenses of the
Fund. Finally, the Board considered materials it had received in approving a
proposed reduction in the advisory fee rate effective June 1, 2005 and approving
a reverse stock split for the Fund, as discussed by Board of Trustees at its
June 2006 meeting. The Board of Trustees considered the investment advisory
agreement over a period of several months and the trustees held sessions both
with the investment adviser and separate from the investment adviser in
reviewing and considering the investment advisory agreement.
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
10
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
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 agreement.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory agreement.
11
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees discuss with the investment adviser its revenues and expenses,
including among 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 agreement.
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 agreement.
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 agreement.
12
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
CORPORATE BONDS 94.4%
AEROSPACE & DEFENSE 0.5%
$ 2,870 DAE Aviation Holdings (a).................... 11.250% 08/01/15 $ 2,870,000
------------
AUTOMOTIVE 6.1%
4,345 ArvinMeritor, Inc. .......................... 8.750 03/01/12 4,323,275
3,675 Ford Motor Credit Co. ....................... 5.800 01/12/09 3,463,937
6,080 Ford Motor Credit Co. ....................... 7.000 10/01/13 5,421,086
4,195 Ford Motor Credit Co. ....................... 7.250 10/25/11 3,827,497
4,450 General Motors Acceptance Corp. ............. 4.375 12/10/07 4,392,822
6,220 General Motors Acceptance Corp. ............. 6.875 09/15/11 5,552,059
1,690 General Motors Corp. ........................ 7.125 07/15/13 1,453,400
2,195 General Motors Corp. ........................ 8.375 07/15/33 1,772,463
2,955 Penske Automotive Group, Inc. ............... 7.750 12/15/16 2,836,800
------------
33,043,339
------------
CHEMICALS 6.0%
2,828 Equistar Chemicals, LP....................... 10.125 09/01/08 2,948,190
354 Equistar Chemicals, LP....................... 10.625 05/01/11 375,240
1,715 Innophos Holdings, Inc. (a).................. 9.500 04/15/12 1,706,425
2,700 Innophos, Inc. .............................. 8.875 08/15/14 2,673,000
EUR 1,959 JohnsonDiversey, Inc. ....................... 9.625 05/15/12 2,722,019
3,463 JohnsonDiversey, Inc. Ser B.................. 9.625 05/15/12 3,497,630
2,585 Koppers Holdings, Inc. (b)................... 0/9.875 11/15/14 2,171,400
1,730 Koppers, Inc. ............................... 9.875 10/15/13 1,807,850
2,775 Nalco Co. ................................... 7.750 11/15/11 2,837,438
3,960 Nalco Co. ................................... 8.875 11/15/13 4,068,900
EUR 1,390 Rockwood Specialties Group, Inc. ............ 7.625 11/15/14 1,846,188
3,185 Terra Capital, Inc. ......................... 7.000 02/01/17 3,073,525
2,940 Westlake Chemical Corp. ..................... 6.625 01/15/16 2,719,500
------------
32,447,305
------------
CONSUMER PRODUCTS 1.9%
3,740 Jarden Corp. ................................ 7.500 05/01/17 3,515,600
2,460 Oxford Industrials, Inc. .................... 8.875 06/01/11 2,478,450
4,305 Phillips-Van Heusen Corp. ................... 7.250 02/15/11 4,353,431
------------
10,347,481
------------
DIVERSIFIED MANUFACTURING 2.5%
1,295 Baldor Electric Co. ......................... 8.625 02/15/17 1,343,563
4,645 Hexcel Corp. ................................ 6.750 02/01/15 4,540,487
3,235 Propex Fabrics, Inc. ........................ 10.000 12/01/12 2,701,225
4,660 RBS Global & Rexnord Corp. .................. 9.500 08/01/14 4,729,900
------------
13,315,175
------------
ELECTRIC 4.4%
925 AES Corp. ................................... 7.750 03/01/14 920,375
528 AES Corp. ................................... 8.875 02/15/11 545,160
3,035 AES Corp. (a)................................ 9.000 05/15/15 3,179,162
740 AES Corp. ................................... 9.375 09/15/10 777,000
See Notes to Financial Statements 13
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
ELECTRIC (CONTINUED)
$ 3,150 Dynegy Holdings, Inc. (a).................... 7.750% 06/01/19 $ 2,929,500
3,380 InterGen NV (Netherlands) (a)................ 9.000 06/30/17 3,447,600
2,585 IPALCO Enterprises, Inc. .................... 8.375 11/14/08 2,630,238
1,355 IPALCO Enterprises, Inc. .................... 8.625 11/14/11 1,399,038
2,945 Nevada Power Co. Ser A....................... 8.250 06/01/11 3,223,797
1,646 PSEG Energy Holdings......................... 8.625 02/15/08 1,668,751
2,945 Reliant Energy, Inc. ........................ 7.875 06/15/17 2,893,463
190 Sierra Pacific Power Co. Ser H............... 6.250 04/15/12 195,435
------------
23,809,519
------------
ENVIRONMENTAL 1.7%
5,715 Allied Waste North America, Inc. ............ 6.375 04/15/11 5,657,850
1,850 Allied Waste North America, Inc. ............ 7.875 04/15/13 1,887,000
1,437 Allied Waste North America, Inc. Ser B....... 9.250 09/01/12 1,501,665
------------
9,046,515
------------
FINANCE 0.5%
2,752 UCAR Finance, Inc. .......................... 10.250 02/15/12 2,889,600
------------
FOOD/BEVERAGE 4.4%
2,320 Constellation Brands, Inc. (a)............... 7.250 05/15/17 2,262,000
3,000 Michael Foods, Inc. ......................... 8.000 11/15/13 2,985,000
4,720 Pilgrim's Pride Corp. ....................... 7.625 05/01/15 4,731,800
7,600 Pilgrim's Pride Corp. ....................... 9.625 09/15/11 7,853,308
4,565 Smithfield Foods, Inc. ...................... 7.000 08/01/11 4,587,825
450 Smithfield Foods, Inc. Ser B................. 7.750 05/15/13 454,500
1,080 Smithfield Foods, Inc. Ser B................. 8.000 10/15/09 1,112,400
------------
23,986,833
------------
GAMING 5.3%
993 Caesars Entertainment........................ 8.875 09/15/08 1,009,136
6,935 Isle of Capri Casinos, Inc. ................. 7.000 03/01/14 6,050,787
5,440 Las Vegas Sands Corp. ....................... 6.375 02/15/15 5,195,200
9,470 MGM Mirage, Inc. ............................ 6.000 10/01/09 9,434,487
3,005 Station Casinos, Inc. ....................... 6.000 04/01/12 2,802,163
3,795 Station Casinos, Inc. ....................... 6.875 03/01/16 3,197,288
1,085 Station Casinos, Inc. ....................... 7.750 08/15/16 1,044,313
------------
28,733,374
------------
HEALTH CARE 8.9%
2,885 Community Health Systems, Inc. (a)........... 8.875 07/15/15 2,895,819
3,745 DaVita, Inc. ................................ 6.625 03/15/13 3,642,012
4,345 Fisher Scientific International, Inc. ....... 6.125 07/01/15 4,263,418
4,050 FMC Finance III SA (Luxembourg) (a).......... 6.875 07/15/17 3,989,250
9,830 Fresenius Medical Care Capital Trust IV...... 7.875 06/15/11 10,051,175
2,545 HCA, Inc. ................................... 5.750 03/15/14 2,048,725
3,810 HCA, Inc. ................................... 6.250 02/15/13 3,276,600
4,795 HCA, Inc. ................................... 6.500 02/15/16 3,931,900
940 HCA, Inc. ................................... 8.750 09/01/10 937,650
14 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
$ 545 HCA, Inc. (a)................................ 9.125% 11/15/14 $ 559,988
680 Invacare Corp. .............................. 9.750 02/15/15 659,600
2,655 National Mentor Holdings, Inc. .............. 11.250 07/01/14 2,801,025
3,885 Omnicare, Inc. .............................. 6.750 12/15/13 3,632,475
750 Omnicare, Inc. .............................. 6.875 12/15/15 703,125
2,215 Sun Healthcare Group, Inc. (a)............... 9.125 04/15/15 2,226,075
1,480 Tenet Healthcare Corp. ...................... 7.375 02/01/13 1,235,800
1,710 Tenet Healthcare Corp. ...................... 9.875 07/01/14 1,521,900
------------
48,376,537
------------
HOME CONSTRUCTION 2.2%
968 Goodman Global Holdings, Inc. Ser B (c)...... 8.360 06/15/12 951,060
3,365 Interface, Inc. Ser B........................ 9.500 02/01/14 3,499,600
1,435 Interface, Inc. ............................. 10.375 02/01/10 1,492,400
5,130 Nortek, Inc. ................................ 8.500 09/01/14 4,463,100
1,550 Realogy Corp. (a)............................ 10.500 04/15/14 1,309,750
------------
11,715,910
------------
INTEGRATED ENERGY 6.1%
2,325 Chesapeake Energy Corp. ..................... 6.375 06/15/15 2,234,906
4,360 Chesapeake Energy Corp. ..................... 7.500 09/15/13 4,458,100
960 Cimarex Energy Co. .......................... 7.125 05/01/17 940,800
109 Hanover Equipment Trust Ser A................ 8.500 09/01/08 109,273
3,042 Hanover Equipment Trust Ser B................ 8.750 09/01/11 3,140,865
6,685 Hilcorp Energy/Finance Corp. (a)............. 7.750 11/01/15 6,434,313
3,460 Husky Oil, Ltd. (Canada)..................... 8.900 08/15/28 3,587,383
6,170 Massey Energy Co. ........................... 6.875 12/15/13 5,599,275
3,450 Pacific Energy Partners...................... 7.125 06/15/14 3,546,262
2,820 SandRidge Energy, Inc. (Senior Unsecured Term
Loan) (a).................................... 8.625 04/01/15 2,756,550
------------
32,807,727
------------
LODGING 1.6%
5,000 Host Marriott, LP............................ 6.375 03/15/15 4,875,000
4,000 Host Marriott, LP Ser J...................... 7.125 11/01/13 4,000,000
------------
8,875,000
------------
MEDIA--CABLE 5.1%
6,005 Cablevision Systems Corp. (c)................ 9.820 04/01/09 6,185,150
1,839 CCH I, LLC................................... 11.000 10/01/15 1,811,415
1,355 CCH II, LLC/CCH II Capital Co. .............. 10.250 09/15/10 1,375,325
5,320 Echostar DBS Corp. .......................... 6.375 10/01/11 5,240,200
1,290 Echostar DBS Corp. .......................... 6.625 10/01/14 1,251,300
1,505 Intelsat Bermuda, Ltd. (Bermuda) (c)......... 8.886 01/15/15 1,523,813
460 Intelsat Subsidiary Holding Co., Ltd.
(Bermuda).................................... 8.250 01/15/13 464,600
4,315 Intelsat Subsidiary Holding Co., Ltd.
(Bermuda).................................... 8.625 01/15/15 4,363,544
3,740 Lin Television Corp. ........................ 6.500 05/15/13 3,534,300
655 NTL Cable, PLC (United Kingdom).............. 8.750 04/15/14 666,462
360 NTL Cable, PLC (United Kingdom).............. 9.125 08/15/16 365,850
See Notes to Financial Statements 15
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
MEDIA--CABLE (CONTINUED)
$ 898 PanAmSat Corp. .............................. 9.000% 08/15/14 $ 918,205
4,000 Park N View, Inc. Ser B (d) (e) (f).......... 13.000 05/15/08 0
------------
27,700,164
------------
MEDIA--NONCABLE 4.5%
6,187 CanWest Media, Inc. (Canada)................. 8.000 09/15/12 6,055,377
2,282 Dex Media East/Finance Corp., LLC............ 12.125 11/15/12 2,441,740
3,587 Dex Media West/Finance Corp., LLC Ser B...... 9.875 08/15/13 3,802,220
4,700 Idearc, Inc. ................................ 8.000 11/15/16 4,664,750
2,250 Interpublic Group of Cos., Inc. ............. 6.250 11/15/14 2,013,750
2,065 Univision Communications, Inc. (a) (g)....... 9.750 03/15/15 1,977,238
4,020 Valassis Communications, Inc. ............... 8.250 03/01/15 3,437,100
------------
24,392,175
------------
METALS 2.7%
1,340 Foundation PA Coal Co. ...................... 7.250 08/01/14 1,289,750
2,640 Freeport McMoRan Cooper & Gold, Inc. ........ 8.375 04/01/17 2,818,200
7,050 Novelis, Inc. (Canada)....................... 7.250 02/15/15 6,873,750
EUR 2,445 SGL Carbon Luxembourg SA (Luxembourg) (a).... 8.500 02/01/12 3,505,561
------------
14,487,261
------------
NONCAPTIVE-DIVERSIFIED FINANCE 0.2%
840 Capmark Financial Group, Inc. (a)............ 5.875 05/10/12 744,680
350 Capmark Financial Group, Inc. (a)............ 6.300 05/10/17 284,780
------------
1,029,460
------------
OIL FIELD SERVICES 2.7%
4,700 Chaparral Energy, Inc. ...................... 8.500 12/01/15 4,230,000
705 Chaparral Energy, Inc. (a)................... 8.875 02/01/17 638,025
2,220 Compagnie Generale de Geophysique
SA (France).................................. 7.500 05/15/15 2,242,200
2,635 OPTI Canada, Inc. (Canada) (a)............... 8.250 12/15/14 2,681,113
4,560 Pogo Producing Co. .......................... 6.875 10/01/17 4,617,000
------------
14,408,338
------------
PACKAGING 1.9%
EUR 1,975 Crown European Holdings SA (France).......... 6.250 09/01/11 2,690,442
2,100 Owens-Illinois, Inc. ........................ 7.350 05/15/08 2,110,500
5,540 Owens-Illinois, Inc. ........................ 7.500 05/15/10 5,540,000
------------
10,340,942
------------
PAPER 4.6%
6,115 Berry Plastics Holding Corp. ................ 8.875 09/15/14 6,130,288
2,785 Berry Plastics Holding Corp. ................ 10.250 03/01/16 2,687,525
1,490 Crown Americas............................... 7.625 11/15/13 1,504,900
3,610 Georgia-Pacific Corp. (a).................... 7.125 01/15/17 3,411,450
1,345 Graham Packaging Co., Inc. .................. 8.500 10/15/12 1,318,100
3,965 Graham Packaging Co., Inc. .................. 9.875 10/15/14 3,905,525
4,870 Graphic Packaging International, Inc. ....... 9.500 08/15/13 4,943,050
16 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
PAPER (CONTINUED)
$ 114 Owens-Brockway Glass Containers, Inc. ....... 8.875% 02/15/09 $ 116,422
1,085 P.H. Glatfelter.............................. 7.125 05/01/16 1,074,150
------------
25,091,410
------------
PHARMACEUTICALS 0.5%
2,699 Warner Chilcott Corp. ....................... 8.750 02/01/15 2,705,748
------------
PIPELINES 3.3%
6,425 Colorado Interstate Gas Co. ................. 6.800 11/15/15 6,662,359
4,785 Kinder Morgan Finance Co.(Canada)............ 5.700 01/05/16 4,266,655
6,210 Williams Cos., Inc. ......................... 7.875 09/01/21 6,691,275
------------
17,620,289
------------
RETAILERS 2.3%
3,350 Brown Shoe Co., Inc. ........................ 8.750 05/01/12 3,433,750
5,720 Petro Stopping Center, LP.................... 9.000 02/15/12 5,991,700
3,225 Rite Aid Corp. .............................. 8.125 05/01/10 3,241,125
------------
12,666,575
------------
SERVICES 3.4%
1,750 Aramark Services, Inc. ...................... 5.000 06/01/12 1,509,375
790 Aramark Services, Inc. ...................... 8.500 02/01/15 790,988
250 Aramark Services, Inc. (c)................... 8.856 02/01/15 248,750
1,610 Asbury Automotive Group, Inc. (a)............ 7.625 03/15/17 1,489,250
6,870 CHC Helicopter Corp. (Canada)................ 7.375 05/01/14 6,423,450
8,425 Sonic Automotive, Inc. Ser B................. 8.625 08/15/13 8,298,625
------------
18,760,438
------------
SUPERMARKETS 1.9%
2,392 Delhaize America, Inc. ...................... 9.000 04/15/31 2,810,600
3,279 Kroger Co. (a)............................... 8.500 07/15/17 3,547,365
2,345 SUPERVALU, Inc. ............................. 7.500 05/15/12 2,433,796
1,305 SUPERVALU, Inc. ............................. 7.500 11/15/14 1,324,575
------------
10,116,336
------------
TECHNOLOGY 2.9%
4,700 Freescale Semiconductor, Inc. ............... 8.875 12/15/14 4,359,250
525 Iron Mountain, Inc. ......................... 6.625 01/01/16 475,125
2,050 Iron Mountain, Inc. ......................... 7.750 01/15/15 2,003,875
3,070 Iron Mountain, Inc. ......................... 8.625 04/01/13 3,085,350
2,275 PGS Solutions, Inc. (a)...................... 9.625 02/15/15 2,115,750
3,540 Sungard Data Systems, Inc. .................. 9.125 08/15/13 3,672,750
------------
15,712,100
------------
TOBACCO 0.6%
3,055 Reynolds American, Inc. ..................... 6.500 07/15/10 3,132,899
------------
UTILITY 1.0%
5,261 Ormat Funding Corp. ......................... 8.250 12/30/20 5,260,731
------------
See Notes to Financial Statements 17
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
WIRELESS 1.8%
$ 3,090 American Tower Corp. ........................ 7.125% 10/15/12 $ 3,105,450
3,085 American Tower Corp. ........................ 7.500 05/01/12 3,131,275
3,340 Wind Acquisition Finance SA (Luxembourg)
(a).......................................... 10.750 12/01/15 3,456,900
------------
9,693,625
------------
WIRELINE 2.9%
3,986 Axtel SA (Mexico)............................ 11.000 12/15/13 4,284,950
1,535 Citizens Communications Co................... 6.250 01/15/13 1,481,275
6,030 Exodus Communications, Inc. (d) (e) (f)...... 11.250 07/01/08 0
EUR 4,000 Exodus Communications, Inc. (d) (e) (f)...... 11.375 07/15/08 0
770 Exodus Communications, Inc. (d) (e) (f)...... 11.625 07/15/10 0
8,250 GST Network Funding, Inc. (d) (e) (f)........ 10.500 05/01/08 825
1,320 Nordic Telephone Co. Holdings (Denmark)
(a).......................................... 8.875 05/01/16 1,372,800
4,357 Qwest Communications International, Inc.
(c).......................................... 9.058 02/15/09 4,389,677
990 Qwest Corp. ................................. 5.625 11/15/08 992,475
EUR 1,100 TDC A S (Denmark)............................ 6.500 04/19/12 1,499,224
1,410 Windstream Corp. ............................ 8.125 08/01/13 1,462,875
------------
15,484,101
------------
TOTAL CORPORATE BONDS 94.4%.................................... 510,866,907
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 1.6%
1,685 American Home Mortgage Assets (c)............ 5.805 06/25/47 1,513,140
1,668 Countrywide Alternative Loan Trust (c)....... 6.025 10/25/46 1,128,452
1,300 Countrywide Alternative Loan Trust (c)....... 6.325 01/25/36 979,368
1,375 Harborview Mortgage Loan Trust (c)........... 6.088 08/21/36 947,499
1,775 Harborview Mortgage Loan Trust (c)........... 6.238 01/19/36 1,554,452
2,061 Luminent Mortgage Trust (c).................. 5.865 07/25/36 1,806,248
920 Residential Accredit Loans, Inc. (c)......... 6.255 01/25/46 822,361
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS....................... 8,751,520
------------
FOREIGN CONVERTIBLE CORPORATE
OBLIGATIONS 0.7%
3,980 Nortel Networks Corp. (Canada)............... 4.250 09/01/08 3,950,150
------------
FOREIGN GOVERNMENT OBLIGATIONS 0.5%
MXN24,425 Mexico (United Mexican States) (Mexico)...... 9.500 12/18/14 2,423,018
------------
18 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
DESCRIPTION VALUE
--------------------------------------------------------------------------------------------
EQUITIES 0.0%
DecisionOne Corp. (19,895 Common Shares) (f) (h)............................. $ 0
HF Holdings, Inc. (36,820 Common Stock Warrants, expiring 09/27/09) (f)
(h)........................................................................ 0
Hosiery Corp. of America, Inc., Class A (1,000 Common Shares) (a) (f) (h).... 0
Jazztel, PLC (5,000 Common Stock Warrants, expiring 07/15/10) (EUR) (United
Kingdom) (a) (h)........................................................... 0
NEON Communications Group, Inc. (1,830 Common Shares) (h).................... 8,784
OpTel, Inc. (3,275 Common Shares) (a) (f) (h)................................ 0
Park N View, Inc. (4,000 Common Stock Warrants, expiring 05/15/18) (a) (f)
(h)........................................................................ 0
Reunion Industries, Inc. (107,947 Common Stock Warrants, expiring 12/02/08)
(f) (h).................................................................... 0
Ventelo, Inc. (73,021 Common Shares) (EUR) (United Kingdom) (a) (f) (h)...... 0
Viatel Holding Bermuda, Ltd. (7,852 Common Shares) (Bermuda) (h)............. 253
VS Holdings, Inc. (946,962 Common Shares) (f) (h)............................ 0
XO Holdings, Inc. (3,469 Common Shares) (h).................................. 12,141
XO Holdings, Inc., Ser A (6,941 Common Stock Warrants, expiring 01/16/10)
(h)........................................................................ 4,512
XO Holdings, Inc., Ser B (5,205 Common Stock Warrants, expiring 01/16/10)
(h)........................................................................ 1,822
XO Holdings, Inc., Ser C (5,205 Common Stock Warrants, expiring 01/16/10)
(h)........................................................................ 781
------------
TOTAL EQUITIES............................................................... 28,293
------------
TOTAL LONG-TERM INVESTMENTS 97.2%
(Cost $576,400,435)........................................................ 526,019,888
------------
SHORT-TERM INVESTMENTS 1.1%
REPURCHASE AGREEMENTS 0.7%
Banc of America Securities ($1,293,585 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 5.30%, dated
08/31/07, to be sold on 09/04/07 at $1,294,347)............................ 1,293,585
Citigroup Global Markets, Inc. ($1,149,854 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.25%,
dated 08/31/07, to be sold on 09/04/07 at $1,150,525)...................... 1,149,854
State Street Bank & Trust Co. ($1,396,561 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 4.83%,
dated 08/31/07, to be sold on 09/04/07 at $1,397,310)...................... 1,396,561
------------
TOTAL REPURCHASE AGREEMENTS.................................................. 3,840,000
------------
See Notes to Financial Statements 19
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
DESCRIPTION VALUE
--------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 0.4%
United States Treasury Bill ($1,900,000 par, yielding 4.972%, 01/10/08
maturity) (i).............................................................. $ 1,866,742
------------
TOTAL SHORT-TERM INVESTMENTS 1.1%
(Cost $5,706,742).......................................................... 5,706,742
------------
TOTAL INVESTMENTS 98.3%
(Cost $582,107,177)........................................................ 531,726,630
FOREIGN CURRENCY 0.4%
(Cost $2,226,928).......................................................... 2,248,467
OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%.................................. 7,222,947
------------
NET ASSETS 100.0%........................................................... $541,198,044
============
Percentages are calculated as a percentage of net assets.
(a) 144A-Private Placement security which is exempt from registration under Rule
144A of the Securities Act of 1933, as amended. This security may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) Floating Rate Coupon
(d) Non-income producing as security is in default.
(e) This borrower has filed for protection in federal bankruptcy court.
(f) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(g) Payment-in-kind security.
(h) Non-income producing security as this stock currently does not declare
income dividends.
(i) All or a portion of this security has been physically segregated in
connection with open futures or swap contracts.
Currency Abbreviations:
EUR--Euro
MXN--Mexican Peso
20 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
SWAP AGREEMENTS OUTSTANDING AS OF AUGUST 31, 2007:
CREDIT DEFAULT SWAPS
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
JP Morgan Chase Bank,
N.A., New York....... Belo Corp. Buy 1.180% 06/20/14 $1,085 $ 0 $ (8,642)
JP Morgan Chase Bank,
N.A., New York....... Belo Corp. Buy 1.300 06/20/14 3,070 0 (45,995)
JP Morgan Chase Bank,
N.A., New York....... CDX.NA.HY.8 Sell 2.750 06/20/12 17,000 (1,147,500) (737,715)
----------- ---------
TOTAL CREDIT DEFAULT SWAPS........................................................ $(1,147,500) $(792,352)
=========== =========
INTEREST RATE SWAPS
PAY/
FLOATING RECEIVE NOTIONAL
RATE FLOATING FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY INDEX RATE RATE DATE (000) PAYMENTS VALUE
JP Morgan Chase Bank,
N.A, New York........... USD-LIBOR BBA Pay 5.361% 08/24/17 $13,500 $ 0 $ 130,139
JP Morgan Chase Bank,
N.A., New York.......... USD-LIBOR BBA Pay 5.428 08/20/17 37,000 0 549,942
----------- ---------
TOTAL INTEREST RATE SWAPS.......................................................... $ 0 $ 680,081
----------- ---------
TOTAL SWAP AGREEMENTS.............................................................. $(1,147,500) $(112,271)
=========== =========
See Notes to Financial Statements 21
VAN KAMPEN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2007 continued
FUTURES CONTRACTS OUTSTANDING AS OF AUGUST 31, 2007:
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
LONG CONTRACTS:
U.S. Treasury Notes 10-Year Futures, December 2007
(Current Notional Value of $109,047 per contract)......... 287 $210,169
U.S. Treasury Notes 2-Year Futures, December 2007
(Current Notional Value of $206,156 per contract)......... 130 (5,467)
U.S. Treasury Notes 5-Year Futures, December 2007
(Current Notional Value of $106,703 per contract)......... 81 34,957
SHORT CONTRACTS:
U.S. Treasury Bond Futures, September 2007
(Current Notional Value of $111,781 per contract)......... 34 (59,594)
U.S. Treasury Bond Futures, December 2007
(Current Notional Value of $111,563 per contract)......... 340 (107,461)
U.S. Treasury Notes 10-Year Futures, September 2007
(Current Notional Value of $109,484 per contract)......... 46 (37,972)
--- --------
TOTAL FUTURES CONTRACTS..................................... 918 $ 34,632
=== ========
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AS OF AUGUST 31, 2007:
UNREALIZED
APPRECIATION/
IN EXCHANGE FOR CURRENT VALUE DEPRECIATION
SHORT CONTRACTS:
Euro Currency 11,073,000 expiring 10/31/07.... US $ $15,121,392 $34,334
LONG CONTRACTS:
Euro Currency 1,990,000 expiring 10/31/07..... US $ 2,717,563 (3,305)
-------
TOTAL FORWARD FOREIGN CURRENCY CONTRACTS........................................ $31,029
=======
22 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2007
ASSETS:
Total Investments (Cost $582,107,177)....................... $ 531,726,630
Foreign Currency (Cost $2,226,928).......................... 2,248,467
Cash........................................................ 54,957
Receivables:
Interest.................................................. 11,389,760
Fund Shares Sold.......................................... 146,499
Investments Sold.......................................... 3,652
Swap Contracts.............................................. 680,081
Forward Foreign Currency Contracts.......................... 34,334
Other....................................................... 148,411
--------------
Total Assets............................................ 546,432,791
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 2,499,724
Income Distributions...................................... 713,708
Distributor and Affiliates................................ 305,349
Investment Advisory Fee................................... 191,971
Variation Margin on Futures............................... 25,712
Swap Contracts.............................................. 792,352
Trustees' Deferred Compensation and Retirement Plans........ 412,006
Forward Foreign Currency Contracts.......................... 3,305
Accrued Expenses............................................ 290,620
--------------
Total Liabilities....................................... 5,234,747
--------------
NET ASSETS.................................................. $ 541,198,044
==============
NET ASSETS CONSIST OF:
Capital (Par value of $0.01 per share with an unlimited
number of shares authorized).............................. $1,140,540,211
Accumulated Undistributed Net Investment Income............. (2,324,482)
Net Unrealized Depreciation................................. (49,253,402)
Accumulated Net Realized Loss............................... (547,764,283)
--------------
NET ASSETS.................................................. $ 541,198,044
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $425,365,733 and 40,987,672 shares of
beneficial interest issued and outstanding)............. $ 10.38
Maximum sales charge (4.75%* of offering price)......... 0.52
--------------
Maximum offering price to public........................ $ 10.90
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $77,644,037 and 7,438,517 shares of
beneficial interest issued and outstanding)............. $ 10.44
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $32,143,721 and 3,121,391 shares of
beneficial interest issued and outstanding)............. $ 10.30
==============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $6,044,553 and 582,297 shares of
beneficial interest issued and outstanding)............. $ 10.38
==============
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 23
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended August 31, 2007
INVESTMENT INCOME:
Interest.................................................... $ 46,776,489
Other....................................................... 1,527,542
------------
Total Income............................................ 48,304,031
------------
EXPENSES:
Distribution (12b-1) and Service Fees
Class A................................................... 1,147,050
Class B................................................... 998,167
Class C................................................... 419,976
Investment Advisory Fee..................................... 2,469,339
Transfer Agent Fees......................................... 1,088,020
Reports to Shareholders..................................... 144,057
Accounting and Administrative Expenses...................... 130,438
Registration Fees........................................... 62,336
Custody..................................................... 58,497
Professional Fees........................................... 53,791
Trustees' Fees and Related Expenses......................... 47,908
Other....................................................... 39,368
------------
Total Expenses.......................................... 6,658,947
Less Credits Earned on Cash Balances.................... 63,149
------------
Net Expenses............................................ 6,595,798
------------
NET INVESTMENT INCOME....................................... $ 41,708,233
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 6,356,375
Foreign Currency Transactions............................. 1,477,227
Futures................................................... 198,508
Swaps..................................................... 7,839
Forward Foreign Currency Contracts........................ (2,654)
------------
Net Realized Gain........................................... 8,037,295
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (37,098,761)
------------
End of the Period:
Investments............................................. (50,380,547)
Swaps................................................... 1,035,229
Futures................................................. 34,632
Forward Foreign Currency Contracts...................... 31,029
Foreign Currency Translation............................ 26,255
------------
(49,253,402)
------------
Net Unrealized Depreciation During the Period............... (12,154,641)
------------
NET REALIZED AND UNREALIZED LOSS............................ $ (4,117,346)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 37,590,887
============
24 See Notes to Financial Statements
VAN KAMPEN HIGH YIELD FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2007 AUGUST 31, 2006
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 41,708,233 $ 46,409,194
Net Realized Gain/Loss................................... 8,037,295 (10,496,939)
Net Unrealized Depreciation During the Period............ (12,154,641) (16,043,354)
------------- -------------
Change in Net Assets from Operations..................... 37,590,887 19,868,901
------------- -------------
Distributions from Net Investment Income:
Class A Shares......................................... (32,205,371) (35,559,226)
Class B Shares......................................... (6,184,026) (10,076,519)
Class C Shares......................................... (2,649,680) (3,035,788)
Class I Shares......................................... (268,995) (481,065)
------------- -------------
Total Distributions...................................... (41,308,072) (49,152,598)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... (3,717,185) (29,283,697)
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 119,619,493 137,558,848
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 31,009,428 35,523,788
Cost of Shares Repurchased............................... (224,513,522) (325,876,260)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... (73,884,601) (152,793,624)
------------- -------------
TOTAL DECREASE IN NET ASSETS............................. (77,601,786) (182,077,321)
NET ASSETS:
Beginning of the Period.................................. 618,799,830 800,877,151
------------- -------------
End of the Period (Including accumulated undistributed
net investment income of $(2,324,482) and $(3,780,148),
respectively).......................................... $ 541,198,044 $ 618,799,830
============= =============
See Notes to Financial Statements 25
VAN KAMPEN HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
ALL SHARE AMOUNTS AND NET ASSET VALUES HAVE BEEN ADJUSTED AS A RESULT OF THE
1-FOR-3 REVERSE SHARE SPLIT ON SEPTEMBER 5, 2006.
YEAR ENDED AUGUST 31,
CLASS A SHARES ----------------------------------------------
2007 2006 2005 2004 2003
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $10.47 $10.89 $10.92 $10.29 $ 9.45
------ ------ ------ ------ ------
Net Investment Income..................... 0.75(a) 0.75(a) 0.78 0.78 0.87
Net Realized and Unrealized Gain/Loss..... (0.10) (0.39) (0.06) 0.63 0.87
------ ------ ------ ------ ------
Total from Investment Operations............ 0.65 0.36 0.72 1.41 1.74
------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.................................. 0.74 0.78 0.75 0.75 0.72
Return of Capital Distributions........... -0- -0- -0- 0.03 0.18
------ ------ ------ ------ ------
Total Distributions......................... 0.74 0.78 0.75 0.78 0.90
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.......... $10.38 $10.47 $10.89 $10.92 $10.29
====== ====== ====== ====== ======
Total Return (b)............................ 6.23% 3.55% 6.89% 14.02% 19.26%
Net Assets at End of the Period (In
millions)................................. $425.4 $457.7 $532.0 $379.5 $408.7
Ratio of Expenses to Average Net Assets
(c)....................................... 0.92% 0.92% 1.06% 1.06% 1.12%
Ratio of Net Investment Income to Average
Net Assets................................ 7.05% 7.04% 7.11% 7.45% 8.36%
Portfolio Turnover.......................... 42% 44% 84% 88% 95%
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. If
the sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the years ended August 31,
2007 and 2006.
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.
ALL SHARE AMOUNTS AND NET ASSET VALUES HAVE BEEN ADJUSTED AS A RESULT OF THE
1-FOR-3 REVERSE SHARE SPLIT ON SEPTEMBER 5, 2006.
YEAR ENDED AUGUST 31,
CLASS B SHARES ----------------------------------------------
2007 2006 2005 2004 2003
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $10.53 $10.95 $10.95 $10.32 $ 9.48
------ ------ ------ ------ ------
Net Investment Income..................... 0.68(a) 0.66(a) 0.75 0.69 0.75
Net Realized and Unrealized Gain/Loss..... (0.11) (0.39) (0.06) 0.63 0.90
------ ------ ------ ------ ------
Total from Investment Operations............ 0.57 0.27 0.69 1.32 1.65
------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.................................. 0.66 0.69 0.69 0.66 0.63
Return of Capital Distributions........... -0- -0- -0- 0.03 0.18
------ ------ ------ ------ ------
Total Distributions......................... 0.66 0.69 0.69 0.69 0.81
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.......... $10.44 $10.53 $10.95 $10.95 $10.32
====== ====== ====== ====== ======
Total Return (b)............................ 5.41% 2.75% 6.36% 12.79% 18.27%
Net Assets at End of the Period (In
millions)................................. $ 77.6 $115.8 $191.0 $160.7 $175.6
Ratio of Expenses to Average Net Assets
(c)....................................... 1.68% 1.68% 1.83% 1.82% 1.89%
Ratio of Net Investment Income to Average
Net Assets................................ 6.32% 6.28% 6.33% 6.70% 7.68%
Portfolio Turnover.......................... 42% 44% 84% 88% 95%
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within the first and second year of purchase and declining to 0% after
the fifth year. If the sales charge was included, total returns would be
lower. These returns include combined Rule 12b-1 fees and service fees of up
to 1% and do not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the years ended August 31,
2007 and 2006.
See Notes to Financial Statements 27
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.
ALL SHARE AMOUNTS AND NET ASSET VALUES HAVE BEEN ADJUSTED AS A RESULT OF THE
1-FOR-3 REVERSE SHARE SPLIT ON SEPTEMBER 5, 2006.
YEAR ENDED AUGUST 31,
CLASS C SHARES ----------------------------------------------
2007 2006 2005 2004 2003
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $10.38 $10.80 $10.83 $10.23 $ 9.39
------ ------ ------ ------ ------
Net Investment Income..................... 0.66(a) 0.66(a) 0.75 0.69 0.75
Net Realized and Unrealized Gain/Loss..... (0.08) (0.36) (0.09) 0.60 0.90
------ ------ ------ ------ ------
Total from Investment Operations............ 0.58 0.30 0.66 1.29 1.65
------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.................................. 0.66 0.72 0.69 0.66 0.63
Return of Capital Distributions........... -0- -0- -0- 0.03 0.18
------ ------ ------ ------ ------
Total Distributions......................... 0.66 0.72 0.69 0.69 0.81
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.......... $10.30 $10.38 $10.80 $10.83 $10.23
====== ====== ====== ====== ======
Total Return (b)............................ 5.59% 2.83%(d) 6.17%(d) 12.98%(d) 18.14%(e)
Net Assets at End of the Period (In
millions)................................. $ 32.1 $ 43.6 $ 54.5 $ 41.4 $ 41.5
Ratio of Expenses to Average Net Assets
(c)....................................... 1.68% 1.64%(d) 1.82%(d) 1.81%(d) 1.86%
Ratio of Net Investment Income to Average
Net Assets................................ 6.26% 6.32%(d) 6.34%(d) 6.71%(d) 7.68%(e)
Portfolio Turnover.......................... 42% 44% 84% 88% 95%
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1% charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the years ended August 31,
2007 and 2006.
(d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect actual 12b-1 fees of less
than 1% (See footnote 7).
(e) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .01%.
28 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.
ALL SHARE AMOUNTS AND NET ASSET VALUES HAVE BEEN ADJUSTED AS A RESULT OF THE
1-FOR-3 REVERSE SHARE SPLIT ON SEPTEMBER 5, 2006.
YEAR ENDED MARCH 23, 2005
AUGUST 31, (COMMENCEMENT OF
CLASS I SHARES ---------------- OPERATIONS) TO
2007 2006 AUGUST 31, 2005
-----------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD............... $10.47 $10.89 $10.95
------ ------ ------
Net Investment Income................................ 0.71(a) 0.78(a) 0.36
Net Realized and Unrealized Gain/Loss................ (0.04) (0.39) (0.06)
------ ------ ------
Total from Investment Operations....................... 0.67 0.39 0.30
Less Distributions from Net Investment Income.......... 0.76 0.81 0.36
------ ------ ------
NET ASSET VALUE, END OF THE PERIOD..................... $10.38 $10.47 $10.89
====== ====== ======
Total Return (b)....................................... 6.49% 3.82% 2.69%*
Net Assets at End of the Period (In millions).......... $ 6.0 $ 1.7 $ 23.3
Ratio of Expenses to Average Net Assets (c)............ 0.67% 0.63% 0.85%
Ratio of Net Investment Income to Average Net Assets... 6.72% 7.37% 6.97%
Portfolio Turnover..................................... 42% 44% 84%
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of expense,
the ratio would decrease by .01% for the years ended August 31, 2007 and
2006.
See Notes to Financial Statements 29
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen High Yield Fund (the "Fund") is organized as a series of Van Kampen
High Yield, a Delaware statutory trust, and is registered as a diversified,
open-end management investment company under the Investment Company Act of 1940
(the "1940 Act"), as amended. The Fund's primary investment objective is to seek
to maximize current income. Capital appreciation is a secondary objective which
is sought only when consistent with the Fund's primary investment objective. The
fund commenced investment operations on October 2, 1978. The Fund offers Class A
Shares, Class B Shares, Class C Shares and Class I Shares. Each class of shares
differs by its initial sales load, contingent deferred sales charges, the
allocation of class-specific expenses and voting rights on matters affecting a
single class. On September 5, 2006, there was a 1-for-3 reverse share split for
Class A Shares, Class B Shares, Class C Shares and Class I Shares.
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 stocks 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 prices. For those securities where quotations or prices are not readily
available, valuations are determined in accordance with procedures established
in good faith by the Board of Trustees. Forward foreign currency contracts are
valued using quoted foreign exchange rates. Credit default and interest rate
swaps are valued using market quotations obtained from brokers. Futures
contracts are valued at the settlement price established each day on the
exchange on which they are traded. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund 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, 2007, there were no when-issued or delayed
delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along
30
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007 continued
with other investment companies advised by Van Kampen Asset Management (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts on debt
securities are accreted and premiums are amortized over the expected life of
each applicable security. Other income is comprised primarily of consent fees.
Consent fees are earned as compensation for agreeing to changes in terms of debt
instruments. Income and expenses of the Fund are allocated on a pro rata basis
to each class of shares, except for distribution and service fees and
incremental transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of 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. During the current fiscal year, the fund utilized capital losses carried
forward of $3,768,075. At August 31, 2007, the Fund had an accumulated capital
loss carryforward for tax purposes of $544,778,026 which will expire according
to the following schedule:
AMOUNT EXPIRATION
$ 33,682,013................................................ August 31, 2008
51,935,293................................................ August 31, 2009
138,518,165................................................ August 31, 2010
165,406,856................................................ August 31, 2011
117,018,188................................................ August 31, 2012
32,804,299................................................ August 31, 2013
5,413,212................................................ August 31, 2014
At August 31, 2007, the cost and related gross unrealized appreciation and
depreciation were as follows:
Cost of investments for tax purposes........................ $584,334,420
============
Gross tax unrealized appreciation........................... $ 8,203,616
Gross tax unrealized depreciation........................... (60,811,406)
------------
Net tax unrealized depreciation on investments.............. $(52,607,790)
============
31
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007 continued
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 at least annually. Distributions from net realized gains for book
purposes may include short-term capital gains which are included as ordinary
income for tax purposes.
The tax character of distributions paid during the years ended August 31,
2007 and 2006 were as follows:
2007 2006
Distributions paid from:
Ordinary income........................................... $41,566,393 $49,344,799
Long-term capital gain.................................... -0- -0-
----------- -----------
$41,566,393 $49,344,799
=========== ===========
Permanent differences, primarily due to the capital loss carryforward
expiring in the current year and book to tax amortization differences, resulted
in the following reclassifications among the Fund's components of net assets at
August 31, 2007:
ACCUMULATED UNDISTRIBUTED ACCUMULATED
NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL
$1,055,505 $10,390,399 $(11,445,904)
As of August 31, 2007, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income............................... $1,940,668
Undistributed long-term capital gain........................ -0-
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses relating to wash sales
transactions, the book to tax differences for partnership income and expense
items, and gains and losses recognized for tax purposes on open futures
transactions on August 31, 2007.
F. EXPENSE REDUCTIONS During the year ended August 31, 2007, the Fund's custody
fee was reduced by $63,149 as a result of credits earned on cash balances.
G. FOREIGN CURRENCY TRANSLATION Assets 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 asked 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, the amount realized between trade date and
settlement date on securities transactions and the foreign currency portion of
gains and losses on the sale of securities. Income and expenses are translated
at rates prevailing when accrued.
32
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007 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:
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .420%
Next $250 million........................................... .345%
Next $250 million........................................... .295%
Next $1 billion............................................. .270%
Next $1 billion............................................. .245%
Over $3 billion............................................. .220%
For the year ended August 31, 2007, the Fund recognized expenses of
approximately $10,300 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, 2007, the Fund recognized
expenses of approximately $46,300 representing Van Kampen Investments Inc.'s or
its affiliates' (collectively "Van Kampen") cost of providing accounting
services to the Fund, as well as the salary, benefits and related costs of the
CCO and related support staff paid by Van Kampen. Services provided pursuant to
the Accounting Services and CCO Employment agreement are reported as part of
"Accounting and Administrative 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, 2007, the Fund recognized expenses of approximately $852,200
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 $293,230 are included in
"Other" assets on the Statement of Assets and Liabilities at August 31, 2007.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
For the year ended August 31, 2007, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A Shares of approximately
$99,700 and contingent deferred sales charge (CDSC) on redeemed shares of
approximately $201,700. Sales charges do not represent expenses to the Fund.
33
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007 continued
3. CAPITAL TRANSACTIONS
For the years ended August 31, 2007 and 2006, transactions were as follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2007 AUGUST 31, 2006
----------------------------- ----------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A...................... 8,065,381 $ 85,272,316 29,290,990 $ 103,011,978
Class B...................... 1,354,417 14,457,571 5,193,622 18,355,586
Class C...................... 1,409,386 14,780,209 4,549,191 15,796,883
Class I...................... 479,189 5,109,397 115,790 394,401
------------ ------------- ----------- -------------
Total Sales.................... 11,308,373 $ 119,619,493 39,149,593 $ 137,558,848
============ ============= =========== =============
Dividend Reinvestment:
Class A...................... 2,301,212 $ 24,424,026 7,372,644 $ 25,916,242
Class B...................... 423,585 4,522,334 1,998,462 7,065,215
Class C...................... 183,309 1,935,553 590,646 2,061,273
Class I...................... 12,003 127,515 136,311 481,058
------------ ------------- ----------- -------------
Total Dividend Reinvestment.... 2,920,109 $ 31,009,428 10,098,063 $ 35,523,788
============ ============= =========== =============
Repurchases:
Class A...................... (100,686,829)* $(138,653,149) (52,016,777) $(183,438,639)
Class B...................... (27,361,106)* (57,032,500) (26,554,629) (93,925,102)
Class C...................... (11,073,294)* (28,095,426) (7,670,401) (26,835,230)
Class I...................... (388,939)* (732,447) (6,186,212) (21,677,289)
------------ ------------- ----------- -------------
Total Repurchases.............. (139,510,168) $(224,513,522) (92,428,019) $(325,876,260)
============ ============= =========== =============
* Includes 87,378,893, 21,991,341, 8,405,187 and 319,870 shares redeemed in
1-for-3 reverse share split for Class A Shares, Class B Shares, Class C
Shares and Class I Shares, respectively.
4. REDEMPTION FEE
The Fund will assess a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within 30 days of purchase. The redemption
fee is paid directly to the Fund and allocated on a pro rata basis to each class
of shares. For the year ended August 31, 2007, the Fund received redemption fees
of approximately $18,200 which are reported as part of "Cost of Shares
Repurchased" on the Statements of Changes in Net Assets. The per share impact
from redemption fees paid to the Fund was less than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $242,170,702 and $300,608,692,
respectively.
6. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
34
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007 continued
The fund may use derivative instruments, to earn income, to facilitate
portfolio management and to mitigate risks. All of the Fund's holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when taking delivery of
a security underlying a forward commitment. In this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
forward commitment.
Purchasing securities or foreign currency on a forward commitment basis
involves a risk that the market value at the time of delivery may be lower than
the agreed upon purchase price resulting in an unrealized loss. Selling
securities or foreign currency on a forward commitment basis involves different
risks and can result in losses more significant than those arising from the
purchase of such securities. Risks may arise as a result of the potential
inability of the counterparties to meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. FORWARD FOREIGN CURRENCY CONTRACTS A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Upon the settlement of the contract, a realized gain or
loss is recognized and is included as a component of realized gain/loss on
forward foreign currency contracts. Risks may arise from the unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
B. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures contracts on U.S. Treasury
securities for duration and risk management purposes and typically closes the
contract prior to the delivery date. Upon entering into futures contracts, the
Fund maintains an amount of cash or liquid securities with a value equal to a
percentage of the contract amount with either a futures commission merchant
pursuant to rules and regulations promulgated under the 1940 Act, as amended, or
with its custodian in an account in the broker's name. This amount is known as
initial margin. During the period the futures contract is open, payments are
received from or made to the broker based upon changes in the value of the
contract (the variation margin). The risk of loss associated with a futures
contract is in excess of the variation margin reflected on the Statement of
Assets and Liabilities.
Transactions in futures contracts for the year ended August 31, 2007 were as
follows:
CONTRACTS
Outstanding at August 31, 2006.............................. -0-
Futures Opened.............................................. 6,946
Futures Closed.............................................. (6,028)
------
Outstanding at August 31, 2007.............................. 918
======
C. SWAP CONTRACTS The Fund may enter into credit default swap contracts for
hedging purposes or to gain exposure to a credit in which the Fund may otherwise
invest. A credit default swap is an agreement between two parties to exchange
the credit risk of an issuer. A
35
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007 continued
buyer of a credit default swap is said to buy protection by paying periodic fees
in return for a contingent payment from the seller if the issuer has a credit
event such as bankruptcy, a failure to pay outstanding obligations or
deteriorating credit while the swap is outstanding. A seller of a credit default
swap is said to sell protection and thus collects the periodic fees and profits
if the credit of the issuer remains stable or improves while the swap is
outstanding but the seller in a credit default swap contract would be required
to pay an agreed-upon amount, which approximates the notional amount of the swap
as disclosed in the table following the Portfolio of Investments, to the buyer
in the event of an adverse credit event of the issuer. The Fund accrues for the
periodic fees on credit default swaps on a daily basis with the net amount
accrued recorded within unrealized appreciation/depreciation of swap contracts.
Upon cash settlement of the periodic fees, the net amount is recorded as
realized gain/loss on swap contracts on the Statements of Operations. Net
unrealized gains are recorded as an asset or net unrealized losses are reported
as a liability on the Statement of Assets and Liabilities. The change in value
of the swap contracts is reported as unrealized gains or losses on the Statement
of Operations. Payments received or made upon entering into a credit default
swap contract, if any, are recorded as realized gain or loss on the Statement of
Operations upon termination or maturity of the swap. Credit default swaps may
involve greater risks than if a Fund had invested in the issuer directly. Credit
default swaps are subject to general market risk, counterparty risk and credit
risk.
The Fund may also enter into interest rate swaps primarily to preserve a
return or spread on a particular investment or portion of its portfolio, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. Interest rate swaps
are contractual agreements to exchange periodic interest payment streams
calculated on a predetermined notional principal amount. Interest rate swaps
generally involve one party paying a fixed interest rate and the other party
paying a variable rate. The Fund will usually enter into interest rate swaps on
a net basis, i.e, the two payment streams are netted out in a cash settlement on
the payment date or dates specified in the instrument, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments. The Fund
accrues the net amount with respect to each interest rate swap on a daily basis.
This net amount is recorded within unrealized appreciation/depreciation on swap
contracts. Upon cash settlement of the periodic payments, the net amount is
recorded as realized gain/loss on swap contracts on the Statement of Operations.
Risks may arise as a result of the potential inability of the counterparties to
meet the terms of their contracts.
If there is a default by the counterparty to a swap agreement, the Fund will
have contractual remedies pursuant to the agreements related to the transaction.
Counterparties are required to pledge collateral daily (based on the valuation
of each swap) on behalf of the Fund with a value approximately equal to the
amount of any unrealized gain. Cash collateral, when received by the Fund, is
recorded with an offsetting liability shown on the Statement of Assets and
Liabilities. Reciprocally, when the Fund has an unrealized loss on a swap
contract, the Fund has instructed the custodian to pledge cash or liquid
securities as collateral with a value approximately equal to the amount of the
unrealized loss. Collateral pledges are monitored and subsequently adjusted if
and when the swap valuations fluctuate. Restricted cash, if any, for segregating
purposes is shown on the Statement of Assets and Liabilities.
36
VAN KAMPEN HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2007 continued
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees of up to .25% of Class A average daily net assets and up
to 1.00% each of Class B and Class C average daily net assets. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $1,392,000 and $10,200
for Class B and Class C Shares, respectively. These amounts may be recovered for
future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, the distribution fee is
reduced.
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.
9. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for fiscal
years beginning after December 15, 2006 and is to be applied to all open tax
years as of the effective date. Recent SEC guidance allows implementing FIN 48
in the fund NAV calculations as late as the fund's last NAV calculation in the
first required financial statement period. As a result, the Fund will
incorporate FIN 48 in its semiannual report on February 29, 2008. The impact to
the Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
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,
including the portfolio of investments, of Van Kampen High Yield Fund (the
"Fund") as of August 31, 2007, 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, 2007, 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 Van
Kampen High Yield Fund at August 31, 2007, 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 16, 2007
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
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
STUART N. SCHULDT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
522 Fifth Avenue
New York, New York 10036
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
One Parkview Plaza - Suite 100
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
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,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (62) Trustee Trustee Chairman and Chief 73 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products Director of the Heartland
manufacturer. Alliance, a nonprofit
organization serving
human needs based in
Chicago. Board member of
the Illinois
Manufacturers'
Association.
Jerry D. Choate (69) Trustee Trustee Prior to January 1999, 73 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of H&R Block,
("Allstate") and Allstate Amgen Inc., a
Insurance Company. Prior biotechnological company,
to January 1995, and Valero Energy
President and Chief Corporation, an
Executive Officer of independent refining
Allstate. Prior to August company.
1994, various management
positions at Allstate.
40
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS 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 (66) Trustee Trustee President of CAC, L.L.C., 73 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Corporation, Stericycle,
Inc., Ventana Medical
Systems, Inc. and Trustee
of The Scripps Research
Institute. Prior to April
2007, Director of GATX
Corporation. Prior to
April 2004, Director of
TheraSense, Inc. Prior to
January 2004, Director of
TeleTech Holdings Inc.
and Arris Group, Inc.
Linda Hutton Heagy+ (59) Trustee Trustee Managing Partner of 73 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive international executive in the Fund Complex.
Suite 7000 search firm. Prior to Trustee on the University
Chicago, IL 60606 1997, Partner of Ray & of Chicago Hospitals
Berndtson, Inc., an Board, Vice Chair of the
executive recruiting Board of the YMCA of
firm. Prior to 1995, Metropolitan Chicago and
Executive Vice President a member of the Women's
of ABN AMRO, N.A., a bank Board of the University
holding company. Prior to of Chicago.
1990, Executive Vice
President of The Exchange
National Bank.
41
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS 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
R. Craig Kennedy (55) Trustee Trustee Director and President of 73 Trustee/Director/Managing
1744 R Street, NW since 1995 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 73 Trustee/Director/Managing
14 Huron Trace since 2003 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the Marrow
Foundation.
Jack E. Nelson (71) Trustee Trustee President of Nelson 73 Trustee/Director/Managing
423 Country Club Drive since 1995 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of FINRA,
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.
42
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS 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
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 73 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Trustee of the University
Distinguished Service of Rochester and a member
Professor in the of its investment
Department of Economics committee. Member of the
at the University of National Academy of
Chicago. Prior to July Sciences, the American
2000, President of the Philosophical Society and
University of Chicago. a fellow of the American
Academy of Arts and
Sciences.
43
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS 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
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 73 Trustee/Director/Managing
(65) since 1999 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004. Director of
Operating Officer from Intelligent Medical
1993 to 2001. Prior to Devices, Inc., a symptom
1993, Executive Director based diagnostic tool for
of the Commission on physicians and clinical
Behavioral and Social labs. Director of the
Sciences and Education at Institute for Defense
the National Academy of Analyses, a federally
Sciences/National funded research and
Research Council. From development center,
1980 through 1989, Director of the German
Partner of Coopers & Marshall Fund of the
Lybrand. United States, Director
of the Rocky Mountain
Institute of Technology
and the Colorado College.
44
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS continued
INTERESTED TRUSTEE*
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* (68) Trustee Trustee Partner in the law firm 73 Trustee/Director/Managing
333 West Wacker Drive since 1995 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
+ As indicated above, Ms. Heagy is an employee of Heidrick and Struggles, an
international executive search firm ("Heidrick"). Heidrick has been (and may
continue to be) engaged by Morgan Stanley from time to time to perform
executive searches. Such searches have been unrelated to Van Kampen's or
Morgan Stanley's asset management businesses and have been done by
professionals at Heidrick without any involvement by Ms. Heagy. Ethical wall
procedures exist to ensure that Ms. Heagy will not have any involvement with
any searches performed by Heidrick for Morgan Stanley. Ms. Heagy does not
receive any compensation, directly or indirectly, for searches performed by
Heidrick for Morgan Stanley. Ms. Heagy does own common shares of Heidrick
(representing less than 1% of Heidrick's outstanding common shares).
* 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.
45
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS continued
OFFICERS
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (68) President and Officer President of funds in the Fund Complex since September 2005
522 Fifth Avenue Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10036 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (54) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
522 Fifth Avenue since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10036 and Van Kampen Advisors Inc. Chief Investment Officer--
Global Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
20 Bank Street, since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer--
London, GBR E14 4AD Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
46
VAN KAMPEN HIGH YIELD FUND
TRUSTEES AND OFFICERS continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (45) Vice President Officer Managing Director and General Counsel--U.S. Investment
522 Fifth Avenue since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10036 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
522 Fifth Avenue and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10036 Complex.
John L. Sullivan (52) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza - Suite 100 Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
Stuart N. Schuldt (45) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza - Suite 100 and Treasurer since 2007 Inc. since June 2007. Chief Financial Officer and Treasurer
Oakbrook Terrace, IL 60181 of funds in the Fund Complex since June 2007. Prior to June
2007, Senior Vice President of Northern Trust Company,
Treasurer and Principal Financial Officer for Northern Trust
U.S. mutual fund complex.
47
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 - Suite 100
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2007 Van Kampen Funds Inc.
All rights reserved. Member FINRA/SIPC.
28, 128, 228, 628
HYIANN 10/07
(VAN KAMPEN INVESTMENTS LOGO) IU07-03922P-Y08/07
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Due to personnel changes at the Adviser, the list of covered officers set
forth in Exhibit B was amended in November 2006 and June 2007 and the general
counsel's designee set forth in Exhibit C was amended in October and December
2006. All three editions of Exhibit B and all three editions of Exhibit C are
attached.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit 12(1).
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees : Rod Dammeyer, Jerry D. Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2007
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES ............. $43,700 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES .. $ 0 $ 781,800(2)
TAX FEES ............ $ 3,100(3) $ 63,070(4)
ALL OTHER FEES ...... $ 0 $ 157,910(5)
TOTAL NON-AUDIT FEES ... $ 3,100 $1,002,780
TOTAL .................. $46,800 $1,002,780
2006
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES ............. $42,400 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES .. $ 0 $ 706,000(2)
TAX FEES ............ $ 2,800(3) $ 75,537(4)
ALL OTHER FEES ...... $ 0 $ 749,041(5)
TOTAL NON-AUDIT FEES ... $ 2,800 $1,530,578
TOTAL .................. $45,200 $1,530,578
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any
entity controlling, controlled by or under common control with the Adviser
that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that
are reasonably related to the performance of the audit of the financial
statements of the Covered Entities' and funds advised by the Adviser or its
affiliates, specifically attestation services provided in connection with a
SAS 70 Report.
(3) Tax Fees represent tax advice and compliance services provided in
connection with the review of the Registrant's tax.
(4) Tax Fees represent tax advice services provided to Covered Entities,
including research and identification of PFIC entities.
(5) All Other Fees represent attestation services provided in connection with
performance presentation standards and assistance with compliance policies
and procedures.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider whether
such services are consistent with the SEC's rules on auditor independence. The
Audit Committee will also consider whether the Independent Auditors are best
positioned to provide the most effective and efficient services, for reasons
such as its familiarity with the Fund's business, people, culture, accounting
systems, risk profile and other factors, and whether the service might enhance
the Fund's ability to manage or control risk or improve audit quality. All such
factors will be considered as a whole, and no one factor should necessarily be
determinative.
The Audit Committee is also mindful of the relationship between fees for
audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax and
All Other services that have the general pre-approval of the Audit Committee.
The term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
----------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval Policy
and Procedures (the "Policy"), amended as of the date above, supercedes and
replaces all prior versions that may have been amended from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have the
meanings as defined in the Joint Audit Committee Charter.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1.
All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix
B.2. All other Audit-related services not listed in Appendix B.2 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services. Hence, the Audit Committee believes it may grant
general pre-approval to those Tax services that have historically been provided
by the Independent Auditors, that the Audit Committee has reviewed and believes
would not impair the independence of the Independent Auditors, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the
Independent Auditors in connection with a transaction initially recommended by
the Independent Auditors, the sole business purpose of which may be tax
avoidance and the tax treatment of which may not be supported in the Internal
Revenue Code and related regulations. The Audit Committee will consult with
Director of Tax or outside counsel to determine that the tax planning and
reporting positions are consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the Tax Services in Appendix B.3. All Tax services involving large and complex
transactions not listed in Appendix B.3 must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix B.5. The SEC's rules and relevant guidance should be
consulted to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be rendered. The Fund's Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the Independent Auditors. Requests or applications to provide services that
require specific approval by the Audit Committee will be submitted to the Audit
Committee by both the Independent Auditors and the Fund's Chief Financial
Officer, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. A sample report is included as Appendix
B.7. Both the Fund's Chief Financial Officer and management will immediately
report to the chairman of the Audit Committee any breach of this Policy that
comes to the attention of the Fund's Chief Financial Officer or any member of
management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
- Van Kampen Investments Inc.
- Van Kampen Asset Management
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Investor Services Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Trust Company
- Morgan Stanley Investment Management Ltd.
- Morgan Stanley Investment Management Company
- Morgan Stanley Asset & Investment Trust Management Company Ltd.
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (included herein).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: R.
Craig Kennedy, Jerry D. Choate, Rod Dammeyer.
(b) Not applicable.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen High Yield Fund
By: /s/ Ronald E. Robison
-----------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 18, 2007
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 18, 2007
By: /s/ Stuart N. Schuldt
-----------------------------------
Name: Stuart N. Schuldt
Title: Principal Financial Officer
Date: October 18, 2007