-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A12a2SGK5BX/m8euDt15IYaA54WQ9zX7CUFUc4vQEW3iXvQRQ63Rg0DKHitqoEBe 9hc87UGO8onVbXfKE5LUDw== 0000950137-01-500929.txt : 20010424 0000950137-01-500929.hdr.sgml : 20010424 ACCESSION NUMBER: 0000950137-01-500929 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20010420 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN SENIOR FLOATING RATE FUND CENTRAL INDEX KEY: 0001052136 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 364201397 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: SEC FILE NUMBER: 005-53917 FILM NUMBER: 1607290 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND DATE OF NAME CHANGE: 19971230 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN SENIOR FLOATING RATE FUND CENTRAL INDEX KEY: 0001052136 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 364201397 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND DATE OF NAME CHANGE: 19971230 SC TO-I 1 c60983scto-i.txt ISSUER TENDER OFFER STATEMENT 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ SCHEDULE TO ISSUER TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) VAN KAMPEN SENIOR FLOATING RATE FUND (NAME OF ISSUER) VAN KAMPEN SENIOR FLOATING RATE FUND (NAME OF PERSON(S) FILING STATEMENT) Common Shares of Beneficial Interest, Par Value $0.01 per Share (Title of Class of Securities) 920960-101 (CUSIP Number of Class of Securities) A. Thomas Smith III Managing Director, General Counsel and Secretary Van Kampen Investments Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 (630) 684-6000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) Copies to: Wayne W. Whalen, Esq. Thomas A. Hale, Esq. Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 W. Wacker Drive Chicago, Illinois 60606 (312) 407-0700 CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Transaction Valuation $268,026,608 Amount of Filing Fees: $53,605 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (a) Calculated as the aggregate maximum purchase price to be paid for 30,914,257 shares in the offer. (b) Calculated as 1/50 of 1% of the Transaction Valuation. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Form or Registration No.: Filing Party: Date Filed: [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [ ] third-party tender offer subject to Rule 14d-1. [X] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. [ ] Check the following box if the filing is a final amendment reporting the results of the tender offer. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 1. SUMMARY TERM SHEET. Reference is hereby made to the "Summary Term Sheet" of the Offer to Purchase, dated April 20, 2001 (the "Offer to Purchase"), which is attached hereto as Exhibit (a)(1)(ii) and incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) Name and Address. The name of the issuer is Van Kampen Senior Floating Rate Fund, a non-diversified, closed-end management investment company organized as a Massachusetts business trust (the "Trust"). The principal executive office of the Trust is located at 1 Parkview Plaza, Oakbrook Terrace, IL 60181-5555. The telephone number of the principal executive office of the Trust is (630) 684-6000. (b) Securities. The title of the securities being sought is common shares of beneficial interest, par value $0.01 per share (the "Common Shares"). As of April 12, 2001 there were approximately 93,679,568 Common Shares issued and outstanding. (c) Trading Market and Price. The Common Shares are not currently traded on an established trading market. ITEM 3. IDENTITY AND BACKGROUND OF THE FILING PERSON. The name of the filing person is the Trust. The name, business address and business telephone number of the Trust is Van Kampen Senior Floating Rate Fund which is located at: 1 Parkview Plaza, Oakbrook Terrace, IL 60181-5555, and can be reached by telephone at (630) 684-6000. The filing person is the subject company. ITEM 4. TERMS OF THE TRANSACTION. The Trust is seeking tenders for 30,914,257 Common Shares at the net asset value per Common Share calculated on the day the tender offer expires, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal (which together with the Offer to Purchase constitute the "Offer"). Tendering shareholders receive cash proceeds from the tender of Common Shares of the Trust, or tendering shareholders may elect to have the Trust's depositary invest the cash proceeds from the tender of Common Shares of the Trust in shares of other investment companies advised by Van Kampen Investment Advisory Corp. or Van Kampen Asset Management Inc. and distributed by Van Kampen Funds Inc. as described in the Offer to Purchase and related Letter of Transmittal. An "Early Withdrawal Charge" will be imposed on most Common Shares accepted for payment that have been held for less than one year. The scheduled expiration date is May 18, 2001, unless extended as described in the Offer to Purchase (the later of May 18, 2001 or the date of the extended expiration date is referred to as the "Expiration Date"). As described in the Offer to Purchase, shareholders may withdraw Common Shares tendered in the Offer at any time prior to the Expiration Date or, if not yet accepted for payment, after June 15, 2001. The procedures for tendering and withdrawing Common Shares, the manner in which Common Shares will be accepted for payment, the Trust's intentions in the event the Offer is oversubscribed and federal income tax consequences of the Offer are described in the Offer to Purchase. The Trust is not aware of any Common Shares to be purchased from any officer, trustee or affiliate of the Trust pursuant to the Offer. Copies of the Offer to Purchase and the form of Letter of Transmittal are attached hereto as Exhibit (a)(1)(ii) and Exhibit (a)(2), respectively and are incorporated herein by reference. ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. Reference is hereby made to Section 10 "Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Common Shares" and Section 12 "Source and Amount of Funds" of the Offer to Purchase which is incorporated herein by reference. Except as set forth therein, the Trust does not know of any agreement, arrangement or understanding, whether or not legally enforceable, between the Trust, any of the Trust's executive officers or Trustees, any person controlling the Trust or any officer or director of any corporation ultimately in control of the Trust and any other person with respect to any securities of the Trust. 2 3 ITEM 6. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS. Reference is hereby made to Section 7 "Purpose of the Offer," Section 8 "Plans or Proposals of the Trust," Section 10 "Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Common Shares," Section 11 "Certain Effects of the Offer," Section 12 "Source and Amount of Funds" and Section 13 "Certain Information about the Trust" of the Offer to Purchase, which are incorporated herein by reference. In addition, the Trust regularly purchases and sells assets in its ordinary course of business. Except as set forth above, the Trust has no plans or proposals which relate to or would result in (a) an extraordinary transaction, such as a merger, reorganization or liquidation, involving the Trust; (b) any purchase, sale or transfer of a material amount of assets of the Trust; (c) any material change in the present dividend rate or policy, or indebtedness or capitalization of the Trust; (d) any change in the present Board of Trustees or management of the Trust, including, but not limited to, any plans or proposals to change the number or the term of Trustees, or to fill any existing vacancy on the Board of Trustees or to change any material term of the employment contract of any executive officer of the Trust; (e) any other material change in the Trust's corporate structure or business, including any plans or proposals to make any changes in its investment policy for which a vote would be required by Section 13 of the Investment Company Act of 1940, as amended; (f) a class of equity securities of the Trust to be delisted from a national securities exchange or to cease to be authorized to be quoted on an inter-dealer quotation system of a registered national securities association; (g) a class of equity security of the Trust becoming eligible for termination of registration under the Investment Company Act of 1940, as amended; (h) the suspension of the Trust's obligation to file reports pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended; (i) the acquisition by any person of additional securities of the Trust or the disposition of securities of the Trust; or (j) changes in the Trust's declaration of trust, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Trust by any person. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Reference is hereby made to Section 12 "Source and Amounts of Funds" of the Offer to Purchase, which is incorporated herein by reference. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. Reference is hereby made to Section 10 "Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Common Shares" of the Offer to Purchase and the financial statements included as part of Exhibit (a)(1)(ii) attached hereto, which are incorporated herein by reference. Except as set forth therein, there have not been any transactions involving the Common Shares of the Trust that were effected during the past 60 days by the Trust, any executive officer or Trustee of the Trust, any person controlling the Trust, any executive officer or director of any corporation ultimately in control of the Trust or by any associate or subsidiary of any of the foregoing, including any executive officer or director of any such subsidiary. ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED. No persons have been employed, retained or are to be compensated by or on behalf of the Trust to make solicitations or recommendations in connection with the Offer. ITEM 10. FINANCIAL INFORMATION. (a)-(b) Reference is hereby made to the financial statements included as part of Exhibit (a)(1)(ii) attached hereto, which are incorporated herein by reference. 3 4 ITEM 11. ADDITIONAL INFORMATION. (a)(1) Reference is hereby made to Section 10 "Interests of Trustees and Executive Officers; Transactions and Arrangements Concerning the Common Shares" of the Offer to Purchase which is incorporated herein by reference. (a)(2) through (a)(5) Not applicable. (b) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is incorporated herein by reference in its entirety. ITEM 12. MATERIAL TO BE FILED AS EXHIBITS. (a)(1)(i) Advertisement printed in The Wall Street Journal. (ii) Offer to Purchase (including Financial Statements). (a)(2) Form of Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number). (a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (ii) Form of Letter to Clients of Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (iii) Form of Letter to Selling Group Members. (iv) Form of Operations Notice. (a)(4) Form of Letter to Shareholders who have requested Offer to Purchase. (a)(5) Text of Press Release dated April 20, 2001. (b)(1) Third Amendment and Restatement of Credit Agreement between Van Kampen Prime Rate Income Trust, Van Kampen Senior Floating Rate Fund, Various Financial Institutions and Bank of America, N.A., as agent, dated as of September 13, 2000. (d)(1) Investment Advisory Agreement between Van Kampen Senior Floating Rate Fund and Van Kampen Investment Advisory Corp., dated as of December 19, 1997. (d)(2) Administration Agreement between Van Kampen Senior Floating Rate Fund and Van Kampen Investments Inc., dated as of December 19, 1997. (d)(3) Offering Agreement between Van Kampen Senior Floating Rate Fund and Van Kampen Funds Inc., dated as of December 19, 1997. (d)(4) Service Plan of Van Kampen Senior Floating Rate Fund. (g)-(h) Not applicable.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. Not applicable. 4 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. VAN KAMPEN SENIOR FLOATING RATE FUND Dated: April 20, 2001 /s/ STEPHEN L. BOYD ----------------------------------------------------------- Stephen L. Boyd, Executive Vice President and Chief Investment Officer
5 6 EXHIBIT INDEX
EXHIBIT DESCRIPTION ------- ----------- (a)(1)(i) Advertisement printed in The Wall Street Journal (a)(1)(ii) Offer to Purchase (including Financial Statements) (a)(2) Form of Letter of Transmittal (including Guidelines for Certification of Tax Identification Number) (a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(3)(ii) Form of Letter to Clients of Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(3)(iii) Form of Letter to Selling Group Members (a)(3)(iv) Form of Operations Notice (a)(4) Form of Letter to Shareholders who have requested Offer to Purchase (a)(5) Text of Press Release dated April 20, 2001 (b)(1) Third Amendment and Restatement of Credit Agreement between Van Kampen Prime Rate Income Trust, Van Kampen Senior Floating Rate Fund, Various Financial Institutions and Bank of America, N.A., as agent, dated as of September 13, 2000 (d)(1) Investment Advisory Agreement between Van Kampen Senior Floating Rate Fund and Van Kampen Investment Advisory Corp., dated as of December 19, 1997 (d)(2) Administration Agreement between Van Kampen Senior Floating Rate Fund and Van Kampen Investments Inc., dated as of December 19, 1997 (d)(3) Offering Agreement between Van Kampen Senior Floating Rate Fund and Van Kampen Funds Inc., dated as of December 19, 1997 (d)(4) Service Plan of Van Kampen Senior Floating Rate Fund
EX-99.(A)(1)(I) 2 c60983ex99-a1i.txt ADVERTISEMENT PRINTED IN THE WALL STREET JOURNAL 1 EXHIBIT (a)(1)(i) This announcement is not an offer to purchase or a solicitation of an offer to sell Common Shares. The Offer is made only by the Offer to Purchase dated April 20, 2001 and the related Letter of Transmittal. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Common Shares in any jurisdiction in which making or accepting the Offer would violate that jurisdiction's laws. VAN KAMPEN SENIOR FLOATING RATE FUND NOTICE OF OFFER TO PURCHASE FOR CASH 30,914,257 OF ITS ISSUED AND OUTSTANDING COMMON SHARES AT NET ASSET VALUE PER COMMON SHARE - -------------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT EASTERN TIME ON FRIDAY, MAY 18, 2001, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- Van Kampen Senior Floating Rate Fund (the "Trust") is offering to purchase 30,914,257 of its issued and outstanding common shares of beneficial interest, par value of $0.01 per share ("Common Shares"), at a price equal to the net asset value per Common Share ("NAV") determined as of 5:00 pm Eastern Time on Friday, May 18, 2001, unless extended by action of the Trust's Board of Trustees. The tendering, acceptance and withdrawal of tenders are subject to the terms and conditions set forth in the Offer to Purchase dated April 20, 2001 and the related Letter of Transmittal (which together constitute the "Offer"). An "Early Withdrawal Charge" will be imposed on most Common Shares accepted for payment that have been held for less than one year. The NAV on April 12, 2001 was $8.67. The purpose of the Offer is to attempt to provide liquidity to shareholders since the Trust is unaware of any secondary market which exists for the Common Shares. The Offer is not conditioned upon the tender of any minimum number of Common Shares, but is subject to certain conditions as set forth in the Offer. If more than 30,914,257 Common Shares are duly tendered prior to the expiration of the Offer, the Trust presently intends to, assuming no changes in the factors originally considered by the Board of Trustees when it determined to make the Offer and the other conditions set forth in the Offer, but is under no obligation to, extend the Offer period, if necessary, and increase the number of Common Shares that the Trust is offering to purchase to an amount which it believes will be sufficient to accommodate the excess Common Shares tendered as well as any Common Shares tendered during the extended Offer period, or purchase 30,914,257 Common Shares (or such greater number of Common Shares sought) on a pro rata basis. Common Shares tendered pursuant to the Offer may be withdrawn at any time prior to 12:00 Midnight Eastern Time on May 18, 2001, and, if not yet accepted for payment by the Trust, Common Shares may also be withdrawn after June 15, 2001. The information required to be disclosed by paragraph (d)(1) of Rule 13e-4 under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. Questions and requests for assistance, for current NAV quotations or for copies of the Offer to Purchase, Letter of Transmittal and any other tender offer document, may be directed to Van Kampen Funds Inc. at the address and telephone number below. Copies will be furnished promptly at no expense to you. Shareholders who do not own Common Shares directly may tender their Common Shares through their broker, dealer or nominee. - -------------------------------------------------------------------------------- THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. - -------------------------------------------------------------------------------- VAN KAMPEN FUNDS INC. 1 PARKVIEW PLAZA - P.O. BOX 5555 - OAKBROOK TERRACE, IL 60181-5555 800-421-5666 (Between the hours of 7:00 am to 7:00 pm Central Time) April 20, 2001 EX-99.(A)(1)(II) 3 c60983ex99-a1ii.txt OFFER TO PURCHASE 1 EXHIBIT (a)(1)(ii) VAN KAMPEN SENIOR FLOATING RATE FUND OFFER TO PURCHASE FOR CASH 30,914,257 OF ITS ISSUED AND OUTSTANDING COMMON SHARES AT NET ASSET VALUE PER COMMON SHARE - -------------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT EASTERN TIME ON FRIDAY, MAY 18, 2001, UNLESS THE OFFER IS EXTENDED. TO ENSURE PROCESSING OF YOUR REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY (AS DEFINED BELOW) ON OR BEFORE MAY 18, 2001. - -------------------------------------------------------------------------------- To the Holders of Common Shares of VAN KAMPEN SENIOR FLOATING RATE FUND: Van Kampen Senior Floating Rate Fund (the "Trust") is offering to purchase up to 30,914,257 of its common shares of beneficial interest, with par value of $0.01 per share ("Common Shares"), at a price (the "Purchase Price") equal to the net asset value per Common Share ("NAV") determined as of 5:00 P.M. Eastern Time on the Expiration Date (as defined herein). The tendering, acceptance and withdrawal of tenders are subject to the terms and conditions set forth in this Offer to Purchase and the related Letter of Transmittal (which together constitute the "Offer"). The Offer is scheduled to terminate as of 12:00 Midnight Eastern Time on May 18, 2001, unless extended by action of the Trust's Board of Trustees. An Early Withdrawal Charge (as defined in Section 3) will be imposed on most Common Shares accepted for payment that have been held for less than one year. The Common Shares are not currently traded on an established trading market. The purpose of the Offer is to attempt to provide liquidity to shareholders since the Trust is unaware of any secondary market which exists for the Common Shares. The NAV on April 12, 2001 was $8.67. You may obtain current NAV quotations from Van Kampen Funds Inc. ("VKFI") by calling (800) 341-2911 between the hours of 7:00 A.M. and 7:00 P.M. Central Time, Monday through Friday, except holidays. See Section 9. If more than 30,914,257 Common Shares are duly tendered prior to the expiration of the Offer, the Trust presently intends to, subject to the condition that there have been no changes in the factors originally considered by the Board of Trustees when it determined to make the Offer and the other conditions set forth in Section 6, but is under no obligation to, extend the Offer period, if necessary, and increase the number of Common Shares that the Trust is offering to purchase to an amount which it believes will be sufficient to accommodate the excess Common Shares tendered as well as any Common Shares tendered during the extended Offer period or purchase 30,914,257 Common Shares (or such greater number of Common Shares sought) on a pro rata basis. THIS OFFER IS BEING MADE TO ALL SHAREHOLDERS OF THE TRUST AND IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF COMMON SHARES BEING TENDERED. THIS OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE SECTION 6. 13 SFR006-04/01 2 SUMMARY TERM SHEET THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION IN THIS OFFER TO PURCHASE. YOU SHOULD CAREFULLY READ THE ENTIRE OFFER TO PURCHASE AND RELATED LETTER OF TRANSMITTAL FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF THE OFFER AND TO FULLY UNDERSTAND THESE TERMS AND CONDITIONS. The Trust The Trust is a non-diversified, closed-end management investment company organized as a Massachusetts business trust. The Trust seeks to provide a high level of current income, consistent with the preservation of capital. The Trust seeks to achieve its investment objective by investing in a professionally managed portfolio of interests in floating or variable rate senior loans. As of April 12, 2001, the Trust had net assets of approximately $812 million and had issued and outstanding 93,679,568 Common Shares. As of April 12, 2001, the Trust's NAV was $8.67. For additional information about the Trust, see Sections 9, 10, 13 and 14. The Offer The Trust is offering to purchase for cash at the Purchase Price up to 30,914,257 of its outstanding Common Shares which are properly tendered and accepted for payment prior to the Expiration Date of the Offer. The tendering, acceptance and withdrawal of tenders are subject to the terms and conditions set forth in this Offer to Purchase and the related Letter of Transmittal. See Sections 1, 2, 5 and 6. An early withdrawal charge will be imposed on most Common Shares accepted for payment that have been held for less than one year. See Section 3. Purpose of the Offer The purpose of this Offer is to attempt to provide liquidity to the holders of Common Shares. The Trust currently does not believe that an active secondary market for its Common Shares exists or is likely to develop, and therefore the Trustees consider each quarter making a tender offer to purchase Common Shares at their NAV to attempt to provide liquidity to the holders of Common Shares. There can be no assurance that this Offer will provide sufficient liquidity to all holders of Common Shares that desire to sell their Common Shares or that the Trust will make any such tender offer in the future. The Trustees may terminate the Offer, amend its terms, reject Common Shares tendered for payment or postpone payment, if during the tender period, certain events occur which the Trustees consider make it inadvisable to proceed with the Offer. See Sections 6, 7, 11 and 16. The Purchase Price The purchase price is equal to the NAV determined as of 5:00 P.M. Eastern Time on the Expiration Date. See Section 1. The cost of purchasing the full 30,914,257 Common Shares pursuant to the Offer would be approximately $268,026,608 (assuming a NAV of $8.67 on the Expiration Date). The Trust anticipates that cash necessary to purchase any Common Shares acquired pursuant to the Offer will first be derived from cash on hand, such as proceeds from sales of new common shares of the Trust and specified pay-downs from the senior loans in the Trust's portfolio, and then from the proceeds from the sale of cash equivalents held by the Trust. The Trust also may borrow amounts, if necessary, pursuant to a credit agreement which has been established to provide the Trust with additional liquidity for its tender offers. See Section 12. The Expiration Date The Offer is scheduled to terminate as of 12:00 Midnight Eastern Time on May 18, 2001, unless extended by action of the Trust's Board of Trustees. The later of May 18, 2001 or the latest time and date to which the Offer is extended is the "Expiration Date". If the expiration date is extended, the Trust will make a public announcement of the new expiration date. See Sections 1 and 16. Tendering Common Shares Shareholders seeking to tender their Common Shares pursuant to the Offer must send to the Trust's depositary on or before the Expiration Date a properly completed and executed Letter of Transmittal (or manually signed facsimile thereof), Common Share certificates (if applicable) and any other documents required by the Letter of Transmittal. See Section 3. Withdrawing Tenders Shareholders seeking to withdraw their tender of Common Shares must send to the Trust's depositary a written, telegraphic, telex or facsimile transmission notice of withdrawal that specifies the name of the person withdrawing a tender of Common Shares, the number of Common Shares to be withdrawn, and, if certificates representing such Common Shares have been delivered or otherwise identified to the depositary, the name of the registered holder(s) of such Common Shares. Shareholders may withdraw Common Shares tendered at any time prior to the Expiration Date and, if the Common Shares have not yet been accepted for payment by the Trust, at any time after 12:00 Midnight Eastern Time on June 15, 2001. See Section 4.
2 3 IMPORTANT If you desire to tender all or any portion of your Common Shares, you should either (1) complete and sign the Letter of Transmittal and mail or deliver it along with any Common Share certificate(s) and any other required documents to Van Kampen Investor Services Inc. (the "Depositary") or (2) request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you. If your Common Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact such broker, dealer, commercial bank, trust company or other nominee if you desire to tender your Common Shares. NEITHER THE TRUST NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S COMMON SHARES. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER COMMON SHARES AND, IF SO, HOW MANY COMMON SHARES TO TENDER. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE TRUST AS TO WHETHER SHAREHOLDERS SHOULD TENDER COMMON SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. Questions and requests for assistance may be directed to VKFI at the address and telephone number set forth below. Requests for additional copies of this Offer to Purchase and the Letter of Transmittal should be directed to VKFI. April 20, 2001 VAN KAMPEN SENIOR FLOATING RATE FUND Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 (800) 341-2911 Depositary: Van Kampen Investor Services Inc. By Mail, Hand Delivery or Courier: 7501 Tiffany Springs Parkway Kansas City, MO 64153 Attn: Van Kampen Senior Floating Rate Fund 3 4 TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1. Price; Number of Common Shares.............................. 5 2. Procedure for Tendering Common Shares....................... 5 3. Early Withdrawal Charge..................................... 7 4. Withdrawal Rights........................................... 8 5. Payment for Shares.......................................... 9 6. Certain Conditions of the Offer............................. 9 7. Purpose of the Offer........................................ 10 8. Plans or Proposals of the Trust............................. 10 9. Price Range of Common Shares; Dividends..................... 11 10. Interest of Trustees and Executive Officers; Transactions and Arrangements Concerning the Common Shares............... 11 11. Certain Effects of the Offer................................ 11 12. Source and Amount of Funds.................................. 12 13. Certain Information about the Trust......................... 14 14. Additional Information...................................... 15 15. Certain Federal Income Tax Consequences..................... 15 16. Extension of Tender Period; Termination; Amendments......... 16 17. Miscellaneous............................................... 16 EXHIBIT A: Unaudited Financial Statements For The Period Ended January 31, 2001.................................................... A-1 Audited Financial Statements for the Fiscal Year Ended July 31, 2000.................................................... A-24
4 5 1. PRICE; NUMBER OF COMMON SHARES. The Trust will, upon the terms and subject to the conditions of the Offer, accept for payment (and thereby purchase) 30,914,257 or such lesser number of its issued and outstanding Common Shares which are properly tendered (and not withdrawn in accordance with Section 4) prior to 12:00 Midnight Eastern Time on May 18, 2001 (such time and date being hereinafter called the "Initial Expiration Date"). The Trust reserves the right to extend the Offer. See Section 16. The later of the Initial Expiration Date or the latest time and date to which the Offer is extended is hereinafter called the "Expiration Date." The Purchase Price of the Common Shares will be their NAV determined as of 5:00 P.M. Eastern Time on the Expiration Date. The NAV on April 12, 2001 was $8.67. You may obtain current NAV quotations from VKFI by calling (800) 341-2911 between the hours of 7:00 A.M. and 7:00 P.M. Central Time, Monday through Friday, except holidays. Shareholders tendering Common Shares remain entitled to receive dividends declared on such shares up to the settlement date of the Offer. See Section 9. The Trust will not pay interest on the Purchase Price under any circumstances. An Early Withdrawal Charge will be imposed on most Common Shares accepted for payment that have been held for less than one year. See Section 3. The Offer is being made to all shareholders of the Trust and is not conditioned upon any minimum number of Common Shares being tendered. If the number of Common Shares properly tendered prior to the Expiration Date and not withdrawn is less than or equal to 30,914,257 Common Shares (or such greater number of Common Shares as the Trust may elect to purchase pursuant to the Offer), the Trust will, upon the terms and subject to the conditions of the Offer, purchase at NAV all Common Shares so tendered. If more than 30,914,257 Common Shares are duly tendered prior to the expiration of the Offer and not withdrawn, the Trust presently intends to, subject to the condition that there have been no changes in the factors originally considered by the Board of Trustees when it determined to make the Offer and the other conditions set forth in Section 6, but is not obligated to, extend the Offer period, if necessary, and increase the number of Common Shares that the Trust is offering to purchase to an amount which it believes will be sufficient to accommodate the excess Common Shares tendered as well as any Common Shares tendered during the extended Offer period or purchase 30,914,257 Common Shares (or such greater number of Common Shares sought) on a pro rata basis. On April 12, 2001 there were approximately 93,679,568 Common Shares issued and outstanding and there were approximately 22,513 holders of record of Common Shares. The Trust has been advised that no trustees, officers or affiliates of the Trust intend to tender any Common Shares pursuant to the Offer. The Trust reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary and making a public announcement thereof. See Section 16. There can be no assurance, however, that the Trust will exercise its right to extend the Offer. If the Trust decides, in its sole discretion, to increase (except for any increase not in excess of 2% of the outstanding Common Shares) or decrease the number of Common Shares being sought and, at the time that notice of such increase or decrease is first published, sent or given to holders of Common Shares in the manner specified below, the Offer is scheduled to expire at any time earlier than the tenth business day from the date that such notice is first so published, sent or given, the Offer will be extended at least until the end of such ten business day period. 2. PROCEDURE FOR TENDERING COMMON SHARES. Proper Tender of Common Shares. Except as otherwise set forth under the heading "Procedures for Selling Group Members" below, for Common Shares to be properly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees, any certificates for such Common Shares, and any other documents required by the Letter of Transmittal, must be received on or before the Expiration Date by the Depositary at its address set forth on page 3 of this Offer to Purchase. It is a violation of Section 14(e) of the Securities and Exchange Act of 1934 (the "Exchange Act"), and Rule 14e-4 promulgated thereunder, for a person to tender Common Shares in a partial tender offer for such person's own account unless at the time of tender and until such time as the securities are accepted for payment the person so tendering has a net long position equal to or greater than the amount tendered in (i) the Common Shares and will deliver or cause to be delivered such shares for purposes of tender to the 5 6 Trust prior to or on the Expiration Date, or (ii) an equivalent security and, upon the acceptance of his or her tender will acquire the Common Shares by conversion, exchange, or exercise of such equivalent security to the extent required by the terms of the Offer, and will deliver or cause to be delivered the Common Shares so acquired for the purpose of tender to the Trust prior to or on the Expiration Date. Section 14(e) and Rule 14e-4 provide a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. The acceptance of Common Shares by the Trust for payment will constitute a binding agreement between the tendering shareholder and the Trust upon the terms and subject to the conditions of the Offer, including the tendering shareholder's representation that (i) such shareholder has a net long position in the Common Shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act and (ii) the tender of such Common Shares complies with Rule 14e-4. Signature Guarantees and Method of Delivery. Signatures on the Letter of Transmittal are not required to be guaranteed unless (1) the proceeds for the tendered Common Shares will amount to more than $100,000, (2) the Letter of Transmittal is signed by someone other than the registered holder of the Common Shares tendered therewith, or (3) payment for tendered Common Shares is to be sent to a payee other than the registered owner of such Common Shares and/or to an address other than the registered address of the registered owner of the Common Shares. In those instances, all signatures on the Letter of Transmittal must be guaranteed by a bank or trust company; a broker-dealer; a credit union; a national securities exchange, registered securities association or clearing agency; a savings and loan association; or a federal savings bank (an "Eligible Institution"). If Common Shares are registered in the name of a person or persons other than the signer of the Letter of Transmittal or (a) if payment is to be made to, (b) unpurchased Common Shares are to be registered in the name of or (c) any certificates for unpurchased Common Shares are to be returned to any person other than the registered owner, then the Letter of Transmittal and, if applicable, the tendered Common Share certificates must be endorsed or accompanied by appropriate authorizations, in either case signed exactly as such name or names appear on the registration of the Common Shares with the signatures on the certificates or authorizations guaranteed by an Eligible Institution. If signature is by attorney-in-fact, executor, administrator, Trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, other legal documents will be required. See Instructions 1 and 4 of the Letter of Transmittal. Payment for Common Shares tendered and accepted for payment pursuant to the Offer will be made only after receipt by the Depositary on or before the Expiration Date of a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other documents required by the Letter of Transmittal. If your Common Shares are evidenced by certificates, those certificates must be received by the Depositary on or prior to the Expiration Date. THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR COMMON SHARES, IS AT THE ELECTION AND RISK OF THE PARTY TENDERING COMMON SHARES. IF DOCUMENTS ARE SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. Procedures for Selling Group Members. If you are a selling group member, in order for you to tender any Common Shares pursuant to the Offer, you may place a confirmed wire order with VKFI. All confirmed wire orders used to tender Common Shares pursuant to this Offer must be placed on the Expiration Date only (wire orders placed on any other date will not be accepted by the Trust). Common Shares tendered by a wire order are deemed to be tendered when VKFI receives the order but subject to the condition subsequent that the settlement instructions, including (with respect to tendered Common Shares for which the selling group member is not the registered owner) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), any other documents required by the Letter of Transmittal and any Common Share certificates, are received by the Depository within three New York Stock Exchange trading days after receipt by VKFI of such order. Determinations of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of tenders will be determined by the Trust, in its sole discretion, whose determination shall be final and binding. The Trust reserves the absolute right to reject any or all tenders determined by it not to be in 6 7 appropriate form or the acceptance of or payment for which may, in the opinion of the Trust's counsel, be unlawful. The Trust also reserves the absolute right to waive any of the conditions of the Offer or any defect in any tender with respect to any particular Common Share(s) or any particular shareholder, and the Trust's interpretations of the terms and conditions of the Offer will be final and binding. Unless waived, any defects or irregularities in connection with tenders must be cured within such times as the Trust shall determine. Tendered Common Shares will not be accepted for payment unless the defects or irregularities have been cured within such time or waived. Neither the Trust, VKFI, the Depositary nor any other person shall be obligated to give notice of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give such notice. Federal Income Tax Withholding. To prevent backup federal income tax withholding equal to 31% of the gross payments made pursuant to the Offer, each shareholder who has not previously submitted a Form W-9 to the Trust or does not otherwise establish an exemption from such withholding must notify the Depositary of such shareholder's correct taxpayer identification number (or certify that such taxpayer is awaiting a taxpayer identification number) and provide certain other information by completing the Form W-9 enclosed with the Letter of Transmittal. Foreign shareholders who are resident aliens and who have not previously submitted a Form W-9, or other foreign shareholders who have not previously submitted a Form W-8, to the Trust must do so in order to avoid backup withholding. The Depositary will withhold 30% of the gross payments payable to a foreign shareholder unless the foreign shareholder has provided to the Depositary a form on which it claims eligibility for a reduced rate of withholding or establishes an exemption from withholding. (Exemption from backup withholding does not exempt a foreign shareholder from the 30% withholding). For this purpose, a foreign shareholder, in general, is a shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of the source of such income or (iv) a trust whose administration is subject to the primary jurisdiction of a United States court and which has one or more United States fiduciaries who have the authority to control all substantial decisions of the trust. The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to certificates or statements provided by the foreign shareholder concerning eligibility for a reduced rate of, or exemption from, withholding unless facts and circumstances indicate that reliance is not warranted. A foreign shareholder who has not previously submitted the appropriate certificates or statements with respect to a reduced rate of, or exemption from, withholding for which such shareholder may be eligible should consider doing so in order to avoid over-withholding. A foreign shareholder may be eligible to obtain a refund of tax withheld if such shareholder meets one of the three tests for capital gain or loss treatment described in Section 15 or is otherwise able to establish that no tax or a reduced amount of tax was due. For a discussion of certain other federal income tax consequences to tendering shareholders, see Section 15. 3. EARLY WITHDRAWAL CHARGE. The Depositary will impose an early withdrawal charge (the "Early Withdrawal Charge") on most Common Shares accepted for payment which have been held less than one year. The Early Withdrawal Charge will be imposed on a number of Common Shares accepted for payment from a record holder of Common Shares the value of which exceeds the aggregate value at the time the tendered Common Shares are accepted for payment of (a) all Common Shares owned by such holder that were purchased more than one year prior to such acceptance, (b) all Common Shares owned by such holder that were acquired through reinvestment of distributions, and (c) the increase, if any, of value of all other Common Shares owned by such holder (namely, those purchased within the one year preceding acceptance for payment) over the purchase price of such Common Shares. The Early Withdrawal Charge will be paid to VKFI on behalf of the holder of the Common Shares. In determining whether an Early Withdrawal Charge is payable, Common Shares accepted for payment pursuant to the Offer shall be deemed to be those Common 7 8 Shares purchased earliest by the Shareholder. Any Early Withdrawal Charge which is required to be imposed will be made in accordance with the following schedule.
EARLY YEAR OF REPURCHASE WITHDRAWAL AFTER PURCHASE CHARGE ------------------ ---------- First....................................................... 1.0% Second and following........................................ 0.0%
Exchanges. Tendering shareholders may elect to have the Depositary invest the cash proceeds from the tender of Common Shares of the Trust in contingent deferred sales charge shares ("Class C Shares") of certain open-end investment companies advised by either Van Kampen Investment Advisory Corp. or Van Kampen Asset Management Inc. and distributed by VKFI (such funds are collectively referred to as "VK Funds"), subject to certain limitations. The Early Withdrawal Charge will be waived for Common Shares tendered pursuant to this election, however, such Class C Shares immediately become subject to a contingent deferred sales charge schedule equivalent to the Early Withdrawal Charge schedule of the Trust. Thus, shares of such VK Funds may be subject to a contingent deferred sales charge upon a subsequent redemption from the VK Funds. The purchase of shares of such VK Fund will be deemed to have occurred at the time of the purchase of the Common Shares of the Trust for calculating the applicable contingent deferred sales charge. The prospectus for each VK Fund describes its investment objectives and policies. Shareholders can obtain a prospectus without charge by calling 1-800-341-2911 and should consider these objectives and policies carefully before making the election described above. Tendering shareholders may purchase Class C Shares of a VK Fund only if shares of such VK Fund are available for sale, and shareholders establishing a new Class C Share account of a VK Fund must invest net tender proceeds from Common Shares which have a value at or above the new account minimum of such VK Fund. An exchange is still deemed to be a tender of Common Shares causing a taxable event and may result in a taxable gain or loss for the tendering shareholders. A shareholder may make the election described above by completing the appropriate section on the Letter of Transmittal or by giving proper instructions to the shareholder's broker or dealer. Although this election to purchase Class C Shares of a VK Fund has been made available as a convenience to the Trust's shareholders, neither the Trust nor its Board of Trustees makes any recommendation as to whether shareholders should invest in shares of another VK Fund. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Common Shares made pursuant to the Offer will be irrevocable. You may withdraw Common Shares tendered at any time prior to the Expiration Date and, if the Common Shares have not yet been accepted for payment by the Trust, at any time after 12:00 Midnight Eastern Time on June 15, 2001. To be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at the address set forth on page 3 of this Offer to Purchase. Any notice of withdrawal must specify the name of the person having tendered the Common Shares to be withdrawn, the number of Common Shares to be withdrawn, and, if certificates representing such Common Shares have been delivered or otherwise identified to the Depositary, the name of the registered holder(s) of such Common Shares as set forth in such certificates if different from the name of the person tendering the Common Shares. If certificates have been delivered to the Depositary, then, prior to the release of such certificates, you must also submit the certificate numbers shown on the particular certificates evidencing such Common Shares and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Trust in its sole discretion, whose determination shall be final and binding. None of the Trust, VKFI, Van Kampen Investments Inc. ("VK Inc."), the Depositary or any other person is or will be obligated to give any notice of any defects or irregularities in any notice of withdrawal, and none of them will incur any liability for failure to give any such notice. Common Shares properly withdrawn shall not thereafter 8 9 be deemed to be tendered for purposes of the Offer. However, withdrawn Common Shares may be retendered by following the procedures described in Section 2 prior to the Expiration Date. 5. PAYMENT FOR SHARES. For purposes of the Offer, the Trust will be deemed to have accepted for payment (and thereby purchased) Common Shares which are tendered and not withdrawn when, as and if it gives oral or written notice to the Depositary of its acceptance of such Common Shares for payment pursuant to the Offer. Payment for Common Shares purchased pursuant to the Offer will be made by depositing the aggregate purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Trust and either transmitting payment directly to the tendering shareholders or, in the case of tendering shareholders electing to invest such proceeds in another VK Fund, transmitting payment directly to the transfer agent for purchase of Class C Shares of the designated VK Fund for the account of such shareholders. In all cases, payment for Common Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary, as required pursuant to the Offer, of a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), any certificates representing such Common Shares, if issued, and any other required documents. Certificates for Common Shares not purchased (see Sections 1 and 6), or for Common Shares not tendered included in certificates forwarded to the Depositary, will be returned promptly following the termination, expiration or withdrawal of the Offer, without expense to the tendering shareholder. The Trust will pay all transfer taxes, if any, payable on the transfer to it of Common Shares purchased pursuant to the Offer. If, however, payment of the purchase price is to be made to, or (in the circumstances permitted by the Offer) if unpurchased Common Shares are to be registered in the name of any person other than the registered holder, or if tendered certificates, if any, are registered or the Common Shares tendered are held in the name of any person other than the person signing the Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered holder or such other person) payable on account of the transfer to such person will be deducted from the Purchase Price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. Shareholders tendering Common Shares remain entitled to receive dividends declared on such shares up to the settlement date of the Offer. The Trust will not pay any interest on the Purchase Price under any circumstances. An Early Withdrawal Charge will be imposed on most Common Shares accepted for payment that have been held for less than one year. See Section 3. In addition, if certain events occur, the Trust may not be obligated to purchase Common Shares pursuant to the Offer. See Section 6. ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO HAS NOT PREVIOUSLY SUBMITTED A COMPLETED AND SIGNED FORM W-9 AND WHO FAILS TO COMPLETE FULLY AND SIGN THE FORM W-9 ENCLOSED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 2. 6. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Trust shall not be required to accept for payment, purchase or pay for any Common Shares tendered, and may terminate or amend the Offer or may postpone the acceptance for payment of, the purchase of and payment for Common Shares tendered, if at any time at or before the time of purchase of any such Common Shares, any of the following events shall have occurred (or shall have been determined by the Trust to have occurred) which, in the Trust's sole judgment in any such case and regardless of the circumstances (including any action or omission to act by the Trust), makes it inadvisable to proceed with the Offer or with such purchase or payment: (1) in the reasonable judgment of the Trustees, there is not sufficient liquidity of the assets of the Trust; (2) such transactions, if consummated, would (a) impair the Trust's status as a regulated investment company under federal income tax law (which would make the Trust a taxable entity, causing the Trust's taxable income to be taxed at the Trust level) or (b) result in a failure to comply with applicable asset coverage requirements; or (3) there is, in the Board of Trustees' reasonable judgment, any (a) material legal action or proceeding instituted or threatened challenging such transactions or otherwise materially adversely affecting the Trust, (b) suspension of or limitation on prices for trading securities generally on any United States national securities exchange or in the over-the-counter market, (c) declaration of a banking 9 10 moratorium by federal or state authorities or any suspension of payment by banks in the United States, (d) limitation affecting the Trust or the issuers of its portfolio securities imposed by federal or state authorities on the extension of credit by lending institutions, (e) commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States or (f) other event or condition which would have a material adverse effect on the Trust or the holders of its Common Shares if the tendered Common Shares are purchased. The foregoing conditions are for the Trust's sole benefit and may be asserted by the Trust regardless of the circumstances giving rise to any such condition (including any action or inaction by the Trust), and any such condition may be waived by the Trust in whole or in part, at any time and from time to time in its sole discretion. The Trust's failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts or circumstances; and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Trust concerning the events described in this Section 6 shall be final and shall be binding on all parties. If the Trust determines to terminate or amend the Offer or to postpone the acceptance for payment of or payment for Common Shares tendered, it will, to the extent necessary, extend the period of time during which the Offer is open as provided in Section 16. Moreover, in the event any of the foregoing conditions are modified or waived in whole or in part at any time, the Trust will promptly make a public announcement of such waiver and may, depending on the materiality of the modification or waiver, extend the Offer period as provided in Section 16. 7. PURPOSE OF THE OFFER. The Trust currently does not believe that an active secondary market for its Common Shares exists or is likely to develop. In recognition of the possibility that a secondary market may not develop for the Common Shares of the Trust, or, if such a market were to develop, the Common Shares might trade at a discount, the Trustees have determined that it would be in the best interest of its shareholders for the Trust to take action to attempt to provide liquidity to shareholders or to reduce or eliminate any future market value discount from NAV that might otherwise exist, respectively. To that end, the Trustees presently intend each quarter to consider making a tender offer to purchase Common Shares at their NAV. The purpose of this Offer is to attempt to provide liquidity to the holders of Common Shares. There can be no assurance that this Offer will provide sufficient liquidity to all holders of Common Shares that desire to sell their Common Shares or that the Trust will make any such tender offer in the future. NEITHER THE TRUST NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S COMMON SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER COMMON SHARES AND, IF SO, HOW MANY COMMON SHARES TO TENDER. 8. PLANS OR PROPOSALS OF THE TRUST. Except as set forth in this Section 8, the Trust has no present plans or proposals which relate to or would result in any extraordinary transaction such as a merger, reorganization or liquidation involving the Trust; any purchase, sale or transfer of a material amount of assets of the Trust other than in its ordinary course of business; any material changes in the Trust's present capitalization (except as resulting from the Offer or otherwise set forth herein); or any other material changes in the Trust's structure or business. The Trust's fundamental investment policies and restrictions give the Trust the flexibility to pursue its investment objective through a fund structure commonly known as a "master-feeder" structure. If the Trust converts to a master-feeder structure, the existing shareholders of the Trust would continue to hold their shares of the Trust and the Trust would become a feeder-fund of the master-fund. The value of a shareholder's shares would be the same immediately after any conversion as the value immediately before such conversion. Use of this master-feeder structure potentially would result in increased assets invested among the collective investment vehicle of which the Trust would be a part, thus allowing operating 10 11 expenses to be spread over a larger asset base, potentially achieving economies of scale. The Trust's Board of Trustees presently does not intend to affect any conversion to a master-feeder structure. 9. PRICE RANGE OF COMMON SHARES; DIVIDENDS. The Trust's NAV from April 12, 1999 through April 12, 2001 ranged from a high of $10.12 to a low of $8.67. On April 12, 2001, the NAV was $8.67. You may obtain current NAV quotations from VKFI by calling (800) 341-2911 between the hours of 7:00 A.M. and 7:00 P.M. Central Time, Monday through Friday, except holidays. NAV quotes also may be obtained through the ICI Pricing Service which is released each Friday evening and published by the Dow Jones Capital Markets Wire Service on each Friday; published in the New York Times on each Saturday; published in the Chicago Tribune on each Sunday; and published weekly in Barron's magazine. The Trust offers and sells its Common Shares to the public on a continuous basis through VKFI as principal underwriter. The Trust is not aware of any secondary market trading for the Common Shares. Dividends on the Common Shares are declared daily and paid monthly. Over the twelve month period preceding the commencement of the Offer, the Trust paid the following dividends per Common Share held for the entire respective dividend period:
DIVIDEND PAYMENT AMOUNT OF DIVIDEND DATE PER COMMON SHARE ---------------- ------------------ March 23, 2001............................................. $0.0610 February 23, 2001.......................................... $0.0665 January 25, 2001........................................... $0.0489 December 31, 2000.......................................... $0.017602938 December 22, 2000.......................................... $0.0665 November 24, 2000.......................................... $0.0665 October 25, 2000........................................... $0.0665 September 25, 2000......................................... $0.065693541 August 25, 2000............................................ $0.063999996 July 25, 2000.............................................. $0.0640 June 23, 2000.............................................. $0.0640 May 25, 2000............................................... $0.0640 April 25, 2000............................................. $0.0640
Shareholders tendering Common Shares remain entitled to receive dividends declared on such Common Shares up to the settlement date of the Offer. 10. INTEREST OF TRUSTEES AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE COMMON SHARES. As of April 12, 2001, the trustees and executive officers of the Trust as a group beneficially owned no Common Shares. In connection with the Trust's organization on December 19, 1997, VK Inc., an affiliate of the Trust's investment adviser, was issued 10,000 Common Shares for $100,000. The Trust has been informed that no trustee or executive officer or affiliate of the Trust intends to tender any Common Shares pursuant to the Offer. Except as set forth in this Section 10, based upon the Trust's records and upon information provided to the Trust by its trustees, executive officers and affiliates (as such term is used in the Securities Exchange Act of 1934), neither the Trust nor, to the best of the Trust's knowledge, any of the trustees or executive officers of the Trust, nor any affiliates of any of the foregoing, has effected any transactions in the Common Shares during the 60 day period prior to the date hereof. Except as set forth in this Offer to Purchase, neither the Trust nor, to the best of the Trust's knowledge, any of its affiliates, trustees or executive officers, is a party to any agreement, arrangement or understanding, whether or not legally enforceable, between the Trust, any of the Trust's executive officers or trustees, any person controlling the Trust or any officer or director of any corporation ultimately in control of the Trust and any other person with respect to any securities of the Trust. 11. CERTAIN EFFECTS OF THE OFFER. The purchase of Common Shares pursuant to the Offer will have the effect of increasing the proportionate interest in the Trust of shareholders who do not tender their Common 11 12 Shares. If you retain your Common Shares you will be subject to any increased risks that may result from the reduction in the Trust's aggregate assets resulting from payment for the tendered Common Shares (e.g., greater volatility due to decreased diversification and higher expenses). However, the Trust believes that since the Trust is engaged in a continuous offering of the Common Shares, those risks would be reduced to the extent new Common Shares of the Trust are sold. All Common Shares purchased by the Trust pursuant to the Offer will be held in treasury pending disposition. 12. SOURCE AND AMOUNT OF FUNDS. The total cost to the Trust of purchasing the full 30,914,257 Common Shares pursuant to the Offer would be approximately $268,026,608 (assuming a NAV of $8.67 on the Expiration Date). The Trust anticipates that the Purchase Price for any Common Shares acquired pursuant to the Offer will first be derived from cash on hand, such as proceeds from sales of new Common Shares of the Trust and specified pay-downs from the participation interests in senior corporate loans which it has acquired, and then from the proceeds from the sale of cash equivalents held by the Trust. The Trust may from time to time enter into one or more credit agreements to provide the Trust with additional liquidity to meet its obligations to purchase Common Shares pursuant to any tender offer it may make. The Trust currently is a party to a credit agreement which will terminate by its terms on September 12, 2001 (described in more detail below). The Trust has never borrowed any amounts available under such credit arrangements in the past. If, in the judgment of the Trustees, there is not sufficient liquidity of the assets of the Trust to pay for tendered Common Shares, the Trust may terminate the Offer. See Section 6. The Trust has entered into a Third Amendment and Restatement of Credit Agreement, dated as of September 13, 2000 (the "Credit Agreement"), among the Trust and Van Kampen Prime Rate Income Trust (the "Co-Borrower") as borrowers (collectively the "Borrowers"), the banks party thereto (the "Financial Institutions"), and Bank of America, N.A., ("BofA"), as agent, pursuant to which the Financial Institutions have committed to provide a credit facility of up to $500,000,000 (subject to an optional commitment increase upon approval of each Borrower's Board of Trustees and the Financial Institutions) (the "Credit Facility Commitment") to the Trust and the Co-Borrower, which is not secured by the assets of the Trust or Co-Borrower or other collateral. As of the date hereof, neither the Trust nor the Co-Borrower has drawn any of the funds available under the Credit Agreement. The proceeds of any amounts borrowed under the Credit Agreement may be used to provide the Trust with additional liquidity to meet its obligations to purchase Common Shares pursuant to any tender offer that it may make. The Credit Agreement has terms and conditions substantially similar to the following: a. Each of the Trust and the Co-Borrower is entitled to borrow money ("Loans") from the Financial Institutions in amounts which in the aggregate do not exceed the amount of the Credit Facility Commitment, provided that the aggregate amount of Loans to the Trust or the Co-Borrower on an individual basis cannot exceed twenty-five percent (25%) of the net asset value of the Trust or Co-Borrower, as the case may be (defined as total assets minus total liabilities minus assets subject to liens). b. Loans made under the Credit Agreement, if any, will bear interest daily at the option of the Trust or Co-Borrower, as applicable, (i) at a rate per annum equal to the federal funds rate from time to time plus 0.50%, or (ii) at a rate per annum equal to a reserve-adjusted interbank offered rate offered by BofA's Grand Cayman Branch ("IBOR") plus 0.50% per annum. Each of the Trust and Co-Borrower will bear the expenses of any borrowings attributable to it under the Credit Agreement. Such interest will be due, in arrears, on the outstanding principal amount of each Loan (i) as to any federal funds rate Loan on the last business day of each calendar quarter and (ii) as any offshore rate Loan, from one (1) day to sixty (60) days from the date of the Loan, as selected by the Trust or Co-Borrower, as applicable, in advance. Interest on the outstanding principal of the Loans will also be due on the date of any prepayment of any offshore rate Loan and on demand during the existence of an event of default under the Credit Agreement payable by the borrower subject to such event of default. Overdue payments of principal and interest will bear interest, payable upon demand, at a penalty rate. No Loan shall be outstanding for a period of more than sixty (60) days, and there shall be no more than three Interest Periods as defined in the Credit Agreement in effect. 12 13 c. The Trust paid arrangement fees and expenses to BofA or its affiliates on the date the Credit Agreement was executed. In addition, during the term of the Credit Agreement, the Trust is obligated to pay its pro rata share (based on the relative net assets of the Trust and Co-Borrower) of a commitment fee computed at the rate of 0.09% per annum on the average daily unused amount of the facility. d. The principal amount of any Loan made under the Credit Agreement, if any, is required to be paid sixty (60) days from the date of the Loan. Each of the Trust and Co-Borrower is entitled to prepay a Loan made to it in multiples of $1,000,000, provided that the Trust or Co-Borrower, as applicable, gives sufficient notices of prepayment. On the Commitment Termination Date (as defined below), all outstanding principal and accrued interest under the Credit Agreement will be due and payable in full. e. The Credit Agreement provides for BofA to elect to make swingline loans to each Borrower in amounts which in the aggregate do not exceed $25,000,000, provided that the aggregate amount of such swingline loans to the Trust or the Co-Borrower on an individual basis cannot exceed the lesser of (a) BofA's commitment under the Credit Agreement, (b) the combined commitment of all Financial Institutions under the Credit Agreement or (c) twenty-five percent (25%) of the net asset value of the Trust or Co-Borrower, as the case may be. Such swingline loans are due no later than the seventh business day following the day the swingline loan was made, bear interest at a rate per annum equal to the federal funds rate from time to time plus 0.50% due upon the repayment of such loan and, if unpaid when due or the Borrower otherwise elects, may convert to a traditional federal funds rate Loan under the Credit Agreement funded by BofA and all of the other Financial Institutions in accordance with the Credit Agreement's commitment schedule. f. The drawdown of the initial Loan or swingline loan, if any, under the Credit Agreement is subject to certain conditions, including, among other things, the Trust and Co-Borrower, as applicable, executing and delivering a promissory note made payable to the order of each Financial Institution, in the form attached to the Credit Agreement (the "Promissory Notes"). The drawdown of each Loan or swingline loan, if any, is further conditioned upon the satisfaction of additional conditions, including, without limitation, (i) the providing of notice with respect to the Loan; (ii) the asset coverage ratio for the applicable borrower being at least 4 to 1; (iii) there being no default or event of default in existence with respect to the applicable borrower; (iv) the representations and warranties with respect to the applicable borrower made in the Credit Agreement continuing to be true; and (v) there being no Loans outstanding with respect to the applicable borrower for more than sixty (60) days on the day preceding the proposed borrowing. g. The Credit Agreement contains various affirmative and negative covenants of the Trust and Co-Borrower, including, without limitation, obligations: (i) to provide periodic financial information; (ii) with limited exceptions, to not consolidate with or merge into any other entity or have any other entity merge into it and to not sell all or any substantial part of its assets; (iii) to continue to engage in its current type of business and to maintain its existence as a business trust; (iv) to comply with applicable laws, rules and regulations; (v) to maintain insurance on its property and business; (vi) to limit the amount of its debt based upon 25% of the net asset value of the applicable borrower; and (vii) to not create any lien on any of its assets, with certain exceptions. h. The Credit Agreement also contains various events of default (with certain specified grace periods), including, without limitation: (i) failure to pay when due any amounts required to be paid to the Financial Institutions under the Credit Agreement or the Promissory Notes; (ii) any material misrepresentations in the Credit Agreement or documents delivered to the Financial Institutions; (iii) failure to observe or perform certain terms, covenants and agreements contained in the Credit Agreement, the Promissory Notes or other documents delivered to the Financial Institutions; (iv) failure to comply with the Trust's or Co-Borrower's, as applicable, fundamental investment policies or investment restrictions; (v) failure to comply by the Trust or Co-Borrower, as applicable, with all material provisions of the Investment Company Act of 1940; (vi) the voluntary or involuntary bankruptcy of the Trust or Co-Borrower, as applicable; (vii) the entry of judgments for the payment 13 14 of money in excess of $5,000,000 in the aggregate which remains unsatisfied or unstayed for a period of 30 days; and (viii) a change in control of the Trust's or Co-Borrower's, as applicable, investment adviser. i. The credit facility provided pursuant to the Credit Agreement will terminate on September 12, 2001 (the "Commitment Termination Date"), unless extended or earlier terminated pursuant to the terms thereof, and all accrued interest and principal will be due thereon. Pursuant to guidelines applicable to the Trust and the Co-Borrower, any Loans to the Trust and Co-Borrower will be made on a first-come, first-serve basis. If, at any time, the demand for borrowings by the Trust and Co-Borrower exceeds amounts available under the Credit Agreement, such borrowing will be allocated on a fair and equitable basis, taking into consideration factors, including without limitation, relative net assets of the Trust and Co-Borrower, amounts requested by the Trust and Co-Borrower, and availability of other sources of cash to meet each parties needs. The Trust intends to repay any Loans under the Credit Agreement from proceeds from the specified pay-downs from the interests in Senior Loans (as defined below) which will be acquired and from proceeds from the sale of Common Shares. The foregoing descriptions of the Credit Agreement do not purport to be complete or final, and are qualified in their entirety by reference to the Credit Agreement included as Exhibit (b)(1) to the Issuer Tender Offer Statement on Schedule TO of the Trust. See Section 14. 13. CERTAIN INFORMATION ABOUT THE TRUST. The Trust was organized as a Massachusetts business trust on December 19, 1997 and is a non-diversified, closed-end management investment company under the Investment Company Act of 1940. The Trust's investment objective is to provide a high level of current income, consistent with preservation of capital. The Trust seeks to achieve its investment objective by investing in a professionally managed portfolio of interests primarily in floating or variable rate senior loans ("Senior Loans") to corporations, partnerships and other entities ("Borrowers") which operate in a variety of industries and geographical regions. Although the Trust's NAV will vary, the Trust's policy of acquiring interests in floating or variable rate Senior Loans is expected to minimize fluctuations in the Trust's NAV as a result of changes in interest rates. Senior Loans in which the Trust will invest generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally the prime rate offered by one or more major United States banks ("Prime Rate"), the London Inter-Bank Offered Rate ("LIBOR"), the certificate of deposit rate or other base lending rates used by commercial lenders. The Senior Loans in the Trust's portfolio at all times have a dollar-weighted average time until next interest rate redetermination of 90 days or less. As a result, as short-term interest rates increase, the interest payable to the Trust from its investments in Senior Loans should increase, and as short-term interest rates decrease, the interest payable to the Trust on its investments in Senior Loans should decrease. The amount of time required to pass before the Trust realizes the effects of changing short-term market interest rates on its portfolio varies with the dollar-weighted average time until the next interest rate redetermination on securities in the Trust's portfolio. The Trust has registered as a "non-diversified" investment company so that, subject to its investment restrictions, it is able to invest more than 5% of the value of its assets in the obligations of any single issuer, including Senior Loans of a single Borrower or participations in Senior Loans purchased from a single lender. To the extent the Trust invests a relatively high percentage of its assets in obligations of a limited number of issuers, the Trust will be more susceptible than a more widely diversified investment company to any single corporate, economic, political or regulatory occurrence. The Trust is advised by Van Kampen Investment Advisory Corp. (the "Adviser") pursuant to an Investment Advisory Agreement under which the Trust accrues daily and pays monthly to the Adviser an investment management fee based on the per annum rate of: 0.95% of the first $4.0 billion of average daily net assets of the Trust, 0.90% on the next $3.5 billion, 0.875% on the next $2.5 billion and 0.85% on average daily net assets over $10.0 billion. The Trust is a party to an Administration Agreement with VK Inc. Under the Administration Agreement, the Trust pays VK Inc. a monthly fee based on the per annum rate of 0.25% of the 14 15 Trust's average daily net assets. The Trust is a party to an Offering Agreement with VKFI. Under the Offering Agreement, the Trust offers and sells its Common Shares to the public on a continuous basis through VKFI as principal underwriter. The Adviser, VK Inc. and VKFI are indirect wholly owned subsidiaries of Morgan Stanley Dean Witter & Co. VKFI compensates broker-dealers participating in the continuous offering of the Trust's Common Shares at a rate of 0.75% of the dollar value of Common Shares purchased from the Trust by such broker-dealers. VKFI also compensates broker-dealers who have entered into sales agreements with VKFI at an annual rate, paid quarterly, equal to an amount up to 0.75% of the value of Common Shares sold by each respective broker-dealer and remaining outstanding after one year from the date of their original purchase. VKFI also may provide, from time to time, additional cash incentives to broker-dealers which employ representatives who sell a minimum dollar amount of the Common Shares. All such compensation is or will be paid by VKFI out of its own assets, and not out of the assets of the Trust. The compensation paid to such broker-dealers and to VKFI, including the compensation paid at the time of purchase, the quarterly payments, any additional incentives paid from time to time and the Early Withdrawal Charge, if any, will not in the aggregate exceed applicable limitations. In addition, the Trust may make service fee payments pursuant to the Trust's Service Plan for personal services and/or the maintenance of shareholder accounts to VKFI and broker-dealers and other persons in amounts not exceeding 0.25% of the Trust's average daily net assets for any fiscal year. The Trustees have initially implemented the Service Plan by authorizing service fee payments to VKFI and broker-dealers and other persons in amounts not expected to exceed 0.15% of the Trust's average daily net assets. The principal executive offices of the Trust are located at 1 Parkview Plaza, Oakbrook Terrace, IL 60181-5555. Reference is hereby made to Section 9 of this Offer to Purchase and the financial statements attached hereto as Exhibit A which are incorporated herein by reference. 14. ADDITIONAL INFORMATION. The Trust has filed an Issuer Tender Offer Statement on Schedule TO with the Securities and Exchange Commission (the "Commission") which includes certain additional information relating to the Offer. Such material may be inspected and copied at prescribed rates at the Commission's public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Jacob K. Javits Federal Building, 26 Federal Plaza, New York, New York 10278; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may also be obtained by mail at prescribed rates from the Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Issuer Tender Offer Statement on Schedule TO is available along with other related materials at the Commission's internet website (http://www.sec.gov). 15. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a general summary of the federal income tax consequences of a sale of Common Shares pursuant to the Offer. Shareholders should consult their own tax advisers regarding the tax consequences of a sale of Common Shares pursuant to the Offer, as well as the effects of state, local and foreign tax laws and any proposed tax law changes. The sale of Common Shares pursuant to the Offer will be a taxable transaction for federal income tax purposes, either as a "sale or exchange," or under certain circumstances, as a "dividend." Under Section 302(b) of the Internal Revenue Code of 1986, as amended (the "Code"), a sale of Common Shares pursuant to the Offer generally will be treated as a "sale or exchange" if the receipt of cash by the shareholder or by the Depositary on behalf of the shareholder, in the case of a tendering shareholder electing to invest cash proceeds from the tender of Common Shares in Class C Shares of a designated VK Fund: (a) results in a "complete redemption" of the shareholder's interest in the Trust, (b) is "substantially disproportionate" with respect to the shareholder, or (c) is "not essentially equivalent to a dividend" with respect to the shareholder. In determining whether any of these tests has been met, Common Shares actually owned, as well as Common Shares considered to be owned by the shareholder by reason of certain constructive ownership rules set forth in Section 318 of the Code, generally must be taken into account. If any of these three tests for "sale or exchange" treatment is met, a shareholder will recognize gain or loss equal to the difference between the amount of cash received by the shareholder or by the Depositary on behalf of the shareholder, in the case of a tendering shareholder electing to invest cash proceeds from the tender of Common Shares in Class C Shares of a designated VK Fund, pursuant to the Offer and the tax basis of the Common Shares sold. If such 15 16 Common Shares are held as a capital asset, the gain or loss will be a capital gain or loss. The maximum tax rate applicable to net capital gains recognized by individuals and other non-corporate taxpayers is (i) the same as the maximum ordinary income rate for capital assets held for one year or less or (ii) 20% for capital assets held for more than one year. The maximum long-term capital gains rate for corporations is 35%. If none of the tests set forth in Section 302(b) of the Code is met, amounts received by a shareholder or by the Depositary on behalf of a shareholder, as the case may be, who sells Common Shares pursuant to the Offer will be taxable to the shareholder as a "dividend" to the extent of such shareholder's allocable share of the Trust's current or accumulated earnings and profits, and the excess of such amounts received over the portion that is taxable as a dividend would constitute a non-taxable return of capital (to the extent of the shareholder's tax basis in the Common Shares sold pursuant to the Offer), and any amounts in excess of the shareholder's tax basis would constitute taxable gain. Thus, a shareholder's tax basis in the Common Shares sold will not reduce the amount of the "dividend." Any remaining tax basis in the Common Shares tendered to the Trust will be transferred to any remaining Common Shares held by such shareholder. In addition, if a tender of Common Shares is treated as a "dividend" to a tendering shareholder, a constructive dividend under Section 305(c) of the Code may result to a non-tendering shareholder whose proportionate interest in the earnings and assets of the Trust has been increased by such tender. The Trust believes, however, that the nature of the repurchase will be such that a tendering shareholder will qualify for "sale or exchange" treatment (as opposed to "dividend" treatment). 16. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Trust reserves the right, at any time and from time to time, to extend the period of time during which the Offer is pending by making a public announcement thereof. In the event that the Trust so elects to extend the tender period, the Purchase Price for the Common Shares tendered will be determined as of 5:00 P.M. Eastern Time on the Expiration Date, as extended, and the Offer will terminate as of 12:00 Midnight Eastern Time on the Expiration Date, as extended. During any such extension, all Common Shares previously tendered and not purchased or withdrawn will remain subject to the Offer. The Trust also reserves the right, at any time and from time to time up to and including the Expiration Date, to (a) terminate the Offer and not to purchase or pay for any Common Shares or, subject to applicable law, postpone payment for Common Shares upon the occurrence of any of the conditions specified in Section 6, and (b) amend the Offer in any respect by making a public announcement thereof. Such public announcement will be issued no later than 9:00 A.M. Eastern Time on the next business day after the previously scheduled Expiration Date and will disclose the approximate number of Common Shares tendered as of that date. Without limiting the manner in which the Trust may choose to make a public announcement of extension, termination or amendment, except as provided by applicable law, the Trust shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a release to the Dow Jones News Service. If the Trust materially changes the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Trust will extend the Offer to the extent required by Rule 13e-4 promulgated under the Exchange Act. These rules require that the minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer (other than a change in price or a change in percentage of securities sought) will depend on the facts and circumstances, including the relative materiality of such terms or information. If (i) the Trust increases or decreases the price to be paid for Common Shares, or the Trust increases the number of Common Shares being sought by an amount exceeding 2% of the outstanding Common Shares, or the Trust decreases the number of Common Shares being sought and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given, the Offer will be extended at least until the expiration of such period of ten business days. 17. MISCELLANEOUS. The Offer is not being made to, nor will the Trust accept tenders from, owners of Common Shares in any jurisdiction in which the Offer or its acceptance would not comply with the securities or Blue Sky laws of such jurisdiction. The Trust is not aware of any jurisdiction in which the making of the Offer or the tender of Common Shares would not be in compliance with the laws of such jurisdiction. However, the Trust reserves the right to exclude holders in any jurisdiction in which it is asserted that the 16 17 Offer cannot lawfully be made. So long as the Trust makes a good-faith effort to comply with any state law deemed applicable to the Offer, the Trust believes that the exclusion of holders residing in such jurisdiction is permitted under Rule 13e-4(f)(9) promulgated under the Exchange Act. In any jurisdiction the securities or Blue Sky laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on the Trust's behalf by one or more registered brokers or dealers licensed under the laws of such jurisdiction. April 20, 2001 VAN KAMPEN SENIOR FLOATING RATE FUND 17 18 BY THE NUMBERS YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited) THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF THE REPORTING PERIOD.(1)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE VARIABLE RATE** SENIOR LOAN INTERESTS 84.1% AEROSPACE/DEFENSE 2.6% $ 3,198 Aerostructures Corp., Term Loan............... NR BB- 12/31/03 $ 3,167,829 3,723 Decrane Finance Co., Term Loan............... B2 B+ 06/30/05 3,568,002 9,574 EG&G Technical Services, Inc., Term Loan......... B1 NR 08/20/07 9,438,308 2,146 Hexcel Corp., Term Loan.................... Ba3 BB- 09/15/05 2,116,440 7,432 Stellex Technologies, Inc., Term Loan (b)..... Caa2 NR 09/30/06 6,391,364 1,990 Vought Aircraft Industries, Inc., Term Loan.................... NR NR 07/30/07 to 06/30/08 1,980,879 -------------- 26,662,822 -------------- AUTOMOTIVE 5.3% 3,970 AMCAN Technologies, Inc., Term Loan......... NR NR 03/28/07 3,961,114 963 Breed Technologies, Inc., Term Loan (a)..... NR NR 12/20/04 962,999 4,685 Exide Corp., Term Loan.. Ba3 B+ 03/18/05 4,278,586 5,000 Federal-Mogul Corp., Term Loan............... B2 B+ 02/24/04 4,975,000 12,515 J.L. French Automotive Castings, Inc., Term Loan.................... B1 B+ 10/21/06 11,814,874 7,500 Meridian Automotive Systems, Inc., Term Loan.................... B1 BB- 03/31/07 7,505,424 9,850 Metalforming Technologies, Inc., Term Loan.................... NR NR 06/30/06 9,198,343
See Notes to Financial Statements A-1 19 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE AUTOMOTIVE (CONTINUED) $ 3,980 Polypore, Inc., Term Loan.................... Ba3 B+ 12/31/06 $ 3,997,114 7,155 Safelite Glass Corp., Term Loan (a)........... NR NR 09/30/07 7,154,506 -------------- 53,847,960 -------------- BEVERAGE, FOOD & TOBACCO 2.0% 18,716 Agrilink Foods, Inc., Term Loan............... B1 B+ 09/30/04 to 09/30/05 17,160,154 3,721 B & G Foods, Inc., Term Loan.................... B1 B+ 03/31/06 3,463,933 -------------- 20,624,087 -------------- BROADCASTING--CABLE 0.6% 6,975 Fairchild Corp., Term Loan.................... Ba3 BB- 04/30/06 6,556,335 -------------- BROADCASTING--DIVERSIFIED 1.4% 10,000 Comcorp Broadcasting, Inc., Term Loan......... NR NR 06/30/07 8,400,000 2,000 Emmis Communications Corp., Term Loan........ Ba2 B+ 08/31/09 2,005,312 4,550 White Knight Broadcasting, Inc., Term Loan.................... NR NR 06/30/07 3,822,000 -------------- 14,227,312 -------------- BROADCASTING--TELEVISION 0.8% 7,920 Quoram Broadcasting, Inc., Term Loan......... NR NR 09/30/07 7,926,605 566 Sinclair Broadcast Group, Inc., Term Loan.................... Ba2 BB- 09/15/05 554,450 -------------- 8,481,055 -------------- BUILDINGS & REAL ESTATE 1.1% 4,904 Builders Firstsource, Inc., Term Loan......... NR BB- 12/30/05 4,927,707 5,412 Corrections Corp. of America, Term Loan...... B3 B 12/31/02 4,221,481 1,491 Crescent Real Estate Equities Co., Term Loan.................... NR NR 02/01/04 1,494,885 -------------- 10,644,073 --------------
See Notes to Financial Statements A-2 20 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE CHEMICALS, PLASTICS & RUBBER 4.9% $ 4,975 Applied Tech Management Corp., Term Loan........ B1 NR 04/30/07 $ 4,953,670 4,938 Georgia Gulf Corp., Term Loan.................... Ba1 BBB- 11/12/06 4,955,329 4,628 Huntsman Corp., Term Loan.................... Ba2 NR 09/30/03 to 12/31/05 4,534,187 1,507 Huntsman Corp., Revolving Credit Agreement............... Ba2 NR 12/31/02 1,462,784 3,910 Huntsman ICI Chemicals, LLC, Term Loan.......... Ba3 BB 06/30/07 to 06/30/08 3,921,343 5,803 Lyondell Chemical Co., Term Loan............... Ba3 NR 06/30/05 to 05/17/06 5,909,532 4,950 MetoKote Corp., Term Loan.................... NR NR 11/02/05 4,919,070 4,945 Nutrasweet Acquisition Corp., Term Loan........ Ba3 NR 05/25/07 to 05/25/09 4,917,549 2,978 OM Group, Inc., Term Loan.................... NR NR 03/31/07 2,990,527 8,000 Pioneer America Acquisition Corp., Term Loan (a)................ Caa1 D 12/31/06 2,800,000 5,437 Sterling Pulp Chemicals, Inc., Term Loan......... B3 BB- 06/30/05 5,347,168 5,825 West American Rubber Co., Term Loan.......... NR NR 06/30/05 to 12/30/05 3,494,751 -------------- 50,205,910 -------------- CONSTRUCTION MATERIAL 1.9% 875 Dayton Superior Corp., Term Loan............... Ba3 BB- 06/01/08 878,281 6,194 Flextek Components, Inc., Term Loan (a)..... NR NR 08/31/03 2,229,856 10,192 Magnatrax Corp., Term Loan.................... NR NR 11/15/05 10,168,581 5,970 Washington Group International, Inc., Term Loan............... NR BBB- 07/07/07 5,949,481 -------------- 19,226,199 --------------
See Notes to Financial Statements A-3 21 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE CONTAINERS, PACKAGING & GLASS 3.7% $10,000 LLS Corp., Term Loan.... B1 B+ 07/31/06 $ 9,971,880 14,775 Nexpak Corp., Term Loan.................... NR NR 12/31/05 to 12/31/06 13,775,477 5,000 Pliant Corp., Term Loan.................... B2 BB- 05/31/08 4,772,362 3,891 Stone Container Corp., Term Loan............... Ba3 B+ 10/01/03 3,907,715 4,975 Tekni-Plex, Inc., Term Loan.................... Ba3 B+ 06/26/08 4,875,500 -------------- 37,302,934 -------------- DIVERSIFIED MANUFACTURING 1.0% 7,491 Citation Corp., Term Loan.................... NR B+ 12/01/07 7,355,296 2,431 Mueller Group, Inc., Term Loan............... B1 B+ 08/16/07 2,441,619 -------------- 9,796,915 -------------- ECOLOGICAL 0.4% 3,467 Allied Waste Industries, Inc., Term Loan......... Ba3 BB 07/23/06 to 07/23/07 3,413,111 3,143 Safety-Kleen Corp., Term Loan (a) (b)............ NR NR 04/03/05 to 04/03/06 958,549 -------------- 4,371,660 -------------- ELECTRONICS 4.1% 838 Audio Visual Services Corp., Term Loan........ NR NR 10/01/01 519,591 1,118 Audio Visual Services Corp., Revolving Credit Agreement............... NR NR 10/01/01 693,188 5,334 Dynamic Details, Inc., Term Loan............... B1 B+ 04/22/05 5,310,270 4,500 Kinetic Group, Inc., Term Loan............... Ba3 B- 02/28/06 4,501,047 9,781 Stratus Computer, Inc., Term Loan............... NR NR 02/26/05 9,761,599 5,000 Stream International Holdings, Inc., Term Loan.................... NR NR 12/31/06 4,968,750 5,896 Superior Telecom, Inc., Term Loan............... B2 B+ 11/27/05 5,350,891
See Notes to Financial Statements A-4 22 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE ELECTRONICS (CONTINUED) $ 2,488 Veridian Corp., Term Loan.................... Ba3 BB- 08/24/06 $ 2,499,373 7,993 Viasystems, Inc., Term Loan.................... B1 BB- 03/31/07 7,959,362 -------------- 41,564,071 -------------- ENTERTAINMENT & LEISURE 2.6% 9,860 Aspen Marketing Group, Term Loan............... NR NR 06/30/06 9,773,410 10,882 Fitness Holdings Worldwide, Inc., Term Loan.................... NR B 11/02/06 to 11/02/07 10,544,716 4,000 Six Flags Theme Parks, Inc., Term Loan......... Ba2 BB- 09/30/05 4,027,748 2,615 True Temper, Inc., Term Loan.................... B1 BB- 09/30/05 2,546,271 -------------- 26,892,145 -------------- FARMING & AGRICULTURE 0.3% 3,250 The Scotts Co., Term Loan.................... Ba3 BB 12/31/07 3,271,531 -------------- FINANCE 2.2% 2,305 Bridge Information Systems, Inc., Term Loan (a) (c)................. NR NR 05/29/05 368,790 16,788 Outsourcing Solutions, Term Loan............... B2 BB- 06/01/06 16,395,797 5,715 Rent-A-Center, Inc., Term Loan............... Ba3 BB- 01/31/06 to 01/31/07 5,659,967 -------------- 22,424,554 -------------- GROCERY 0.5% 4,990 The Pantry, Inc., Term Loan.................... B1 BB- 01/31/06 5,004,963 -------------- HEALTHCARE 3.9% 7,500 AMN Healthcare, Inc., Term Loan............... NR NR 03/31/05 7,428,511 589 Community Health Systems, Inc., Term Loan.................... NR NR 12/31/05 584,300 1,000 InteliStaf Group, Inc., Term Loan............... NR NR 10/31/07 991,281
See Notes to Financial Statements A-5 23 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE HEALTHCARE (CONTINUED) $ 8,014 LifePoint Hospitals, Inc., Term Loan......... B1 B+ 11/11/05 $ 8,050,182 4,919 Unilab Corp., Term Loan.................... B1 B+ 11/23/06 4,937,758 18,119 Vencor, Inc., Term Loan (a) (b)................. NR NR 01/15/05 17,394,520 -------------- 39,386,552 -------------- HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER PRODUCTS 1.2% 8,436 Formica Corp., Term Loan.................... B1 B+ 04/30/06 8,090,423 16,043 Imperial Home Decor Group, Inc., Term Loan (a) (b)................. NR NR 03/12/04 to 03/13/06 1,331,582 5,355 Imperial Home Decor Group, Inc., Revolving Credit Agreement (a) (b)................. NR NR 03/12/04 444,450 873 Sleepmaster, LLC, Term Loan.................... B1 BB- 12/31/06 872,843 1,500 Targus Group International, Inc., Term Loan............... NR NR 08/31/06 1,491,552 -------------- 12,230,850 -------------- HOTELS, MOTELS, INNS & GAMING 2.9% 9,947 Aladdin Gaming, LLC, Term Loan............... B2 NR 03/31/07 8,057,368 2,494 Autotote Corp., Term Loan.................... B1 B+ 09/30/07 2,504,331 10,000 Extended Stay America, Inc., Term Loan......... Ba3 NR 06/30/07 10,046,430 3,474 Isle of Capri Casinos, Inc., Term Loan......... Ba2 BB- 03/02/06 to 03/02/07 3,486,235 5,473 Las Vegas Sands, Inc., Term Loan............... B2 B+ 06/30/04 5,483,615 -------------- 29,577,979 -------------- INSURANCE 0.5% 4,975 Brera GAB Robins, Inc., Term Loan............... NR NR 12/01/05 4,654,579 --------------
See Notes to Financial Statements A-6 24 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE MACHINERY 3.5% $ 2,993 Alliance Laundry Systems, LLC, Term Loan.................... B1 B+ 06/30/05 $ 2,921,428 5,000 Ashtead Group, PLC, Term Loan.................... NR NR 06/01/07 4,946,875 7,250 Gleason Corp., Term Loan.................... NR NR 02/18/08 7,280,702 15,000 Ocean Rig ASA--(Norway), Term Loan............... NR NR 06/01/08 14,116,988 3,190 Terex Corp., Term Loan.. Ba3 BB- 03/06/06 3,186,177 2,989 Weigh-Tronix, LLC, Term Loan.................... NR NR 06/30/07 2,970,075 -------------- 35,422,245 -------------- MEDICAL PRODUCTS & SUPPLIES 4.1% 10,000 Alliance Imaging, Inc., Term Loan............... B1 NR 11/02/07 to 11/02/08 9,858,330 6,300 Charles River Laboratories, Inc., Term Loan.................... Ba3 BB- 09/29/07 6,324,839 14,849 Dade Behring, Inc., Term Loan.................... NR B 06/30/06 to 06/30/07 10,691,457 9,925 National Nephrology Associates, Inc., Term Loan.................... B1 B+ 12/31/05 9,866,075 5,136 Stryker Corp., Term Loan.................... Ba1 BBB- 12/04/05 5,163,941 -------------- 41,904,642 -------------- MINING, STEEL, IRON & NON-PRECIOUS METALS 1.9% 15,689 Ispat Inland, Term Loan.................... Ba3 BB- 07/16/05 to 07/16/06 11,296,142 2,695 P&L Coal Holdings Corp., Term Loan............... Ba2 NR 06/30/06 2,695,760 4,950 UCAR International, Inc., Term Loan......... Ba3 BB- 12/30/07 4,895,277 -------------- 18,887,179 --------------
See Notes to Financial Statements A-7 25 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE NON-DURABLE CONSUMER PRODUCTS 1.5% $ 8,072 American Marketing Industries, Inc., Term Loan.................... NR NR 11/30/04 to 11/30/05 $ 7,518,137 992 American Safety Razor Co., Term Loan.......... B1 B+ 04/30/07 988,734 1,636 GFSI, Inc., Term Loan... Ba3 NR 03/31/04 1,609,882 4,939 Norcorp, Inc., Term Loan.................... NR NR 05/30/06 to 11/30/06 4,906,196 -------------- 15,022,949 -------------- PERSONAL & MISCELLANEOUS SERVICES 1.5% 2,466 Coinmach Laundry Corp., Term Loan............... NR BB- 12/31/04 2,405,668 11,953 DIMAC Corp., Term Loan (b)..................... NR NR 06/30/06 to 12/30/06 6,215,556 414 DIMAC Corp., Debtor in Possession (b).......... NR NR 03/31/01 414,208 9,454 Telespectrum Worldwide, Inc., Term Loan......... NR NR 12/31/01 to 12/31/03 6,618,034 -------------- 15,653,466 -------------- PHARMACEUTICALS 0.1% 988 Bergen Brunswig Corp., Term Loan............... NR BB 03/31/06 989,282 -------------- PRINTING & PUBLISHING 7.0% 4,974 21st Century Newspapers, Term Loan............... NR NR 09/15/05 4,949,552 4,963 American Reprographics Co., Term Loan.......... NR NR 03/31/08 4,986,212 4,873 Check Printers, Inc., Term Loan............... NR NR 06/30/05 4,761,180 8,500 Commerce Connect Media, Inc., Term Loan......... NR NR 12/31/07 8,432,260 9,900 Haights Cross Communications, LLC, Term Loan............... B2 B+ 12/10/06 9,323,981 4,975 Liberty Group Operating, Inc., Term Loan......... B1 B 03/31/07 4,984,328 4,888 Medical Arts Press, Inc., Term Loan......... NR NR 05/16/06 4,910,828
See Notes to Financial Statements A-8 26 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE PRINTING & PUBLISHING (CONTINUED) $ 6,396 Penton Media, Inc., Term Loan.................... Ba3 BB- 06/30/07 $ 6,235,462 5,000 PRIMEDIA, Inc., Term Loan.................... NR BB- 07/31/04 4,992,190 4,026 TWP, Inc., Term Loan.... Ba3 B+ 10/01/04 3,911,199 5,951 Vertis, Inc., Term Loan.................... B1 BB- 12/06/08 5,847,302 5,985 Vutek, Inc., Term Loan.................... NR NR 06/30/07 5,932,815 2,031 Ziff-Davis Media, Inc., Term Loan............... Ba3 B+ 03/31/07 2,028,402 -------------- 71,295,711 -------------- RESTAURANTS & FOOD SERVICE 1.5% 2,600 AFC Enterprises, Inc., Term Loan............... Ba2 BB- 06/30/02 2,590,513 7,500 Captain D's, Inc., Term Loan.................... B2 B+ 12/31/01 6,862,528 1,384 Carvel Corp., Term Loan.................... NR NR 06/30/01 1,365,625 4,344 Domino's Pizza, Inc., Term Loan............... B1 B+ 12/21/06 to 12/21/07 4,365,129 -------------- 15,183,795 -------------- RETAIL--OFFICE PRODUCTS 0.2% 3,760 U.S. Office Products Co., Term Loan.......... Caa1 CCC- 06/09/06 2,331,253 -------------- RETAIL--OIL & GAS 1.2% 7,396 Barjan Products, LLC, Term Loan............... NR NR 05/31/06 7,427,997 4,975 Kwik Trip, Term Loan.... NR NR 07/27/07 4,931,621 -------------- 12,359,618 -------------- RETAIL--STORES 2.1% 7,051 Kirklands Holdings, Term Loan.................... NR NR 06/30/02 7,051,024 14,000 Rite Aid Corp., Term Loan.................... B1 BB- 08/01/02 13,860,000 -------------- 20,911,024 -------------- TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 3.5% 12,000 360networks, Inc., Term Loan.................... B1 BB- 10/24/07 11,709,996 2,973 Alaska Communications Systems Holdings, Inc., Term Loan............... B1 BB 11/14/07 to 05/14/08 2,967,523
See Notes to Financial Statements A-9 27 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS (CONTINUED) $ 5,000 Cincinnati Bell, Inc., Term Loan............... Ba1 BB+ 12/30/06 $ 5,013,670 2,000 McLeodUSA, Inc., Term Loan.................... Ba2 BB- 05/31/08 2,003,334 9,190 Orius Corp., Term Loan.. NR B+ 12/14/06 8,914,519 5,000 Rural Cellular Corp., Term Loan............... B1 B+ 10/03/08 to 04/03/09 4,989,065 -------------- 35,598,107 -------------- TELECOMMUNICATIONS--LONG DISTANCE 1.3% 14,000 Pacific Crossing, Ltd., Term Loan............... NR NR 07/28/06 13,282,500 -------------- TELECOMMUNICATIONS--PAGING 0.0% 10,973 TSR Wireless, LLC, Term Loan (a) (b)............ NR NR 06/30/05 0 -------------- TELECOMMUNICATIONS--WIRELESS 4.3% 15,000 BCP SP, Ltd., Term Loan.................... NR NR 03/31/02 to 03/31/05 14,702,668 5,000 Crown Castle International Corp., Term Loan............... Ba3 BB- 03/15/08 5,024,305 3,500 Nextel Finance Co., Term Loan.................... Ba2 BB- 06/30/08 to 12/31/08 3,510,434 5,000 Nextel Partners, Inc., Term Loan............... B2 B- 07/29/08 5,017,710 10,000 VoiceStream Wireless Corp., Term Loan........ B1 B+ 06/30/09 9,934,380 5,000 Western Wireless Corp., Term Loan............... Ba2 BB 09/30/08 5,016,145 -------------- 43,205,642 -------------- TEXTILES & LEATHER 2.0% 18,955 Glenoit Corp., Term Loan.................... Caa1 D 12/31/03 to 06/30/04 14,784,511 5,397 Humphrey's, Inc., Term Loan.................... NR NR 01/15/03 1,322,151
See Notes to Financial Statements A-10 28 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE TEXTILES & LEATHER (CONTINUED) $ 3,044 Joan Fabrics Corp., Term Loan.................... NR BB- 06/30/05 to 06/30/06 $ 2,966,271 1,703 Norcross Safety Products, LLC, Term Loan.................... NR NR 10/02/05 1,670,929 -------------- 20,743,862 -------------- TRANSPORTATION--CARGO 2.4% 4,340 Atlas Freighter Leasing, Inc., Term Loan......... NR NR 04/20/05 to 04/20/06 4,194,496 3,936 Evergreen International Aviation, Inc., Term Loan.................... NR NR 05/02/04 3,920,780 3,474 Gemini Leasing, Inc., Term Loan............... B1 NR 08/12/05 3,477,925 4,860 North American Van Lines, Inc., Term Loan.................... B1 B+ 11/18/07 4,550,387 7,977 OmniTrax Railroads, LLC, Term Loan............... NR NR 05/14/05 7,894,773 -------------- 24,038,361 -------------- TRANSPORTATION--PERSONAL 1.3% 18,363 Motor Coach Industries International, Inc., Term Loan............... Ba3 BB- 06/16/06 13,496,749 -------------- TRANSPORTATION--RAIL MANUFACTURING 0.2% 2,978 RailWorks Corp., Term Loan.................... B3 B 09/30/06 2,471,325 -------------- UTILITIES 0.6% 5,970 Western Resources, Inc., Term Loan............... NR NR 03/17/03 6,024,727 -------------- TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 84.1%........................ 855,776,923 --------------
EQUITIES 0.2% Breed Technologies, Inc. (Warrants for 126,731 common shares) (d) (e)........................................... 718,565 Flextek Components, Inc. (Warrants for 758 common shares) (d) (e)................................................... 0 Safelite Glass Corp. (321,953 common shares) (e)............ 978,737
See Notes to Financial Statements A-11 29 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BORROWER VALUE EQUITIES (CONTINUED) Safelite Realty (21,732 common shares) (d) (e).............. $ 0 Stream International, Inc. (Warrants for 286,063 common shares) (d) (e)........................................... 0 -------------- TOTAL EQUITIES.............................................. 1,697,302 -------------- TOTAL LONG-TERM INVESTMENTS 84.3% (Cost $955,009,243)....................................... 857,474,225 -------------- SHORT-TERM INVESTMENTS 15.2% COMMERCIAL PAPER 7.3% Centex Corp. ($15,000,000 par, maturing 02/09/01, yielding 6.63%).................................................... 14,977,900 Chevron Phillips Chemical Co. ($18,400,000 par, maturing 02/09/01, yielding 6.55% to 6.65%)........................ 18,372,995 Comdisco, Inc. ($15,000,000 par, maturing 02/08/01, yielding 6.70% to 6.75%)........................................... 14,980,361 ConAgra Foods, Inc. ($10,000,000 par, maturing 02/05/01, yielding 6.60%)........................................... 9,992,667 TRW, Inc. ($4,900,000 par, maturing 02/06/01, yielding 6.85%).................................................... 4,895,338 TXU Corp. ($11,000,000 par, maturing 02/12/01, yielding 6.70%).................................................... 10,977,481 -------------- TOTAL COMMERCIAL PAPER...................................... 74,196,742 -------------- SHORT-TERM LOAN PARTICIPATIONS 7.7% Chevron Philips Chemical Co. ($4,200,000 par, maturing 02/01/01, yielding 6.50%)................................. 4,200,000 Cox Communications, Inc. ($15,000,000 par, maturing 02/01/01, yielding 6.50%)................................. 15,000,000 Federated Department Stores, Inc. ($1,200,000 par, maturing 02/01/01, yielding 6.50%)................................. 1,200,000 NiSource, Inc. ($13,000,000 par, maturing 02/05/01 to 02/09/01, yielding 6.60% to 6.62%)........................ 13,000,000 Tampa Electric Co. ($10,000,000 par, maturing 02/01/01, yielding 5.95%)........................................... 10,000,000 TRW, Inc. ($4,900,000 par, maturing 02/01/01, yielding 6.50%).................................................... 10,000,000 WorldCom, Inc. ($25,000,000 par, maturing 02/01/01, yielding 6.60% to 6.75%)........................................... 25,000,000 -------------- TOTAL SHORT-TERM LOAN PARTICIPATIONS........................ 78,400,000 --------------
See Notes to Financial Statements A-12 30 YOUR FUND'S INVESTMENTS January 31, 2001 (Unaudited)
BORROWER VALUE TIME DEPOSIT 0.2% State Street Bank & Trust Corp. ($2,000,000 par, 5.625% coupon, dated 01/31/01, to be sold on 02/01/01 at $2,000,313)............................................... $ 2,000,000 -------------- TOTAL SHORT-TERM INVESTMENTS 15.2% (Cost $154,596,742)....................................... 154,596,742 -------------- TOTAL INVESTMENTS 99.5% (Cost $1,109,605,985)..................................... 1,012,070,967 OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%................. 5,169,580 -------------- NET ASSETS 100.0%.......................................... $1,017,240,547 ==============
NR--Not rated + Bank Loans rated below Baa by Moody's Investor Service, Inc. or BBB by Standard & Poor's Group are considered to be below investment grade. (1) Industry percentages are calculated as a percentage of net assets. (a) This Senior Loan interest is non-income producing. (b) This borrower has filed for protection in federal bankruptcy court. (c) Subsequent to January 31, 2001, this borrower has filed for protection in federal bankruptcy court. (d) Non-income producing security as this stock currently does not declare dividends. (e) Restricted Security * Senior Loans in the Fund's portfolio generally are subject to mandatory and/or optional prepayment. Because of these mandatory prepayment conditions and because there may be significant economic incentives for a Borrower to prepay, prepayments of Senior Loans in the Fund's portfolio may occur. As a result, the actual remaining maturity of Senior Loans held in the Fund's portfolio may be substantially less than the stated maturities shown. Although the Fund is unable to accurately estimate the actual remaining maturity of individual Senior Loans, the Fund estimates that the actual average maturity of the Senior Loans held in its portfolio will be approximately 18-24 months. ** Senior Loans in which the Fund invests generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the London Inter-Bank Offered Rate ("LIBOR"), (ii) the prime rate offered by one or more major United States banks and (iii) the certificate of deposit rate. Senior Loans are generally considered to be restricted in that the Fund ordinarily is contractually obligated to receive approval from the Agent Bank and/or borrower prior to the disposition of a Senior Loan. See Notes to Financial Statements A-13 31 FINANCIAL STATEMENTS Statement of Assets and Liabilities January 31, 2001 (Unaudited) ASSETS: Total Investments (Cost $1,109,605,985)..................... $1,012,070,967 Receivables: Investments Sold.......................................... 20,511,094 Interest.................................................. 9,628,742 Fund Shares Sold.......................................... 659,931 Prepaid Expenses............................................ 506,710 Other....................................................... 46,410 -------------- Total Assets............................................ 1,043,423,854 -------------- LIABILITIES: Payables: Custodian Bank............................................ 21,990,302 Income Distributions...................................... 1,577,194 Investment Advisory Fee................................... 893,064 Distributor and Affiliates................................ 484,108 Administrative Fee........................................ 254,686 Initial Offering and Registration Costs................... 41,558 Accrued Expenses............................................ 866,693 Trustees' Deferred Compensation and Retirement Plans........ 75,702 -------------- Total Liabilities....................................... 26,183,307 -------------- NET ASSETS.................................................. $1,017,240,547 ============== NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 114,790,745 shares issued and outstanding).............................................. $ 1,147,907 Paid in Surplus............................................. 1,181,582,432 Accumulated Undistributed Net Investment Income............. 4,659,362 Accumulated Net Realized Loss............................... (72,614,136) Net Unrealized Depreciation................................. (97,535,018) -------------- NET ASSETS.................................................. $1,017,240,547 ============== NET ASSET VALUE PER COMMON SHARE ($1,017,240,547 divided by 114,790,745 shares outstanding)........................... $ 8.86 ==============
See Notes to Financial Statements A-14 32 Statement of Operations For the Six Months Ended January 31, 2001 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 60,701,939 Fees........................................................ 21,644 Other....................................................... 888,545 ------------ Total Income............................................ 61,612,128 ------------ EXPENSES: Investment Advisory Fee..................................... 5,690,100 Administrative Fee.......................................... 1,497,395 Service Fee................................................. 898,437 Shareholder Services........................................ 580,569 Legal....................................................... 338,150 Custody..................................................... 200,502 Trustees' Fees and Related Expenses......................... 25,297 Other....................................................... 859,006 ------------ Total Expenses.......................................... 10,089,456 ------------ NET INVESTMENT INCOME....................................... $ 51,522,672 ============ REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Loss........................................... $(72,607,098) ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... (85,096,571) End of the Period......................................... (97,535,018) ------------ Net Unrealized Depreciation During the Period............... (12,438,447) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(85,045,545) ============ NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(33,522,873) ============
See Notes to Financial Statements A-15 33 Statement of Changes in Net Assets For the Six Months Ended January 31, 2001 and the Year Ended July 31, 2000 (Unaudited)
SIX MONTHS ENDED YEAR ENDED JANUARY 31, 2001 JULY 31, 2000 --------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income........................... $ 51,522,672 $ 116,971,614 Net Realized Gain/Loss.......................... (72,607,098) 3,089,393 Net Unrealized Depreciation During the Period... (12,438,447) (84,184,679) -------------- -------------- Change in Net Assets from Operations............ (33,522,873) 35,876,328 -------------- -------------- Distributions from Net Investment Income........ (50,467,727) (116,807,793) Distributions from Net Realized Gain............ (2,869,516) (1,076,619) -------------- -------------- Total Distributions......................... (53,337,243) (117,884,412) -------------- -------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.................................... (86,860,116) (82,008,084) -------------- -------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold....................... 56,259,606 568,093,865 Net Asset Value of Shares Issued Through Dividend Reinvestment......................... 34,777,539 81,211,399 Cost of Shares Repurchased...................... (444,545,090) (581,641,209) -------------- -------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.................................. (353,507,945) 67,664,055 -------------- -------------- TOTAL DECREASE IN NET ASSETS.................... (440,368,061) (14,344,029) NET ASSETS: Beginning of the Period......................... 1,457,608,608 1,471,952,637 -------------- -------------- End of the Period (Including accumulated undistributed net investment income of $4,659,362 and $3,604,417, respectively)...... $1,017,240,547 $1,457,608,608 ============== ==============
See Notes to Financial Statements A-16 34 Statement of Cash Flows For the Six Months Ended January 31, 2001 (Unaudited) CHANGE IN NET ASSETS FROM OPERATIONS........................ $ (33,522,873) ------------- Adjustments to Reconcile the Change in Net Assets from Operations to Net Cash Used for Operating Activities: Decrease in Investments at Value.......................... 437,561,147 Decrease in Interest Receivable........................... 1,403,144 Increase in Receivable for Investments Sold............... (20,511,094) Decrease in Prepaid Expenses.............................. 9,426 Increase in Other Assets.................................. (12,786) Decrease in Investment Advisory Fees Payable.............. (339,976) Decrease in Administrative Fees Payable................... (89,468) Increase in Distributor & Affiliates Payable.............. 110,059 Increase in Accrued Expenses.............................. 102,312 Increase in Trustees' Deferred Compensation and Retirement Plans................................................... 9,657 ------------- Total Adjustments....................................... 418,242,421 ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES................... 384,719,548 ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Shares Sold................................... 58,277,856 Change in Intra-day Credit Line with Custodian Bank......... 20,462,657 Payments on Shares Repurchased.............................. (444,596,879) Cash Dividends Paid......................................... (15,993,666) Capital Gain Distributions Paid............................. (2,869,516) ------------- Net Cash Provided by Financing Activities................. (384,719,548) ------------- NET INCREASE IN CASH........................................ -0- Cash at Beginning of the Period............................. -0- ------------- CASH AT END OF THE PERIOD................................... $ -0- =============
See Notes to Financial Statements A-17 35 Financial Highlights (Unaudited) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
MARCH 27, 1998 SIX MONTHS (COMMENCEMENT ENDED YEAR ENDED JULY 31, OF INVESTMENT JANUARY 31, ------------------------- OPERATIONS) TO 2001 2000 1999 JULY 31, 1998 ---------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD......................... $ 9.58 $ 10.09 $ 10.04 $ 10.00 -------- -------- -------- ------- Net Investment Income.......... .42 .72 .65 .21 Net Realized and Unrealized Gain/Loss.................... (.71) (.50) .04 .04 -------- -------- -------- ------- Total from Investment Operations..................... (.29) .22 .69 .25 -------- -------- -------- ------- Less: Distributions from Net Investment Income............ .40 .72 .64 .21 Distributions from Realized Gain......................... .03 .01 -0- -0- -------- -------- -------- ------- Total Distributions.............. .43 .73 .64 .21 -------- -------- -------- ------- NET ASSET VALUE, END OF THE PERIOD......................... $ 8.86 $ 9.58 $ 10.09 $ 10.04 ======== ======== ======== ======= Total Return* (a)................ -3.37%** 2.27% 7.09% 2.52%** Net Assets at End of the Period (In millions).................. $1,017.2 $1,457.6 $1,472.0 $ 411.4 Ratio of Expenses to Average Net Assets*........................ 1.68% 1.64% 1.60% 1.70% Ratio of Net Investment Income to Average Net Assets*............ 8.60% 7.37% 6.66% 6.33% Portfolio Turnover (b)........... 10%** 54% 23% 4%** * If certain expenses had not been waived by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets......................... N/A N/A 1.61% 1.92% Ratio of Net Investment Income to Average Net Assets............. N/A N/A 6.65% 6.11%
** Non-Annualized N/A = Not Applicable. (a) Total return assumes an investment at the beginning of the period indicated, reinvestment of all distributions for the period and tender of all shares at the end of the period indicated, excluding payment of 1% imposed on most shares accepted by the Fund for repurchase which have been held for less than one year. If the early withdrawal charge was included, total return would be lower. (b) Calculation includes the proceeds from principal repayments and sales of variable rate senior loan interests. See Notes to Financial Statements A-18 36 NOTES TO FINANCIAL STATEMENTS January 31, 2001 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Senior Floating Rate Fund (the "Fund") is registered as a non- 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 provide a high level of current income, consistent with preservation of capital. The Fund seeks to achieve its objective by investing primarily in a portfolio of interests in floating or variable rate senior loans to corporations, partnerships and other entities which operate in a variety of industries and geographical regions. The Fund commenced investment operations on March 27, 1998. 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 The Fund's Variable Rate Senior Loan interests ("Loan interests") are valued by the Fund following valuation guidelines established and periodically reviewed by the Fund's Board of Trustees. Under the valuation guidelines, Senior Loans and securities for which reliable market quotes are readily available are valued at the mean of such bid and ask quotes and all other Senior Loans securities and assets of the Fund are valued at fair value in good faith following procedures established by the Board of Trustees. Subject to criteria established by the Fund's Board of Trustees about the availability and reliability of market indicators obtained from independent pricing sources approved by the Board, certain Senior Loans will be valued on the basis of such indicators. Other Senior Loans will be valued by independent pricing sources approved by the Fund's Board of Trustees based upon pricing models developed, maintained and operated by those pricing sources or valued by Van Kampen Investment Advisory Corp. (the "Adviser") by considering a number of factors including consideration of market indicators, transactions in instruments which the Adviser believes may be comparable (including comparable credit quality, interest rate, interest rate redetermination period and maturity), the credit worthiness of the Borrower, the current interest rate, the period until next interest rate redetermination and the maturity of such Senior Loan interests. Consideration of comparable instruments may include commercial paper, negotiable certificates of deposit and short-term variable rate securities which have adjustment periods comparable to the Senior Loan interests in the Fund's portfolio. The fair value of Senior Loans are reviewed and approved by the Fund's Valuation Committee A-19 37 NOTES TO FINANCIAL STATEMENTS January 31, 2001 (Unaudited) consistent with a methodology established by the Fund's Trustees. The Fund and Trustees will continue to monitor development in the Senior Loan market and will make modifications to the current valuation methodology as deemed appropriate. Equity securities are valued on the basis of prices furnished by pricing services or as determined in good faith by the Adviser under the direction of the Board of Trustees. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. Short-term loan participations are valued at cost in the absence of any indication of impairment. B. SECURITY TRANSACTIONS Investment transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Facility fees received are treated as market discounts. Market premiums are amortized and discounts are accreted over the stated life of each applicable security. Other income is comprised primarily of amendment fees. Amendment fees are earned as compensation for agreeing to changes in loan agreements. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. 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. At January 31, 2001, for federal income tax purposes the cost of long- and short-term investments is $1,109,608,636, the aggregate gross unrealized appreciation is $4,008,705 and the aggregate gross unrealized depreciation is $101,546,374, resulting in net unrealized depreciation on long- and short-term investments of $97,537,669. E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed at least annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. A-20 38 NOTES TO FINANCIAL STATEMENTS January 31, 2001 (Unaudited) 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 $4.0 billion.......................................... .950 of 1% Next $3.5 billion........................................... .900 of 1% Next $2.5 billion........................................... .875 of 1% Over $10.0 billion.......................................... .850 of 1%
In addition, the Fund will pay a monthly administrative fee to Van Kampen Funds Inc., the Fund's Administrator, at an annual rate of .25% of the average net assets of the Fund. The administrative services to be provided by the Administrator include monitoring the provisions of the loan agreements and any agreements with respect to participations and assignments, record keeping responsibilities with respect to interests in Variable Rate Senior Loans in the Fund's portfolio and providing certain services to the holders of the Fund's securities. For the six months ended January 31, 2001, the Fund recognized expenses of approximately $165,700 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under a Legal Services agreement, the Adviser provides legal services to the Fund. The Adviser allocates the cost of such services to each Fund. For the six months ended January 31, 2001, the Fund recognized expenses of approximately $29,600 representing Van Kampen Investments or its affiliates (collectively "Van Kampen") cost of providing legal services to the Fund, which are reported as part of legal expenses, in the statement of operations. Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as the shareholder servicing agent of the Fund. For the six months ended January 31, 2001, the Fund recognized expenses for their services of approximately $432,100. Shareholder servicing fees are determined through negotiations with the Fund's Board of Trustees and are based on competitive market benchmarks. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation to a later date. Benefits under the retirement plan are payable for a ten-year period and are A-21 39 NOTES TO FINANCIAL STATEMENTS January 31, 2001 (Unaudited) based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 3. CAPITAL TRANSACTIONS At January 31, 2001 and July 31, 2000, paid in surplus aggregated $1,181,582,432 and $1,534,716,501, respectively. Transactions in common shares were as follows:
SIX MONTHS ENDED YEAR ENDED JANUARY 31, 2001 JULY 31, 2000 Beginning Shares.................................... 152,178,276 145,951,374 ----------- ----------- Shares Sold....................................... 5,985,842 57,196,384 Shares Issued Through Dividend Reinvestment....... 3,736,676 8,251,082 Shares Repurchased................................ (47,110,049) (59,220,564) ----------- ----------- Net Increase/Decrease in Shares................... (37,387,531) 6,226,902 ----------- ----------- Ending Shares....................................... 114,790,745 152,178,276 =========== ===========
4. INVESTMENT TRANSACTIONS During the period, the costs of purchases and proceeds from investments sold and repaid, excluding short-term investments, were $110,515,091 and $541,170,282, respectively. 5. TENDER OF SHARES The Board of Trustees currently intends, each quarter, to consider authorizing the Fund to make tender offers for all or a portion of its then outstanding common shares at the net asset value of the shares on the expiration date of the tender offer. For the six months ended January 31, 2001, 47,110,049 shares were tendered and repurchased by the Fund. 6. EARLY WITHDRAWAL CHARGE An early withdrawal charge to recover offering expenses will be imposed in connection with most common shares held for less than one year which are accepted by the Fund for repurchase pursuant to tender offers. The early withdrawal charge of 1.00% will be payable to Van Kampen. For the six months ended January 31, 2001, Van Kampen received early withdrawal charges of approximately $825,000 in connection with tendered shares of the Fund. 7. COMMITMENTS/BORROWINGS Pursuant to the terms of certain of the Variable Rate Senior Loan agreements, the Fund had unfunded loan commitments of approximately $6,609,600 as of A-22 40 NOTES TO FINANCIAL STATEMENTS January 31, 2001 (Unaudited) January 31, 2001. The Fund generally will maintain with its custodian short-term investments having an aggregate value at least equal to the amount of unfunded loan commitments. The Fund, along with the Van Kampen Prime Rate Income Trust, has entered into a revolving credit agreement with a syndicate led by Bank of America for an aggregate of $500,000,000, which will terminate on September 12, 2001. The proceeds of any borrowing by the Fund under the revolving credit agreement shall be used for temporary liquidity purposes and funding of shareholder tender offers. Annual commitment fees of .09% are charged on the unused portion of the credit line. Borrowings under this facility will bear interest at either the LIBOR rate or the Federal Funds rate plus .50%. There have been no borrowings under this agreement to date. 8. SENIOR LOAN PARTICIPATION COMMITMENTS The Fund invests primarily in participations, assignments, or acts as a party to the primary lending syndicate of a Variable Rate Senior Loan interest to corporations, partnerships, and other entities. When the Fund purchases a participation of a Senior Loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation, but not with the borrower directly. As such, the Fund assumes the credit risk of the borrower, selling participant or other persons interpositioned between the Fund and the borrower. At January 31, 2001, the following sets forth the selling participants with respect to interests in Senior Loans purchased by the Fund on a participation basis.
PRINCIPAL AMOUNT VALUE SELLING PARTICIPANT (000) (000) Canadian Imperial Bank of Commerce.......................... $ 8,626 $ 8,572 Bankers Trust............................................... 16,508 15,609 ------- ------- Total....................................................... $25,134 $24,181 ======= =======
9. SERVICE PLAN The Fund has adopted a Service Plan (the "Plan") designed to meet the service fee requirements of the sales charge rule of the National Association of Securities Dealers, Inc. The Plan governs payments for personal services and/or the maintenance of shareholder accounts. Annual fees under the Plan of .15% (.25% maximum) of net assets are accrued daily and paid quarterly. For the six months ended January 31, 2001, the Fund paid service fees of approximately $951,400 to Van Kampen. A-23 41 REPORT OF INDEPENDENT AUDITORS To the Board of Trustees and Shareholders of Van Kampen Senior Floating Rate Fund We have audited the accompanying statement of assets and liabilities of Van Kampen Senior Floating Rate Trust (the "Fund"), including the portfolio of investments as of July 31, 2000, and the related statements of operations, cash flows, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The Fund's financial statements and financial highlights for the periods ended prior to July 31, 2000, were audited by other auditors whose report, dated September 14, 1999, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2000, by correspondence with the Fund's custodian and selling or agent banks. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Senior Floating Rate Fund as of July 31, 2000, the results of its operations, cash flows, changes in net assets, and financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1A, the portfolio of investments includes certain loan interests for which, fair values are determined by the Fund's investment adviser under procedures approved by the Board of Trustees. Determination of fair values involves subjective judgement, as the actual market value of a particular security can be established only by negotiations between parties in a transaction. We have reviewed the procedures established by the Board of Trustees and applied by the investment adviser in determining the fair values of such loan interests and inspected the underlying documentation. We believe that, in the circumstances, the procedures are reasonable and the documentation appropriate. DELOITTE & TOUCHE LLP Chicago, Illinois September 15, 2000 A-24 42 BY THE NUMBERS YOUR FUND'S INVESTMENTS July 31, 2000 THE FOLLOWING PAGES DETAIL THE PORTFOLIO OF INVESTMENTS OF YOUR FUND AT THE END OF THE REPORTING PERIOD.(1)
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE VARIABLE RATE** SENIOR LOAN INTERESTS 94.1% AEROSPACE/DEFENSE 1.8% $ 4,782 Aerostructures Corp., Term Loan............... NR BB- 12/31/03 $ 4,720,699 13,780 Decrane Finance Co., Term Loan............... B2 B+ 09/30/05 13,781,452 7,432 Stellex Technologies, Inc., Term Loan......... Caa1 CCC- 09/30/06 7,431,818 -------------- 25,933,969 -------------- AUTOMOTIVE 4.4% 5,042 Breed Technologies, Inc., Term Loan (a) (b)............ NR NR 09/30/00 to 04/27/06 2,319,253 648 Breed Technologies, Inc., Revolving Credit Agreement (a) (b)....... NR NR 04/27/04 298,073 284 Breed Technologies, Inc., Debtor In Possession (b).......... NR NR 09/30/00 284,335 4,985 Exide Corp., Term Loan.................... Ba3 B+ 03/18/05 4,997,461 12,548 J.L. French Automotive Castings, Inc., Term Loan.................... B1 B+ 10/21/06 12,430,776 7,500 Meridian Automotive Systems, Inc., Term Loan.................... B1 BB- 03/31/07 7,490,853 9,900 Metalforming Technologies, Inc., Term Loan.................... NR NR 06/30/06 9,899,956 4,000 Polypore, Inc., Term Loan.................... Ba3 B+ 12/31/06 4,000,014
See Notes to Financial Statements A-25 43 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE AUTOMOTIVE (CONTINUED) $ 9,947 Safelite Glass Corp., Term Loan (a) (b)....... Caa1 NR 12/23/03 to 12/23/05 $ 5,468,191 3,144 Safelite Glass Corp., Revolving Credit Agreement (a) (b)....... Caa1 NR 12/23/03 1,728,394 15,000 Tenneco Automotive, Inc., Term Loan......... Ba3 BB 11/04/07 to 07/04/08 14,899,680 -------------- 63,816,986 -------------- BEVERAGE, FOOD & TOBACCO 2.6% 28,741 Agrilink Foods, Inc., Term Loan............... B1 B+ 09/30/04 to 09/30/05 28,740,512 9,250 B & G Foods, Inc., Term Loan.................... B1 B+ 03/31/06 9,245,946 -------------- 37,986,458 -------------- BROADCASTING--CABLE 0.5% 6,975 Fairchild Corp., Term Loan.................... Ba3 BB- 04/30/06 6,975,039 -------------- BROADCASTING--DIVERSIFIED 1.0% 10,000 Comcorp Broadcasting, Inc., Term Loan......... NR NR 06/30/07 10,000,024 4,550 White Knight Broadcasting, Inc., Term Loan.................... NR NR 06/30/07 4,550,011 -------------- 14,550,035 -------------- BROADCASTING--RADIO 0.5% 7,000 Cumulus Media, Inc., Term Loan............... B1 B+ 09/30/07 to 02/28/08 7,000,000 -------------- BROADCASTING--TELEVISION 1.2% 7,960 Quoram Broadcasting, Inc., Term Loan......... NR NR 09/30/07 7,959,965 8,833 Sinclair Broadcast Group, Inc., Term Loan.................... Ba2 BB- 09/15/05 8,834,182 -------------- 16,794,147 --------------
See Notes to Financial Statements A-26 44 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE BUILDINGS & REAL ESTATE 1.3% $ 4,929 Builders FirstSource, Inc., Term Loan......... NR BB- 12/30/05 $ 4,929,731 1,491 Crescent Real Estate Equities Co., Term Loan.................... NR NR 02/01/04 1,483,104 6,000 Morrison Knudsen Corp., Term Loan............... Ba1 NR 08/14/00 5,996,250 7,450 Prison Realty Trust, Inc., Term Loan......... B3 B 12/31/02 7,286,816 -------------- 19,695,901 -------------- CHEMICAL, PLASTICS & RUBBER 5.1% 4,247 Applied Tech Management Corp., Term Loan........ B1 NR 04/30/07 4,231,088 4,962 Georgia Gulf Corp., Term Loan.................... Ba1 BBB- 11/12/06 4,996,100 4,628 Huntsman Group Holdings, Term Loan............... Ba2 NR 04/01/02 4,613,284 1,026 Huntsman Group Holdings, Revolving Credit Agreement............... Ba2 NR 12/31/02 1,025,812 4,950 Huntsman ICI Chemicals LLC, Term Loan.......... Ba3 BB 06/30/07 to 06/30/08 4,987,407 14,081 Lyondell Petrochemical Co., Term Loan.......... Ba3 NR 06/30/05 to 05/17/06 14,447,930 4,975 MetoKote Corp., Term Loan.................... NR NR 11/02/05 4,975,703 10,000 Nutrasweet Co., Term Loan.................... Ba3 NR 05/25/07 to 05/25/09 9,988,086 2,993 Om Group, Inc., Term Loan.................... NR NR 03/31/07 2,999,981 8,025 Pioneer Americas Acquisition Corp., Term Loan.................... B3 B 12/31/06 8,024,117 6,220 Sterling Pulp Chemicals, Inc., Term Loan......... B3 BB- 09/30/04 6,220,670
See Notes to Financial Statements A-27 45 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE CHEMICAL, PLASTICS & RUBBER (CONTINUED) $ 3,990 Sybron Chemicals, Inc., Term Loan............... NR NR 07/31/04 $ 3,977,631 5,713 West American Rubber, Term Loan............... NR NR 06/30/05 3,999,100 -------------- 74,486,909 -------------- CONSTRUCTION MATERIALS 3.4% 875 Dayton Superior Corp., Term Loan............... Ba3 BB- 06/01/08 872,920 5,538 Flextek Components, Inc., Term Loan (a)..... NR NR 08/31/03 3,045,808 8,479 Formica Corp., Term Loan.................... B1 B+ 04/30/06 8,491,998 7,180 Hexcel Corp., Term Loan.................... Ba3 BB- 09/14/05 7,171,891 20,731 Magnatrax Corp., Term Loan.................... NR NR 11/15/05 20,731,053 9,900 Mueller Group, Inc., Term Loan............... B1 B+ 08/16/06 to 08/16/07 9,924,750 -------------- 50,238,420 -------------- CONTAINERS, PACKAGING & GLASS 3.7% 10,905 Dr. Pepper/Seven-Up Cos., Inc., Term Loan... NR NR 10/07/07 10,910,363 10,000 Huntsman Packaging Corp., Term Loan........ B1 BB- 05/31/08 10,031,250 10,000 LLS Corp., Term Loan.... B1 B+ 07/31/06 10,000,534 14,850 Mediapak Corp., Term Loan.................... NR NR 12/31/05 to 12/31/06 14,851,104 3,894 Stone Container Corp., Term Loan............... Ba3 B+ 10/01/03 3,906,148 5,000 Tekni-Plex, Inc., Term Loan.................... Ba3 B+ 06/26/08 5,028,125 -------------- 54,727,524 -------------- DIVERSIFIED MANUFACTURING 1.8% 4,938 Blount, Inc., Term Loan.................... B1 B+ 09/30/06 4,965,337 12,500 Citation Corp., Term Loan.................... NR B+ 12/01/07 12,501,694
See Notes to Financial Statements A-28 46 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE DIVERSIFIED MANUFACTURING (CONTINUED) $ 3,990 Tritech Precision, Inc., Term Loan............... B1 B+ 03/28/07 $ 3,968,996 4,983 UCAR Global Enterprises, Inc., Term Loan......... Ba3 BB- 12/31/07 4,981,778 -------------- 26,417,805 -------------- ECOLOGICAL 2.8% 40,000 Allied Waste Industries, Inc., Term Loan......... Ba3 BB 07/23/06 to 07/23/07 38,545,600 3,180 Safety-Kleen Corp., Term Loan (a) (b)............ NR NR 04/03/05 to 04/03/06 2,162,215 -------------- 40,707,815 -------------- ELECTRONICS 3.5% 7,131 Amphenol Corp., Term Loan.................... Ba2 BB 05/19/04 7,031,038 5,355 Dynamic Details, Inc., Term Loan............... B1 B+ 04/22/05 5,355,242 9,914 EG&G Technical Services, Inc., Term Loan......... B1 NR 08/20/07 9,913,772 9,844 Stratus Computers, Inc., Term Loan............... NR NR 02/26/05 9,856,055 5,000 Stream International Holdings, Inc., Term Loan.................... NR NR 12/31/06 5,000,177 5,928 Superior Telcom, Inc., Term Loan............... Ba3 B+ 11/27/05 5,910,433 8,000 Viasystems, Inc., Term Loan.................... B1 BB- 03/31/07 7,996,248 -------------- 51,062,965 -------------- ENTERTAINMENT & LEISURE 4.2% 9,930 Aspen Marketing Group, Term Loan............... NR NR 06/30/06 9,930,697 15,936 Fitness Holdings Worldwide, Inc., Term Loan.................... NR B+ 11/02/06 to 11/02/07 15,789,384 15,000 SFX Entertainment, Inc., Term Loan............... B1 NR 06/30/06 15,015,000
See Notes to Financial Statements A-29 47 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE ENTERTAINMENT & LEISURE (CONTINUED) $ 17,000 Six Flags Theme Parks, Inc., Term Loan......... Ba2 B+ 09/30/05 $ 17,111,571 3,185 True Temper Sports, Inc., Term Loan......... B1 BB- 09/30/05 3,185,171 -------------- 61,031,823 -------------- FINANCE 2.8% 7,305 Bridge Information Systems, Inc., Term Loan.................... NR NR 05/29/05 7,306,036 16,873 Outsourcing Solutions, Term Loan............... B2 BB- 06/01/06 16,832,951 10,000 Paul G. Allen, Term Loan.................... NR NR 06/10/03 9,995,667 6,000 Sovereign Bancorp, Inc., Term Loan............... Ba3 NR 11/14/03 6,022,500 -------------- 40,157,154 -------------- GROCERY 0.5% 7,523 The Pantry, Inc., Term Loan.................... B1 BB- 01/31/06 7,523,400 -------------- HEALTHCARE 4.5% 6,300 Charles River Laboratories, Inc., Term Loan.................... B1 B+ 09/29/07 6,300,000 5,000 Columbia/HCA Healthcare Corp., Term Loan........ NR NR 09/13/01 4,946,882 14,925 Dade Behring, Inc., Term Loan.................... Ba3 B+ 06/30/06 to 06/30/07 14,924,193 8,055 LifePoint Hospitals, Inc., Term Loan......... B1 B+ 11/11/05 8,059,796 9,975 National Nephrology Associates, Inc., Term Loan.................... B1 B+ 12/31/05 9,975,373 4,944 Unilab Corp., Term Loan.................... B1 B+ 11/23/06 4,945,092 18,119 Vencor, Inc., Term Loan (a) (b)............ NR NR 01/15/05 15,763,783 -------------- 64,915,119 --------------
See Notes to Financial Statements A-30 48 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER PRODUCTS 2.1% $ 16,043 Imperial Home Decor Group, Inc., Term Loan (a) (b)............ NR NR 03/12/04 to 03/13/06 $ 9,306,205 5,355 Imperial Home Decor Group, Inc., Revolving Credit Agreement (a) (b)....... NR NR 03/12/04 3,103,405 4,913 Medical Arts Press, Inc., Term Loan......... NR NR 05/16/06 4,912,061 13,402 Rent-A-Center, Inc., Term Loan............... Ba3 BB- 01/31/06 to 12/31/07 13,359,207 -------------- 30,680,878 -------------- HOTELS, MOTELS, INNS & GAMING 3.5% 10,000 Aladdin Gaming LLC, Term Loan.................... B2 NR 08/25/06 10,000,007 15,000 Extended Stay America, Inc., Term Loan......... Ba3 NR 12/31/03 to 06/30/07 14,961,470 9,973 FelCor Lodging LP, Term Loan.................... Ba2 BB 03/31/04 9,931,774 3,491 Isle Of Capri Casinos, Inc., Term Loan......... Ba2 BB- 03/02/06 to 03/02/07 3,510,578 5,500 Las Vegas Sands, Inc., Term Loan............... NR B+ 07/31/04 5,479,858 7,569 Meditrust Corp., Revolving Credit Agreement............... NR NR 07/17/01 7,569,735 -------------- 51,453,422 -------------- INSURANCE 0.3% 5,000 Brera Gab Robins, Inc., Term Loan............... NR NR 12/01/05 5,000,104 -------------- MACHINERY 4.0% 3,000 Alliance Laundry Systems LLC, Term Loan.......... B1 B+ 06/30/05 2,985,000 15,000 Ashtead Group PLC, Term Loan.................... NR NR 06/01/07 14,913,506 4,970 Coinmach Corp., Term Loan.................... NR BB- 12/31/04 to 06/30/05 4,951,912 7,323 Gleason Corp., Term Loan.................... NR NR 02/18/08 7,305,005
See Notes to Financial Statements A-31 49 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE MACHINERY (CONTINUED) $ 15,000 Ocean Rig (Norway), Term Loan.................... NR NR 06/01/08 $ 15,001,271 9,834 Terex Corp., Term Loan.................... Ba3 BB- 03/06/06 9,844,058 3,000 Weigh-Tronix LLC, Term Loan.................... NR NR 06/30/07 2,985,000 -------------- 57,985,752 -------------- MEDICAL PRODUCTS & SUPPLIES 1.9% 15,000 Alliance Imaging, Inc., Term Loan............... B1 NR 11/02/07 to 11/02/08 14,887,500 5,162 Stryker Corp., Term Loan.................... Ba2 BB 12/04/05 5,186,488 7,860 Wilson Greatbatch, Ltd., Term Loan............... NR NR 07/30/04 7,860,229 -------------- 27,934,217 -------------- MINING, STEEL, IRON & NON-PRECIOUS METALS 1.1% 15,770 Ispat Inland, Term Loan.................... Ba3 BB 07/16/05 to 07/16/06 15,702,066 -------------- NATURAL RESOURCES 0.2% 3,268 P&L Coal Holdings Corp., Term Loan............... Ba2 NR 06/30/06 3,263,400 -------------- NON-DURABLE CONSUMER GOODS 0.1% 997 American Safety Razor Co., Term Loan.......... B1 B+ 04/30/07 994,157 -------------- PAPER & FOREST PRODUCTS 0.6% 8,745 Pacifica Papers, Inc., Term Loan............... Ba2 BB 03/12/06 8,788,725 -------------- PERSONAL & MISCELLANEOUS SERVICES 1.6% 917 Boyds Collection, Ltd., Term Loan............... Ba3 B+ 04/21/06 911,107 18,762 Davel Financing Co. LLC, Term Loan (c)........... NR NR 06/23/05 3,002,000 13,500 DIMAC Corp., Term Loan (b)................ NR NR 06/30/06 to 12/30/06 10,935,000 9,525 Telespectrum Worldwide, Inc., Term Loan......... NR NR 12/31/01 to 12/31/03 9,527,735 -------------- 24,375,842 --------------
See Notes to Financial Statements A-32 50 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE PHARMACEUTICALS 0.6% $ 8,620 King Pharmaceuticals, Inc., Term Loan......... B1 BB- 12/18/06 $ 8,631,508 -------------- PRINTING & PUBLISHING 5.1% 5,000 21st Century Newspaper, Term Loan............... B3 NR 09/15/05 4,981,536 6,380 Advanstar Communications, Term Loan.................... Ba3 B+ 04/30/05 6,379,673 4,988 American Reprographics, Term Loan............... NR NR 03/31/08 4,942,311 5,990 Big Flower Press Holdings, Inc., Term Loan.................... B1 NR 12/06/08 6,012,651 4,898 Check Printers, Inc., Term Loan............... NR NR 06/30/05 4,897,963 8,500 Commerce Connect Media, Term Loan............... NR NR 12/31/07 8,457,877 9,950 Haights Cross Comm. Operating Co., Term Loan.................... B2 B+ 12/10/06 9,951,490 5,000 Liberty Group Operating, Inc., Term Loan......... B1 B 03/31/07 4,987,828 6,429 Penton Media, Inc., Term Loan.................... Ba3 BB- 06/30/07 6,428,789 4,980 Reiman Publications, Inc., Term Loan......... NR NR 12/10/05 4,999,492 4,081 TWP LP, Term Loan....... Ba3 B+ 10/01/04 4,080,543 6,000 Vutek, Inc., Term Loan.................... NR NR 06/30/07 5,962,500 2,495 Ziff-Davis Media, Inc., Term Loan............... Ba3 B+ 03/31/07 2,499,050 -------------- 74,581,703 -------------- RESTAURANTS & FOOD SERVICE 0.6% 3,120 Americas Favorite Chicken, Inc., Term Loan.................... Ba3 BB- 06/30/02 3,120,307 1,384 Carvel Corp., Term Loan.................... NR NR 06/30/01 1,383,744 4,354 Domino's Pizza, Term Loan.................... B1 B+ 12/21/06 to 12/21/07 4,372,268 -------------- 8,876,319 --------------
See Notes to Financial Statements A-33 51 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE RETAIL--OFFICE PRODUCTS 1.0% $ 6,540 Buhrmann U.S., Inc., Term Loan............... Ba3 BB- 10/26/07 $ 6,556,445 8,804 U.S. Office Products Co., Term Loan.......... Caa1 CCC+ 06/09/06 8,363,623 -------------- 14,920,068 -------------- RETAIL--OIL & GAS 1.8% 7,433 Barjan Products LLC, Term Loan............... NR NR 05/31/06 7,396,501 5,000 Kwik Trip, Inc., Term Loan.................... NR NR 07/27/07 4,987,500 5,000 Port Arthur Coker Co., Term Loan............... Ba3 NR 07/15/07 4,743,876 9,288 Superior Energy Services, Inc., Term Loan.................... Ba3 BB- 06/30/06 9,288,760 -------------- 26,416,637 -------------- RETAIL--STORES 2.5% 14,738 Duane Reade, Inc., Term Loan.................... B1 B+ 02/15/06 14,738,547 7,087 Kirklands, Holdings, Term Loan............... NR NR 06/30/02 7,087,096 14,000 Rite Aid Corp., Term Loan.................... Ba3 B 08/01/02 13,930,003 -------------- 35,755,646 -------------- TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 2.2% 2,973 Alaska Communications Systems Holdings, Inc., Term Loan............... B1 BB 11/14/07 to 05/14/08 2,974,559 5,000 Cincinnati Bell, Inc., Term Loan............... Ba1 NR 12/30/06 5,010,115 7,000 McLeodUSA, Inc., Term Loan.................... Ba2 BB- 05/31/08 7,015,624 11,743 Orius Corp., Term Loan.................... NR B+ 12/14/06 11,744,126 5,000 Rural Cellular Corp., Term Loan............... B1 B+ 10/03/08 to 04/03/09 4,994,375 -------------- 31,738,799 -------------- TELECOMMUNICATIONS--LONG DISTANCE 1.6% 24,000 Pacific Crossing, Ltd., Term Loan............... NR NR 07/28/06 24,000,000 --------------
See Notes to Financial Statements A-34 52 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE TELECOMMUNICATIONS--PAGING 0.8% $ 10,973 TSR Wireless LLC, Term Loan.................... NR NR 06/30/05 $ 10,972,500 -------------- TELECOMMUNICATIONS--WIRELESS 7.2% 5,000 American Cellular Corp., Term Loan............... Ba3 B+ 03/31/08 to 03/31/09 5,000,390 15,000 BCP SP Ltd., Term Loan.. NR NR 03/31/00 to 03/31/05 14,851,437 5,000 Crown Castle International Corp., Term Loan............... Ba3 BB- 03/15/08 5,015,180 53,996 Iridium Operating LLC, Term Loan (a) (b)....... NR D 12/29/00 11,879,117 19,500 Nextel Finance Co., Term Loan.................... Ba2 BB- 06/30/08 to 03/31/09 19,554,599 15,000 Nextel Partners, Inc., Term Loan............... Ba2 B- 07/29/08 15,081,255 5,000 Telecorp PCS, Inc., Term Loan.................... B2 NR 12/05/07 4,994,790 23,250 VoiceStream Wireless Corp., Term Loan........ B1 B+ 02/25/08 to 02/25/09 23,147,950 5,000 Western Wireless Corp., Term Loan............... Ba2 BB 09/30/08 5,021,250 -------------- 104,545,968 -------------- TEXTILES & LEATHER 3.7% 8,113 American Marketing Industries, Inc., Term Loan.................... NR NR 11/30/04 to 11/30/05 8,114,153 1,645 GFSI, Inc., Term Loan... Ba3 NR 03/31/04 1,628,674 18,955 Glenoit Corp., Term Loan (c)................ Caa1 D 12/31/03 to 06/30/04 16,682,696 5,400 Humphrey's, Inc., Term Loan.................... NR NR 01/15/03 3,832,952 3,370 Jo-Ann Fabrics Corp., Term Loan............... Ba3 BB- 06/30/05 3,353,361 4,968 Norcorp, Inc., Term Loan.................... NR NR 05/30/06 to 11/30/06 4,968,252
See Notes to Financial Statements A-35 53 YOUR FUND'S INVESTMENTS July 31, 2000
PRINCIPAL BANK LOAN AMOUNT RATINGS+ (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE TEXTILES & LEATHER (CONTINUED) $ 13,755 Norcross Safety Products, Term Loan..... NR NR 10/02/05 $ 13,750,181 2,000 Sleepmaster LLC, Term Loan.................... B1 BB- 12/31/06 1,992,507 -------------- 54,322,776 -------------- TRANSPORTATION--CARGO 2.6% 4,903 Atlas Freighter Leasing, Term Loan............... NR NR 04/20/05 to 04/20/06 4,884,325 3,936 Evergreen International Aviation, Inc., Term Loan.................... NR NR 05/02/04 3,901,303 3,783 Gemini Leasing, Inc., Term Loan............... B1 NR 08/12/05 3,783,888 16,915 North American Van Lines, Inc., Term Loan.................... B1 B+ 11/18/07 16,915,000 8,018 OmniTrax Railroads LLC, Term Loan............... NR NR 05/14/05 8,019,343 -------------- 37,503,859 -------------- TRANSPORTATION--PERSONAL 2.1% 9,973 Avis Rent A Car, Inc., Term Loan............... Ba3 BB+ 06/30/06 to 06/30/07 9,982,030 19,976 Motor Coach Industries International, Inc., Term Loan............... Ba3 BB- 06/15/06 19,979,456 -------------- 29,961,486 -------------- TRANSPORTATION--RAIL MANUFACTURING 0.2% 2,993 RailWorks Corp., Term Loan.................... B1 BB- 09/30/06 3,014,955 -------------- UTILITIES 1.1% 10,000 AES Texas Funding LLC, Term Loan............... Ba1 NR 04/24/01 10,001,126 6,000 Western Resources, Inc., Term Loan............... NR NR 03/17/03 6,025,500 -------------- 16,026,626 -------------- TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 94.1% (Cost $1,456,565,453).................................................... 1,371,468,882 --------------
See Notes to Financial Statements A-36 54 YOUR FUND'S INVESTMENTS July 31, 2000
DESCRIPTION VALUE COMMERCIAL PAPER 5.4% Armstrong World Industries, Inc. ($10,000,000 par, maturing 08/09/00, yielding 6.67%).............................................................. $ 9,985,178 Ashland, Inc. ($20,000,000 par, maturing 08/04/00, yielding 6.67%)........... 19,988,883 Bridgestone/Firestone, Inc. ($2,300,000 par, maturing 08/02/00, yielding 6.50%)....................................................................... 2,299,585 Federated Department Stores, Inc. ($10,000,000 par, maturing 08/02/00, yielding 6.67%).............................................................. 9,998,147 Hunt (J.B.) Transportation Services, Inc. ($5,000,000 par, maturing 08/03/00, yielding 6.70%).............................................................. 4,998,139 Mallinckrodt, Inc. ($11,500,000 par, maturing 08/01/00, yielding 6.75%)...... 11,500,000 Temple Inland, Inc. ($3,400,000 par, maturing 08/01/00, yielding 6.78%)...... 3,400,000 Texas Utilities Co. ($10,000,000 par, maturing 08/01/00, yielding 6.68%)..... 10,000,000 Xtra, Inc. ($6,000,000 par, maturing 08/07/00, yielding 6.70%)............... 5,993,300 -------------- TOTAL COMMERCIAL PAPER 5.4% (Cost $78,163,232)......................................................... 78,163,232 -------------- TOTAL INVESTMENTS 99.5% (Cost $1,534,728,685)...................................................... 1,449,632,114 OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%.................................. 7,976,494 -------------- NET ASSETS 100.0%........................................................... $1,457,608,608 ==============
NR=Not Rated + Bank loans rated below Baa by Moody's Investor Service, Inc. or BBB by Standard & Poor's Group are considered to be below investment grade. (Unaudited) 1 Industry percentages are calculated as a percentage of net assets. (a) This Senior Loan interest is non-income producing. (b) This Borrower has filed for protection in federal bankruptcy court. (c) Subsequent to July 31, 2000, this borrower has filed for protection in federal bankruptcy court. See Notes to Financial Statements A-37 55 YOUR FUND'S INVESTMENTS July 31, 2000 * Senior Loans in the Fund's portfolio generally are subject to mandatory and/or optional prepayment. Because of these mandatory prepayment conditions and because there may be significant economic incentives for a Borrower to prepay, prepayments of Senior Loans in the Fund's portfolio may occur. As a result, the actual remaining maturity of Senior Loans held in the Fund's portfolio may be substantially less than the stated maturities shown. Although the Fund is unable to accurately estimate the actual remaining maturity of individual Senior Loans, the Fund estimates that the actual average maturity of the Senior Loans held in its portfolio will be approximately 18-24 months. ** Senior Loans in which the Fund invests generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the London Inter-Bank Offered Rate ("LIBOR"), (ii) the prime rate offered by one or more major United States banks and (iii) the certificate of deposit rate. Senior loans are generally considered to be restricted in that the Fund ordinarily is contractually obligated to receive approval from the Agent Bank and/or borrower prior to the disposition of a Senior Loan. See Notes to Financial Statements A-38 56 FINANCIAL STATEMENTS Statement of Assets and Liabilities July 31, 2000 ASSETS: Total Investments (Cost $1,534,728,685)..................... $1,449,632,114 Receivables: Interest.................................................. 11,031,886 Fund Shares Sold.......................................... 2,678,181 Prepaid Expenses............................................ 516,136 Other....................................................... 33,624 -------------- Total Assets.......................................... 1,463,891,941 ============== LIABILITIES: Payables: Income Distributions...................................... 1,880,672 Custodian Bank............................................ 1,527,645 Investment Advisory Fee................................... 1,233,040 Distributor and Affiliates................................ 374,049 Administrative Fee........................................ 344,154 Fund Shares Repurchased................................... 51,789 Initial Offering and Registration Costs................... 41,558 Accrued Expenses............................................ 764,381 Trustees' Deferred Compensation and Retirement Plans........ 66,045 -------------- Total Liabilities..................................... 6,283,333 -------------- NET ASSETS.................................................. $1,457,608,608 ============== NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 152,178,276 shares issued and outstanding).............................................. $ 1,521,783 Paid in Surplus............................................. 1,534,716,501 Accumulated Undistributed Net Investment Income............. 3,604,417 Accumulated Net Realized Gain............................... 2,862,478 Net Unrealized Depreciation................................. (85,096,571) -------------- NET ASSETS.................................................. $1,457,608,608 ============== NET ASSET VALUE PER COMMON SHARE ($1,457,608,608 divided by 152,178,276 shares outstanding)........................... $ 9.58 ==============
See Notes to Financial Statements A-39 57 Statement of Operations For the Year Ended July 31, 2000 INVESTMENT INCOME: Interest.................................................... $140,920,030 Fees........................................................ 33,586 Other....................................................... 2,077,389 ------------ Total Income............................................ 143,031,005 ------------ EXPENSES: Investment Advisory Fee..................................... 15,073,901 Administrative Fee.......................................... 3,966,816 Service Fee................................................. 2,380,090 Shareholder Services........................................ 1,159,712 Custody..................................................... 674,541 Legal....................................................... 622,791 Amortization of Organizational Costs........................ 102,254 Trustees' Fees and Related Expenses......................... 76,608 Other....................................................... 2,002,678 ------------ Total Expenses.......................................... 26,059,391 ------------ NET INVESTMENT INCOME....................................... $116,971,614 ============ REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Gain........................................... $ 3,089,393 ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... (911,892) End of the Period......................................... (85,096,571) ------------ Net Unrealized Depreciation During the Period............... (84,184,679) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(81,095,286) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 35,876,328 ============
See Notes to Financial Statements A-40 58 Statement of Changes in Net Assets For the Years Ended July 31, 2000 and 1999
YEAR ENDED YEAR ENDED JULY 31, 2000 JULY 31, 1999 -------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income............................ $ 116,971,614 $ 58,912,884 Net Realized Gain................................ 3,089,393 891,210 Net Unrealized Depreciation During the Period.... (84,184,679) (1,472,606) -------------- -------------- Change in Net Assets from Operations............. 35,876,328 58,331,488 -------------- -------------- Distributions from Net Investment Income......... (116,807,793) (56,436,224) Distributions from Net Realized Gain............. (1,076,619) (39,076) -------------- -------------- Total Distributions.......................... (117,884,412) (56,475,300) -------------- -------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..................................... (82,008,084) 1,856,188 -------------- -------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold........................ 568,093,865 1,133,265,976 Net Asset Value of Shares Issued Through Dividend Reinvestment................................... 81,211,399 39,411,306 Cost of Shares Repurchased....................... (581,641,209) (114,016,137) -------------- -------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS................................... 67,664,055 1,058,661,145 -------------- -------------- TOTAL INCREASE/DECREASE IN NET ASSETS............ (14,344,029) 1,060,517,333 NET ASSETS: Beginning of the Period.......................... 1,471,952,637 411,435,304 -------------- -------------- End of the Period (Including accumulated undistributed net investment income of $3,604,417 and $3,303,975, respectively)....... $1,457,608,608 $1,471,952,637 ============== ==============
See Notes to Financial Statements A-41 59 Statement of Cash Flows For the Year Ended July 31, 2000 CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 35,876,328 ------------- Adjustments to Reconcile the Change in Net Assets from Operations to Net Cash Used for Operating Activities: Decrease in Investments at Value.......................... 1,117,270 Increase in Interest Receivable........................... (3,545,844) Decrease in Receivable for Funding Fee.................... 250,000 Increase in Prepaid Expenses.............................. (267,501) Decrease in Unamortized Organizational Costs.............. 102,254 Increase in Other Assets.................................. (20,882) Increase in Investment Advisory Fees Payable.............. 38,183 Increase in Administrative Fees Payable................... 10,048 Increase in Distributor & Affiliates Payable.............. 52,836 Increase in Accrued Expenses.............................. 501,409 Increase in Trustees' Deferred Compensation and Retirement Plans................................................... 31,603 ------------- Total Adjustments....................................... (1,730,624) ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES................... 34,145,704 ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Shares Sold................................... 584,707,828 Change in Intra-day Credit Line with Custodian Bank......... (565,467) Payments on Shares Repurchased.............................. (581,589,420) Cash Dividends Paid......................................... (35,622,026) Capital Gain Distributions Paid............................. (1,076,619) ------------- Net Cash Provided by Financing Activities................. (34,145,704) ------------- NET INCREASE IN CASH........................................ -0 - Cash at Beginning of the Period............................. -0 - ------------- CASH AT END OF THE PERIOD................................... $ -0 - =============
See Notes to Financial Statements A-42 60 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
MARCH 27, 1998 (COMMENCEMENT YEAR ENDED JULY 31, OF INVESTMENT ------------------------- OPERATIONS) TO 2000 1999 JULY 31, 1998 ------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD..... $ 10.09 $ 10.04 $ 10.00 -------- -------- ------- Net Investment Income...................... .72 .65 .21 Net Realized and Unrealized Gain/Loss...... (.50) .04 .04 -------- -------- ------- Total from Investment Operations............. .22 .69 .25 -------- -------- ------- Less: Distributions from Net Investment Income... .72 .64 .21 Distributions from Realized Gain........... .01 -0- -0- -------- -------- ------- Total Distributions.......................... .73 .64 .21 -------- -------- ------- NET ASSET VALUE, END OF THE PERIOD........... $ 9.58 $ 10.09 $ 10.04 ======== ======== ======= Total Return* (a)............................ 2.27% 7.09% 2.52%** Net Assets at End of the Period (In millions).................................. $1,457.6 $1,472.0 $ 411.4 Ratio of Expenses to Average Net Assets*..... 1.64% 1.60% 1.70% Ratio of Net Investment Income to Average Net Assets*.................................... 7.37% 6.66% 6.33% Portfolio Turnover (b)....................... 54% 23% 4%** * If certain expenses had not been waived by Van Kampen, Total Return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets................................. N/A 1.61% 1.92% Ratio of Net Investment Income to Average Net Assets............................. N/A 6.65% 6.11%
** Non-Annualized N/A = Not Applicable. (a) Total return assumes an investment at the beginning of the period indicated, reinvestment of all distributions for the period and tender of all shares at the end of the period indicated, excluding payment of 1% imposed on most shares accepted by the Fund for repurchase which have been held for less than one year. If the early withdrawal charge was included, total return would be lower. (b) Calculation includes the proceeds from principal repayments and sales of variable rate senior loan interests. See Notes to Financial Statements A-43 61 NOTES TO FINANCIAL STATEMENTS July 31, 2000 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Senior Floating Rate Fund (the "Fund") is registered as a non- diversified closed-end management investment company under the Investment Company Act of 1940, as amended. The Fund's investment objective is to provide a high level of current income, consistent with preservation of capital. The Fund seeks to achieve its objective by investing primarily in a portfolio of interests in floating or variable rate senior loans to corporations, partnerships and other entities which operate in a variety of industries and geographical regions. The Fund commenced investment operations on March 27, 1998. 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 The Fund's Variable Rate Senior Loan interests ("Loan interests") are valued by the Fund following guidelines established and periodically reviewed by the Fund's Board of Trustees. Subject to criteria established by the Fund's Board of Trustees about the availability and reliability of market indicators obtained from independent pricing sources, certain Loan interests are valued at the mean of bid and ask market indicators supplied by independent pricing sources approved by the Fund's Board of Trustees. All other Loan interests are valued by considering a number of factors including consideration of market indicators, transactions in instruments which Van Kampen Investment Advisory Corp. (the "Adviser") believes may be comparable (including comparable credit quality, interest rate, interest rate redetermination period and maturity), the credit worthiness of the borrower, the current interest rate, the period until next interest rate redetermination and the maturity of such Loan interests. Consideration of comparable instruments may include commercial paper, negotiable certificates of deposit and short-term variable rate securities which have adjustment periods comparable to the Loan interests in the Fund's portfolio. The fair value of Loan interests are reviewed and approved by the Fund's Valuation Committee and by the Fund's Board of Trustees. The fair value of a Loan interest may differ significantly from the market value that would have been used had there been a ready and reliable market for that Loan interest. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. Short-term loan participations are valued at cost in the absence of any indication of impairment. A-44 62 NOTES TO FINANCIAL STATEMENTS July 31, 2000 B. SECURITY TRANSACTIONS Investment transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Facility fees received are treated as market discounts. Market premiums are amortized and discounts are accreted over the stated life of each applicable security. Other income is comprised primarily of amendment fees. Amendment fees are earned as compensation for agreeing to changes in loan agreements. D. ORGANIZATIONAL COSTS The Fund has agreed to reimburse Van Kampen Funds Inc. or its affiliates (collectively "Van Kampen") for costs incurred in connection with the Fund's organization in the amount of $140,000. These costs normally are amortized over a 60 month period beginning on the date of the Fund's initial public offering of its shares. However, AICPA Statement of Position 98-5, which is effective for fiscal years beginning after December 15, 1998, requires that unamortized organizational costs on the Fund's statement of assets and liabilities be written off. Therefore, the Fund wrote off the remaining unamortized organizational costs in August 1999. E. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. 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. At July 31, 2000, for federal income tax purposes the cost of long- and short-term investments is $1,534,731,336, the aggregate gross unrealized appreciation is $6,537,395 and the aggregate gross unrealized depreciation is $91,636,617, resulting in net unrealized depreciation on long- and short-term investments of $85,099,222. F. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly dividends from net investment income. Net realized gains, if any, are distributed at least annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. Due to inherent differences in the recognition of income, expenses and realized gains/losses under generally accepted accounting principles and federal income tax purposes, permanent differences between financial and tax basis reporting for the 2000 fiscal year have been identified and appropriately reclassified. A permanent difference of $136,621 relating to expenses not A-45 63 NOTES TO FINANCIAL STATEMENTS July 31, 2000 deductible for tax purposes has been reclassified from capital to accumulated undistributed net investment income. 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 $4.0 billion.......................................... .950 of 1% Next $3.5 billion........................................... .900 of 1% Next $2.5 billion........................................... .875 of 1% Over $10.0 billion.......................................... .850 of 1%
In addition, the Fund will pay a monthly administrative fee to Van Kampen Funds Inc., the Fund's Administrator, at an annual rate of .25% of the average net assets of the Fund. The administrative services to be provided by the Administrator include monitoring the provisions of the loan agreements and any agreements with respect to participations and assignments, record keeping responsibilities with respect to interests in Variable Rate Senior Loans in the Fund's portfolio and providing certain services to the holders of the Fund's securities. For the year ended July 31, 2000, the Fund recognized expenses of approximately $284,100 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated person. For the year ended July 31, 2000, the Fund recognized expenses of approximately $22,500 representing Van Kampen's cost of providing legal services to the Fund. Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as the shareholder servicing agent of the Fund. For the year ended July 31, 2000, the Fund recognized expenses for their services of approximately $887,100. Shareholder servicing fees are determined through negotiations with the Fund's Board of Trustees and are based on competitive market benchmarks. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation to a later date. Benefits under the retirement plan are payable for a ten-year period and are A-46 64 NOTES TO FINANCIAL STATEMENTS July 31, 2000 based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 3. CAPITAL TRANSACTIONS At July 31, 2000 and July 31, 1999, paid in surplus aggregated $1,534,716,501 and $1,467,251,336 respectively. Transactions in common shares were as follows:
YEAR ENDED YEAR ENDED JULY 31, 2000 JULY 31, 1999 Beginning Shares....................................... 145,951,374 40,992,495 ----------- ----------- Shares Sold.......................................... 57,196,384 112,343,843 Shares Issued Through Dividend Reinvestment.......... 8,251,082 3,904,175 Shares Repurchased................................... (59,220,564) (11,289,139) ----------- ----------- Net Increase in Shares............................... 6,226,902 104,958,879 ----------- ----------- Ending Shares.......................................... 152,178,276 145,951,374 =========== ===========
4. INVESTMENT TRANSACTIONS During the period, the costs of purchases and proceeds from investments sold and repaid, excluding short-term investments, were $1,004,256,377 and $702,218,160, respectively. 5. TENDER OF SHARES The Board of Trustees currently intends, each quarter, to consider authorizing the Fund to make tender offers for all or a portion of its then outstanding common shares at the net asset value of the shares on the expiration date of the tender offer. For the year ended July 31, 2000, 59,220,564 shares were tendered and repurchased by the Fund. 6. EARLY WITHDRAWAL CHARGE An early withdrawal charge to recover offering expenses will be imposed in connection with most common shares held for less than one year which are accepted by the Fund for repurchase pursuant to tender offers. The early withdrawal charge of 1.00% will be payable to Van Kampen. For the year ended July 31, 2000, Van Kampen received early withdrawal charges of approximately $1,278,800 in connection with tendered shares of the Fund. 7. COMMITMENTS/BORROWINGS Pursuant to the terms of certain of the Variable Rate Senior Loan agreements, the Fund had unfunded loan commitments of approximately $9,631,900 as of July 31, A-47 65 NOTES TO FINANCIAL STATEMENTS July 31, 2000 2000. The Fund generally will maintain with its custodian short-term investments having an aggregate value at least equal to the amount of unfunded loan commitments. The Fund, along with the Van Kampen Prime Rate Income Trust, has entered into a revolving credit agreement with a syndicate led by Bank of America for an aggregate of $500,000,000, which will terminate on September 12, 2001. The proceeds of any borrowing by the Fund under the revolving credit agreement shall be used for temporary liquidity purposes and funding of shareholder tender offers. Annual commitment fees of .09% are charged on the unused portion of the credit line. Borrowings under this facility will bear interest at either the LIBOR rate or the Federal Funds rate plus .50%. There have been no borrowings under this agreement to date. 8. SENIOR LOAN PARTICIPATION COMMITMENTS The Fund invests primarily in participations, assignments, or acts as a party to the primary lending syndicate of a Variable Rate Senior Loan interest to corporations, partnerships, and other entities. When the Fund purchases a participation of a Senior Loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation, but not with the borrower directly. As such, the Fund assumes the credit risk of the borrower, selling participant or other persons interpositioned between the Fund and the borrower. At July 31, 2000, the following sets forth the selling participants with respect to interests in Senior Loans purchased by the Fund on a participation basis.
PRINCIPAL AMOUNT VALUE SELLING PARTICIPANT (000) (000) Chase Securities, Inc. ..................................... $ 66,879 $ 64,546 Bankers Trust............................................... 65,217 65,195 Toronto Dominion............................................ 34,250 34,186 Canadian Imperial Bank of Commerce.......................... 26,279 26,296 Bank of America............................................. 20,654 20,693 Morgan Guaranty Trust....................................... 19,983 20,011 Lehman Brothers............................................. 15,688 15,502 Bank of New York............................................ 15,000 14,914 ABN Amro.................................................... 15,000 14,851 Bank One.................................................... 14,078 14,013 Fleet National Bank......................................... 11,055 11,045 Credit Suisse............................................... 10,985 10,994 Union Bank.................................................. 10,975 10,952 IBJ Schroder Bank........................................... 10,000 9,974
A-48 66 NOTES TO FINANCIAL STATEMENTS July 31, 2000
PRINCIPAL AMOUNT VALUE SELLING PARTICIPANT (CONTINUED) (000) (000) GE Capital.................................................. 9,000 8,948 Industrial Bank of Japan.................................... 5,000 4,987 Deutsche Bank............................................... 5,000 4,744 Citibank.................................................... 5,000 4,988 Bank of Nova Scotia......................................... 4,913 4,912 Heller Finance.............................................. 4,247 4,231 National City Bank.......................................... 2,993 3,000 First Union................................................. 2,000 1,993 UBS AG...................................................... 1,491 1,483 -------- -------- Total....................................................... $375,687 $372,458 ======== ========
9. SERVICE PLAN The Fund has adopted a Service Plan (the "Plan") designed to meet the service fee requirements of the sales charge rule of the National Association of Securities Dealers, Inc. The Plan governs payments for personal services and/or the maintenance of shareholder accounts. Annual fees under the Plan of .15% (.25% maximum) of net assets are accrued daily and paid quarterly. For the year ended July 31, 2000, the Fund paid service fees of approximately $2,380,100 to Van Kampen. A-49 EX-99.(A)(2) 4 c60983ex99-a2.txt FORM OF LETTER OF TRANSMITTAL 1 ------------------------------------------------------------------------------- EXHIBIT (a)(2) LETTER OF TRANSMITTAL REGARDING COMMON SHARES OF VAN KAMPEN SENIOR FLOATING RATE FUND TENDERED PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 20, 2001 THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT EASTERN TIME ON MAY 18, 2001, UNLESS THE OFFER IS EXTENDED Ladies and Gentlemen: The undersigned hereby tenders to the Van Kampen Senior Floating Rate Fund, a non-diversified, closed-end investment management company organized as a Massachusetts business trust (the "Trust"), the common shares of beneficial interest, par value $0.01 per share, of the Trust (the "Common Shares") described below in Box No. 1, at a price (the "Purchase Price") equal to the net asset value per Common Share ("NAV") determined as of 5:00 P.M. Eastern Time on the Expiration Date (as defined in the Offer to Purchase), upon the terms and conditions set forth in the Offer to Purchase, dated April 20, 2001, receipt of which is hereby acknowledged, and in this Letter of Transmittal and the Instructions hereto (which together constitute the "Offer"). An Early Withdrawal Charge (as defined in the Offer to Purchase) will be imposed on most Common Shares accepted for payment which have been held for less than one year. Subject to and effective upon acceptance for payment of the Common Shares tendered hereby in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Trust all right, title and interest in and to all Common Shares tendered hereby that are purchased pursuant to the Offer and hereby irrevocably constitutes and appoints Van Kampen Investor Services Inc. (the "Depositary") as attorney-in-fact of the undersigned with respect to such Common Shares, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Common Shares or transfer ownership of such Common Shares on the Trust's books, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Trust, upon receipt by the Depositary, as the undersigned's agent, of the NAV per Common Share with respect to such Common Shares; (b) present certificates for such Common Shares, if any, for cancellation and transfer on the Trust's books; (c) deduct from the Purchase Price deposited with the Depositary any applicable Early Withdrawal Charge and remit such charge to Van Kampen Funds Inc.; and (d) receive all benefits and otherwise exercise all rights of beneficial ownership of such Common Shares, subject to the next paragraph, all in accordance with the terms of the Offer. (tear along dotted line) 2 The undersigned hereby represents and warrants that: (a) the undersigned has a "net long position" in the Common Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Act of 1934, as amended, and has full power and authority to validly tender, sell, assign and transfer the Common Shares tendered hereby; (b) when and to the extent the Trust accepts the Common Shares for purchase, the Trust will acquire good, marketable and unencumbered title to them, free and clear of all security interests, liens, charges, encumbrances, conditional sales agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim; (c) on request, the undersigned will execute and deliver any additional documents the Depositary or the Trust deems necessary or desirable to complete the assignment, transfer and purchase of the Common Shares tendered hereby; and (d) the undersigned has read and agrees to all of the terms of this Offer. The names and addresses of the registered owners should be printed, if they are not already printed, in Box 1 as they appear on the registration of the Common Shares. The number of Common Shares that the undersigned wishes to tender should be indicated in Box No. 1, which number may be determined by indicating in Option B of such box the dollar amount of proceeds the undersigned desires to receive pursuant to the tender offer after any applicable Early Withdrawal Charge has been deducted from such proceeds. The undersigned may elect to have the Depositary invest the cash proceeds of the Offer in Class C Shares of certain open-end investment companies advised by either Van Kampen Investment Advisory Corp. or Van Kampen Asset Management Inc. and distributed by Van Kampen Funds Inc., subject to certain limitations, by indicating in Option C. If the Common Shares tendered hereby are in certificate form, the certificates representing such Common Shares must be returned together with this Letter of Transmittal. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Trust may terminate or amend the Offer or may not be required to purchase any of the Common Shares tendered hereby. In any such event, the undersigned understands that certificate(s) for any Common Shares not purchased, if any, will be returned to the undersigned at the address indicated below in Box No. 1 unless otherwise indicated under the Special Payment and Delivery Instructions in Box No. 2. The undersigned understands that acceptance of Common Shares by the Trust for payment will constitute a binding agreement between the undersigned and the Trust upon the terms and subject to the conditions of the Offer. The check for the Purchase Price of the tendered Common Shares purchased, minus any applicable Early Withdrawal Charge, will be issued to the order of the undersigned and mailed to the address indicated below in Box No. 1, unless otherwise indicated in Box No. 2. Shareholders tendering Common Shares remain entitled to receive dividends declared on such shares up to the settlement date of the Offer. The Trust will not pay interest on the Purchase Price under any circumstances. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and all obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN BELOW DOES NOT CONSTITUTE VALID DELIVERY. SEND TO: VAN KAMPEN INVESTOR SERVICES INC., Depositary By Regular Mail, By, Certified, Registered, Van Kampen Investor Services Inc. Overnight Mail or Courier P.O. Box 218256 Van Kampen Investor Services Inc. Kansas City, MO 64121-8256 7501 Tiffany Springs Parkway Attn: Van Kampen Senior Kansas City, MO 64153 Floating Rate Fund Tender Attn: Van Kampen Senior Floating Rate Fund Tender
FOR ADDITIONAL INFORMATION CALL: (800) 341-2911 13 SFR004(a)-04/01 3 ------------------------------------------------------------------------------- THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE COMMON SHARES TO BE TENDERED ARE REGISTERED IN THE SHAREHOLDER'S NAME AND THE NECESSARY DOCUMENTS WILL BE TRANSMITTED TO THE DEPOSITARY BY THE SHAREHOLDER OR HIS BROKER, DEALER OR OTHER SELLING GROUP MEMBER. DO NOT USE THIS FORM IF A BROKER, DEALER OR OTHER SELLING GROUP MEMBER IS THE REGISTERED OWNER OF THE COMMON SHARES AND IS EFFECTING THE TRANSACTION FOR THE SHAREHOLDER. IF THE COMMON SHARES TENDERED HEREBY ARE IN CERTIFICATE FORM, THE CERTIFICATES REPRESENTING SUCH COMMON SHARES MUST BE RETURNED TOGETHER WITH THIS LETTER OF TRANSMITTAL. PLEASE NOTE THAT WE SUGGEST THAT SUCH CERTIFICATES BE RETURNED VIA CERTIFIED OR REGISTERED MAIL. TO ENSURE PROCESSING OF YOUR REQUEST, THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE (MAY 18, 2001). - -------------------------------------------------------------------------------- BOX NO. 1: SHAREHOLDER INFORMATION - --------------------------------------------------- Name and Address of Registered Owner Shareholder Information - --------------------------------------------------- PLEASE PROVIDE:Social Security No. Confirm No. (if applicable) ACCOUNT NO.: - ---------------------------------------------------
CHECK ONE OF THE FOLLOWING AND FILL IN THE APPROPRIATE AMOUNT OPTION A: [ ] I hereby tender ALL COMMON SHARES of the Trust. I understand that an Early Withdrawal Charge will be imposed on most Common Shares accepted for payment that have been held for less than one year and that such charge, if any, will be deducted from the proceeds from such Common Shares. (See Instruction 3 and 4(f)). OPTION B: [ ] I hereby tender __________ Common Shares of the Trust or that certain number of Common Shares of the Trust necessary to receive $__________ from the Trust after the Early Withdrawal Charge, if any, is to be deducted from tendering these Common Shares. (See Instruction 3 and 4(f)). OPTION C: [ ] I hereby tender __________ Common Shares of the Trust and elect to have the proceeds from such tender invested into Class C Shares of __________________________________ Fund Acct. No. __________ (if applicable). (See Instruction 3). - -------------------------------------------------------------------------------- PLEASE NOTE: 1. Additional legal documentation may be required. 2. If the account indicated by the account number in this Box No. 1 is a Van Kampen FIDUCIARY IRA ACCOUNT, an IRA DISTRIBUTION FORM MUST be submitted with this Letter of Transmittal. 3. If the SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER IS NOT CERTIFIED, OR THE ACCOUNT IS BEING TRANSFERRED TO A NEW SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER, THE ENCLOSED FORM W-9 MUST be completed and signed by the account owner. (Estate accounts must be signed by the legal representative of the estate and bear the estate tax identification number and not the social security number of the deceased. Completion of the Form W-9 certifies the tax identification number. Certification will prevent a 31% withholding pursuant to Internal Revenue Service regulations.) PLEASE BE SURE TO COMPLETE BOTH SIDES OF THIS FORM (tear along dotted line) 4 ----------------------------------------------- BOX NO. 2: SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 2, 3 AND 4) ----------------------------------------------- To be completed ONLY if any checks are to be sent or wired to someone other than the undersigned and/or any checks or certificates for Common Shares not tendered or not purchased are to be sent to the undersigned at an address other than that shown above in Box No. 1. A SIGNATURE GUARANTEE IS REQUIRED IF THIS PORTION IS COMPLETED. ----------------------------------------------- CHECK/CERTIFICATE INFORMATION BANK WIRE INFORMATION ----------------------------------------------- PAYEE: Wire Proceeds To: [ ] Checking [ If you would like the check and/or certificates ] Savings PAYABLE to someone other than who the account (Minimum $5,000 to be wired) is registered, please provide the following: Bank Name(s) (NAME) (PLEASE PRINT) Address Address ABA Routing No. (INCLUDE ZIP CODE) Account No. (SHAREHOLDER'S BANK ACCOUNT NO.) MAILING: If you would like the check and/or certificates Bank Account Registration MAILED to an address other than the account (NAME) registration, please provide the following: Please attach a voided check or deposit slip if possible. Name(s) (PLEASE PRINT) Address (INCLUDE ZIP CODE) -----------------------------------------------
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BOX NO. 3: SIGNATURES (SEE INSTRUCTIONS 2, 3 AND 4) - -------------------------------------------------------------------------------- A. By signing this Letter of Transmittal, you represent that you have read the letter printed on the other side of this page and the Instructions enclosed herewith, which Instructions form part of the terms and conditions of the Offer. B. This Letter of Transmittal must be signed by the registered owner(s) of the Common Shares tendered hereby or by person(s) authorized to become registered owner(s) by documents transmitted herewith. If signature is by attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth the name and full title of such authorized signor and include the required additional legal documentation regarding the authority of the signor. See Instruction 4. NOTE: ANY QUESTIONS REGARDING ADDITIONAL LEGAL DOCUMENTATION WHICH MAY BE REQUIRED SHOULD BE DIRECTED TO OUR INVESTOR SERVICES DEPARTMENT AT (800) 341-2911. C. YOUR SIGNATURE MUST BE GUARANTEED and you MUST complete the signature guarantee in this Box No. 3 if (i) the value of the Common Shares tendered herewith pursuant to the OFFER IS GREATER THAN $100,000, (ii) this LETTER OF TRANSMITTAL IS SIGNED BY SOMEONE OTHER THAN THE REGISTERED HOLDER OF THE COMMON SHARES TENDERED HEREWITH, or (iii) you REQUEST PAYMENT FOR THE COMMON SHARES TENDERED HEREWITH TO BE SENT TO A PERSON OTHER THAN THE REGISTERED OWNER of such Common Shares for the benefit of such owner(s) and/or TO AN ADDRESS OTHER THAN THE REGISTERED ADDRESS OF THE REGISTERED OWNER of the Common Shares. For information with respect to what constitutes an acceptable guarantee, please see Instruction 4(f). D. See Instruction 8 and Form W-9 enclosed herewith regarding backup withholding. ................................................................................ ................................................................................ (SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED) Dated ...................................................., 20.... DAYTIME TELEPHONE NUMBER( ) ........................................... SIGNATURE GUARANTEE (IF APPLICABLE): ............................................................................ Bank Name ............................................................................ Print Name of Authorized Signer Telephone Number ( ) ............................... (Affix signature guarantee stamp above if required) - -------------------------------------------------------------------------------- 13 SFR004(b)-04/01 5 ------------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be used only if the Common Shares to be tendered are registered in the shareholder's name and the necessary documents will be transmitted to the Depositary by the shareholder or his broker, dealer or other selling group member. Do not use this form if a broker, dealer or other selling group member is the registered owner of the Common Shares and is effecting the transaction for the shareholder. A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL OR MANUALLY SIGNED FACSIMILE OF IT, ANY CERTIFICATES REPRESENTING COMMON SHARES TENDERED AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL SHOULD BE MAILED OR DELIVERED TO THE DEPOSITARY AT THE ADDRESS SET FORTH IN THE LETTER OF TRANSMITTAL AND MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (MAY 18, 2001). THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR COMMON SHARES, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. THE TRUST WILL NOT ACCEPT ANY ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS. ALL TENDERING SHAREHOLDERS, BY EXECUTION OF THE LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE OF IT), WAIVE ANY RIGHT TO RECEIVE ANY NOTICE OF THE ACCEPTANCE OF THEIR TENDER. 2. COMPLETING THE LETTER OF TRANSMITTAL. If you intend to tender any Common Shares pursuant to the Offer, please complete the Letter of Transmittal as follows: (a) Read the Letter of Transmittal in its entirety. By signing the Letter of Transmittal in Box No. 3, you agree to its terms. (b) Complete Box No. 1 by providing your Social Security Number, a Confirm Number, if applicable, and selecting and completing either Option A, Option B or Option C. (c) Complete Box No. 2 if certificates for Common Shares not tendered or not purchased and/or any check issued in the name of a person other than the signer of the Letter of Transmittal are to be sent or wired to someone other than such signer or to the signer at an address other than that shown in Box No. 1. (d) Complete Box No. 3 in accordance with Instruction 4 set forth below. 3. PARTIAL TENDERS, UNPURCHASED SHARES AND EXCHANGES. If fewer than all of the Common Shares evidenced by any certificate submitted are to be tendered and if any tendered Common Shares are purchased, a new certificate for the remainder of the Common Shares evidenced by your old certificate(s) will be issued and sent to the registered owner, unless otherwise specified in Box No. 2 of the Letter of Transmittal, as soon as practicable after the Expiration Date of the Offer. Tendering shareholders who elect to have the Depositary invest the cash proceeds from the tender of Common Shares of the Trust in Class C Shares of certain open-end investment companies advised by either Van Kampen Investment Advisory Corp. or Van Kampen Asset Management Inc. and distributed by Van Kampen Funds Inc. should select and complete Option C. The Early Withdrawal Charge will be waived for Common Shares tendered for reinvestment pursuant to this election; however, such Class C Shares immediately become subject to a contingent deferred sales charge schedule equivalent to the Early Withdrawal Charge schedule of the Trust. 4. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATIONS AND ENDORSEMENTS. (a) If this Letter of Transmittal is signed by the registered owner(s) of the Common Shares tendered hereby, the signature(s) must correspond exactly with the name(s) in which the Common Shares are registered. (b) If the Common Shares are held of record by two or more joint owners, each such owner must sign this Letter of Transmittal. (c) If any tendered Common Shares are registered in different names, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or manually signed facsimiles of it) as there are different registrations of Common Shares. (d) When this Letter of Transmittal is signed by the registered owner(s) of the Common Shares listed and transmitted hereby, no endorsements of any certificate(s) representing such Common Shares or separate authorizations are required. If, however, payment is to be made to a person other than the registered owner(s), any unpurchased Common Shares are to be registered in the name of any person other than the registered owner(s) or any certificates for unpurchased Common Shares are to be issued to a person other than the registered owner(s), then the Letter of Transmittal and, if applicable, the certificate(s) transmitted hereby, must be endorsed or accompanied by appropriate authorizations, in either case signed exactly as such name(s) appear on the registration of the Common Shares and on the face of the certificate(s) and such endorsements or authorizations must be guaranteed by an institution described in Box No. 3. (e) If this Letter of Transmittal or any certificates or authorizations are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Trust of their authority so to act. Please contact the Investor Services Department for assistance at (800) 341-2911. 13 SFR005-04/01 (tear along dotted line) 6 ------------------------------------------------------------------------------- (f) Your signature MUST be guaranteed and you MUST complete the signature guarantee in Box No. 3 if (i) the value of the Common Shares tendered herewith pursuant to the Offer is greater than $100,000, (ii) this Letter of Transmittal is signed by someone other than the registered holder of the Common Shares tendered herewith, or (iii) you request payment for the Common Shares tendered herewith to be sent to a payee other than the registered owner of such Common Shares and/or to an address other than the registered address of the registered owner of the Common Shares. An acceptable guarantee is one made by a bank or trust company; a broker-dealer; a credit union; a national securities exchange, registered securities association or clearing agency; a savings and loan association; or a federal savings bank. The guarantee must state the words "Signature Guaranteed" along with the name of the granting institution. Shareholders should verify with the institution that it is an eligible guarantor prior to signing. A guarantee from a notary public is not acceptable. 5. TRANSFER TAXES. The Trust will pay all share transfer taxes, if any, payable on the transfer to it of Common Shares purchased pursuant to the Offer. If, however, (a) payment of the Purchase Price is to be made to any person other than the registered owner(s), (b) (in the circumstances permitted by the Offer) unpurchased Common Shares are to be registered in the name(s) of any person other than the registered owner(s) or (c) tendered certificates are registered in the name(s) of any person other than the person(s) signing this Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered owner(s) or such other persons) payable on account of the transfer to such person(s) will be deducted from the Purchase Price by the Depositary unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. 6. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Common Shares will be determined by the Trust in its sole discretion, whose determination shall be final and binding on all parties. The Trust reserves the absolute right to reject any or all tenders determined by it not to be in appropriate form or the acceptance of or payment for any Common Shares which may, in the opinion of the Trust's counsel, be unlawful. The Trust also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in tender of any particular Common Shares or any particular shareholder, and the Trust's interpretations of the terms and conditions of the Offer (including these Instructions) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Trust shall determine. Tendered Common Shares will not be accepted for payment unless all defects and irregularities have either been cured within such time or waived by the Trust. None of the Trust, Van Kampen Funds Inc., Van Kampen Investments Inc., the Depositary, or any other person shall be obligated to give notice of defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any such notice. 7. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to, and additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from Van Kampen Funds Inc., 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181-5555, or by telephoning (800) 341-2911. 8. FORM W-9. Each tendering shareholder who has not already submitted a completed and signed Form W-9 to the Trust is required to provide the Depositary with a correct taxpayer identification number ("TIN") on Form W-9 which is enclosed herewith. Failure to provide the information on the form may subject the tendering shareholder to 31% backup federal income tax withholding on the payments made to the shareholder or other payee with respect to Common Shares purchased pursuant to the Offer. 9. WITHHOLDING ON FOREIGN SHAREHOLDERS. The Depositary will withhold federal income taxes equal to 30% of the gross payments payable to a foreign shareholder unless the foreign shareholder has provided to the Depositary a Form W-8 on which it claims eligibility for a reduced rate of withholding or establishes an exemption from withholding is applicable. For this purpose, a foreign shareholder is any shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof, (iii) any estate the income of which is subject to United States federal income taxation regardless of the source of such income or (iv) a trust whose administration is subject to the primary jurisdiction of a United States court and which has one or more United States fiduciaries who have authority to control all substantial decisions of the trust. The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to certificates or statements provided by the foreign shareholder concerning eligibility for a reduced rate of, or exemption from, withholding unless facts and circumstances indicate that reliance is not warranted. A foreign shareholder who has not previously submitted the appropriate certificates or statements with respect to a reduced rate of, or an exemption from, withholding for which such shareholder may be eligible should consider doing so in order to avoid overwithholding. A foreign shareholder may be eligible to obtain a refund of tax withheld if such shareholder meets one of the three tests for capital gain or loss treatment described in Section 15 of the Offer to Purchase or is otherwise able to establish that no tax or a reduced amount of tax was due. IMPORTANT: THE LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE. EX-99.(A)(3)(I) 5 c60983ex99-a3i.txt FORM OF LETTER 1 ------------------------------------------------------------------------------- EXHIBIT (a)(3)(i) OFFER BY VAN KAMPEN SENIOR FLOATING RATE FUND TO PURCHASE FOR CASH 30,914,257 OF ITS COMMON SHARES AT NET ASSET VALUE PER COMMON SHARE April 20, 2001 To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees: Pursuant to your request, we are enclosing herewith the material listed below relating to the offer of Van Kampen Senior Floating Rate Fund (the "Trust") to purchase up to 30,914,257 of its common shares of beneficial interest with par value of $0.01 per share (the "Common Shares") at net asset value per Common Share ("NAV") determined as of 5:00 P.M. Eastern Time on the Expiration Date (defined below) upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 20, 2001 and in the related Letter of Transmittal (which together constitute the "Offer"). The Offer and withdrawal rights will expire at 12:00 Midnight Eastern Time on May 18, 2001, unless extended (the "Expiration Date"). An "Early Withdrawal Charge" will be imposed on most Common Shares accepted for payment which have been held for less than one year. The Offer is not conditioned upon any minimum number of Common Shares being tendered but is subject to certain conditions as set forth in the Offer to Purchase. If more than 30,914,257 Common Shares are duly tendered prior to the expiration of the Offer, the Trust presently intends to, assuming no changes in the factors originally considered by the Board of Trustees when it determined to make the Offer and the other conditions set forth in the Offer, but is not obligated to, extend the Offer period, if necessary, and increase the number of Common Shares that the Trust is offering to purchase to an amount which it believes will be sufficient to accommodate the excess Common Shares tendered as well as any Common Shares tendered during the extended Offer period or purchase 30,914,257 Common Shares (or such greater number of Common Shares sought) on a pro rata basis. No fees or commissions will be payable to brokers, dealers or other persons for soliciting tenders of Common Shares pursuant to the Offer. The Trust will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to those of your clients who have requested such materials. The Trust will pay all transfer taxes on its purchase of shares, subject to Instruction 5 of the Letter of Transmittal. However, backup tax withholding at a 31% rate may be required unless an exemption is proved or unless the required tax identification information is or has previously been provided. See Section 15 of the Offer to Purchase and Instructions 8 and 9 to the Letter of Transmittal. For your information and for forwarding to those of your clients who have requested them, we are enclosing the following documents: (1) Offer to Purchase dated April 20, 2001; (2) Letter of Transmittal to be used by holders of Common Shares to tender such shares to the Depositary directly or through their broker, dealer or other nominee who is not the registered owner; (3) Guidelines for Certification of Taxpayer Identification Number; (4) Letter to Clients which may be sent to your clients for whose account you hold Common Shares registered in your name (or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer); and (5) Return envelope addressed to the Depositary. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT EASTERN TIME ON MAY 18, 2001, UNLESS THE OFFER IS EXTENDED. TO ENSURE PROCESSING OF YOUR OR YOUR CLIENT'S REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE (MAY 18, 2001). 13 SFR009-04/01 BDR (tear along dotted line) 2 The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Common Shares residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Additional copies of the enclosed material may be obtained from Van Kampen Funds Inc. at the address and telephone number set forth in the Offer to Purchase. Any questions you have with respect to the Offer should be directed to Van Kampen Funds Inc. at (800) 421-5666. Very truly yours, VAN KAMPEN SENIOR FLOATING RATE FUND - -------------------------------------------------------------------------------- NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE TRUST OR THE DEPOSITARY OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY MATERIAL ON THEIR BEHALF WITH RESPECT TO THE OFFER, OTHER THAN THE MATERIAL ENCLOSED HEREWITH AND THE STATEMENTS SPECIFICALLY SET FORTH IN SUCH MATERIAL. - -------------------------------------------------------------------------------- EX-99.(A)(3)(II) 6 c60983ex99-a3ii.txt FORM OF LETTER TO CLIENTS 1 ------------------------------------------------------------------------------- EXHIBIT (a)(3)(ii) OFFER BY VAN KAMPEN SENIOR FLOATING RATE FUND TO PURCHASE FOR CASH 30,914,257 OF ITS COMMON SHARES AT NET ASSET VALUE PER COMMON SHARE To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated April 20, 2001, of Van Kampen Senior Floating Rate Fund (the "Trust") and related Letter of Transmittal pursuant to which the Trust is offering to purchase up to 30,914,257 of its common shares of beneficial interest with par value of $0.01 per share (the "Common Shares") at the net asset value per Common Share ("NAV") determined as of 5:00 P.M. Eastern Time on the Expiration Date (defined below) upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal (which together constitute the "Offer"). An "Early Withdrawal Charge" will be imposed on most Common Shares accepted for payment which have been held for less than one year. The Offer to Purchase and the Letter of Transmittal are being forwarded to you as the beneficial owner of Common Shares held by us for your account but not registered in your name. A tender of such shares can be made only by us as the holder of record and only pursuant to your instructions. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR INFORMATION ONLY; YOU CANNOT USE IT TO TENDER COMMON SHARES WE HOLD FOR YOUR ACCOUNT. Your attention is called to the following: (1) The tender price is the NAV determined as of 5:00 P.M. Eastern Time on the Expiration Date. An "Early Withdrawal Charge" will be imposed on most Common Shares accepted for payment which have been held for less than one year. (2) The Offer is not conditioned upon any minimum number of Common Shares being tendered, but is subject to certain conditions set forth in the Offer to Purchase. (3) The Offer and withdrawal rights expire at 12:00 Midnight Eastern Time on May 18, 2001, unless extended (the "Expiration Date"). (4) The Offer is for 30,914,257 Common Shares. (5) Tendering shareholders will not be obligated to pay brokerage commissions or, subject to Instruction 5 of the Letter of Transmittal, transfer taxes on the purchase of Common Shares by the Trust pursuant to the Offer. However, a broker, dealer or selling group member may charge a fee for processing the transaction on your behalf. (6) If more than 30,914,257 Common Shares are duly tendered prior to the expiration of the Offer, the Trust presently intends to, assuming no changes in the factors originally considered by the Board of Trustees when it determined to make the Offer and the other conditions set forth in the Offer, but is under no obligation to, extend the Offer period, if necessary, and increase the number of Common Shares that the Trust is offering to purchase to an amount which it believes will be sufficient to accommodate the excess Common Shares tendered as well as any Common Shares tendered during the extended Offer period or purchase 30,914,257 Common Shares (or such greater number of Common Shares sought) on a pro rata basis. If you wish to have us tender any or all of your Common Shares, please so instruct us by completing, executing and returning to us the attached instruction form. An envelope to return your instructions to us is enclosed. If you authorize us to tender your Common Shares, all such Common Shares will be tendered 13 SFR007-04/01 (tear along dotted line) 2 unless you specify otherwise on the attached instruction form. WE MUST RECEIVE YOUR INSTRUCTIONS, IF ANY, SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE (MAY 18, 2001) TO PROVIDE US WITH TIME TO PROCESS SUCH INSTRUCTIONS AND FORWARD THEM TO THE DEPOSITARY SO THAT THE DEPOSITARY WILL RECEIVE THEM ON OR PRIOR TO SUCH EXPIRATION DATE. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT EASTERN TIME ON MAY 18, 2001, UNLESS THE OFFER IS EXTENDED. The Trust is not making the Offer to, nor will it accept tenders from or on behalf of, owners of Common Shares in any jurisdiction in which the Offer or its acceptance would violate the securities, Blue Sky or other laws of such jurisdiction. In any jurisdiction the securities or Blue Sky laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on the Trust's behalf by one or more registered brokers or dealers licensed under the laws of such jurisdiction. 3 ------------------------------------------------------------------------------- INSTRUCTIONS WITH RESPECT TO OFFER BY VAN KAMPEN SENIOR FLOATING RATE FUND TO PURCHASE FOR CASH 30,914,257 OF ITS COMMON SHARES AT NET ASSET VALUE PER COMMON SHARE THIS FORM IS NOT TO BE USED TO TENDER COMMON SHARES DIRECTLY TO THE DEPOSITARY. IT SHOULD BE SENT TO YOUR BROKER ONLY IF YOUR BROKER IS THE HOLDER OF RECORD OF YOUR COMMON SHARES AND WILL BE EFFECTING THE TENDER ON YOUR BEHALF. IT SHOULD BE SENT TO SUCH BROKER SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE (MAY 18, 2001) TO PROVIDE THE BROKER WITH TIME TO PROCESS THESE INSTRUCTIONS AND FORWARD THEM TO THE DEPOSITARY SO THAT THE DEPOSITARY WILL RECEIVE THEM ON OR PRIOR TO THE EXPIRATION DATE (MAY 18, 2001). The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated April 20, 2001, and the related Letter of Transmittal (which together constitute the "Offer"), in connection with the offer by Van Kampen Senior Floating Rate Fund (the "Trust") to purchase 30,914,257 common shares of beneficial interest with par value of $0.01 per share (the "Common Shares") at the net asset value per Common Share determined as of 5:00 P.M. Eastern Time on the Expiration Date on the terms and subject to the conditions of the Offer. The undersigned acknowledges that an "Early Withdrawal Charge" will be imposed on most Common Shares accepted for payment which have been held for less than one year. The undersigned hereby instructs you to tender to the Trust the number of Common Shares indicated below (or, if no number is indicated below, all Common Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions of the Offer. Aggregate number of Common Shares to be tendered by you for us (fill in number below): ______ Common Shares Unless otherwise indicated above, it will be assumed that all of the Common Shares held for the account of the undersigned are to be tendered. SIGNATURE(S) ---------------------------------------------------------------------- ...................................................................... ...................................................................... (SIGNATURES(S) OF BENEFICIAL OWNERS) ...................................................................... (ACCOUNT NUMBER) ...................................................................... (PLEASE PRINT NAME(S) AND ADDRESSES HERE) ...................................................................... (AREA CODE AND TELEPHONE NUMBER) ...................................................................... (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) ---------------------------------------------------------------------- Date: April 20, 2001 - - 13 SFR008-04/01 ARROW - - (tear along dotted line) ------------------------------------------------------------------------------- ARROW (tear along dotted line) EX-99.(A)(3)(III) 7 c60983ex99-a3iii.txt FORM OF LETTER TO SELLING GROUP MEMBERS 1 EXHIBIT (a)(3)(iii) [VAN KAMPEN LETTERHEAD] April 20, 2001 RE: VAN KAMPEN SENIOR FLOATING RATE FUND Commencement of Tender Offer To Our Dealer Friends: As you may be aware, it is the policy of the Board of Trustees of Van Kampen Senior Floating Rate Fund (the "Trust") to consider on a quarterly basis whether to make a tender offer for common shares of the Trust. We are pleased to announce that the Board has authorized the Trust's thirteenth quarterly tender offer commencing today, April 20, 2001, for the purpose of attempting to provide liquidity to its shareholders. The commencement of the tender offer was announced in the Wall Street Journal today. The Trust is offering to purchase up to 30,914,257 of its common shares at a price equal to the net asset value per common share of the Trust determined as of 5:00 P.M. Eastern Time on the expiration date of the offer. The offer is scheduled to terminate as of 12:00 Midnight Eastern Time on May 18, 2001, the expiration date of the offer (unless extended). An "Early Withdrawal Charge" will be imposed on most common shares accepted for payment that have been held for less than one year. Terms and conditions of the tender offer are contained in the Trust's Offer to Purchase dated April 20, 2001, and the related Letter of Transmittal, copies of which are available to you upon request. Should you have any questions regarding the tender offer, please contact Van Kampen's Investor Services Department at 1-800-421-5666. Sincerely, VAN KAMPEN FUNDS INC. 13 SFR003-04/01 EX-99.(A)(3)(IV) 8 c60983ex99-a3iv.txt FORM OF OPERATIONS NOTICE 1 EXHIBIT (a)(3)(iv) ANNOUNCING . . . VAN KAMPEN SENIOR FLOATING RATE FUND COMMENCEMENT OF TENDER OFFER It is the policy of the Board of Trustees of the Van Kampen Senior Floating Rate Fund to consider on a quarterly basis whether to make a Tender Offer for common shares of the Trust. We are pleased to announce that the Board has authorized the Trust's thirteenth quarterly Tender Offer commencing on April 20, 2001. The purpose of the offer is to attempt to provide liquidity to its shareholders. The commencement of the Tender Offer is announced in today's Wall Street Journal. Shareholders of the Trust may elect to have the cash proceeds from the Tender Offer invested in Class C Shares of eligible open-end investment companies advised by either Van Kampen Investment Advisory Corp. or Van Kampen Asset Management Inc. and distributed by Van Kampen Funds Inc., subject to certain limitations. Please note that the Class C Shares acquired pursuant to this election are subject to a contingent deferred sales charge schedule equal to the "Early Withdrawal Charge" schedule of the Trust. The Trust is offering to purchase up to 30,914,257 of its common shares at a price equal to the net asset value per common share of the Trust as of 5:00 P.M., Eastern Time on May 18, 2001, the expiration date of the Tender Offer (unless extended). The Tender Offer and the withdrawal rights expire at 12:00 Midnight Eastern Time on May 18, 2001, unless the Tender Offer is extended. An "Early Withdrawal Charge" will be imposed on most common shares accepted for payment that have been held for less than one year. Terms and conditions of the tender offer are contained in the Trust's Offer to Purchase dated April 20, 2001, and the related Letter of Transmittal. Copies are available to you upon request by calling Van Kampen's Investor Services Department at (800) 421-5666. Shareholders may tender by completing and returning the Letter of Transmittal by May 18, 2001. Alternatively, Selling Firms may tender account positions with a wire order redemption via NSCC Fund/SERV or by calling Van Kampen's Brokerage Operations Support Services at (800) 421-3863, on May 18, 2001 (trade date of the Tender Offer).
- ---------------------------------------------------------------------------------------------------------- FUND NAME NUMBER SYMBOL CUSIP TENDER START TENDER END - ---------------------------------------------------------------------------------------------------------- VK Senior Floating Rate Fund 259 VKSFR 920960101 04/20/01 05/18/01 - ----------------------------------------------------------------------------------------------------------
PLEASE DIRECT YOUR TENDER QUESTIONS TO THE FOLLOWING AREAS: MAIN OFFICE OPERATIONS: BROKERAGE OPERATIONS SUPPORT SERVICES (BOSS) AT (800) 421-3863. REGISTERED REPRESENTATIVES: INVESTOR SERVICES DEPARTMENT AT (800) 421-5666. This material is prepared for internal or broker/dealer use only. It may not be reproduced or shown to members of the public or used in written form as sales literature. Such use would be in violation of the NASD code of conduct. This material is subject to change, please consult the prospectus. EX-99.(A)(4) 9 c60983ex99-a4.txt FORM OF LETTER TO SHAREHOLDERS 1 EXHIBIT (a)(4) Dear Shareholder: As you requested, we are enclosing a copy of the Van Kampen Senior Floating Rate Fund ("Trust") Offer to Purchase 30,914,257 of its issued and outstanding common shares of beneficial interest ("Common Shares") and the related Letter of Transmittal (which together constitute the "Offer"). The Offer is at the net asset value per Common Share ("NAV") determined as of 5:00 P.M. Eastern Time on May 18, 2001, the expiration date of the Offer (unless extended). An "Early Withdrawal Charge" will be imposed on most Common Shares accepted for payment that have been held for less than one year. Please read carefully the enclosed documents. If, after reviewing the information set forth in the Offer, you wish to tender Common Shares for purchase by the Trust, please either follow the instructions contained in the Offer to Purchase and related Letter of Transmittal or, if your Common Shares are held of record in the name of a broker, dealer or other nominee, contact such broker, dealer or nominee to effect the tender for you. Neither the Trust nor its Board of Trustees is making any recommendation to any holder of Common Shares as to whether to tender Common Shares. Each shareholder is urged to consult his or her broker or tax adviser before deciding whether to tender any Common Shares. The Trust's NAV from April 12, 1999 through April 12, 2001 ranged from a high of $10.12 to a low of $8.67. On April 12, 2001 the NAV was $8.67. You may obtain current NAV quotations from Van Kampen Funds Inc. by calling (800) 341-2911 between the hours of 7:00 A.M. and 7:00 P.M. Central Time, Monday through Friday, except holidays. NAV quotes also may be obtained through the ICI Pricing Service which will be released each Friday evening and published by the Dow Jones Capital Markets Wire Service on each Friday; published in the New York Times on each Saturday; published in the Chicago Tribune on each Sunday; and published weekly in Barron's magazine. The Trust offers and sells its Common Shares to the public on a continuous basis. The Trust is not aware of any secondary market trading for the Common Shares. Should you have any questions on the enclosed material, please call Van Kampen Funds Inc. at (800) 341-2911 during ordinary business hours. We appreciate your continued interest in Van Kampen Senior Floating Rate Fund. Sincerely, VAN KAMPEN SENIOR FLOATING RATE FUND - -------------------------------------------------------------------------------- TO ENSURE PROCESSING OF YOUR REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE (MAY 18, 2001). - -------------------------------------------------------------------------------- 13 SFR-010-04/01 S/0 EX-99.(A)(5) 10 c60983ex99-a5.txt TEXT OF PRESS RELEASE DATED 4/20/01 1 EXHIBIT (a)(5) NEWS RELEASE FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT: A. Thomas Smith III or Ian J. McPheron 800/225-2222 800/225-2222 Ext. 6784 Ext. 6845
VAN KAMPEN SENIOR FLOATING RATE FUND BEGINS TENDER OFFER FOR COMMON SHARES CHICAGO (April 20, 2001) -- Van Kampen Senior Floating Rate Fund, distributed by Van Kampen Funds Inc., a subsidiary of Van Kampen Investments Inc. ("Van Kampen"), announced today that it has commenced a tender offer for 30,914,257 of its outstanding common shares of beneficial interest. The offer is not conditioned on any minimum number of common shares that must be tendered. The offer is subject to the terms and conditions set forth in the Offer to Purchase and the related Letter of Transmittal. The common shares are being tendered for cash at a price equal to the net asset value per common share determined as of 5:00 p.m., Eastern Time, on May 18, 2001, the expiration date, unless extended. The offer and withdrawal rights will expire, as of 12:00 Midnight, Eastern Time, on May 18, 2001, unless extended. An early withdrawal charge will be imposed on most common shares accepted for payment that have been held for less than one year. As indicated in the Trust's current prospectus, the Board of Trustees currently intends, each quarter, to consider authorizing the Trust to make tender offers for its common shares in order to attempt to provide liquidity to its investors. The Van Kampen Senior Floating Rate Fund tender offer is being made only by the Offer to Purchase dated April 20, 2001 and the related Letter of Transmittal. Questions and requests for assistance, for current net asset value quotes, or for copies of the Offer to Purchase, Letter of Transmittal, and any other tender offer documents may be directed to Van Kampen by calling 1-800-341-2911. Van Kampen is one of the nation's largest investment management companies, with more than $81 billion in assets under management or supervision, as of March 31, 2001. With roots in money management dating back to 1927, Van Kampen has helped more than four generations of investors achieve their financial goals. Headquartered in the Chicagoland area, Van Kampen is a wholly owned subsidiary of Morgan Stanley (NYSE:MWD). # # # For more complete information, including risk considerations, fees, sales charges and ongoing expenses, please contact your financial advisor for a prospectus or download one at www.vankampen.com. Please read it carefully before you invest or send money. EX-99.(B)(1) 11 c60983ex99-b1.txt 3RD AMENDMENT & RESTATEMENT OF CREDIT AGREEMENT 1 EXHIBIT (b)(1) ================================================================================ THIRD AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT Dated as of September 13, 2000 among VAN KAMPEN PRIME RATE INCOME TRUST and VAN KAMPEN SENIOR FLOATING RATE FUND, as Borrowers, THE FINANCIAL INSTITUTIONS PARTY HERETO COMMERZBANK AKTIENGESELLSCHAFT, as Syndication Agent, and BANK OF AMERICA, N.A., as Agent, further amending and restating that certain CREDIT AGREEMENT Dated as of April 17, 1997 among VAN KAMPEN PRIME RATE INCOME TRUST, as Borrower, THE FINANCIAL INSTITUTIONS PARTY THERETO and BANK OF AMERICA, N.A., as Agent, BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION 1.1. Defined Terms.....................................................................1 ARTICLE II THE CREDITS 2.1. Amounts and Terms of Commitments..................................................3 2.2. Notes.............................................................................3 2.3. Procedure for Borrowing...........................................................3 2.4. Conversion and Continuation Elections.............................................4 2.5. Voluntary Termination or Reduction of Commitments.................................5 2.6. Prepayments.......................................................................6 2.7. Repayment.........................................................................6 2.8. Interest..........................................................................6 2.9. Fees..............................................................................7 2.10. Computation of Fees and Interest..................................................8 2.11. Payments..........................................................................8 2.12. Payments by the Banks to the Agent................................................8 2.13. Sharing of Payments, etc..........................................................9 2.14. Non-Allocated Payments............................................................9 2.15. Optional Increase in Commitments.................................................10 2.16. Swing Loans......................................................................11 2.17. Extension of Commitment Termination Date.........................................12 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.1. Taxes............................................................................12 3.2. Illegality.......................................................................13 3.3. Increased Costs and Reduction of Return..........................................14 3.4. Funding Losses...................................................................15 3.5. Inability to Determine Rates.....................................................15 3.6. Certificates of Banks............................................................16 3.7. Substitution of Banks............................................................16
i 3
Page ---- 3.8. Survival.........................................................................16 ARTICLE IV CONDITIONS TO AMENDMENTS AND BORROWING 4.1. Conditions to Amendment and Restatement..........................................17 4.2. All Borrowings ..................................................................18 4.3. Consequences of Effectiveness, etc...............................................19 4.4. Amounts Outstanding Under the Original Credit Agreement Deemed to Be Loans Under This Agreement......................................................19 ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1. Existence........................................................................20 5.2. Authorization....................................................................20 5.3. No Conflicts.....................................................................20 5.4. Validity and Binding Effect......................................................20 5.5. No Default.......................................................................20 5.6. Financial Statements.............................................................20 5.7. Litigation.......................................................................21 5.8. Liens............................................................................21 5.9. Partnerships.....................................................................21 5.10. Purpose..........................................................................21 5.11. Compliance and Government Approvals..............................................21 5.12. Pension and Welfare Plans........................................................22 5.13. Taxes............................................................................22 5.14. Subsidiaries; Investments........................................................22 5.15. Full Disclosure..................................................................22 5.16. Investment Policies..............................................................22 5.17. Regulations T, U and X...........................................................22 5.18. Status of Loans..................................................................22 5.19. Prospectus.......................................................................22 5.20. Affiliated Person................................................................22 ARTICLE VI COVENANTS 6.1. Financial Statements and Other Reports...........................................23
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Page ---- 6.2. Notices..........................................................................24 6.3. Existence........................................................................25 6.4. Nature of Business...............................................................25 6.5. Books, Records and Access........................................................25 6.6. Insurance........................................................................25 6.7. Investment Policies and Restrictions.............................................25 6.8. Taxes............................................................................26 6.9. Compliance.......................................................................26 6.10. Pension Plans....................................................................26 6.11. Merger, Purchase and Sale........................................................26 6.12. Asset Coverage Ratio.............................................................27 6.13. Liens............................................................................27 6.14. Guaranties.......................................................................27 6.15. Other Agreements.................................................................28 6.16. Transactions with Related Parties................................................28 6.17. Other Indebtedness...............................................................28 6.18. Changes to Organization Documents, etc...........................................28 6.19. Proceeds of Loans................................................................28 ARTICLE VII EVENTS OF DEFAULT 7.1. Events of Default................................................................28 7.2. Remedies.........................................................................30 ARTICLE VIII THE AGENT 8.1. Appointment and Authorization....................................................31 8.2. Delegation of Duties.............................................................31 8.3. Liability of Agent...............................................................31 8.4. Reliance by Agent................................................................31 8.5. Notice of Default................................................................32 8.6. Credit Decision..................................................................32 8.7. Indemnification of Agent.........................................................33 8.8. Agent in Individual Capacity.....................................................33 8.9. Successor Agent..................................................................33 8.10. Withholding Tax..................................................................34
iii 5 ARTICLE IX MISCELLANEOUS PROVISIONS 9.1. Amendments and Waivers...........................................................35 9.2. Notices..........................................................................36 9.3. No Waiver; Cumulative Remedies...................................................37 9.4. Costs and Expenses...............................................................37 9.5. Borrower Indemnification.........................................................37 9.6. Payments Set Aside...............................................................39 9.7. Successors and Assigns...........................................................39 9.8. Confidentiality..................................................................40 9.9. Set-off..........................................................................41 9.10. Notification of Addresses, Lending Offices, etc..................................41 9.11. Counterparts.....................................................................42 9.12. Survival.........................................................................42 9.13. Disclaimer.......................................................................42 9.14. Severability.....................................................................42 9.15. No Third Parties Benefitted......................................................42 9.16. Governing Law and Jurisdiction...................................................42 9.17. Waiver of Jury Trial.............................................................43 9.18. Entire Agreement.................................................................43 9.19. Affiliated Person................................................................43 9.20. Continuing Effectiveness, etc....................................................43 9.21. Facsimile Execution..............................................................43 9.22. Syndication Agent................................................................44 9.23. Section 6.1(a); Change in Independent Accountants................................44
SCHEDULE I Definitions SCHEDULE II Commitments and Pro Rata Shares SCHEDULE III Offshore and Domestic Lending Offices, Addresses for Notices EXHIBIT 2.2 Promissory Note EXHIBIT 2.3 Form of Loan Request EXHIBIT 2.4 Conversion/Continuation Notice EXHIBIT 2.14 Allocation Notice EXHIBIT 2.15 Form of Request for Increase in Commitments EXHIBIT 2.16 Form of Swing Loan Note EXHIBIT 4.1(c)-1 Form of Opinion of Counsel to the Borrower EXHIBIT 4.1(c)-2 Form of Opinion of Counsel to the Agent EXHIBIT 5.7-1 Schedule of Litigation EXHIBIT 5.7-2 Schedule of Contingent Liabilities EXHIBIT 6.1 Form of Borrowing Base Certificate iv 6 THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of September 13, 2000 by the signatories hereto and amends and restates that certain Credit Agreement, dated as of April 17, 1997 (as heretofore amended by that certain First Amended and Restated Credit Agreement, dated as of April 16, 1998, that certain letter agreement, dated April 15, 1999, that certain Second Amended and Restated Credit Agreement, dated as of June 14, 1999, that certain letter agreement, dated June 15, 2000 and that certain letter agreement, dated August 9, 2000, the "Existing Credit Agreement"), by and among VAN KAMPEN PRIME RATE INCOME TRUST and VAN KAMPEN SENIOR FLOATING RATE FUND, as Borrowers (the "Borrowers"), the various banks (as defined in Section 2(a)(5) of the Act) party thereto (collectively, the "Banks"), and BANK OF AMERICA, N.A. ("BofA"), as agent (in such capacity, the "Agent") for the Banks. W I T N E S S E T H: WHEREAS, the Borrowers, the Banks and Bank of America, N.A., as agent for the Banks, are parties to the Existing Credit Agreement, which provided for the Banks to extend Loans to the Borrowers from time to time; WHEREAS, by means of a letter agreement dated June 13, 2000, each of the Banks amended the Agreement by changing the scheduled Commitment Termination Date from June 13, 2000 to September 13, 2000; WHEREAS, Bayerische Hypo-Und Vereinsbank AG, New York Branch, has elected not to continue as a Bank hereunder; and WHEREAS, the Borrowers and the Banks signatory hereto desire to amend and restate the Existing Credit Agreement, among other things, reallocate certain of the Commitments as provided herein, to extend the scheduled Commitment Termination Date, to add an optional commitment increase feature, to add BNP Paribas as a Bank hereunder and to amend and restate the Existing Credit Agreement in certain other respects, all as more fully hereinafter set forth (the "Refinancing"). NOW, THEREFORE, the parties hereto agree that the Existing Credit Agreement shall be amended and restated, as of the Refinancing Date, upon satisfaction of the conditions set forth herein, to state in its entirety as follows: ARTICLE I DEFINITIONS AND INTERPRETATION 1.1. Defined Terms. Unless otherwise defined herein, terms defined in Schedule I have the same respective meanings when used in this Agreement. 7 1.2. Interpretation. In this Agreement, unless otherwise specified herein: (a) the singular number includes the plural number and vice versa; (b) reference to any Person includes such Person's successors and assigns but, if specified herein, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended, restated, supplemented or otherwise modified and in effect from time to time in accordance with the terms thereof and, if specified herein, the terms hereof and the other Credit Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (e) reference to any applicable law means such applicable law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any applicable law means that provision of such applicable law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (f) reference to any Article, Section, Annex, Schedule or Exhibit means such Article or Section hereof or Annex, Schedule or Exhibit hereto; (g) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof; (h) "including" (and with the correlative meaning "include") means including without limiting the generality of any description preceding such term; (i) "or" is not exclusive; and (j) relative to the determination of any period of time, "from" means "from and including" and "to" and "through" mean "to but excluding". 1.3. Accounting Terms. In this Agreement, unless expressly otherwise provided, accounting terms shall be construed and interpreted, and accounting determinations and computations shall be made, in accordance with GAAP in effect from time to time. 2 8 ARTICLE II THE CREDITS 2.1. Amounts and Terms of Commitments. Each Bank severally agrees, on the terms and conditions set forth herein, to make Loans to the Borrowers from time to time on any Business Day during the period from the Refinancing Date to the Commitment Termination Date equal to its Pro Rata Share of the aggregate amount of the Borrowing requested by a Borrower to be made on such day. The Commitment of each Bank and the outstanding principal amount of Loans made by each Bank hereunder shall not exceed at any time the aggregate amount set forth on Schedule II (such amount as the same may be reduced under Section 2.5 or as a result of one or more assignments as permitted herein pursuant to Section 3.7 and Section 9.7, the Bank's "Commitment"); provided, however, that, after giving effect to any Borrowing, the aggregate principal amount of all outstanding Loans shall not at any time exceed the Commitment Amount; and provided, further, that the aggregate principal amount of all Loans outstanding from time to time to a Borrower shall not exceed the Borrowing Base for the relevant Borrower. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, a Borrower may borrow under this Section 2.1, repay under the terms hereof and reborrow under this Section 2.1. 2.2. Notes. The Loans made by each Bank under its Commitment to a Borrower shall be evidenced by a Note in the form of Exhibit 2.2. Each such Bank shall record on the schedules annexed to its Note the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the relevant Borrower with respect thereto. Each such Bank is irrevocably authorized by each Borrower to so record such information on such schedules to its Note, and each Bank's record shall be rebuttable presumptive evidence; provided, however, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the relevant Borrower hereunder or under any such Note to such Bank. 2.3. Procedure for Borrowing. (a) Each Borrowing shall be made upon a Borrower's irrevocable written notice or telephonic notice confirmed in writing within 24 hours delivered to the Agent in the form of a loan request ("Loan Request") substantially in the form of Exhibit 2.3 hereto (which notice must be received on a Business Day by the Agent prior to 12:00 noon. (Eastern time)) (i) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans, and (ii) on the Borrowing Date for which a Loan is requested, in the case of Federal Funds Rate Loans, specifying: (A) the amount of the Borrowing, which shall be in an aggregate minimum amount of $1,000,000 or any multiple of $1,000,000 in excess thereof; (B) the requested Borrowing Date, which shall be a Business Day; (C) the Type of Loans comprising the Borrowing; and 3 9 (D) the duration of the Interest Period applicable to such Loans included in such notice. If the Loan Request fails to specify the duration of the Interest Period for any Borrowing comprised of Offshore Rate Loans, such Interest Period shall be two weeks. In the event that more than one Loan Request is delivered on any Business Day, the Agent shall, for purposes of ensuring that the aggregate of the then-outstanding Loans and the Loans which are the subject of the Loan Requests will not exceed the Commitment Amount, process the Loan Requests in the order of receipt. (b) The Agent will promptly notify each Bank of its receipt of any Loan Request and of the amount of such Bank's Pro Rata Share of that Borrowing. (c) Each Bank will make the amount of its Pro Rata Share of each Borrowing available to the Agent for the account of the Borrower at the Agent's Payment Office by 2:00 p.m. (Eastern time) on the Borrowing Date requested by a Borrower in funds immediately available to the Agent for deposit to the account which the Agent shall from time to time specify by notice to the Banks. The proceeds of all such Loans will then be made available promptly to the relevant Borrower by the Agent in accordance with written instructions provided to the Agent by the Borrower in like funds as received by the Agent. No Bank's obligation to make any Loan shall be affected by any other Bank's failure to make any Loan. (d) After giving effect to any Borrowing, there may not be more than three (3) different Interest Periods in effect with respect to each Borrower. 2.4. Conversion and Continuation Elections. (a) A Borrower may as to its Loans, upon irrevocable written notice or telephonic notice confirmed in writing within 24 hours to the Agent in accordance with Section 2.4(b): (i) elect, as of any Business Day, in the case of Federal Funds Rate Loans, or as of the last day of the applicable Interest Period, in the case of any other Type of Loans (other than a Swing Loan), to convert any such Loans (or any part thereof in an amount that is not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof) into Loans of any other Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Loans having Interest Periods expiring on such day (or any part thereof in an amount that is not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof); provided that, if at any time the aggregate amount of Offshore Rate Loans in respect of any Borrowing is reduced by payment, prepayment or conversion of part thereof to be less than $1,000,000, such Offshore Rate Loans shall automatically convert into Federal Funds Rate Loans, and on and after such date, the right of the Borrower to continue such Loans as, and convert such Loans into, Offshore Rate Loans shall terminate. 4 10 Notwithstanding anything to the contrary, no Loan shall be outstanding for a period of more than sixty (60) days (including, in the case of a Loan that was initially made as a Swing Loan, the days during which such Loan was a Swing Loan) and there shall be no more than three Interest Periods in respect of an Offshore Rate Loan with respect to each Borrower. (b) The relevant Borrower shall deliver a Conversion/Continuation Notice as to its Loans to be received by the Agent not later than 12:00 noon (Eastern time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans, and (ii) on the Conversion/Continuation Date, if the Loans are to be continued or converted into Federal Funds Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or continued; (C) the Type of Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Federal Funds Rate Loans, the duration of the requested Interest Period. (c) The Agent will promptly notify each Bank of its receipt of a Conversion/Continuation Notice. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank. (d) Unless the Majority Banks otherwise agree, during the existence of a Default with respect to a Borrower, such Borrower may not elect to have a Loan converted into or continued as an Offshore Rate Loan. 2.5. Voluntary Termination or Reduction of Commitments. The Borrowers may, upon not less than five Business Days' prior written or telephonic notice to the Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof; unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the then-outstanding principal amount of the Loans would exceed the amount of the Commitment Amount then in effect. Once reduced in accordance with this Section, the Commitment Amount may not be increased. Any reduction of the Commitment Amount shall be applied to each Bank according to its Pro Rata Share. All accrued commitment fees to but not including the effective date of any termination of Commitments shall be paid on the effective date of such termination. All accrued commitment fees to but not including the effective date of any reduction of Commitments shall be paid on the last Business Day of the then-current calendar quarter. 5 11 2.6. Prepayments. (a) If at any time the outstanding balance of a Borrower's Indebtedness shall exceed the then-current Borrowing Base of such Borrower and at such time as there are Loans outstanding to such Borrower, such Borrower shall immediately prepay the outstanding principal amount of its Loans in an amount equal to such excess, together with interest accrued thereon and amounts required under Section 3.4. (b) Subject to Section 3.4, a Borrower may, at any time or from time to time, upon not less than three Business Days' irrevocable written or telephonic notice to the Agent, ratably prepay its Loans, in whole or in part, in minimum amounts of $1,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. If such notice is given, the relevant Borrower shall make such prepayment to the Agent, and the payment amount specified in such notice shall be due and payable on the date specified therein, together with, in the case of the prepayment of Offshore Rate Loans, accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.4. (c) The Agent will promptly notify each Bank of its receipt of any such notice and of such Bank's Pro Rata Share of such prepayment. (d) Each prepayment of any Loans pursuant to this Section shall be without premium or penalty, except as may be required by Section 3.4. No voluntary prepayment of principal of any Loans shall cause a reduction in the Commitment Amount. 2.7. Repayment. Each Borrower shall repay to the Agent for the benefit of the Banks on the Commitment Termination Date the aggregate principal amount of its Loans outstanding on such date. 2.8. Interest. (a) Each Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Federal Funds Rate or the Offshore Rate, as the case may be (and subject to a Borrower's right to convert to another Type of Loans under Section 2.4), plus the Applicable Margin. (b) Interest on each Loan shall be paid by the relevant Borrower on its Loans in arrears on each Interest Payment Date. Interest shall also be paid by the relevant Borrower on its Loans on the date of any prepayment of Offshore Rate Loans under Section 2.6 for the portion of such Loans so prepaid and upon payment (including prepayment) in full thereof, and during the existence of any Event of Default, interest from the Borrower subject to such Event of Default shall be paid by such Borrower on demand of the Agent at the request or with the consent of the Majority Banks. Notwithstanding subsection (a) of this Section, if any amount of principal of or interest on any Loan, or any other amount payable hereunder or under any other Credit Document, is not paid in full when due by the relevant Borrower on its Loans (whether at stated maturity or by acceleration, demand or otherwise), the relevant Borrower agrees, to the extent permitted by law, 6 12 to pay interest on such unpaid principal or other amount from the date such amount becomes due until the date such amount is paid in full, and after as well as before any entry of judgment thereon, payable on demand at a fluctuating rate per annum equal to the Base Rate plus 2%. (c) Anything herein to the contrary notwithstanding, the obligations of each Borrower to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank, and in such event the relevant Borrower shall pay such Bank interest at the highest rate permitted by applicable law. 2.9. Fees. (a) Arrangement, Agency Fees. The Borrowers shall pay on a several, and not on a joint, basis an arrangement fee to the Arranger for the Arranger's own account, and shall pay agency fees to the Agent for the Agent's own account, as required by the letter agreement ("Fee Letter") among the Borrowers, the Arranger and the Agent dated August 16, 2000. Van Kampen Prime Rate Income Trust shall be responsible for its pro rata portion of such fees and Van Kampen Senior Floating Rate Fund shall be responsible for its pro rata portion of such fees based upon the relative net asset value of each Borrower on any date of determination thereof. (b) Commitment Fees. The Borrowers shall pay on a several, and not on a joint, basis to the Agent for the account of each Bank a commitment fee on the daily unused portion of such Bank's Commitment, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon the daily utilization for that quarter as calculated by the Agent, equal to 0.09% per annum. For the avoidance of doubt, the contingent obligation of a Bank to pay funds to BofA in respect of a Swing Loan that may convert to a Federal Funds Rate Loan as provided in Section 2.16 shall not be considered use of such Borrower's Commitment. Van Kampen Prime Rate Income Trust shall be responsible for its pro rata portion of the commitment fee and Van Kampen Senior Floating Rate Fund shall be responsible for its pro rata portion of the commitment fee based upon the relative net asset value of each Borrower on any date of determination thereof. Such commitment fee shall accrue from the date of this third amended and restated Agreement to the Commitment Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December commencing on September 13, 2000 through the Commitment Termination Date, with the final payment to be made on the Commitment Termination Date. All accrued commitment fees to but not including the effective date of any termination of Commitments shall be paid on the effective date of such termination. All accrued commitment fees to but not including the effective date of any reduction of Commitments shall be paid on the last Business Day of the then-current calendar quarter, with such quarterly payment being calculated on the basis of the period from such reduction date to such quarterly payment date. The commitment fees provided in this subsection shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article IV are not met. 7 13 2.10. Computation of Fees and Interest. (a) All computations of interest on the basis of the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365- or 366-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Borrower and the Banks in the absence of manifest error. The Agent will, at the request of a Borrower or any Bank, deliver to such Borrower or Bank, as the case may be, a statement showing the quotations used by the Agent in determining any interest rate and the resulting interest rate. 2.11. Payments. (a) All payments to be made by a Borrower shall be made without set-off, recoupment or counterclaim, subject to Section 3.1. Except as otherwise expressly provided herein, all such payments shall be made to the Agent for the account of the Banks at the Agent's Payment Office and shall be made in Dollars and in immediately available funds no later than 2:00 p.m. (Eastern time) on the date specified herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 2:00 p.m. (Eastern time) shall be deemed to have been received on the following Business Day, and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent receives notice from a Borrower prior to the date on which any payment is due to the Banks that such Borrower will not make such payment in full as and when required, the Agent may assume that such Borrower has made such payment in full to the Agent on such date in immediately available funds, and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent a Borrower has not made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid. 2.12. Payments by the Banks to the Agent. (a) Unless the Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day prior to the date of such Borrowing, that such Bank will not make available as and when required hereunder to the Agent for the account of a Borrower the amount of that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent 8 14 may (but shall not be so required), in reliance upon such assumption, make available to the relevant Borrower on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the relevant Borrower such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the relevant Borrower of such failure to fund, and upon demand by the Agent, such Borrower shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date. 2.13. Sharing of Payments, etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) in excess of its Pro Rata Share, such Bank shall immediately (a) notify the Agent of such fact and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's ratable share (according to the proportion of (i) the amount of such paying Bank's required repayment to the purchasing Bank to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The relevant Borrower agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off with respect to such participation) as fully as if such Bank were the direct creditor of such Borrower in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments. 2.14. Non-Allocated Payments. Notwithstanding any other provision of this Agreement, the parties agree that (i) the obligations of each Borrower hereunder are, and at all times shall continue to be, several and not joint, (ii) the assets and liabilities of each Borrower are separate and distinct from the assets and liabilities of the other Borrower and (iii) a Borrower shall not be liable or 9 15 charged for any debt, obligation, liability, fee or expense arising under this Agreement or the Notes of the other Borrower. The Borrowers shall (i) as provided in Section 4.1(h), (ii) to the extent feasible, at least five (5) Business Days in advance of a date on which a payment in respect of a debt, obligation, liability, fee or expense arising hereunder (other than commitment fees, principal of or interest on a Loan, expenses allocable specifically to one Borrower hereunder, indemnities allocable to one Borrower in accordance with the terms and conditions hereof or Taxes or Other Taxes allocated to a particular Borrower and arrangement and agency fees) shall be due and payable and (iii) upon request of the Agent, cause to be provided to the Agent an Allocation Notice; provided, however, should the Borrowers fail to deliver to the Agent an Allocation Notice with respect to such amounts within five Business Days following a request for the same by the Agent, the Borrowers shall be liable therefor to the Agent and/or the Banks on a pro rata basis in the proportion of the respective net asset value of each Borrower on any date of determination thereof. 2.15. Optional Increase in Commitments. The Borrowers may, on one occasion, during the period from the Refinancing Date to the Commitment Termination Date, by means of a letter to the Agent and each Bank substantially in the form of Exhibit 2.15, request that the Banks increase the combined Commitments; provided that (i) such letter shall be accompanied by a certificate of an Authorized Officer of each Borrower as to resolutions of the board of trustees of the Borrower approving such increase, (ii) the amount of the increase in Commitments shall not be less than $50,000,000 and (iii) in no event shall the aggregate amount of the combined Commitments exceed $650,000,000 without the written consent of all Banks. Each Bank shall have the option (in its sole and complete discretion) to subscribe for its proportionate share of such increase, according to its then-existing Pro Rata Share. Each Bank shall respond to the Borrowers' request within 20 Business Days by submitting a response in the form of Attachment 1 to Exhibit 2.15 to the Agent (and any Bank not responding within such period shall be deemed to have declined such request). At the option of the Borrowers, any part of the proposed increase not so subscribed may be assumed, within 10 Business Days after all Banks have responded to (or are deemed to have declined) such request, by one or more existing Banks and/or by one or more Persons meeting the qualifications of an Eligible Assignee, in amounts which are acceptable to the Borrowers; it being understood that any assumption by a Person which is not an existing Bank shall be subject to consent of the Agent and each Borrower (which consents shall not be unreasonably withheld or delayed). Any increase in the combined Commitments pursuant to this Section 2.15 shall become effective on the date on which (a) the proposed increase has been fully subscribed or each of the Borrowers has notified the Agent that such Borrower accepts an increase in the combined Commitments which is less than the full amount of the requested increase (but not less than the amount specified in clause (ii) of the first sentence of this Section 2.15) and (b) the Agent shall have received from each Borrower replacement Notes and/or one or more new Notes in favor of the Banks whose Commitments have changed or been put in place as a result of the increase in the combined Commitments and such other documents as the Banks, through the Agent, shall have reasonably requested from the Borrowers. The Agent shall promptly notify the Borrowers and the Banks of any increase in the amount of the combined Commitments pursuant to this Section 2.15 and of the Commitment and Pro Rata Share of each Bank after giving effect thereto. Each Borrower acknowledges that, in order to maintain Loans in accordance with each Bank's Pro Rata Share, a reallocation of the Commitments as a result of a non- 10 16 pro-rata subscription to an increase in the combined Commitments may require prepayment of all or portions of certain Loans on the date of such increase (and any such prepayment shall be subject to the provisions of Section 3.4). 2.16. Swing Loans. BofA may elect in its sole discretion to make loans that shall bear interest at the Federal Funds Rate plus 0.50% per annum (each, a "Swing Loan") to a Borrower solely for BofA's own account from time to time on or after the Refinancing Date and prior to the Commitment Termination Date up to an aggregate principal amount at any one time outstanding to both of the Borrowers not to exceed $25,000,000; provided, however, that after giving effect to any Swing Loan, the aggregate principal amount of all outstanding Loans shall not exceed the least of (i) the Commitment of BofA; (ii) the combined Commitments of all the Banks; and (iii) the Borrowing Base. BofA may make Swing Loans (subject to the conditions precedent set forth in Section 4.2), provided that BofA receives notice no later than 2:00 p.m. (Eastern time) either (i) by facsimile transmission of a Loan Request or (ii) by telephone notice from an Authorized Officer of the relevant Borrower for funding of a Swing Loan on the Business Day on which such Swing Loan is requested to be made. BofA shall not make any Swing Loan after BofA becomes aware that one or more of the conditions precedent contained in Section 4.2 is not satisfied until such conditions have been satisfied or waived. If a Borrower shall request by telephonic notice and obtain a Swing Loan, it shall deliver promptly by facsimile transmission to BofA a Loan Request signed by an Authorized Officer of the Borrower confirming such telephonic notice for a Swing Loan. If the information contained in any such Loan Request differs in any material respect from the action taken by BofA, the records of BofA shall govern, absent manifest error. Each outstanding Swing Loan shall be payable no later than the seventh Business Day next following the day the Swing Loan was made, with interest at the Federal Funds Rate plus 0.50% per annum, and shall be subject to all the terms and conditions applicable to Loans, except that all interest thereon shall be payable to BofA solely for its own account. On the due date for such Swing Loan, unless the relevant Borrower delivers or has previously delivered to BofA a notice of its intention to repay and does repay the Swing Loan prior to 12:00 noon (Eastern time), such Swing Loan shall automatically convert to a Federal Funds Rate Loan under this Agreement, and each Bank (other than BofA), shall irrevocably and unconditionally purchase from BofA, without recourse or warranty, an undivided interest and participation in such Swing Loan in an amount equal to such Bank's Pro Rata Share and promptly pay such amount to BofA in immediately available funds (which payment shall be due by 2:00 p.m. (Eastern time) on such day if BofA requests payment therefor prior to 12:00 noon (Eastern time) on such day; otherwise such payment shall be due by 2:00 p.m. (Eastern time) on the first Business Day after BofA requests the same). Such payment shall be made by the other Banks whether or not an Event of Default or a Default is then continuing or any other condition precedent set forth in Section 4.2 is then met and whether or not the relevant Borrower has then requested a Loan in such amount. If such amount is not in fact paid to BofA by any Bank, BofA shall be entitled to recover such amount on demand from such Bank, together with accrued interest thereon from the due date therefor (if made prior to 2:00 p.m., Eastern time) on any 11 17 Business Day until the date such amount is paid to BofA by such Bank, at the Federal Funds Rate. The failure of any Bank to pay such amount to BofA shall not relieve any other Bank of its obligation to BofA hereunder. 2.17. Extension of Commitment Termination Date. Between 60 and 45 days prior to the Commitment Termination Date, the Borrowers may, by notice to the Agent, request that all Banks extend for an additional 364 days the Commitment Termination Date. Such extension so requested shall become effective if (and only if) on or prior to 30 days after such notice, each Bank shall have consented to such extension in writing by notice to the Agent. If a Bank shall not respond to any such request, it shall be deemed to have refused to extend. If any Bank (a "Non-Extending Bank") shall not agree to such extension, but Banks holding at least 80% of the Commitments shall agree to such extension, the Borrowers may request one or more of the other Banks to purchase the Commitment of the Non-Extending Bank or, with the consent of the Agent, the Borrowers may request an Assignee to purchase the Commitment of the Non-Extending Bank. Such purchase shall be subject to the payment to the Non-Extending Bank of all accrued and unpaid interest, principal, fees and other amounts due and owing hereunder. Any such purchase by such other Bank(s) or Assignee shall be subject to the terms of Section 9.7, except that the assignment fee contemplated by Section 9.7(b) shall not be payable. The respective obligations of the Borrowers to any Non-Extending Bank under Sections 2.9, 3.1, 3.3, 3.4, 9.4 and 9.5, and the obligations of such Non-Extending Bank under Sections 8.7 and 9.8, shall in each case survive and continue in full force and effect after the date on which such Non-Extending Bank shall cease to be a Bank hereunder. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.1. Taxes. (a) Any and all payments by a Borrower to each Bank or the Agent under this Agreement and any other Credit Document shall be made free and clear of, and without deduction or withholding for, any Taxes with respect to such Borrower's payments. In addition, the relevant Borrower shall pay all of its Other Taxes which have been reasonably allocated to it. (b) The relevant Borrower agrees to indemnify and hold harmless each Bank and the Agent for the full amount of its Taxes or its Other Taxes in connection with a payment by it (including any of its Taxes or its Other Taxes imposed by any jurisdiction on amounts payable by it under this Section) paid by the Bank or the Agent and any liability (including penalties, interest, additions to tax and expenses other than penalties, additions to tax, interest and expenses arising solely as a result of the willful misconduct or gross negligence of such Bank or Agent) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank or the Agent makes written demand therefor to the relevant Borrower including with such demand an identification of the Taxes or Other Taxes (and amounts thereof) with respect to which such demand for indemnification is being sought. 12 18 (c) If the relevant Borrower shall be required by law to deduct or withhold any of its Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Bank or the Agent, as the case may be, receives an amount equal to the sum it would have received from such Borrower had no such deductions or withholdings been made; (ii) such Borrower shall make such deductions and withholdings; (iii) such Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) such Borrower shall also pay to the Agent for the account of such Bank, at the time interest is paid, all additional amounts which the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes or Other Taxes had not been imposed. (d) Within 30 days after the date of any payment by the relevant Borrower of its Taxes or Other Taxes, such Borrower shall furnish the Agent the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Agent. (e) If the relevant Borrower is required to pay additional amounts to any Bank or the Agent pursuant to subsections (b) or (c) of this Section, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by such Borrower which may thereafter accrue, if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. A Borrower shall have no obligation to pay any amounts or increase any amounts payable to any Bank pursuant to this Section 3.1 which are owing on account of such Bank's failure to comply with its obligations under Section 8.10. (f) Within 30 days after the written request of a Borrower, each Bank or Agent shall execute and deliver to such Borrower such certificates or forms as are reasonably requested by such Borrower in such request, that can be furnished consistent with the facts and that are necessary to assist such Borrower in applying for refunds of its Taxes or its Other Taxes paid or indemnified by such Borrower hereunder. If a Bank or Agent receives a refund of any Taxes or Other Taxes with respect to which a Borrower has made a payment of additional amounts, such Bank or Agent shall pay over such refund to such Borrower within 30 days of receipt in an amount not in excess of the payments made by such Borrower with respect thereto. 3.2. Illegality. (a) If any Bank reasonably determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or 13 19 administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank to the Borrowers through the Agent, any obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank gives notice, and the Bank agrees promptly to give such notice, to the Agent and the Borrowers when the circumstances giving rise to such determination no longer exist. (b) If a Bank reasonably determines that it is unlawful to maintain any Offshore Rate Loan, each Borrower shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), prepay in full its respective Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 3.4, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan, as provided in a notice from the Bank to each respective Borrower. If a Borrower is required to so prepay any of its Offshore Rate Loan, then concurrently with such prepayment, the Borrower may borrow from the affected Bank, in the amount of such repayment, a Federal Funds Rate Loan. (c) If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, a Borrower may elect, by giving notice to the Bank through the Agent, that all of its Loans that would otherwise be made by the Bank as Offshore Rate Loans shall be instead Federal Funds Rate Loans. (d) Before giving any notice to the Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise materially disadvantageous to the Bank. 3.3. Increased Costs and Reduction of Return. (a) If any Bank reasonably determines that, due to the introduction of or any change in or in the interpretation of any law or regulation or the compliance by that Bank with any guideline or request made subsequent to the date of this Agreement from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank (not included in the calculation of the Eurodollar Reserve Percentage) of agreeing to make or making, funding or maintaining any Offshore Rate Loans to a Borrower, then such Borrower shall be liable for, and shall from time to time within 30 days after demand (with a copy of such demand to be sent to the Agent) pay to the Agent, for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs with respect to such Borrower. (b) If any Bank shall have reasonably determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance 14 20 by such Bank (or its Lending Office) or any corporation controlling such Bank with any guideline or request made subsequent to the date hereof with respect to any Capital Adequacy Regulation affects or would affect the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) and such Bank determines that, as a result of any of the foregoing, the amount of such capital is increased as a consequence of its Commitment, Loans, credits or other obligations under this Agreement, then, within 30 days after demand therefor accompanied by the certificate contemplated by Section 3.6 of such Bank to each affected Borrower through the Agent, the relevant Borrower shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for any reduced return on such capital reasonably allocated to the relevant Borrower as a result of such increase. 3.4. Funding Losses. The relevant Borrower will reimburse each Bank and hold each Bank harmless from any loss or expense which the Bank may reasonably sustain or incur as a consequence of: (a) the failure of such Borrower to make on a timely basis any payment of principal of any Offshore Rate Loan; (b) the failure of such Borrower to borrow, continue or convert a Loan after such Borrower has given (or is deemed to have given) a Loan Request or a Conversion/Continuation Notice; (c) the failure of such Borrower to make any prepayment in accordance with any notice delivered under Section 2.6; or (d) the prepayment or other payment (including after acceleration thereof) of any of such Borrower's Offshore Rate Loans on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by a Borrower to the Banks under this Section and under Section 3.3(b), each of such Borrower's Offshore Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the IBOR used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded. 3.5. Inability to Determine Rates. If the Agent determines that for any reason adequate and reasonable means do not exist for determining a relevant Borrower's Offshore Rate for any requested 15 21 Interest Period with respect to a proposed Offshore Rate Loan or that the Offshore Rate applicable pursuant to Section 2.8(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to any Bank of funding such Loan, the Agent will promptly so notify the relevant Borrower and each Bank. Thereafter, the obligation of the Banks to make or maintain such Offshore Rate Loans hereunder shall be suspended until the Agent gives notice (and, if appropriate, the Agent shall give such notice) to the relevant Borrower that adequate and reasonable means do exist for determining such Offshore Rate or such Offshore Rate does adequately and fairly reflect the costs to the Banks of funding such Loans. Upon receipt of such notice, such Borrower may revoke any Loan Request or Conversion/Continuation Notice then submitted by it. If such Borrower does not revoke such Notice, the Banks shall make, convert or continue such Loans at the end of the applicable Interest Period, as proposed by such Borrower, in the amount specified in the applicable notice submitted by such Borrower, but such Loans shall be made, converted or continued as Federal Funds Rate Loans instead of Offshore Rate Loans until the Agent revokes such notice. 3.6. Certificates of Banks. Any Bank claiming reimbursement or compensation under this Article III shall deliver to the relevant Borrower (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Bank hereunder, and such certificate shall be conclusive and binding on the Borrower in the absence of manifest error. 3.7. Substitution of Banks. Upon the receipt by a Borrower from any Bank (an "Affected Bank") of a claim for compensation against such Borrower under Section 3.1 or Section 3.3 or any circumstances exist with respect to such Bank described in Section 3.2, such Borrower may: (i) request the Affected Bank to use its best efforts to obtain a replacement bank or financial institution satisfactory to such Borrower to acquire and assume all or a ratable part of all of such Affected Bank's Loans and Commitment (a "Replacement Bank"); (ii) request one or more of the other Banks to acquire and assume all or part of such Affected Bank's Loans and Commitment (it being understood that no such other Bank shall in any way be required to effect any such acquisition and assumption); or (iii) designate a Replacement Bank. Any such designation of a Replacement Bank under clause (i) or (iii) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld) and payment in full of all amounts due and owing hereunder to the Replacement Bank. Each Bank which is an Affected Bank agrees to execute the necessary documentation to assign its interest to a Replacement Bank upon five (5) days' written notice from such Borrower after a Replacement Bank is identified. 3.8. Survival. The agreements and obligations of the respective Borrowers in Sections 3.1, 3.3 and 3.4 shall survive the payment of all other Obligations. 16 22 ARTICLE IV CONDITIONS TO AMENDMENTS AND BORROWING 4.1. Conditions to Amendment and Restatement. This amended and restated Agreement shall take effect from the first day that the Agent shall have received counterparts hereof signed by the Borrowers, the Agent and the Banks, and each of the conditions set forth in this Section 4.1 has been waived by the Agent and each Bank or met (the "Refinancing Date"). (a) The Agent shall have received from each Borrower a certificate, dated the Refinancing Date, of its Secretary or Assistant Secretary as to (i) resolutions of its board of trustees then in full force and effect authorizing the execution, delivery and performance of this amended and restated Agreement, the Notes and each other Credit Document to be executed by it and the Borrower's Declaration of Trust as amended or amended and restated to the date hereof and By-Laws; (ii) the incumbency and signatures of those of its officers or agents authorized to act with respect to this amended and restated Agreement, the Notes and each other Credit Document executed by it; (iii) such Borrower's valid existence as evidenced by a certificate issued by the Secretary of State of the Commonwealth of Massachusetts and appended to the relevant certificate of its Secretary or Assistant Secretary; and (iv) the fact that the agreements delivered by such Borrower pursuant to Section 4.1(e) constitute all such agreements between the Borrower and the Adviser as of such date; upon which certificate the Agent and each Bank may conclusively rely as to the matters described in clauses (i) and (ii) until they shall have received a further certificate from such Borrower canceling or amending such prior certificate. (b) The Agent shall have received for the account of (i) BofA, BNP Paribas, Commerzbank Aktiengesellschaft, New York and Grand Cayman Branches, and Credit Lyonnais a Note from each Borrower duly executed and delivered by such Borrower and made payable to the order of such Bank in the principal amount of such Bank's Commitment and (ii) BofA, a Swing Loan Note from each Borrower duly executed and delivered by such Borrower and made payable to the order of such Bank in the principal amount of $25,000,000. 17 23 (c) The Agent shall have received (1) an opinion, dated the Refinancing Date and addressed to the Agent and all Banks, from Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to each Borrower, substantially in the form of Exhibit 4.1(c)-1 and (2) an opinion, dated the Refinancing Date and addressed to the Agent and all Banks, from Mayer, Brown & Platt, counsel to the Agent, substantially in the form of Exhibit 4.1(c)-2. (d) The Agent shall have received evidence of payment of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Refinancing Date, together with Attorney Costs of the Agent to the extent invoiced prior to or on the Refinancing Date, plus such additional amounts of Attorney Costs as shall constitute the Agent's reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Borrowers and the Agent), including any such costs, fees and expenses then due and payable arising under or referenced in Section 2.9(a) and those then due and payable pursuant to Section 9.4. (e) The Agent shall have received copies of each investment advisory agreement between each Borrower and the Adviser, together with all sub-advisory agreements, if any, in effect as of the Refinancing Date. (f) The Agent shall have received copies of the most recent prospectus and statement of additional information for the Borrowers in effect as of the Refinancing Date. (g) The Agent shall have received from the Borrowers an Allocation Notice. 4.2. All Borrowings. The obligation of (i) each Bank to fund any Loan (other than the reimbursement of the Swing Loan pursuant to Section 2.16) on the occasion of any Borrowing (including the initial Borrowing) by a Borrower and (ii) BofA to make any Swing Loan to a Borrower shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 4.2. (a) No Default shall have occurred and be continuing with respect to the Borrower on such date. (b) The representations and warranties of the relevant Borrower contained in Article V (except to the extent such representations and warranties relate solely to an earlier date, in which case they shall be true and correct as of such earlier date) shall be true and correct in all material respects on and as of the date of such Borrowing, both immediately before and after giving effect to such Borrowing, as if then made. (c) In the case of a Borrowing, the Agent shall have received a Loan Request for such Borrowing. Each of the delivery of a Loan Request and the acceptance by the relevant 18 24 Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the relevant Borrower that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof), the statements made in Sections 4.2(a), (b), (d) and (e) are true and correct with respect to such Borrower. (d) Both before and after the Loan in question, such Borrower's Asset Coverage Ratio shall be at least 4 to 1. (e) There shall not have been outstanding to such Borrower as of the close of business (Eastern time) on the day preceding the proposed Borrowing Date for the requested Loan a Loan that had been outstanding for more than sixty (60) days. Any instrument, agreement or other document to be received by the Agent pursuant to this Article IV, and any other condition precedent required to be met or satisfied under this Article IV, shall be in form and substance reasonably satisfactory to the Agent and each Bank and in sufficient copies for each Bank. 4.3. Consequences of Effectiveness, etc. On the Refinancing Date the Existing Credit Agreement shall be automatically amended and restated to read as set forth herein. On and after the Refinancing Date the rights and obligations of the parties hereto shall be governed by this amended and restated Agreement; provided that rights and obligations of the parties hereto with respect to the period prior to the Refinancing Date shall continue to be governed by the provisions of the Existing Credit Agreement. On the Refinancing Date, the Pro Rata Share of each Bank shall immediately become the percentage set forth opposite the name of such Bank on Schedule II. With effect from and including the Refinancing Date, each Person listed on the signature pages hereof that is not a party to the Existing Credit Agreement shall become a party to this Agreement and, as of such date Bayerische Hypo-Und Vereinsbank AG shall cease to be a Bank party to this Agreement. 4.4. Amounts Outstanding Under the Original Credit Agreement Deemed to Be Loans Under This Agreement. The principal amounts of Loans, if any, owing by a Borrower under the Existing Credit Agreement as at the Refinancing Date to each Bank that is a party thereto (as reallocated pursuant to this Agreement) shall be deemed to be Loans made by that Bank hereunder. ARTICLE V REPRESENTATIONS AND WARRANTIES In order to induce the Banks and the Agent to enter into this Agreement and to make Loans hereunder, each Borrower represents and warrants unto the Agent and each Bank with respect to itself as set forth in this Article V. The representations and warranties contained in this Article V 19 25 shall be deemed to be repeated by a Borrower each time that such Borrower requests that a Loan be made as provided in Article IV. 5.1. Existence. The Borrower is a Massachusetts business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. The Borrower is a duly registered, non-diversified, closed-end investment company under the Act and has registered the sale of its common shares of beneficial interest under the Securities Act of 1933, as amended, pursuant to one or more registration statements, including any related prospectus, that is or are currently effective. The Borrower is in good standing and is duly qualified to do business in each state where, because of the nature of its activities or properties, such qualification is required, except where the failure to be so qualified could not reasonably be expected to have a material adverse effect on the business or operations of the Borrower. 5.2. Authorization. The Borrower is duly authorized to execute and deliver this Agreement and the Notes and, so long as this Agreement shall remain in effect, the Borrower will continue to be duly authorized to borrow monies hereunder and to perform its obligations under this Agreement and the Notes. 5.3. No Conflicts. The execution, delivery and performance by the Borrower of this Agreement and the Notes do not and, so long as this Agreement shall remain in effect with respect to them, will not (i) conflict with any provision of law, (ii) conflict with the Trust Agreement or its by-laws, (iii) conflict with any material agreement or instrument binding upon it, (iv) conflict with the Borrower's most recent prospectus or its most recent statement of additional information, (v) conflict with any court or administrative order or decree applicable to it or (vi) require or result in the creation or imposition of any Lien on any of its assets. 5.4. Validity and Binding Effect. This Agreement is, and the Notes when duly executed and delivered will be, the legal, valid and binding obligation of the Borrower, enforceable against it in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, fraudulent conveyance, fraudulent transfer, moratorium or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. 5.5. No Default. The Borrower is not in default under any agreement or instrument to which it is a party or by which any of its respective properties or assets is bound or affected, other than defaults that could not reasonably be expected to result in a Material Adverse Change with respect to such Borrower. To the best of its knowledge, no Default with respect to it has occurred and is continuing. 5.6. Financial Statements. The Borrower's most recent audited Statement of Assets and Liabilities and its most recent semi-annual asset statement, copies of which have been or will be furnished to the Banks, have been prepared in conformity with GAAP applied on a basis consistent with that of the preceding Fiscal Year or period and present fairly its financial condition as at such 20 26 dates and the results of its operations for the periods then ended, subject (in the case of the interim financial statement) to year-end audit adjustments. Since the date of its most recent Statement of Assets and Liabilities and such semi-annual asset statement, there has been no Material Adverse Change with respect to such Borrower. 5.7. Litigation. No claims, litigation, arbitration proceedings or governmental proceedings that could reasonably be expected to result in a Material Adverse Change with respect to such Borrower are pending or, to the best of its knowledge, threatened against or affecting such Borrower, except those referred to in Exhibit 5.7-1. Other than any liability incident to such claims, litigation or proceedings or provided for or disclosed in the financial statements referred to in Section 5.6 or listed on Exhibit 5.7-2, to the best of its knowledge, it has no contingent liabilities which are material to it other than those incurred in the ordinary course of business. 5.8. Liens. None of the Borrower's property, revenues or assets is subject to any Lien, except (i) Liens in favor of the Banks, if any, (ii) Liens for current Taxes not delinquent or Taxes being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained, (iii) Liens as are necessary in connection with a secured letter of credit opened by or for it in connection with its trustees' and officers' errors and omissions liability insurance policy, (iv) Liens in connection with the payment of initial and variation margin in connection with authorized futures and options transactions and collateral arrangements with respect to options, futures contracts, options on futures contracts, when-issued or delayed-delivery securities or other authorized investments, (v) Liens arising under any custodian agreement to which it is a party, (vi) other Liens on assets with a value no greater than $2,000,000 and (vii) Liens in connection with reverse repurchase transactions. Less than 25% of the value (as determined by any reasonable method) of the assets of the Borrower, not including shares of the Borrower itself, consists of "margin stock" as defined in FRB Regulation U. 5.9. Partnerships. The Borrower is not a general partner or joint venturer in any partnership or joint venture. 5.10. Purpose. The proceeds of the Loans will be used by it for short-term liquidity and other temporary emergency purposes, which purposes are permitted under the Act and by its prospectus and statement of additional information. Neither the making of any Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of FRB Regulation T, U or X. It acknowledges that Loans made to it may be deemed by the FRB to be "purpose loans" under Regulation U because of its status as an investment company (or the functional equivalent thereof). 5.11. Compliance and Government Approvals. The Borrower is in compliance with all statutes and governmental rules and regulations applicable to it, including, without limitation, the Act, other than incidents of non-compliance that could not reasonably be expected to result in a Material Adverse Change with respect to such Borrower. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other person is required for the due execution, delivery or performance by the Borrower of this Agreement, 21 27 the Notes or any of the other Credit Documents and the Borrowings, other than those that have been obtained or made. 5.12. Pension and Welfare Plans. The Borrower has not established or maintained, nor is it liable under, any Plan. 5.13. Taxes. The Borrower has filed all tax returns that are required to have been filed and has paid, or made adequate provisions for the payment of, all of its Taxes that are due and payable, except such Taxes, if any, as are being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP have been maintained. The Borrower is not aware of any proposed assessment against it for such additional Taxes (or any basis for any such assessment) which might be material in amount to it. The Borrower has substantially complied with all requirements of the Code applicable to regulated investment companies so as to be relieved of federal income tax on net investment income and net capital gains distributed to its shareholders. 5.14. Subsidiaries; Investments. The Borrower has no Subsidiaries or equity investments or any interest in any other Person other than portfolio securities (including investment company securities) which may have been acquired in the ordinary course of business. 5.15. Full Disclosure. No document or instrument furnished by the Borrower to the Banks in connection herewith contains any untrue statement of any material fact as of the date when made or omits to state any material fact necessary to make the statements herein or therein taken as a whole not misleading as of the date when made in light of the circumstances in which the same were made. 5.16. Investment Policies. The Borrower's assets are being invested substantially in accordance with the investment policies and restrictions set forth in its most recent prospectus and its most recent statement of additional information other than any de minimis violation of such policies arising in the ordinary course of business which the Borrower is in the process of correcting. 5.17. Regulations T, U and X. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock. 5.18. Status of Loans. The Borrower's obligation in connection with the repayment of any Loans made to it hereunder shall at all times rank at least pari passu in priority of payment with all of its other present and future unsecured and unsubordinated Indebtedness. 5.19. Prospectus. The asset coverage restrictions on the Borrower in its prospectus are not more restrictive than the provisions of Section 6.12 hereof. 22 28 5.20. Affiliated Person. To the best of the knowledge of the Borrower as of the date hereof, it is not an "Affiliated Person" or an "Affiliated Person" of such an "Affiliated Person", as defined in the Act, of any Bank party to the Agreement as of the date hereof. ARTICLE VI COVENANTS From the date of this Agreement (or, in the case of Van Kampen Senior Floating Rate Fund, the date of the second amendment and restatement of this Agreement) and thereafter until the expiration or termination of the Commitments and until all Obligations other than those expressly stated to survive expiration or termination of this Agreement have been paid or performed in full, each Borrower, as to itself, shall perform the obligations made applicable to it in this Article VI. 6.1. Financial Statements and Other Reports. Each Borrower shall deliver to the Agent, with sufficient copies for each Bank: (a) As soon as available and in any event within 70 days after each of its Fiscal Years commencing with the Fiscal Year ending July 31, 1997, a copy of its annual audited Statement of Assets and Liabilities, including a statement of investments, prepared in conformity with GAAP and certified by Deloitte & Touche LLP or such other independent certified public accountant who, in the commercially reasonable judgment of the Majority Banks, shall be satisfactory to the Majority Banks, together with a certificate from such accountant (i) acknowledging to the Banks such accountant's understanding that the Banks are relying on such Statement of Assets and Liabilities, (ii) containing a computation of, and showing compliance with, the financial ratio contained in Section 6.12 and (iii) to the effect that, in making the examination necessary for the signing of such Statement of Assets and Liabilities, such accountant has not become aware of any Default that has occurred and is continuing, or if such accountant has become aware of any such event, describing it and the steps, if any, being taken to cure it; (b) Within 70 days after the end of the first six months of its Fiscal Year, a copy of its published semi-annual asset statement, prepared in conformity with GAAP; (c) Within 15 days after the end of each calendar quarter, (i) a certificate substantially in the form of Exhibit 6.1 ("Borrowing Base Certificate") setting forth its (A) borrowing base (as calculated in the manner contemplated by the form of Borrowing Base Certificate) ("Borrowing Base") and (B) Asset Coverage Ratio as of the last day of such calendar quarter and (ii) a certificate signed by an Authorized Officer certifying that, to the best of such Person's knowledge, no Default has occurred and is continuing or, if an Event of Default has occurred and is continuing, the steps being taken to remedy the same; 23 29 (d) (i) Within 15 days following the filing thereof, any preliminary proxy materials filed with the Securities and Exchange Commission and (ii) within 15 days after the same become available, copies of its current prospectus and statement of additional information (marked to show changes from the prospectus and statement of additional information most recently delivered to the Banks), except that if its investment policies are changed materially (including any change in its ability to borrow hereunder), copies of a revised prospectus (or a prospectus supplement) and statement of additional information (marked to show changes from the prospectus (or prospectus supplement) and statement of additional information most recently delivered to the Banks) reflecting any such changes shall be provided to the Agent within 15 days after the same becomes available; and (e) Promptly from time to time such other reports or information as any of the Banks may reasonably request. 6.2. Notices. The Borrower shall notify the Agent in writing of any of the following immediately upon learning of the occurrence thereof, describing the same and, if applicable, stating the steps being taken by the Person(s) affected with respect thereto: (a) the occurrence of a Default; (b) the institution of any litigation, arbitration proceeding or governmental proceeding which is likely to result in a Material Adverse Change with respect to such Borrower; (c) the entry of any judgment or decree against it if the aggregate amount of all judgments and decrees then outstanding against it exceeds the lesser of 5% of its Net Asset Value or $5,000,000 after deducting (i) the amount with respect to which it is insured and with respect to which the insurer has assumed responsibility in writing and (ii) the amount for which it is otherwise indemnified if the terms of such indemnification and the Person providing such indemnification are satisfactory to the Majority Banks; (d) the occurrence of a change of its name (whether of its legal name or a "d/b/a" designation). The Borrower shall promptly execute and deliver to each Bank a new Note for execution in its new name, together with such other documents in connection therewith as the Banks shall reasonably request; and (e) the scheduling of consideration by the board of trustees of the Borrower of a change in the Borrower's Adviser (except as contemplated hereby), distributor, administrator, custodian (unless such custodian is a Bank) or independent accountant, or the appointment of any sub-adviser or any Person acting in a similar capacity to an Adviser (except as contemplated hereby); provided that a mailing to shareholders with respect to any of the foregoing shall not be deemed to be sufficient notice hereunder. 24 30 Notwithstanding anything to the contrary in the foregoing, in the case of the matters described in subparagraph (e), the notice contemplated by this Section 6.2 shall be given not later than 30 days prior to the time (i) the board of trustees of the Borrower is to consider approval of such change or appointment or otherwise determines to recommend such change or appointment (if necessary) to the Borrower's shareholders for their approval and (ii) of any change of the Borrower's custodian; provided, however, if in the case of the matters contemplated by subparagraph (e) the Borrower could not in good faith have provided the specified advance notice, such notice shall be given by the Borrower immediately following the earliest feasible time the notice could have been provided. 6.3. Existence. The Borrower, except as specified in Section 6.11(a), shall maintain and preserve its existence as a registered investment company, and maintain and preserve all rights, privileges, licenses, copyrights, trademarks, trade names, franchises and other authority to the extent material and necessary for the conduct of its business in the ordinary course as conducted from time to time, unless the Borrower has no Loans outstanding and the Borrower has irrevocably notified the Agent (which shall thereupon promptly notify the Banks) that it shall not request any Loans hereunder. 6.4. Nature of Business. The Borrower shall continue in, and limit its operations to, the business of a closed-end management investment company, within the meaning of the Act, and maintain in full force and effect at all times all governmental licenses, registrations, permits and approvals necessary for the continued conduct of its business, including, without limitation, its registration with the Securities and Exchange Commission under the Act as a closed-end investment company, except where the failure to so maintain such licenses, registrations, permits and approvals would not result in a Material Adverse Change with respect to such Borrower. 6.5. Books, Records and Access. The Borrower shall maintain complete and accurate books and records in which full and correct entries in conformity with GAAP shall be made of all transactions in relation to its business and activities; upon reasonable notice, the Borrower shall at the expense of the Banks prior to Default or at the expense of the Borrower after Default permit access by the Banks to its books and records during normal business hours and permit the Banks to make copies of such books and records; provided that the Banks agree that Borrower shall not be required to provide the Banks with access to such of its books and records that are subject to confidentiality agreements which prohibit such access or which are proprietary in nature. 6.6. Insurance. The Borrower shall maintain in full force and effect insurance to such extent and against such liabilities as is commonly maintained by companies similarly situated, including but not limited to (i) such fidelity bond coverage as shall be required by Rule 17g-1 promulgated under the Act or any similar or successor provision and (ii) errors and omissions, director and officer liability and other insurance against such risks and in such amounts (and with such co-insurance and deductibles) as is usually carried by other companies of comparable size and financial strength engaged in the same or similar businesses and similarly situated and will, upon the reasonable 25 31 request of the Agent, furnish to the Banks a certificate of an Authorized Officer setting forth the nature and extent of all insurance maintained by the Borrower in accordance with this Section. 6.7. Investment Policies and Restrictions. (a) The Borrower, without prior written notice to the Agent of at least 30 days, shall not rescind, amend or modify any investment policy described as "fundamental" in any prospectus or any registration statement(s) that may be on file with the Securities and Exchange Commission with respect thereto (collectively herein, a "proposed change"). If, in the reasonable judgment of the Majority Banks, such proposed change will result in a change in the Banks' analysis of the creditworthiness of the Borrower, the Agent shall notify the Borrower of such decision; thereafter, if such proposed change is implemented, the Banks may terminate their Commitments to lend to the Borrower, and all Loans outstanding to the Borrower shall become immediately due and payable. (b) The Borrower's investment in any assets shall be made in accordance with its investment policies and restrictions set forth in its most recent prospectus and statement of additional information other than any investment which shall constitute a de minimis violation of such policies arising in the ordinary course of business which the Borrower is in the process of correcting. 6.8. Taxes. The Borrower shall pay when due all of its Taxes, unless and only to the extent that such Taxes are being contested in good faith and by appropriate proceedings and it shall have set aside on its books such reserves or other appropriate provisions therefor as may be required by GAAP. The Borrower shall at all times comply with all requirements of the Code applicable to regulated investment companies, to such effect as not to be subject to federal income taxes on net investment income and net capital gains distributed to its shareholders. 6.9. Compliance. The Borrower shall comply in all material respects with all statutes and governmental rules and regulations applicable to it, including, without limitation, the Act. 6.10. Pension Plans. The Borrower shall not enter into, or incur any liability relating to, any Plan. 6.11. Merger, Purchase and Sale. The Borrower shall not: (a) be a party to any merger or consolidation; provided, however, that the Borrower may merge or consolidate with any other Person in accordance with 17 C.F.R. 270.17a-8 if (i) such merger or consolidation complies in all material respects with the requirements of 17 C.F.R. 270.17a-8 and all rules promulgated in connection therewith, (ii) the surviving entity assumes all of the obligations to the Banks of the Borrower prior to such merger or consolidation and (iii) in the good faith judgment of the Majority Banks, the financial condition and investment policies and restrictions of the surviving entity are not fundamentally different from those of the Borrower prior to such merger or consolidation, unless the Majority Banks otherwise consent; 26 32 (b) except as permitted by Section 6.11(a) and except for sales or other dispositions of assets in the ordinary course of its business or to meet shareholder redemption requests, sell, transfer, convey, lease or otherwise dispose of all or any substantial part of its assets; provided, however, that the Borrower may sell substantially all of its assets to another Person in accordance with 17 C.F.R. 270.17a-8 if (i) such sale complies in all material respects with the requirements of 17 C.F.R. 270.17a-8 and all rules promulgated in connection therewith, (ii) the purchasing entity assumes all obligations to the Banks of the Borrower prior to such sale and (iii) in the good faith judgment of the Majority Banks, the financial condition and investment policies and restrictions of the purchasing entity are not fundamentally different from those of the Borrower prior to the asset sale; or (c) except as permitted by Section 6.11(a), purchase or otherwise acquire all or substantially all the assets of any Person without the review and consent thereto of the Majority Banks, which consent shall not be unreasonably withheld. For purposes of this Section 6.11 only, a sale, transfer, conveyance, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets of the Borrower only if the value of such assets, when added to the value of all other assets sold, transferred, conveyed, leased or otherwise disposed of by the Borrower (other than in the normal course of business or in a manner otherwise consistent with the Borrower's investment policies and other than payments or transfers made to satisfy quarterly tenders of shares of the Borrower) during the same Fiscal Year, exceeds 15% of the Borrower's Total Assets determined as of the end of the immediately preceding Fiscal Year. 6.12. Asset Coverage Ratio. The Borrower shall not at any time permit its Asset Coverage Ratio to be less than 4 to 1 or such other more restrictive ratio as may be set forth in any prospectus with respect to the Borrower. 6.13. Liens. The Borrower shall not create or permit to exist any Lien with respect to any property, revenues or assets now owned or hereafter acquired by it, except (i) Liens in favor of the Banks, if any, (ii) Liens for current Taxes not delinquent or Taxes being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained, (iii) Liens as are necessary in connection with a secured letter of credit opened by or on behalf of the Borrower in connection with the Borrower's trustees' errors and omissions liability insurance policy, (iv) Liens incurred in the ordinary course of business in connection with authorized futures and options transactions and collateral arrangements with respect to options, futures contracts, options on futures contracts, when-issued or delayed-delivery securities or other authorized investments, (v) Liens arising under any custodian agreement to which the Borrower is a party, (vi) Liens in connection with reverse repurchase agreements and (vii) other Liens on assets with a value no greater than $2,000,000; provided, however, the value of any of its assets subject to a Lien shall be excluded from calculation of its Borrowing Base. The Borrower shall not permit "margin stock" as defined in FRB Regulation U (not including shares of the 27 33 Borrower itself) to constitute 25% or more of the value (as determined by any reasonable method) of the assets of the Borrower. 6.14. Guaranties. The Borrower shall not become or be a guarantor or surety of, or otherwise become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services or as an account party under any letter of credit issued in favor of a third party, or otherwise) with respect to, any undertaking of any other Person, except for the endorsement, in the ordinary course of collection, of instruments payable to it or its order. 6.15. Other Agreements. The Borrower shall not enter into any agreement containing any provision that would be violated or breached by performance of its obligations hereunder or under any instrument or document delivered or to be delivered by it hereunder or in connection herewith. 6.16. Transactions with Related Parties. The Borrower shall not enter into or be a party to any transaction or arrangement, including, without limitation, the purchase, sale, loan, lease or exchange of property or the rendering of any service, with any Related Party, except in the ordinary course of and pursuant to the reasonable requirements of its business and upon fair and reasonable terms no less favorable to it than would be obtainable in a comparable arm's-length transaction with a Person not a Related Party; provided that any such transaction must be made in substantial compliance with Section 17 of the Act or an exemption therefrom. 6.17. Other Indebtedness. The Borrower shall not incur or permit to exist any Indebtedness, other than (i) the Loans; (ii) unsecured Indebtedness that is subordinated in right of payment upon liquidation of the Borrower to the payment of the Loans; (iii) Indebtedness incurred in connection with Liens permitted by Section 6.13; (iv) reverse repurchase transactions in an amount not exceeding that permitted by the Borrower's investment policies and restrictions; and (v) other Indebtedness approved in writing by the Majority Banks. 6.18. Changes to Organization Documents, etc. The Borrower shall not make or permit to be made any material changes to its Organization Documents without the prior written consent of the Majority Banks. 6.19. Proceeds of Loans. The Borrower shall utilize the proceeds of each Loan made to it to provide temporary liquidity funding and to fund shareholder tender offers as permitted by the Act. 28 34 ARTICLE VII EVENTS OF DEFAULT 7.1. Events of Default. Each of the following shall constitute an Event of Default with respect to each Borrower under this Agreement (it being understood that an Event of Default with respect to one Borrower shall not constitute an Event of Default with respect to the other Borrower): (a) Default in payment by the Borrower (i) when and as required to be paid herein of any amount of principal of any Loan or (ii) within five days after the same becomes due of any interest, fee or any other amount payable hereunder or under any other Credit Document; provided that conversion of a Swing Loan to a Federal Funds Rate Loan as contemplated by the second sentence of the third paragraph of Section 2.16 shall not constitute an Event of Default under this Section 7.1(a). (b) Default by the Borrower in the payment when due, whether by acceleration or otherwise (subject to any applicable grace period), of any Indebtedness of, or guaranteed by, the Borrower in excess of $5,000,000 (other than the Indebtedness evidenced by the Notes). (c) Any event or condition shall occur that results in the acceleration of the maturity of any Indebtedness of, or guaranteed by, the Borrower in excess of $5,000,000 or enables the holder or holders of such other Indebtedness or any trustee or agent for such holders (any required notice of default having been given and any applicable grace period having expired) to accelerate the maturity of such other Indebtedness. (d) The Borrower (i) becomes insolvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing. (e) (i) Any involuntary Insolvency Proceeding is commenced or filed against the Borrower, or any writ, judgment, warrant of attachment, execution or similar process is issued or levied against a substantial part of its assets, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded, within 60 days after commencement, filing or levy; (ii) the Borrower admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) it acquiesces in the appointment of a receiver, trustee, custodian, liquidator, mortgagee in possession (or agent therefor) or other similar Person for itself or a substantial part of its property or business. 29 35 (f) The Borrower shall default in the performance of its agreement under Section 6.4, 6.11 or 6.12. (g) The Borrower shall default in the performance of its other agreements herein set forth (and not constituting an Event of Default under any of the other subsections of this Section 7.1), and such default shall continue for 30 days (or five Business Days in the case of the agreement contained in the last sentence of the definition of "Total Assets") after notice thereof to the Borrower from the Agent. (h) Any representation or warranty made by the Borrower herein, or in any schedule, statement, report, notice, certificate or other writing furnished by it on or as of the date as of which the facts set forth therein are stated or certified, is untrue or misleading in any material respect when made or deemed made or any certification made or deemed made by it to the Banks is untrue or misleading in any material respect on or as of the date made or deemed made. (i) There shall be entered against the Borrower one or more judgments or decrees which, when taken together, will exceed $5,000,000 at any one time outstanding, excluding those judgments or decrees (i) that shall have been stayed or discharged within 30 calendar days from the entry thereof and (ii) those judgments and decrees for and to the extent which the Borrower is insured and with respect to which the insurer has assumed responsibility in writing or for and to the extent which the Borrower is otherwise indemnified if the terms of such indemnification and the Person providing such indemnification are satisfactory to the Majority Banks. (j) The Borrower shall no longer be in compliance in all material respects with all material provisions of the Act after giving effect to all notice, cure and contest periods thereunder. (k) The Borrower shall violate or take any action that would result in a violation of any of its investment restrictions or fundamental investment policies as from time to time in effect, except for violations or the taking of such actions that could not reasonably be expected to result in a Material Adverse Change with respect to such Borrower. (l) There occurs a Change in Control of the Borrower's Adviser. (m) The Borrower shall have failed to maintain Van Kampen Investment Advisory Corp. or one of its Affiliates as Adviser to it and the Majority Banks shall not have consented to such failure. (n) The Borrower shall have changed its distributor, custodian, accountant or administrator and the Majority Banks shall not have provided their prior written consent to such change; provided, however, that the Majority Banks shall not withhold such consent 30 36 unless, based upon their reasonable judgment, the Majority Banks in good faith conclude that such change would result in a change in the creditworthiness of the Borrower. 7.2. Remedies. If any Event of Default described in Section 7.1 shall have occurred and be continuing, the Agent, upon the direction of the Majority Banks, shall declare the Commitments to be terminated with respect to the relevant Borrower and such Borrower's obligations under its Notes to be due and payable, whereupon such Commitments shall immediately terminate with respect to such Borrower and such Borrower's Notes shall become immediately due and payable, all without advance notice of any kind (except that if an event described in Section 7.1(d) or Section 7.1(e) occurs, the Commitments shall immediately terminate with respect to such Borrower and the obligations under the Notes with respect to such Borrower shall become immediately due and payable without declaration or advance notice of any kind). The Agent shall promptly advise the relevant Borrower of any such declaration, but failure to do so shall not impair the effect of such declaration. If an Event of Default shall have occurred, the Agent may exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks against the relevant Borrower under the Credit Documents or applicable law. ARTICLE VIII THE AGENT 8.1. Appointment and Authorization. Each Bank hereby irrevocably (subject to Section 8.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Credit Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Credit Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Credit Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against the Agent. 8.2. Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 8.3. Liability of Agent. None of the Agent-Related Persons shall (i) be liable to any of the Banks for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Credit Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct) or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by either Borrower or any officer or agent 31 37 thereof contained in this Agreement or in any other Credit Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Credit Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document, or for any failure of a Borrower or any other party to any Credit Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in or conditions of this Agreement or any other Credit Document or to inspect the properties, books or records of a Borrower. 8.4. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to a Borrower), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate, and if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Credit Document in accordance with a request or consent of the Majority Banks and such request, and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. 8.5. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or a Borrower referring to this Agreement, describing such Default and stating that such notice is a "notice of default". The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default as may be requested by the Majority Banks in accordance with Article VII; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable or in the best interest of the Banks. 8.6. Credit Decision. Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrowers, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrowers, and all applicable bank regulatory laws relating to the transactions contemplated hereby, 32 38 and made its own decision to enter into this Agreement and to extend credit to the Borrowers hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrowers. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrowers which may come into the possession of any of the Agent-Related Persons. 8.7. Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrowers and without limiting the obligation of the Borrowers to do so), pro rata, from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Credit Document or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 8.8. Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrowers and their Affiliates as though BofA were not the Agent hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Borrowers or their Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrowers) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" include BofA in its individual capacity. 8.9. Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks and the Borrowers. If the Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks, which successor agent shall be subject to approval by the Borrowers. If no successor agent is 33 39 appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Borrowers, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent, and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article VIII and Sections 9.4 and 9.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective, and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. 8.10. Withholding Tax. (a) On or prior to the date of execution and delivery of this Agreement in the case of each initial Bank, and on or prior to the date of the assignment pursuant to which it becomes a party to this Agreement in the case of an assignee Bank, and from time to time thereafter if requested by the Agent or either Borrower, any Bank that is a "foreign corporation, partnership or trust" within the meaning of the Code agrees with and in favor of the Agent and the Borrowers to deliver to the Agent and the Borrowers IRS Form 1001 and IRS Form W-8, two copies of IRS Form 4224, as appropriate, or any successor form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. A Bank providing IRS Forms 1001 and W-8 shall also provide to the Agent and Borrowers properly completed IRS Forms 1001 and W-8 in each third succeeding calendar year during which interest may be paid under this Agreement. A Bank providing IRS Form 4224 shall also provide to the Agent and Borrowers two properly completed IRS Forms 4224 before the payment of interest is due in each succeeding taxable year of such Bank during which interest may be paid under this Agreement. Such Bank agrees to promptly notify the Agent and the Borrowers of any change in circumstances that would modify or render invalid any claimed exemption or reduction. If the IRS form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States withholding tax in excess of zero, withholding tax at such rate shall be considered excluded from Taxes and Other Taxes unless and until such Bank provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes and Other Taxes for the period governed by such form; provided, however, that, if at the date of an assignment pursuant to which an assignee becomes a party to this Agreement, the Bank assignor was entitled to payments under Section 3.1 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include United States withholding tax, if any, applicable with respect to the Bank assignee on such date. For any period with respect to which a Bank that is a "foreign corporation, partnership or trust" within the meaning of the Code has failed to provide the Agent and Borrowers with the appropriate 34 40 IRS forms described above (other than if such failure is due to a change in law occurring subsequent to the date on which a Bank, or an assignee thereof, becomes a party to this Agreement), such Bank shall not be entitled to indemnification under Section 3.1 with respect to withholding taxes imposed by the United States; provided, however, that should a Bank become subject to withholding taxes because of its failure to deliver a form required hereunder, the Borrowers shall take such steps as the Bank shall reasonably request to assist the Bank to recover such Taxes. (b) If any Bank claims exemption from or reduction of withholding tax under a United States tax treaty by providing IRS Form 1001 and such Bank sells, assigns, grants a participation in or otherwise transfers all or part of the Obligations of a Borrower to such Bank, such Bank agrees to notify the Agent and such Borrower of the percentage amount in which it is no longer the beneficial owner of Obligations of such Borrower to such Bank. To the extent of such percentage amount, the Agent and the relevant Borrower will treat such Bank's IRS Form 1001 as no longer valid. (c) If any Bank claiming exemption from United States withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a participation in or otherwise transfers all or part of the Obligations of a Borrower to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent or a Borrower did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Agent or the relevant Borrower of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Bank shall indemnify the Agent and the relevant Borrower fully for all amounts paid, directly or indirectly, by the Agent or the Borrower as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent or the Borrower under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent. ARTICLE IX MISCELLANEOUS PROVISIONS 9.1. Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Credit Document, and no consent with respect to any departure by the Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks) and the Borrowers and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such 35 41 waiver, amendment or consent shall, unless in writing and signed by all the Banks and the Borrowers and acknowledged by the Agent, do any of the following: (a) increase or extend the Commitments of any Bank (or reinstate any Commitment(s) terminated pursuant to Section 7.1); (b) postpone or delay any date fixed by this Agreement or any other Credit Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Credit Document; (c) reduce the principal of, or the rate of interest specified herein on, any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Credit Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section, Section 2.13, Section 6.12, the definition of "Asset Coverage Ratio" (or any defined term as it is used in such definition) or any provision herein providing for consent or other action by all Banks; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Credit Document and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. 9.2. Notices. (a) All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by a Borrower by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule III and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed by certified mail return receipt requested postage prepaid, faxed or delivered to the address or facsimile number specified for notices on Schedule III, or, as directed to the Borrowers or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery or faxed, be effective when delivered for overnight (next-day) delivery or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail by certified mail return receipt requested, or if delivered, upon 36 42 delivery; provided that notices pursuant to Article II or VIII shall not be effective until actually received by the Agent. (c) Any agreement of the Agent and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrowers. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by a Borrower to give such notice, and the Agent and the Banks shall not have any liability to such Borrower or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of a Borrower to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 9.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 9.4. Costs and Expenses. The relevant Borrower shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse BofA (so long as it is the Agent, or if BofA is not the Agent, the Bank acting as successor Agent) (including in its capacity as Agent) within five Business Days after demand (i) each Borrower shall pay its pro rata portion of reasonable costs and expenses (based upon its respective net asset value as of the date of determination of any payment) in connection with the preparation, delivery, administration and execution of this Amended and Restated Credit Agreement, any Credit Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by BofA (so long as it is the Agent, or if BofA is not the Agent, the Bank acting as successor Agent) (including in its capacity as Agent) with respect thereto; and (ii) the Borrower responsible for a required amendment, supplement, waiver or modification (in each case whether or not consummated) of this Agreement, any Credit Document and any other document prepared in connection herewith or therewith shall pay all reasonable costs and expenses in connection therewith; provided, however, notwithstanding anything to the contrary in the foregoing, the responsibility of the relevant Borrower to reimburse BofA (so long as it is the Agent, or if BofA is not the Agent, the Bank acting as successor Agent) for Attorney Costs in connection with the development, preparation, delivery and execution of this amended and restated Agreement and such other documents and the consummation of such transactions shall be limited to the reasonable fees and disbursements of outside counsel to BofA (so long as it is the Agent, or if BofA is not the Agent, the Bank acting as successor Agent); and 37 43 (b) the Borrower responsible for a breach or violation of this Agreement or any Credit Document shall pay or reimburse the Agent, the Arranger and each Bank within five Business Days after demand for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement or preservation of any rights or remedies under this Agreement or any other Credit Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans and including in any Insolvency Proceeding or appellate proceeding). 9.5. Borrower Indemnification. (a) Whether or not the transactions contemplated hereby are consummated, Van Kampen Prime Rate Income Trust shall indemnify and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person"), harmless from and against any and all liabilities, obligations, losses, damages, penalties, settlements costs, actions, judgments, suits, costs, charges, expenses and disbursements (including reasonable Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any Credit Document as a result of the activities of Van Kampen Prime Rate Income Trust, or the transactions contemplated hereby, the use of proceeds of any Loan or the Commitments or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans to Van Kampen Prime Rate Income Trust or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that Van Kampen Prime Rate Income Trust shall not have an obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations. (b) Whether or not the transactions contemplated hereby are consummated, Van Kampen Senior Floating Rate Fund shall indemnify and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person"), harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including reasonable Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any Credit Document as a result of the activities of Van Kampen Senior Floating Rate Fund, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans to Van Kampen Senior Floating Rate Fund or the use of the proceeds thereof, whether or not any 38 44 Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that Van Kampen Senior Floating Rate Fund shall not have an obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations. (c) Promptly after receipt by an Indemnified Person under subsections (a) or (b) above of notice of the commencement of any action, such Indemnified Person shall, if a claim in respect thereof is to be made against the respective Borrower under such subsection, notify such Borrower in writing of the commencement thereof, but the omission so to notify such Borrower shall not relieve it from any liability which it may have to any Indemnified Person otherwise than under such subsection. In case any such action shall be brought against any Indemnified Person and it shall notify the respective Borrower of the commencement thereof, the relevant Borrower or Borrowers, as applicable, shall be entitled to participate therein and, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Person (who shall not, except with the consent of the Indemnified Person, be counsel to the relevant Borrower or Borrowers), and after notice from the relevant Borrower or Borrowers to such Indemnified Person of its election so to assume the defense thereof; provided that in no event shall any settlement or compromise of any such claims, actions or demands be made without the consent of the Indemnified Person, the consent of which shall not be unreasonably withheld; and provided, further, that the relevant Borrower or Borrowers shall not be required to reimburse the expenses of more than one counsel in any jurisdiction unless the Indemnified Parties shall determine in their sole discretion that their interests may differ. (d) The agreements in this Section 9.5 shall survive payment of all other Obligations. The obligations under 9.5(a) and 9.5(b) hereof shall be without duplication. 9.6. Payments Set Aside. To the extent that a Borrower makes a payment to the Agent or the Banks, or the Agent or the Banks exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred and (b) each Bank severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent. 9.7. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the Borrowers, the Agent and the Banks and their respective successors and assigns, except that a Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of the Banks; provided that the Banks hereby agree that (i) they each consent to any transfer or assignment made to another Person pursuant to Section 6.11(b) so long as all of the conditions in the proviso in Section 6.11(b) are met; (ii) the 39 45 Banks further agree that any transfer or assignment made pursuant to Section 6.11(b) shall not itself be deemed to be a rescission, amendment or modification of any "fundamental" investment policy under Section 6.7(a) or a violation of Section 6.7(b); and (iii) the Banks agree to release the relevant original Borrower from all liability hereunder. (b) The Loans are being made by the Banks in the ordinary course of their business and not with a view toward distribution, it being understood that each Bank may sell participations and assignments in its Commitments and the Loans (other than Swing Loans) as provided herein. Any Bank may, upon payment by such Bank to the Agent of an assignment fee of $3,500, at any time assign, subject to the relevant Borrower's consent, which consent shall not be unreasonably withheld, to one or more financial institutions (each of which shall have a net worth of at least $500,000,000 (or the equivalent thereof in another currency)) not an affiliate (as defined in the Act) of or an affiliate (as defined in the Act) of such an affiliate of either of the Borrowers or Van Kampen Investment Advisory Corp. (each an "Assignee") all, or a proportionate part of all, of its rights under this Agreement and the relevant Borrower's Notes in a minimum amount of $25,000,000; provided that the relevant Borrower may continue to deal solely and directly with the Bank in connection with any interest assigned until such Borrower receives written notice of assignment, the address of the assignee and such Borrower consents. Any Bank may at any time grant to one or more financial institutions (each of which shall have a net worth of at least $500,000,000 (or the equivalent thereof in another currency)) not an affiliate (as defined in the Act) of either of the Borrowers or Van Kampen Investment Advisory Corp. (each a "Participant") participating interests in its Commitments or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the relevant Borrower, such Bank shall remain responsible for the performance of its obligations hereunder, and such Borrower shall continue to deal solely and directly with such Bank in connection with the Bank's rights and obligations under this Agreement. Any agreement pursuant to which such Bank may grant such a participating interest shall provide that the Bank shall retain the sole right and responsibility to enforce the obligations of the relevant Borrower hereunder, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement (i) which increases or decreases the Commitments of the Bank, (ii) reduces the principal of or rate of interest on any Loan or fees hereunder or (iii) postpones the date fixed for any payment of principal of or interest on any Loan or any fees hereunder without the consent of the Participant. The relevant Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article III hereof with respect to its participating interest subject to clause (d) below and subject to compliance with Section 8.10 by the participant as if it were a Bank. (c) Any Bank may at any time assign all or any portion of its rights under this Agreement and the Notes to a Federal Reserve Bank. No such assignment shall release such Bank from its obligations hereunder. (d) No Assignee, Participant or other transferee of a Bank's rights shall be entitled to receive any greater payment under Section 3.1 and Section 3.3 hereof than such Bank would have been 40 46 entitled to receive with respect to the rights transferred, unless such transfer is made with the relevant Borrower's prior written consent or at a time when the circumstances giving rise to such greater payment did not exist. 9.8. Confidentiality. Each Bank agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all written information identified as "confidential" or "secret" by any Borrower and provided to it by or on behalf of such Borrower, or by the Agent on a Borrower's behalf, under this Agreement or any other Credit Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Credit Documents, except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Bank or (ii) was or becomes available on a non-confidential basis from a source other than a Borrower; provided that such source is not bound by a confidentiality agreement with a Borrower known to the Bank; provided, however, that any Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other legal process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which the Agent, any Bank or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Credit Document; (F) to persons (including Affiliates) that perform credit administration and review processes for such Bank and to such Bank's independent auditors and other professional advisors; (G) to any Participant or Assignee, actual or potential; provided that such Person agrees in writing to keep such information confidential to the same extent as required by the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which a Borrower is party or is deemed party with such Bank or such Affiliate; and (I) to its Affiliates; provided that each Bank shall require its Affiliates to agree to comply with the provisions of Section 9.9; and provided further that in the case of clauses (B), (C) and (D), such Bank shall use reasonable efforts to notify the relevant Borrower promptly of any requests to disclose such information so that the Borrower may seek a protective order or other appropriate remedy. 9.9. Set-off. (a) In addition to any rights and remedies of the Banks provided by law, but subject to Section 9.9(b), if, as to a Borrower, an Event of Default exists and is continuing or the Loans have been accelerated, each Bank is authorized at any time and from time to time, without prior notice to such Borrower (any such notice being waived by such Borrower to the fullest extent permitted by law), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of such Borrower against any and all Obligations of such Borrower owing to such Bank, now or hereafter existing, irrespective of whether or not the Agent or such Bank shall have made demand under this Agreement or any Credit Document and although such Obligations may be contingent or unmatured; provided that any such appropriation and application shall be subject to the provisions of Section 2.13. Each Bank agrees promptly to notify the relevant Borrower and the Agent after any such set-off and application made by such Bank; provided, 41 47 however, that the failure to give such notice shall not affect the validity of such set-off and application. (b) Notwithstanding the foregoing, in no event shall any Bank have any right to set off or otherwise apply any deposits of any kind at any time held by any such Bank to the extent that such Bank holds such deposits as a Borrower's custodian or agent. Without limiting the foregoing, in no event shall State Street Bank and Trust Company set off or otherwise apply any deposits of any kind at any time held by State Street Bank and Trust Company pursuant to any Custodian Contract between a Borrower and State Street Bank and Trust Company as in effect on the date hereof and as the same may be amended, restated, supplemented or otherwise modified from time to time. 9.10. Notification of Addresses, Lending Offices, etc. Each Bank shall notify the Agent in writing of any changes in the address to which notices to the Bank should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 9.11. Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 9.12. Survival. The respective obligations of the Borrowers under Sections 2.9, 3.1, 3.3, 3.4 and Sections 9.4 and 9.5, and the obligations of the Banks under Sections 8.7 and 9.8, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The respective representations and warranties made by the Borrowers in this Agreement and in each other Credit Document shall survive the execution and delivery of this Agreement and each such other Credit Document. 9.13. Disclaimer. None of the shareholders, trustees, officers, employees and other agents of a Borrower shall be personally bound by or liable for any indebtedness, liability or obligation hereunder or under the Notes, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. 9.14. Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 9.15. No Third Parties Benefitted. This Agreement is made and entered into for the sole protection and legal benefit of the Borrowers, the Banks, the Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Credit Documents. 42 48 9.16. Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT AGAINST EACH BORROWER IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH BORROWER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH BORROWER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW. 9.17. Waiver of Jury Trial. EACH BORROWER, THE BANKS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH BORROWER, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS. 9.18. Entire Agreement. This Agreement, together with the other Credit Documents, embodies the entire agreement and understanding among the Borrowers, the Banks and the Agent and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. 43 49 9.19. Affiliated Person. Each Bank represents that it is not an"Affiliated Person" or an "Affiliated Person" of such an "Affiliated Person", as defined in the Act, of a Borrower. 9.20. Continuing Effectiveness, etc. After the Refinancing Date, all references in the Credit Documents or other similar documents to "Credit Agreement" or words of like import shall refer to this Agreement. The execution, delivery and effectiveness of this Agreement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Banks under any of the other Credit Documents, nor constitute a waiver of any provision of the Credit Documents. 9.21. Facsimile Execution. One or more executed counterparts of this Agreement or any document or instrument related hereto may be delivered by facsimile, with the intention that such counterparts have the same effect as an original executed counterpart hereof or thereof. Any party hereto delivering an executed counterpart of this Agreement or any related document or instrument by facsimile shall promptly provide an original of such executed counterpart to the Agent. 9.22. Syndication Agent. The parties hereto acknowledge that the Syndication Agent has been designated as such for purposes of convenience only and that the Syndication Agent shall not have any duties or responsibilities, except those that may be expressly set forth in a separate written instrument signed by the Syndication Agent, or any fiduciary relationship with any Bank and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Syndication Agent. 9.23. Section 6.1(a); Change in Independent Accountants. (a) The Banks that are signatories hereto (other than BNP Paribas) acknowledge that Van Kampen Prime Rate Income Trust, as to fiscal years 1997, 1998 and 1999, and Van Kampen Senior Floating Rate Fund, as to fiscal year 1999, failed to deliver the independent accountants certificates contemplated by Section 6.1(a) and such Banks hereby waive any Event of Default that may have arisen as a result of such failure. (b) The Banks that are signatories hereto (other than BNP Paribas) acknowledge that the firm of Deloitte & Touche LLP has replaced KPMG LLP as the independent accountants of the Borrowers and such Banks hereby waive the rights and remedies hereunder as a result of the failure of the Borrowers to comply with the advance notice requirements of Section 6.2(e) and agree that such change in accountants shall not be regarded as having given rise to an Event of Default under Section 7.1(n). 44 50 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. VAN KAMPEN PRIME RATE INCOME TRUST By: /s/ John L. Sullivan ---------------------------------------- Title: Chief Financial Officer & Treasurer ------------------------------------- VAN KAMPEN SENIOR FLOATING RATE FUND By: /s/ John L. Sullivan ---------------------------------------- Title: Chief Financial Officer & Treasurer ------------------------------------- S-1 51 BANK OF AMERICA, N.A., as Agent By: /s/ Joan D'Amico ---------------------------------------- Title: Managing Director ------------------------------------- BANK OF AMERICA, N.A. By: /s/Joan D'Amico ---------------------------------------- Title: Managing Director ------------------------------------- S-2 52 COMMERZBANK AKTIENGESELLSCHAFT, as Syndication Agent By: /s/ M. McCarthy ---------------------------------------- Title: Vice President ------------------------------------- By: /s/ David Bennett ---------------------------------------- Title: Assistant Treasurer ------------------------------------- COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK and GRAND CAYMAN BRANCHES, as a Bank By: /s/ M. McCarthy ---------------------------------------- Title: Vice President ------------------------------------- By: /s/ David Bennett ---------------------------------------- Title: Assistant Treasurer ------------------------------------- S-3 53 THE BANK OF NEW YORK By: /s/ Scott H. Buitekant ---------------------------------------- Title: Vice President -------------------------------------- S-4 54 FLEET NATIONAL BANK By: /s/ Robert T.P. Storer ---------------------------------------- Title: Managing Director ------------------------------------- S-5 55 STATE STREET BANK AND TRUST COMPANY By: /s/ Steven G. Caron ---------------------------------------- Title: Vice President ------------------------------------- S-6 56 CITIBANK N.A. By: /s/ Pierre Guigui ---------------------------------------- Title: Vice President ------------------------------------- S-7 57 CREDIT LYONNAIS NEW YORK BRANCH By: /s/ S. Rocco ---------------------------------------- Title: Senior Vice President ------------------------------------- S-8 58 HARRIS TRUST AND SAVINGS BANK By: /s/ Charles Howes ---------------------------------------- Title: Vice President ------------------------------------- S-9 59 BNP PARIBAS By: /s/ Marguerite L. Lebon ---------------------------------------- Title: Assistant Vice President ------------------------------------- By: /s/ Barry K. Chung ---------------------------------------- Title: Vice President ------------------------------------- S-10 60 SCHEDULE I Definitions "Act" means the Investment Company Act of 1940. "Adviser" means Van Kampen Investment Advisory Corp., a Delaware corporation or any of its Affiliates as investment adviser, sub-adviser or administrator to the Borrower, or any other successor or assign thereto consented to by the Majority Banks. "Affected Bank" is defined in Section 3.7. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, membership interests, by contract or otherwise. "Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Agent pursuant to Section 8.9. "Agent-Related Persons" means BofA (as Agent) and any successor Agent arising under Section 8.9, together with their respective Affiliates (including, in the case of BofA, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agent's Payment Office" means the address for payments set forth on Schedule III in relation to the Agent or such other address as the Agent may from time to time specify. "Agreement" means this Credit Agreement, as amended, restated, modified and/or supplemented from time to time. "Allocation Notice" means a notice, substantially in the form of Exhibit 2.14, furnished to the Agent by or on behalf of each Borrower, setting forth, as of the date of such notice, the manner of allocation of liability for amounts that shall become due and payable by the Borrowers under the Credit Documents (other than commitment fees, principal and interest in respect of Loans, expenses allocable specifically to one Borrower hereunder, indemnities allocable to one Borrower in accordance with the terms and conditions hereof or Taxes or Other Taxes allocated to a particular Borrower and arrangement and agency fees). I-1 61 "Applicable Margin" means, (i) with respect to Federal Funds Rate Loans, 0.50%; and (ii) with respect to Offshore Rate Loans, 0.50%. "Arranger" means Banc of America Securities LLC, as sole lead arranger and sole book manager. "Asset Coverage Ratio" means, with respect to a Borrower, the ratio which the Net Asset Value of the Borrower, less the value of assets subject to Liens, bears to the aggregate amount of Indebtedness of the Borrower. "Assignee" is defined in Section 9.7(b). "Attorney Costs" means and includes any and all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all reasonable disbursements of internal counsel. "Authorized Officer" means, relative to the Borrower, those of its officers or agents whose signatures and incumbency shall have been certified to the Agent and the Banks pursuant to Section 4.1(a). "Banks" is defined in the preamble. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978. "Base Rate" means, for any day, the rate of interest in effect for such day as publicly announced from time to time by BofA in Charlotte, North Carolina, as its "reference rate." The "reference rate" is a rate set by BofA based upon various factors, including BofA's costs and desired return, general economic conditions and other factors and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate. Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "BofA" is defined in the preamble. "Borrower" means each of Van Kampen Prime Rate Income Trust, Van Kampen Senior Floating Rate Fund and the successors and assigns permitted pursuant to Section 9.7(a). "Borrowing" means a borrowing hereunder, other than Swing Loans, consisting of Loans of the same Type made to a Borrower on the same day by the Banks under Article II and, other than in the case of Federal Funds Rate Loans, having the same Interest Period. I-2 62 "Borrowing Base" has the meaning set forth in Section 6.1(c). "Borrowing Base Certificate" means a Borrowing Base Certificate as defined in Section 6.1(c) and substantially in the form of Exhibit 6.1 attached hereto. "Borrowing Date" means any date on which a Borrowing occurs under Section 2.3. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, New York City or Charlotte are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Capitalized Lease" means any lease which is or should be capitalized on the balance sheet of the lessee in accordance with GAAP. "Change in Control" means with respect to any Person any transaction or series of transactions where (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") as in effect on the date hereof) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as in effect on the date hereof), directly or indirectly, of securities of such Person (the "Target") representing 20% or more of the combined voting power of the Target's then-outstanding securities; (ii) at any time less than a majority of the members of the Target's board of directors shall be persons who were either nominated for election or were elected by such board of directors; (iii) the Target's stockholders approve a merger or consolidation of the Target with any other Person, other than a merger or consolidation that would result in the voting securities of the Target outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the combined voting power of the voting securities of the Target or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the Target's stockholders approve a plan of complete liquidation of the Target or an agreement for the sale or disposition of all or substantially all of the Target's assets. "Closing Date" means April 17, 1997. "Code" means the Internal Revenue Code of 1986. "Commitment" means, relative to any Bank, such Bank's obligation to make Loans pursuant to Section 2.1. I-3 63 "Commitment Amount" means, on any date, $500,000,000, as such amount may be reduced from time to time pursuant to Section 2.5 or increased pursuant to Section 2.15. "Commitment Termination Date" means the earliest to occur of: (a) September 12, 2001 or such later date as may be established pursuant to Section 2.17; (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement; and (c) the date on which any Event of Default described in Section 7.1(e) or Section 7.1(f) occurs. Upon the occurrence of any event described in clause (b) or (c) above, the Commitments shall terminate automatically and without further action. "Conversion/Continuation Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of a Borrower, substantially in the form of Exhibit 2.4. "Credit Documents" means this Agreement, any Notes, the Fee Letter and all other documents delivered to the Agent or any Bank in connection herewith. "Default" means any Event of Default or any condition, occurrence or event which, with notice or lapse of time or both, would, unless cured or waived, constitute an Event of Default. "Dollar" and the symbol "$" mean the lawful money of the United States. "ERISA" means the Employee Retirement Income Security Act of 1974. "Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate". "Event of Default" means any of the events described in Section 7.1. "Exchange Act" has the meaning specified in the definition of "Change in Control". "Federal Funds Rate" means, for any day, the rate as quoted by the Federal Reserve Bank of New York and confirmed in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for I-4 64 the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Federal Funds Rate Loan" means a Loan (other than a Swing Loan) that bears interest based on the Federal Funds Rate. "Fee Letter" means the letter agreement referred to in Section 2.9. "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on the last day of such twelve-month period; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1995 Fiscal Year") refer to the Fiscal Year ending on July 31 during such calendar year. "FRB" means the Board of Governors of the Federal Reserve System and any Governmental Authority succeeding to any of its principal functions. "GAAP" means United States generally accepted accounting principles. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing which exercise a similar function. "Indebtedness" of any Person means, without duplication, (i) any obligation of such Person for borrowed money, including, without limitation (a) any obligation of such Person evidenced by bonds, debentures, notes or other similar debt instruments and (b) any obligation for borrowed money which is non-recourse to the credit of such Person but which is secured by a Lien on any asset of such Person, (ii) any obligation of such Person on account of advances, (iii) any obligation of such Person for the deferred purchase price of any property or services, except Trade Accounts Payable, (iv) any obligation of such Person as lessee under a Capitalized Lease, (v) all net obligations with respect to Swap Contracts and (vi) any Indebtedness of another Person secured by a Lien on any asset of such first Person, whether or not such Indebtedness is assumed by such first Person. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Indemnified Liabilities" is defined in Section 9.5. "Indemnified Person" is defined in Section 9.5. I-5 65 "Insolvency Proceeding" means, with respect to any Person, (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors, undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, as to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan, as to any Federal Funds Rate Loan, the last Business Day of each calendar quarter and, as to any Swing Loan, at the time of repayment of such Swing Loan. "Interest Period" means, as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan and ending on the date one day to 60 days thereafter as selected by a Borrower in its Loan Request or Conversion/Continuation Notice, provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; and (ii) no Interest Period for any Loan shall extend beyond the Commitment Termination Date. "IRS" means the Internal Revenue Service and any Governmental Authority succeeding to any of its principal functions under the Code. "Lending Office" means, as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on Schedule III hereto or in the case of an Assignee Bank, in the Bank Assignment Agreement or such other office or offices as such Bank may from time to time notify to a Borrower and the Agent. "Lien" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, segregated asset arrangement established in connection with reverse repurchase transactions, encumbrance, lien (statutory or other), or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law) and any I-6 66 contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease. "Loan" means an extension of credit by a Bank to a Borrower under Article II and may be a Federal Funds Rate Loan, an Offshore Rate Loan or a Swing Loan (each, a "Type" of Loan). "Loan Request" means a request for a Loan given by a Borrower to the Agent, substantially in the form of Exhibit 2.3. "Majority Banks" means, at any time, at least two Banks (which are not Affiliates of each other) then holding at least 51% of the then aggregate unpaid principal amount of the Loans or, if no such principal amount is then outstanding, at least two Banks then having at least 51% of the Commitments. "Material Adverse Change" means with respect to a relevant Borrower any change that is material and adverse to (x) the condition (financial or otherwise) or business of such Borrower, provided any change occurring after the most recent Borrowing Date resulting from a decrease in the Net Asset Value of such Borrower shall not be deemed a Material Adverse Change as long as such Borrower's Net Asset Value has not decreased by more than 25% per share since the Borrowing Date or (y) the ability of such Borrower to duly and punctually pay and perform all or any of its Obligations. "Net Asset Value" means, at any date, Total Assets less Total Liabilities. "Non-Extending Bank" is defined in Section 2.17. "Note" means the promissory note of a Borrower, substantially in the form set forth as Exhibit 2.2. "Obligations" means all obligations (monetary or otherwise) of a Borrower to the Banks and the Agent under the Credit Documents and the Fee Letter, including (a) all obligations to make payments to the Banks of, and in respect of the principal amount of and interest on, any Loan and (b) all obligations of a Borrower to the Banks and the Agent in respect of fees, costs, expenses and indemnification under Sections 9.4 and 9.5. "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Agent as follows: Offshore Rate = IBOR ------------------------------------- 1.00 - Eurodollar Reserve Percentage Where I-7 67 "Eurodollar Reserve Percentage" means, for any day for any Interest Period, the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and "IBOR" means the rate of interest per annum determined by the Agent as the rate at which Dollar deposits in the approximate amount of BofA's Offshore Rate Loan for such Interest Period would be offered by BofA's Grand Cayman Branch, Grand Cayman B.W.I. (or such other office as may be designated for such purpose by BofA), to major banks in the offshore Dollar interbank market at their request at approximately 11:00 a.m. (Eastern time) one Business Day prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Loan" means a Loan that bears interest based on the Offshore Rate. "Organization Documents" means, for a Borrower, the Trust Agreement, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of the Borrower and all applicable resolutions of the board of trustees (or any committee thereof) of the Borrower. "Original Agreement" is defined in the first recital to this amended and restated Agreement. "Other Taxes" means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Credit Documents. "Participant" is defined in Section 9.7(b). "Person" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Plan" means any "pension plan" or "welfare benefit plan" as such terms are defined in ERISA. "proposed change" is defined in Section 6.7. "Pro Rata Share" means, as to any Bank (a) at any time there are no Loans outstanding, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of I-8 68 such Bank's Commitment divided by the combined Commitments of all Banks, as set forth on Schedule II, as such amount may be adjusted from time to time as a result of an assignment made by such Bank pursuant to Section 9.7, and (b) at any other time, the percentage equivalent at such time of such Bank's Loans divided by the combined Loans of all the Banks. "Refinancing" is defined in the fourth recital to this Agreement. "Refinancing Date" is defined in Section 4.1. "Regulation U" means the FRB's Regulation U. "Related Party" means, with respect to a Borrower and for purposes of Section 6.16 only, any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Borrower, (ii) which beneficially owns or holds 5% or more of the equity interest of the Borrower or (iii) 5% or more of the equity interest of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Replacement Bank" is defined in Section 3.7. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Subsidiary" means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the outstanding capital stock, membership interests or other equity interests having ordinary voting power to elect a majority of the board of directors (or other similar body) of such entity (irrespective of whether at the time capital stock, membership interests or other equity interests, of any other class or classes of such entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. "Swap Contracts" means swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates or commodity prices. "Swing Loan" is defined in Section 2.16. "Swing Loan Note" means a promissory note substantially in the form of Exhibit 2.16. "Target" has the meaning specified in the definition of "Change in Control". I-9 69 "Taxes" means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, franchise taxes and such taxes (including income taxes) as are imposed on or measured by each Bank's net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a lending office. "Total Assets" means, with respect to a Borrower as of any date, the aggregate amount of all items that would be set forth as assets on a balance sheet of the Borrower on such date prepared in accordance with GAAP in effect on such date. The assets of a Borrower shall be valued in accordance with the Act, the rules and regulations under the Act and the valuation procedures set forth in its most recent statement of additional information. Upon the written request of the Agent, a Borrower shall promptly furnish all such information as the Agent shall reasonably request relating to the value of any portfolio security or other asset of the Borrower or the assignment of values thereto by the Borrower or any other Person. "Total Liabilities" means, with respect to a Borrower as of any date, the aggregate amount of all items that would be set forth as liabilities on a balance sheet of the Borrower on such date prepared in accordance with GAAP in effect on such date. "Trade Accounts Payable" of any Person means trade accounts payable of such Person with a maturity of not greater than 90 days incurred in the ordinary course of such Person's business. "Trust Agreement" means, with respect to each Borrower, such Borrower's Agreement and Declaration of Trust, as the same may be amended, modified, supplemented or restated from time to time. "Type" has the meaning specified in the definition of Loan. "United States" or "U.S." means the United States of America, its 50 States and the District of Columbia. I-10 EX-99.(D)(1) 12 c60983ex99-d1.txt INVESTMENT ADVISORY AGREEMENT 1 Exhibit (d)(1) INVESTMENT ADVISORY AGREEMENT THIS INVESTMENT ADVISORY AGREEMENT, dated as of December 19, 1997 (the "Agreement"), by and between VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND, a Massachusetts business trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. (the "ADVISER"), a Delaware corporation. 1. (a) RETENTION OF ADVISER BY FUND. Subject to the terms and conditions set forth herein, the Fund hereby employs the Adviser to act as the investment adviser for and to manage the investment and reinvestment of the assets of the Fund in accordance with the Fund's investment objectives and policies and limitations, and to administer its affairs to the extent requested by, and subject to the review and supervision of, the Board of Trustees of the Fund for the period and upon the terms herein set forth. The investment of funds shall be subject to all applicable restrictions of applicable law and of the Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of Trustees of the Fund as may from time to time be in force and delivered or made available to the Adviser. (b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The Adviser accepts such employment and agrees during such period to render such services, to supply investment research and portfolio management (including without limitation the selection of securities for the Fund to purchase, hold or sell and the selection of brokers through whom the Fund's portfolio transactions are executed, in accordance with the policies adopted by the Fund and its Board of Trustees), to administer the business affairs of the Fund, to furnish offices and necessary facilities and equipment to the Fund, to provide administrative services for the Fund, to render periodic reports to the Board of Trustees of the Fund, and to permit any of its officers or employees to serve without compensation as trustees or officers of the Fund if elected to such positions. (c) ESSENTIAL PERSONNEL. Commencing on the effective date of this Agreement until May 31, 1998, the Adviser and the Fund agree that the retention of (i) the chief executive officer, president, chief financial officer and secretary of the Adviser and (ii) each director, officer and employee of the Adviser or any of its Affiliates (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Fund (each person referred to in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his or her current capacities, is in the best interest of the Fund and the Fund's shareholders. In connection with the Adviser's acceptance of employment hereunder, the Adviser hereby agrees and covenants for itself and on behalf of its Affiliates that neither the Adviser nor any of its Affiliates shall make any material or significant personnel changes or replace or seek to replace any Essential Person or cause to be replaced any Essential Person, in each case without first informing the Board of Trustees of the Fund in a timely manner. In Addition, neither the Adviser nor any Affiliate of the Adviser shall change or seek to change or cause to be changed, in any material respect, the duties and responsibilities of any Essential Person, in each case without first informing the Board of Trustees of the Fund in a timely manner. (d) INDEPENDENT CONTRACTOR. The Adviser shall be deemed to be an independent contractor under this Agreement and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Fund in any way or otherwise be deemed as agent of the Fund. (e) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Fund under this Agreement are not to be deemed exclusive, and the Adviser shall be free to render similar services or other services to others so long as its services hereunder are not impaired thereby. 2 2. (a) FEE. For the services and facilities described in Section 1, the Fund will accrue daily and pay to the Adviser at the end of each calendar month an investment management fee computed based on a fee rate (expressed as a percentage per annum) applied to the average daily net assets of the Fund as follows:
Fee Percent Per Annum of Average Daily Average Daily Net Assets (millions) Net Assets --------------------- -------------- First $4.0 billion 0.950 of 1.00% Next $3.5 billion 0.900 of 1.00% Next $2.5 billion 0.875 of 1.00% Over $10.0 billion 0.850 of 1.00%
(b) DETERMINATION OF NET ASSET VALUE. The net asset value of the Fund shall be calculated as of the close of the New York Stock Exchange on the last day the Exchange is open for trading or such other time or times as the trustees may determine in accordance with the provisions of applicable law and the Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of Trustees of the Fund as from time to time in force. For the purpose of the foregoing computations, on each such day when net asset value is not calculated, the net asset value of a share of beneficial interest of the Fund shall be deemed to be the net asset value of such share as of the close of business of the last day on which such calculation was made. (c) PRORATION. For the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration of the Adviser's fee on the basis of the number of days that the Agreement is in effect during such month and year, respectively. 3. EXPENSES. In addition to the fee of the Adviser, the Fund shall assume and pay any expenses for services rendered by a custodian for the safekeeping of the Fund's securities or other property, for keeping its books of account, for any other changes of the custodian and for calculating the net asset value of the Fund as provided above. The adviser shall not be required to pay, and the Fund shall assume and pay, the charges and expenses of its operations, including compensation of the trustees (other than those who are interested persons of the Adviser and other than those who are interested persons of the distributor of the Fund but not of the Adviser, if the distributor has agreed to pay such compensation), charges and expenses of independent accountants, of legal counsel and of any transfer or dividend disbursing agent, costs of acquiring and disposing of portfolio securities, cost of listing shares on the New York Stock Exchange or other exchange, interest (if any) on obligations incurred by the Fund, costs of shares certificates, membership dues in the Investment Company Institute or any similar organization, costs of reports and notices to shareholders, cost of registering shares of the Fund under the federal securities laws, miscellaneous expenses and all taxes and fees to federal, state or other governmental agencies on account of the registration of securities issued by the Fund, filing of corporate documents or otherwise. The Fund shall not pay or incur any obligation for any management or administrative expenses for which the Fund intends to seek reimbursement from the Adviser without first obtaining the written approval of the Adviser. The Adviser shall arrange, if desired by the Fund, for officers or employees of the Adviser to serve, without compensation from the Fund, as trustees, officers or agents of the Fund if duly elected or appointed to such positions and subject to their individual consent and to any limitations imposed by the law. 4. INTERESTED PERSONS. Subject to applicable statutes and regulations, it is understood that trustees, officers, shareholders and agents of the Fund are or may be interested in the Adviser as directors, officers, shareholders, agents or otherwise and that the directors, officers, shareholders and agents of the Adviser may be interested in the Fund as trustees, officers, shareholders, agents or otherwise. 3 5. LIABILITY. The Adviser shall not be liable for any error of judgment or of law, or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its obligations and duties, or by reason of its reckless disregard of its obligations and duties under this Agreement. 6. (a) TERM. This Agreement shall become effective on the date hereof and shall remain in full force until December 19, 1999 unless sooner terminated as hereinafter provided. This Agreement shall continue in force from year to year thereafter, but only for so long as such continuance is specifically approved as least annually, in the manner required by the 1940 Act. (b) TERMINATION. This Agreement shall automatically terminate in the event of its assignment. This Agreement may be terminated at any time without the payment of any penalty by the Fund or by the Adviser on sixty (60) days written notice to the other party. The Fund may effect termination by action of the Board of Trustees or by vote of a majority of the outstanding shares of stock of the Fund, accompanied by appropriate notice. This Agreement may be terminated at any time without the payment of any penalty and without advance notice by the Board of Trustees or by vote of a majority of the outstanding shares of the Fund in the event that it shall have been established by a court of competent jurisdiction that the Adviser or any officer or director of the Adviser has taken any action which results in a breach of the covenants of the Adviser set forth herein. (c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not affect the right of the Adviser to receive payment on any unpaid balance of the compensation described in Section 2 earned prior to such termination. 7. SEVERABILITY. If any provision of this Agreement shall be held or made invalid by a court decision, statue, rule or otherwise, the remainder shall not thereby be affected. 8. NOTICES. Any notice under this Agreement shall be in writing, addressed and delivered or mailed, postage prepaid, to the other party at such address as such other party may designate for the receipt of such notice. 9. DISCLAIMER. The Adviser acknowledges and agrees that, as provided by Section 5.5 of the Declaration of Trust of the Trust, the shareholders, trustees, officers, employees and other agents of the Trust and the Fund shall not personally be bound by or liable hereunder, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. 10. GOVERNING LAW. All questions concerning the validity, meaning and effect of this Agreement shall be determined in accordance with the laws (without giving effect to the conflict-of-law principles thereof) of the State of Delaware applicable to contracts made and to be performed in that state. 11. NAME. In connection with its employment hereunder, the Adviser hereby agrees and covenants not to change its name without the prior consent of the Board of Trustees of the Fund. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written. VAN KAMPEN AMERICAN CAPITAL VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. SENIOR FLOATING RATE FUND
By: /s/ Dennis J. McDonnell By: /s/ Ronald A, Nyberg --------------------------- --------------------------- Name: Dennis J. McDonnell Name: Ronald A. Nyberg Title: President Title: Vice President
EX-99.(D)(2) 13 c60983ex99-d2.txt ADMINISTRATION AGREEMENT 1 Exhibit (d) (2) ADMINISTRATION AGREEMENT Agreement made as of December 19, 1997, between VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND, a Massachusetts business trust (the "Fund"), and VAN KAMPEN AMERICAN CAPITAL, INC., a Delaware corporation (the "Administrator"). WHEREAS, the Fund intends to operate as a closed-end management investment company, and is so registered under the Investment Company act of 1940, as amended ("1940 Act"); and WHEREAS, the Fund wishes to retain the Administrator to provide certain administrative services to the Fund, under the terms and conditions stated below, and the Administrator is willing to provide such services for the compensation set forth below; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties agree as follows: 1. APPOINTMENT. The Fund hereby appoints the Administrator to administer the Fund, and the Administrator accepts such appointment and agrees that it will furnish the services set forth in paragraph 2 below. 2. SERVICES AND DUTIES OF THE ADMINISTRATOR. Subject to the supervision of the Fund's Board of Trustees (the "Board"), the Administrator will: (a) Monitor the provisions of the loan agreements and any agreements with respect to participations and assignments and be responsible for recordkeeping with respect to senior loans in the Fund's portfolio; (b) Prepare all reports required to be sent to Fund shareholders, and arrange for the printing and dissemination of such reports to shareholders; (c) Arrange for the dissemination to shareholders of the Fund's proxy materials and oversee the tabulation of proxies by the Fund's transfer agent; (d) Negotiate the terms and conditions under which custodian services will be provided to the Fund and the fees to be paid by the Fund to its custodian (which may or may not be an affiliate of the Fund's investment adviser), in connection therewith; (e) Negotiate the terms and conditions under which dividend disbursing services will be provided to the Fund, and the fees to be paid by the Fund in connection therewith; review the provision of dividend disbursing services to the Fund; (f) Determine the amounts available for distribution as dividends and distributions to be paid by the Fund to its Shareholders; prepare and arrange for the printing of dividend notices to Shareholders; and provide the Fund's dividend disbursing agent and custodian with such information as is required for such parties to effect the payment of dividends and distributions and to implement the Fund's dividend reinvestment plan; (g) Make such reports and recommendations to the Board as the Board reasonably requests or deems appropriate; and 2 (h) Provide shareholder services to holders or potential holders of the Fund's securities including but not limited to responding to shareholder requests for information. 3. PUBLIC INQUIRIES. The Fund and the Administrator agree that the Administrator will not be responsible for replying to questions or requests for information concerning the Fund from shareholders, brokers or the public. The Fund will inform the Administrator of the party or parties to whom any such questions or requests should be directed, and the Administrator will refer such questions and requests to such party or parties. 4. COMPLIANCE WITH THE FUND'S GOVERNING DOCUMENTS AND APPLICABLE LAW. In all matters relating to the performance of this Agreement, the Administrator will act in conformity with the Declaration of Trust, By-Laws and registration statement of the Fund and with the directions of the Board and Fund executive officers and will conform to and comply with the requirements of the 1940 Act and all other applicable federal or state laws and regulations. 5. SERVICES NOT EXCLUSIVE. The Administrator's services hereunder are not deemed to be exclusive, and the Administrator is free to render administrative or other services to other funds or clients so long as the Administrator's services under this Agreement are not impaired thereby. 6. COMPENSATION. For the services provided and expenses assumed by the Administrator under this Agreement, the Fund will pay the Administrator a fee, accrued daily and paid monthly, at the annualized rate of 0.25% of the Fund's average weekly managed assets (which, for the purposes of determining such fee, shall mean the average weekly value of the total assets of the Fund, minus the sum of the accrued liabilities of the Fund other than the aggregate amount of any borrowings undertaken by the Fund). 7. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The Administrator will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or its shareholders in connection with the performance of its duties under this Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its duties under this Agreement. 8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE FUND. Pursuant to the provisions of Article V, Section 5.5 of the Declaration of Trust as amended or restated as of the date hereof, this Agreement is entered into by the Board not individually, but as trustees under such Declaration of Trust and the obligations of the Fund hereunder are not binding upon any such trustees or Shareholders of the Fund, but bind only the trust estate. 9. DURATION AND TERMINATION. This Agreement will become effective upon the date hereabove written and shall continue in effect thereafter until terminated without penalty by the Administrator or the Fund upon 30 days' written notice to the other and shall automatically terminate in the event of its assignment as that term is defined in the 1940 Act. 10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 11. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the Commonwealth of Massachusetts and the 1940 Act. To the extent that the applicable laws of the Commonwealth of Massachusetts conflict with the applicable provisions of the 1940 Act, the latter shall control. 3 12. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. Attest: VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND /s/ Weston B. Wetherell By: /s/ Edward C.Wood, III - ---------------------------- ------------------------------------- Weston B. Wetherell Edward C. Wood, III, Vice President and Assistant Secretary Chief Financial Officer Attest: VAN KAMPEN AMERICAN CAPITAL, INC. /s/ Weston B. Wetherell By: /s/ William R. Molinari - ---------------------------- -------------------------------------- Weston B. Wetherell William R. Molinari, President Assistant Secretary
EX-99.(D)(3) 14 c60983ex99-d3.txt OFFERING AGREEMENT 1 Exhibit (d) (3) OFFERING AGREEMENT THIS OFFERING AGREEMENT, dated as of December 19, 1997 (the "Agreement"), by and between VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND (the "Fund"), a Massachusetts business trust, and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware corporation (the "Principal Underwriter"). 1. (a) APPOINTMENT OF PRINCIPAL UNDERWRITER. The Fund appoints the Principal Underwriter as a principal underwriter and exclusive distributor of shares of the Fund (the "Shares") effective as of the date upon which the continuous public offering of the Fund's Shares, as described in the Fund's then current Prospectus, shall commence. The Fund reserves the right, however, to refuse at any time or times to sell Shares hereunder for any reason at any time or times to sell Shares hereunder for any reason deemed adequate by the Board of Trustees of the Fund. (b) BEST EFFORTS. The Principal Underwriter shall use its best efforts to sell through its organization and through other dealers and agents the Shares which the Principal Underwriter has the right to purchase under Section 2 hereof, but the Principal Underwriter does not undertake to sell any specific number of Shares. Without the prior approval of the Board of Trustees, the Principal Underwriter shall not, directly or indirectly, distribute, sell or market, through its organization or other brokers, dealers or agents, shares of any investment companies unless the Board of Trustees of the Fund determines that such companies do not compete, or potentially compete, with the Fund. (c) POSITIONS IN THE SHARES. The Principal Underwriter agrees that it will not take any long or short positions in the Shares, except for long positions in those Shares purchased by the Principal Underwriter in accordance with any systematic sales plan described in the then current Prospectus of the Fund and except as permitted by Section 2 hereof, and that so far as it can control the situation, it will prevent any of its trustees, officers or shareholders from taking any long or short positions in the Shares, except for legitimate investment purposes. (d) ESSENTIAL PERSONNEL. Commencing on the date of this Agreement until May 31, 1998, the Principal Underwriter and the Fund agree that the retention of (i) the chief executive officer, president, treasurer and secretary of the Principal Underwriter, and (ii) each director, officer and employee of the Principal Underwriter or any of its Affiliates (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Fund (each person referred to in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his or her current capacities, is in the best interest of the Fund and the Fund's shareholders. In connection with the Principal Underwriter's acceptance of employment hereunder, the Principal Underwriter hereby agrees and covenants for itself and on behalf of its Affiliates that neither the Principal Underwriter nor any of its Affiliates shall replace or seek to replace any Essential Person or cause to be replaced any Essential Person, in each case without first consulting with the Board of Trustees of the Fund in a timely manner. In addition, neither the Principal Underwriter nor any Affiliate of the Principal Underwriter, shall change or seek to change or cause to be changed, in any material respect, the duties and responsibilities of any Essential Person, in each case without first consulting with the Board of Trustees of the Fund in a timely manner. 2. SALE OF SHARES TO PRINCIPAL UNDERWRITER; EARLY WITHDRAWAL CHARGE. The Fund hereby grants to the Principal Underwriter the exclusive right, except as herein otherwise provided, to purchase Shares upon the terms herein set forth. Such exclusive right hereby granted shall not apply to Shares issued or transferred or sold at net asset value: (a) in connection with the merger or consolidation of the Fund with any other investment company or the acquisition by the Fund of all or substantially all of the assets of or the outstanding Shares of any investment company; (b) in connection with a pro rata distribution directly to the holders of Shares in the nature of a stock dividend or stock split or in connection with any other recapitalization approved by the Board of Trustees; (c) upon the exercise of purchase or subscription rights granted to the holders of Shares on a pro rata basis; or (d) in connection with the automatic reinvestment of dividends and distributions from the Fund. 2 The Principal Underwriter shall have the right to buy from the Fund the Shares needed, but not more than the Shares needed (except for reasonable allowances for clerical errors, delays and errors of transmission and cancellation of orders) to fill unconditional orders for Shares received by the Principal Underwriter from dealers, agents and investors during each period when a particular net asset value and public offering price are in effect as provided in Section 3 hereof; and the price which the Principal Underwriter shall pay for the Shares so purchased shall be the net asset value used in determining the public offering price on which such orders were based. The Principal Underwriter shall notify the Fund at the end of each such period, or as soon thereafter on that business day as the orders received in such period have been compiled, of the number of Shares which the Principal Underwriter elects to purchase hereunder. The Fund shall impose an early withdrawal charge, payable to the Principal Underwriter, on most shares accepted for tender by the Fund which have been held for less than five years, as set forth in the current Fund Prospectus. 3. PUBLIC OFFERING PRICE. The public offering price per Share shall be determined in accordance with the then current Prospectus of the Fund. In no event shall the public offering price exceed the net asset value per Share. The net asset value per Share shall be determined in the manner provided in the Declaration of Trust and By-laws of the Fund as then amended and in accordance with the then current Prospectus of the Fund. The Fund will cause immediate notice to be given to the Principal Underwriter of each change in net asset value as soon as it is determined. Compensation from the Principal Underwriter to dealers purchasing Shares from the Principal Underwriter for resale and to brokers and other eligible agents making sales to investors shall be sent the forms of agreement between the Principal Underwriter and such dealers or agents, respectively, as from time to time amended, and, if such compensation from the Principal Underwriter is described in the then current Prospectus for the Fund, shall be as so set forth. In connection with the Principal Underwriter's employment hereunder, the Principal Underwriter hereby agrees to distribute the Shares through brokers, dealers and other agents of Dean Witter Distributors, Inc. on a "proprietary basis" substantially identical to the distribution of shares of proprietary open-end investment companies distributed by Dean Witter Distributors, Inc. 4. COMPLIANCE WITH NASD RULES, ETC. In selling Fund Shares, the Principal Underwriter will in all respects duly comply with all state and Federal laws relating to the sale of such securities and with all applicable rules and regulations of all regulatory bodies, including, without limitation, the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and all applicable rules and regulations of the Securities and Exchange Commission under the 1940 Act, and will indemnify and save the Fund harmless from any damage or expense on account of any unlawful act by the Principal Underwriter or its agents or employees. The Principal Underwriter is not, however, to be responsible for the acts of other dealers or agents except as and to the extent that they shall be acting for the Principal Underwriter or under its direction or authority. None of the Principal Underwriter, any dealer, any agent or any other person is authorized by the Fund to give any information or to make any representations, other than those contained in the Registration Statement or Prospectus heretofore or hereafter filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "1933 Act") (as any such Registration Statement and Prospectus may have been or may be amended from time to time), covering the Shares and in any supplemental information to any such Prospectus approved by the Fund in connection with the offer of sale of Shares. None of the Principal Underwriter, any dealer, any broker or any other person is authorized to act as agent for the Fund in connection with the offering or sale of Shares to the public or otherwise. All such sales shall be made by the Principal Underwriter as principal for its own account. 3 5. EXPENSES. (a) The Fund will pay or cause to be paid: (i) all expenses in connection with the registration of Shares under the Federal securities laws, and the Fund will exercise its best efforts to obtain said registration and qualification; (ii) all expenses in connection with the printing of any notices of shareholders' meetings, proxy and proxy statements and enclosures therewith, as well as any other notice or communication sent to shareholders in connection with any meeting of the shareholders or otherwise, any annual, semi-annual or other reports or communications sent to the shareholders, and the expense of sending prospectuses relating to the Shares to existing shareholders; (iii) all expenses of any Federal or state original issue tax or transfer tax payable upon the issuance, transfer or delivery of Shares from the Fund to the Principal Underwriter; and (iv) the costs of preparing and issuing any Share certificates which may be issued to represent Shares. (b) The Principal Underwriter will pay the costs and expenses of qualifying and maintaining qualification of the Shares for sale under the securities laws of the various states. The Principal Underwriter will also permit its officers and employees to serve without compensation as trustees and officers of the Fund if duly elected to such positions. 6. NO SECONDARY MARKET ACTIVITY. It is understood that Shares of the Fund will not be repurchased by either the Fund or the Principal Underwriter, and that no secondary market for the Fund shares exists currently, or is expected to develop. While the Board of Trustees of the Fund intends to consider tendering for all or a portion of the Fund's shares on a quarterly basis, there is no assurance that the Fund will tender for shares at any time or, following such a tender offer, that shares so tendered will be repurchased by the Fund. Accordingly investment in the Fund's shares would be considered illiquid. ANY REPRESENTATION AS TO A TENDER OFFER BY THE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE FUND'S THEN CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED. The Principal Underwriter hereby covenants that it (i) will not make a secondary market in any shares of the Fund, (ii) will not purchase or hold such shares in inventory for the purpose of resale in the open market, (iii) will not repurchase shares in the open market, and (iv) will require every bank, broker or dealer participating in the continuous offering of the shares to make the covenants contained in clauses (i), (ii) and (iii) of this Section 6 as a condition precedent to their participation in such offering. 7. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless the Principal Underwriter and each of its trustees and officers and each person, if any, who controls the Principal Underwriter within the meaning of Section 15 of the 1933 Act against any loss, liability, claim, damages, or expenses (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages, or expenses and reasonable counsel fees incurred in connection therewith), arising by reason of any person acquiring any Shares, based upon the grounds that the registration statement, Prospectus, shareholder reports or other information filed or made public by the Fund (as from time to time amended), included an untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make the statements not misleading under the 1933 Act or any other statute or the common law. However, the Fund does not agree to indemnify the Principal Underwriter or hold it harmless to the extent that the statement or omission was made in reliance upon, and in conformity with, information furnished to the Fund by or on behalf of the Principal Underwriter. In no case (i) is the indemnity of the Fund in favor of the Principal Underwriter or any person indemnified to be deemed to protect the Principal Underwriter or any person against any liability to the Fund or its security holders to 4 which the Principal Underwriter or such person would otherwise by subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement, or (ii) is the Fund to be liable under its indemnity agreement contained in this Section with respect to any claim made against the Principal Underwriter or any other person unless the Principal Underwriter or such other person shall have notified the Fund in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon the Principal Underwriter or any such person (or after the Principal Underwriter or the person shall have received notice of service on any designated agent). However, failure to notify the Fund of any claim shall not relieve the Fund from any liability which it may have to the Principal Underwriter or any person against whom such action is brought otherwise than on account of its indemnity agreement contained in this paragraph. The Fund shall be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any such action brought to enforce any claims, but if the Fund elects to assume the defense, the defense shall be conducted by counsel chosen by it and satisfactory to the Principal Underwriter or officers or trustees or controlling person or persons or defendant or defendants in the suit. In the event the Fund elects to assume the defense of any suit and retain counsel, the Principal Underwriter, officers or trustees or controlling person or persons or defendant or defendants in the suit shall bear the fees and expenses of any additional counsel retained by them. If the Fund does not elect to assume the defense of any suit, it will reimburse the Principal Underwriter, officers or trustees or controlling person or persons or defendant or defendants in the suit for the reasonable fees and expenses of any counsel retained by them. The Fund agrees to notify the Principal Underwriter promptly of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of any of the Shares. The Principal Underwriter also covenants and agrees that it will indemnify and hold harmless the Fund and each of its trustees and officers and each person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act, against any loss, liability, damages, claim or expense (including the reasonable cost of investigating or defending any alleged loss, liability, damages, claim or expense and reasonable counsel fees incurred in connection therewith) arising by reason of any person acquiring any Shares, based upon the 1933 Act or any other statute or common law, alleging any wrongful act of the Principal Underwriter or any of its employees or alleging that the registration statement, Prospectus, shareholder reports or other information filed or made public by the Fund (as from time to time amended), included an untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make the statements not misleading, insofar as the statement or omission was made in reliance upon, and in conformity with information furnished to the Fund by or on behalf of the Principal Underwriter. In no case (i) is the indemnity of the Principal Underwriter in favor of the Fund or any person indemnified to be deemed to protect the Fund or any such person against any liability to which the Fund or such person would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement, or (ii) is the Principal Underwriter to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Fund or any person indemnified unless the Fund or person, as the case may be, shall have notified the Principal Underwriter in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon the Fund or person (or after the Fund or such person shall have received notice of service on any designated agent). However, failure to notify the Principal Underwriter of any claim shall not relieve the Principal Underwriter from any liability which it may have to the Fund or any person against whom the action is brought otherwise than on account of its indemnity agreement contained in this paragraph. In the case of any notice to the Principal Underwriter, it shall be entitled to participate, at its own expense, in the defense or, if it so elects, to assume the defense of any suit brought to enforce the claim, but if the Principal Underwriter elects to assume the defense the defense shall be conducted by counsel chosen by it and satisfactory to the Fund, to its officers and trustees and to any controlling person or persons, defendant or defendants in the suit. In the event that the Principal Underwriter elects to assume the defense of any suit and retain counsel, the Fund or controlling persons or defendants in the suit shall bear the fees and expenses of any additional counsel retained by them. If the Principal Underwriter does not elect to assume the defense of any suit, it will reimburse the Fund, officers and trustees or controlling 5 person or persons or defendant or defendants in the suit for the reasonable fees and expenses of any counsel retained by them. The Principal Underwriter agrees to notify the Fund promptly of the commencement of any litigation or proceedings against it in connection with the issue and sale of any of the Shares. 8. CONTINUATION, AMENDMENT OR TERMINATION OF THE AGREEMENT. This Agreement shall become effective on the Effective Date and thereafter shall continue in full force and effect from year to year so long as such continuance is approved at least annually (i) by the Board of Trustees of the Fund or by a vote of a majority of the outstanding voting securities of the Fund, and (ii) by vote of a majority of the Trustees who are not parties to this Agreement or interested persons in any such party (the "Disinterested Trustees") cast in person at a meeting called for the purpose of voting on such approval, provided, however, that (a) this Agreement may at any time be terminated without the payment of any penalty either by vote of a majority of the Disinterested Trustees, or by vote of a majority of the outstanding voting securities of the Fund, on written notice to the Principal Underwriter; (b) this Agreement shall immediately terminate in the event of its assignment; and (c) this Agreement may be terminated by the Principal Underwriter on ninety (90) days' written notice to the Fund. Upon termination of this Agreement, the obligations of the parties hereunder shall cease and terminate as of the date of such termination, except for any obligation to respond for a breach of this Agreement committed prior to such termination and except with respect to any rights and obligations of indemnification arising out of any action or inaction occurring prior to such termination. This Agreement may be amended at any time by mutual consent of the parties, provided that such consent on the part of the Fund shall have been approved (i) by the Board of Trustees of the Fund, or by a vote of the majority of the outstanding voting securities of the Fund and (ii) by vote of a majority of the Disinterested Trustees cast in person at a meeting called for the purpose of voting on such amendment. For purposes of this section, the terms "vote of a majority of the outstanding voting securities," "interested person" and "assignment" shall have the meanings defined in the 1940 Act, as amended. 9. DISCLAIMER LIABILITY. Notwithstanding anything to the contrary contained in this Agreement, you acknowledge and agree that, as provided by Section 5.5 of the Declaration of Trust of the Fund, the shareholders, trustees, officers, employees and other agents of the Fund shall not personally be bound by or liable hereunder, nor shall any resort to their personal property being had for the satisfaction of any obligation or claim hereunder. 10. NOTICE. Any notice given under this Agreement shall be given in writing, addressed and delivered, or mailed postpaid, to the other party at any office of such party or at such other address as such party shall have designated in writing. 11. NAME. In connection with its employment hereunder, the Principal Underwriter hereby agrees and covenants not to change its name without the prior consent of the Board of Trustees. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be executed on their behalf on the day and year first above written. VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND By: /s/ Dennis J. McDonnell ----------------------------- Name: Dennis J. McDonnell Title: President VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC. By: /s/ William R. Molinari ----------------------------- Name: William R. Molinari Title: President EX-99.(D)(4) 15 c60983ex99-d4.txt SERVICE PLAN 1 Exhibit (d) (4) VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND SERVICE PLAN The plan set forth below (the "Service Plan") for the VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND (the "Fund"), describes the material terms and conditions under which assets of the Fund may be used to compensate the Fund's principal underwriter, within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"), brokers, dealers and other financial intermediaries (collectively "Financial Intermediaries") for providing personal services to shareholders and/or the maintenance of shareholder accounts with respect to each of its Shares of beneficial interest (the "Shares"). Each Share is offered and sold subject to a service fee and contingent deferred sales charge. The Fund also has entered into a distribution and services agreement (the "Distribution and Services Agreement") with Van Kampen American Capital Distributors, Inc. (the "Distributor"), pursuant to which the Distributor acts as agent on behalf of the Fund in connection with the implementation of the Service Plan and acts as the principal underwriter with respect to the Shares. The Distributor may enter into selling agreements (the "Selling Agreements") with brokers, dealers and other financial intermediaries ("Financial Intermediaries") in order to implement the Distribution Agreement and this Service Plan. 1. The Fund hereby is authorized to pay a service fee with respect to its Shares to any person who sells such Shares and provides personal services to shareholders and/or maintains shareholder accounts in an annual amount not to exceed 0.25% of the average annual net asset value of the Shares maintained in the Fund by such person that were sold on or after the date on which this Service Plan was first implemented. The aggregate annual amount of all such payments with respect to each such Share may not exceed 0.25% of the Fund's average annual net assets attributable to the Shares sold on or after the date on which this Service Plan was first implemented and maintained in the Fund more than one year. 2. Payments pursuant to this Service Plan may be paid or prepaid on behalf of the Fund by the Distributor acting as the Fund's agent. 3. Payments by the Fund to the Distributor pursuant to this Service Plan shall not be made more often than monthly upon receipt by the Fund of a separate written expense report with respect to the Shares setting forth the expenses qualifying for such reimbursement allocated to each Share and the purposes thereof. 4. In the event that amounts payable hereunder do not fully reimburse the Distributor for pre-paid service fees, such unreimbursed service fee expenses will be carried forward and paid by the Fund hereunder in future years so long as this Service Plan remains in effect, subject to applicable laws and regulations. Reimbursements for service fee related expenses payable hereunder with respect to a particular class of Shares may not be used to subsidize services provided with respect to any other class of Shares. 5. The Fund shall not compensate the Distributor, and neither the Fund nor the Distributor shall compensate any Financial Intermediary, for any service related expenses incurred prior to the later of (a) the implementation of this Service Plan with respect to such class of Shares or (b) the date that such Financial Intermediary enters into a Selling Agreement with the Distributor. 6. The Fund hereby authorizes the Distributor to enter into Selling Agreements with certain Financial Intermediaries to provide compensation to such Financial Intermediaries for activities and services of the 2 type referred to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement, such agreement shall be approved by a majority of the Board of Trustees of the Trust and a majority of the Disinterested Trustees (within the meaning of the 1940 Act) by a vote cast in person at a meeting called for the purpose of voting on such Selling Agreements. Such Selling Agreements shall provide that the Financial Intermediaries shall provide the Distributor with such information as is reasonably necessary to permit the Distributor to comply with the reporting requirements set forth in Paragraphs 3 and 8 hereof. 7. Subject to the provisions of this Service Agreement, the Fund is hereby authorized to pay a service fee to any person that is not an "affiliated person" or "interested person" of the Fund or its "investment adviser" or "principal underwriter" (as such terms are defined in the 1940 Act) who provides any of the foregoing services for the Fund. Such fee shall be paid only pursuant to written agreements between the Fund and such other person the terms of which permit payments to such person only in accordance with the provisions of this Service Agreement and which have the approval of a majority of the Disinterested Trustees by vote cast separately with respect to each class of Shares and cast in person at a meeting called for the purpose of voting on such written agreement. 8. The Fund and the Distributor shall prepare separate written reports for each class of Shares and shall submit such reports to the Fund's Board of Trustees on a quarterly basis summarizing all payments made by them with respect to each class of Shares pursuant to this Service Plan and the agreements contemplated hereby, the purposes for which such payments were made and such other information as the Board of Trustees or the Disinterested Trustees may reasonably request from time to time, and the Board of Trustees shall review such reports and other information. 9. This Service Plan may be terminated with respect to a class of Shares without penalty at any time by a majority of the Disinterested Trustees or by a "majority of the outstanding voting securities" of the respective class of Shares of the Fund. 10. This Service Plan shall become effective upon its approval by (a) a majority of the Board of Trustees and a majority of the Disinterested Trustees by vote cast separately with respect to each class of Shares cast in person at a meeting called for the purpose of voting on this Distribution Plan, and (b) with respect to each class of Shares, a "majority of the outstanding voting securities" (as such phrase is defined in the 1940 Act) of such class of Shares voting separately as a class. 11. This Service Plan and any agreement contemplated hereby shall continue in effect beyond the first anniversary of its adoption by the Board of Trustees of the Fund only so long as (a) its continuation is approved at least annually in the manner set forth in clause (a) of paragraph 10 above and (b) the selection and nomination of those trustees of the Fund who are not "interested persons" of the Fund are committed to the discretion of such trustees. 12. This Service Plan may not be amended to increase materially the maximum amounts permitted to be expended hereunder except with the approval of a "majority of the outstanding voting securities" of the respective class of Shares of the Fund. This Service Plan may not be amended in any material respect except with the approval of a majority of the Disinterested Trustees. Amendments required to conform requirements of the Investment Company Act of 1940, the rules and regulations thereunder, the Rules of Fair Practice of the National Association of Securities Dealers, Inc. or other applicable law shall not be deemed to be material amendments. The Trustees of the Trust have adopted this Service Plan as trustees under the Declaration of Trust of the Trust and the policies of the Trust adopted hereby are not binding upon any of the Trustees or shareholders of the Trust individually, but bind only the trust estate. -----END PRIVACY-ENHANCED MESSAGE-----