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)
1221 Avenue of the Americas New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 6/30
Date of reporting period: 6/30/06
Item 1. Reports to Shareholders.
The Fund's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen 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, 2006.
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
---------------------------------------------------------------------------------------
Performance Summary as of 6/30/06
BOND FUND
SYMBOL: VBF
------------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS MARKET PRICE NAV
10-year 6.08% 6.38%
5-year 3.08 5.41
1-year -2.59 -0.18
------------------------------------------------------------
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.
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
Fund Report
FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2006
MARKET CONDITIONS
Several events shaped fixed-income markets trends during the 12-month period. In
mid-2005, a series of natural disasters struck the U.S., generating concern
about their effect on economic growth. While some observers initially believed
that the U.S. economy would suffer lingering aftereffects following Hurricane
Katrina, only a temporary impact was felt. Additionally, sharply higher energy
prices failed to interrupt the positive economic momentum. In fact, real gross
domestic product (GDP) growth averaged near 4 percent throughout 2005.
The second half of the period followed a more consistent path. To virtually no
one's surprise, the Federal Open Market Committee (the "Fed") continued to raise
the target federal funds rate by 25 basis points at each of its meetings during
the first half of 2006, bringing the rate to 5.25 percent at the end of June. In
the Fed's view, the U.S. economy during the period remained on solid footing,
with relatively low core inflation, though most measures of core inflation ended
the period either at or above the high end of the range viewed as acceptable by
the Fed.
Also as expected, longtime Fed Chairman Alan Greenspan retired in January after
a term of more than 18 years. Ben S. Bernanke replaced Greenspan as Chairman,
and in his first Congressional testimony in the role acknowledged some risks to
the Fed's relatively contained inflation forecast, as well as the potential for
upward pressure on inflation in the event of continued high energy prices and
other building inflationary pressures.
Comments made by Fed members after their May and June meetings indicated that
they will rely heavily on economic data in making future decisions concerning
the direction of interest rates. In fact, based on these comments it appears
that the Fed historically may be driven by the weight of the economic data more
so now than perhaps at any time over the past few years.
Overall, U.S. Treasury yields rose over the twelve month period. Corporate bond
spreads continued to narrow and sector returns were unevenly distributed, with a
few key names driving performance within each sector. Within the investment
grade sector Aaa-rated issues and shorter maturity issues posted the highest
returns. Among the corporate sub-sectors, financials outpaced industrial and
utility issues.
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, 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 may differ, as they did during the reporting period. On an NAV basis,
the fund outperformed its benchmark index, the BBB Corporate Bond Index. On a
market price basis, the fund underperformed its benchmark.
TOTAL RETURNS FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2006
----------------------------------------------------------
BASED ON BASED ON LEHMAN BROTHERS BBB
NAV MARKET PRICE CORPORATE BOND INDEX
-0.18% -2.59% -2.53%
----------------------------------------------------------
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.
During the period, we kept the fund's overall duration (a measure of interest
rate sensitivity) well below that of the Lehman benchmark. This posture was
beneficial as interest rates rose across the market, especially in the short-
and intermediate-portions of the yield curve.
Within the investment-grade segment of the portfolio, we employed a defensive
strategy with a focus on higher-quality securities. While this defensive posture
provided some performance support over the period, much of that support was
offset by the underperformance of higher-rated bonds relative to lower-rated
segments of the market. The fund benefited from strong security selection among
corporate issues.
Our approach to the high yield market was also conservative. This stance
hampered returns over most of the period as lower rated credits advanced
strongly. The fund's performance was also hurt by security selection in the
forest products, building products and financial sectors. On a more positive
note, security selection in the transportation, cable and consumer products
sectors boosted relative returns.
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 6/30/06
AAA/Aaa 18.8%
AA/Aa 27.6
A/A 21.1
BBB/Baa 28.0
BB/Ba 3.0
B/B 1.5
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 6/30/06
United States Government Agency Obligations 17.5%
Banking 13.6
Electric 7.2
Noncaptive-Consumer Finance 5.4
Property & Casualty 3.7
Wireline Communications 3.4
Life Insurance 3.0
Automotive 2.9
Diversified Manufacturing 2.5
Noncaptive-Diversified Finance 2.5
Railroads 2.4
Healthcare 2.3
Retail 2.0
Media-Cable 1.6
Brokerage 1.6
Media-Noncable 1.5
Natural Gas Pipelines 1.4
Gaming 1.2
Integrated Energy 1.1
Chemicals 1.1
Environmental & Facilities Services 0.9
Food/Beverage 0.9
Construction Machinery 0.9
Supermarkets 0.7
Lodging 0.7
Consumer Products 0.7
Natural Gas Distributors 0.6
Other Utilities 0.6
Real Estate Investment Trusts 0.6
Oil Field Services 0.5
Textile 0.5
Transportation Services 0.4
Technology 0.4
Independent Energy 0.3
Tobacco 0.3
Aerospace & Defense 0.2
-----
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. All percentages are as a percentage of
total investments. Van Kampen is a wholly owned subsidiary of a global
securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen trust 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 trust 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 trust files a complete schedule of portfolio
holdings with the SEC for the trust's first and third fiscal quarters on
Form N-Q. Van Kampen does not deliver the reports for the first and third
fiscal quarters to shareholders, nor are the reports posted to the Van
Kampen public Web site. You may, however, obtain the Form N-Q filings (as
well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web
site, http://www.sec.gov. You may also review and copy them at the SEC's
Public Reference Room in Washington, DC. Information on the operation of
the SEC's Public Reference Room may be obtained by calling the SEC at
(800) SEC-0330. You can also request copies of these materials, upon
payment of a duplicating fee, by electronic request at the SEC's e-mail
address (publicinfo@sec.gov) or by writing the Public Reference section
of the SEC, Washington, DC 20549-0102.
You may obtain copies of a trust'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.
5
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry. 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 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
6
business judgment, that approval of the investment advisory agreement is in the
best interests of the Fund and its shareholders. The following summary provides
more detail on certain matters considered but does not detail all matters
considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The trustees also discuss
certain other services which are provided on a cost-reimbursement basis by the
investment adviser or its affiliates to the Van Kampen funds including certain
accounting, administrative and legal services. The Board has determined that the
nature, extent and quality of the services provided by the investment adviser
support its decision to approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report. 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 contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees discuss with the investment adviser its revenues and expenses,
including among other things, revenues for advisory services, portfolio
management-related expenses, revenue sharing arrangement costs and allocated
expenses both on an aggregate basis and per fund. The Board has determined that
the analysis of the
7
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
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 contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
8
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
CORPORATE BONDS 72.7%
AEROSPACE & DEFENSE 0.2%
$ 407 Raytheon Co. ................................... 4.500% 11/15/07 $ 399,704
------------
AUTOMOTIVE 3.1%
1,280 DaimlerChrysler NA Holding Corp. ............... 8.500 01/18/31 1,453,312
1,840 General Motors Acceptance Corp. ................ 6.875 09/15/11 1,757,528
4,075 General Motors Corp. ........................... 8.375 07/15/33 3,300,750
------------
6,511,590
------------
BANKING 14.2%
2,230 Bank of America Corp. .......................... 3.375 02/17/09 2,114,312
2,250 Bank of Scotland, 144A--Private Placement
(United Kingdom) (a)............................ 3.500 11/30/07 2,188,422
2,860 JPMorgan Chase & Co. ........................... 6.750 02/01/11 2,975,561
2,255 M & I Marshall & Ilsley Bank.................... 3.800 02/08/08 2,191,050
1,635 MBNA Corp. (Floating Rate Coupon)............... 5.580 05/05/08 1,647,637
2,315 National City Bank.............................. 3.375 10/15/07 2,247,534
805 Popular NA, Inc., Ser F......................... 5.650 04/15/09 799,009
2,195 SunTrust Banks, Inc. ........................... 5.050 07/01/07 2,182,258
2,250 U.S. Bancorp.................................... 3.950 08/23/07 2,202,811
1,090 USB Capital IX (Variable Rate Coupon)........... 6.189 03/29/49 1,066,984
4,390 Wachovia Capital Trust III (Variable Rate
Coupon)......................................... 5.800 08/29/49 4,264,367
1,350 Wachovia Corp. ................................. 3.625 02/17/09 1,284,922
885 Wachovia Corp. ................................. 4.950 11/01/06 882,810
925 Washington Mutual Bank FA....................... 5.500 01/15/13 899,054
900 Washington Mutual, Inc. ........................ 8.250 04/01/10 965,819
2,190 Wells Fargo & Co. .............................. 5.125 02/15/07 2,183,723
------------
30,096,273
------------
BROKERAGE 1.6%
185 Goldman Sachs Group, Inc. ...................... 5.250 10/15/13 177,527
2,000 Lehman Brothers Holdings, Inc. ................. 8.500 05/01/07 2,039,678
819 World Financial Prop., 144A--Private Placement
(a)............................................. 6.910 09/01/13 845,506
373 World Financial Prop., 144A--Private Placement
(a)............................................. 6.950 09/01/13 385,003
------------
3,447,714
------------
CHEMICALS 1.1%
640 ICI Wilmington, Inc. ........................... 4.375 12/01/08 617,988
1,785 Sealed Air Corp., 144A--Private Placement (a)... 5.625 07/15/13 1,703,220
------------
2,321,208
------------
CONSTRUCTION MACHINERY 0.9%
2,045 Caterpillar Financial Services Corp., Ser F..... 3.625 11/15/07 1,991,229
------------
CONSUMER PRODUCTS 0.7%
1,495 Clorox Co. (Floating Rate Coupon)............... 5.444 12/14/07 1,497,278
------------
See Notes to Financial Statements 9
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING 2.6%
$ 1,245 Brascan Corp. (Canada).......................... 7.125% 06/15/12 $ 1,313,187
1,275 Cooper Industries, Inc. ........................ 5.250 07/01/07 1,263,772
1,155 Cooper Industries, Inc. ........................ 5.250 11/15/12 1,118,398
1,845 United Technologies Corp........................ 4.375 05/01/10 1,768,001
------------
5,463,358
------------
ELECTRIC 7.5%
1,350 Ameren Corp. ................................... 4.263 05/15/07 1,332,299
1,340 Arizona Public Service Co. ..................... 5.800 06/30/14 1,297,306
795 Arizona Public Service Co. ..................... 6.750 11/15/06 797,530
805 Carolina Power & Light Co. ..................... 6.800 08/15/07 814,248
1,460 CC Funding Trust I.............................. 6.900 02/16/07 1,468,410
860 Cincinnati Gas & Electric Co. .................. 5.700 09/15/12 843,952
865 Detroit Edison Co. ............................. 6.125 10/01/10 872,589
960 Duquesne Light Co., Ser O....................... 6.700 04/15/12 994,925
655 Entergy Gulf States, Inc. ...................... 3.600 06/01/08 626,031
1,600 Entergy Gulf States, Inc. (Floating Rate
Coupon)......................................... 5.631 12/01/09 1,584,610
425 Entergy Gulf States, Inc., 144A--Private
Placement (Floating Rate Coupon) (a)............ 6.020 12/08/08 425,650
255 Indianapolis Power & Light Co., 144A--Private
Placement (a)................................... 6.300 07/01/13 256,368
655 Monongahela Power Co. .......................... 5.000 10/01/06 653,496
900 NiSource Finance Corp. (Floating Rate Coupon)... 5.764 11/23/09 901,808
1,270 Ohio Power Co., Ser K........................... 6.000 06/01/16 1,254,642
595 Pacific Gas & Electric Co. ..................... 6.050 03/01/34 563,393
650 PSE&G Energy Holdings, LLC...................... 8.625 02/15/08 669,500
560 Wisconsin Electric Power........................ 3.500 12/01/07 543,899
------------
15,900,656
------------
ENVIRONMENTAL & FACILITIES SERVICES 1.0%
1,500 Waste Management, Inc. ......................... 7.000 10/15/06 1,505,223
550 Waste Management, Inc. ......................... 7.375 08/01/10 580,664
------------
2,085,887
------------
FOOD/BEVERAGE 1.0%
660 ConAgra Foods, Inc. ............................ 7.000 10/01/28 673,021
520 ConAgra Foods, Inc. ............................ 8.250 09/15/30 600,919
160 Pilgrim's Pride Corp. .......................... 9.625 09/15/11 167,200
550 YUM! Brands, Inc. .............................. 8.875 04/15/11 613,160
------------
2,054,300
------------
GAMING 1.2%
2,090 Harrah's Operating Co., Inc. ................... 5.625 06/01/15 1,936,387
640 Harrah's Operating Co., Inc. ................... 6.500 06/01/16 624,725
------------
2,561,112
------------
HEALTHCARE 2.4%
600 AmerisourceBergen Corp., 144A--Private Placement
(a)............................................. 5.625 09/15/12 576,000
1,885 Health Net, Inc. ............................... 8.375 04/15/11 2,118,101
10 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$ 1,130 UnitedHealth Group, Inc. ....................... 5.200% 01/17/07 $ 1,127,255
650 Wellpoint, Inc. ................................ 3.750 12/14/07 631,794
590 Wellpoint, Inc. ................................ 4.250 12/15/09 563,199
------------
5,016,349
------------
INDEPENDENT ENERGY 0.4%
285 Kerr-McGee Corp. ............................... 5.875 09/15/06 286,326
470 Kerr-McGee Corp. ............................... 6.625 10/15/07 476,134
------------
762,460
------------
INTEGRATED ENERGY 1.1%
790 Consumers Energy Co., Ser F..................... 4.000 05/15/10 736,116
455 Consumers Energy Co., Ser H..................... 4.800 02/17/09 442,733
1,300 Kinder Morgan, Inc. ............................ 6.500 09/01/12 1,236,784
------------
2,415,633
------------
LIFE INSURANCE 3.2%
635 AXA Financial, Inc. ............................ 6.500 04/01/08 641,191
475 John Hancock Financial Services, Inc. .......... 5.625 12/01/08 475,831
2,365 Marsh & McLennan Cos., Inc. .................... 5.875 08/01/33 2,060,471
105 Metlife, Inc. .................................. 6.125 12/01/11 106,924
1,030 Monumental Global Funding II, 144A--Private
Placement (a)................................... 3.850 03/03/08 999,906
585 Nationwide Financial Services, Inc. ............ 6.250 11/15/11 594,999
1,895 Xlliac Global Funding, 144A--Private Placement
(a)............................................. 4.800 08/10/10 1,821,635
------------
6,700,957
------------
LODGING 0.7%
1,325 Hyatt Equities, LLC, 144A--Private Placement
(a)............................................. 6.875 06/15/07 1,333,169
185 Starwood Hotels & Resorts Worldwide, Inc. ...... 7.375 05/01/07 187,081
------------
1,520,250
------------
MEDIA-CABLE 1.7%
1,835 Comcast Cable Communications, Inc. ............. 6.750 01/30/11 1,895,438
90 Comcast Cable Communications, Inc. ............. 7.125 06/15/13 94,407
490 Comcast Cable Communications, Inc. ............. 8.375 05/01/07 500,411
935 Echostar DBS Corp. ............................. 6.375 10/01/11 897,600
180 Echostar DBS Corp. ............................. 6.625 10/01/14 169,650
------------
3,557,506
------------
MEDIA-NONCABLE 1.6%
950 Interpublic Group of Cos., Inc. ................ 5.400 11/15/09 876,375
970 News America Holdings, Inc. .................... 8.875 04/26/23 1,137,888
115 News America, Inc. ............................. 6.400 12/15/35 106,700
1,310 Viacom, Inc., 144A--Private Placement (a)....... 6.875 04/30/36 1,268,140
------------
3,389,103
------------
NATURAL GAS DISTRIBUTORS 0.6%
435 Keyspan Corp. .................................. 4.900 05/16/08 428,826
890 Sempra Energy................................... 4.621 05/17/07 881,513
------------
1,310,339
------------
See Notes to Financial Statements 11
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
NATURAL GAS PIPELINES 1.4%
$ 765 Consolidated Natural Gas Co., Ser A............. 5.000% 12/01/14 $ 704,870
1,065 Consolidated Natural Gas Co., Ser C............. 6.250 11/01/11 1,076,619
470 Kinder Morgan Energy Partners................... 5.125 11/15/14 429,780
755 Texas Eastern Transmission Corp. ............... 7.000 07/15/32 809,517
------------
3,020,786
------------
NONCAPTIVE-CONSUMER FINANCE 5.6%
1,000 American Express Co. ........................... 4.750 06/17/09 978,366
230 American General Finance Corp. ................. 4.625 05/15/09 223,444
2,000 American General Finance Corp. ................. 4.625 09/01/10 1,916,910
2,245 Countrywide Home Loans, Inc. ................... 3.250 05/21/08 2,148,945
1,555 HSBC Finance Corp. ............................. 6.750 05/15/11 1,614,731
1,000 HSBC Finance Corp. ............................. 7.875 03/01/07 1,014,171
150 HSBC Finance Corp. ............................. 8.000 07/15/10 161,839
2,595 Residential Capital Corp. ...................... 6.375 06/30/10 2,561,901
1,330 SLM Corp. ...................................... 5.000 10/01/13 1,255,274
------------
11,875,581
------------
NONCAPTIVE-DIVERSIFIED FINANCE 2.6%
415 CIT Group, Inc. ................................ 3.650 11/23/07 403,638
415 CIT Group, Inc. ................................ 7.375 04/02/07 420,244
2,100 General Electric Capital Corp., Ser A........... 4.750 09/15/14 1,965,430
90 General Electric Capital Corp., Ser A........... 5.875 02/15/12 90,584
415 General Electric Capital Corp., Ser A........... 6.750 03/15/32 444,374
2,240 Nationwide Building Society, 144A--Private
Placement (United Kingdom) (a).................. 4.250 02/01/10 2,134,478
------------
5,458,748
------------
OIL FIELD SERVICES 0.6%
1,195 Panhandle Eastern Pipe Line Co., Ser B.......... 2.750 03/15/07 1,169,731
------------
OTHER UTILITIES 0.6%
1,295 Plains All American Pipeline, 144A--Private
Placement (a)................................... 6.700 05/15/36 1,266,251
------------
PROPERTY & CASUALTY 3.9%
1,195 AIG SunAmerica Global Financial VI,
144A--Private Placement (a)..................... 6.300 05/10/11 1,222,339
1,545 Farmers Exchange Capital, 144A--Private
Placement (a)................................... 7.050 07/15/28 1,482,383
1,230 Farmers Insurance Exchange Surplus,
144A--Private Placement (a)..................... 8.625 05/01/24 1,367,962
1,800 Mantis Reef Ltd., 144A--Private Placement
(Australia) (a)................................. 4.692 11/14/08 1,745,609
1,415 St. Paul Travelers Cos., Inc. .................. 5.010 08/16/07 1,399,223
1,035 Two-Rock Pass Through Trust, 144A--Private
Placement (Floating Rate Coupon) (Bermuda)
(a)............................................. 6.102 02/11/49 1,019,910
------------
8,237,426
------------
12 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
RAILROADS 2.5%
$ 590 Burlington Northern Santa Fe Corp. ............. 6.125% 03/15/09 $ 596,761
615 Burlington Northern Santa Fe Railway Co. ....... 4.575 01/15/21 574,902
1,000 CSX Corp. ...................................... 6.750 03/15/11 1,038,631
520 Norfolk Southern Corp. ......................... 7.350 05/15/07 526,967
2,600 Union Pacific Corp. ............................ 6.625 02/01/08 2,635,038
------------
5,372,299
------------
REAL ESTATE INVESTMENT TRUSTS 0.6%
250 EOP Operating LP................................ 4.750 03/15/14 227,107
175 EOP Operating LP................................ 7.875 07/15/31 192,627
850 Reckson Operating Partnership LP................ 5.150 01/15/11 816,810
------------
1,236,544
------------
RETAIL 2.1%
270 CVS Corp. ...................................... 3.875 11/01/07 262,928
500 Federated Department Stores, Inc. .............. 6.300 04/01/09 505,941
1,500 Federated Department Stores, Inc. .............. 6.625 09/01/08 1,524,723
920 Limited Brands, Inc. ........................... 6.950 03/01/33 879,701
1,275 May Department Stores Co. ...................... 5.950 11/01/08 1,277,479
------------
4,450,772
------------
SUPERMARKETS 0.8%
495 Delhaize America, Inc. ......................... 9.000 04/15/31 545,297
1,035 Fred Meyer, Inc. ............................... 7.450 03/01/08 1,060,810
------------
1,606,107
------------
TECHNOLOGY 0.4%
870 Hewlett-Packard Co. (Floating Rate Coupon)...... 5.339 05/22/09 870,719
------------
TEXTILE 0.5%
995 Mohawk Industries, Inc., Ser D.................. 7.200 04/15/12 1,026,648
------------
TOBACCO 0.3%
615 Reynolds American, Inc., 144A--Private Placement
(a)............................................. 7.250 06/01/13 604,237
------------
TRANSPORTATION SERVICES 0.5%
1,000 FedEx Corp. .................................... 2.650 04/01/07 976,623
------------
WIRELINE COMMUNICATIONS 3.5%
1,785 AT&T Corp. ..................................... 8.000 11/15/31 2,055,361
740 Deutsche Telekom International Finance BV
(Netherlands)................................... 8.250 06/15/30 856,773
1,385 France Telecom SA (France)...................... 8.500 03/01/31 1,671,299
1,125 SBC Communications, Inc. ....................... 6.150 09/15/34 1,035,756
See Notes to Financial Statements 13
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
WIRELINE COMMUNICATIONS (CONTINUED)
$ 1,010 Sprint Capital Corp. ........................... 8.750% 03/15/32 $ 1,221,435
590 Verizon New England, Inc. ...................... 6.500 09/15/11 590,827
------------
7,431,451
------------
TOTAL CORPORATE BONDS 72.7%...................................... 153,606,829
------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 18.4%
7,180 United States Treasury Bonds.................... 6.125 08/15/29 7,985,510
6,000 United States Treasury Bonds.................... 6.375 08/15/27 6,812,346
21,250 United States Treasury Notes (b)................ 4.250 08/15/13 20,167,588
4,000 United States Treasury Notes.................... 4.250 11/15/13 3,786,564
------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS................. 38,752,008
------------
TOTAL LONG-TERM INVESTMENTS 91.1%
(Cost $196,394,432)........................................................ 192,358,837
------------
SHORT-TERM INVESTMENTS 13.5%
REPURCHASE AGREEMENT 13.4%
State Street Bank & Trust Co. ($28,287,000 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.10%,
dated 06/30/06, to be sold on 07/03/06 at $28,299,022) 28,287,000
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 0.1%............................
United States Treasury Bills ($300,000 par, yielding 4.266%, 07/13/06
maturity) (c) 299,574
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $28,586,574)......................................................... 28,586,574
------------
TOTAL INVESTMENTS 104.6%
(Cost $224,981,006)........................................................ 220,945,411
LIABILITIES IN EXCESS OF OTHER ASSETS (4.6%)................................ (9,720,389)
------------
NET ASSETS 100.0%........................................................... $211,225,022
============
Percentages are calculated as a percentage of net assets.
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Security purchased on a when-issued or delayed delivery basis.
(c) All or a portion of this security has been physically segregated in
connection with open futures contracts.
14 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 continued
FUTURES CONTRACTS OUTSTANDING AS OF JUNE 30, 2006:
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
LONG CONTRACTS:
U.S. Treasury Notes 10-Year Futures September 2006 (Current
Notional Value of $104,859 per contract).................. 218 $(78,531)
U.S. Treasury Bond Futures September 2006 (Current Notional
Value of $106,656 per contract)........................... 59 (18,092)
SHORT CONTRACTS:
U.S. Treasury Notes 5-Year Futures September 2006 (Current
Notional Value of $103,406 per contract).................. 11 (5,015)
U.S. Treasury Notes 2-Year Futures September 2006 (Current
Notional Value of $202,781 per contract).................. 121 73,347
--- --------
409 $(28,291)
=== ========
SWAP AGREEMENTS OUTSTANDING AS OF JUNE 30, 2006:
CREDIT DEFAULT SWAPS
PAY/
RECEIVE NOTIONAL UNREALIZED
BUY/SELL FIXED EXPIRATION AMOUNT APPRECIATION/
COUNTERPARTY REFERENCE ENTITY PROTECTION RATE DATE (000) DEPRECIATION
Goldman Sachs Jones Apparel
Capital Group, Inc.
Markets Buy 1.64% 6/20/11 $1,300 $8,091
See Notes to Financial Statements 15
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2006
ASSETS:
Total Investments, including repurchase agreement of
$28,287,000 (Cost $224,981,006)........................... $220,945,411
Cash........................................................ 636
Receivables:
Interest.................................................. 2,958,849
Investments Sold.......................................... 269,196
Variation Margin on Futures............................... 123,391
Swap Contracts.............................................. 8,091
Other....................................................... 16,398
------------
Total Assets............................................ 224,321,972
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 12,536,024
Income Distributions...................................... 135,328
Investment Advisory Fee................................... 73,233
Other Affiliates.......................................... 5,720
Trustees' Deferred Compensation and Retirement Plans........ 226,196
Accrued Expenses............................................ 120,449
------------
Total Liabilities....................................... 13,096,950
------------
NET ASSETS.................................................. $211,225,022
============
NET ASSET VALUE PER COMMON SHARE ($211,225,022 divided by
11,362,465 shares outstanding)............................ $ 18.59
============
NET ASSETS CONSIST OF:
Common Shares ($1.00 par value with 15,000,000 shares
authorized, 11,362,465 shares issued and outstanding)..... $ 11,362,465
Paid in Surplus............................................. 207,602,030
Accumulated Undistributed Net Investment Income............. (1,423,038)
Accumulated Net Realized Loss............................... (2,260,640)
Net Unrealized Depreciation................................. (4,055,795)
------------
NET ASSETS.................................................. $211,225,022
============
16 See Notes to Financial Statements
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended June 30, 2006
INVESTMENT INCOME:
Interest.................................................... $ 11,309,263
Other....................................................... 30,606
------------
Total Income............................................ 11,339,869
------------
EXPENSES:
Investment Advisory Fee..................................... 915,769
Shareholder Reports......................................... 75,805
Trustees' Fees and Related Expenses......................... 69,625
Custody..................................................... 27,099
Legal....................................................... 23,739
Other....................................................... 172,067
------------
Total Expenses.......................................... 1,284,104
Less Credits Earned on Cash Balances.................... 346
------------
Net Expenses............................................ 1,283,758
------------
NET INVESTMENT INCOME....................................... $ 10,056,111
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 94,375
Futures................................................... 24,564
Swap Contracts............................................ (5,271)
------------
Net Realized Gain........................................... 113,668
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 7,764,627
------------
End of the Period:
Investments............................................. (4,035,595)
Futures................................................. (28,291)
Swap Contracts.......................................... 8,091
------------
(4,055,795)
------------
Net Unrealized Depreciation During the Period............... (11,820,422)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(11,706,754)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (1,650,643)
============
See Notes to Financial Statements 17
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2006 JUNE 30, 2005
------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................................... $ 10,056,111 $ 10,914,053
Net Realized Gain.......................................... 113,668 4,772,518
Net Unrealized Appreciation/Depreciation During the
Period................................................... (11,820,422) 2,110,710
------------ ------------
Change in Net Assets from Operations....................... (1,650,643) 17,797,281
Distributions from Net Investment Income................... (10,885,053) (11,589,525)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES........ (12,535,696) 6,207,756
------------ ------------
NET ASSETS:
Beginning of the Period.................................... 223,760,718 217,552,962
------------ ------------
End of the Period (Including accumulated undistributed net
investment income of $(1,423,038) and $(1,077,256),
respectively)............................................ $211,225,022 $223,760,718
============ ============
18 See Notes to Financial Statements
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,
------------------------------------------
2006 2005 2004 2003 2002
------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD....... $19.69 $19.15 $19.78 $18.78 $19.41
------ ------ ------ ------ ------
Net Investment Income........................ .89(a) .96 1.03 1.10 1.26
Net Realized and Unrealized Gain/Loss........ (1.03) .60 (.54) 1.11 (.56)
------ ------ ------ ------ ------
Total from Investment Operations............... (.14) 1.56 .49 2.21 .70
Less Distributions from Net Investment
Income....................................... .96 1.02 1.12 1.21 1.33
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD............. $18.59 $19.69 $19.15 $19.78 $18.78
====== ====== ====== ====== ======
Common Share Market Price at End of the
Period....................................... $16.40 $17.80 $17.02 $19.57 $18.50
Total Return (b)............................... -2.59% 10.69% -7.44% 12.67% 3.50%
Net Assets at End of the Period (In
millions).................................... $211.2 $223.8 $217.6 $224.7 $213.4
Ratio of Expenses to Average Net Assets........ .59% .60% .65% .65% .65%
Ratio of Net Investment Income to Average Net
Assets....................................... 4.61% 4.90% 5.24% 5.79% 6.39%
Portfolio Turnover............................. 64% 61% 41% 57% 107%
(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.
See Notes to Financial Statements 19
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006
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 (the
"1940 Act"), as amended. The Fund's investment objective is to seek interest
income while conserving capital through investing in a diversified portfolio
consisting primarily of high-quality debt securities.
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 sales price as of the close of such securities exchange. Listed and
unlisted securities for which the last sales price is not available are valued
at the mean of the bid and asked prices. For those securities where quotations
or prices are not available 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. 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, 2006, the Fund had $12,536,024 of 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.
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.
20
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 continued
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. During the current fiscal year, the Fund utilized capital losses carried
forward of $1,014,664. At June 30, 2006, the Fund had an accumulated capital
loss carryforward for tax purposes of $753,340, which will expire on June 30,
2011.
At June 30, 2006, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $226,479,566
============
Gross tax unrealized appreciation........................... $ 1,420,473
Gross tax unrealized depreciation........................... (6,954,628)
------------
Net tax unrealized depreciation on investments.............. $ (5,534,155)
============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays quarterly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on futures transactions. All
short-term capital gains and a portion of futures gains are included in ordinary
income for tax purposes.
The tax character of distributions paid during the years ended June 30, 2006
and 2005 was as follows:
2006 2005
Distributions paid from:
Ordinary income........................................... $10,897,728 $11,599,970
Long-term capital gain.................................... -0- -0-
----------- -----------
$10,897,728 $11,599,970
=========== ===========
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on Statement of Assets and Liabilities. Permanent book and tax
differences relating to consent fee income received from tender offers totaling
$28,350 and the recognition of net realized losses on paydowns of mortgage pool
obligations totaling $10,132 were reclassified from accumulated undistributed
net investment income to accumulated net realized loss. Additionally, a
permanent difference relating to book to tax amortization differences totaling
$501,378 was reclassified to accumulated undistributed net investment income
from accumulated net realized loss.
21
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 continued
As of June 30, 2006, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income............................... $58,085
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses relating to wash sale
transactions, gains or losses recognized for tax purposes on open futures
transactions on June 30, 2006, and post October losses which are not realized
for tax purposes until the first day of the following fiscal year.
F. EXPENSE REDUCTIONS During the year ended June 30, 2006, the Fund's custody
fee was reduced by $346 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, 2006, the Fund recognized expenses of
approximately $23,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
Under separate Accounting Services and Chief Compliance Officer (CCO)
Employment agreements, the Adviser provides accounting services and the CCO
provides compliance services to the Fund. The costs of these services are
allocated to each fund. For the year ended June 30, 2006, the Fund recognized
expenses of approximately $16,500 representing Van Kampen Investments Inc.'s or
its affiliates' (collectively "Van Kampen") cost of providing accounting
services to the Fund, as well as, the salary, benefits and related costs of the
CCO and related support staff paid by Van Kampen. Services provided pursuant to
the Accounting Services and CCO Employment agreement are reported as part of
"Other" expenses on the Statement of Operations.
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. 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
$51,270,529 and $75,154,916,
22
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 continued
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 $78,574,364 and $62,566,512, respectively.
4. 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.
All of the Fund's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the 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 this instance, 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.
A. FUTURES CONTRACTS During the period, the Fund invested in futures contracts,
a type of derivative. 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 on U.S. Treasury Bonds and
Notes for duration and risk management purposes, and typically closes the
contract prior to delivery date. Upon entering into futures contracts, the Fund
maintains an amount of cash or liquid securities with a value equal to a
percentage of the contract amount with either a futures commission merchant
pursuant to rules and regulations promulgated under the 1940 Act, as amended, or
with its custodian in an account in the broker's name. This amount is known as
initial margin. During the period the futures contract is open, payments are
received from or made to the broker based upon changes in the value of the
contract (the variation margin). The risk of loss associated with a futures
contract is in excess of the variation margin reflected on the Statement of
Assets and Liabilities.
Transactions in futures contracts for the year ended June 30, 2006, were as
follows:
CONTRACTS
Outstanding at June 30, 2005................................ 400
Futures Opened.............................................. 2,778
Futures Closed.............................................. (2,769)
------
Outstanding at June 30, 2006................................ 409
======
B. CREDIT DEFAULT SWAPS The Fund may enter into credit default swap contracts
for hedging purposes or to gain exposure to a credit in which the Fund may
otherwise invest. A credit 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,
23
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 continued
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 swap
contracts on a daily basis with the net amount accrued recorded within
unrealized appreciation/depreciation of swap contracts. Upon cash settlement of
the periodic fees, the net amount is recorded as realized gain/loss on swap
contracts on the 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 swaps is reported as
unrealized gains or losses in the Statement of Operations.
Credit default swaps may involve greater risks than if a Fund had invested
in the issuer directly. Credit default swaps are subject to general market risk,
counterparty risk and credit risk. If there is a default by the counterparty,
the Fund will have contractual remedies pursuant to the agreements related to
the transaction.
5. 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.
24
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"), including the portfolio of investments, as of
June 30, 2006, the related statements 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, 2006, by correspondence with the custodian
and brokers. 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, 2006, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
August 14, 2006
25
VAN KAMPEN BOND FUND
DIVIDEND REINVESTMENT PLAN
The Fund pays distributions in cash, but you may elect to participate in the
Fund's dividend reinvestment plan (the "Plan"). Under the Plan, shares will be
issued by the Fund at net asset value on a date determined by the Board of
Trustees between the record and payable dates on each distribution; however, if
the market price including brokerage commissions, is less than the net asset
value, the amount of the distribution will be paid to the Plan Agent, which will
buy such shares as are available at prices below the net asset value. (If the
market price is not significantly less than the net asset value, it is possible
that open market purchases of shares may increase the market price so that such
price plus brokerage commissions would equal or exceed the net asset value of
such shares.) If the Plan Agent cannot buy the necessary shares at less than net
asset value before the distribution date, the balance of the distribution will
be made in authorized but unissued shares of the Fund at net asset value. The
cost per share will be the average cost, including brokerage commissions, of all
shares purchased. Since all shares purchased from the Fund are at net asset
value, there will be no dilution, and no brokerage commissions are charged on
such shares.
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gain distributions does not relieve you of any income tax
which may be payable (or required to be withheld) on dividends or distributions.
You may begin or discontinue participation in the Plan at any time by
written notice to the address below. If you withdraw from the Plan, you may
rejoin at any time. Elections and terminations will be effective for
distributions declared after receipt. If you withdraw from the Plan, a
certificate for the whole shares and a check for the fractional shares, if any,
credited to your Plan account will be sent as soon as practicable after receipt
of your election to withdraw. Except for brokerage commissions, if any, which
are borne by Plan participants, all costs of the Plan are borne by the Fund. The
Fund reserves the right to amend or terminate the Plan on 30 days' written
notice prior to the record date of the distribution for which such amendment or
termination is effective.
Record stockholders should address all notices, correspondence, questions or
other communications about the Plan to:
Van Kampen Closed End Funds
c/o Computershare Trust Company, N.A.
PO Box 43011
Providence, RI 02940-3011
1-800-341-2929
If your shares are not held directly in your name, you should contact your
brokerage firm, bank or other nominee for more information and to see if your
nominee will participate in the Plan on your behalf. If you participate through
your broker and choose to move your account to another broker, you will need to
re-enroll in the Plan through your new broker.
To obtain a complete copy of the Dividend Reinvestment Plan, please call our
Client Relations department at 1-800-341-2929.
26
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
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
PHILLIP G. GOFF
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
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 43011
Providence, Rhode Island 02940-3011
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 60606-4301
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
27
VAN KAMPEN BOND FUND
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on June 23, 2006, where
shareholders voted on the election of trustees.
With regard to the election of the following trustees by common shareholders of
the Fund:
# OF SHARES
---------------------
IN FAVOR WITHHELD
-----------------------------------------------------------------------------------
Rod Dammeyer................................................ 8,714,476 776,560
Linda Hutton Heagy.......................................... 8,675,583 815,453
Wayne W. Whalen............................................. 8,716,899 774,137
The other trustees of the Fund whose terms did not expire in 2006 are David C.
Arch, Jerry D. Choate, R. Craig Kennedy, Howard J Kerr, Jack E. Nelson, Hugo F.
Sonnenschein, and Suzanne H. Woolsey.
28
VAN KAMPEN BOND FUND
TRUSTEES AND OFFICERS INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees 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 FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 68 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
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (67) Trustee Trustee Prior to January 1999, 68 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 Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
29
VAN KAMPEN BOND FUND
TRUSTEES AND OFFICERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (65) Trustee Trustee President of CAC, L.L.C., 68 Trustee/Director/Managing
CAC, L.L.C. since 1997 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
30
VAN KAMPEN BOND FUND
TRUSTEES AND OFFICERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 68 Trustee/Director/Managing
Heidrick & Struggles since 2003 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 68 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.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (70) Trustee Trustee Prior to 1998, President 68 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.
31
VAN KAMPEN BOND FUND
TRUSTEES AND OFFICERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 68 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 NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (65) Trustee Trustee President Emeritus and 68 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 Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 68 Trustee/Director/Managing
(64) since 2003 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
32
VAN KAMPEN BOND FUND
TRUSTEES AND OFFICERS 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 FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 68 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.
* 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.
33
VAN KAMPEN BOND FUND
TRUSTEES AND OFFICERS INFORMATION continued
OFFICERS:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan
Stanley & Co. Incorporated. Managing Director and Director
of Morgan Stanley Investment Management Inc. Chief
Administrative Officer, Managing Director and Director of
Morgan Stanley Investment Advisors Inc. and Morgan Stanley
Services Company Inc. Managing Director and Director of
Morgan Stanley Distributors Inc. and Morgan Stanley
Distribution Inc. Chief Executive Officer and Director of
Morgan Stanley Trust. Executive Vice President and Principal
Executive Officer of the Institutional and Retail Morgan
Stanley Funds. Director of Morgan Stanley SICAV. Previously,
Chief Global Operations Officer of Morgan Stanley Investment
Management Inc. and Executive Vice President of funds in the
Fund Complex from May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer--
Global Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square, Canary since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Wharf and Van Kampen Advisors Inc. Chief Investment Officer--
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
34
VAN KAMPEN BOND FUND
TRUSTEES AND OFFICERS INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisers Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (39) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
Phillip G. Goff (42) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza and Treasurer since 2005 Inc. since June 2005. Chief Financial Officer and Treasurer
Oakbrook Terrace, IL 60181 of funds in the Fund Complex since August 2005. Prior to
June 2005, Vice President and Chief Financial Officer of
Enterprise Capital Management, Inc., an investment holding
company.
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 July 18, 2005, he was not aware of any violation by
the Fund of NYSE corporate governance listing standards.
The certifications 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.
35
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.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
VBF ANR 8/06
(VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-02179P-Y06/06
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1.
Due to personnel changes at the Adviser, the list of Covered Officers set forth
in Exhibit B was amended in September 2005. Both editions of Exhibit B are
attached.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit 12A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees : Jerry Choate and R. Craig Kennedy. Under applicable
securities laws, a person who is determined to be an audit committee financial
expert will not be deemed an "expert" for any purpose, including without
limitation for the purposes of Section 11 of the Securities Act of 1933, as a
result of being designated or identified as an audit committee financial expert.
The designation or identification of a person as an audit committee financial
expert does not impose on such person any duties, obligations, or liabilities
that are greater than the duties, obligations, and liabilities imposed on such
person as a member of the audit committee and Board of Trustees in the absence
of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2006
COVERED
REGISTRANT ENTITIES(1)
---------- -----------
AUDIT FEES ............. $31,800 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES .. $ 0 $244,200(2)
TAX FEES ............ $ 1,600(3) $ 0
ALL OTHER FEES ...... $ 0 $ 0
TOTAL NON-AUDIT FEES ... $ 1,600 $244,200
TOTAL .................. $33,400 $244,200
2005
COVERED
REGISTRANT ENTITIES(1)
---------- -----------
AUDIT FEES ............. $30,855 N/A
NON-AUDIT FEES .........
AUDIT-RELATED FEES .. $ 0 $321,000(2)
TAX FEES ............ $ 1,600(3) $ 0
ALL OTHER FEES ...... $ 0 $ 0
TOTAL NON-AUDIT FEES ... $ 1,600 $321,000
TOTAL .................. $32,455 $321,000
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.
Please refer to Item #1.
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.
VAN KAMPEN BOND FUND
FUND MANAGEMENT
PORTFOLIO MANAGEMENT. As of the date of this report, the Fund is managed by
members of the Taxable Fixed Income team. The team consists of portfolio
managers and analysts. Current members of the team jointly and primarily
responsible for the day-to-day management of the Fund's portfolio and the
overall execution of the strategy of the Fund are David S. Horowitz, a Managing
Director of the Adviser and Gerhardt P. Herbert, an Executive Director of the
Adviser.
Mr. Horowitz has been associated with the Adviser in an investment management
capacity since May 1995 and began managing the Fund in December 2001. Mr.
Herbert has been associated with the Adviser in an investment management
capacity since August 1994 and began managing the Fund in June 2005.
The composition of the team may change without notice from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
The following information is as of June 30, 2006.
As of June 30, 2006, Mr. Horowitz managed 26 mutual funds with a total of
approximately $23.4 billion in assets; one pooled investment vehicle other than
mutual funds with a total of approximately $12.2 billion in assets; and 41 other
accounts (including accounts managed
under certain "wrap fee programs") with a total of approximately $6.8 billion in
assets. Of these other accounts, three accounts with a total of approximately
$933.2 million in assets had performance based fees.
As of June 30, 2006, Mr. Herbert managed seven mutual funds with a total of
approximately $18.8 billion in assets; no pooled investment vehicles other than
mutual funds; and no other accounts.
Because the portfolio managers manage 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. 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 funds/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 Equity Incentive Compensation Program (EICP) 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 Deferred Compensation Plan (IMDCP) 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 75% of the
IMDCP deferral into a combination of the designated open-end mutual funds they
manage that are included in the IMDCP Fund menu, which may or may not include
the Fund.
- 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 a fund's/account's primary benchmark, indices and/or
peer groups where applicable. 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, and
the overall performance of the investment team(s) of which the portfolio manager
is a member.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of June 30, 2006, the portfolio managers 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/ Ronald E. Robison
---------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 10, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
---------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 10, 2006
By: /s/ Phillip G. Goff
---------------------------------
Name: Phillip G. Goff
Title: Principal Financial Officer
Date: August 10, 2006