-----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, N63L3DdW8ZSv8wcGWOJoCJ+uZ/dmXZV3HeiaSFIbYrTMqU61V/ZMmbvyoZ6T511x 1zYvDNki8Y0VxrmEumnhyQ== 0000950137-03-005056.txt : 20031001 0000950137-03-005056.hdr.sgml : 20031001 20031001160851 ACCESSION NUMBER: 0000950137-03-005056 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030731 FILED AS OF DATE: 20031001 EFFECTIVENESS DATE: 20031001 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN SENIOR LOAN FUND CENTRAL INDEX KEY: 0000853180 IRS NUMBER: 366911789 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05845 FILM NUMBER: 03920804 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLZ 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 PRIME RATE INCOME TRUST DATE OF NAME CHANGE: 19981006 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST DATE OF NAME CHANGE: 19951018 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT PRIME RATE INCOME TRUST DATE OF NAME CHANGE: 19920703 N-CSR 1 c79353nvcsr.txt ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5845 Van Kampen Senior Loan Fund - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 Avenue of the Americas NY NY 10020 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas New York, NY 10020 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 ----------------------------- Date of fiscal year end: 7/03 ----------- Date of reporting period: 7/31/03 ----------- Item 1. Report to Shareholders Welcome, Shareholder In this update, you'll learn about how your fund performed during the reporting period. The portfolio manager will provide an overview of the market climate, and discuss some of the factors that helped or hindered performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments, as well as other information. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the fund will achieve its investment objective. The fund is subject to market risk which is the possibility that the market values of securities owned by the fund will decline and, therefore, the value of the fund shares may be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. An investment in senior loans is subject to certain risks such as loan defaults and illiquidity due to insufficient collateral backing. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Performance Summary CURRENT DISTRIBUTION (July 25, 1993--July 31, 2003) (LINE GRAPH)
SENIOR LOAN FUND - CLASS B 3-MONTH TREASURY BILL* -------------------------- ---------------------- 7/93 5.76 3.10 5.75 3.07 5.75 2.98 5.50 3.10 5.49 3.20 5.47 3.06 5.47 3.03 5.48 3.43 5.72 3.55 6.16 3.95 6.50 4.24 6.50 4.22 7/94 6.50 4.36 6.81 4.66 7.00 4.77 7.00 5.15 7.00 5.71 7.57 5.69 8.01 5.99 8.04 5.94 8.03 5.87 8.02 5.86 8.02 5.80 8.01 5.57 7/95 8.02 5.58 8.01 5.44 8.02 5.41 8.03 5.51 8.03 5.49 7.54 5.08 7.54 5.05 7.25 5.03 7.26 5.14 7.01 5.15 6.80 5.18 6.80 5.16 7/96 6.80 5.31 7.01 5.28 7.01 5.03 7.01 5.15 7.01 5.13 7.02 5.17 7.02 5.15 7.02 5.22 7.02 5.32 7.03 5.23 7.03 4.94 6.60 5.17 7/97 7.02 5.23 6.80 5.22 6.79 5.10 7.26 5.20 6.58 5.20 7.26 5.35 7.01 5.18 6.37 5.31 7.52 5.12 7.01 4.97 7.52 5.01 6.18 5.08 7/98 7.26 5.07 6.60 4.83 6.82 4.36 7.11 4.32 5.81 4.48 6.63 4.45 6.02 4.45 6.20 4.67 6.88 4.48 6.63 4.54 6.22 4.63 6.49 4.78 7/99 6.48 4.75 6.55 4.97 6.56 4.85 6.58 5.09 6.59 5.30 6.59 5.33 6.90 5.69 6.96 5.78 7.22 5.87 7.23 5.83 7.25 5.62 7.57 5.85 7/00 7.57 6.22 7.60 6.31 8.14 6.21 8.31 6.39 8.40 6.20 8.53 5.90 8.63 4.99 8.74 4.86 8.09 4.29 7.20 3.88 6.75 3.62 6.54 3.66 7/01 6.29 3.52 5.97 3.37 5.80 2.37 5.28 2.01 4.71 1.73 4.47 1.72 4.19 1.76 3.97 1.76 3.93 1.77 3.90 1.77 3.92 1.73 3.95 1.68 7/02 4.15 1.70 4.32 1.67 4.33 1.55 4.48 1.45 4.48 1.21 4.25 1.20 4.09 1.17 4.11 1.20 4.10 1.11 3.81 1.11 3.75 1.10 3.67 0.85 7/03 3.54 0.94
Data provided for the fund reflects distributions that occur on the 25th of each month or the prior business day if the 25th falls on a weekend or holiday, whereas benchmark data is as of the month end. * Source: Bloomberg
B SHARES C SHARES since 10/04/89 since 06/13/03 - ----------------------------------------------------------------------------------- AVERAGE ANNUAL W/O SALES W/O SALES TOTAL RETURNS CHARGES CHARGES Since Inception 5.63% 2.02% 10-year 4.64 -- 5-year 2.23 -- 1-year 6.58 -- - -----------------------------------------------------------------------------------
Past performance is no guarantee of future results. Investment return and principal value will fluctuate and fund shares, when tendered, may be worth more or less than their original cost. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. Average annual total return assumes reinvestment of all dividends and capital gains and excludes payment of maximum early withdrawal charge. An early withdrawal charge for Class B shares of 3.00% will be imposed on most shares accepted by the fund for repurchase within the first year after purchase and declining thereafter to 0.00% after the fifth year. An early withdrawal charge for Class C shares of 1.00% will be imposed on most shares accepted by the fund for repurchase, which have been held for less than one year. Distribution rate represents the monthly annualized distributions of the fund at the end of the period and not the earnings of the fund. 1 Fund Report FOR THE 12-MONTH PERIOD ENDED JULY 31, 2003 Howard Tiffen, Managing Director, is primarily responsible for the day- to-day management of Van Kampen Senior Loan Fund. The following discussion reflects his views on the fund's performance. Q. BEFORE YOU DISCUSS HOW THE FUND PERFORMED, PLEASE DESCRIBE THE OVERALL MARKET ENVIRONMENT. A. The market over the past year can really be divided into two distinct segments. During the first six months of the reporting period, a stagnant economy, lack of corporate earning power, and the effects of a series of corporate-governance scandals resulted in a very difficult environment for senior loans. During the latter half of the period, however, the market improved dramatically. Absolute levels of corporate profitability began to increase, the number of debt refinancings rose considerably, and default rates began to subside. As a result, bank loan prices rallied. We believe this marked improvement was the result of several factors. First, corporate management has been forced to learn how to better operate in a low-growth, low-inflation environment, which has led to stronger corporate valuations. Second, more companies have been able to issue long-term debt to shore up their balance sheets. And lastly, we began to see many companies that were in bankruptcy two to three years ago return to performing status and earn a profit. Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. -- The fund returned 6.58 percent for the twelve months ended July 31, 2003. This return is for Class B shares, assumes the reinvestment of all distributions, but does not reflect the deduction of any applicable early withdrawal charges. If these charges were included, performance would be lower. Past performance is no guarantee of future results. -- The fund's monthly dividend of $.0244 for Class B shares translated to a distribution rate of 3.54 percent based on the fund's offering price on July 25, 2003. See Performance Summary for additional information. Q. WHAT FACTORS HELPED PERFORMANCE? -- As mentioned earlier, declining default rates, improved corporate profitability and increased loan issuance, as well as an overall improving economy, all contributed to performance. -- A deeper secondary trading market in senior loans created greater opportunities for us to capture value. This, coupled with the 2 appreciation of bank loan prices overall, helped boost the fund's return and net asset value. -- In addition, our team now includes a total of 24 analysts, who have an average of 16 years of industry experience. Given that we employ a bottom-up investment approach, we believe that such a large team has enabled us to conduct even more in-depth analysis of every investment candidate as well as all existing portfolio holdings, and is vital to our ongoing success. Q. WHAT HINDERED PERFORMANCE DURING THE REPORTING PERIOD? A. -- Early in the reporting period, flat corporate performance and a low level of issuance dampened fund returns and left us with few compelling new investment opportunities. However, we saw marked improvement here in the last several months. -- While we have seen default rates decline, they are still at higher-than-normal levels. The number of issuers in the portfolio that are in default (defined here as those not paying principal and/or interest as contractually obligated) has also declined, by approximately 45 percent since this same period last year. -- Because senior-loan coupon rates float with short-term market rates, the near-record low interest rates throughout the entire period also held the fund back. TOP 10 INDUSTRIES AS OF 7/31/03 Healthcare 7.4% Entertainment & Leisure 6.9 Broadcasting--Cable 6.8 Medical Products & Services 5.9 Printing & Publishing 5.9 Telecommunications--Wireless 5.7 Hotels, Motels, Inns & Gaming 5.0 Beverage, Food & Tobacco 4.8 Chemicals, Plastics & Rubber 4.8 Automotive 4.5
Subject to change daily. All percentages are as a percentage of total assets. Provided for informational purposes only and should not be deemed as a recommendation to buy securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisor services. 3 Q. PLEASE WALK US THROUGH HOW YOU POSITIONED THE FUND, HIGHLIGHTING KEY THEMES. A. We employed a variety of strategies during the period: -- In an effort to build value and avoid losses in the portfolio, we made greater use of the secondary market, where we were able to purchase loans at or below their repayment or recovery values. In fact, we now have two analysts on our team who are largely dedicated to this market, conducting transactions daily. -- We continued to keep the portfolio highly diversified by issuer. As of July 31, the fund contained a total of 291 issuers. Typically, each of the fund's ten largest holdings represents less than two percent of total assets. We believe that a high level of diversification--not only in this environment but going forward as well--is instrumental to successful investing in the senior loan asset class. -- We strive to manage the fund as defensively as possible, and therefore, don't typically favor individual sectors. Some sectors may, however, fall out of favor from time to time. For example, we have chosen to reduce the fund's exposure to the auto and aerospace segments because we believe they are likely to deliver poor profits, and the value of collateral they can offer is also likely to fall. The fund's exposure to the health-care sector did increase slightly over the past year. We believe that certain parts of this sector have seen a significant improvement in business fundamentals, making some companies in the sector more attractive investments than they had previously been. -- We continued with our long-term strategy of focusing on companies that we believe demonstrate solid management strength--those that have learned to improve productivity in a low-inflation environment and keep their costs low. Q. NOW THAT YOU'VE PROVIDED AN OVERVIEW OF THE FUND, DO YOU HAVE ANY CLOSING THOUGHTS FOR THE SHAREHOLDERS? A. We believe that the turnaround we've seen in the senior loan market as of late is based upon fundamentally-sound factors that may continue to positively influence the market. We also anticipate that default rates may continue their downward trend as the bankruptcies that occurred between 1999 and 2002 increasingly work their way through the system. 4 While no one can predict with certainty where or when interest rates will bottom out, we believe it's likely that short-term rates may rise, or at least remain stable, over the next several months. Such an environment, coupled with more robust corporate performance, has historically been quite favorable for senior loans. Going forward, we will continue with our disciplined investment approach, monitoring the market closely for opportunities. 5 ANNUAL HOUSEHOLDING NOTICE To reduce expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectus and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. PROXY VOTING POLICIES AND PROCEDURES A description of the fund's policies and procedures with respect to the voting of proxies relating to the fund's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 6 BY THE NUMBERS YOUR FUND'S INVESTMENTS July 31, 2003 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 88.9% AEROSPACE/DEFENSE 1.7% $ 4,560 DeCrane Aircraft Holdings, Inc., Term Loan............ B2 B 09/30/05 $ 4,081,094 3,554 DRS Technologies, Inc., Term Loan.................. Ba3 BB- 09/30/08 3,585,583 1,934 ILC Industries, Inc., Term Loan....................... NR NR 04/11/10 1,919,458 2,801 Integrated Defense Technologies, Inc., Term Loan....................... Ba3 BB- 03/04/08 2,797,390 13,533 The Titan Corp., Term Loan....................... Ba3 BB- 06/30/09 13,569,749 1,500 Transdigm, Inc., Term Loan....................... B1 B+ 07/22/10 1,516,407 4,089 Veridian Corp., Term Loan....................... Ba3 BB- 06/30/08 4,116,642 4,238 Vought Aircraft Industries, Inc., Term Loan............ Ba3 B+ 12/31/06 to 06/30/08 4,237,879 -------------- 35,824,202 -------------- AUTOMOTIVE 4.2% 2,264 AMCAN Consolidate Technologies, Inc., Term Loan....................... NR NR 03/28/07 2,161,948 3,216 Citation Corp., Term Loan....................... NR B 12/01/07 2,612,614 29,161 Federal-Mogul Corp., Term Loan (c)................... NR NR 10/01/03 to 02/24/05 27,744,267 3,090 Federal-Mogul Corp., Revolving Credit Agreement (c)........................ NR NR 02/24/04 3,074,137 16,742 MetoKote Corp., Term Loan.. B1 B+ 11/14/05 16,480,196 2,633 Polypore, Inc., Term Loan....................... Ba3 B+ 12/31/07 2,653,083 17,889 Safelite Glass Corp., Term Loan (a)................... NR NR 09/30/07 17,620,787 863 Stoneridge, Inc., Term Loan....................... Ba3 BB 04/30/08 862,500 5,500 The Goodyear Tire and Rubber Co., Term Loan...... Ba2 BB- 03/31/06 5,472,500
See Notes to Financial Statements 7 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE AUTOMOTIVE (CONTINUED) $ 7,547 ThermaSys Corp., Term Loan....................... NR NR 08/25/07 $ 4,475,286 4,000 TRW Automotive, Inc., Term Loan....................... Ba2 BB 02/28/11 4,020,416 2,500 United Components, Inc., Term Loan.................. B1 BB- 06/30/10 2,522,395 -------------- 89,700,129 -------------- BEVERAGE, FOOD & TOBACCO 4.9% 23,605 Aurora Foods, Inc., Term Loan....................... B3 CC 09/30/06 23,375,200 4,040 B & G Foods, Inc., Term Loan....................... B1 B+ 03/31/06 4,042,166 9,216 Birds Eye Foods, Inc., Term Loan....................... NR B+ 06/30/08 9,246,789 4,988 Burns Philp Food, Inc., Term Loan.................. B1 B+ 02/26/09 5,018,672 5,258 Commonwealth Brands, Inc., Term Loan.................. NR NR 08/28/07 5,264,225 245 Cott Beverages, Inc., Term Loan....................... NR BB+ 12/31/06 245,919 913 Dean Foods Co., Term Loan.. Ba1 BB+ 07/15/08 917,497 7,636 Doane Pet Care Co., Term Loan....................... B1 B 12/30/05 to 12/29/06 7,653,896 5,271 Dole Food Co., Inc., Term Loan....................... Ba3 BB+ 03/28/08 to 09/28/08 5,316,887 7,170 Hartz Mountain Corp., Term Loan....................... B1 B 12/31/07 7,174,233 7,223 Land O' Lakes, Inc., Term Loan....................... B1 BB 10/10/06 to 10/10/08 7,081,829 4,783 Mafco Worldwide Corp., Term Loan....................... NR NR 03/31/06 4,734,863 418 Meow Mix Co., Term Loan.... Ba3 BB- 01/31/08 418,544 2,500 Merisant Co., Term Loan.... Ba3 BB- 01/11/10 2,518,750 2,000 NBTY, Inc., Term Loan...... Ba2 BB+ 07/25/09 2,022,500 3,301 New World Pasta Co., Term Loan....................... B3 NR 01/28/06 2,805,704 954 New World Pasta Co., Revolving Credit Agreement.................. B3 NR 01/28/05 829,980 2,895 Otis Spunkmeyer, Inc., Term Loan....................... B1 B+ 02/20/09 2,899,469
8 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE BEVERAGE, FOOD & TOBACCO (CONTINUED) $ 6,993 Pinnacle Foods, Inc., Term Loan....................... Ba3 BB- 05/22/08 $ 7,001,351 1,088 Southern Wine & Spirits of America, Inc., Term Loan... NR NR 07/02/08 1,093,788 4,992 Swift & Co., Term Loan..... Ba2 BB 09/19/08 5,004,170 -------------- 104,666,432 -------------- BROADCASTING--CABLE 7.0% 9,653 CC VIII Operating, LLC, Term Loan.................. B2 B- 02/02/08 9,094,506 67,685 Charter Communications Operating, LLC, Term Loan.. B2 B 09/18/07 to 09/18/08 63,873,175 37,637 Falcon Cable Communications, LP, Term Loan....................... B2 B 12/31/07 34,367,695 12,432 Frontiervision Operating Partners, LP, Term Loan (c)........................ NR NR 09/30/05 to 03/31/06 11,830,846 2,917 Frontiervision Operating Partners, LP, Revolving Credit Agreement (c)....... NR NR 10/31/05 2,775,837 10,500 Insight Midwest Holdings LLC, Term Loan............. Ba3 BB+ 06/30/09 to 12/31/09 10,511,693 4,250 MCC Iowa, LLC, Term Loan... NR NR 09/30/10 4,285,122 1,489 Mediacom Illinois, LLC, Term Loan.................. NR BB+ 12/31/08 1,486,889 739 Mediacom Southeast, LLC, Term Loan.................. Ba3 BB+ 09/30/08 740,569 11,760 Olympus Cable Holdings, LLC, Term Loan (c)......... NR NR 09/30/10 10,441,410 -------------- 149,407,742 -------------- BROADCASTING--DIVERSIFIED 0.6% 955 Comcorp Broadcasting, Inc., Term Loan (g).............. NR NR 03/31/03 947,887 1,995 Cumulus Media, Inc., Term Loan....................... Ba3 B+ 03/28/10 2,008,404 6,000 DirecTV Holdings, LLC, Term Loan....................... NR BB- 03/06/10 6,038,628
See Notes to Financial Statements 9 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE BROADCASTING--DIVERSIFIED (CONTINUED) $ 843 Nexstar Broadcasting, Inc., Term Loan.................. NR NR 12/31/10 $ 846,845 3,422 White Knight Broadcasting, Inc., Term Loan (g)........ NR NR 03/31/03 3,396,816 -------------- 13,238,580 -------------- BROADCASTING--TELEVISION 0.7% 3,080 Gray Television, Inc., Term Loan....................... Ba3 B+ 12/31/10 3,106,950 357 Mission Broadcasting, Inc., Term Loan.................. NR B+ 12/31/10 358,318 11,900 Quorum Broadcasting, Inc., Term Loan.................. NR NR 12/31/04 11,483,265 -------------- 14,948,533 -------------- BUILDINGS & REAL ESTATE 2.6% 3,000 AIMCO Properties, L.P., Term Loan.................. NR NR 05/30/08 3,013,125 13,374 Builders FirstSource, Inc., Term Loan.................. NR BB- 12/30/05 13,072,634 5,950 CB Richard Ellis Services, Inc., Term Loan............ B1 B+ 07/18/08 5,994,625 8,371 Central Parking Corp., Term Loan....................... Ba2 BB+ 03/31/10 8,361,965 3,500 Century Maintenance & Supply, Inc., Term Loan.... NR NR 05/12/10 3,552,500 9,083 Corrections Corp. of America, Term Loan......... Ba3 BB- 03/31/08 9,138,191 3,122 The Macerich Co., Term Loan....................... NR NR 07/26/05 3,133,447 5,490 Ventas, Inc., Term Loan.... NR NR 04/17/07 5,475,814 1,802 Ventas, Inc., Revolving Credit Agreement........... NR NR 04/17/05 1,720,844 2,500 Wackenhut Corrections Corp., Term Loan........... Ba3 BB- 07/09/09 2,512,500 -------------- 55,975,645 -------------- CHEMICALS, PLASTICS & RUBBER 4.8% 9,815 CP Kelco ApS, Term Loan.... B3 B+ 09/30/06 to 09/30/08 9,811,577 6,893 GenTek, Inc., Term Loan (c)........................ NR NR 04/30/05 to 10/31/07 4,542,740 2,824 GenTek, Inc., Revolving Credit Agreement (c)....... NR NR 04/30/05 1,886,493 4,550 GEO Specialty Chemicals, Inc., Term Loan............ B3 CCC+ 12/31/07 4,178,415
10 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE CHEMICALS, PLASTICS & RUBBER (CONTINUED) $38,586 Huntsman Corp., Term Loan.. B2 B+ 03/31/07 $ 35,655,090 17,440 Huntsman ICI Chemicals, LLC, Term Loan............. B1 B+ 06/30/07 to 06/30/08 17,538,926 3,651 Jet Plastica Industries, Inc., Term Loan............ NR NR 12/31/03 2,829,525 1,000 Jet Plastica Industries, Inc., Revolving Credit Agreement.................. NR NR 12/31/03 775,000 10,500 Lyondell Chemical Co., Term Loan....................... Ba3 BB- 06/10/04 9,975,000 856 Messer Griesheim, Term Loan....................... Ba2 BB 04/27/09 to 04/27/10 863,046 5,273 Nutrasweet Acquisition Corp., Term Loan........... Ba3 NR 06/30/06 to 12/31/07 4,908,570 4,000 Rockwood Specialties Group, Inc., Term Loan............ B1 B+ 07/23/10 4,050,000 2,943 TruSeal Technologies, Inc., Term Loan.................. NR NR 06/30/04 2,906,342 930 West American Rubber Co., LLC, Term Loan............. NR NR 11/09/03 929,583 -------------- 100,850,307 -------------- CONSTRUCTION MATERIAL 0.5% 5,000 Interline Brands, Inc., Term Loan.................. B2 B+ 11/30/09 5,018,750 523 National Waterworks, Inc., Term Loan.................. B1 BB- 11/22/09 528,220 1,719 Therma-Tru Corp., Term Loan....................... Ba3 BB- 02/21/10 1,727,435 3,750 Werner Holding Co., Inc., Term Loan.................. Ba3 B+ 06/11/09 3,799,999 -------------- 11,074,404 -------------- CONTAINERS, PACKAGING & GLASS 3.2% 9,375 Crown Cork & Seal Co., Inc., Term Loan............ Ba3 NR 09/15/08 9,418,950 14,591 Dr. Pepper/Seven Up Bottling Group, Inc., Term Loan....................... NR NR 10/07/06 to 10/07/07 14,549,662 1,330 Fleming Packaging Corp., Term Loan (b) (c).......... NR NR 08/31/04 255,391 176 Fleming Packaging Corp., Revolving Credit Agreement (b) (c) (g)................ NR NR 03/31/03 33,844
See Notes to Financial Statements 11 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE CONTAINERS, PACKAGING & GLASS (CONTINUED) $ 981 Impress Metal Packaging Holding B.V., Term Loan.... NR NR 12/31/06 $ 978,196 374 Jefferson Smurfit Corp., Revolving Credit Agreement.................. NR NR 03/31/05 363,859 9,698 Kranson Industries, Inc., Term Loan.................. NR NR 12/31/06 9,601,508 12,000 Owens-Illinois, Inc., Term Loan....................... NR NR 04/01/07 to 04/01/08 12,038,281 4,732 Packaging Dynamics, Term Loan....................... NR NR 11/20/05 4,719,673 2,931 Pliant Corp., Term Loan.... B2 BB- 05/31/08 2,911,133 156 Pliant Corp., Revolving Credit Agreement........... B2 BB- 05/31/06 144,757 4,542 Riverwood International Corp., Term Loan........... B1 B 12/31/06 to 03/31/07 4,537,277 611 Smurfit-Stone Container Corp., Term Loan........... NR NR 06/30/09 614,296 3,607 Stone Container Corp., Term Loan....................... NR NR 06/30/09 3,625,593 2,939 Tekni-Plex, Inc., Term Loan....................... B1 B+ 06/21/08 2,898,060 2,211 U.S. Can Corp., Term Loan....................... B2 B 01/04/06 2,189,491 -------------- 68,879,971 -------------- DIVERSIFIED MANUFACTURING 2.3% 17,462 Chart Industries, Inc., Term Loan (b) (c).......... NR NR 03/31/06 13,708,021 2,438 EnerSys, Term Loan......... NR NR 11/09/08 2,443,672 13,817 Mueller Group, Inc., Term Loan....................... B1 B+ 05/31/08 13,826,634 16,630 Neenah Foundry Co., Term Loan (c)................... Caa3 D 09/30/05 16,526,212 3,396 United Fixtures Co., Term Loan (a)................... NR NR 12/31/04 2,003,446 -------------- 48,507,985 -------------- ECOLOGICAL 1.8% 23,000 Allied Waste North America, Inc., Term Loan............ Ba3 BB 01/15/10 23,221,927 6,050 Casella Waste Systems, Inc., Term Loan............ B1 BB- 05/11/07 6,082,519
12 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE ECOLOGICAL (CONTINUED) $ 4,844 Duratek, Inc., Term Loan... NR NR 12/08/06 $ 4,722,827 20,556 Safety-Kleen Corp., Term Loan (b) (c)............... NR NR 04/03/05 to 04/03/06 5,036,186 -------------- 39,063,459 -------------- ELECTRONICS 2.5% 372 AMI Semiconductor, Inc., Term Loan.................. Ba3 BB 12/26/06 370,792 7,308 Audio Visual Services Corp., Term Loan........... NR NR 03/04/04 to 03/04/06 7,003,261 2,984 Dynamic Details, Inc., Term Loan....................... Caa2 NR 04/22/05 1,641,392 4,987 Kinetics Group, Inc., Term Loan....................... B1 NR 02/28/06 4,376,487 6,432 Knowles Electronics, Inc., Term Loan.................. B3 CCC+ 06/29/07 6,355,562 5,785 Rayovac Corp., Term Loan... Ba3 BB- 09/30/09 5,797,050 14,721 Semiconductor Components Industries, LLC, Term Loan....................... B3 B 08/04/06 to 08/04/07 14,626,196 13,541 Stratus Technologies, Inc., Term Loan.................. NR NR 02/26/05 11,915,877 -------------- 52,086,617 -------------- ENTERTAINMENT & LEISURE 6.0% 2,447 Bell Sports, Inc., Term Loan....................... NR NR 12/31/05 to 03/31/07 1,847,238 7,028 Carmike Cinemas, Inc., Term Loan....................... NR NR 01/31/07 7,070,787 1,467 Cinemark USA, Inc., Term Loan....................... Ba3 BB- 03/31/08 1,478,373 2,685 Festival Fun Parks, LLC, Term Loan.................. NR NR 06/30/07 to 12/31/07 2,674,290 33,323 Fitness Holdings Worldwide, Inc., Term Loan............ NR B 11/02/06 to 11/02/07 33,094,079 1,990 Kerasotes Theatres, Inc., Term Loan.................. NR NR 12/31/08 2,004,925 14,491 Loews Cineplex Entertainment Corp., Term Loan....................... NR NR 03/31/07 to 02/29/08 14,462,383 13,425 Metro-Goldwyn-Mayer, Inc., Term Loan.................. NR NR 06/30/08 13,445,983 1,500 Mets II, LLC, Term Loan.... NR NR 08/23/05 1,498,125
See Notes to Financial Statements 13 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE ENTERTAINMENT & LEISURE (CONTINUED) $ 2,949 Panavision, Inc., Term Loan....................... B3 CCC 03/31/05 $ 2,901,290 9,700 Playcore Wisconsin, Inc., Term Loan.................. NR NR 07/01/07 9,308,941 5,000 Pure Fishing, Term Loan.... NR NR 12/31/09 4,993,750 3,000 Regal Cinemas, Inc., Term Loan....................... Ba2 BB- 06/30/09 3,033,750 2,500 Riddell Sports Group, Inc., Term Loan.................. NR NR 06/30/08 2,506,250 6,500 Six Flags Theme Parks, Inc., Term Loan............ Ba2 BB- 06/30/09 6,496,614 233 Six Flags Theme Parks, Inc., Revolving Credit Agreement.................. Ba2 BB- 06/30/08 226,333 2,538 Sportcraft, Ltd., Term Loan....................... NR NR 07/31/05 2,410,985 1,252 Sportcraft, Ltd., Revolving Credit Agreement........... NR NR 07/31/05 1,188,979 9,200 Vivendi Universal Entertainment, Term Loan... Ba2 B+ 06/30/08 9,258,935 3,750 Worldspan, LP, Term Loan... B1 BB- 06/30/07 3,775,781 4,465 Worldwide Sports & Recreation, Inc., Term Loan....................... NR NR 12/31/06 4,278,452 -------------- 127,956,243 -------------- FARMING AND AGRICULTURE 0.1% 2,250 Central Garden & Pet Co., Term Loan.................. Ba2 BB+ 05/14/09 2,264,767 -------------- FINANCE 1.5% 39,320 Outsourcing Solutions, Term Loan (b) (c)............... Caa1 NR 12/10/05 to 06/10/06 18,207,308 8,500 Rent-A-Center, Inc., Term Loan....................... Ba2 BB 05/28/09 8,567,295 4,849 Risk Management Assurance Co., Term Loan............. NR NR 12/21/06 4,845,521 -------------- 31,620,124 --------------
14 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE GROCERY 0.2% $ 2,729 Fleming Cos., Inc., Term Loan (c)................... NR NR 06/18/08 $ 2,578,640 1,569 Fleming Cos., Inc., Revolving Credit Agreement (c)........................ NR NR 06/18/07 1,492,892 -------------- 4,071,532 -------------- HEALTHCARE 4.2% 1,995 Ameripath, Inc., Term Loan....................... B1 B+ 03/27/10 2,007,469 28,614 Community Health Systems, Inc., Term Loan............ NR NR 07/16/10 to 01/16/11 28,721,006 4,411 Genesis Health Ventures, Inc., Term Loan............ Ba3 B+ 03/31/07 4,405,989 8,855 InteliStaf Group, Inc., Term Loan.................. NR NR 10/31/05 to 10/31/07 8,788,632 22,206 Kindred Healthcare, Inc., Term Loan (a).............. NR NR 04/13/08 21,983,875 11,901 Magellan Health Services, Inc., Term Loan (c)........ NR D 02/12/05 to 02/12/06 11,702,170 7,518 Medical Staffing Network Holdings, Inc., Term Loan....................... NR NR 10/26/06 7,485,389 3,758 Team Health, Inc., Term Loan....................... Ba3 B+ 10/31/08 3,717,368 -------------- 88,811,898 -------------- HEALTHCARE & BEAUTY 0.8% 3,750 Jafra Cosmetics International, Inc., Term Loan....................... NR B+ 05/20/08 3,656,250 1,288 Mary Kay, Inc., Term Loan.. Ba3 BB 10/03/07 1,294,186 2,895 Prestige Brands Holdings, Inc., Term Loan............ NR NR 12/30/08 2,909,475 8,873 Revlon Consumer Products Corp., Term Loan........... B3 B- 05/30/05 8,650,904 -------------- 16,510,815 -------------- HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER PRODUCTS 1.0% 2,079 Formica Corp., Term Loan (c)........................ NR NR 04/30/06 2,016,849 7,083 General Binding Corp., Term Loan....................... B2 B+ 01/15/08 7,061,198 1,645 Holmes Products Corp., Term Loan....................... NR B 02/05/07 1,606,234
See Notes to Financial Statements 15 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER PRODUCTS (CONTINUED) $ 5,045 Imperial Home Decor Group, Inc., Term Loan (a) (b).... NR NR 04/04/06 $ 126,121 3,289 National Bedding Co., Term Loan....................... B1 B+ 08/31/08 3,302,348 3,567 Sealy Mattress Co., Term Loan....................... B1 B+ 12/15/04 to 12/15/06 3,553,807 3,290 Targus Group International, Inc., Term Loan............ NR NR 08/31/06 2,911,576 -------------- 20,578,133 -------------- HOTELS, MOTELS, INNS & GAMING 5.1% 41,792 Aladdin Gaming, LLC, Term Loan (b) (c)............... NR NR 02/25/05 to 02/26/08 35,092,779 3,908 Extended Stay America, Inc., Term Loan............ Ba3 BB- 01/15/08 3,934,169 2,277 Greektown Casino, LLC, Term Loan....................... NR NR 09/30/04 2,283,415 10,500 Mandalay Resort Group, Term Loan....................... NR NR 08/21/06 10,493,437 4,273 Penn National Gaming, Inc., Term Loan.................. B1 B+ 09/01/07 4,290,179 7,463 Scientific Games Corp., Term Loan.................. Ba3 BB- 12/31/08 7,490,484 7,500 Thunder Valley Casino, Term Loan....................... NR NR 12/01/08 7,518,750 44,123 Wyndham International, Inc., Term Loan............ NR NR 06/30/04 to 06/30/06 37,566,981 -------------- 108,670,194 -------------- INSURANCE 1.3% 5,000 Alea Group Holdings, Term Loan....................... NR BBB- 03/31/07 4,987,500 16,275 BRW Acquisition, Inc., Term Loan....................... NR NR 07/10/06 to 07/10/07 15,949,500 4,725 Gab Robins North America, Inc., Term Loan............ NR NR 12/31/05 4,488,750 1,800 Infinity Property and Casualty Corp., Term Loan.. Baa3 BBB 06/30/10 1,814,625 -------------- 27,240,375 --------------
16 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE MACHINERY 1.4% $ 4,482 Alliance Laundry Holdings, LLC, Term Loan............. B1 B 08/02/07 $ 4,462,257 139 Alliance Laundry Holdings, LLC, Revolving Credit Agreement.................. B1 B 06/02/05 135,417 8,690 Ashtead Group, PLC, Term Loan....................... NR NR 06/01/07 6,669,816 2,136 Flowserve Corp., Term Loan....................... Ba3 BB- 06/30/09 2,148,164 13,717 Gleason Corp., Term Loan... NR NR 02/18/06 to 02/18/08 13,658,311 2,214 SWT Finance, BV, Term Loan....................... NR NR 09/30/05 1,715,992 -------------- 28,789,957 -------------- MEDICAL PRODUCTS & SERVICES 4.3% 4,556 Alaris Medical Systems, Inc., Term Loan............ B1 BB 06/30/09 4,604,531 5,061 Alliance Imaging, Inc., Term Loan.................. B1 B+ 06/10/08 4,945,066 2,000 Conmed Corp., Term Loan.... Ba3 BB- 12/15/09 2,021,250 15,340 Dade Behring, Inc., Term Loan....................... B1 B+ 10/03/08 15,550,532 11,290 DaVita, Inc., Term Loan.... Ba3 BB- 03/31/07 to 03/31/09 11,319,123 3,950 Fisher Scientific International, Inc., Term Loan....................... Ba3 BB+ 03/31/10 3,973,801 15,794 Fresenius Medical Care Holding, Inc., Term Loan... Ba1 BB+ 02/21/10 15,922,074 2,358 InSight Health, Term Loan.. NR B+ 10/17/08 2,368,205 7,926 Kinetic Concepts, Inc., Term Loan.................. Ba3 BB- 12/31/04 to 12/31/05 7,924,214 8,995 Mediq/PRN Life Support Services, Inc., Term Loan....................... NR NR 06/13/05 7,825,374 8,758 National Nephrology Associates, Inc., Term Loan....................... B1 B+ 12/31/05 8,703,134 1,605 Rotech Healthcare, Inc., Term Loan.................. Ba2 BB 03/31/08 1,606,572 4,000 Symmetry Medical, Inc., Term Loan.................. NR NR 06/30/08 to 06/30/09 4,002,092 -------------- 90,765,968 --------------
See Notes to Financial Statements 17 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE MINING, STEEL, IRON & NON-PRECIOUS METALS 2.8% $14,621 Carmeuse Lime, Inc., Term Loan....................... NR NR 03/31/06 $ 11,696,844 7,348 CII Carbon, LLC, Term Loan....................... NR NR 06/25/08 6,540,093 1,915 Fairmount Minerals, Ltd., Term Loan.................. NR NR 03/13/09 1,919,852 56,070 Ispat Inland, Term Loan.... Caa1 B- 07/16/05 to 07/16/06 38,828,464 1,197 Peabody Energy Corp., Term Loan....................... Ba1 BB+ 03/21/10 1,208,970 -------------- 60,194,223 -------------- NATURAL RESOURCES 1.5% 1,250 CITGO Petroleum Corp., Term Loan....................... Ba2 BB+ 02/27/06 1,290,625 7,500 El Paso Coastal, Term Loan....................... NR NR 12/31/06 7,485,937 1,250 El Paso Coastal, Revolving Credit Agreement........... NR NR 12/31/06 1,237,305 20,000 Ocean Rig ASA--(Norway), Term Loan.................. NR NR 06/01/08 16,800,000 5,186 Tesoro Petroleum Corp., Term Loan.................. Ba3 BB 04/17/07 5,231,243 700 U.S. Synthetic Corp., Term Loan....................... NR NR 05/31/05 672,000 -------------- 32,717,110 -------------- NON-DURABLE CONSUMER PRODUCTS 0.4% 1,903 Aero Products International, Inc., Term Loan....................... NR NR 12/19/08 1,879,722 782 American Safety Razor Co., Term Loan.................. B2 B- 01/31/05 766,803 2,985 Amscan Holdings, Inc., Term Loan....................... B1 BB- 06/15/07 2,999,925 2,000 The Boyds Collection, Ltd., Term Loan.................. Ba3 B+ 04/21/05 1,959,556 -------------- 7,606,006 -------------- PAPER & FOREST PRODUCTS 0.3% 2,448 Bear Island Paper Co., LLC, Term Loan.................. B3 B- 12/31/05 2,436,239 3,910 Port Townsend Paper Corp., Term Loan.................. NR NR 03/16/07 3,636,300 -------------- 6,072,539 --------------
18 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE PERSONAL & MISCELLANEOUS SERVICES 1.1% $ 2,545 Aspen Marketing Group, Term Loan....................... NR NR 09/30/04 $ 1,145,155 7,775 Aspen Marketing Group, Revolving Credit Agreement.................. NR NR 09/30/04 3,498,954 3,642 Encompass Service Corp., Term Loan (b) (c).......... NR NR 02/22/06 to 05/10/07 482,558 2,000 Global Imaging Systems, Inc., Term Loan............ Ba3 BB- 06/25/09 2,025,000 1,925 infoUSA, Inc., Term Loan... Ba3 NR 04/30/07 1,922,594 4,950 Katun Corp., Term Loan..... NR B+ 06/30/09 4,934,531 1,695 Stewart Enterprises, Inc., Term Loan.................. Ba3 BB 01/31/06 1,703,586 8,086 The Relizon Co., Term Loan....................... NR NR 09/30/06 to 12/31/07 7,951,991 -------------- 23,664,369 -------------- PHARMACEUTICALS 0.7% 848 Alpharma, Inc., Term Loan.. B2 BB- 10/05/07 842,577 3,426 Caremark Rx, Inc., Term Loan....................... Ba2 BBB- 03/31/06 3,433,898 10,247 MedPointe, Inc., Term Loan....................... B1 B 09/30/07 to 09/30/08 9,644,331 -------------- 13,920,806 -------------- PRINTING & PUBLISHING 6.1% 4,962 21st Century Newspapers, Term Loan.................. NR NR 08/27/08 4,961,538 1,487 Adams Outdoor Advertising LP, Term Loan.............. B1 B+ 02/08/08 1,494,395 8,396 Advanstar Communications, Inc., Term Loan............ NR B 04/11/07 to 10/11/07 8,297,425 8,245 American Reprographics Co., Term Loan.................. NR NR 04/10/08 8,072,007 3,919 Check Printers, Inc., Term Loan....................... NR NR 06/30/05 3,914,325 13,014 CommerceConnect Media, Inc., Term Loan............ NR NR 12/31/07 12,493,670 2,010 Daily News, LP, Term Loan.. NR NR 03/19/08 1,927,427 5,119 F&W Publications, Inc., Term Loan.................. NR NR 12/31/09 5,118,668
See Notes to Financial Statements 19 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE PRINTING & PUBLISHING (CONTINUED) $ 5,082 Haights Cross Communications, LLC, Term Loan....................... B2 B+ 12/10/06 $ 4,925,455 10,785 Journal Register Co., Term Loan....................... Ba1 BB+ 09/29/06 10,704,417 4,800 Lamar Media Corp., Term Loan....................... Ba2 BB- 06/30/10 4,820,002 1,388 Liberty Group Operating, Inc., Term Loan............ B1 B 03/31/07 1,386,388 5,167 Merrill Communications, LLC, Term Loan............. B3 B 11/23/05 to 11/23/07 5,064,027 2,500 Moore Corp., Ltd, Term Loan....................... B2 BB+ 03/15/10 2,508,203 10,000 Morris Communications Corp., Term Loan........... NR BB 09/30/09 10,031,250 3,435 Network Communications, Inc., Term Loan............ NR NR 06/27/08 3,443,380 10,031 Primedia, Inc., Term Loan....................... NR B 06/30/08 to 06/30/09 9,735,865 5,833 R.H. Donnelley, Inc., Term Loan....................... Ba3 BB 12/31/08 to 06/30/10 5,941,413 5,757 The Reader's Digest Association, Inc., Term Loan....................... Ba1 BB+ 05/21/07 5,691,784 5,684 Vutek, Inc., Term Loan..... B1 NR 07/31/07 5,513,182 9,500 Xerox Corp., Term Loan..... NR BB- 09/30/08 9,428,750 4,793 Ziff-Davis Media, Inc., Term Loan.................. NR CCC 03/31/07 4,290,081 -------------- 129,763,652 -------------- RESTAURANTS & FOOD SERVICE 0.2% 1,632 Carvel Corp., Term Loan.... NR NR 12/31/06 1,615,841 2,672 Papa Ginos, Inc., Term Loan....................... NR NR 08/31/07 2,665,237 -------------- 4,281,078 -------------- RETAIL--OIL & GAS 0.6% 4,458 Barjan Products, LLC, Term Loan....................... NR NR 05/31/06 2,228,944 9,421 The Pantry, Inc., Term Loan....................... B1 B- 03/31/07 9,502,856 -------------- 11,731,800 --------------
20 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE RETAIL--SPECIALTY 0.5% $ 1,049 American Blind & Wallpaper Factory, Inc., Term Loan (a)........................ NR NR 12/31/05 $ 1,048,652 3,209 DRL Acquisition, Inc., Term Loan....................... NR NR 04/30/09 3,197,340 1,739 Home Interiors & Gifts, Inc., Term Loan............ B2 B+ 12/31/06 1,722,951 5,113 Nebraska Book Co., Inc., Term Loan.................. Ba3 B+ 03/31/06 5,125,493 -------------- 11,094,436 -------------- RETAIL--STORES 2.1% 4,198 Advance Stores Co., Inc., Term Loan.................. Ba3 BB- 11/30/07 4,221,509 5,350 CSK Auto, Inc., Term Loan.. Ba3 BB- 02/15/06 5,403,500 6,481 Murray's Discount Auto Stores, Inc., Term Loan.... NR NR 08/15/03 6,474,333 410 Murray's Discount Auto Stores, Inc., Revolving Credit Agreement........... NR NR 08/15/03 409,567 28,000 Rite Aid Corp., Term Loan....................... B1 BB 04/30/08 28,231,000 -------------- 44,739,909 -------------- TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 1.1% 6,170 Alaska Communications Systems Holdings, Inc., Term Loan.................. B1 BB- 11/14/07 to 05/14/08 6,165,007 3,143 Cincinnati Bell, Inc., Term Loan....................... B1 B+ 11/09/04 to 06/29/07 3,170,973 2,000 FairPoint Communications, Inc., Term Loan............ B1 BB- 03/31/07 2,007,500 7,406 NATG Holdings, LLC, Term Loan (a)................... NR NR 01/23/09 to 01/23/10 1,919,327 4,331 NATG Holdings, LLC, Revolving Credit Agreement (a)........................ NR NR 01/23/05 2,490,270 5,381 Qwest Corp., Term Loan..... Ba3 B- 06/30/07 5,425,345 7,500 WCI Capital Corp., Term Loan (b) (c)............... NR NR 09/30/07 9,375 2,158 WCI Capital Corp., Revolving Credit Agreement (b) (c) (g)................ NR NR 12/31/02 1,035,884 -------------- 22,223,681 --------------
See Notes to Financial Statements 21 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE TELECOMMUNICATIONS--LONG DISTANCE 0.1% $29,946 Pacific Crossing, Ltd., Term Loan (b) (c).......... NR NR 07/28/06 $ 2,096,223 -------------- TELECOMMUNICATIONS-WIRELESS 5.5% 9,124 American Cellular Corp., Term Loan.................. B3 CC 03/31/08 to 03/31/09 9,044,255 269 American Cellular Corp., Revolving Credit Agreement.................. B3 CC 03/31/07 268,218 25,338 BCP SP Ltd., Term Loan (g) (j)........................ NR NR 03/31/02 to 03/31/05 8,543,218 2,246 Centennial Cellular, Corp., Term Loan.................. B3 B 11/30/06 2,176,482 4,409 Centennial Puerto Rico Operations Corp., Term Loan....................... NR B 05/31/07 to 11/30/07 4,287,380 8,000 Cricket Communications, Inc., Term Loan (b) (c).... NR NR 06/30/07 3,100,000 1,773 Crown Castle International Corp., Term Loan........... Ba3 B- 03/15/08 1,778,084 7,280 Dobson Operating Co., Term Loan....................... Ba3 B- 03/31/08 7,100,442 24,475 Nextel Finance Co., Term Loan....................... Ba2 BB 12/31/07 to 12/31/08 24,300,660 12,439 Nextel Partners, Inc., Term Loan....................... B1 B- 01/29/08 to 07/29/08 12,391,894 17,624 Rural Cellular Corp., Term Loan....................... B2 B- 10/03/08 to 04/03/09 17,366,109 4,076 Spectrasite Communications, Inc., Term Loan............ B1 B+ 12/31/07 4,117,659 18,589 Sygnet Wireless, Inc., Term Loan....................... NR NR 12/23/06 to 12/23/07 18,222,312 1,043 TSI Telecommunication Services, Inc., Term Loan....................... Ba3 B+ 12/31/06 1,044,640 2,034 Western Wireless Corp., Term Loan.................. B3 B- 09/30/08 2,003,934 -------------- 115,745,287 -------------- TRANSPORTATION--CARGO 1.6% 7,912 American Commercial Lines, LLC, Term Loan (c)......... NR NR 07/31/04 to 06/30/07 6,663,304 14,612 Atlas Freighter Leasing, Inc., Term Loan............ Caa3 NR 04/25/05 to 04/25/06 8,858,659
22 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE TRANSPORTATION--CARGO (CONTINUED) $ 4,872 Comcar Industries, Inc., Term Loan.................. NR NR 09/30/04 $ 4,092,781 3,763 Havco Wood Products, Inc., Term Loan (j).............. NR NR 06/30/06 2,351,697 2,652 Ingram Industries, Inc., Term Loan.................. NR NR 07/02/08 2,625,859 7,118 Pacer International, Inc., Term Loan.................. B1 BB- 06/10/10 7,179,927 1,196 Roadway Corp., Term Loan... Baa3 BBB 11/30/06 1,191,424 1,305 United States Shipping, LLC, Term Loan............. Ba2 BB 09/12/08 1,309,096 -------------- 34,272,747 -------------- TRANSPORTATION--PERSONAL 0.9% 5,996 IAP Newsub, Inc., Term Loan (b)........................ NR NR 05/29/05 929,438 900 IAP Newsub, Inc., Revolving Credit Agreement (b)....... NR NR 05/29/05 139,476 9,900 Laidlaw Investments Ltd., Term Loan.................. Ba3 BB+ 06/19/09 9,974,250 7,063 Motor Coach Industries, Inc., Term Loan............ B2 B 06/16/05 5,950,256 1,905 Transcore Holdings, Inc., Term Loan.................. NR NR 10/01/06 1,912,112 -------------- 18,905,532 -------------- TRANSPORTATION-RAIL MANUFACTURING 0.1% 2,423 Helm, Inc., Term Loan...... NR NR 10/18/06 2,259,706 1,998 RailWorks Corp., Term Loan....................... NR NR 11/13/04 749,216 -------------- 3,008,922 -------------- UTILITIES 0.6% 750 Alleghany Energy, Inc., Term Loan.................. B2 B 09/30/04 750,375 853 Aquila, Inc., Term Loan.... B2 B+ 05/15/06 859,573 27 CMS Energy Corp., Term Loan....................... B2 B 09/30/04 27,044 950 Consumers Energy Co., Term Loan....................... Baa3 NR 07/11/04 956,531 2,471 Pike Electric, Inc., Term Loan....................... NR NR 04/18/10 2,488,347 3,125 Southern California Edison Co., Term Loan............. Ba2 NR 03/01/05 3,137,697
See Notes to Financial Statements 23 YOUR FUND'S INVESTMENTS July 31, 2003
BANK LOAN PRINCIPAL RATINGS+ AMOUNT -------------- (000) BORROWER MOODY'S S&P STATED MATURITY* VALUE UTILITIES (CONTINUED) $ 441 TNP Enterprises, Inc., Term Loan....................... Ba2 BB+ 03/30/06 $ 435,117 4,213 Westar Energy, Inc., Term Loan....................... NR NR 06/05/05 4,233,951 10 Westar Energy, Inc., Revolving Credit Agreement.................. NR NR 06/05/05 9,375 -------------- 12,898,010 -------------- TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 88.9%........................... 1,886,440,342 --------------
DESCRIPTION VALUE NOTES 2.1% Alderwoods Group, Inc. ($1,877,300 par, 11.00% to 12.25% coupon, maturing 01/02/07 to 01/02/09)...................................................... 1,971,473 American Home Patient, Inc. ($814,858 par, 6.79% to 8.57% coupon, maturing 07/01/09).................................................................. 554,104 Commonwealth Brands, Inc. ($1,500,000 par, 8.74% coupon, maturing 04/15/08) (h)........................................................................ 1,537,500 Dade Behring, Inc. ($5,244,700 par, 11.91% coupon, maturing 10/03/10)........ 5,506,935 Genesis Health Ventures, Inc. ($12,837,827 par, 6.11% coupon, maturing 04/02/07) (h).............................................................. 12,837,827 PCI Chemicals Canada, Inc. ($3,128,801 par, 10.00% coupon, maturing 12/31/08).................................................................. 2,706,413 Pioneer Cos., Inc. ($1,515,821 par, 4.60% coupon, maturing 12/31/06) (h)..... 1,296,027 Premcor Refining Group, Inc. ($8,500,000 par, 4.34% coupon, maturing 02/11/06) (h).............................................................. 8,574,375 Satelites Mexicanos ($10,320,000 par, 5.61% coupon, maturing 06/30/04), 144A Private Placement (f) (h).................................................. 9,133,200 -------------- 44,117,854 -------------- EQUITIES 6.6% Alderwoods Group, Inc. (89,681 common shares) (e)............................ 608,844 American Home Patient, Inc. (Warrants for 10,147 common shares) (e).......... 0 Aspen Marketing (166,871 common shares) (e).................................. 0 Audio Visual Services Corp. (137,193 common shares) (d) (e).................. 1,440,526 Best Products Co., Inc. (297,480 common shares) (e).......................... 0 Chart Industries, Inc. (Warrants for 169,199 common shares) (e).............. 0 Dade Behring Holdings, Inc. (486,689 common shares) (e)...................... 12,001,751 DecorateToday.com (198,600 common shares) (a) (d) (e)........................ 2,125,020 Genesis Health Ventures, Inc. (1,568,796 common shares) (e).................. 33,336,915 Genesis Health Ventures, Inc. (19,700 preferred shares) (d) (j).............. 2,043,875
24 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003
DESCRIPTION VALUE EQUITIES (CONTINUED) Havco Wood Products, Inc. (30 common shares) (d) (e)......................... $ 0 Holmes Group, Inc. (Warrants for 11,447 common shares) (e)................... 0 Imperial Home Decor Group, Inc. (1,816,143 common shares) (a) (d) (e)........ 0 Imperial Home Decor Realty, Inc. (1,846,143 common shares) (a) (d) (e)....... 0 Kindred Healthcare, Inc. (1,033,585 common shares) (a) (e)................... 24,764,697 London Fog Industries, Inc. (515,922 common shares) (a) (d) (e).............. 8,848,062 Mediq/PRN Life Support Services, Inc. (22,626 preferred shares) (d) (e)...... 0 Murray's Discount Auto Stores, Inc. (Warrants for 290 common shares) (d) (e)........................................................................ 1,485,680 Orius Corp. (1,211,236 common shares) (a) (d) (e)............................ 0 Pioneer Cos., Inc. (251,854 common shares) (e)............................... 805,933 RailWorks Corp. (223 preferred shares) (d) (e)............................... 0 RailWorks Corp. (Warrants for 3,935 common shares) (d) (e)................... 0 Rotech Healthcare, Inc. (930,691 common shares) (e).......................... 22,103,911 Rotech Medical Corp. (94,289 common shares) (d) (e).......................... 0 Safelite Glass Corp. (724,479 common shares) (a) (d) (e)..................... 8,266,305 Safelite Realty (48,903 common shares) (a) (d) (e)........................... 0 Stellex (33,390 common shares) (d) (e)....................................... 122,207 Teligent, Inc. (400 common shares) (d) (e)................................... 0 Tembec, Inc. (140,409 common shares) (e)..................................... 727,319 Trans World Entertainment Corp. (3,789,962 common shares) (a) (e)............ 22,550,274 United Fixtures Holdings, Inc. (196,020 common shares) (a) (d) (e)........... 0 United Fixtures Holdings, Inc. (53,810 preferred shares) (a) (d) (e)......... 0 West American Rubber Co., LLC (11.39% ownership interest) (d) (e)............ 0 -------------- TOTAL EQUITIES 6.6%......................................................... 141,231,319 -------------- TOTAL LONG-TERM INVESTMENTS 97.6% (Cost $2,338,486,814)...................................................... 2,071,789,515 -------------- SHORT TERM INVESTMENTS 4.4% REPURCHASE AGREEMENT 4.3% State Street Bank & Trust Corp. ($90,800,000 par collateralized by U.S. Government Obligations in a pooled cash account, 0.95% coupon, dated 07/31/03, to be sold on 08/01/03 at $90,802,396) (i)....................... 90,800,000 --------------
See Notes to Financial Statements 25 YOUR FUND'S INVESTMENTS July 31, 2003
DESCRIPTION VALUE TIME DEPOSIT 0.1% State Street Bank & Trust Corp. ($2,132,356 par collateralized by U.S. Government Obligations in a pooled cash account, 0.15% coupon, dated 07/31/03, to be sold on 08/01/03 at $2,132,364) (i)........................ $ 2,132,356 -------------- TOTAL SHORT-TERM INVESTMENTS 4.4% (Cost $92,932,356)......................................................... 92,932,356 -------------- TOTAL INVESTMENTS 102.0% (Cost $2,431,419,170)...................................................... 2,164,721,871 LIABILITIES IN EXCESS OF OTHER ASSETS (2.0)%................................ (42,561,964) -------------- NET ASSETS 100.0%........................................................... $2,122,159,907 ==============
26 See Notes to Financial Statements YOUR FUND'S INVESTMENTS July 31, 2003 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. (Bank loan ratings are unaudited.) (1) Industry percentages are calculated as a percentage of net assets. (a) Affiliated company. See Notes to Financial Statements (b) This Senior Loan interest is non-income producing. (c) This borrower has filed for protection in federal bankruptcy court. (d) Restricted security. (e) Non-income producing security as this stock currently does not declare dividends. (f) 144A Securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally transactions with qualified institutional buyers. (g) This borrower is in the process of restructuring or amending the terms of this loan. (h) Variable rate security. Interest rate shown is that in effect at July 31, 2003. (i) A portion of this security is designated in connection with unfunded loan commitments. (j) Payment-in-kind 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 or (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 27 FINANCIAL STATEMENTS Statement of Assets and Liabilities July 31, 2003 ASSETS: Total Investments (Cost $2,431,419,170)..................... $ 2,164,721,871 Receivables: Investments Sold.......................................... 21,778,473 Interest and Fees......................................... 8,165,835 Fund Shares Sold.......................................... 1,441,080 Other....................................................... 30,530 --------------- Total Assets............................................ 2,196,137,789 --------------- LIABILITIES: Payables: Investments Purchased..................................... 67,255,749 Investment Advisory Fee................................... 1,778,730 Income Distributions...................................... 1,152,100 Distributor and Affiliates................................ 549,457 Administrative Fee........................................ 468,087 Custodian Bank............................................ 242,280 Fund Shares Repurchased................................... 160,355 Accrued Expenses............................................ 1,485,822 Trustees' Deferred Compensation and Retirement Plans........ 885,302 --------------- Total Liabilities....................................... 73,977,882 --------------- NET ASSETS.................................................. $ 2,122,159,907 =============== NET ASSETS CONSIST OF: Capital..................................................... $ 3,407,661,893 Accumulated Undistributed Net Investment Income............. (8,537,236) Net Unrealized Depreciation................................. (266,697,299) Accumulated Net Realized Loss............................... (1,010,267,451) --------------- NET ASSETS.................................................. $ 2,122,159,907 =============== NET ASSET VALUE PER COMMON SHARE: Class B Shares: Net asset value and offering price per share (Based on net assets of $1,876,097,431 and 226,254,943 shares of beneficial interest issued and outstanding)............. $ 8.29 =============== Class C Shares: Net asset value and offering price per share (Based on net assets of $246,062,476 and 29,686,398 shares of beneficial interest issued and outstanding)............. $ 8.29 ===============
28 See Notes to Financial Statements Statement of Operations For the Year Ended July 31, 2003 INVESTMENT INCOME: Interest.................................................... $ 118,478,312 Dividends................................................... 465,709 Other....................................................... 5,785,405 ------------- Total Income............................................ 124,729,426 ------------- EXPENSES: Investment Advisory Fee..................................... 20,652,618 Administrative Fee.......................................... 5,434,899 Shareholder Services........................................ 2,586,458 Legal....................................................... 1,805,592 Custody..................................................... 658,498 Trustees' Fees and Related Expenses......................... 183,546 Service Fees--Class C....................................... 47,460 Other....................................................... 1,994,093 ------------- Total Operating Expenses................................ 33,363,164 Less Credits Earned on Cash Balances.................... 101,748 ------------- Net Operating Expenses.................................. 33,261,416 ------------- Interest Expense........................................ 57,912 ------------- Total Expenses.......................................... 33,319,328 ------------- NET INVESTMENT INCOME....................................... $ 91,410,098 ============= REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Loss........................................... $(180,662,448) ------------- Net Unrealized Appreciation During the Period............... 202,756,414 ------------- NET REALIZED AND UNREALIZED LOSS............................ $ 22,093,966 ============= NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 113,504,064 =============
See Notes to Financial Statements 29 Statements of Changes in Net Assets
YEAR ENDED YEAR ENDED JULY 31, 2003 JULY 31, 2002 --------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................... $ 91,410,098 $ 161,678,241 Net Realized Loss....................................... (180,662,448) (178,082,248) Net Unrealized Appreciation/Depreciation During the Period................................................ 202,756,414 (34,932,297) -------------- --------------- Change in Net Assets from Operations.................... 113,504,064 (51,336,304) -------------- --------------- Distributions from Net Investment Income: Class B Shares........................................ (79,942,206) (151,858,532) Class C Shares........................................ (1,067,561) -0- -------------- --------------- (81,009,767) (151,858,532) -------------- --------------- Return of Capital Distribution: Class B Shares........................................ (7,501,943) -0- Class C Shares........................................ -0- -0- -------------- --------------- (7,501,943) -0- -------------- --------------- Total Distributions..................................... (88,511,710) (151,858,532) -------------- --------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 24,992,354 (203,194,836) -------------- --------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold............................... 267,313,569 28,378,816 Net Asset Value of Shares Issued Through Dividend Reinvestment.......................................... 44,870,091 73,318,476 Cost of Shares Repurchased.............................. (773,706,504) (1,329,486,630) -------------- --------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... (461,522,844) (1,227,789,338) -------------- --------------- TOTAL DECREASE IN NET ASSETS............................ (436,530,490) (1,430,984,174) NET ASSETS: Beginning of the Period................................. 2,558,690,397 3,989,674,571 -------------- --------------- End of the Period (Including accumulated undistributed net investment income of $(8,537,236) and $3,552,247, respectively)......................................... $2,122,159,907 $ 2,558,690,397 ============== ===============
30 See Notes to Financial Statements Statement of Cash Flows For the Year Ended July 31, 2003 CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 113,504,064 ------------- Adjustments to Reconcile the Change in Net Assets from Operations to Net Cash provided by Operating Activities: Decrease in Investments at Value.......................... 388,505,003 Decrease in Interest and Fees Receivables................. 2,730,313 Decrease in Receivable for Investments Sold............... 19,230,801 Decrease in Other Assets.................................. 90,818 Decrease in Investment Advisory Fee Payable............... (402,987) Decrease in Administrative Fee Payable.................... (106,049) Decrease in Distributor and Affiliates Payable............ (127,214) Increase in Payable for Investments Purchased............. 28,359,189 Decrease in Accrued Expenses.............................. (291,415) Increase in Trustees' Deferred Compensation and Retirement Plans................................................... 216,616 ------------- Total Adjustments....................................... 438,205,075 ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES................... 551,709,139 ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Shares Sold................................... 266,009,003 Change in Intra-day Credit Line with Custodian Bank......... 238,474 Payments on Shares Repurchased.............................. (773,590,111) Cash Dividends Paid......................................... (44,366,505) ------------- Net Cash Used for Financing Activities.................. (551,709,139) ------------- NET INCREASE IN CASH........................................ -0- Cash at Beginning of the Period............................. -0- ------------- CASH AT THE END OF THE PERIOD............................... $ -0- =============
See Notes to Financial Statements 31 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED JULY 31, CLASS B SHARES -------------------------------------------------------- 2003 (c) 2002 (c) 2001 (c) 2000 1999 -------------------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD............................ $ 8.09 $ 8.61 $ 9.50 $ 9.85 $ 9.98 -------- -------- -------- -------- -------- Net Investment Income............. .33 .41 .66 .68 .64 Net Realized and Unrealized Gain/Loss....................... .19 (.55) (.86) (.36) (.13) -------- -------- -------- -------- -------- Total from Investment Operations.... .52 (.14) (.20) .32 .51 Less: Distributions from Net Investment Income.......................... .29 .38 .69 .67 .64 Return of Capital Distributions... .03 -0- -0- -0- -0- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD............................ $ 8.29 $ 8.09 $ 8.61 $ 9.50 $ 9.85 ======== ======== ======== ======== ======== Total Return (a).................... 6.58% -1.61% -2.11% 3.15% 5.23% Net Assets at End of the Period (In millions)......................... $1,876.1 $2,558.7 $3,989.7 $6,458.0 $8,136.4 Ratio of Gross Expenses to Average Net Assets........................ 1.54% 1.43% 1.43% 1.34% 1.35% Ratio of Net Investment Income to Average Net Assets................ 4.21% 4.85% 7.34% 6.97% 6.48% Portfolio Turnover (b).............. 49% 36% 42% 36% 44%
(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 the 3% imposed on most shares accepted by the Fund for repurchase within the first year and declining to 0% after the fifth 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. (c) Based on average shares outstanding. 32 See Notes to Financial Statements Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
JUNE 13, 2003 (COMMENCEMENT OF INVESTMENT CLASS C SHARES OPERATIONS) TO JULY 31, 2003 (c) ----------------- NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 8.16 ------ Net Investment Income..................................... .04 Net Realized and Unrealized Gain.......................... .12 ------ Total from Investment Operations............................ .16 Less Distributions from Net Investment Income............... .03 ------ NET ASSET VALUE, END OF THE PERIOD.......................... $ 8.29 ====== Total Return (a)............................................ 2.02%* Net Assets at End of the Period (In millions)............... $246.1 Ratio of Gross Expenses to Average Net Assets............... 1.56% Ratio of Net Investment Income to Average Net Assets........ 3.89% Portfolio Turnover (b)...................................... 49%
* Non-annualized (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 the 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. (c) Based on average shares outstanding. See Notes to Financial Statements 33 NOTES TO FINANCIAL STATEMENTS July 31, 2003 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Senior Loan Fund (formerly, Van Kampen Prime Rate Income Trust) (the "Fund") is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The Fund invests primarily in adjustable rate Senior Loans. Senior Loans are business loans that have a senior right to payment and are made to borrowers that may be corporations, partnerships, or other entities. These borrowers operate in a variety of industries and geographic regions. The Fund commenced investment operations on October 4, 1989. In June 2003, the Fund completed a transaction in which it redesignated its shares issued before June 13, 2003 as Class B Shares and issued new Class C Shares to the shareholders of Van Kampen Senior Floating Rate Fund in exchange for the assets and liabilities of that fund. 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 Senior Loans 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 for which reliable market quotes are readily available are valued at the mean of such bid and ask quotes. Where reliable market quotes are not readily available, Senior Loans are valued, where possible, using independent market indicators provided by independent pricing sources approved by the Board of Trustees. Other Senior Loans are valued by independent pricing sources approved by the 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 redetermination period and maturity), the credit worthiness of the Borrower, the current interest rate, the period until the next interest rate redetermination and the maturity of such Senior Loans. 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 Loans in the Fund's portfolio. The fair value of Senior Loans are reviewed and approved by the Fund's Valuation Committee and Board of Trustees. Equity securities are valued on the basis of prices furnished by pricing services or at fair value 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. The Fund may invest in repurchase 34 NOTES TO FINANCIAL STATEMENTS July 31, 2003 agreements, which are short-term investments in which the Fund acquires ownership of a debt security and the seller agrees to repurchase the security at a future time and specified price. Repurchase agreements are fully collateralized by the underlying debt security. The Fund will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the custodian bank. The seller is required to maintain the value of the underlying security at not less than the repurchase proceeds due the Fund. B. SECURITY TRANSACTIONS Investment transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. C. INCOME AND EXPENSES Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Facility fees on senior loans purchased are treated as market discounts. Market premiums are amortized and discounts are accreted over the stated life of each applicable senior loan, note or other fixed-income security. Other income is comprised primarily of amendment fees which are recorded when received. Amendment fees are earned as compensation for agreeing to changes in loan agreements. Income, expenses and realized and unrealized gains or losses are allocated on a pro-rata basis to each class of shares except for service fees, which are applicable only to Class C shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At July 31, 2003, the Fund had an accumulated capital loss carryforward for tax purposes of $727,526,397, which will expire between July 31, 2004 and July 31, 2011. At July 31, 2003, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $2,553,716,266 ============== Gross tax unrealized appreciation........................... $ 42,518,730 Gross tax unrealized depreciation........................... (431,513,125) -------------- Net tax unrealized depreciation on investments.............. $ (388,994,395) ==============
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. 35 NOTES TO FINANCIAL STATEMENTS July 31, 2003 The tax character of distributions paid during the years ended July 31, 2003 and 2002 were as follows:
2003 2002 Distributions paid from: Ordinary income........................................... $81,734,653 $151,858,532 Return of Capital......................................... 7,501,943 -0- ----------- ------------ $89,236,596 $151,858,532 =========== ============
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under accounting principles generally accepted in the United States of America and federal income tax purposes, permanent differences between financial and tax basis reporting for the 2003 fiscal year have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Permanent differences relating to return of capital distributions totaling $7,501,943 were reclassified from accumulated undistributed net investment income to capital. Also, permanent differences relating to book to tax amortization differences totaling $21,719,457 were reclassified from accumulated undistributed net investment income to accumulated net realized loss. Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of the deferral of losses related to wash sale transactions, post October losses which may not be recognized for tax purposes until the first day of the following fiscal year, and losses that were recognized for book purposes but not for tax purposes at the end of the fiscal year. F. CREDITS EARNED ON CASH BALANCES During the year ended July 31, 2003, the Fund's custody fee was reduced by $101,748 as a result of credits earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, the Adviser will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $4.0 billion.......................................... .950% Next $3.5 billion........................................... .900% Next $2.5 billion........................................... .875% Over $10 billion............................................ .850%
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 daily 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 Senior Loans in the Fund's portfolio and providing certain services to the holders of the Fund's securities. 36 NOTES TO FINANCIAL STATEMENTS July 31, 2003 For the year ended July 31, 2003, the Fund recognized expenses of approximately $934,700 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 year ended July 31, 2003, the Fund recognized expenses of approximately $70,300 representing Van Kampen Investments Inc.'s or its affiliates (collectively "Van Kampen") cost of providing legal services to the Fund, which are reported as "Legal" expenses in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent of the Fund. For the year ended July 31, 2003, the Fund recognized expenses for these services of approximately $1,939,200 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. Certain officers and Trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or Trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its Trustees who are not officers of Van Kampen. Under the deferred compensation plan, Trustees may elect to defer all or a portion of their compensation to a later date. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each Trustee's years of service to the Fund. The maximum annual benefit per Trustee under the plan is $2,500. 37 NOTES TO FINANCIAL STATEMENTS July 31, 2003 During the period, the Fund owned shares of the following affiliated companies. Affiliated companies are defined by the Investment Company Act of 1940, as amended, as those companies in which a Fund holds 5% or more of the outstanding voting securities.
REALIZED INTEREST/ MARKET PAR/ GAIN/ DIVIDEND VALUE NAME SHARES* (LOSS) INCOME 7/31/03 COST American Blind & Wallpaper Factory, Inc.-- Term Loan...................... $ 1,048,652 $ 0 $ 164,729 $ 1,048,652 $ 1,048,652 Decorate Today.com--Common Shares.................... 198,600 0 0 2,125,020 3,505,909 Imperial Home Decor Group, Inc.--Common Shares....... 1,816,143 0 0 0 1,852,465 Imperial Home Decor Realty, Inc.--Common Shares....... 1,816,143 0 0 0 0 Imperial Home Decor Group, Inc.--Term Loan........... $ 5,044,842 0 177,723 126,121 5,015,112 Kindred Healthcare, Inc.-- Common Shares............. 1,033,585 0 0 24,764,697 29,967,875 Kindred Healthcare, Inc.-- Term Loan................. $22,205,934 0 1,539,557 21,983,875 20,589,617 London Fog Industries, Inc.--Common Shares....... 515,922 0 0 8,848,062 33,576,536 NATG Holdings, LLC--Term Loan...................... $ 7,405,983 (17,566,361) 472,418 1,919,327 2,422,870 NATG Holdings, LLC-- Revolver.................. $ 4,330,904 0 111,168 2,490,270 2,947,872 Orius Corp.--Common Shares.................... 1,211,236 0 0 0 0 Safelite Glass Corp.-- Common Shares............. 724,479 0 0 8,266,305 3,912,187 Safelite Glass Realty-- Common Shares............. 48,903 0 0 0 0 Safelite Glass Corp.--Term Loan...................... $17,889,124 150,487 737,388 17,620,787 17,844,359 Transworld Entertainment Corp.--Common Shares...... 3,789,962 0 0 22,550,274 69,498,017 United Fixtures Holdings, Inc.--Common & Preferred Shares.................... 249,830 0 0 0 535,486 United Fixtures Holdings, Inc.--Term Loan........... $ 3,395,671 0 166,320 2,003,446 3,395,671
* Shares were acquired through the restructuring of senior loan interests. 38 NOTES TO FINANCIAL STATEMENTS July 31, 2003 3. CAPITAL TRANSACTIONS At July 31, 2003, capital aggregated $2,991,737,259 and $415,924,634 for Classes B and C, respectively. For the year ended July 31, 2003, transactions were as follows:
SHARES VALUE Sales: Class B................................................... 1,819,593 $ 14,406,804 Class C................................................... 31,027,158 252,906,765 ----------- ------------- Total Sales................................................. 32,846,751 $ 267,313,569 =========== ============= Dividend Reinvestment: Class B................................................... 5,643,216 $ 44,419,861 Class C................................................... 54,622 450,230 ----------- ------------- Total Dividend Reinvestment................................. 5,697,838 $ 44,870,091 =========== ============= Repurchases: Class B................................................... (97,344,162) $(762,180,622) Class C................................................... (1,395,382) (11,525,882) ----------- ------------- Total Repurchases........................................... (98,739,544) $(773,706,504) =========== =============
At July 31, 2002, capital aggregated $3,702,593,159 and $0, for Classes B and C, respectively. For the year ended July 31, 2002, transactions in common shares were as follows:
SHARES VALUE Sales: Class B................................................. 3,382,131 $ 28,378,816 Class C................................................. -- -- ------------ --------------- Total Sales............................................... 3,382,131 $ 28,378,816 ============ =============== Dividend Reinvestment: Class B................................................. 8,743,854 $ 73,318,476 Class C................................................. -- -- ------------ --------------- Total Dividend Reinvestment............................... 8,743,854 $ 73,318,476 ============ =============== Repurchases: Class B................................................. (159,456,892) $(1,329,486,630) Class C................................................. -- -- ------------ --------------- Total Repurchases......................................... (159,456,892) $(1,329,486,630) ============ ===============
On June 13, 2003, the Fund acquired all of the assets and liabilities of the Van Kampen Senior Floating Rate Fund (the "VKSFR Fund") through a tax-free reorganization approved by VKSFR Fund shareholders on June 3, 2003. The Fund issued 30,644,607 shares of Class C valued at $249,753,514 in exchange for VKSFR Fund's net assets. Fund shares held prior to the acquisition were renamed Class B Shares. The shares of VKSFR Fund were converted into Class C shares at a ratio of 1.089 to 1. Included in these net assets was a capital loss 39 NOTES TO FINANCIAL STATEMENTS July 31, 2003 carryforward of $88,912,248, amortization differences of $49,259,549 and wash sales of $1,603, which is included in accumulated net realized loss. Also included in these net assets was a deferred compensation balance of $102,698 and non-accrual interest income of $667,659, which are included in accumulated undistributed net investment income. Net unrealized depreciation of VKSFR Fund as of June 13, 2003 was $35,149,764. Shares issued in connection with this reorganization are included in proceeds from shares sold for the year ended July 31, 2003. Combined net assets on the day of reorganization were $2,213,412,834. 4. INVESTMENT TRANSACTIONS During the period, the costs of purchases and proceeds from investments sold and repaid, excluding short-term investments, were $1,027,632,358 and $1,702,354,765, 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, 2003, 98,739,544 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 five years which are accepted by the Fund for repurchase pursuant to tender offers. The early withdrawal charge will be payable to Van Kampen. Any early withdrawal charge which is required to be imposed will be made in accordance with the following schedule.
WITHDRAWAL WITHDRAWAL CHARGE CHARGE ------------------------ YEAR OF REDEMPTION CLASS B CLASS C First....................................................... 3.0% 1.0% Second...................................................... 2.5% -- Third....................................................... 2.0% -- Fourth...................................................... 1.5% -- Fifth....................................................... 1.0% -- Sixth and following......................................... 0.0% --
For the year ended July 31, 2003, Van Kampen received early withdrawal charges of approximately $3,060,000, in connection with tendered shares of the Fund. 7. COMMITMENTS/BORROWINGS Pursuant to the terms of certain of the Senior Loan agreements, the Fund had unfunded loan commitments of approximately $31,991,200 as of July 31, 2003. The Fund intends to reserve against such contingent obligations by designating cash, liquid securities and liquid senior loans as a reserve. 40 NOTES TO FINANCIAL STATEMENTS July 31, 2003 The Fund 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 November 7, 2003. 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 .11% are charged on the unused portion of the credit line. For the year ended July 31, 2003, the Fund recognized commitment fee expenses of approximately $638,400. Borrowings under this facility will bear interest at either the LIBOR rate or the Federal Funds rate plus .50%. 8. SENIOR LOAN PARTICIPATION COMMITMENTS The Fund invests primarily in participations, assignments, or acts as a party to the primary lending syndicate of a 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, 2003, 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) Credit Suisse First Boston.................................. $1,196 $1,191 Goldman Sachs Credit Partners L.P. ......................... 738 722 ------ ------ Total....................................................... $1,934 $1,913 ====== ======
9. LITIGATION On September 28, 2001 and October 11, 2001, separate complaints were filed in the United States District Court for the Northern District of Illinois each by a shareholder of the Fund against the Fund, the Adviser, Van Kampen Funds Inc. and certain directors and officers of the Fund. The respective complaints, framed as class actions, allege misstatements and omissions in the Fund's registration statements in violation of the federal securities laws. The separate complaints were consolidated on or about December 15, 2001, and the class was certified on or about August 26, 2002. The consolidated action is entitled Abrams et al. v. Van Kampen Funds, Inc., et al., No. 01 C 7538 (N.D. Ill., Hart J.). 10. SERVICE PLAN For Class C, 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. 41 NOTES TO FINANCIAL STATEMENTS July 31, 2003 Annual fees under the Plan of .15% (.25% maximum) of average daily net assets are accrued daily and paid quarterly for Class C. Included in the fees for the year ended July 31, 2003, are payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $46,900. 42 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Trustees of Van Kampen Senior Loan Fund We have audited the accompanying statement of assets and liabilities of Van Kampen Senior Loan Fund (the "Fund"), including the portfolio of investments, as of July 31, 2003, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The Fund's 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 financial highlights. We conducted our audits 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, 2003, by correspondence with the Fund's custodian, brokers, and selling or agent banks; where replies were not received, we performed other auditing procedures. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Van Kampen Senior Loan Fund as of July 31, 2003, the results of its operations, cash flows, the changes in its net assets and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Chicago, Illinois September 4, 2003 43 VAN KAMPEN INVESTMENTS THE VAN KAMPEN FAMILY OF FUNDS Global/International Asian Equity** Emerging Markets European Value Equity Global Equity Allocation Global Franchise Global Value Equity International Advantage International Magnum Latin American** Worldwide High Income Growth Aggressive Growth American Value Emerging Growth Enterprise Equity Growth Focus Equity Growth Mid Cap Growth Pace Select Growth Small Cap Growth Small Cap Value Technology Growth and Income Comstock Equity and Income Growth and Income Harbor Real Estate Securities Utility Value Value Opportunities Income Corporate Bond Government Securities High Income Corporate Bond High Yield Limited Maturity Government U.S. Government Tax Free California Insured Tax Free High Yield Municipal* Insured Tax Free Income Intermediate Term Municipal Income Municipal Income New York Tax Free Income Pennsylvania Tax Free Income Strategic Municipal Income Capital Preservation Reserve Tax Free Money Senior Loan Senior Loan Fund For more complete information, including risk considerations, fees, sales charges and ongoing expenses, please contact your financial advisor for a prospectus. Please read it carefully before you invest or send money. To view a current Van Kampen fund prospectus or to receive additional fund information, choose from one of the following: - - visit our Web site at VANKAMPEN.COM-- to view a prospectus, select Download Fund Info (COMPUTER ICON) - - call us at (800) 847-2424 Telecommunications Device for the Deaf (TDD) users, call (800) 421-2833. (PHONE ICON) - - e-mail us by visiting VANKAMPEN.COM and selecting Contact Us (MAIL ICON) * Open to new investors for a limited time ** Closed to new investors. 44 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN SENIOR LOAN FUND BOARD OF TRUSTEES DAVID C. ARCH ROD DAMMEYER HOWARD J KERR THEODORE A. MYERS RICHARD F. POWERS, III* - Chairman HUGO F. SONNENSCHEIN WAYNE W. WHALEN * INVESTMENT ADVISER VAN KAMPEN INVESTMENT ADVISORY CORP. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. 45 TRUSTEES AND OFFICERS The business and affairs of the Fund are managed under the direction of the Fund's Board of Trustees and the Fund's officers appointed by the Board of Trustees. The tables below list the trustees and executive officers of the Trust and their principal occupations during the last five years, other directorships held by trustees and their affiliations, if any, with Van Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are referred to herein collectively as the "Advisers." The term "Fund Complex" includes each of the investment companies advised by the Advisers or their affiliates as of the date of this Statement of Additional Information. Trustees serve until reaching their retirement age or until their successors are duly elected and qualified. Officers are annually elected by the trustees. INDEPENDENT TRUSTEES
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE David C. Arch (58) Trustee Trustee Chairman and Chief 91 Trustee/Director/Managing Blistex Inc. since 1988 Executive Officer of General Partner of funds 1800 Swift Drive Blistex Inc., a consumer in the Fund Complex. Oak Brook, IL 60523 health care products manufacturer. Former Director of the World Presidents Organization-Chicago Chapter. Director of the Heartland Alliance, a nonprofit organization serving human needs based in Chicago.
46
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Rod Dammeyer (62) Trustee Trustee President of CAC, llc., a 91 Trustee/Director/Managing CAC, llc. since 1988 private company offering General Partner of funds 4350 LaJolla Village Drive capital investment and in the Fund Complex. Suite 980 management advisory Director of TeleTech San Diego, CA 92122-6223 services. Prior to July Holdings Inc., 2000, Managing Partner of Stericycle, Inc., Equity Group Corporate TheraSense, Inc., GATX Investment (EGI), a Corporation, Arris Group, company that makes Inc. and Trustee of the private investments in University of Chicago other companies. Hospitals and Health Systems. Prior to May 2002, Director of Peregrine Systems Inc. Prior to February 2001, Vice Chairman and Director of Anixter International, Inc. and IMC Global Inc. Prior to July 2000, Director of Allied Riser Communications Corp., Matria Healthcare Inc., Transmedia Networks, Inc., CNA Surety, Corp. and Grupo Azcarero Mexico (GAM). Prior to April 1999, Director of Metal Management, Inc. Howard J Kerr (67) Trustee Trustee Prior to 1998, President 91 Trustee/Director/Managing 736 North Western Avenue since 1992 and Chief Executive General Partner of funds P.O. Box 317 Officer of Pocklington in the Fund Complex. Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake investment holding Forest Bank & Trust. company. Director of the Marrow Foundation
47
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Theodore A. Myers (73) Trustee Trustee Financial consultant, 36 Director of Met Life 550 Washington Avenue since 1988 Trustee or Managing Investors (formerly knows Glencoe, IL 60022 General Partner of other as COVA Financial Life funds in the Closed-End Insurance). Prior to Fund Complex. Prior to 1997, Director of McLouth 1998, Senior Financial Steel. Advisor (and, prior to 1997, an Executive Vice President, Chief Financial Officer and Director) of Qualitech Steel Corporation, a producer of high quality engineered steels for automotive, transportation and capital goods industries. Prior to 1997, member of the Arthur Andersen Chief Financial Officers' Advisory Committee. Hugo F. Sonnenschein (62) Trustee Trustee President Emeritus and 91 Trustee/Director/Managing 1126 E. 59th Street since 1994 Honorary Trustee of the General Partner of funds Chicago, IL 60637 University of Chicago and in the Fund Complex. the Adam Smith Director of Winston Distinguished Service Laboratories, Inc. Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago. Trustee of the University of Rochester and a member of its investment committee. Member of the National Academy of Sciences, the American Philosophical Society and a fellow of the American Academy of Arts and Sciences.
48 INTERESTED TRUSTEES*
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (57) Trustee Trustee Advisory Director of 91 Trustee/Director/Managing 1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds P.O. Box 5555 December 2002, Chairman, in the Fund Complex. Oakbrook Terrace, IL 60181 Director, President, Chief Executive Officer and Managing Director of Van Kampen Investments and its investment advisory, distribution and other subsidiaries. Prior to December 2002, President and Chief Executive Officer of funds in the Fund Complex. Prior to May 1998, Executive Vice President and Director of Marketing at Morgan Stanley and Director of Dean Witter, Discover & Co. and Dean Witter Realty. Prior to 1996, Director of Dean Witter Reynolds Inc. Wayne W. Whalen* (64) Trustee Trustee Partner in the law firm 91 Trustee/Director/Managing 333 West Wacker Drive since 1988 of Skadden, Arps, Slate, General Partner of funds Chicago, IL 60606 Meagher & Flom in the Fund Complex. (Illinois), legal counsel to funds in the Fund Complex.
- --------------- * Such trustee is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain funds in the Fund Complex by reason of his firm currently acting as legal counsel to such funds in the Fund Complex. Messrs. Merin and Powers are interested persons of funds in the Fund Complex and the Advisers by reason of their current or former positions with Morgan Stanley or its affiliates. 49 OFFICERS
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS Stephen L. Boyd (62) Vice President Officer Managing Director of Global Research Investment Management. 2800 Post Oak Blvd. since 1998 Vice President of funds in the Fund Complex. Prior to 45th Floor December 2002, Chief Investment Officer of Van Kampen Houston, TX 77056 Investments and President and Chief Operations Officer of the Advisers and Van Kampen Advisors Inc. Prior to May 2002, Executive Vice President and Chief Investment Officer of funds in the Fund Complex. Prior to May 2001, Managing Director and Chief Investment Officer of Van Kampen Investments, and Managing Director and President of the Advisers and Van Kampen Advisors Inc. Prior to December 2000, Executive Vice President and Chief Investment Officer of Van Kampen Investments, and President and Chief Operating Officer of the Advisers. Prior to April 2000, Executive Vice President and Chief Investment Officer for Equity Investments of the Advisers. Prior to October 1998, Vice President and Senior Portfolio Manager with AIM Capital Management, Inc. Prior to February 1998, Senior Vice President and Portfolio Manager of Van Kampen American Capital Asset Management, Inc., Van Kampen American Capital Investment Advisory Corp. and Van Kampen American Capital Management, Inc. Stefanie V. Chang (36) Vice President Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas since 2003 Vice President of funds in the Fund Complex. New York, NY 10020 Joseph J. McAlinden (60) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment New York, NY 10020 Investment Officer Management Inc. and Morgan Stanley Investments LP and Director of Morgan Stanley Trust for over 5 years. Executive Vice President and Chief Investment Officer of funds in the Fund Complex. Managing Director and Chief Investment Officer of Van Kampen Investments, the Advisers and Van Kampen Advisors Inc. since December 2002. John R. Reynoldson (50) Vice President Officer Executive Director and Portfolio Specialist of the Advisers 1 Parkview Plaza since 2000 and Van Kampen Advisors Inc. Vice President of funds in the P.O. Box 5555 Fund Complex. Prior to July 2001, Principal and Co-head of Oakbrook Terrace, IL 60181 the Fixed Income Department of the Advisers and Van Kampen Advisors Inc. Prior to December 2000, Senior Vice President of the Advisers and Van Kampen Advisors Inc. Prior to May 2000, Senior Vice President of the investment grade taxable group for the Advisers. Prior to June 1999, Senior Vice President of the government securities bond group for Asset Management.
50
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS Ronald E. Robison (64) Executive Vice Officer Chief Executive Officer and Chairman of Investor Services. 1221 Avenue of the Americas President and since 2003 Executive Vice President and Principal Executive Officer of New York, NY 10020 Principal Executive funds in the Fund Complex. Chief Global Operations Officer Officer and Managing Director of Morgan Stanley Investment Management Inc. Managing Director of Morgan Stanley. Managing Director and Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Vice President of the Morgan Stanley Funds. A. Thomas Smith III (46) Vice President and Officer Managing Director of Morgan Stanley, Managing Director and 1221 Avenue of the Americas Secretary since 1999 Director of Van Kampen Investments, Director of the New York, NY 10020 Advisers, Van Kampen Advisors Inc., the Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Managing Director and General Counsel-Mutual Funds of Morgan Stanley Investment Advisors, Inc. Vice President and Secretary of funds in the Fund Complex. Prior to July 2001, Managing Director, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, the Distributor, Investor Services, and certain other subsidiaries of Van Kampen Investments. Prior to December 2000, Executive Vice President, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, Van Kampen Advisors Inc., the Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Prior to January 1999, Vice President and Associate General Counsel to New York Life Insurance Company ("New York Life"), and prior to March 1997, Associate General Counsel of New York Life. Prior to December 1993, Assistant General Counsel of The Dreyfus Corporation. Prior to August 1991, Senior Associate, Willkie Farr & Gallagher. Prior to January 1989, Staff Attorney at the Securities and Exchange Commission, Division of Investment Management, Office of Chief Counsel. John L. Sullivan (48) Vice President, Chief Officer Director and Managing Director of Van Kampen Investments, 1 Parkview Plaza Financial Officer and since 1996 the Advisers, Van Kampen Advisors Inc. and certain other P.O. Box 5555 Treasurer subsidiaries of Van Kampen Investments. Vice President, Oakbrook Terrace, IL 60181 Chief Financial Officer and Treasurer of funds in the Fund Complex. Head of Fund Accounting for Morgan Stanley Investment Management. Prior to December 2002, Executive Director of Van Kampen Investments, the Advisers and Van Kampen Advisors Inc. Howard Tiffen (55) Vice President Officer Managing Director of the Advisers and Van Kampen Advisors 1 Parkview Plaza since 2000 Inc. Vice President of the senior loan funds advised by the P.O. Box 5555 Adviser. Prior to 1999, senior portfolio manager for Pilgrim Oakbrook Terrace, IL 60181 Investments. Associate of the Chartered Institute of Bankers and a member of the Economic Club of Chicago.
51 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. The Statement of Additional Information includes additional information about Fund trustees and is available, without charge, upon request by calling (800) 847-2424. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2003 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 59 359 SLF ANR 9/03 12025I03-AP-9/03 Item 2. Code of Ethics. (a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) The Fund has amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (d) The Fund has granted a waiver or an implicit waiver from a provision of its Code of Ethics. (e) Not applicable. (f) (1) The Fund's Code of Ethics is attached hereto as Exhibit 10A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Fund's Board of Trustees has determined that it has one "audit committee financial expert" serving on its audit committee, each of whom is "independent" Trustee: Theodore A. Myers. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. Item 4. Principal Accountant Fees and Services. Applicable only for reports covering fiscal years ending on or after December 15, 2003. Item 5. Audit Committee of Listed Registrants. Applicable only for reports covering periods ending on or after the earlier of (i) the first annual shareholder meeting after January 15, 2004 or (ii) October 31, 2004. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. The Fund's and its investment advisor's Proxy Voting Policies and Procedures are as follows: MORGAN STANLEY INVESTMENT MANAGEMENT PROXY VOTING POLICY AND PROCEDURES I. POLICY STATEMENT Introduction - Morgan Stanley Investment Management's ("MSIM") policies and procedures for voting proxies with respect to securities held in the accounts of clients applies to those MSIM entities that provide discretionary Investment Management services and for which a MSIM entity has the authority to vote their proxies. The policies and procedures and general guidelines in this section will be reviewed and, as necessary, updated periodically to address new or revised proxy voting issues. The MSIM entities covered by these policies and procedures currently include the following: Morgan Stanley Investment Advisors Inc., Morgan Stanley Alternative Investment Partners, L.P., Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Group Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited, Morgan Stanley Investments LP, Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP, Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., and Van Kampen Advisors Inc. (each a "MSIM Affiliate" and collectively referred to as the "MSIM Affiliates"). Each MSIM Affiliate will vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (Van Kampen, Institutional and Advisor Funds) (collectively referred to as the "MSIM Funds"), each MSIM Fund will vote proxies pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by its Board of Directors or Trustees. A MSIM Affiliate will not vote proxies if the "named fiduciary" for an ERISA account has reserved the authority for itself, or in the case of an account not governed by ERISA, the Investment Management Agreement does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in a prudent and diligent manner, vote proxies in the best interests of clients, including beneficiaries of and participants in a client's benefit plan(s) for which we manage assets, consistent with the objective of maximizing long-term investment returns ("Client Proxy Standard"). In certain situations, a client or its fiduciary may provide a MSIM Affiliate with a statement of proxy voting policy. In these situations, the MSIM Affiliate will comply with the client's policy unless to do so would be inconsistent with applicable laws or regulations or the MSIM Affiliate's fiduciary responsibility. Proxy Research Services - To assist the MSIM Affiliates in their responsibility for voting proxies and the overall global proxy voting process, Institutional Shareholder Services ("ISS") and the Investor Responsibility Research Center ("IRRC") have been retained as experts in the proxy voting and corporate governance area. ISS and IRRC are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided to MSIM Affiliates include in-depth research, global issuer analysis, and voting recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping. MSIM's Proxy Review Committee (see Section IV.A. below) will carefully monitor and supervise the services provided by the proxy research services. Voting Proxies for certain Non-US Companies - While the proxy voting process is well established in the United States and other developed markets with a number of tools and services available to assist an investment manager, voting proxies of non-US companies located in certain jurisdictions, particularly emerging markets, may involve a number of problems that may restrict or prevent a MSIM Affiliate's ability to vote such proxies. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuer's jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person, (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi) requirements to provide local agents with power of attorney to facilitate the MSIM Affiliate's voting instructions. As a result, clients' non-U.S. proxies will be voted on a best efforts basis only, consistent with the Client Proxy Standard. ISS has been retained to provide assistance to the MSIM Affiliates in connection with voting their clients' non-US proxies. II. GENERAL PROXY VOTING GUIDELINES To ensure consistency in voting proxies on behalf of its clients, MSIM Affiliates will follow (subject to any exception set forth herein) these Proxy Voting Policies and Procedures, including the guidelines set forth below. These guidelines address a broad range of issues, including board size and composition, executive compensation, anti-takeover proposals, capital structure proposals and social responsibility issues and are meant to be general voting parameters on issues that arise most frequently. The MSIM Affiliates, however, may vote in a manner that is contrary to the following general guidelines, pursuant to the procedures set forth in Section IV. below, provided the vote is consistent with the Client Proxy Standard. III. GUIDELINES A. MANAGEMENT PROPOSALS 1. When voting on routine ballot items the following proposals are generally voted in support of management, subject to the review and approval of the Proxy Review Committee, as appropriate. - Selection or ratification of auditors. - Approval of financial statements, director and auditor reports. - Election of Directors. - Limiting Directors' liability and broadening indemnification of Directors. - Requirement that a certain percentage (up to 66 2/3%) of its Board's members be comprised of independent and unaffiliated Directors. - Requirement that members of the company's compensation, nominating and audit committees be comprised of independent or unaffiliated Directors. - Recommendations to set retirement ages or require specific levels of stock ownership by Directors. - General updating/corrective amendments to the charter. - Elimination of cumulative voting. - Elimination of preemptive rights. - Provisions for confidential voting and independent tabulation of voting results. - Proposals related to the conduct of the annual meeting except those proposals that relate to the "transaction of such other business which may come before the meeting." 2. The following non-routine proposals, which potentially may have a substantive financial or best interest impact on a shareholder, are generally voted in support of management, subject to the review and approval of the Proxy Review Committee, as appropriate. Capitalization changes - Capitalization changes that eliminate other classes of stock and voting rights. - Proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if: (i) a clear and legitimate business purpose is stated; (ii) the number of shares requested is reasonable in relation to the purpose for which authorization is requested; and (iii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the new authorization will be outstanding. - Proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital. - Proposals for share repurchase plans. - Proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock. - Proposals to effect stock splits. - Proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount will generally be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases. Compensation - Director fees, provided the amounts are not excessive relative to other companies in the country or industry. - Employee stock purchase plans that permit discounts up to 15%, but only for grants that are part of a broad based employee plan, including all non-executive employees. - Establishment of Employee Stock Option Plans and other employee ownership plans. Anti-Takeover Matters - Modify or rescind existing supermajority vote requirements to amend the charters or bylaws. - Adoption of anti-greenmail provisions provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders. 3. The following non-routine proposals, which potentially may have a substantive financial or best interest impact on the shareholder, are generally voted against (notwithstanding management support), subject to the review and approval of the Proxy Review Committee, as appropriate. - Capitalization changes that add classes of stock which substantially dilute the voting interests of existing shareholders. - Proposals to increase the authorized number of shares of existing classes of stock that carry preemptive rights or supervoting rights. - Creation of "blank check" preferred stock. - Changes in capitalization by 100% or more. - Compensation proposals that allow for discounted stock options that have not been offered to employees in general. - Amendments to bylaws that would require a supermajority shareholder vote to pass or repeal certain provisions. - Proposals to indemnify auditors. 4. The following types of non-routine proposals, which potentially may have a potential financial or best interest impact on an issuer, are voted as determined by the Proxy Review Committee. Corporate Transactions - Mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) will be examined on a case-by-case basis. In all cases, ISS and IRRC research and analysis will be used along with MSIM Affiliates' research and analysis, based on, among other things, MSIM internal company-specific knowledge. - Change-in-control provisions in non-salary compensation plans, employment contracts, and severance agreements that benefit management and would be costly to shareholders if triggered. - Shareholders rights plans that allow appropriate offers to shareholders to be blocked by the board or trigger provisions that prevent legitimate offers from proceeding. - Executive/Director stock option plans. Generally, stock option plans should meet the following criteria: (i) Whether the stock option plan is incentive based; (ii) For mature companies, should be no more than 5% of the issued capital at the time of approval; (iii) For growth companies, should be no more than 10% of the issued capital at the time of approval. Anti-Takeover Provisions - Proposals requiring shareholder ratification of poison pills. - Anti-takeover and related provisions that serve to prevent the majority of shareholders from exercising their rights or effectively deter the appropriate tender offers and other offers. B. SHAREHOLDER PROPOSALS 1. The following shareholder proposals are generally supported, subject to the review and approval of the Proxy Review Committee, as appropriate: - Requiring auditors to attend the annual meeting of shareholders. - Requirement that members of the company's compensation, nominating and audit committees be comprised of independent or unaffiliated Directors. - Requirement that a certain percentage of its Board's members be comprised of independent and unaffiliated Directors. - Confidential voting. - Reduction or elimination of supermajority vote requirements. 2. The following shareholder proposals will be voted as determined by the Proxy Review Committee. - Proposals that limit tenure of directors. - Proposals to limit golden parachutes. - Proposals requiring directors to own large amounts of stock to be eligible for election. - Restoring cumulative voting in the election of directors. - Proposals that request or require disclosure of executive compensation in addition to the disclosure required by the Securities and Exchange Commission ("SEC") regulations. - Proposals that limit retirement benefits or executive compensation. - Requiring shareholder approval for bylaw or charter amendments. - Requiring shareholder approval for shareholder rights plan or poison pill. - Requiring shareholder approval of golden parachutes. - Elimination of certain anti-takeover related provisions. - Prohibit payment of greenmail. 3. The following shareholder proposals are generally not supported, subject to the review and approval of the Committee, as appropriate. - Requirements that the issuer prepare reports that are costly to provide or that would require duplicative efforts or expenditures that are of a non-business nature or would provide no pertinent information from the perspective of institutional shareholders. - Restrictions related to social, political or special interest issues that impact the ability of the company to do business or be competitive and that have a significant financial or best interest impact to the shareholders. - Proposals that require inappropriate endorsements or corporate actions. IV. ADMINISTRATION OF PROXY POLICIES AND PROCEDURES A. PROXY REVIEW COMMITTEE 1. The MSIM Proxy Review Committee ("Committee") is responsible for creating and implementing MSIM's Proxy Voting Policy and Procedures and, in this regard, has expressly adopted them. Following are some of the functions and responsibilities of the Committee. (a) The Committee, which will consist of members designated by MSIM's Chief Investment Officer, is responsible for establishing MSIM's proxy voting policies and guidelines and determining how MSIM will vote proxies on an ongoing basis. (b) The Committee will periodically review and have the authority to amend as necessary MSIM's proxy voting policies and guidelines (as expressed in these Proxy Voting Policy and Procedures) and establish and direct voting positions consistent with the Client Proxy Standard. (c) The Committee will meet at least monthly to (among other matters): (1) address any outstanding issues relating to MSIM's Proxy Voting Policy and Procedures; and (2) generally review proposals at upcoming shareholder meetings of MSIM portfolio companies in accordance with this Policy and Procedures including, as appropriate, the voting results of prior shareholder meetings of the same issuer where a similar proposal was presented to shareholders. The Committee, or its designee, will timely communicate to ISS MSIM's Proxy Voting Policy and Procedures (and any amendments to them and/or any additional guidelines or procedures it may adopt). (d) The Committee will meet on an ad hoc basis to (among other matters): (1) authorize "split voting" (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or "override voting" (i.e., voting all MSIM portfolio shares in a manner contrary to the Procedures); (2) review and approve upcoming votes, as appropriate, for matters for which specific direction has been provided in Sections I, II, and III above; and (3) determine how to vote matters for which specific direction has not been provided in Sections I, II and III above. Split votes will generally not be approved within a single Global Investor Group team. The Committee may take into account ISS recommendations and the research provided by IRRC as well as any other relevant information they may request or receive. (e) In addition to the procedures discussed above, if the Committee determines that an issue raises a potential material conflict of interest, or gives rise to the appearance of a potential material conflict of interest, the Committee will designate a special committee to review, and recommend a course of action with respect to, the conflict(s) in question ("Special Committee"). The Special Committee may request the assistance of the Law and Compliance Departments and will have sole discretion to cast a vote. In addition to the research provided by ISS and IRRC, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate. (f) The Committee and the Special Committee, or their designee(s), will document in writing all of their decisions and actions, which documentation will be maintained by the Committee and the Special Committee, or their designee(s) for a period of at least 6 years. To the extent these decisions relate to a security held by a MSIM U.S. registered investment company, the Committee and Special Committee, or their designee(s), will report their decisions to each applicable Board of Trustees/Directors of those investment companies at each Board's next regularly Scheduled Board meeting. The report will contain information concerning decisions made by the Committee and Special Committee during the most recently ended calendar quarter immediately preceding the Board meeting. (g) The Committee and Special Committee, or their designee(s), will timely communicate to applicable PMs, the Compliance Departments and, as necessary to ISS, decisions of the Committee and Special Committee so that, among other things, ISS will vote proxies consistent with their decisions. Item 8. [Reserved.] Item 9. Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) VAN KAMPEN SENIOR LOAN FUND -------------------------------------------------------------------- By: /s/ Ronald E. Robison ----------------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: September 22, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison ----------------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: September 22, 2003 By: /s/ John L. Sullivan ----------------------------------------------------------------------------- Name: John L. Sullivan Title: Principal Financial Officer Date: September 22, 2003 EX-99.CODEETH 3 c79353exv99wcodeeth.txt CODE OF ETHICS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS ADOPTED JULY 23, 2003 I. This Code of Ethics (the "Code") for the investment companies within the Van Kampen complex identified in Exhibit A (collectively, "Funds" and each, a "Fund") applies to each Fund's Principal Executive Officer, President, Principal Financial Officer and Treasurer (or persons performing similar functions) ("Covered Officers" each of whom are set forth in Exhibit B) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. - full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; - compliance with applicable laws and governmental rules and regulations; - prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Any question about the application of the Code should be referred to the General Counsel or his/her designee (who is set forth in Exhibit C). II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes, or appears to interfere, with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" (as defined in the Investment Company Act) of the Fund. The Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside the parameters of this Code, unless or until the General Counsel determines that any violation of such programs and procedures is also a violation of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Fund and its investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Fund and its investment adviser. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors/Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. Each Covered Officer must not: - use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly) to the detriment of the Fund; - cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or - use material non-public knowledge of portfolio transactions made or contemplated for, or actions proposed to be taken by, the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. Each Covered Officer must, at the time of signing this Code, report to the General Counsel all affiliations or significant business relationships outside the Morgan Stanley complex and must update the report annually. Conflict of interest situations should always be approved by the General Counsel and communicated to the relevant Fund or Fund's Board. Any activity or relationship that would present such a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if an immediate member of the Covered Officer's family living in the same household engages in such an activity or has such a relationship. Examples of these include: - service or significant business relationships as a director on the board of any public or private company; - accepting directly or indirectly, anything of value, including gifts and gratuities in excess of $100 per year from any person or entity with which the Fund has current or prospective business dealings, not including occasional meals or tickets for theatre or sporting events or other similar entertainment; provided it is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, principal underwriter, or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer should familiarize himself/herself with the disclosure and compliance requirements generally applicable to the Funds; - each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Directors/Trustees and auditors, or to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and their investment advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he has received, read and understands the Code; - annually thereafter affirm to the Boards that he has complied with the requirements of the Code; - not retaliate against any other Covered Officer, other officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and - notify the General Counsel promptly if he/she knows or suspects of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers(1) sought by a Covered Officer must be considered by the Board of the relevant Fund or Funds. The Funds will follow these procedures in investigating and enforcing this Code: - the General Counsel will take all appropriate action to investigate any potential violations reported to him; - if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; - any matter that the General Counsel believes is a violation will be reported to the relevant Fund's Audit Committee; - if the directors/trustees/managing general partners who are not "interested persons" as defined by the Investment Company Act (the "Independent Directors/Trustees/Managing General Partners") of the relevant Fund concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer or other appropriate disciplinary actions; - the Independent Directors/Trustees/Managing General Partners of the relevant Fund will be responsible for granting waivers of this Code, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of - ----------------- (1) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics." the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code unless any provision of this Code conflicts with any applicable federal or state law, in which case the requirements of such law will govern. The Funds' and their investment advisers' and principal underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and Morgan Stanley's Code of Ethics are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibits A, B or C, must be approved or ratified by a majority vote of the Board of each Fund, including a majority of Independent Directors/Trustees/Managing General Partners. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Independent Directors/Trustees/Managing General Partners of the relevant Fund or Funds and their counsel, the relevant Fund or Funds and their counsel and the relevant investment adviser and its counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion I have read and understand the terms of the above Code. I recognize the responsibilities and obligations incurred by me as a result of my being subject to the Code. I hereby agree to abide by the above Code. - ---------------------------- Date: ----------------------- EXHIBIT A FUND LIST Van Kampen Series Fund, Inc. on behalf of its series Van Kampen American Value Fund Van Kampen Asian Equity Fund Van Kampen Emerging Markets Debt Fund Van Kampen Emerging Markets Fund Van Kampen Equity Growth Fund Van Kampen European Value Equity Fund Van Kampen Focus Equity Fund Van Kampen Global Equity Allocation Fund Van Kampen Global Value Equity Fund Van Kampen Growth and Income Fund II Van Kampen International Magnum Fund Van Kampen Japanese Equity Fund Van Kampen Latin American Fund Van Kampen Mid Cap Growth Fund Van Kampen Global Franchise Fund Van Kampen Value Fund Van Kampen Worldwide High Income Fund Van Kampen U.S. Government Trust on behalf of its series Van Kampen U.S. Government Fund Van Kampen Tax Free Trust on behalf of its series Van Kampen Insured Tax Free Income Fund Van Kampen Strategic Municipal Income Fund Van Kampen California Insured Tax Free Fund Van Kampen Municipal Income Fund Van Kampen Intermediate Term Municipal Income Fund Van Kampen New York Tax Free Income Fund Van Kampen California Municipal Income Fund Van Kampen Michigan Tax Free Income Fund Van Kampen Missouri Tax Free Income Fund Van Kampen Ohio Tax Free Income Fund Van Kampen Trust on behalf of its series Van Kampen High Yield Fund Van Kampen Managed Short Term Income Fund Van Kampen Equity Trust on behalf of its series Van Kampen Utility Fund Van Kampen Growth Fund Van Kampen Aggressive Growth Fund Van Kampen Small Cap Value Fund Van Kampen Select Growth Fund Van Kampen Small Company Growth Fund Van Kampen Small Cap Growth Fund Van Kampen Value Opportunities Fund Van Kampen Tax-Exempt Trust on behalf of its Series Van Kampen High Yield Municipal Fund EXHIBIT A (CONT.) FUND LIST Van Kampen Equity Trust II on behalf of its Series Van Kampen Tax Managed Equity Growth Fund Van Kampen Technology Fund Van Kampen International Advantage Van Kampen Pennsylvania Tax Free Income Fund Van Kampen Tax Free Money Fund Van Kampen Comstock Fund Van Kampen Corporate Bond Fund Van Kampen Emerging Growth Fund Van Kampen Enterprise Fund Van Kampen Equity Income Fund Van Kampen Government Securities Fund Van Kampen Growth and Income Fund Van Kampen Harbor Fund Van Kampen High Income Corporate Bond Fund Van Kampen Limited Maturity Government Fund Van Kampen Pace Fund Van Kampen Real Estate Securities Fund Van Kampen Reserve Fund Van Kampen Exchange Fund Van Kampen Life Investment Trust on behalf of its Portfolios Aggressive Growth Portfolio Comstock Portfolio Emerging Growth Portfolio Enterprise Portfolio Government Portfolio Growth and Income Portfolio Money Market Portfolio Van Kampen Municipal Income Trust Van Kampen California Municipal Trust Van Kampen High Income Trust Van Kampen High Income Trust II Van Kampen Investment Grade Municipal Trust Van Kampen Municipal Trust Van Kampen California Quality Municipal Trust Van Kampen Florida Quality Municipal Trust Van Kampen New York Quality Municipal Trust Van Kampen Ohio Quality Municipal Trust Van Kampen Pennsylvania Quality Municipal Trust Van Kampen Trust for Insured Municipals Van Kampen Trust for Investment Grade Municipals Van Kampen Trust for Investment Grade California Municipals Van Kampen Trust for Investment Grade Florida Municipals Van Kampen Trust for Investment Grade New Jersey Municipals Van Kampen Trust for Investment Grade New York Municipals Van Kampen Trust for Investment Grade Pennsylvania Municipals Van Kampen Municipal Opportunity Trust Van Kampen Advantage Municipal Income Trust Van Kampen Advantage Pennsylvania Municipal Income Trust Van Kampen Strategic Sector Municipal Trust EXHIBIT A (CONT.) FUND LIST Van Kampen Value Municipal Income Trust Van Kampen California Value Municipal Income Trust Van Kampen Massachusetts Value Municipal Income Trust Van Kampen New York Value Municipal Income Trust Van Kampen Ohio Value Municipal Income Trust Van Kampen Pennsylvania Value Municipal Income Trust Van Kampen Municipal Opportunity Trust II Van Kampen Advantage Municipal Income Trust II Van Kampen Select Sector Municipal Trust Van Kampen Senior Loan Fund Van Kampen Senior Income Trust Van Kampen Bond Fund Van Kampen Income Trust EXHIBIT B COVERED OFFICERS Mitchell M. Merin -- President Ronald E. Robison -- Executive Vice President and Principal Executive Officer John L. Sullivan -- Vice President, Chief Financial Officer and Treasurer EXHIBIT C GENERAL COUNSEL'S DESIGNEE A. Thomas Smith III EX-99.CERT 4 c79353exv99wcert.txt CERTIFICATIONS OF PEO AND PFO I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Senior Loan Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 22, 2003 /s/ Ronald E. Robison -------------------------------- Principal Executive Officer I, John L. Sullivan, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Senior Loan Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 22, 2003 /s/ John L. Sullivan ---------------------------------------- Principal Financial Officer EX-99.906CERT 5 c79353exv99w906cert.txt SECTION 906 CERTIFICATIONS Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Senior Loan Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended July 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: September 22, 2003 /s/ Ronald E. Robison ---------------------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Senior Loan Fund and will be retained by Van Kampen Senior Loan Fund and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Senior Loan Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended July 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: September 22, 2003 /s/ John L. Sullivan ---------------------------------- John L. Sullivan Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Senior Loan Fund and will be retained by Van Kampen Senior Loan Fund and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. -----END PRIVACY-ENHANCED MESSAGE-----