UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02090
Van Kampen Bond Fund
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)
Ronald Robison
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 6/30
Date of reporting period: 12/31/07
Item 1. Reports to Shareholders.
The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen Bond
Fund performed during the semiannual period. The portfolio management
team will provide an overview of the market conditions and discuss some
of the factors that affected investment performance during the reporting
period. In addition, this report includes the fund's financial statements
and a list of fund investments as of December 31, 2007.
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.
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
Performance Summary as of 12/31/07
BOND FUND
SYMBOL: VBF
------------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS MARKET PRICE NAV
10-year 4.46% 5.84%
5-year 3.85 6.12
1-year 0.71 6.35
6-month 2.18 5.48
------------------------------------------------------------
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
Trust Report
FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2007
MARKET CONDITIONS
Worries surrounding the residential housing downturn persisted throughout the
six-month reporting period. Confronted with increasing delinquency rates on
subprime loans, high-profile hedge fund collapses, and a series of subprime
mortgage related credit downgrades, markets responded severely. This impact was
exacerbated by an influx of forced sellers looking to liquidate assets to help
meet margin calls and capital withdrawals, which resulted in a flight to
quality.
As the subprime mortgage crisis worsened, investors grew increasingly concerned
about the impact on financial markets, the financial system, and the broader
economy, and demanded additional compensation for owning riskier investments. As
a result, credit spreads widened sharply. The subprime debacle severely impacted
many major banks and Wall Street firms, which took write-downs and losses on the
subprime mortgage loans and securities in their portfolios. Some sold stakes to
sovereign funds in exchange for cash infusions needed to bolster their balance
sheets.
The Federal Open Market Committee (the "Fed") took steps to ease the liquidity
crisis, reducing the target federal funds rate by at total of 1 percent in three
separate moves between September and the end of the year, bringing the rate to
4.25 percent. These reductions, coupled with the flight to quality, caused
yields across the yield curve to decline, but more so on the short end. As a
result, the shape of the yield curve ended the year steeper. Overall, U.S.
Treasury securities outperformed all other areas of the fixed income market.
Within the investment-grade corporate sector, higher-rated (AAA) issues outpaced
the middle investment grade issues. Industrials and utilities handily outpaced
financials, which were hit most by the recent liquidity crisis. Overall,
short-term issues outperformed intermediate- and long-dated issues.
Within the high yield sector, spreads were at the tightest levels in over twenty
years at the end of May. However, over the balance of the year, spreads widened.
Various fundamental factors were supportive of the high-yield market throughout
the period, including low default rates, moderate economic growth, favorable
earnings trends, and relatively low U.S. Treasury yields. However, other factors
such as a higher probability of a recession, concerns of higher default rates in
2008, the lingering liquidity crunch, and the inability to finance many of the
leveraged buyouts (LBOs) that occurred earlier in the year, weighed heavily on
the market. Overall, medium- and higher-rated issues outperformed those with
lower ratings.
PERFORMANCE ANALYSIS
The Fund's return can be calculated based upon either the market price or the
net asset value (NAV) of its shares. NAV per share is determined by dividing the
value of the Fund's portfolio securities, cash and other assets, less all
liabilities and
2
preferred shares, by the total number of common shares outstanding, while market
price reflects the supply and demand for the shares. As a result, the two
returns can differ, as they did during the reporting period. On an NAV basis,
the Fund outperformed its benchmark, the Lehman Brothers BBB Corporate Bond
Index. On a market price basis, however, the Fund underperformed its benchmark.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2007
------------------------------------------------------------------
BASED ON LEHMAN BROTHERS
BASED ON NAV MARKET PRICE BBB CORPORATE BOND INDEX
5.48% 2.18% 3.48%
------------------------------------------------------------------
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be higher or lower 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.
Throughout the period, we employed a defensive interest rate strategy by keeping
the Fund's duration (a measure of interest-rate sensitivity) shorter than that
of the benchmark Lehman Brothers BBB Corporate Bond Index. Although this
defensive positioning detracted from performance as Fed easing and the flight to
quality caused interest rates to decline, much of that was offset by the Fund's
favorable yield-curve positioning. The Fund was underweighted on the longer end
of the curve and overweighted on the intermediate portion of the curve, which
was particularly additive to performance as the spread between intermediate- and
long-dated yields widened and the curve steepened.
The Fund had a few allocations away from the benchmark Lehman Brothers BBB
Corporate Bond Index. One of these was a position in Treasury securities,
resulting in an underweight relative to the benchmark in corporate credits. This
positioning was additive to performance as Treasuries outperformed corporate
credit for the reporting year. The Fund also had a small allocation
(approximately two percent) to high-yield securities. These holdings were
primarily in the higher-quality segment of the sector, which was beneficial as
higher-rated issues generally outperformed lower-rated issues during the period.
We are looking for areas to take advantage of recent spread widening and add to
corporate positions, but we are cautious as we believe the credit market remains
vulnerable to potential credit downgrades and/or an economic downturn.
The Trustees have approved a procedure whereby the Fund may, when appropriate,
repurchase its shares in the open market or in privately negotiated transactions
at a price not above market value or NAV, whichever is lower at the time of
purchase. This may help support the market value of the Fund's shares.
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 12/31/07
AAA/Aaa 31.1%
AA/Aa 14.7
A/A 22.4
BBB/Baa 29.6
BB/Ba 1.9
B/B 0.3
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 12/31/07
U.S. Treasury Obligations 16.8%
Banking 13.2
Collateralized Mortgage Obligation 10.8
Electric 7.5
Noncaptive-Consumer Finance 4.8
Wireline 3.8
Diversified Manufacturing 3.5
Brokerage 3.4
Retailers 3.0
Media-Cable 2.9
Railroads 2.7
Property & Casualty Insurance 2.7
Life Insurance 2.4
Integrated Energy 2.2
Noncaptive-Diversified Finance 1.9
Pipelines 1.9
Food/Beverage 1.7
Asset Backed Securities 1.3
Supermarkets 1.0
Media-Noncable 1.0
Automotive 1.0
Other Utilities 0.9
REITS 0.8
Pharmaceuticals 0.8
Refining 0.6
Technology 0.6
Services 0.5
Restaurants 0.5
Independent Energy 0.5
Chemicals 0.5
Environmental & Facilities Services 0.4
Distributors 0.3
Health Care 0.3
Oil Field Services 0.3
Tobacco 0.2
Home Construction 0.1
-----
Total Long-Term Investments 96.8
Total Short-Term Investments 3.2
-----
Total Investments 100.0%
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. Ratings are as a percentage of total
long-term investments. Summary of Investments by Industry Classification is as a
percentage of total investments. Securities are classified by sectors that
represent broad groupings of related industries. Ratings allocations based upon
ratings as issued by Standard and Poor's and Moody's, respectively. Van Kampen
is a wholly owned subsidiary of a global securities firm which is engaged in a
wide range of financial services including, for example, securities trading and
brokerage activities, investment banking, research and analysis, financing and
financial advisory services.
4
CHANGES IN INVESTMENT POLICIES
The fund approved the following changes/clarifications in its investment
policies.
Foreign and Non-U.S. Dollar Denominated Securities. The Fund may invest a
portion or all of its total assets in securities issued by foreign
governments or foreign corporations; provided, however, that the Fund may
not invest more than 30% of its total assets in non-U.S. dollar
denominated securities.
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. You can also request copies of these materials, upon payment of
a duplicating fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 341-2929.
In addition to filing a complete schedule of portfolio holdings with the
SEC each fiscal quarter, the Fund makes portfolio holdings information
available by periodically providing the information on its public web
site, www.vankampen.com. The Fund provides a complete schedule of
portfolio holdings on the public web site on a calendar-quarter basis
approximately 31 calendar days after the close of the calendar quarter.
The Fund also provides Top 10 holdings information on the public web site
approximately 15 business days following the end of each month. For more
information, call (800) 341-2929.
5
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the Fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 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 Fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
6
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED)
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
CORPORATE BONDS 66.9%
AUTOMOTIVE 1.0%
$ 535 ArvinMeritor, Inc. ............................. 8.750% 03/01/12 $ 501,563
1,280 DaimlerChrysler NA Holding LLC.................. 8.500 01/18/31 1,618,932
------------
2,120,495
------------
BANKING 13.0%
800 Bank of America Corp. .......................... 3.375 02/17/09 789,859
880 Bank of America Corp. .......................... 4.875 09/15/12 883,076
670 Bank of America Corp. .......................... 5.750 12/01/17 672,794
335 Barclays Bank PLC (United Kingdom) (a).......... 6.050 12/04/17 338,177
1,075 Citigroup, Inc. ................................ 5.250 02/27/12 1,084,293
1,095 Citigroup, Inc. ................................ 5.875 05/29/37 1,025,357
2,860 JPMorgan Chase & Co. ........................... 6.750 02/01/11 3,005,056
2,255 Marshall & Ilsley Bank.......................... 3.800 02/08/08 2,252,123
1,635 MBNA Corp. (b).................................. 5.307 05/05/08 1,638,028
2,240 Nationwide Building Society (United Kingdom)
(a)............................................. 4.250 02/01/10 2,239,070
465 PNC Bank NA..................................... 6.000 12/07/17 462,083
1,430 Popular North America, Inc. .................... 4.250 04/01/08 1,427,027
805 Popular North America, Inc. .................... 5.650 04/15/09 813,129
2,620 Sovereign Bancorp, Inc. (b)..................... 5.113 03/23/10 2,601,204
2,700 Unicredito Luxembourg Finance
(Luxembourg) (a) (b)............................ 5.142 10/24/08 2,695,197
2,045 Wachovia Capital Trust III (c).................. 5.800 08/29/49 1,828,594
1,350 Wachovia Corp. ................................. 3.625 02/17/09 1,322,418
315 Washington Mutual Bank FA....................... 5.500 01/15/13 279,794
900 Washington Mutual, Inc. ........................ 8.250 04/01/10 859,886
2,045 Wells Fargo & Co. .............................. 5.625 12/11/17 2,050,110
------------
28,267,275
------------
BROKERAGE 3.3%
1,120 Bear Stearns Co., Inc. ......................... 5.550 01/22/17 1,005,485
710 Bear Stearns Co., Inc. ......................... 6.400 10/02/17 687,194
2,370 Goldman Sachs Group, Inc. ...................... 6.750 10/01/37 2,329,411
2,405 Lehman Brothers Holdings, Inc. ................. 6.875 07/17/37 2,358,641
905 Merrill Lynch & Co., Inc. ...................... 5.700 05/02/17 864,079
------------
7,244,810
------------
CHEMICALS 0.4%
320 EI Du Pont de Nemours & Co. .................... 5.000 01/15/13 322,373
640 ICI Wilmington, Inc. ........................... 4.375 12/01/08 639,260
------------
961,633
------------
DISTRIBUTORS 0.3%
585 KeySpan Corp. .................................. 4.900 05/16/08 584,693
------------
DIVERSIFIED MANUFACTURING 3.4%
1,345 Brascan Corp. (Canada).......................... 7.125 06/15/12 1,445,249
685 Brookfield Asset Management, Inc. (Canada)...... 5.800 04/25/17 690,863
See Notes to Financial Statements 7
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING (CONTINUED)
$ 1,325 Cooper Industries, Inc. ........................ 5.250% 11/15/12 $ 1,366,445
3,900 General Electric Co. ........................... 5.250 12/06/17 3,899,134
------------
7,401,691
------------
ELECTRIC 7.4%
1,740 Arizona Public Service Co. ..................... 5.800 06/30/14 1,739,147
385 Carolina Power & Light Co. ..................... 5.150 04/01/15 382,467
65 Detroit Edison Co. ............................. 5.200 10/15/12 65,889
865 Detroit Edison Co. ............................. 6.125 10/01/10 897,346
960 Duquesne Light Co., Ser O....................... 6.700 04/15/12 1,028,813
540 Enel Finance International SA (Luxembourg)
(a)............................................. 5.700 01/15/13 548,847
655 Entergy Gulf States, Inc. ...................... 3.600 06/01/08 650,094
1,600 Entergy Gulf States, Inc. (b)................... 5.523 12/01/09 1,589,952
425 Entergy Gulf States, Inc. (a) (b)............... 5.896 12/08/08 426,445
1,030 Exelon Corp. ................................... 6.750 05/01/11 1,077,308
215 Florida Power Corp. ............................ 5.800 09/15/17 223,729
255 Indianapolis Power & Light Co. (a).............. 6.300 07/01/13 267,147
900 NiSource Finance Corp. (b)...................... 5.585 11/23/09 891,707
1,150 NiSource Finance Corp. ......................... 7.875 11/15/10 1,220,724
1,080 Ohio Edison Co. ................................ 6.400 07/15/16 1,107,836
1,270 Ohio Power Co., Ser K........................... 6.000 06/01/16 1,285,875
685 Pacific Gas & Electric Co. ..................... 5.625 11/30/17 688,368
270 Pacificorp...................................... 6.250 10/15/37 279,783
265 PSEG Energy Holdings, LLC....................... 8.625 02/15/08 266,819
570 Public Service Electric & Gas Co., Ser B........ 5.125 09/01/12 574,679
570 Union Electric Co. ............................. 6.400 06/15/17 598,431
300 Virginia Electric and Power Co., Ser B.......... 5.950 09/15/17 309,808
------------
16,121,214
------------
ENVIRONMENTAL & FACILITIES SERVICES 0.4%
315 Waste Management, Inc. ......................... 6.875 05/15/09 323,504
550 Waste Management, Inc. ......................... 7.375 08/01/10 581,304
------------
904,808
------------
FOOD/BEVERAGE 1.7%
290 Anheuser-Busch Cos, Inc. ....................... 5.500 01/15/18 296,623
660 ConAgra Foods, Inc. ............................ 7.000 10/01/28 702,280
520 ConAgra Foods, Inc. ............................ 8.250 09/15/30 617,719
450 Kellogg Co. .................................... 5.125 12/03/12 454,257
865 Kraft Foods, Inc. .............................. 6.000 02/11/13 890,282
180 Pilgrim's Pride Corp. .......................... 7.625 05/01/15 177,750
465 Smithfield Foods, Inc., Ser B................... 8.000 10/15/09 471,975
------------
3,610,886
------------
HEALTH CARE 0.3%
590 WellPoint, Inc. ................................ 4.250 12/15/09 583,420
------------
HOME CONSTRUCTION 0.1%
175 Pulte Homes, Inc. .............................. 6.375 05/15/33 133,451
------------
8 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
INDEPENDENT ENERGY 0.5%
$ 1,025 Devon Financing Corp., ULC...................... 6.875% 09/30/11 $ 1,098,569
------------
INTEGRATED ENERGY 2.2%
830 Amerada Hess Corp. ............................. 6.650 08/15/11 876,715
515 Chesapeake Energy Corp. ........................ 7.625 07/15/13 534,313
790 Consumers Energy Co., Ser F..................... 4.000 05/15/10 772,501
455 Consumers Energy Co., Ser H..................... 4.800 02/17/09 454,045
745 EnCana Corp. (Canada)........................... 6.500 02/01/38 772,449
1,300 Kinder Morgan, Inc. ............................ 6.500 09/01/12 1,298,699
------------
4,708,722
------------
LIFE INSURANCE 2.4%
635 AXA Financial, Inc. ............................ 6.500 04/01/08 637,914
475 John Hancock Financial Services, Inc. .......... 5.625 12/01/08 479,755
105 MetLife, Inc. .................................. 6.125 12/01/11 108,975
1,030 Monumental Global Funding II (a)................ 3.850 03/03/08 1,027,986
585 Nationwide Financial Services, Inc. ............ 6.250 11/15/11 615,928
390 Prudential Financial, Inc. ..................... 6.625 12/01/37 394,559
1,895 Xlliac Global Funding (a)....................... 4.800 08/10/10 1,907,465
------------
5,172,582
------------
MEDIA-CABLE 2.9%
1,835 Comcast Cable Communications, Inc. ............. 6.750 01/30/11 1,919,792
90 Comcast Cable Communications, Inc. ............. 7.125 06/15/13 96,324
655 Comcast Corp. .................................. 6.500 01/15/15 684,643
935 Echostar DBS Corp. ............................. 6.375 10/01/11 926,117
1,505 Time Warner, Inc. (b)........................... 5.109 11/13/09 1,468,621
1,095 Time Warner, Inc. .............................. 5.875 11/15/16 1,090,131
------------
6,185,628
------------
MEDIA-NONCABLE 1.0%
225 Interpublic Group of Cos., Inc. ................ 6.250 11/15/14 192,375
620 News America, Inc. (a).......................... 6.650 11/15/37 641,622
1,310 Viacom, Inc. ................................... 6.875 04/30/36 1,317,662
------------
2,151,659
------------
NONCAPTIVE-CONSUMER FINANCE 4.7%
1,000 American Express Co. ........................... 4.750 06/17/09 1,000,647
230 American General Finance Corp. ................. 4.625 05/15/09 229,457
2,000 American General Finance Corp. ................. 4.625 09/01/10 1,985,154
665 CIT Group, Inc. ................................ 5.650 02/13/17 584,763
1,325 Countrywide Home Loans, Inc. ................... 3.250 05/21/08 1,197,462
150 Household Finance Corp. ........................ 8.000 07/15/10 159,972
2,560 HSBC Finance Corp. ............................. 6.750 05/15/11 2,657,641
1,600 SLM Corp. (b)................................... 5.243 07/26/10 1,473,626
400 Washington Mutual Preferred Funding (a) (c)..... 6.665 12/31/49 236,344
900 Washington Mutual Preferred Funding (a) (c)..... 9.750 10/29/49 721,053
------------
10,246,119
------------
See Notes to Financial Statements 9
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
NONCAPTIVE-DIVERSIFIED FINANCE 1.8%
$ 525 Capital One Financial Corp. .................... 6.750% 09/15/17 $ 504,415
1,195 Capmark Financial Group, Inc. (a)............... 5.875 05/10/12 946,775
495 Capmark Financial Group, Inc. (a)............... 6.300 05/10/17 369,601
2,100 General Electric Capital Corp. ................. 4.750 09/15/14 2,078,922
90 General Electric Capital Corp., Ser A........... 5.875 02/15/12 93,857
------------
3,993,570
------------
OIL FIELD SERVICES 0.3%
560 Kinder Morgan Energy Partners, LP............... 5.850 09/15/12 577,166
------------
OTHER UTILITIES 0.9%
375 CenterPoint Energy Resources Corp. ............. 6.250 02/01/37 361,049
225 CenterPoint Energy Resources Corp., Ser B....... 7.875 04/01/13 247,314
1,295 Plains All American Pipeline.................... 6.700 05/15/36 1,305,554
------------
1,913,917
------------
PHARMACEUTICALS 0.8%
1,765 Hospira, Inc. (b)............................... 5.309 03/30/10 1,752,994
------------
PIPELINES 1.8%
835 Colorado Interstate Gas Co. .................... 6.800 11/15/15 873,377
590 Consolidated Natural Gas Co., Ser C............. 6.250 11/01/11 613,797
390 DCP Midstream, LLC (a).......................... 6.750 09/15/37 395,634
755 Texas Eastern Transmission Corp. ............... 7.000 07/15/32 847,624
640 TransCanada Pipelines, Ltd. (Canada)............ 6.200 10/15/37 637,597
525 Transcontinental Gas Pipe Line Corp. ........... 8.875 07/15/12 595,875
------------
3,963,904
------------
PROPERTY & CASUALTY INSURANCE 2.7%
1,445 AIG SunAmerica Global Financing VI (a).......... 6.300 05/10/11 1,502,276
680 Farmers Exchange Capital (a).................... 7.050 07/15/28 674,081
1,230 Farmers Insurance Exchange Surplus (a).......... 8.625 05/01/24 1,372,842
1,800 Mantis Reef, Ltd. (Cayman Islands) (a).......... 4.692 11/14/08 1,806,721
1,035 Two-Rock Pass Through Trust (Bermuda) (a) (b)... 5.826 02/11/49 414,000
------------
5,769,920
------------
RAILROADS 2.7%
1,060 Burlington Northern Santa Fe Corp. ............. 6.125 03/15/09 1,074,282
1,000 CSX Corp. ...................................... 6.750 03/15/11 1,050,107
1,035 Union Pacific Corp. ............................ 5.450 01/31/13 1,045,172
2,600 Union Pacific Corp. ............................ 6.625 02/01/08 2,603,149
------------
5,772,710
------------
REFINING 0.6%
720 Enterprise Products Operating, LP, Ser B........ 5.600 10/15/14 719,558
675 Valero Energy Corp. ............................ 3.500 04/01/09 663,694
------------
1,383,252
------------
REITS 0.8%
1,970 iStar Financial, Inc. (b)....................... 5.496 03/09/10 1,767,450
------------
10 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
RESTAURANTS 0.5%
$ 1,010 Yum! Brands, Inc. .............................. 8.875% 04/15/11 $ 1,114,855
------------
RETAILERS 3.0%
650 CVS Caremark Corp. ............................. 5.750 08/15/11 666,359
90 CVS Caremark Corp. ............................. 5.750 06/01/17 90,743
500 Federated Department Stores, Inc. .............. 6.300 04/01/09 503,985
1,500 Federated Department Stores, Inc. .............. 6.625 09/01/08 1,511,663
1,940 Home Depot, Inc. (b)............................ 5.115 12/16/09 1,901,493
345 JC Penney Corp., Inc. .......................... 5.750 02/15/18 324,670
1,275 May Department Stores Co. ...................... 5.950 11/01/08 1,278,514
195 Target Corp. ................................... 6.500 10/15/37 196,640
------------
6,474,067
------------
SERVICES 0.5%
1,105 FedEx Corp. .................................... 5.500 08/15/09 1,117,625
------------
SUPERMARKETS 1.0%
794 Delhaize America, Inc. ......................... 9.000 04/15/31 921,974
1,270 Fred Meyer, Inc. ............................... 7.450 03/01/08 1,274,499
------------
2,196,473
------------
TECHNOLOGY 0.5%
625 Fiserv, Inc. ................................... 6.800 11/20/17 640,508
540 Xerox Corp. .................................... 5.500 05/15/12 549,501
------------
1,190,009
------------
TOBACCO 0.2%
465 Reynolds American, Inc. ........................ 6.500 07/15/10 478,402
------------
WIRELINE 3.8%
2,740 AT&T Corp. ..................................... 8.000 11/15/31 3,374,872
1,375 France Telecom, SA (France)..................... 8.500 03/01/31 1,788,065
1,125 SBC Communications, Inc. ....................... 6.150 09/15/34 1,126,783
1,155 Sprint Capital Corp. ........................... 8.750 03/15/32 1,305,413
590 Verizon New England, Inc. ...................... 6.500 09/15/11 620,011
------------
8,215,144
------------
TOTAL CORPORATE BONDS 66.9%...................................... 145,179,113
------------
UNITED STATES TREASURY OBLIGATIONS 16.6%
16,000 United States Treasury Notes.................... 3.500 02/15/10 16,143,760
8,400 United States Treasury Notes.................... 4.625 10/31/11 8,805,569
8,500 United States Treasury Notes.................... 4.750 01/31/12 8,962,196
1,900 United States Treasury Notes.................... 4.875 04/30/11 2,001,828
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS.......................... 35,913,353
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 10.6%
647 American Home Mortgage Assets (b)............... 5.165 06/25/47 522,893
875 Banc of America Commercial Mortgage, Inc. ...... 5.414 09/10/47 881,788
See Notes to Financial Statements 11
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
$ 975 Banc of America Commercial Mortgage, Inc. (c)... 5.658% 06/10/49 $ 998,718
1,075 Banc of America Commercial Mortgage, Inc. (c)... 5.745 07/10/17 1,110,637
850 Bear Stearns Commercial Mortgage Securities
(c)............................................. 5.694 06/11/50 869,632
1,600 Bear Stearns Commercial Mortgage Securities
(c)............................................. 5.712 06/11/40 1,649,568
875 Citigroup Commercial Mortgage Trust............. 5.431 10/15/49 881,644
900 Citigroup Commercial Mortgage Trust (c)......... 5.700 12/10/49 927,259
850 Citigroup/Deutsche Bank Commercial
Mortgage Trust (c).............................. 5.886 11/15/44 879,152
1,600 Commercial Mortgage Pass- Through Certificates
(c)............................................. 5.816 12/10/49 1,661,344
1,600 Credit Suisse Mortgage Capital Certificates
(c)............................................. 5.723 06/15/39 1,648,462
1,400 Greenwich Capital Commercial Funding Corp. ..... 5.444 03/10/39 1,410,957
1,700 GS Mortgage Securities Corp. II (c)............. 5.799 08/10/45 1,761,658
788 Harborview Mortgage Loan Trust (b).............. 5.665 01/19/36 622,235
1,600 JPMorgan Chase Commercial Mortgage
Securities Corp. ............................... 5.440 06/12/47 1,609,405
875 JPMorgan Chase Commercial Mortgage
Securities Corp. (c)............................ 5.746 02/12/49 901,697
1,400 JPMorgan Chase Commercial Mortgage
Securities Corp. (c)............................ 5.818 06/15/49 1,451,422
900 LB-UBS Commercial Mortgage Trust (c)............ 5.858 07/15/40 932,655
875 LB-UBS Commercial Mortgage Trust (c)............ 5.866 09/15/45 906,899
299 Luminent Mortgage Trust (b)..................... 5.225 07/25/36 230,063
575 Mastr Adjustable Rate Mortgages Trust (b)....... 5.715 05/25/47 304,211
850 Wachovia Bank Commercial Mortgage Trust (c)..... 5.740 06/15/49 874,388
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 10.6%.................. 23,036,687
------------
ASSET BACKED SECURITIES 1.2%
487 America West Airlines, Inc., Class G............ 7.100 04/02/21 504,009
1,266 CVS Lease Pass Through Trust (a)................ 6.036 12/10/28 1,219,395
682 World Financial Properties (a).................. 6.910 09/01/13 712,371
310 World Financial Properties (a).................. 6.950 09/01/13 324,404
------------
TOTAL ASSET BACKED SECURITIES..................................... 2,760,179
------------
TOTAL LONG-TERM INVESTMENTS 95.3%
(Cost $206,530,607)........................................................ 206,889,332
------------
12 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
DESCRIPTION VALUE
-----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 3.2%
REPURCHASE AGREEMENTS 2.2%
Banc of America Securities ($1,352,500 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 4.50%, dated 12/31/07, to
be sold on 01/02/08 at $1,352,838).............................................. $ 1,352,500
Citigroup Global Markets, Inc. ($1,202,222 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 4.10%, dated 12/31/07, to
be sold on 01/02/08 at $1,202,496).............................................. 1,202,222
State Street Bank & Trust Co. ($2,247,278 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 3.90%, dated 12/31/07, to
be sold on 01/02/08 at $2,247,765).............................................. 2,247,278
------------
TOTAL REPURCHASE AGREEMENTS..................................................... 4,802,000
------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 1.0%
United States Treasury Bill ($2,075,000 par, yielding 4.791%, 01/10/08 maturity)
(d)............................................................................. 2,072,611
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $6,874,611)............................................................. 6,874,611
------------
TOTAL INVESTMENTS 98.5%
(Cost $213,405,218)........................................................... 213,763,943
OTHER ASSETS IN EXCESS OF LIABILITIES 1.5%..................................... 3,363,014
------------
NET ASSETS 100.0%.............................................................. $217,126,957
============
Percentages are calculated as a percentage of net assets.
(a) 144A-Private Placement security which is exempt from registration under Rule
144A of the Securities Act of 1933, as amended. This security may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Floating Rate Coupon
(c) Variable Rate Coupon
(d) All or a portion of this security has been physically segregated in
connection with open futures or swap contracts.
See Notes to Financial Statements 13
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
SWAP AGREEMENTS OUTSTANDING AS OF DECEMBER 31, 2007:
CREDIT DEFAULT SWAPS
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
Bank of America, N.A. ..... Centurytel,
Inc. Buy 0.880% 09/20/17 $ 530 $0 $ (1,494)
Bank of America, N.A. ..... The Gap, Inc. Buy 1.190 03/20/12 1,300 0 (23,795)
Goldman Sachs Capital
Markets, L.P. ............ Dell, Inc. Buy 0.220 03/20/12 1,095 0 3,286
Goldman Sachs Capital
Markets, L.P. ............ Motorola, Inc. Buy 0.150 12/20/11 720 0 12,308
Goldman Sachs Capital
Markets, L.P. ............ Motorola, Inc. Buy 0.157 12/20/11 1,500 0 25,255
Goldman Sachs Capital
Markets, L.P. ............ The Chubb Corp. Buy 0.100 03/20/12 2,200 0 14,687
Goldman Sachs Capital
Markets, L.P. ............ The Hartford
Financial
Services Group,
Inc. Buy 0.120 12/20/11 2,200 0 16,159
JP Morgan Chase Bank,
N.A. ..................... Union Pacific
Corp. Buy 0.190 12/20/11 1,100 0 5,185
-------- --------
TOTAL CREDIT DEFAULT SWAPS................................................................ $0 $ 51,591
======== ========
INTEREST RATE SWAPS
PAY/
RECEIVE NOTIONAL
FLOATING RATE FLOATING FIXED EXPIRATION AMOUNT
COUNTERPARTY INDEX RATE RATE DATE (000) VALUE
Citibank, N.A., New York........ USD-LIBOR BBA Pay 5.275% 10/25/37 $14,700 $ 579,589
Citibank, N.A., New York........ USD-LIBOR BBA Pay 5.414 05/25/17 28,400 1,708,082
Citibank, N.A., New York........ USD-LIBOR BBA Pay 5.440 05/29/17 975 60,455
Citibank, N.A., New York........ USD-LIBOR BBA Pay 5.448 08/09/17 30,000 2,302,229
JP Morgan Chase Bank, N.A. ..... USD-LIBOR BBA Pay 5.448 05/29/17 6,475 405,546
----------
TOTAL INTEREST RATE SWAPS................................................................ $5,055,901
----------
TOTAL SWAP AGREEMENTS.................................................................... $5,107,492
==========
14 See Notes to Financial Statements
VAN KAMPEN BOND FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
FUTURES CONTRACTS OUTSTANDING AS OF DECEMBER 31, 2007:
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
LONG CONTRACTS:
U.S. Treasury Notes 5-Year Futures, March 2008 (Current
Notional Value of $110,281 per contract).................. 7 $ (2,640)
U.S. Treasury Notes 2-Year Futures, March 2008 (Current
Notional Value of $210,250 per contract).................. 70 15,945
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures, March 2008 (Current
Notional Value of $113,391 per contract).................. 167 (72,587)
U.S. Treasury Bond Futures, March 2008 (Current Notional
Value of $116,375 per contract)........................... 252 36,717
--- --------
TOTAL FUTURES CONTRACTS..................................... 496 $(22,565)
=== ========
See Notes to Financial Statements 15
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2007 (Unaudited)
ASSETS:
Total Investments (Cost $213,405,218)....................... $213,763,943
Cash........................................................ 504
Swap Contracts.............................................. 5,132,781
Interest Receivable......................................... 2,580,741
Other....................................................... 2,117
------------
Total Assets............................................ 221,480,086
------------
LIABILITIES:
Swap Collateral............................................. 3,551,320
Payables:
Variation Margin on Futures............................... 229,969
Income Distributions...................................... 122,572
Investment Advisory Fee................................... 77,243
Other Affiliates.......................................... 17,740
Trustees' Deferred Compensation and Retirement Plans........ 241,506
Swap Contracts.............................................. 25,289
Accrued Expenses............................................ 87,490
------------
Total Liabilities....................................... 4,353,129
------------
NET ASSETS.................................................. $217,126,957
============
NET ASSET VALUE PER COMMON SHARE ($217,126,957 divided by
11,308,623 shares outstanding)............................ $ 19.20
============
NET ASSETS CONSIST OF:
Common Shares ($1.00 par value with 15,000,000 shares
authorized, 11,308,623 shares issued and outstanding)..... $ 11,308,623
Paid in Surplus............................................. 206,706,494
Net Unrealized Appreciation................................. 5,443,652
Accumulated Undistributed Net Investment Income............. (1,405,235)
Accumulated Net Realized Loss............................... (4,926,577)
------------
NET ASSETS.................................................. $217,126,957
============
16 See Notes to Financial Statements
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended December 31, 2007 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 5,809,130
-----------
EXPENSES:
Investment Advisory Fee..................................... 453,733
Reports to Shareholders..................................... 73,222
Professional Fees........................................... 62,302
Accounting and Administrative Expenses...................... 26,410
Transfer Agent Fees......................................... 25,628
Custody..................................................... 12,114
Registration Fees........................................... 10,488
Trustees' Fees and Related Expenses......................... 2,859
Other....................................................... 46,199
-----------
Total Expenses.......................................... 712,955
Less Credits Earned on Cash Balances.................... 534
-----------
Net Expenses............................................ 712,421
-----------
NET INVESTMENT INCOME....................................... $ 5,096,709
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 874,861
Futures................................................... (2,209,523)
Swap Contracts............................................ (823,375)
-----------
Net Realized Loss........................................... (2,158,037)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (2,528,812)
-----------
End of the Period:
Investments............................................. 358,725
Futures................................................. (22,565)
Swap Contracts.......................................... 5,107,492
-----------
5,443,652
-----------
Net Unrealized Appreciation During the Period............... 7,972,464
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 5,814,427
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $10,911,136
===========
See Notes to Financial Statements 17
VAN KAMPEN BOND FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2007 JUNE 30, 2007
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 5,096,709 $ 10,213,317
Net Realized Gain/Loss.................................. (2,158,037) 114,273
Net Unrealized Appreciation During the Period........... 7,972,464 1,526,983
------------ ------------
Change in Net Assets from Operations.................... 10,911,136 11,854,573
Distributions from Net Investment Income................ (5,201,966) (10,712,430)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 5,709,170 1,142,143
FROM CAPITAL TRANSACTIONS:
Repurchase of Shares.................................... -0- (949,378)
------------ ------------
TOTAL INCREASE IN NET ASSETS............................ 5,709,170 192,765
NET ASSETS
Beginning of the Period................................. 211,417,787 211,225,022
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $(1,405,235) and
$(1,299,978), respectively)........................... $217,126,957 $211,417,787
============ ============
18 See Notes to Financial Statements
VAN KAMPEN BOND FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------------------------------
2007 2007 2006 2005 2004 2003
-------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................... $18.70 $18.59 $19.69 $19.15 $19.78 $18.78
------ ------ ------ ------ ------ ------
Net Investment Income......... 0.45(a) 0.90(a) 0.89(a) 0.96 1.03 1.10
Net Realized and Unrealized
Gain/Loss................... 0.51 0.15 (1.03) 0.60 (0.54) 1.11
------ ------ ------ ------ ------ ------
Total from Investment
Operations.................... 0.96 1.05 (0.14) 1.56 0.49 2.21
Less Distributions from Net
Investment Income............. 0.46 0.94 0.96 1.02 1.12 1.21
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD........................ $19.20 $18.70 $18.59 $19.69 $19.15 $19.78
====== ====== ====== ====== ====== ======
Common Share Market Price at End
of the Period................. $16.75 $16.84 $16.40 $17.80 $17.02 $19.57
Total Return (b)................ 2.18%* 8.38% -2.59% 10.69% -7.44% 12.67%
Net Assets at End of the Period
(In millions)................. $217.1 $211.4 $211.2 $223.8 $217.6 $224.7
Ratio of Expenses to Average Net
Assets........................ .66% .57% .59% .60% .65% .65%
Ratio of Net Investment Income
to Average Net Assets......... 4.72% 4.72% 4.61% 4.90% 5.24% 5.79%
Portfolio Turnover.............. 74%* 188% 64% 61% 41% 57%
* Non-Annualized
(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 -- DECEMBER 31, 2007 (UNAUDITED)
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.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Fixed income investments are stated at value using market
quotations or indications of value obtained from an independent pricing service.
Investments in securities listed on a securities exchange are valued at their
last sale price as of the close of such securities exchange. Listed and unlisted
securities for which the last sale price is not available are valued at the mean
of the last reported bid and asked prices. For those securities where quotations
or prices are not readily available as noted above, valuations are determined in
accordance with procedures established in good faith by the Board of Trustees.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded. Credit default and interest rate swaps are
valued using market quotations from brokers. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
segregate assets with its custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At December 31, 2007, there were no when-issued or delayed
delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along 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 -- DECEMBER 31, 2007 (UNAUDITED) 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 adopted the provisions of the Financial Accounting Standards Board's
("FASB") Interpretation No. 48 ("FIN 48") Accounting for Uncertainly in Income
Taxes on December 31, 2007. FIN 48 sets forth a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return. The implementation of FIN 48 did not result in any
unrecognized tax benefits in the accompanying financial statements. If
applicable, the Fund recognizes interest accrued related to unrecognized tax
benefits in "Interest Expense" and penalties in "Other" expenses on the
Statement of Operations. The Fund files tax returns with the U.S. Internal
Revenue Service, New York and various states. Generally, each of the tax years
in the four year period ended December 31, 2007, remains subject to examination
by taxing authorities.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At June 30, 2007, the Fund had an accumulated capital loss carryforward
for tax purposes of $1,225,950, which will expire according to the following
schedule:
AMOUNT EXPIRATION
$753,340 ............................................................ June 30, 2011
472,610 ............................................................ June 30, 2015
At December 31, 2007, the cost and related gross unrealized appreciation and
depreciation were as follows:
Cost of investments for tax purposes........................ $215,046,252
============
Gross tax unrealized appreciation........................... $ 2,634,529
Gross tax unrealized depreciation........................... (3,916,838)
------------
Net tax unrealized depreciation on investments.............. $ (1,282,309)
============
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays quarterly
dividends from net investment income. Net realized gains, if any, are
distributed at least annually. Distributions from net realized gains for book
purposes may include short-term capital gains and gains on futures transactions.
All short-term capital gains and a portion of futures gains are included as
ordinary income for tax purposes.
The tax character of distributions paid during the year ended June 30, 2007
were as follows:
Distributions paid from:
Ordinary income........................................... $10,723,719
Long-term capital gain.................................... -0-
-----------
$10,723,719
===========
21
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
As of June 30, 2007, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income............................... $137,366
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses relating to wash sales
transactions, post October losses which are not recognized for tax purposes
until the first day of the following fiscal year and gains and losses recognized
for tax purposes on open futures transactions on June 30, 2007.
F. EXPENSE REDUCTIONS During the six months ended December 31, 2007, the Fund's
custody fee was reduced by $534 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 six months ended December 31, 2007, the Fund recognized expenses of
approximately $44,800 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 six months ended December 31, 2007, the Fund
recognized expenses of approximately $9,000 representing Van Kampen Investments
Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing
accounting services to the Fund, as well as the salary, benefits and related
costs of the CCO and related support staff paid by Van Kampen. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Accounting and Administrative Expenses" on the Statement of Operations.
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.
22
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
For the six months ended December 31, 2007 and the year ended June 30, 2007,
transactions in common shares were as follows:
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2007 JUNE 30, 2007
Beginning Shares......................................... 11,308,623 11,362,465
Shares Repurchased*...................................... -0- (53,842)
---------- ----------
Ending Shares............................................ 11,308,623 11,308,623
========== ==========
* For the period ended June 30, 2007, the Fund repurchased 53,842 of its
shares at an average discount of 8.26% from net asset value per share.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments and U.S. Government securities, were
$56,564,270 and $37,618,006, respectively. The cost of purchases and proceeds
from sales of long-term U.S. Government securities, including paydowns on
mortgage-backed securities, for the period were $94,563,985 and $138,086,951,
respectively.
5. MORTGAGE BACKED SECURITIES
The Fund may invest in various types of Mortgage Backed Securities. A Mortgage
Backed Security (MBS) is a pass-through security created by pooling mortgages
and selling participations in the principal and interest payments received from
borrowers. Most of these securities are guaranteed by federally sponsored
agencies--Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). A
Collateralized Mortgage Obligation (CMO) is a bond which is collateralized by a
pool of MBS's.
These securities derive their value from or represent interests in a pool of
mortgages, or mortgage securities. Mortgage securities are subject to prepayment
risk--the risk that, as mortgage interest rates fall, borrowers will refinance
and "prepay" principal. A fund holding mortgage securities that are experiencing
prepayments will have to reinvest these payments at lower prevailing interest
rates. On the other hand, when interest rates rise, borrowers are less likely to
refinance resulting in lower prepayments. This can effectively extend the
maturity of a fund's mortgage securities resulting in greater price volatility.
It can be difficult to measure precisely the remaining life of a mortgage
security or the average life of a portfolio of such securities.
To the extent a fund invests in mortgage securities offered by
non-governmental issuers, such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers, the Fund may be subject to additional risks. Timely
payment of interest and principal of non-governmental issuers are supported by
various forms of private insurance or guarantees, including individual loan,
title, pool and hazard insurance purchased by the issuer. There can be no
assurance that the private insurers can meet their obligations under the
policies.
An unexpectedly high rate of defaults on the mortgages held by a mortgage
pool may adversely affect the value of a mortgage backed security and could
result in losses to a Fund.
23
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
The risk of such defaults is generally higher in the case of mortgage pools that
include subprime mortgages. Subprime mortgages refer to loans made to borrowers
with weakened credit histories or with a lower capacity to make timely payment
on their mortgages.
6. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund may use derivative instruments for a variety of reasons, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when taking delivery of
a security underlying a futures contract. In these instances, the recognition of
gain or loss is postponed until the disposal of the security underlying the
futures contract. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.
Summarized below are specific types of derivative financial instruments used
by the Fund.
A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures contracts on U.S. Treasury
securities for duration and risk management purposes and typically closes the
contract prior to the delivery date. Upon entering into futures contracts, the
Fund maintains an amount of cash or liquid securities with a value equal to a
percentage of the contract amount with either a futures commission merchant
pursuant to rules and regulations promulgated under the 1940 Act, 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 six months ended December 31,
2007, were as follows:
CONTRACTS
Outstanding at June 30, 2007................................ 495
Futures Opened.............................................. 1,564
Futures Closed.............................................. (1,563)
------
Outstanding at December 31, 2007............................ 496
======
B. SWAPS CONTRACTS The Fund may enter into credit default swap contracts for
hedging purposes or to gain exposure to a credit in which the Fund may otherwise
invest. A credit default swap is an agreement between two parties to exchange
the credit risk of an issuer. A buyer of a credit default swap is said to buy
protection by paying periodic fees in return for a contingent payment from the
seller if the issuer has a credit event such as bankruptcy, a failure to pay
outstanding obligations or deteriorating credit while the swap is outstanding.
24
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
A seller of a credit default swap is said to sell protection and thus collects
the periodic fees and profits if the credit of the issuer remains stable or
improves while the swap is outstanding but the seller in a credit default swap
contract would be required to pay an agreed-upon amount, which approximates the
notional amount of the swap as disclosed in the table following the Portfolio of
Investments, to the buyer in the event of an adverse credit event of the issuer.
The Fund accrues for the periodic fees on credit default swaps on a daily basis
with the net amount accrued recorded within unrealized appreciation/depreciation
of swap contracts. Upon cash settlement of the periodic fees, the net amount is
recorded as realized gain/loss on swap contracts on the Statements of
Operations. Net unrealized gains are recorded as an asset or net unrealized
losses are reported as a liability on the Statement of Assets and Liabilities.
The change in value of the swap contracts is reported as unrealized gains or
losses on the Statement of Operations. Payments received or made upon entering
into a credit default swap contract, if any, are recorded as realized gain or
loss on the Statement of Operations upon termination or maturity of the swap.
Credit default swaps may involve greater risks than if a Fund had invested in
the issuer directly. Credit default swaps are subject to general market risk,
counterparty risk and credit risk.
The Fund may also enter into interest rate swaps primarily to preserve a
return or spread on a particular investment or portion of its portfolio, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. Interest rate swaps
are contractual agreements to exchange periodic interest payment streams
calculated on a predetermined notional principal amount. Interest rate swaps
generally involve one party paying a fixed interest rate and the other party
paying a variable rate. The Fund will usually enter into interest rate swaps on
a net basis, i.e, the two payment streams are netted out in a cash settlement on
the payment date or dates specified in the instrument, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments. The Fund
accrues the net amount with respect to each interest rate swap on a daily basis.
This net amount is recorded within unrealized appreciation/depreciation on swap
contracts. Upon cash settlement of the periodic payments, the net amount is
recorded as realized gain/loss on swap contracts on the Statement of Operations.
Risks may arise as a result of the potential inability of the counterparties to
meet the terms of their contracts.
If there is a default by the counterparty to a swap agreement, the Fund will
have contractual remedies pursuant to the agreements related to the transaction.
Counterparties are required to pledge collateral daily (based on the valuation
of each swap) on behalf of the Fund with a value approximately equal to the
amount of any unrealized gain. Cash collateral, when received by the Fund, is
recorded with an offsetting liability shown on the Statement of Assets and
Liabilities. Reciprocally, when the Fund has an unrealized loss on a swap
contract, the Fund has instructed the custodian to pledge cash or liquid
securities as collateral with a value approximately equal to the amount of the
unrealized loss. Collateral pledges are monitored and subsequently adjusted if
and when the swap valuations fluctuate. Restricted cash, if any, for segregating
purposes is shown on the Statement of Assets and Liabilities.
7. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
25
VAN KAMPEN BOND FUND
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2007 (UNAUDITED) continued
8. ACCOUNTING PRONOUNCEMENT
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. As of December 31, 2007, the Adviser does not believe the adoption
of SFAS 157 will impact the amounts reported in the financial statements,
however, additional disclosures will be required about the inputs used to
develop the measurements of fair value and the effect of certain measurements
reported on the Statement of Operations for a fiscal period.
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
STUART N. SCHULDT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
522 Fifth Avenue
New York, New York 10036
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
TRANSFER AGENT
COMPUTERSHARE TRUST COMPANY, N.A.
C/O COMPUTERSHARE INVESTOR SERVICES
P.O. Box 43078
Providence, Rhode Island 02940-3078
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
27
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)
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable for semi-annual reports.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSRS
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) Code of Ethics - Not applicable for semi-annual reports.
(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: February 15, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
---------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: February 15, 2008
By: /s/ Stuart N. Schuldt
---------------------------------
Name: Stuart N. Schuldt
Title: Principal Financial Officer
Date: February 15, 2008