UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02851
Van Kampen High Income Corporate Bond Fund
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 8/31
Date of reporting period: 2/29/04
Item 1. Reports to Shareholders.
The Fund's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen High
Income Corporate Bond Fund performed during the semiannual 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 February 29, 2004.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the fund will achieve its investment
objective. The fund is subject to market risk, which is the possibility
that the market values of securities owned by the fund will decline and,
therefore, the value of the fund shares may be less than what you paid
for them. Accordingly, you can lose money investing in this fund. Please
see the prospectus for more complete information on investment risks.
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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Performance Summary
A SHARES B SHARES C SHARES
since 10/02/78 since 07/02/92 since 07/06/93
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AVERAGE ANNUAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 7.46% 7.25% 5.21% 5.21% 3.83% 3.83%
10-year 4.10 3.60 3.62 3.62 3.27 3.27
5-year 0.87 -0.09 0.06 -0.12 0.06 0.06
1-year 21.41 15.66 20.43 16.43 20.34 19.34
6-month 9.46 4.29 8.71 4.71 8.83 7.83
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30-Day SEC Yield 5.96% 5.47% 5.54%
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost. The returns shown in this report do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Performance of share classes will vary due to differences in sales
charges and expenses.
As a result of recent market activity, current performance may vary from the
figures shown. Average annual total return with sales charges includes payment
of the maximum sales charge of 4.75 percent for Class A shares, a contingent
deferred sales charge of 4.00 percent for Class B shares (in years one and two
and declining to zero after year five), a contingent deferred sales charge of
1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and
service fees of up to 0.25 percent for Class A shares and 1.00 percent for Class
B and C shares. The since-inception and 10-year returns for Class B and Class C
shares reflect their conversion into Class A shares six and ten years after
purchase, respectively. See footnote 3 in the Notes to Financial Statements for
additional information. Figures shown above assume reinvestment of all dividends
and capital gains. SEC yield is a calculation for determining the amount of
portfolio income, excluding non-income items as prescribed by the SEC. Yields
are subject to change.
Chase Global High Yield Index is a broad-based index that reflects the general
performance of the global high-yield corporate debt market. Lipper High Yield
Bond Fund Index is an index of funds with similar return objectives as this
fund. Indexes do not include any expenses, fees or sales charges, which would
lower performance. Indexes are unmanaged and should not be considered an
investment.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 29, 2004
Van Kampen High Income Corporate Bond Fund is managed by the adviser's Taxable
Fixed Income team. Members of the team include Gordon Loery, Executive Director;
Sheila A. Finnerty, Managing Director; and Joshua Givelber and Chad Liu, Vice
Presidents.(1)
MARKET CONDITIONS
The high-yield market staged a strong rally through most of the six-month period
ended February 29, 2004. In fact, before succumbing to a technically driven
market correction in mid-February, the high-yield market produced extraordinary
returns for much of the past 18 months. The rally was sparked by an improving
U.S. economy and inexpensive valuations in many high-yield bonds. Other positive
influences included an improving stock market--which benefited the balance
sheets of many high-yield issuers--and steady declines in high-yield default
rates. According to Moody's Investor Service, the annual default rate of
high-yield issues declined from 10.9 percent in January 2002 to 4.3 percent in
February 2004. With so many positive factors working for the high-yield market,
investors have been willing to assume more credit risk within this asset class.
In addition, high-yield bond market performance has been supported by strong
inflows of money into the asset class beginning in late 2002. For 2003, AMG Data
Services reported a record $26 billion of inflows into high-yield bonds. The
high-yield market sell-off that occurred during the last two weeks of the fund's
semiannual period was principally due to two factors. First, corporations
continued to come to market with a heavy supply of high-yield paper. Second,
many "asset allocators" who had emphasized high yield within their portfolios
decided to shift out of the asset class, which resulted in a $2.5 billion
outflow over a short period of time. By early March, though, positive asset
flows into high yield had resumed, at least for the moment.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
For the semiannual period, the fund returned 9.46 percent (Class A shares
unadjusted for sales charge), yet slightly underperformed its benchmarks, the
Chase Global High Yield Index and the Lipper High Yield Bond Fund Index. (See
table below.) The fund's relative performance was hindered by our concerns over
the quality of securities available for purchase, which led us to assume a
slightly more conservative stance compared with the benchmark indexes. As
background, weakened U.S. economic activity in recent years had led to credit
downgrades for many high-yield companies, raising the portion of the market
carrying a CCC rating or coming under the category of "distressed." While we
maintained some exposure to this segment of the market, our analysis indicated
that many of the companies carrying this rating were too speculative for the
fund's portfolio. Therefore, the portfolio held a smaller segment of CCC-rated
and distressed bonds than the indexes. While those lower-rated securities
provided a higher return than the overall market during the period, we believe
our focus on higher-quality issues will add to performance going forward.
In addition, while the market rally appeared to reward entire credit tiers and
sectors, we remained focused on thorough bottom-up analysis of individual
securities. As a result, the fund was underweighted in the utilities and
telecommunications sectors relative to the benchmarks during the period because
our analysts were unwilling to recommend companies with unfavorable fundamental
characteristics. Both sectors posted strong performance for the six-month
reporting period. We remain confident that our analysis of the prospects for
individual companies within these sectors will help the fund's relative
performance on a longer-term basis.
During the period, the fund benefited from positive security selection within
the diversified-media and wireless-communications sectors. Within diversified
media, Dex Media and Advanstar Communications performed well, while in wireless,
SBA Communications and American Tower Corporation posted positive performance.
These companies' bonds benefited from improving fundamentals, and the fact that
their debt securities had previously been undervalued.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 29, 2004
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CHASE GLOBAL LIPPER HIGH YIELD
CLASS A CLASS B CLASS C HIGH YIELD INDEX BOND FUND INDEX
9.46% 8.71% 8.83% 10.92% 10.09%
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The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information.
3
On an ongoing basis, we seek to maintain a balanced and well-diversified
portfolio. The fund's portfolio consists of approximately 150 issuers. This
diversifies the fund's credit risk, yet it also allows sufficient average
security size for strategic overweights. We continue to maintain an average
credit quality of high single B, which is very close to that of the benchmarks.
In terms of size, we focus on larger companies because of their financial
flexibility, their ability to withstand less-favorable financial markets and
their superior access to capital markets.
The U.S. and global economies have continued to show signs of sustainable
growth. Despite the increasing prospect for short-term interest rate increases
later this year, the fundamentals of the high-yield market remain positive, with
favorable earnings, lower default rates and tightening high-yield credit
spreads. At the same time, many of these positive factors have already been
"priced into" the market. We believe that the tremendous rally in distressed
high-yield bonds has for the most part run its course and that price
appreciation should subside, with returns driven more by coupon income. We look
for the fund's holdings to earn their coupons for the remainder of 2004, with
the hope of some additional price appreciation in the BB- and B-rated securities
which make up the bulk of the portfolio.
Going forward, we will continue our rigorous bottom-up security analysis, and
monitor the high-yield market closely for individual credits with attractive
yield and total-return potential.
TOP 5 INDUSTRIES AS OF 2/29/04 RATINGS ALLOCATION AS OF 2/29/04
Energy 9.6% BBB 1.8%
Utility 8.3 BB 27.1
Chemicals 7.5 B 53.6
Housing 7.2 CCC 12.1
Diversified Media 7.1 CC 1.0
NR 4.4
Subject to change daily. Industry percentages are as a percentage of long-term
investments. Provided for informational purposes only and should not be deemed
as a recommendation to buy securities in the industries shown above. Ratings
allocations based upon ratings as issued by Standard and Poor's. Ratings
allocation percentages are as a percentage of corporate-debt obligations. Van
Kampen is a wholly owned subsidiary of a global securities firm which is engaged
in a wide range of financial services including, for example, securities trading
and brokerage activities, investment banking, research and analysis, financing
and financial advisory services.
4
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 POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED)
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
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CORPORATE BONDS 93.2%
AEROSPACE 0.3%
$1,765 Dunlop Stand Aero Holdings (United Kingdom),
144A--Private Placement (a).................. 11.875% 05/15/09 $ 1,897,375
------------
BROADCASTING 2.5%
1,950 Granite Broadcasting Corp., 144A--Private
Placement (a)................................ 9.750 12/01/10 1,925,625
3,280 Interep National Radio Sales, Inc., Ser B.... 10.000 07/01/08 2,935,600
596 Nextmedia Operating, Inc. ................... 10.750 07/01/11 671,990
3,535 Salem Communications Corp. .................. 7.750 12/15/10 3,764,775
5,674 TV Azteca SA, Ser B (Mexico)................. 10.500 02/15/07 5,872,590
------------
15,170,580
------------
CABLE 5.9%
756 Avalon Cable LLC (b)......................... 0/11.875 12/01/08 802,572
1,145 Charter Communications Holdings LLC.......... 10.750 10/01/09 1,013,325
5,765 Charter Communications Holdings LLC.......... 9.625 11/15/09 4,943,487
1,100 Charter Communications Holdings LLC (b)...... 0/11.750 01/15/10 902,000
650 CSC Holdings, Inc. .......................... 7.250 07/15/08 695,500
830 CSC Holdings, Inc. .......................... 10.500 05/15/16 956,575
2,435 CSC Holdings, Inc., Ser B.................... 8.125 07/15/09 2,666,325
4,140 DirecTV Holdings/Finance LLC................. 8.375 03/15/13 4,729,950
5,098 Echostar DBS Corp. .......................... 9.125 01/15/09 5,798,975
3,425 Multicanal Participacoes, Ser B (Brazil)
(c).......................................... 12.625 06/18/04 2,072,125
645 Pegasus Communications Corp., Ser B.......... 9.750 12/01/06 590,175
1,735 Pegasus Communications Corp., Ser B.......... 12.500 08/01/07 1,587,525
465 Pegasus Satellite Communications (b)......... 0/13.500 03/01/07 385,950
1,570 Renaissance Media Group (b).................. 0/10.000 04/15/08 1,632,800
5,895 Satelites Mexicanos SA, Ser B (Mexico) (c)... 10.125 11/01/04 2,446,425
2,075 Telenet Communications (Belgium)............. 9.000 12/15/13 2,659,058
2,515 Telenet Group Holding NV, 144A--Private
Placement (Belgium) (a) (b).................. 0/11.500 06/15/14 1,571,875
------------
35,454,642
------------
CHEMICALS 7.1%
3,047 Avecia Group PLC (United Kingdom)............ 11.000 07/01/09 2,620,420
3,343 Equistar Chemicals LP........................ 10.125 09/01/08 3,627,155
1,245 Equistar Chemicals LP........................ 10.625 05/01/11 1,357,050
1,564 FMC Corp. ................................... 10.250 11/01/09 1,845,520
1,475 Huntsman Advanced Materials LLC, 144A--
Private Placement (a)........................ 11.000 07/15/10 1,666,750
1,519 Huntsman ICI Chemicals LLC................... 10.125 07/01/09 1,556,975
2,800 Huntsman International LLC (Euro)............ 10.125 07/01/09 3,413,946
1,280 ISP Chemco, Inc., Ser B...................... 10.250 07/01/11 1,452,800
3,930 ISP Holdings, Inc., Ser B.................... 10.625 12/15/09 4,362,300
1,000 Koppers, Inc.,144A--Private Placement (a).... 9.875 10/15/13 1,115,000
3,680 Millennium America, Inc. .................... 7.000 11/15/06 3,735,200
775 Millennium America, Inc. .................... 9.250 06/15/08 844,750
6 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
CHEMICALS (CONTINUED)
$3,730 Nalco Co., 144A--Private Placement (a)....... 7.750% 11/15/11 $ 3,897,850
3,330 Nalco Financial Holdings, Inc., 144A--
Private Placement (a) (b).................... 0/9.000 02/01/14 2,031,300
1,105 PCI Chemicals Canada, Inc. (Canada).......... 10.000 12/31/08 1,082,622
350 Pioneer Cos., Inc. (Variable Rate Coupon).... 5.355 12/31/06 342,830
3,705 Rhodia SA, 144A--Private Placement (France)
(a).......................................... 8.875 06/01/11 3,334,500
2,410 Rockwood Specialties Group, Inc. ............ 10.625 05/15/11 2,687,150
1,485 Westlake Chemical Corp. ..................... 8.750 07/15/11 1,626,075
------------
42,600,193
------------
CONSUMER PRODUCTS 1.7%
1,555 Oxford Industrials, Inc., 144A--Private
Placement (a)................................ 8.875 06/01/11 1,663,850
2,220 Rayovac Corp. ............................... 8.500 10/01/13 2,380,950
3,560 Safilo Capital International SA, 144A--
Private Placement (Euro) (Luxembourg) (a).... 9.625 05/15/13 3,764,796
4,000 Sleepmaster LLC, Ser B (c) (d)............... 11.000 05/15/09 880,000
1,082 Tempur Pedic, Inc., 144A-- Private Placement
(a).......................................... 10.250 08/15/10 1,219,955
------------
9,909,551
------------
DIVERSIFIED MEDIA 6.8%
4,843 Advanstar Communications, Inc. .............. 8.630 08/15/08 5,144,722
820 Advanstar Communications, Inc. .............. 10.750 08/15/10 899,950
3,250 Alliance Atlantis Communications, Inc.
(Canada)..................................... 13.000 12/15/09 3,672,500
4,500 Dex Media, Inc., 144A-- Private Placement (a)
(b).......................................... 0/9.000 11/15/13 3,026,250
2,335 Dex Media/East Finance Corp. LLC............. 12.125 11/15/12 2,772,812
2,475 Dex Media/West Finance Corp., 144A--Private
Placement (a)................................ 9.875 08/15/13 2,790,562
4,452 Hollinger Participation Trust, 144A--Private
Placement (a) (e)............................ 12.125 11/15/10 5,153,460
1,695 Muzak LLC.................................... 10.000 02/15/09 1,792,462
3,102 Muzak LLC.................................... 9.875 03/15/09 3,102,000
2,130 Nebraska Book Co., Inc., 144A--Private
Placement (a)................................ 8.625 03/15/12 2,130,000
1,475 PEI Holdings, Inc. .......................... 11.000 03/15/10 1,707,312
3,705 Primedia, Inc. .............................. 8.875 05/15/11 3,843,937
1,160 Vivendi Universal SA (France)................ 6.250 07/15/08 1,249,900
2,570 Vivendi Universal SA (France)................ 9.250 04/15/10 3,039,025
------------
40,324,892
------------
ENERGY 9.3%
3,876 BRL Universal Equipment...................... 8.875 02/15/08 4,166,700
2,875 Chesapeake Energy Corp. ..................... 7.500 09/15/13 3,155,312
1,635 Citgo Petroleum Corp. ....................... 11.375 02/01/11 1,953,825
See Notes to Financial Statements 7
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
$6,170 El Paso Production Holding Co. .............. 7.750% 06/01/13 $ 5,830,650
4,385 Frontier Oil Corp. .......................... 11.750 11/15/09 4,900,237
1,428 Grey Wolf, Inc. ............................. 8.875 07/01/07 1,474,410
1,929 Gulfterra Energy Partners LP................. 10.625 12/01/12 2,391,960
854 Gulfterra Energy Partners LP, Ser B.......... 8.500 06/01/10 969,290
2,465 Hanover Compressor Co. ...................... 8.625 12/15/10 2,600,575
2,004 Hanover Equipment Trust, Ser B............... 8.750 09/01/11 2,164,320
3,890 Hilcorp Energy/Finance Corp., 144A--Private
Placement (a)................................ 10.500 09/01/10 4,356,800
2,370 Husky Oil Ltd. (Variable Rate Coupon)
(Canada)..................................... 8.900 08/15/28 2,772,900
1,994 Magnum Hunter Resources, Inc. ............... 9.600 03/15/12 2,233,280
650 MSW Energy Holdings/Finance.................. 8.500 09/01/10 711,750
2,735 MSW Energy Holdings/Finance II, 144A--
Private Placement (a)........................ 7.375 09/01/10 2,858,075
2,550 Port Arthur Finance Corp., Ser A............. 12.500 01/15/09 3,022,153
1,954 Tesoro Petroleum Corp. ...................... 9.625 04/01/12 2,178,710
1,810 Tesoro Petroleum Corp., Ser B................ 9.000 07/01/08 1,886,925
1,225 Transcontinental Gas Pipe Line Corp., Ser
B............................................ 8.875 07/15/12 1,457,750
3,792 Vintage Petroleum, Inc. ..................... 7.875 05/15/11 4,057,440
------------
55,143,062
------------
FINANCIAL 0.5%
2,475 Istar Financial, Inc. ....................... 8.750 08/15/08 2,759,625
------------
FOOD & DRUG 1.1%
3,098 California Farm Lease Trust, 144A--Private
Placement (a)................................ 8.500 07/15/17 3,533,692
2,605 Delhaize America, Inc. ...................... 8.125 04/15/11 3,015,287
1,200 Jitney-Jungle Stores America, Inc. (c) (d)
(f).......................................... 12.000 03/01/06 0
------------
6,548,979
------------
FOOD & TOBACCO 2.6%
2,360 Michael Foods, Inc., Ser B, 144A--Private
Placement (a)................................ 8.000 11/15/13 2,460,300
5,400 Pilgrim's Pride Corp. ....................... 9.625 09/15/11 5,886,000
1,390 PPC Escrow Corp., 144A-- Private Placement
(a).......................................... 9.250 11/15/13 1,473,400
4,750 Smithfield Foods, Inc. ...................... 7.625 02/15/08 5,035,000
600 Smithfield Foods, Inc., Ser B................ 8.000 10/15/09 657,750
------------
15,512,450
------------
FOREST PRODUCTS 6.1%
3,050 Abitibi-Consolidated, Inc. (Canada).......... 6.000 06/20/13 2,933,383
5,025 Georgia-Pacific Corp. ....................... 8.875 02/01/10 5,753,625
2,615 Graphic Packaging International, Inc. ....... 9.500 08/15/13 2,954,950
3,525 JSG Funding PLC (Euro) (United Kingdom)...... 10.125 10/01/12 4,955,758
1,785 Norampac, Inc. (Canada)...................... 6.750 06/01/13 1,892,100
8 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
FOREST PRODUCTS (CONTINUED)
$ 245 Owens-Brockway Glass Containers, Inc. ....... 7.750% 05/15/11 $ 260,925
1,000 Owens-Brockway Glass Containers, Inc. ....... 8.750 11/15/12 1,102,500
4,390 Owens-Illinois, Inc. ........................ 7.500 05/15/10 4,346,100
1,585 Pliant Corp. ................................ 13.000 06/01/10 1,355,175
2,419 Pliant Corp. ................................ 13.000 06/01/10 2,068,245
740 Tekni-Plex, Inc., 144A--Private Placement
(a).......................................... 8.750 11/15/13 775,150
3,355 Tekni-Plex, Inc., Ser B...................... 12.750 06/15/10 3,640,175
4,800 Tembec Industries, Inc. (Canada)............. 7.750 03/15/12 4,608,000
------------
36,646,086
------------
GAMING & LEISURE 4.4%
241 Hilton Hotels Corp. ......................... 7.950 04/15/07 269,318
2,925 Hilton Hotels Corp. ......................... 7.625 12/01/12 3,327,187
2,325 HMH Properties, Inc., Ser B.................. 7.875 08/01/08 2,418,000
3,271 Horseshoe Gaming LLC, Ser B.................. 8.625 05/15/09 3,446,816
1,850 LodgeNet Entertainment Corp. ................ 9.500 06/15/13 2,076,625
2,885 MGM Mirage, Inc. ............................ 6.000 10/01/09 3,032,856
1,660 Park Place Entertainment Corp. .............. 7.875 12/15/05 1,772,050
993 Park Place Entertainment Corp. .............. 8.875 09/15/08 1,127,055
884 Starwood Hotels & Resorts Worldwide, Inc. ... 7.375 05/01/07 961,350
2,576 Starwood Hotels & Resorts Worldwide, Inc. ... 7.875 05/01/12 2,885,120
2,500 Station Casinos, Inc., 144A--Private
Placement (a)................................ 6.500 02/01/14 2,537,500
2,280 Venetian Casino Resort LLC................... 11.000 06/15/10 2,633,400
------------
26,487,277
------------
HEALTHCARE 3.6%
418 AmerisourceBergen Corp. ..................... 8.125 09/01/08 467,115
3,775 AmerisourceBergen Corp. ..................... 7.250 11/15/12 4,077,000
965 Fisher Scientific International Inc., 144A--
Private Placement (a)........................ 8.000 09/01/13 1,063,913
1,507 Fisher Scientific International, Inc. ....... 8.125 05/01/12 1,638,863
4,790 Fresenius Medical Care Capital Trust IV...... 7.875 06/15/11 5,227,088
510 HCA, Inc. ................................... 8.750 09/01/10 615,332
475 HCA, Inc. ................................... 7.190 11/15/15 531,109
350 Manor Care, Inc. ............................ 7.500 06/15/06 382,375
1,008 Manor Care, Inc. ............................ 8.000 03/01/08 1,166,760
565 National Nephrology Associates, Inc., 144A--
Private Placement (a)........................ 9.000 11/01/11 658,225
1,805 Tenet Healthcare Corp. ...................... 5.375 11/15/06 1,723,775
1,180 Tenet Healthcare Corp. ...................... 6.500 06/01/12 1,047,250
3,305 Tenet Healthcare Corp. ...................... 7.375 02/01/13 3,073,650
------------
21,672,455
------------
HOUSING 6.9%
6,055 Associated Materials, Inc., 144A--Private
Placement (a) (b)............................ 0/11.250 03/01/14 3,506,269
1,400 CB Richard Ellis Service, Inc. .............. 9.750 05/15/10 1,554,000
See Notes to Financial Statements 9
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
HOUSING (CONTINUED)
$3,622 CB Richard Ellis Service, Inc. .............. 11.250% 06/15/11 $ 4,092,860
765 Interface, Inc. ............................. 7.300 04/01/08 768,825
955 Interface, Inc. ............................. 10.375 02/01/10 1,074,375
2,910 Interface, Inc., 144A--Private Placement
(a).......................................... 9.500 02/01/14 2,895,450
4,005 Jacuzzi Brands, Inc. ........................ 9.625 07/01/10 4,405,500
2,440 LNR Property Corp. .......................... 7.625 07/15/13 2,598,600
1,575 Meritage Corp. .............................. 9.750 06/01/11 1,771,875
7,125 Nortek Holdings, Inc., 144A--Private
Placement (a) (b)............................ 0/10.000 05/15/11 5,290,313
1,980 Ply Gem Industries, Inc., 144A--Private
Placement (a)................................ 9.000 02/15/12 2,049,300
3,898 Schuler Homes, Inc. ......................... 9.375 07/15/09 4,365,760
1,186 Technical Olympic USA, Inc. ................. 9.000 07/01/10 1,289,775
1,600 Technical Olympic USA, Inc. ................. 9.000 07/01/10 1,740,000
1,811 Technical Olympic USA, Inc. ................. 10.375 07/01/12 2,064,540
1,610 WII Components, Inc., 144A--Private Placement
(a).......................................... 10.000 02/15/12 1,650,250
------------
41,117,692
------------
INFORMATION TECHNOLOGY 2.3%
2,958 Avaya, Inc. ................................. 11.125 04/01/09 3,497,835
2,785 Iron Mountain, Inc. ......................... 8.625 04/01/13 3,042,613
2,340 Iron Mountain, Inc. ......................... 7.750 01/15/15 2,480,400
925 Xerox Capital Europe PLC (United Kingdom).... 5.875 05/15/04 931,938
3,400 Xerox Corp. ................................. 7.125 06/15/10 3,621,000
------------
13,573,786
------------
MANUFACTURING 4.2%
1,695 ABB International Finance Ltd. (Euro)
(Guernsey)................................... 9.500 01/15/08 2,462,982
590 ABB International Finance, Inc. ............. 6.750 06/03/04 595,623
1,490 Brand Services, Inc. ........................ 12.000 10/15/12 1,750,750
990 Flowserve Corp. ............................. 12.250 08/15/10 1,148,400
1,377 Johnsondiversey, Inc. (Euro) (Luxembourg).... 9.625 05/15/12 1,867,381
3,021 Johnsondiversey, Inc., Ser B................. 9.625 05/15/12 3,307,995
2,615 Manitowoc, Inc. ............................. 10.500 08/01/12 3,000,713
1,959 NMHG Holdings Co. ........................... 10.000 05/15/09 2,164,695
4,980 Outsourcing Services Group, Inc. ............ 10.875 03/01/06 2,763,900
1,417 Reunion Industries, Inc. (c)................. 13.000 05/01/03 680,160
4,814 Trimas Corp. ................................ 9.875 06/15/12 5,223,190
------------
24,965,789
------------
METALS 2.4%
6,058 Doe Run Resources Corp. (Acquired 3/6/98,
Cost $7,363,774) (e) (f) (g)................. 11.750 11/01/08 2,120,406
1,460 General Cable Corp., 144A--Private Placement
(a).......................................... 9.500 11/15/10 1,620,600
6,655 GS Technologies Operating, Inc. (c) (d)
(f).......................................... 12.000 09/01/04 666
10 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
METALS (CONTINUED)
$2,450 GS Technologies Operating, Inc. (c) (d)
(f).......................................... 12.250% 10/01/05 $ 0
1,416 Republic Engineered Products (c) (d)......... 10.000 08/16/09 984,447
1,635 Sgl Carbon Luxembourg SA (Euro)
(Luxembourg)................................. 8.500 02/01/12 2,115,552
3,422 Ucar Finance, Inc. .......................... 10.250 02/15/12 3,918,190
3,000 United States Steel Corp. ................... 9.750 05/15/10 3,397,500
------------
14,157,361
------------
RETAIL 1.7%
1,738 Big 5 Corp., Ser B........................... 10.875 11/15/07 1,833,590
2,015 General Nutrition Center, Inc., 144A--
Private Placement (a)........................ 8.500 12/01/10 2,108,194
4,515 Payless Shoesource, Inc. .................... 8.250 08/01/13 4,492,425
1,630 Petro Stopping Center/Financial, 144A--
Private Placement (a)........................ 9.000 02/15/12 1,711,500
------------
10,145,709
------------
SERVICES 2.6%
1,750 Allied Waste North America, Inc. ............ 7.875 04/15/13 1,907,500
1,455 Allied Waste North America, Inc., Ser B...... 10.000 08/01/09 1,569,581
1,500 Encompass Services Corp. (c) (d) (f)......... 10.500 05/01/09 0
6,250 Hydrochem Industrial Services, Inc., Ser B... 10.375 08/01/07 6,281,250
2,875 United Rentals North America, Inc., 144A--
Private Placement (a)........................ 6.500 02/15/12 2,875,000
2,900 United Rentals North America, Inc., 144A--
Private Placement (a)........................ 7.750 11/15/13 2,892,750
------------
15,526,081
------------
TELECOMMUNICATIONS 3.8%
4,290 Axtel SA, 144A--Private Placement (Mexico)
(a).......................................... 11.000 12/15/13 4,365,075
4,210 Exodus Communications, Inc. (c) (d) (f)...... 11.250 07/01/08 0
330 Exodus Communications, Inc. (c) (d) (f)...... 11.625 07/15/10 0
2,750 Exodus Communications, Inc. (Euro) (c) (d)
(f).......................................... 11.375 07/15/08 0
5,305 GST Network Funding, Inc. (c) (d) (f)........ 10.500 05/01/08 531
4,021 Knology, Inc., 144A--Private Placement (a)
(e).......................................... 12.000 11/30/09 4,060,801
3,000 Park N View, Inc., Ser B (c) (d) (f)......... 13.000 05/15/08 0
6,075 Primus Telecommunications Holdings, 144A--
Private Placement (a)........................ 8.000 01/15/14 5,740,875
4,030 Qwest Services Corp., 144A--Private Placement
(a).......................................... 13.000 12/15/07 4,674,800
3,605 US West Communications, Inc. ................ 5.625 11/15/08 3,605,000
5,800 Worldwide Fiber, Inc. (Canada) (c) (f)....... 12.000 08/01/09 580
------------
22,447,662
------------
TRANSPORTATION 4.3%
2,815 Amsted Industries, Inc., 144A--Private
Placement (a)................................ 10.250 10/15/11 3,195,025
3,260 Autonation, Inc. ............................ 9.000 08/01/08 3,781,600
See Notes to Financial Statements 11
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
$3,010 Intermet Corp. .............................. 9.750% 06/15/09 $ 2,844,450
4,040 Laidlaw International, Inc., 144A--Private
Placement (a)................................ 10.750 06/15/11 4,656,100
4,025 Sonic Automotive, Inc., Ser B................ 8.625 08/15/13 4,266,500
2,410 Tenneco Automotive, Inc., Ser B.............. 11.625 10/15/09 2,614,850
3,667 TRW Automotive, Inc. ........................ 9.375 02/15/13 4,198,715
------------
25,557,240
------------
UTILITY 7.9%
508 AES Corp. ................................... 9.375 09/15/10 557,530
360 AES Corp. ................................... 8.875 02/15/11 385,200
1,295 AES Corp. ................................... 7.750 03/01/14 1,288,525
2,925 AES Corp., 144A--Private Placement (a)....... 9.000 05/15/15 3,246,750
1,695 Allegheny Energy, Inc. ...................... 7.750 08/01/05 1,762,800
3,050 Calpine Corp. ............................... 8.625 08/15/10 2,340,875
2,305 Calpine Corp., 144A--Private Placement (a)... 8.500 07/15/10 2,132,125
775 CMS Energy Corp. ............................ 7.500 01/15/09 803,094
2,780 CMS Energy Corp. ............................ 8.500 04/15/11 2,995,450
4,232 Dynegy Holdings, Inc. ....................... 6.875 04/01/11 3,713,580
2,460 Dynegy Holdings, Inc., 144A--Private
Placement (a)................................ 9.875 07/15/10 2,718,300
925 IPALCO Enterprises, Inc. .................... 8.625 11/14/11 1,049,875
3,220 Monongahela Power Co. ....................... 5.000 10/01/06 3,288,425
2,590 Nevada Power Co., 144A-- Private Placement
(a).......................................... 9.000 08/15/13 2,887,850
695 Northwest Pipeline Corp. .................... 8.125 03/01/10 761,025
5,955 Ormat Funding Corp., 144A--Private Placement
(a).......................................... 8.250 12/30/20 5,984,775
1,625 PG & E Corp., 144A--Private Placement (a).... 6.875 07/15/08 1,755,000
700 PSEG Energy Holdings, Inc. .................. 7.750 04/16/07 737,625
1,949 PSEG Energy Holdings, Inc. .................. 8.625 02/15/08 2,109,793
1,345 Southern Natural Gas Co. .................... 8.875 03/15/10 1,486,225
3,080 Williams Cos., Inc. ......................... 7.875 09/01/21 3,157,000
2,025 Williams Cos., Inc., Ser A (Variable Rate
Coupon)...................................... 6.750 01/15/06 2,103,469
------------
47,265,291
------------
WIRELESS COMMUNICATIONS 5.2%
3,300 American Tower Corp. ........................ 9.375 02/01/09 3,514,500
2,110 American Tower Corp., 144A--Private Placement
(a).......................................... 7.500 05/01/12 2,036,150
4,115 Centennial Communications, 144A--Private
Placement (a)................................ 8.125 02/01/14 3,888,675
3,355 Metropcs, Inc. .............................. 10.750 10/01/11 3,531,138
5,815 Nextel Communications, Inc. ................. 9.375 11/15/09 6,345,619
2,825 Nextel Partners, Inc. ....................... 11.000 03/15/10 3,142,813
3,858 SBA Communications Corp. .................... 10.250 02/01/09 3,886,935
12 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS (CONTINUED)
$2,015 SBA Communications Corp., 144A--Private
Placement (a) (b)............................ 0/9.750% 12/15/11 $ 1,400,425
2,230 UbiquiTel Operating Co., 144A--Private
Placement (a)................................ 9.875 03/01/11 2,196,550
1,030 UbiquiTel Operating Co. (b).................. 0/14.000 04/15/10 952,750
------------
30,895,555
------------
TOTAL CORPORATE BONDS 93.2%................................................. 555,779,333
------------
FOREIGN GOVERNMENT OBLIGATION 0.3%
1,496 Republic of Colombia (Columbia).............. 9.750 04/09/11 1,720,363
------------
EQUITIES 2.3%
DecisionOne Corp. (14,661 Common Shares) (f) (h)............................. 0
DecisionOne Corp. (8,219 Common Stock Warrants Class A) (f) (h).............. 0
DecisionOne Corp. (14,162 Common Stock Warrants Class B) (f) (h)............. 0
DecisionOne Corp. (8,400 Common Stock Warrants Class C) (f) (h).............. 0
Dobson Communications Corp. (21,103 Preferred Shares) (e).................... 1,777,939
Doe Run Resources Corp. (21 Common Stock Warrants) (f) (h)................... 0
HF Holdings, Inc. (36,820 Common Stock Warrants) (f) (h)..................... 0
Jazztel, PLC, 144A--Private Placement (3,450 Common Stock Warrants) (United
Kingdom) (a) (f) (h)......................................................... 0
Mediq, Inc. (5,526 Common Shares) (f) (h).................................... 22,159
Microcell Telecommunications (16,250 Common Stock Warrants) (Canada) (h)..... 80,632
Microcell Telecommunications (26,407 Convertible Preferred Shares)
(Canada)..................................................................... 507,372
Microcell Telecommunications (9,750 Common Stock Warrants) (Canada) (h)...... 40,740
Microcell Telecommunications, Class A (220 Common Shares) (Canada) (h)....... 4,106
Microcell Telecommunications, Class B (26,249 Common Shares) (Canada) (h).... 489,647
Motient Corp. (32,388 Common Shares) (h)..................................... 224,449
Occidente Y Caribe Celular SA (20,850 Common Stock Warrants) (f) (h)......... 0
OpTel, Inc. (3,275 Common Shares) (f) (h).................................... 0
Park N View, Inc., 144A--Private Placement (3,000 Common Stock Warrants) (a)
(f) (h)...................................................................... 0
Paxon Communications Corp. (50,456 Preferred Shares) (e)..................... 4,780,694
Pioneer Cos., Inc. (71,438 Common Shares) (h)................................ 476,491
Republic Technologies International, Inc., 144A--Private Placement (7,525
Common Stock Warrants) (a) (h)............................................... 0
Startec Global Communications, 144A--Private Placement (8,100 Common Stock
Warrants) (a) (f) (h)........................................................ 0
TNP Enterprises, Inc. (46,183 Preferred Shares, Ser D) (e)................... 5,420,686
See Notes to Financial Statements 13
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
DESCRIPTION VALUE
--------------------------------------------------------------------------------------------
EQUITIES (CONTINUED)
UIH Australia/Pacific, Inc. (5,000 Common Stock Warrants) (f) (h)............ $ 0
VS Holdings, Inc. (568,177 Common Shares) (f) (h)............................ 106,079
------------
TOTAL EQUITIES 2.3%......................................................... 13,930,994
------------
TOTAL LONG-TERM INVESTMENTS 95.8%
(Cost $601,016,956)........................................................ 571,430,690
REPURCHASE AGREEMENT 2.9%
Banc of America Securities LLC ($17,145,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 02/27/04, to be sold
on 03/01/04 at $17,146,443)
(Cost $17,145,000)......................................................... 17,145,000
------------
TOTAL INVESTMENTS 98.7%
(Cost $618,161,956)........................................................ 588,575,690
OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%.................................. 8,027,116
------------
NET ASSETS 100.0%........................................................... $596,602,806
============
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) Non-income producing as security is in default.
(d) This borrower has filed for protection in federal bankruptcy court.
(e) Payment-in-kind security.
(f) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(g) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 0.4% of net
assets.
(h) Non-income producing security.
14 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 29, 2004 (Unaudited)
ASSETS:
Total Investments (Cost $618,161,956)....................... $ 588,575,690
Receivables:
Interest.................................................. 10,952,587
Investments Sold.......................................... 6,049,687
Fund Shares Sold.......................................... 1,005,231
Forward Foreign Currency Contracts.......................... 453,182
Other....................................................... 159,854
--------------
Total Assets............................................ 607,196,231
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 6,675,915
Fund Shares Repurchased................................... 1,774,912
Income Distributions...................................... 913,783
Distributor and Affiliates................................ 409,614
Investment Advisory Fee................................... 259,068
Custodian Bank............................................ 43,314
Accrued Expenses............................................ 294,093
Trustees' Deferred Compensation and Retirement Plans........ 222,726
--------------
Total Liabilities....................................... 10,593,425
--------------
NET ASSETS.................................................. $ 596,602,806
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,023,052,178
Accumulated Undistributed Net Investment Income............. (7,580,034)
Net Unrealized Depreciation................................. (29,131,037)
Accumulated Net Realized Loss............................... (389,738,301)
--------------
NET ASSETS.................................................. $ 596,602,806
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $375,203,816 and 103,788,619 shares of
beneficial interest issued and outstanding)............. $ 3.62
Maximum sales charge (4.75%* of offering price)......... .18
--------------
Maximum offering price to public........................ $ 3.80
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $177,171,791 and 48,815,585 shares of
beneficial interest issued and outstanding)............. $ 3.63
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $44,227,199 and 12,315,199 shares of
beneficial interest issued and outstanding)............. $ 3.59
==============
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 15
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended February 29, 2004 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 25,054,656
Dividends................................................... 985,162
Other....................................................... 207,571
------------
Total Income.............................................. 26,247,389
------------
EXPENSES:
Investment Advisory Fee..................................... 1,649,698
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $463,336, $893,759 and $218,334,
respectively)............................................. 1,575,429
Shareholder Services........................................ 618,753
Custody..................................................... 37,640
Trustees' Fees and Related Expenses......................... 14,580
Legal....................................................... 11,471
Other....................................................... 211,133
------------
Total Expenses.......................................... 4,118,704
Less Credits Earned on Cash Balances.................... 4,941
------------
Net Expenses............................................ 4,113,763
------------
NET INVESTMENT INCOME....................................... $ 22,133,626
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(21,849,498)
Forward Foreign Currency Contracts........................ (241)
Foreign Currency Transactions............................. (959,705)
------------
Net Realized Loss........................................... (22,809,444)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (83,359,848)
------------
End of the Period:
Investments............................................. (29,586,266)
Forward Foreign Currency Contracts...................... 453,182
Foreign Currency Translation............................ 2,047
------------
(29,131,037)
------------
Net Unrealized Appreciation During the Period............... 54,228,811
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 31,419,367
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 53,552,993
============
16 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 22,133,626 $ 45,868,203
Net Realized Loss....................................... (22,809,444) (158,773,118)
Net Unrealized Appreciation During the Period........... 54,228,811 214,331,303
------------- -------------
Change in Net Assets from Operations.................... 53,552,993 101,426,388
------------- -------------
Distributions from Net Investment Income:
Class A Shares........................................ (14,222,432) (24,666,719)
Class B Shares........................................ (5,905,905) (11,156,188)
Class C Shares........................................ (1,463,160) (2,557,102)
------------- -------------
(21,591,497) (38,380,009)
------------- -------------
Return of Capital Distribution:
Class A Shares........................................ -0- (7,393,542)
Class B Shares........................................ -0- (3,119,852)
Class C Shares........................................ -0- (735,655)
------------- -------------
-0- (11,249,049)
------------- -------------
Total Distributions..................................... (21,591,497) (49,629,058)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 31,961,496 51,797,330
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................... 92,655,554 407,546,505
Net Asset Value of Shares Issued Through Dividend
Reinvestment.......................................... 15,421,048 33,579,035
Cost of Shares Repurchased.............................. (169,195,725) (381,177,393)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... (61,119,123) 59,948,147
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS................... (29,157,627) 111,745,477
NET ASSETS:
Beginning of the Period................................. 625,760,433 514,014,956
------------- -------------
End of the Period (Including accumulated undistributed
net investment income of ($7,580,034) and
($8,122,163), respectively)........................... $ 596,602,806 $ 625,760,433
============= =============
See Notes to Financial Statements 17
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS A SHARES FEBRUARY 29, ------------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $ 3.43 $ 3.15 $ 4.23 $ 5.24 $ 5.68 $ 6.06
------ ------ ------- ------ ------ ------
Net Investment Income....... .13 .29 .39 .51 .59 .63
Net Realized and Unrealized
Gain/Loss................. .19 .29 (1.01) (.96) (.43) (.37)
------ ------ ------- ------ ------ ------
Total from Investment
Operations.................. .32 .58 (.62) (.45) .16 .26
------ ------ ------- ------ ------ ------
Less:
Distributions from Net
Investment Income......... .13 .24 .43 .55 .60 .64
Return of Capital
Distributions............. -0- .06 .03 .01 -0- -0-
------ ------ ------- ------ ------ ------
Total Distributions........... .13 .30 .46 .56 .60 .64
------ ------ ------- ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD...................... $ 3.62 $ 3.43 $ 3.15 $ 4.23 $ 5.24 $ 5.68
====== ====== ======= ====== ====== ======
Total Return (b).............. 9.46%* 19.26% -15.75% -9.04% 3.09% 4.41%
Net Assets at End of the
Period (In millions)........ $375.2 $408.7 $ 308.5 $394.4 $465.0 $492.4
Ratio of Expenses to Average
Net Assets.................. 1.08% 1.12% 1.08% 1.05% 1.03% 1.03%
Ratio of Net Investment Income
to Average Net Assets....... 7.56% 8.36% 10.39% 10.93% 10.90% 10.65%
Portfolio Turnover............ 48%* 95% 83% 80% 68% 51%
* Non-Annualized
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset- backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 10.49 % to 10.39%. Net investment income per share and net
realized gains and losses per share were unaffected by the adjustments. Per
share, ratios and supplemental data for periods prior to August 31, 2002
have not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include Rule 12b-1 fees and service fees of up to .25% and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or
the redemption of Fund shares.
18 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS B SHARES FEBRUARY 29, ------------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $ 3.44 $ 3.16 $ 4.24 $ 5.25 $ 5.68 $ 6.06
------ ------ ------- ------ ------ ------
Net Investment Income....... .12 .25 .35 .48 .55 .58
Net Realized and Unrealized
Gain/Loss................. .19 .30 (1.01) (.97) (.43) (.37)
------ ------ ------- ------ ------ ------
Total from Investment
Operations.................. .31 .55 (.66) (.49) .12 .21
------ ------ ------- ------ ------ ------
Less:
Distributions from Net
Investment Income......... .12 .21 .39 .51 .55 .59
Return of Capital
Distributions............. -0- .06 .03 .01 -0- -0-
------ ------ ------- ------ ------ ------
Total Distributions........... .12 .27 .42 .52 .55 .59
------ ------ ------- ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD...................... $ 3.63 $ 3.44 $ 3.16 $ 4.24 $ 5.25 $ 5.68
====== ====== ======= ====== ====== ======
Total Return (b).............. 8.71%* 18.27% -16.12% -9.80% 2.43% 3.57%
Net Assets at End of the
Period (In millions)........ $177.2 $175.6 $ 168.8 $249.6 $268.7 $318.2
Ratio of Expenses to Average
Net Assets.................. 1.84% 1.89% 1.84% 1.83% 1.78% 1.79%
Ratio of Net Investment Income
to Average Net Assets....... 6.80% 7.68% 9.67% 10.13% 10.15% 9.88%
Portfolio Turnover............ 48%* 95% 83% 80% 68% 51%
* Non-Annualized
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset- backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 9.77% to 9.67%. Net investment income per share and net realized
gains and losses per share were unaffected by the adjustments. Per share,
ratios and supplemental data for periods prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within the first and second year of purchase and declining to 0% after
the fifth year. If the sales charge was included, total returns would be
lower. These returns include combined Rule 12b-1 fees and service fees of 1%
and do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
See Notes to Financial Statements 19
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS C SHARES FEBRUARY 29, ------------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $3.41 $ 3.13 $ 4.20 $ 5.22 $ 5.65 $6.04
----- ------ ------- ------- ------ -----
Net Investment Income....... .12 .25 .35 .48 .55 .58
Net Realized and Unrealized
Gain/Loss................. .18 .30 (1.00) (.98) (.43) (.38)
----- ------ ------- ------- ------ -----
Total from Investment
Operations.................. .30 .55 (.65) (.50) .12 .20
----- ------ ------- ------- ------ -----
Less:
Distributions from Net
Investment Income......... .12 .21 .39 .51 .55 .59
Return of Capital
Distributions............. -0- .06 .03 .01 -0- -0-
----- ------ ------- ------- ------ -----
Total Distributions........... .12 .27 .42 .52 .55 .59
----- ------ ------- ------- ------ -----
NET ASSET VALUE, END OF THE
PERIOD...................... $3.59 $ 3.41 $ 3.13 $ 4.20 $ 5.22 $5.65
===== ====== ======= ======= ====== =====
Total Return (b).............. 8.83%* 18.14%(c) -16.04% -10.06% 2.45% 3.42%
Net Assets at End of the
Period (In millions)........ $44.2 $ 41.5 $ 36.7 $ 58.7 $ 59.4 $67.3
Ratio of Expenses to Average
Net Assets.................. 1.84% 1.86% 1.84% 1.82% 1.78% 1.79%
Ratio of Net Investment Income
to Average Net Assets....... 6.80% 7.68%(c) 9.68% 10.12% 10.15% 9.87%
Portfolio Turnover............ 48%* 95% 83% 80% 68% 51%
* Non-Annualized
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on fixed income securities and presenting
paydown gains and losses on mortgage- and asset- backed securities as
interest income. The effect of these changes for the period ended August 31,
2002 was to decrease the ratio of net investment income to average net
assets from 9.78% to 9.68%. Net investment income per share and net realized
gains and losses per share were unaffected by the adjustments. Per share,
ratios and supplemental data for periods prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1% charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .01%.
20 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen High Income Corporate Bond Fund (the "Fund") is organized as a
Delaware statutory trust, and is registered as a diversified, open-end
management investment company under the Investment Company Act of 1940 (the
"1940 Act"), as amended. The Fund's primary investment objective is to seek to
maximize current income. Capital appreciation is a secondary objective which is
sought only when consistent with the Fund's primary investment objective. The
Fund commenced investment operations on October 2, 1978. The distribution of the
Fund's Class B and Class C Shares commenced on July 2, 1992 and July 6, 1993,
respectively.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Fixed income investments and preferred stock are stated at
value using market quotations or indications of value obtained from an
independent pricing service. Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Equity securities traded on NASDAQ are valued at the NASDAQ Official
Closing Price. Listed and unlisted securities for which the last sale price is
not available are valued at the mean of the bid and asked prices. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost, which approximates market value. Forward foreign
currency contracts are valued using quoted foreign exchange rates.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At February 29, 2004, there were no when-issued or delayed
delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management (the "Adviser") or its
affiliates the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to 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.
21
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts on debt
securities are accreted and premiums are amortized over the expected life of
each applicable security. Income and expenses of the Fund are allocated on a pro
rata basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At August 31, 2003, the Fund had an accumulated capital loss carryforward
for tax purposes of $261,908,595 which expires between August 31, 2004 and
August 31, 2011. Of this amount, $9,539,272 will expire on August 31, 2004.
At February 29, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $619,357,112
============
Gross tax unrealized appreciation........................... $ 41,857,665
Gross tax unrealized depreciation........................... (72,639,087)
------------
Net tax unrealized depreciation on investments.............. $(30,781,422)
============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included in ordinary income for
tax purposes.
For tax purposes, the determination of a return of capital distribution is
made at the end of the Fund's fiscal year. Therefore, while it is likely that a
portion of the Fund's distribution will ultimately be characterized as a return
of capital for tax purposes, no such designation has been made for the six
months ended February 29, 2004.
The tax character of distributions paid during the year ended August 31,
2003 was as follows:
2003
Distributions paid from:
Ordinary income........................................... $39,193,541
Long-term capital gain.................................... -0-
Return of capital......................................... 11,249,049
-----------
$50,442,590
===========
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.
22
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
F. EXPENSE REDUCTIONS During the six months ended February 29, 2004, the Fund's
custody fee was reduced by $4,941 as a result of credits earned on cash
balances.
G. FOREIGN CURRENCY TRANSLATION Asset and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars at the mean of the quoted bid and ask prices of
such currencies against the U.S. dollar. Purchases and sales of portfolio
securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Realized gain and loss on foreign currency
transactions on the Statement of Operations includes the net realized amount
from the sale of foreign currency and the amount realized between trade date and
settlement date on securities transactions. Income and expenses are translated
at rates prevailing when accrued.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM
First $150 million.......................................... .625%
Next $150 million........................................... .550%
Over $300 million........................................... .500%
For the six months ended February 29, 2004, the Fund recognized expenses of
approximately $11,500 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
Under an Accounting Services Agreement, the Adviser provides accounting
services to the Fund. The Adviser allocates the cost of such services to each
fund. For the six months ended February 29, 2004, the Fund recognized expenses
of approximately $20,700 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing accounting services to
the Fund which are reported as part of "Other" expenses in the Statement of
Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 29, 2004, the Fund recognized expenses of approximately $501,700
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $125,119 are included in
"Other" assets on the Statement of Assets and Liabilities at February 29, 2004.
Appreciation/ depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a
23
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
ten-year period and are based upon each trustee's years of service to the Fund.
The maximum annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At February 29, 2004, capital aggregated $714,171,788, $246,776,401 and
$62,103,989 for Classes A, B and C, respectively. For the six months ended
February 29, 2004, transactions were as follows:
SHARES VALUE
Sales:
Class A................................................... 20,934,570 $ 74,351,527
Class B................................................... 3,558,896 12,708,910
Class C................................................... 1,579,648 5,595,117
----------- -------------
Total Sales................................................. 26,073,114 $ 92,655,554
=========== =============
Dividend Reinvestment:
Class A................................................... 2,918,287 $ 10,462,768
Class B................................................... 1,109,218 3,992,961
Class C................................................... 270,961 965,319
----------- -------------
Total Dividend Reinvestment................................. 4,298,466 $ 15,421,048
=========== =============
Repurchases:
Class A................................................... (39,179,694) $(138,710,773)
Class B................................................... (6,821,004) (24,460,285)
Class C................................................... (1,693,308) (6,024,667)
----------- -------------
Total Repurchases........................................... (47,694,006) $(169,195,725)
=========== =============
24
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
At August 31, 2003, capital aggregated $768,068,266, $254,534,815, and
$61,568,220 for Classes A, B and C, respectively. For the year ended August 31,
2003, transactions were as follows:
SHARES VALUE
Sales:
Class A.................................................. 108,069,332 $ 354,101,454
Class B.................................................. 11,775,025 38,249,429
Class C.................................................. 4,650,091 15,195,622
------------ -------------
Total Sales................................................ 124,494,448 $ 407,546,505
============ =============
Dividend Reinvestment:
Class A.................................................. 6,823,287 $ 22,296,985
Class B.................................................. 2,819,580 9,226,196
Class C.................................................. 633,008 2,055,854
------------ -------------
Total Dividend Reinvestment................................ 10,275,875 $ 33,579,035
============ =============
Repurchases:
Class A.................................................. (93,634,941) $(310,107,293)
Class B.................................................. (16,965,322) (55,230,999)
Class C.................................................. (4,850,611) (15,839,101)
------------ -------------
Total Repurchases.......................................... (115,450,874) $(381,177,393)
============ =============
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received thereon, automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received thereon, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the six months ended February 29, 2004 and the
year ended August 31, 2003, 422,397 and 1,038,020 Class B Shares automatically
converted to Class A Shares, respectively, and are shown in the above table as
sales of Class A Shares and repurchases of Class B Shares. Class C Shares
purchased before January 1, 1997, and any dividend reinvestment plan Class C
Shares received on such shares, automatically convert to Class A Shares ten
years after the end of the calendar month in which such shares were purchased.
Class C Shares purchased on or after January 1, 1997 do not possess a conversion
feature. For the six months ended February 29, 2004 and the year ended August
31, 2003, 9,895 and 0 Class C Shares automatically converted to Class A Shares,
respectively, and are shown in the above table as sales of Class A Shares and
repurchases of Class C Shares. Class B and C Shares are offered without a front
end sales charge, but are subject to a contingent deferred sales charge (CDSC).
The CDSC will be imposed on most redemptions
25
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
made within five years of the purchase for Class B Shares and one year of the
purchase for Class C Shares as detailed in the following schedule.
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 4.00% None
Third....................................................... 3.00% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth and Thereafter........................................ None None
For the six months ended February 29, 2004, Van Kampen, as Distributor for
the Fund, received net commissions on sales of the Fund's Class A Shares of
approximately $64,800 and CDSC on redeemed shares of approximately $126,900.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $280,343,167 and $324,070,936,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, manage the Fund's effective yield, foreign currency exposure,
maturity and duration or generate potential gain. All of the Fund's holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when taking delivery of
a security underlying a forward commitment. In this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
forward commitment.
Purchasing securities on a forward commitment involves a risk that the
market value at the time of delivery may be lower than the agreed upon purchase
price resulting in an unrealized loss. Selling securities on a forward
commitment involves different risks and can result in losses more significant
than those arising from the purchase of such securities. Risks may arise as a
result of the potential inability of the counterparties to meet the terms of
their contracts.
A forward foreign currency contract is a commitment to purchase or sell a
foreign currency at a future date at a negotiated forward rate. Upon the
settlement of the contract, a realized gain or loss is recognized and is
included as a component of realized gain/loss on forward foreign currency
contracts. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.
26
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
The following forward foreign currency contracts were outstanding as of
February 29, 2004:
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
LONG CONTRACTS:
Euro Currency,
640,000 expiring 04/26/04................................. $ 794,944 $(12,352)
350,000 expiring 04/26/04................................. 434,735 (490)
1,350,000 expiring 04/26/04............................... 1,676,835 (10,570)
--------
(23,412)
--------
SHORT CONTRACTS:
Euro Currency,
10,015,000 expiring 04/26/04.............................. $12,439,635 $249,370
340,000 expiring 04/26/04................................. 422,314 8,602
8,205,000 expiring 04/26/04............................... 10,191,433 204,302
800,000 expiring 04/26/04................................. 993,680 14,320
--------
476,594
--------
$453,182
========
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and maintenance of shareholder accounts
with respect to such classes of shares.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and 1.00% each for Class B and Class C average daily net assets are
accrued daily. The amount of distribution expenses incurred by Van Kampen and
not yet reimbursed ("unreimbursed receivable") was approximately $5,041,438 and
$6,485 for Class B and Class C Shares, respectively. These amounts may be
recovered from future payments under the distribution plan or CDSC. To the
extent the unreimbursed receivable has been fully recovered, any excess 12b-1
fees will be refunded to the Fund on a quarterly basis.
Included in the fees for the six months ended February 29, 2004 are payments
retained by Van Kampen of approximately $711,900 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $72,700.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser and certain investment companies
advised by the Adviser or its affiliates, including the Fund, are named as
defendants in a number of recently filed, similar class action complaints. One
of the actions also names the individual Trustees of the Van Kampen Funds as
defendants. These complaints generally allege that defendants, including the
Fund, violated their statutory disclosure obligations and fiduciary duties by
failing properly to disclose (i) that the Adviser and certain affiliates of the
Adviser allegedly offered economic incentives to brokers and others to steer
investors to the funds advised by
27
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
the Adviser or its affiliates rather than funds managed by other companies, and
(ii) that the funds advised by the Adviser or its affiliates, including the
Fund, allegedly paid excessive commissions to brokers in return for their
alleged efforts to steer investors to these funds. The complaints seek, among
other things, unspecified compensatory damages, rescissionary damages, fees and
costs. The defendants intend to move to dismiss these actions and otherwise
vigorously to defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
28
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
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.
29
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 28, 128, 228
HYI SAR 4/04 14124C04-AP-4/04
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) Code of Ethics -- Not applicable for semi-annual reports.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen High Income Corporate Bond Fund
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: April 20, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: April 20, 2004
By: /s/ John L. Sullivan
Name: John L. Sullivan
Title: Principal Financial Officer
Date: April 20, 2004