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 811-02090
Van Kampen Bond Fund
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)
Jerry W. Miller
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: 6/30
Date of reporting period: 6/30/08
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 Bond
Fund performed during the annual period. The portfolio management team
will provide an overview of the market conditions and discuss some of the
factors that affected investment performance during the reporting period.
In addition, this report includes the fund's financial statements and a
list of fund investments as of June 30, 2008.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND
THAT THE VALUE OF THE FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU
PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND.
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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Performance Summary as of 6/30/08
BOND FUND
SYMBOL: VBF
------------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS MARKET PRICE NAV
10-year 4.86% 5.14%
5-year 2.42 4.23
1-year 4.17 3.52
------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET
ASSET VALUE (NAV) AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND FUND SHARES,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
The NAV per share is determined by dividing the value of the fund's portfolio
securities, cash and other assets, less all liabilities, by the total number of
common shares outstanding. The common share market price is the price the market
is willing to pay for shares of the fund at a given time. Common share market
price is influenced by a range of factors, including supply and demand and
market conditions. Total return assumes an investment at the beginning of the
period, reinvestment of all distributions for the period in accordance with the
fund's dividend reinvestment plan, and sale of all shares at the end of the
period. Periods of less than one year are not annualized.
The Lehman Brothers BBB Corporate Bond Index is generally representative of
corporate bonds. The index does not include any expenses, fees or sales charges,
which would lower performance. The index is unmanaged and should not be
considered an investment. It is not possible to invest directly in an index.
1
Trust Report
FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2008
MARKET CONDITIONS
The 12-month period was marked by disrupted credit markets, recession fears, a
housing downturn, and significant markdowns on mortgage-related securities. In
all, it was an extremely difficult year in which market volatility remained
elevated and prices generally declined in all but the government sectors.
The Federal Reserve (the "Fed") stepped in several times during the period to
minimize the liquidity crisis, reducing the federal funds target rate from 5.25
percent to 2.00 percent, while also taking the unprecedented steps of granting
primary brokerage firms access to its discount window, loosening its collateral
requirements, and extending loans of Treasury securities in exchange for lower
quality, less liquid securities. In what was most decidedly the biggest headline
event, the Fed facilitated JPMorgan Chase's purchase of troubled Bear
Stearns--once the country's fifth largest investment bank--in mid-March, which
was viewed by many as necessary to avoid serious market repercussions had the
firm failed.
Up until that time, the market was defined by a prolonged flight to quality as
investors shunned risky assets in favor of the relative safe haven of
high-quality U.S. Treasury securities. In early April, however, market liquidity
began to improve and investor risk appetite returned, fueling the performance of
spread sectors. At the same time, inflationary pressures from rising food and
energy prices were mounting, prompting the Fed to hold interest rates steady
after its last rate reduction in April. As a result, yields on Treasury
securities began to rise, leading to the sector's lowest three-month return in
the second quarter of this year since 2003. For the overall period, however,
yields across the curve ended lower, with the front end of the curve
experiencing the greatest declines. As such, Treasuries outperformed other
investment grade sectors for the year under review.
The mortgage sector was hit by the residential housing downturn and subprime
mortgage crisis, with non-agency mortgages experiencing the greatest price
declines. Much of the growth in mortgage issuance in recent years has been in
this sector as these non-traditional mortgages offered more lenient borrowing
terms and, therefore, were available to a broader set of borrowers. In the wake
of the subprime mortgage meltdown and subsequent sharp diminishment in the
availability of non-conforming mortgage loans, the performance of non-agency
mortgages has suffered considerably.
Within the corporate sector, credit spreads generally widened. Financials in
particular struggled as writedowns on mortgage-related securities by major banks
and Wall Street firms hurt the sector's performance. Overall, the
investment-grade sector outpaced the high yield sector, with the higher end of
the ratings spectrum posting the best returns.
2
PERFORMANCE ANALYSIS
The Fund's return can be calculated based upon either the market price or the
net asset value (NAV) of its shares. NAV per share is determined by dividing the
value of the Fund's portfolio securities, cash and other assets, less all
liabilities and preferred shares, by the total number of common shares
outstanding, while market price reflects the supply and demand for the shares.
As a result, the two returns can differ, as they did during the reporting
period. On both an NAV basis and a market price basis, the Fund outperformed its
benchmark index, the Lehman Brothers BBB Corporate Bond Index.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2008
---------------------------------------------------------
LEHMAN BROTHERS
BASED ON BBB CORPORATE
BASED ON NAV MARKET PRICE BOND INDEX
3.52% 4.17% 2.46%
---------------------------------------------------------
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. Investment return, net asset value and common share market price will
fluctuate and Fund shares, when sold, may be worth more or less than their
original cost. See Performance Summary for additional performance information
and index definition.
The Fund's yield-curve positioning was additive to performance. Since the
beginning of this year, we have underweighted longer-dated issues and
overweighted intermediate-dated issues through the use of interest rate swaps.
This strategy helped enhance returns as the spread between intermediate- and
long-dated yields widened and the curve steepened in the first quarter of 2008.
In addition, an underweight allocation to corporate bonds relative to the Lehman
Brothers BBB Corporate Bond Index was advantageous as the sector struggled amid
ongoing credit concerns in the market.
The Fund's sector allocations away from the Lehman Brothers BBB Corporate Bond
Index hindered relative performance for the reporting period. In particular, the
Fund had a small allocation to non-agency mortgage securities as well as
positions in asset-backed securities (ABS) and commercial mortgage-backed
securities (CMBS). Holdings in these sectors held back returns as all have been
hard hit by the spillover effects of the subprime mortgage crisis. Lastly, a
small allocation to high yield corporate bonds dampened returns as lower-rated,
higher-yielding issues underperformed higher-rated issues during the period.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.
3
RATINGS ALLOCATION AS OF 6/30/08
AAA/Aaa 6.2%
AA/Aa 17.4
A/A 31.8
BBB/Baa 39.9
BB/Ba 4.1
B/B 0.6
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 6/30/08
Banking 11.2%
Electric 8.6
Brokerage 7.8
Noncaptive-Consumer Finance 6.3
Wireline 5.6
Media-Cable 4.1
Property & Casualty Insurance 3.9
Diversified Manufacturing 3.6
Retailers 3.5
Pharmaceuticals 3.5
Integrated Energy 2.6
Technology 2.4
Health Care 2.3
Pipelines 2.2
Food/Beverage 1.9
Media-Noncable 1.5
Life Insurance 1.4
Automotive 1.3
Metals 1.3
Asset Backed Securities 1.2
Independent Energy 1.2
Noncaptive-Diversified Finance 1.1
Railroads 1.0
Collateralized Mortgage Obligation 1.0
REITS 0.9
Other Utilities 0.9
Tobacco 0.8
Supermarkets 0.6
Oil Field Services 0.6
Diversified Banks 0.5
Restaurants 0.5
Consumer Products 0.4
Refining 0.3
Lodging 0.3
(continued on next page)
4
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 6/30/08
(continued from previous page)
Environmental & Facilities Services 0.3
Chemicals 0.2
Gaming 0.1
Thrifts & Mortgage Finance 0.1
Home Construction 0.1
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Total Long-Term Investments 87.1
Total Short-Term Investments 12.9
-----
Total Investments 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 are as a percentage of total
long-term investments. Summary of Investments by Industry Classification is as a
percentage of total investments. Securities are classified by sectors that
represent broad groupings of related industries. Ratings allocations based upon
ratings as issued by Standard and Poor's and Moody's, respectively. 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.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. 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, D.C. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. You can also request copies of these materials, upon payment of
a duplicating fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 341-2929.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the Trust's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 341-2929 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 Trust voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
6
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 15, 2008 and May 8, 2008, 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. 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. The Board of Trustees evaluated other
benefits the investment adviser and its affiliates derive from their
relationship with the Fund. The Board of Trustees reviewed information about the
foregoing factors and considered changes, if any, in such information since its
previous approval. The Board of Trustees discussed the financial strength of the
investment adviser and its affiliated companies and the capability of the
personnel of the investment adviser, and specifically the strength and
background of its portfolio management personnel. The Board of Trustees reviewed
the statutory and regulatory requirements for approval and disclosure of
investment advisory agreements. The Board of Trustees, including the independent
trustees, evaluated all of the foregoing and does not believe any
7
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 and the Fund's portfolio management
strategy over time. 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. 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 Board has determined that the
performance, fees and expenses of the Fund support its decision to approve the
investment advisory agreement.
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
8
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 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 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.
9
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
CORPORATE BONDS 83.7%
AUTOMOTIVE 1.3%
$ 615 ArvinMeritor, Inc. ............................. 8.750% 03/01/12 $ 544,275
1,280 DaimlerChrysler NA Holding LLC.................. 8.500 01/18/31 1,483,954
745 Harley-Davidson Funding Corp., Ser C (a)........ 6.800 06/15/18 737,397
------------
2,765,626
------------
BANKING 11.2%
880 Bank of America Corp. .......................... 4.875 09/15/12 865,047
670 Bank of America Corp. .......................... 5.750 12/01/17 630,324
1,865 Bank of America Corp., Ser L.................... 5.650 05/01/18 1,744,342
620 Bank of New York Mellon Corp. .................. 4.500 04/01/13 605,018
335 Barclays Bank PLC (United Kingdom) (a).......... 6.050 12/04/17 328,946
1,075 Citigroup, Inc. ................................ 5.250 02/27/12 1,061,897
1,095 Citigroup, Inc. ................................ 5.875 05/29/37 934,082
1,060 Citigroup, Inc. (b)............................. 8.400 04/29/49 1,008,972
1,080 HBOS PLC (United Kingdom) (a)................... 6.750 05/21/18 1,034,698
1,230 JPMorgan Chase & Co. ........................... 4.750 05/01/13 1,196,660
1,275 JPMorgan Chase & Co. ........................... 6.750 02/01/11 1,324,126
1,745 Nationwide Building Society (United Kingdom)
(a)............................................. 4.250 02/01/10 1,715,337
465 PNC Bank NA..................................... 6.000 12/07/17 440,955
805 Popular North America, Inc. .................... 5.650 04/15/09 797,361
2,620 Sovereign Bancorp, Inc. (c)..................... 3.031 03/23/10 2,343,380
2,700 Unicredito Luxembourg Finance (Luxembourg) (a)
(c)............................................. 2.970 10/24/08 2,698,331
2,045 Wachovia Capital Trust III (b).................. 5.800 03/15/42 1,391,383
315 Washington Mutual Bank FA....................... 5.500 01/15/13 252,240
900 Washington Mutual, Inc. ........................ 8.250 04/01/10 796,806
2,045 Wells Fargo & Co. .............................. 5.625 12/11/17 1,982,188
------------
23,152,093
------------
BROKERAGE 7.7%
1,030 Bear Stearns Co., Inc. ......................... 5.550 01/22/17 953,531
710 Bear Stearns Co., Inc. ......................... 6.400 10/02/17 702,824
680 Bear Stearns Co., Inc. ......................... 7.250 02/01/18 710,850
2,500 Credit Suisse (Switzerland)..................... 6.000 02/15/18 2,411,612
3,660 Goldman Sachs Group, Inc. ...................... 6.150 04/01/18 3,557,180
2,370 Goldman Sachs Group, Inc. ...................... 6.750 10/01/37 2,174,482
875 Lehman Brothers Holdings, Inc. ................. 5.750 01/03/17 773,408
1,040 Lehman Brothers Holdings, Inc. ................. 6.500 07/19/17 963,719
2,405 Lehman Brothers Holdings, Inc. ................. 6.875 07/17/37 2,076,126
890 Merrill Lynch & Co., Inc. ...................... 5.450 02/05/13 840,283
905 Merrill Lynch & Co., Inc. ...................... 6.875 04/25/18 862,812
------------
16,026,827
------------
CHEMICALS 0.2%
310 Monsanto Co. ................................... 5.125 04/15/18 304,599
------------
CONSUMER PRODUCTS 0.4%
885 Philips Electronics NV (Netherlands)............ 5.750 03/11/18 868,642
------------
10 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING 3.5%
$1,345 Brascan Corp. (Canada).......................... 7.125% 06/15/12 $ 1,359,342
685 Brookfield Asset Management, Inc. (Canada)...... 5.800 04/25/17 612,718
1,095 Cooper Industries, Inc. ........................ 5.250 11/15/12 1,100,649
3,900 General Electric Co. ........................... 5.250 12/06/17 3,756,043
495 Honeywell International, Inc. .................. 5.300 03/01/18 488,528
------------
7,317,280
------------
ELECTRIC 8.5%
1,055 AES Corp. (a)................................... 8.000 06/01/20 1,023,350
1,740 Arizona Public Service Co. ..................... 5.800 06/30/14 1,655,267
385 Carolina Power & Light Co. ..................... 5.150 04/01/15 384,469
150 CMS Energy Corp. ............................... 6.300 02/01/12 149,392
65 Detroit Edison Co. ............................. 5.200 10/15/12 65,563
960 Duquesne Light Co., Ser O....................... 6.700 04/15/12 1,005,060
540 Enel Finance International SA (Luxembourg)
(a)............................................. 5.700 01/15/13 546,619
1,600 Entergy Gulf States, Inc. (c)................... 3.081 12/01/09 1,582,115
195 Entergy Gulf States, Inc. (a) (c)............... 3.426 12/08/08 194,895
1,060 E.ON International Finance BV (Netherlands)
(a)............................................. 5.800 04/30/18 1,041,788
1,030 Exelon Corp. ................................... 6.750 05/01/11 1,058,825
215 Florida Power Corp. ............................ 5.800 09/15/17 220,478
255 Indianapolis Power & Light Co. (a).............. 6.300 07/01/13 263,119
570 Nevada Power Co., Ser A......................... 8.250 06/01/11 615,712
900 NiSource Finance Corp. (c)...................... 3.208 11/23/09 875,213
635 Nisource Finance Corp. ......................... 6.800 01/15/19 623,866
1,150 NiSource Finance Corp. ......................... 7.875 11/15/10 1,193,207
1,080 Ohio Edison Co. ................................ 6.400 07/15/16 1,079,095
1,270 Ohio Power Co., Ser K........................... 6.000 06/01/16 1,261,805
685 Pacific Gas & Electric Co. ..................... 5.625 11/30/17 683,575
660 PPL Energy Supply LLC........................... 6.500 05/01/18 645,755
570 Public Service Electric & Gas Co., Ser B........ 5.125 09/01/12 576,639
570 Union Electric Co. ............................. 6.400 06/15/17 569,859
300 Virginia Electric and Power Co., Ser B.......... 5.950 09/15/17 302,017
------------
17,617,683
------------
ENVIRONMENTAL & FACILITIES SERVICES 0.3%
550 Waste Management, Inc. ......................... 7.375 08/01/10 574,796
------------
FOOD/BEVERAGE 1.9%
290 Anheuser-Busch Cos, Inc. ....................... 5.500 01/15/18 272,461
660 ConAgra Foods, Inc. ............................ 7.000 10/01/28 681,302
520 ConAgra Foods, Inc. ............................ 8.250 09/15/30 604,013
635 Dr Pepper Snapple Group, Inc. (a)............... 6.820 05/01/18 638,751
865 Kraft Foods, Inc. .............................. 6.000 02/11/13 874,799
315 Kraft Foods, Inc. .............................. 6.125 08/23/18 305,619
180 Pilgrim's Pride Corp. .......................... 7.625 05/01/15 148,950
465 Smithfield Foods, Inc., Ser B................... 8.000 10/15/09 465,000
------------
3,990,895
------------
See Notes to Financial Statements 11
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
GAMING 0.1%
$ 260 MGM Mirage, Inc. ............................... 6.000% 10/01/09 $ 257,075
------------
HEALTH CARE 2.3%
830 Baxter International, Inc. ..................... 4.625 03/15/15 790,949
430 Baxter International, Inc. ..................... 5.375 06/01/18 425,738
250 Covidien International Finance SA
(Luxembourg).................................... 6.000 10/15/17 253,470
1,160 Medco Health Solutions, Inc. ................... 7.125 03/15/18 1,206,761
300 Tenet Healthcare Corp. ......................... 7.375 02/01/13 283,500
1,260 UnitedHealth Group, Inc. ....................... 6.000 02/15/18 1,221,028
590 WellPoint, Inc. ................................ 4.250 12/15/09 584,263
------------
4,765,709
------------
HOME CONSTRUCTION 0.1%
175 Pulte Homes, Inc. .............................. 6.375 05/15/33 136,500
------------
INDEPENDENT ENERGY 1.2%
265 Gaz Capital SA (Luxembourg) (a)................. 6.510 03/07/22 238,500
290 Newfield Exploration Co. ....................... 7.125 05/15/18 276,225
320 Plains Exploration & Production Co. ............ 7.625 06/01/18 321,600
1,095 Questar Market Resources, Inc. ................. 6.800 04/01/18 1,071,780
525 XTO Energy, Inc. ............................... 5.500 06/15/18 502,307
------------
2,410,412
------------
INTEGRATED ENERGY 2.6%
515 Chesapeake Energy Corp. ........................ 7.625 07/15/13 518,862
790 Consumers Energy Co., Ser F..................... 4.000 05/15/10 784,432
745 EnCana Corp. (Canada)........................... 6.500 02/01/38 739,337
1,059 Kinder Morgan, Inc. ............................ 6.500 09/01/12 1,037,820
630 Marathon Oil Corp. ............................. 5.900 03/15/18 623,760
920 Marathon Oil Corp. ............................. 6.000 10/01/17 916,355
750 Petro-Canada (Canada)........................... 6.800 05/15/38 736,943
------------
5,357,509
------------
LIFE INSURANCE 1.4%
105 MetLife, Inc. .................................. 6.125 12/01/11 109,412
585 Nationwide Financial Services, Inc. ............ 6.250 11/15/11 596,598
390 Prudential Financial, Inc. ..................... 6.625 12/01/37 369,290
1,895 Xlliac Global Funding (a)....................... 4.800 08/10/10 1,880,835
------------
2,956,135
------------
LODGING 0.3%
745 Starwood Hotels & Resorts Worldwide, Inc. ...... 6.750 05/15/18 703,816
------------
MEDIA-CABLE 4.1%
1,835 Comcast Cable Communications, Inc. ............. 6.750 01/30/11 1,902,135
90 Comcast Cable Communications, Inc. ............. 7.125 06/15/13 94,981
110 Comcast Corp. .................................. 5.700 05/15/18 104,552
655 Comcast Corp. .................................. 6.500 01/15/15 666,002
430 COX Communications, Inc. (a).................... 6.250 06/01/18 420,526
12 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
MEDIA-CABLE (CONTINUED)
$ 175 DirecTV Holdings LLC............................ 6.375% 06/15/15 $ 164,938
805 DirecTV Holdings LLC (a)........................ 7.625 05/15/16 796,950
935 Echostar DBS Corp. ............................. 6.375 10/01/11 904,613
940 Time Warner Cable, Inc. ........................ 6.750 07/01/18 947,938
1,505 Time Warner, Inc. (c)........................... 2.914 11/13/09 1,463,014
1,095 Time Warner, Inc. .............................. 5.875 11/15/16 1,034,202
------------
8,499,851
------------
MEDIA-NONCABLE 1.5%
770 Grupo Televisa SA (Mexico) (a).................. 6.000 05/15/18 752,707
225 Interpublic Group of Cos., Inc. ................ 6.250 11/15/14 195,750
620 News America, Inc. ............................. 6.650 11/15/37 607,310
230 Thomson Reuters Corp. (Canada).................. 6.500 07/15/18 229,607
1,310 Viacom, Inc. ................................... 6.875 04/30/36 1,233,868
------------
3,019,242
------------
METALS 1.3%
920 ArcelorMittal (Luxembourg) (a).................. 6.125 06/01/18 900,720
465 Evraz Group SA (Luxembourg) (a)................. 9.500 04/24/18 468,488
610 GTL Trade Finance, Inc. (British Virgin Islands)
(a)............................................. 7.250 10/20/17 613,875
705 Rio Tinto Finance USA, Ltd. (Australia)......... 6.500 07/15/18 708,430
------------
2,691,513
------------
NONCAPTIVE-CONSUMER FINANCE 6.3%
1,000 American Express Co. ........................... 4.750 06/17/09 996,498
230 American General Finance Corp. ................. 4.625 05/15/09 228,201
2,000 American General Finance Corp. ................. 4.625 09/01/10 1,938,800
665 CIT Group, Inc. ................................ 5.650 02/13/17 459,458
4,595 General Electric Capital Corp. ................. 5.625 05/01/18 4,451,866
2,560 HSBC Finance Corp. ............................. 6.750 05/15/11 2,662,149
150 HSBC Finance Corp. ............................. 8.000 07/15/10 156,928
1,600 SLM Corp. (c)................................... 3.079 07/26/10 1,420,576
900 Washington Mutual Preferred Funding (a) (b)..... 9.750 10/29/49 709,751
------------
13,024,227
------------
NONCAPTIVE-DIVERSIFIED FINANCE 1.1%
525 Capital One Financial Corp. .................... 6.750 09/15/17 521,064
1,950 Capmark Financial Group, Inc. .................. 5.875 05/10/12 1,376,641
495 Capmark Financial Group, Inc. .................. 6.300 05/10/17 320,453
------------
2,218,158
------------
OIL FIELD SERVICES 0.6%
560 Kinder Morgan Energy Partners, LP............... 5.850 09/15/12 565,225
650 Weatherford International, Inc. ................ 6.350 06/15/17 659,488
------------
1,224,713
------------
OTHER UTILITIES 0.9%
375 CenterPoint Energy Resources Corp. ............. 6.250 02/01/37 333,779
225 CenterPoint Energy Resources Corp. ............. 7.875 04/01/13 241,102
1,295 Plains All American Pipeline.................... 6.700 05/15/36 1,236,102
------------
1,810,983
------------
See Notes to Financial Statements 13
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
PHARMACEUTICALS 3.4%
$1,040 Amgen, Inc. .................................... 5.850% 06/01/17 $ 1,026,119
765 AstraZeneca PLC (United Kingdom)................ 5.900 09/15/17 785,511
1,300 Biogen Idec, Inc. .............................. 6.875 03/01/18 1,333,955
1,440 GlaxoSmithKline Capital, Inc. .................. 5.650 05/15/18 1,437,187
1,765 Hospira, Inc. (c)............................... 3.176 03/30/10 1,711,925
620 Wyeth........................................... 5.450 04/01/17 612,528
205 Wyeth........................................... 5.500 02/15/16 206,350
------------
7,113,575
------------
PIPELINES 2.1%
811 Colorado Interstate Gas Co. .................... 6.800 11/15/15 832,455
590 Consolidated Natural Gas Co., Ser C............. 6.250 11/01/11 609,364
390 DCP Midstream, LLC (a).......................... 6.750 09/15/37 370,566
635 Equitable Resources, Inc. ...................... 6.500 04/01/18 637,052
755 Texas Eastern Transmission Corp. ............... 7.000 07/15/32 758,913
640 TransCanada Pipelines Ltd. (Canada)............. 6.200 10/15/37 588,542
45 Transcontinental Gas Pipe Line Corp. (a)........ 6.050 06/15/18 43,931
525 Transcontinental Gas Pipe Line Corp. ........... 8.875 07/15/12 584,063
------------
4,424,886
------------
PROPERTY & CASUALTY INSURANCE 3.9%
755 Ace INA Holdings, Inc. ......................... 5.600 05/15/15 728,117
1,445 AIG SunAmerica Global Financing VI (a).......... 6.300 05/10/11 1,468,432
1,095 Berkshire Hathaway Finance Corp. (a)............ 5.400 05/15/18 1,096,478
190 Chubb Corp. .................................... 5.750 05/15/18 184,492
680 Farmers Exchange Capital (a).................... 7.050 07/15/28 623,177
1,230 Farmers Insurance Exchange Surplus (a).......... 8.625 05/01/24 1,289,271
1,800 Mantis Reef Ltd. (Cayman Islands) (a)........... 4.692 11/14/08 1,793,266
620 Travelers Cos, Inc. ............................ 5.800 05/15/18 604,348
1,035 Two-Rock Pass Through Trust (Bermuda) (a) (c)... 3.655 02/11/49 104,794
------------
7,892,375
------------
RAILROADS 1.0%
1,000 CSX Corp. ...................................... 6.750 03/15/11 1,036,990
1,035 Union Pacific Corp. ............................ 5.450 01/31/13 1,038,798
------------
2,075,788
------------
REFINING 0.3%
720 Enterprise Products Operating, LP, Ser B........ 5.600 10/15/14 706,231
------------
REITS 0.9%
1,970 iStar Financial, Inc. (c)....................... 3.026 03/09/10 1,670,144
280 Prologis........................................ 6.625 05/15/18 276,309
------------
1,946,453
------------
RESTAURANTS 0.5%
1,010 Yum! Brands, Inc. .............................. 8.875 04/15/11 1,092,383
------------
14 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
RETAILERS 3.5%
$ 650 CVS Caremark Corp. ............................. 5.750% 08/15/11 $ 666,468
90 CVS Caremark Corp. ............................. 5.750 06/01/17 88,672
1,940 Home Depot, Inc. (c)............................ 2.901 12/16/09 1,890,210
1,120 Home Depot, Inc. ............................... 5.400 03/01/16 1,030,013
1,275 Macys Retail Holdings, Inc. .................... 5.950 11/01/08 1,274,078
500 Macys Retail Holdings, Inc. .................... 6.300 04/01/09 498,127
1,500 Macys Retail Holdings, Inc. .................... 6.625 09/01/08 1,501,776
195 Target Corp. ................................... 6.500 10/15/37 188,184
------------
7,137,528
------------
SUPERMARKETS 0.6%
794 Delhaize America, Inc. ......................... 9.000 04/15/31 937,172
390 Kroger Co. ..................................... 5.000 04/15/13 384,018
------------
1,321,190
------------
TECHNOLOGY 2.4%
190 Corning, Inc. .................................. 7.250 08/15/36 193,311
1,090 Dell, Inc. (a).................................. 5.650 04/15/18 1,053,762
625 Fiserv, Inc. ................................... 6.800 11/20/17 633,359
425 Hewlett-Packard Co. ............................ 5.500 03/01/18 417,018
1,120 KLA Instruments Corp. .......................... 6.900 05/01/18 1,099,939
1,075 Oracle Corp. ................................... 5.750 04/15/18 1,076,071
555 Xerox Corp. .................................... 6.350 05/15/18 548,832
------------
5,022,292
------------
TOBACCO 0.8%
1,245 Philip Morris International, Inc. .............. 5.650 05/16/18 1,212,346
465 Reynolds American, Inc. ........................ 6.500 07/15/10 474,300
------------
1,686,646
------------
WIRELINE 5.5%
2,740 AT&T Corp. ..................................... 8.000 11/15/31 3,154,444
440 Deutsche Telekom International Finance BV
(Netherlands)................................... 8.750 06/15/30 506,168
1,375 France Telecom, SA (France)..................... 8.500 03/01/31 1,668,961
1,125 SBC Communications, Inc. ....................... 6.150 09/15/34 1,054,459
1,155 Sprint Capital Corp. ........................... 8.750 03/15/32 1,102,794
555 Sprint Nextel Corp. ............................ 6.000 12/01/16 478,053
1,450 Telefonica Europe BV (Netherlands).............. 8.250 09/15/30 1,669,072
1,255 Verizon Communications, Inc. ................... 5.500 02/15/18 1,196,082
590 Verizon New England, Inc. ...................... 6.500 09/15/11 606,844
------------
11,436,877
------------
TOTAL CORPORATE BONDS 83.7%................................................ 173,550,508
------------
ASSET BACKED SECURITIES 1.2%
476 America West Airlines, Inc., Class G............ 7.100 04/02/21 433,076
1,251 CVS Lease Pass Through Trust (a)................ 6.036 12/10/28 1,164,807
See Notes to Financial Statements 15
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES (CONTINUED)
$ 632 World Financial Properties (a).................. 6.910% 09/01/13 $ 632,374
288 World Financial Properties (a).................. 6.950 09/01/13 286,646
------------
TOTAL ASSET BACKED SECURITIES 1.2%......................................... 2,516,903
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 1.0%
626 American Home Mortgage Assets (c)............... 2.782 06/25/47 242,735
850 Bear Stearns Commercial Mortgage Securities
(b)............................................. 5.694 06/11/50 802,871
850 Citigroup/Deutsche Bank Commercial Mortgage
Trust (b)....................................... 5.886 11/15/44 813,188
787 Harborview Mortgage Loan Trust (c) (d).......... 3.182 01/19/36 59,140
299 Luminent Mortgage Trust (c) (d)................. 2.842 07/25/36 17,740
575 Mastr Adjustable Rate Mortgages Trust (c) (d)... 3.332 05/25/47 14,375
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS................................... 1,950,049
------------
CONVERTIBLE PREFERRED STOCKS 0.6%
Federal National Mortgage Association (5,500 Preferred Shares)............. 210,650
US Bancorp (43,075 Preferred Shares)....................................... 1,093,244
------------
TOTAL CONVERTIBLE PREFERRED STOCKS......................................... 1,303,894
------------
TOTAL LONG-TERM INVESTMENTS 86.5%
(Cost $187,912,493)...................................................... 179,321,354
------------
SHORT-TERM INVESTMENTS 12.8%
REPURCHASE AGREEMENTS 11.2%
Banc of America Securities ($7,053,054 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 2.50%, dated
06/30/08, to be sold on 07/01/08 at $7,053,544)............................ 7,053,054
Citigroup Global Markets, Inc. ($7,053,054 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 2.50%,
dated 06/30/08, to be sold on 07/01/08 at $7,053,544)...................... 7,053,054
JPMorgan Chase & Co. ($2,115,916 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 2.60%, dated
06/30/08, to be sold on 07/01/08 at $2,116,069)............................ 2,115,916
State Street Bank & Trust Co. ($6,969,976 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 1.85%,
dated 06/30/08, to be sold on 07/01/08 at $6,970,334)...................... 6,969,976
------------
TOTAL REPURCHASE AGREEMENTS.................................................. 23,192,000
------------
16 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
DESCRIPTION VALUE
--------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY OBLIGATION 1.6%
United States Treasury Bill ($3,410,000 par, yielding 1.575%, 10/09/08
maturity) (e).............................................................. 3,395,404
------------
TOTAL SHORT-TERM INVESTMENTS 12.8%
(Cost $26,587,404)......................................................... 26,587,404
------------
TOTAL INVESTMENTS 99.3%
(Cost $214,499,897)........................................................ 205,908,758
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%.................................. 1,429,293
------------
NET ASSETS 100.0%........................................................... $207,338,051
============
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) Variable Rate Coupon
(c) Floating Rate Coupon
(d) Security has been deemed illiquid.
(e) All or a portion of this security has been physically segregated in
connection with open futures contracts and swap contracts.
SWAP AGREEMENTS OUTSTANDING AS OF JUNE 30, 2008:
CREDIT DEFAULT SWAPS
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
Carnival
Bank of America, N.A. ... Corporation Buy 1.570% 03/20/18 $1,255 $ 0 $ (4,157)
Centurytel,
Bank of America, N.A. ... Inc. Buy 0.880 09/20/17 530 0 36,904
Goodrich
Bank of America, N.A..... Corporation Buy 0.700 03/20/13 890 0 (7,522)
Goodrich
Bank of America, N.A. ... Corporation Buy 0.820 03/20/18 615 0 (9,705)
Merrill Lynch &
Bank of America, N.A. ... Co., Inc. Buy 3.250 03/20/13 685 0 (18,699)
Bank of America, N.A. ... Nordstrom, Inc. Buy 1.030 03/20/18 850 0 10,354
See Notes to Financial Statements 17
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
CREDIT DEFAULT SWAPS (CONTINUED)
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
Pactiv
Bank of America, N.A. ... Corporation Buy 1.375% 03/20/13 $1,390 $ 0 $ (17,313)
Sealed Air
Bank of America, N.A. ... Corporation Buy 1.080 03/20/18 415 0 18,971
Sealed Air
Bank of America, N.A. ... Corporation Buy 1.120 03/20/18 580 0 24,857
Textron
Financial
Bank of America, N.A. ... Corporation Buy 0.800 03/20/18 665 0 20,574
Toll Brothers,
Bank of America, N.A. ... Inc. Buy 2.250 03/20/18 530 0 9,901
Toll Brothers,
Bank of America, N.A. ... Inc. Buy 2.900 03/20/13 1,065 0 675
YUM! Brands,
Bank of America, N.A. ... Inc. Buy 1.180 03/20/13 70 0 (529)
YUM! Brands,
Bank of America, N.A. ... Inc. Buy 1.250 03/20/13 940 0 (9,905)
Citibank, N.A., New Eaton
York.................... Corporation Buy 0.820 03/20/18 560 0 1,930
Citibank, N.A., New Pitney Bowes,
York.................... Inc. Buy 0.480 03/20/13 1,375 0 12,912
Credit Suisse
International........... ABX.HE.AAA.06-1 Buy 0.180 07/25/45 405 60,716 32,183
Arrow
Credit Suisse Electronics,
International........... Inc. Buy 1.000 03/20/15 1,330 0 (10,246)
Arrow
Credit Suisse Electronics,
International........... Inc. Buy 1.110 03/20/13 325 0 (4,439)
Credit Suisse Pactiv
International........... Corporation Buy 1.350 03/20/13 1,390 0 (15,841)
Deutsche Bank AG New Pactiv
York.................... Corporation Buy 1.340 03/20/13 470 0 (5,157)
Deutsche Bank AG New Washington
York.................... Mutual, Inc. Buy 5.000 06/20/13 1,105 0 39,430
Goldman Sachs Capital
Markets, L.P. .......... Dell, Inc. Buy 0.220 03/20/12 1,095 0 12,004
Goldman Sachs Capital The Chubb
Markets, L.P. .......... Corporation Buy 0.100 03/20/12 2,200 0 37,375
The Hartford
Financial
Goldman Sachs Capital Services Group,
Markets, L.P. .......... Inc. Buy 0.120 12/20/11 2,200 0 66,865
18 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
CREDIT DEFAULT SWAPS (CONTINUED)
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
Avalonbay
Goldman Sachs Communities,
International........... Inc. Buy 3.050% 03/20/13 $2,070 $ 0 $ (121,816)
Goldman Sachs Carnival
International........... Corporation Buy 1.600 03/20/18 110 0 (894)
Goldman Sachs
International........... CDX.NA.IG.10 Sell 1.550 06/20/13 6,120 34,925 19,500
Goldman Sachs
International........... CDX.NA.IG.HVOL.9 Sell 1.400 12/20/12 2,105 (119,237) (166,397)
Goldman Sachs
International........... CDX.NA.IG.HVOL.9 Sell 1.400 12/20/12 2,200 (121,976) (173,907)
Goldman Sachs
International........... CDX.NA.IG.HVOL.9 Sell 1.400 12/20/12 4,720 (278,710) (373,109)
Coca-Cola
Goldman Sachs Enterprises,
International........... Inc. Buy 0.588 03/20/13 2,130 0 (15,169)
Goldman Sachs Eaton
International........... Corporation Buy 0.970 03/20/18 690 0 (5,489)
Goldman Sachs FirstEnergy
International........... Corporation Buy 1.250 03/20/13 2,055 0 (36,779)
Goldman Sachs Goodrich
International........... Corporation Buy 0.470 03/20/18 600 0 6,738
Goldman Sachs Merrill Lynch &
International........... Co., Inc. Buy 3.250 03/20/13 410 0 (11,192)
Goldman Sachs
International........... Prologis Buy 2.970 06/20/13 1,180 0 (33,305)
Goldman Sachs
International........... Prologis Buy 3.330 03/20/13 910 0 (38,306)
Goldman Sachs Sealed Air
International........... Corporation Buy 1.080 03/20/18 745 0 34,056
Goldman Sachs Sealed Air
International........... Corporation Buy 1.240 03/20/18 360 0 12,344
Textron
Goldman Sachs Financial
International........... Corporation Buy 1.050 03/20/13 1,155 0 7,938
Goldman Sachs
International........... Trane Inc. Buy 0.500 03/20/13 380 0 (157)
Goldman Sachs
International........... Trane Inc. Buy 0.600 03/20/18 145 0 556
Goldman Sachs Washington
International........... Mutual, Inc. Buy 6.480 03/20/13 1,575 0 (13,349)
See Notes to Financial Statements 19
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
CREDIT DEFAULT SWAPS (CONTINUED)
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
JP Morgan Chase Bank,
N.A. ................... Nordstrom, Inc. Buy 1.070% 03/20/18 $ 665 $ 0 $ 6,128
JP Morgan Chase Bank,
N.A. ................... Nordstrom, Inc. Buy 1.150 03/20/18 665 0 2,183
JP Morgan Chase Bank,
N.A. ................... SLM Corporation Sell 4.950 03/20/13 600 0 11,842
The Pepsi
JP Morgan Chase Bank, Bottling Group,
N.A. ................... Inc. Buy 0.580 03/20/13 540 0 (3,205)
The Pepsi
JP Morgan Chase Bank, Bottling Group,
N.A. ................... Inc. Buy 0.630 03/20/13 730 0 (5,912)
JP Morgan Chase Bank, Union Pacific
N.A. ................... Corporation Buy 0.190 12/20/11 1,100 0 14,709
Lehman Brothers Special
Financing, Inc. ........ ABX.HE.AAA.06-1 Buy 0.180 07/25/45 405 64,763 32,183
Arrow
Lehman Brothers Special Electronics,
Financing, Inc. ........ Inc. Buy 1.040 03/20/18 200 0 (1,761)
Arrow
Lehman Brothers Special Electronics,
Financing, Inc. ........ Inc. Buy 1.400 03/20/13 1,415 0 (36,909)
Coca-Cola
Lehman Brothers Special Enterprises,
Financing, Inc. ........ Inc. Buy 0.640 03/20/13 965 0 (9,067)
Lehman Brothers Special Goodrich
Financing, Inc. ........ Corporation Buy 0.450 03/20/18 700 0 8,941
Lehman Brothers Special Goodrich
Financing, Inc. ........ Corporation Buy 0.460 03/20/18 500 0 6,001
Lehman Brothers Special
Financing, Inc. ........ Metlife, Inc. Buy 2.150 03/20/13 1,150 0 (44,058)
Merrill Lynch Carnival
International........... Corporation Buy 1.500 03/20/18 1,245 0 (4,891)
Merrill Lynch Carnival
International........... Corporation Buy 1.570 03/20/18 1,035 0 (3,428)
Merrill Lynch Carnival
International........... Corporation Buy 1.600 03/20/18 695 0 (5,649)
Merrill Lynch
International........... CDX.NA.IG.HVOL.9 Sell 1.400 12/20/12 3,865 (408,238) (305,558)
Merrill Lynch Eaton
International........... Corporation Buy 0.920 03/20/18 780 0 (3,241)
Merrill Lynch
International........... SLM Corporation Sell 5.000 03/20/13 600 0 12,941
20 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
CREDIT DEFAULT SWAPS (CONTINUED)
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
Merrill Lynch Walt Disney
International........... Company Buy 0.770% 03/20/13 $2,110 $ 0 $ (32,766)
Martin Marietta
UBS AG................... Materials, Inc. Buy 1.730 03/20/18 990 0 (13,616)
Martin Marietta
UBS AG................... Materials, Inc. Buy 1.780 03/20/13 990 0 (11,945)
Textron
Financial
UBS AG................... Corporation Buy 1.000 03/20/13 660 0 6,160
Textron
Financial
UBS AG................... Corporation Buy 1.010 03/20/13 465 0 4,339
Textron
Financial
UBS AG................... Corporation Buy 1.060 03/20/13 1,140 0 (13,100)
UBS AG................... Trane, Inc. Buy 0.500 03/20/13 1,175 0 (485)
UBS AG................... Trane, Inc. Buy 0.600 03/20/18 1,235 0 4,737
--------- -----------
TOTAL CREDIT DEFAULT SWAPS.............................................................. $(767,757) $(1,072,742)
========= ===========
INTEREST RATE SWAPS
PAY/
RECEIVE NOTIONAL
FLOATING FIXED EXPIRATION AMOUNT
COUNTERPARTY FLOATING RATE INDEX RATE RATE DATE (000) VALUE
Bank of America, N.A. ........ USD-LIBOR BBA Pay 4.429% 06/24/13 $ 4,300 $ 33,266
Bank of America, N.A. ........ USD-LIBOR BBA Pay 4.556 06/17/13 33,800 466,360
Bank of America, N.A. ........ USD-LIBOR BBA Pay 4.983 04/15/18 3,475 (25,819)
Bank of America, N.A. ........ USD-LIBOR BBA Pay 5.070 04/14/18 4,180 (18,058)
Bank of America, N.A. ........ USD-LIBOR BBA Receive 5.380 04/15/23 4,185 (1,423)
Bank of America, N.A. ........ USD-LIBOR BBA Receive 5.470 04/14/23 5,355 (15,048)
Bank of America, N.A. ........ USD-LIBOR BBA Pay 5.550 02/22/18 4,137 55,146
Bank of America, N.A. ........ USD-LIBOR BBA Pay 5.638 03/07/18 14,365 234,006
Bank of America, N.A. ........ USD-LIBOR BBA Receive 5.958 02/22/23 5,167 (84,584)
Bank of America, N.A. ........ USD-LIBOR BBA Receive 6.040 03/07/23 18,470 (342,803)
Citibank, N.A., New York...... USD-LIBOR BBA Pay 5.275 10/25/37 14,700 744,938
Citibank, N.A., New York...... USD-LIBOR BBA Pay 5.414 05/25/17 28,400 1,734,803
Citibank, N.A., New York...... USD-LIBOR BBA Pay 5.440 05/29/17 975 61,212
Citibank, N.A., New York...... USD-LIBOR BBA Pay 5.448 08/09/17 30,000 2,337,048
JP Morgan Chase Bank, N.A. ... USD-LIBOR BBA Receive 3.966 03/25/18 17,700 791,669
JP Morgan Chase Bank, N.A. ... USD-LIBOR BBA Receive 3.966 03/25/18 26,800 1,198,685
See Notes to Financial Statements 21
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 continued
INTEREST RATE SWAPS (CONTINUED)
PAY/
RECEIVE NOTIONAL
FLOATING FIXED EXPIRATION AMOUNT
COUNTERPARTY FLOATING RATE INDEX RATE RATE DATE (000) VALUE
JP Morgan Chase Bank, N.A. ... USD-LIBOR BBA Pay 5.448% 05/29/17 $ 6,475 $ 410,312
Merrill Lynch Capital
Services, Inc. .............. USD-LIBOR BBA Pay 5.000 04/15/18 4,635 (31,564)
Merrill Lynch Capital
Services, Inc. .............. USD-LIBOR BBA Receive 5.395 04/16/23 5,885 (4,414)
-----------
TOTAL INTEREST RATE SWAPS..................................................................... $7,543,732
-----------
SWAP COLLATERAL RECEIVED FROM COUNTERPARTY
Citibank, N.A., New York..................................................................... (4,400,000)
JP Morgan Chase Bank, N.A.................................................................... (2,810,000)
Lehman Brothers Special Financing Inc........................................................ (540,000)
-----------
TOTAL SWAP COLLATERAL RECEIVED $(7,750,000)
-----------
TOTAL SWAP AGREEMENTS......................................................................... $(1,279,010)
===========
FUTURES CONTRACTS OUTSTANDING AS OF JUNE 30, 2008:
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
LONG CONTRACTS:
Interest Rate Swap 5-Year Futures, September 2008 (Current
Notional Value of $107,313 per contract).................. 85 $ 126,931
U.S. Treasury Notes 2-Year Futures, September 2008 (Current
Notional Value of $211,203 per contract).................. 29 (7,704)
SHORT CONTRACTS:
U.S. Treasury Bond Futures, September 2008 (Current Notional
Value of $115,594 per contract)........................... 29 (30,208)
U.S. Treasury Notes 5-Year Futures, September 2008 (Current
Notional Value of $110,555 per contract).................. 32 (27,127)
U.S. Treasury Notes 10-Year Futures, September 2008 (Current
Notional Value of $113,922 per contract).................. 425 (235,284)
--------- -------------
TOTAL FUTURES CONTRACTS..................................... 600 $(173,392)
========= =============
22 See Notes to Financial Statements
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2008
ASSETS:
Total Investments (Including repurchase agreements of
$23,192,000) (Cost $214,499,897).......................... $205,908,758
Cash........................................................ 474,835
Receivables:
Investments Sold.......................................... 7,859,511
Interest.................................................. 2,427,432
Dividends................................................. 27,797
Swap Contracts.............................................. 884,222
Other....................................................... 66
------------
Total Assets............................................ 217,582,621
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 7,195,216
Income Distributions...................................... 119,776
Investment Advisory Fee................................... 71,886
Variation Margin on Futures............................... 20,016
Other Affiliates.......................................... 8,020
Other..................................................... 324,911
Swap Contracts.............................................. 2,163,232
Trustees' Deferred Compensation and Retirement Plans........ 238,329
Accrued Expenses............................................ 103,184
------------
Total Liabilities....................................... 10,244,570
------------
NET ASSETS.................................................. $207,338,051
============
NET ASSET VALUE PER COMMON SHARE ($207,338,051 divided
by 11,308,623 shares outstanding)......................... $ 18.33
============
NET ASSETS CONSIST OF:
Common Shares ($1.00 par value with 15,000,000 shares
authorized,
11,308,623 shares issued and outstanding)................. $ 11,308,623
Paid in Surplus............................................. 206,706,494
Accumulated Undistributed Net Investment Income............. (414,054)
Net Unrealized Depreciation................................. (1,525,784)
Accumulated Net Realized Loss............................... (8,737,228)
------------
NET ASSETS.................................................. $207,338,051
============
See Notes to Financial Statements 23
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended June 30, 2008
INVESTMENT INCOME:
Interest.................................................... $11,634,237
Dividends................................................... 27,797
-----------
Total Income.......................................... 11,662,034
-----------
EXPENSES:
Investment Advisory Fee..................................... 902,105
Reports to Shareholders..................................... 125,585
Professional Fees........................................... 86,852
Accounting and Administrative Expenses...................... 56,590
Transfer Agent Fees......................................... 45,555
Custody..................................................... 37,268
Registration Fees........................................... 21,368
Trustees' Fees and Related Expenses......................... 3,942
Other....................................................... 25,564
-----------
Total Expenses........................................ 1,304,829
Less Credits Earned on Cash Balances.................. 1,578
-----------
Net Expenses.......................................... 1,303,251
-----------
NET INVESTMENT INCOME....................................... $10,358,783
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 2,127,854
Futures................................................... (4,548,150)
Swap Contracts............................................ (2,617,318)
-----------
Net Realized Loss........................................... (5,037,614)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (2,528,812)
-----------
End of the Period:
Investments............................................. (8,591,139)
Futures................................................. (173,392)
Swap Contracts.......................................... 7,238,747
-----------
(1,525,784)
-----------
Net Unrealized Appreciation During the Period............... 1,003,028
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(4,034,586)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 6,324,197
===========
24 See Notes to Financial Statements
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2008 JUNE 30, 2007
------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................................... $ 10,358,783 $ 10,213,317
Net Realized Gain/Loss..................................... (5,037,614) 114,273
Net Unrealized Appreciation During the Period.............. 1,003,028 1,526,983
------------ ------------
Change in Net Assets from Operations....................... 6,324,197 11,854,573
Distributions from Net Investment Income................... (10,403,933) (10,712,430)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES........ (4,079,736) 1,142,143
FROM CAPITAL TRANSACTIONS:
Repurchase of Shares....................................... -0- (949,378)
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS...................... (4,079,736) 192,765
NET ASSETS
Beginning of the Period.................................... 211,417,787 211,225,022
------------ ------------
End of the Period (Including accumulated undistributed net
investment income of $(414,054) and $(1,299,978),
respectively)............................................ $207,338,051 $211,417,787
============ ============
See Notes to Financial Statements 25
VAN KAMPEN BOND FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED JUNE 30,
----------------------------------------------
2008 2007 2006 2005 2004
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $18.70 $18.59 $19.69 $19.15 $19.78
------ ------ ------ ------ ------
Net Investment Income..................... 0.92(a) 0.90(a) 0.89(a) 0.96 1.03
Net Realized and Unrealized Gain/Loss..... (0.37) 0.15 (1.03) 0.60 (0.54)
------ ------ ------ ------ ------
Total from Investment Operations............ 0.55 1.05 (0.14) 1.56 0.49
Less Distributions from Net Investment
Income.................................... 0.92 0.94 0.96 1.02 1.12
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.......... $18.33 $18.70 $18.59 $19.69 $19.15
====== ====== ====== ====== ======
Common Share Market Price at End of the
Period.................................... $16.62 $16.84 $16.40 $17.80 $17.02
Total Return (b)............................ 4.17% 8.38% -2.59% 10.69% -7.44%
Net Assets at End of the Period (In
millions)................................. $207.3 $211.4 $211.2 $223.8 $217.6
Ratio of Expenses to Average Net Assets..... 0.61% .57% .59% .60% .65%
Ratio of Net Investment Income to Average
Net Assets................................ 4.82% 4.72% 4.61% 4.90% 5.24%
Portfolio Turnover.......................... 111% 188% 64% 61% 41%
(a) Based on average shares outstanding.
(b) Total return based on common share market price assumes an investment at the
common share market price at the beginning of the period indicated,
reinvestment of all distributions for the period in accordance with the
Fund's dividend reinvestment plan, and sale of all shares at the closing
common share market price at the end of the period indicated.
26 See Notes to Financial Statements
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Bond Fund (the "Fund") is registered as a diversified, closed-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund's investment objective is to seek interest
income while conserving capital.
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 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. Listed and unlisted
securities for which the last sale 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 as noted above, valuations are determined in
accordance with procedures established in good faith by the Board of Trustees.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded. Credit default and interest rate swaps are
valued using market quotations from brokers. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
segregate assets with its 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 June 30, 2008, 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.
27
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 continued
C. INVESTMENT INCOME Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Premiums are amortized and
discounts are accreted over the expected life of each applicable security.
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 adopted the provisions of the Financial Accounting Standards Board ("FASB")
Interpretation No. 48 ("FIN 48") Accounting for Uncertainty in Income Taxes on
December 31, 2007. FIN 48 sets forth a minimum threshold for financial statement
recognition of the benefit of a tax position taken or expected to be taken in a
tax return. The implementation of FIN 48 did not result in any unrecognized tax
benefits in the accompanying financial statements. If applicable, the Fund
recognizes interest accrued related to unrecognized tax benefits in "Interest
Expense" and penalties in "Other" expenses on the Statement of Operations. The
Fund files tax returns with the U.S. Internal Revenue Service, New York and
various states. Generally, each of the tax years in the four year period ended
June 30, 2008, remains subject to examination by taxing authorities.
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 these losses against any future realized capital
gains. At June 30, 2008, the Fund had an accumulated capital loss carryforward
for tax purposes of $3,464,291, which will expire according to the following
schedule:
AMOUNT EXPIRATION
$ 753,340 ............................................................ June 30, 2011
472,610 ............................................................ June 30, 2015
2,238,341 ............................................................ June 30, 2016
At June 30, 2008, the cost and related gross unrealized appreciation and
depreciation were as follows:
Cost of investments for tax purposes........................ $215,297,047
============
Gross tax unrealized appreciation........................... $ 912,014
Gross tax unrealized depreciation........................... (10,300,303)
------------
Net tax unrealized depreciation on investments.............. $ (9,388,289)
============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays quarterly
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 and gains on futures transactions.
All short-term capital gains and a portion of futures gains are included as
ordinary income for tax purposes.
28
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 continued
The tax character of distributions paid during the years ended June 30, 2008
and 2007 was as follows:
2008 2007
Distributions paid from:
Ordinary income........................................... $10,408,196 $10,723,719
Long-term capital gain.................................... -0- -0-
----------- -----------
$10,408,196 $10,723,719
=========== ===========
Permanent differences, primarily due to reclassification of swap gains and
losses to income and book to tax amortization differences, resulted in the
following reclassifications among the Fund's components of net assets at June
30, 2008:
ACCUMULATED
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED LOSS PAID-IN SURPLUS
$931,074 $(931,074) -0-
As of June 30, 2008, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income............................... $799,004
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the post October losses which are not
recognized for tax purposes until the first day of the following fiscal year and
gains and losses recognized for tax purposes on open futures transactions on
June 30, 2008.
F. CREDITS EARNED ON CASH BALANCES During the year ended June 30, 2008, the
Fund's custody fee was reduced by $1,578 as a result of credits earned on cash
balances.
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.......................................... .42%
Over $500 million........................................... .35%
For the year ended June 30, 2008, the Fund recognized expenses of
approximately $48,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
Under separate Accounting Services and Chief Compliance Officer (CCO)
Employment agreements, the Adviser provides accounting services and the CCO
provides compliance services to the Fund. The costs of these services are
allocated to each fund. For the year ended June 30, 2008, the Fund recognized
expenses of approximately $18,900 representing
29
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 continued
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.
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 to a
later date. Benefits under the retirement plan are payable upon retirement for a
ten-year period and are based upon each trustee's years of service to the Fund.
The maximum annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
For the years ended June 30, 2008 and 2007, transactions in common shares were
as follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2008 JUNE 30, 2007
Beginning Shares............................................ 11,308,623 11,362,465
Shares Repurchased*......................................... -0- (53,842)
---------- ----------
Ending Shares............................................... 11,308,623 11,308,623
========== ==========
* For the period ended June 30, 2007, the Fund repurchased 53,842 of its
shares at an average discount of 8.26% from net assets value per share.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments and U.S. Government securities, were
$129,463,285 and $93,792,471, respectively. The cost of purchases and proceeds
from sales of long-term U.S. Government securities, including paydowns on
mortgage-backed securities, for the period were $94,838,985 and $174,777,207,
respectively.
5. MORTGAGE BACKED SECURITIES
The Fund may invest in various types of Mortgage Backed Securities. A Mortgage
Backed Security (MBS) is a pass-through security created by pooling mortgages
and selling participations in the principal and interest payments received from
borrowers. Most of these securities are guaranteed by federally sponsored
agencies--Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). A
Collateralized Mortgage Obligation (CMO) is a bond which is collateralized by a
pool of MBS's.
These securities derive their value from or represent interests in a pool of
mortgages, or mortgage securities. Mortgage securities are subject to prepayment
risk -- the risk that, as mortgage interest rates fall, borrowers will refinance
and "prepay" principal. A fund holding mortgage securities that are experiencing
prepayments will have to reinvest these payments at lower prevailing interest
rates. On the other hand, when interest rates rise, borrowers are less
30
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 continued
likely to refinance resulting in lower prepayments. This can effectively extend
the maturity of a fund's mortgage securities resulting in greater price
volatility. It can be difficult to measure precisely the remaining life of a
mortgage security or the average life of a portfolio of such securities.
To the extent a fund invests in mortgage securities offered by
non-governmental issuers, such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers, the Fund may be subject to additional risks. Timely
payment of interest and principal of non-governmental issuers are supported by
various forms of private insurance or guarantees, including individual loan,
title, pool and hazard insurance purchased by the issuer. There can be no
assurance that the private insurers can meet their obligations under the
policies.
An unexpectedly high rate of defaults on the mortgages held by a mortgage
pool may adversely affect the value of a mortgage backed security and could
result in losses to a Fund. The risk of such defaults is generally higher in the
case of mortgage pools that include subprime mortgages. Subprime mortgages refer
to loans made to borrowers with weakened credit histories or with a lower
capacity to make timely payment on their mortgages.
6. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund may use derivative instruments for a variety of reasons, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate potential gain. All of the Fund's portfolio 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 futures contract. In these instances, the recognition of
gain or loss is postponed until the disposal of the security underlying the
futures contract. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.
Summarized below are specific types of derivative financial instruments used
by the Fund.
A. 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, 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.
31
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 continued
Transactions in futures contracts for the year ended June 30, 2008, were as
follows:
CONTRACTS
Outstanding at June 30, 2007................................ 495
Futures Opened.............................................. 3,577
Futures Closed.............................................. (3,472)
------
Outstanding at June 30, 2008................................ 600
======
B. SWAPS 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 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.
32
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 continued
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. 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. Cash collateral is disclosed
in the table following the Portfolio of Investments. Cash collateral has been
offset against open swap contracts under the provisions of FIN 39: Offsetting of
Amounts Related to Certain Contracts an interpretation of APB Opinion No. 10 and
FASB Statement No. 105 and are included within "Swap Contracts" on the Statement
of Assets and Liabilities. For cash collateral received, the Fund pays a monthly
fee to the counterparty based on the effective rate for Federal Funds. This fee,
when paid, is included with realized loss on swap contracts on the Statement of
Operations.
7. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
8. ACCOUNTING PRONOUNCEMENTS
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (FAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. As of June 30, 2008 the Adviser does not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosures will be required about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported on
the Statement of Operations for a fiscal period.
On March 19, 2008, Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities (FAS 161). FAS 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. The application of FAS 161 is required for fiscal years
and interim periods beginning after November 15, 2008. At this time, management
is evaluating the implications of FAS 161 and its impact on the financial
statements has not yet been determined.
33
VAN KAMPEN BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of Van Kampen Bond Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Bond Fund (the "Fund"), a fund of Van Kampen Series Fund, Inc., including
the portfolio of investments, as of June 30, 2008, 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its 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, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of June 30, 2008, by correspondence with the Fund's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. 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 Bond Fund as of June 30, 2008, 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 accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
August 18, 2008
34
VAN KAMPEN BOND 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
JERRY W. MILLER
President and Principal Executive Officer
DENNIS SHEA
Vice President
KEVIN KLINGERT
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
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
TRANSFER AGENT
COMPUTERSHARE TRUST COMPANY, N.A.
C/O COMPUTERSHARE INVESTOR SERVICES
P.O. Box 43078
Providence, Rhode Island 02940-3078
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
35
VAN KAMPEN BOND FUND
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of the Shareholders of the Fund was held on June 18, 2008,
where shareholders voted on the election of trustees.
With regard to the election of the following trustees by the common shareholders
of the Fund:
# OF SHARES
-----------------------------
IN FAVOR WITHHELD
------------------------------------------------------------------------------------------
David C. Arch.............................................. 9,271,877 785,105
Jerry D. Choate............................................ 9,261,929 795,053
Howard J. Kerr............................................. 9,253,589 803,393
Suzanne H. Woolsey......................................... 9,255,397 801,584
The other trustees of the Fund whose terms did not expire in 2008 are Rod
Dammeyer, Linda Hutton Heagy, R. Craig Kennedy, Jack E. Nelson, Hugo F.
Sonnenschein and Wayne W. Whalen.
36
VAN KAMPEN BOND FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of each Fund are managed under the direction of the
Funds' Board of Trustees and the Funds' officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of each 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 of the Fund generally serve three year terms 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 EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (63) Trustee Trustee Chairman and Chief 73 Trustee/Director/Managing
Blistex Inc. since 1997 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. Member of
the Board of Visitors,
Institute for the
Humanities, University of
Michigan.
37
VAN KAMPEN BOND FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jerry D. Choate (69) Trustee Trustee Prior to January 1999, 73 Trustee/Director/Managing
33971 Selva Road since 2003 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Valero Energy
to January 1995, Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
Rod Dammeyer (67) Trustee Trustee President of CAC, L.L.C., 73 Trustee/Director/Managing
CAC, L.L.C. since 1997 a private company General Partner of funds
4350 La Jolla 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. and Trustee of The
Scripps Research
Institute. Prior to
February 2008, Director
of Ventana Medical
Systems, Inc. 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.
38
VAN KAMPEN BOND FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy++ (60) Trustee Trustee Prior to February 2008, 73 Trustee/Director/Managing
4939 South Greenwood since 2003 Managing Partner of General Partner of funds
Chicago, IL 60615 Heidrick & Struggles, an in the Fund Complex.
international executive Trustee on the University
search firm. Prior to of Chicago Medical Center
1997, Partner of Ray & Board, Vice Chair of the
Berndtson, Inc., an Board of the YMCA of
executive recruiting Metropolitan Chicago and
firm. Prior to 1995, a member of the Women's
Executive Vice President Board of the University
of ABN AMRO, N.A., a bank of Chicago.
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (56) Trustee Trustee Director and President of 73 Trustee/Director/Managing
1744 R Street, NW since 2003 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S. Director of First Solar,
foundation created to Inc.
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 (72) Trustee Trustee Prior to 1998, President 73 Trustee/Director/Managing
14 Huron Trace since 1997 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.
39
VAN KAMPEN BOND FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (72) Trustee Trustee President of Nelson 73 Trustee/Director/Managing
423 Country Club Drive since 2003 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the Financial
Industry Regulatory
Authority ("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.
Hugo F. Sonnenschein (67) Trustee Trustee President Emeritus and 73 Trustee/Director/Managing
1126 E. 59th Street since 1997 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.
40
VAN KAMPEN BOND FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Suzanne H. Woolsey, Ph.D. (66) Trustee Trustee Chief Communications 73 Trustee/Director/Managing
815 Cumberstone Road since 2003 Officer of the National General Partner of funds
Harwood, MD 20776 Academy of in the Fund Complex.
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 and Trustee of
California Institute of
Technology and the
Colorado College.
41
VAN KAMPEN BOND FUND
TRUSTEE AND OFFICER INFORMATION 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 EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (69) Trustee Trustee Partner in the law firm 73 Trustee/Director/Managing
333 West Wacker Drive since 1997 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.
------------------------------------
+ See Table D below.
++ As indicated above, prior to February 2008, Ms. Heagy was 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 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.
* 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.
42
VAN KAMPEN BOND FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER EACH FUND SERVED DURING PAST 5 YEARS
Jerry W. Miller (47) President and Officer President and Principal Executive Officer of funds in the
522 Fifth Avenue Principal Executive since 2008 Fund Complex since May 2008. President and Chief Executive
New York, NY 10036 Officer Officer of Van Kampen Investments since June 2008. Central
Division Director for Morgan Stanley's Global Wealth
Management Group from March 2006 to June 2008. Previously,
Chief Operating Officer of the global proprietary business
of Merrill Lynch Investment Management from 2002 to 2006.
Dennis Shea (55) 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.
Kevin Klingert (46) Vice President Officer Vice President of funds in the Fund Complex since March
522 Fifth Avenue since 2008 2008. Chief Operating Officer of the Fixed Income portion of
New York, NY 10036 Morgan Stanley Investment Management Inc. since March 2008.
Head of Global Liquidity Portfolio Management and co-Head of
Liquidity Credit Research of Morgan Stanley Investment
Management since December 2007. Managing Director of Morgan
Stanley Investment Management Inc. from December 2007 to
March 2008. Previously, Managing Director on the Management
Committee and head of Municipal Portfolio Management and
Liquidity at BlackRock from October 1991 to January 2007.
Assistant Vice President municipal portfolio manager at
Merrill Lynch from March 1985 to October 1991.
43
VAN KAMPEN BOND FUND
TRUSTEE AND OFfiCER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER EACH FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (46) 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 Yu (41) Vice President Officer Managing 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 (53) 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 (46) Chief Financial Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza - Suite 100 Officer and since 2007 Inc. since June 2007. Chief Financial Officer and Treasurer
Oakbrook Terrace, IL 60181 Treasurer 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.
In accordance with Section 303A.12(a) of the New York Stock Exchange Listed
Company Manual, the Fund's Chief Executive Officer has certified to the New York
Stock Exchange that, as of June 25, 2008, he was not aware of any violation by
the Fund of NYSE corporate governance listing standards.
The certification by the Fund's principal executive officer and principal
financial officer required by Rule 30a-2 under the 1940 Act were filed with the
Fund's report to the SEC on Form N-CSR and are available on the Securities and
Exchange Commission's web site at http://www.sec.gov.
44
Van Kampen Bond 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 Bond 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 Bond 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.
Van Kampen Funds Inc.
522 Fifth Avenue
New York, New York 10036
www.vankampen.com
Copyright (C)2008 Van Kampen Funds Inc.
All rights reserved. Member FINRA/SIPC.
VBFANN 8/08
(VAN KAMPEN INVESTMENTS LOGO) IU08-04215P-Y06/08
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 June 2008 and the general counsel's designee
set forth in Exhibit C was amended in January 2008. Both editions of Exhibit B
and both 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 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:
2008
REGISTRANT COVERED ENTITIES(1)
----------- -------------------
AUDIT FEES....................... $35,015 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES............ $ 0 $215,000(2)
TAX FEES...................... $ 1,650(3) $ 0
ALL OTHER FEES................ $ 0 $ 0
TOTAL NON-AUDIT FEES............. $ 1,650 $215,000
TOTAL............................ $36,665 $215,000
2007
REGISTRANT COVERED ENTITIES(1)
----------- -------------------
AUDIT FEES....................... $32,875 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES............ $ 0 $211,000(2)
TAX FEES...................... $ 1,600(3) $ 0
ALL OTHER FEES................ $ 0 $ 0
TOTAL NON-AUDIT FEES............. $ 1,600 $211,000
TOTAL............................ $34,475 $211,000
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.
(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
----------
(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.
from the Audit Committee. The Audit Committee will add to or subtract from the
list of general pre-approved services from time to time, based on subsequent
determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1.
All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix
B.2. All other Audit-related services not listed in Appendix B.2 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services. Hence, the Audit Committee believes it may grant
general pre-approval to those Tax services that have historically been provided
by the Independent Auditors, that the Audit Committee has reviewed and believes
would not impair the independence of the Independent Auditors, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the Independent Auditors in connection with a
transaction initially recommended by the Independent Auditors, the sole business
purpose of which may be tax avoidance and the tax treatment of which may not be
supported in the Internal Revenue Code and related regulations. The Audit
Committee will consult with Director of Tax or outside counsel to determine that
the tax planning and reporting positions are consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the Tax Services in Appendix B.3. All Tax services involving large and complex
transactions not listed in Appendix B.3 must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix B.5. The SEC's rules and relevant guidance should be
consulted to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be rendered. The Fund's Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the Independent Auditors. Requests or applications to provide services that
require specific approval by the Audit Committee will be submitted to the Audit
Committee by both the Independent Auditors and the Fund's Chief Financial
Officer, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. A sample report is included as Appendix
B.7. Both the Fund's Chief Financial Officer and management will immediately
report to the chairman of the Audit Committee any breach of this Policy that
comes to the attention of the Fund's Chief Financial Officer or any member of
management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
- Van Kampen Investments Inc.
- Van Kampen Asset Management
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Investor Services Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Trust Company
- Morgan Stanley Investment Management Ltd.
- Morgan Stanley Investment Management Company
- Morgan Stanley Asset & Investment Trust Management Company Ltd.
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services
are determined to have a direct impact on the operations or financial reporting
of the Registrant. 100% of such services were pre-approved by the audit
committee pursuant to the Audit Committee's pre-approval policies and procedures
(included herein).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: R.
Craig Kennedy, Jerry Choate and Rod Dammeyer.
(b) Not applicable.
Item 6. Schedule of Investments.
(a) Please refer to Item #1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Fund invests in exclusively non-voting securities and therefore this item is
not applicable to the Fund.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
PORTFOLIO MANAGEMENT. As of the date of this report, the Fund is managed by
members of the Adviser's Taxable Fixed Income team. The Taxable Fixed Income
team consists of portfolio managers and analysts. The current member of the team
primarily responsible for the day-to-day management of the Fund's portfolio and
the execution of the overall strategy of the Fund is Steven Kreider, a Managing
Director of the Adviser. Mr. Kreider has been associated with the Adviser in an
investment management capacity since 1988 and joined the team that manages the
Fund in June 2007.
The composition of the team may change without notice from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGER
As of June 30, 2008, Mr. Kreider managed 40 registered investment companies with
a total of approximately $28.9 billion in assets; two pooled investment vehicles
other than registered investment companies with a total of approximately $217
million in assets; and 42 other accounts (including accounts managed under
certain "wrap fee programs") with a total of approximately $6.4 billion in
assets.
Because the portfolio manager manages assets for other investment companies,
pooled investment vehicles, and/or other accounts (including institutional
clients, pension plans and certain high net worth individuals), there may be an
incentive to favor one client over another resulting in conflicts of interest.
For instance, the Adviser may receive fees from certain accounts that are higher
than the fee it receives from the Fund, or it may receive a performance-based
fee on certain accounts. In those instances, the portfolio manager may have an
incentive to favor the higher and/or performance-based fee accounts over the
Fund. In addition, a conflict of interest could exist to the extent the Adviser
has proprietary investments in certain accounts, where portfolio managers have
personal investments in certain accounts or when certain accounts are investment
options in the Adviser's employee benefits and/or deferred compensation plans.
The portfolio manager may have an incentive to favor these accounts over others.
If the Adviser manages accounts that engage in short sales of securities of the
type in which the Fund invests, the Adviser could be seen as harming the
performance of the Fund for the benefit of the accounts engaged in short sales
if the short sales cause the market value of the securities to fall. The Adviser
has adopted trade allocation and other policies and procedures that it believes
are reasonably designed to address these and other conflicts of interest.
PORTFOLIO MANAGER COMPENSATION STRUCTURE
Portfolio managers receive a combination of base compensation and discretionary
compensation, comprised of a cash bonus and several deferred compensation
programs described below. The methodology used to determine portfolio manager
compensation is applied across all accounts managed by the portfolio manager.
BASE SALARY COMPENSATION. Generally, portfolio managers receive base salary
compensation based on the level of their position with the Adviser.
DISCRETIONARY COMPENSATION. In addition to base compensation, portfolio managers
may receive discretionary compensation.
Discretionary compensation can include:
- Cash Bonus;
- Morgan Stanley's Long-Term Incentive Compensation Program awards -- a
mandatory program that defers a portion of discretionary year-end
compensation into restricted stock units or other awards based on Morgan
Stanley common stock that are subject to vesting and other conditions;
- Investment Management Alignment Plan (IMAP) awards -- a mandatory program
that defers a portion of discretionary year-end compensation and notionally
invests it in designated funds advised by the Adviser or its affiliates.
The award is subject to vesting and other conditions. Portfolio managers
must notionally invest a minimum of 25% to a maximum of 100% of the IMAP
deferral into a combination of the designated open-end funds they manage
that are included in the IMAP Fund menu;
- Voluntary Deferred Compensation Plans -- voluntary programs that permit
certain employees to elect to defer a portion of their discretionary
year-end compensation and directly or notionally invest the deferred
amount: (1) across a range of designated investment funds, including funds
advised by the Adviser or its affiliates; and/or (2) in Morgan Stanley
stock units.
Several factors determine discretionary compensation, which can vary by
portfolio management team and circumstances. In order of relative importance,
these factors include:
- Investment performance. A portfolio manager's compensation is linked to the
pre-tax investment performance of the funds/accounts managed by the
portfolio manager. Investment performance is calculated for one-, three-
and five-year periods measured against an appropriate securities market
index (or indices) for the funds/accounts managed by the portfolio manager.
Other funds/accounts managed by the same portfolio manager may be measured
against this same index and same rankings or ratings, if appropriate, or
against other indices and other rankings or ratings that are deemed more
appropriate given the size and/or style of such funds/accounts as set forth
in such funds'/accounts' disclosure materials and guidelines. The assets
managed by the portfolio manager in funds, pooled investment vehicles and
other accounts are described in "Other Accounts Managed by the Portfolio
Manager" above. Generally, the greatest weight is placed on the three- and
five-year periods.
- Revenues generated by the investment companies, pooled investment vehicles
and other accounts managed by the portfolio manager.
- Contribution to the business objectives of the Adviser.
- The dollar amount of assets managed by the portfolio manager.
- Market compensation survey research by independent third parties.
- Other qualitative factors, such as contributions to client objectives.
- Performance of Morgan Stanley and Morgan Stanley Investment Management
Inc., and the overall performance of the investment team(s) of which the
portfolio manager is a member.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGER
As of June 30, 2008, the portfolio manager did not own any shares of the Fund.
Item 9. Purchase 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 Bond Fund
By: /s/ Jerry W. Miller
------------------------------------
Name: Jerry W. Miller
Title: Principal Executive Officer
Date: August 15, 2008
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/ Jerry W. Miller
------------------------------------
Name: Jerry W. Miller
Title: Principal Executive Officer
Date: August 15, 2008
By: /s/ Stuart N. Schuldt
------------------------------------
Name: Stuart N. Schuldt
Title: Principal Financial Officer
Date: August 15, 2008