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
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 7/31
Date of reporting period: 7/31/04
Item 1. Report to Shareholders.
The Fund's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Senior Loan Fund performed during the annual period. The portfolio
management team will provide an overview of the market conditions and
discuss some of the factors that affected investment performance during
the reporting period. In addition, this report includes the fund's
financial statements and a list of fund investments as of July 31, 2004.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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
THAT THE VALUE OF THE FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU
PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND.
AN INVESTMENT IN SENIOR LOANS IS SUBJECT TO CERTAIN RISKS SUCH AS LOAN
DEFAULTS AND ILLIQUIDITY DUE TO INSUFFICIENT COLLATERAL BACKING.
<Table>
<Caption>
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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</Table>
Performance Summary as of 7/31/04
Current Distribution (July 31, 1994--July 31, 2004)
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND 3-MONTH TREASURY BILL*
--------------------------- ----------------------
7/94 6.50 4.40
6.50 4.71
6.81 4.83
7.00 5.21
7.00 5.79
7.58 5.76
7.58 6.08
8.04 6.02
8.03 5.95
8.03 5.94
8.02 5.88
8.01 5.64
7/95 8.01 5.65
8.01 5.51
8.02 5.48
8.02 5.58
8.03 5.56
8.04 5.14
7.54 5.11
7.31 5.09
7.25 5.20
7.12 5.22
6.94 5.24
6.80 5.22
7/96 6.80 5.37
6.80 5.35
7.01 5.09
7.01 5.21
7.01 5.19
7.02 5.23
7.02 5.21
7.02 5.28
7.03 5.39
7.03 5.30
7.03 5.00
7.03 5.23
7/97 6.88 5.30
6.80 5.28
6.79 5.16
6.80 5.26
6.79 5.26
6.79 5.41
6.79 5.24
6.78 5.38
6.79 5.18
6.79 5.03
6.79 5.07
6.77 5.14
7/98 6.79 5.13
6.81 4.88
6.82 4.40
6.48 4.36
6.18 4.53
6.20 4.50
6.21 4.50
6.20 4.72
6.21 4.52
6.20 4.58
6.22 4.68
6.44 4.83
7/99 6.48 4.80
6.55 5.02
6.56 4.91
6.58 5.15
6.59 5.37
6.59 5.39
6.91 5.77
6.96 5.86
7.14 5.95
7.23 5.91
7.25 5.69
7.51 5.94
7/00 7.57 6.31
7.60 6.40
7.98 6.30
8.31 6.49
8.40 6.29
8.53 5.98
8.63 5.05
8.74 4.91
8.09 4.33
7.20 3.92
6.75 3.64
6.54 3.68
7/01 6.29 3.55
5.97 3.39
5.80 2.38
5.28 2.02
4.71 1.73
4.47 1.73
4.19 1.76
3.97 1.76
3.93 1.78
3.90 1.77
3.92 1.73
3.95 1.69
7/02 4.15 1.70
4.32 1.68
4.33 1.55
4.48 1.45
4.48 1.21
4.25 1.19
4.09 1.17
4.11 1.19
4.10 1.11
3.81 1.11
3.75 1.10
3.67 0.85
7/03 3.54 0.94
3.36 0.97
3.33 0.94
3.29 0.95
3.24 0.93
3.23 0.92
3.19 0.91
3.08 0.94
3.06 0.94
2.98 0.96
2.98 1.06
2.96 1.26
7/04 2.96 1.43
</Table>
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
<Table>
<Caption>
B SHARES C SHARES
since 10/04/1989 since 06/13/2003
- ------------------------------------------------------------------------------------------
W/MAX W/MAX
3.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE
Since Inception 6.05% 6.05% 12.48% 12.48%
10-year 5.17 5.17 -- --
5-year 3.47 3.32 -- --
1-year 12.03 9.03 11.86 10.86
- ------------------------------------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN TENDERED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
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.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED JULY 31, 2004
Van Kampen Senior Loan Fund is managed by the Adviser's Senior Loans team, led
by Howard Tiffen, Managing Director of the Adviser.(1)
MARKET OVERVIEW
The fiscal year ended July 31, 2004 was a highly favorable period for the
senior-loan market. Strong fundamental factors worked in the market's favor:
Gross Domestic Product (GDP) growth topped 4 percent at an annual rate for three
of the last four calendar quarters, inflation remained in check, and interest
rates finally began to rise in early 2004. As the economy continued to improve,
so too did corporate financial performance. Over the past few years, companies
have had to become much more efficient in order to thrive in an era of lower
prices and greater competition. Companies' gains in efficiency have led to
considerable operating leverage, which has helped boost profits. These factors,
coupled with improving credit quality and rising productivity, all contributed
to the senior loan market's strong performance during the period.
Yield spreads in the senior-loan market (the yield differential between senior
loans and short-term lending rates, such as LIBOR) continued to contract,
reaching near-historic lows by the end of the reporting period. This narrowing
of spreads enabled more companies to access the senior-loan market at very
favorable terms. At the same time, demand for and inflows into senior loans
continued to rise, particularly from institutional investors, as the asset class
has gained growing recognition as a defensive investment. Significantly lower
default rates also added to the attractiveness of the senior-loan market. As a
result, investors readily absorbed the record amounts of new issues that came to
market during the period, and demand and supply remained in equilibrium.
PERFORMANCE ANALYSIS
The fund returned 12.03 percent for the 12-month period ended July 31, 2004
(Class B shares unadjusted for sales charges).
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JULY 31, 2004
<Table>
<Caption>
- --------------------------------------------------------------------------------
CLASS B CLASS C
12.03% 11.86%
- --------------------------------------------------------------------------------
</Table>
The performance for the two share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information.
(1)Team members may change without notice at any time.
2
We believe that the fund's strong performance is the result, in part, of our
successfully working through the more challenging credits of the past--a process
that can take up to two years to complete. It is also a reflection of our
larger, experienced team of analysts and the thorough fundamental research they
conduct, which we believe has led to better investment decisions. We continue to
focus on identifying those companies that exhibit strong management, solid and
predictable cash flows, and collateral that is sufficient to provide a healthy
"second way out." This bottom-up security-selection process resulted in an
emphasis on the cable, printing and publishing, and health-care sectors during
the reporting period. We also identified some attractive opportunities in
telecommunications, and we added slightly to the portfolio's holdings in this
sector. The fund's allocation to hotels, motels and gaming also increased during
the reporting period. This industry has been strong this year as consumers are
generally traveling and spending more, and our analysis identified issuers that
offered compelling returns with strong asset coverage.
In an effort to limit risk, we continued to keep the fund broadly diversified,
which helps enhance the portfolio's defensive characteristics. In addition,
while we do not practice sector selection, we do avoid certain industries that
have historically been poor performers in the senior-loan arena, such as fashion
and retail.
Looking ahead, while growth in corporate profits may level off, we believe that
absolute profitability and pricing power are likely to remain strong and that
companies will be able to continue to generate free cash-flow. For these
reasons, we believe the environment for senior loans should continue to be quite
favorable in the coming months. We will continue with our disciplined investment
approach, seeking a relatively stable net asset value for the fund and
attractive yields.
3
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 07/31/04
INDUSTRY PERCENT OF NET ASSETS
Hotels, Motels, Inns & Gaming 7.8%
Entertainment and Leisure 7.4
Chemicals, Plastics, & Rubber 6.6
Printing & Publishing 6.4
Broadcasting--Cable 6.1
Beverage, Food, & Tobacco 5.7
Automotive 5.4
Containers, Packaging & Glass 5.0
Telecommunications--Wireless 4.3
Healthcare 4.0
Ecological 2.3
Retail--Stores 2.3
Electronics 2.2
Medical Products & Services 2.2
Utilities 2.0
Buildings & Real Estate 1.9
Natural Resources 1.9
Aerospace/Defense 1.8
Finance 1.7
Construction Material 1.6
Diversified Manufacturing 1.6
Home & Office Furnishings, Housewares & Durable Consumer
Products 1.4
Mining, Steel, Iron & Non-Precious Metals 1.4
Personal & Misc Services 1.4
Healthcare & Beauty 1.2
Telecommunications--Local Exchange Carriers 1.2
Transportation--Personal 1.2
Insurance 1.1
Retail--Oil & Gas 1.1
Business Equipment 0.9
Non-Durable Consumer Products 0.8
Retail--Specialty 0.8
Transportation--Cargo 0.8
Machinery 0.6
Broadcasting--Radio 0.5
Pharmaceuticals 0.5
Telecommunications--Long Distance 0.5
Broadcasting--Diversified 0.3
Farming & Agriculture 0.3
Grocery 0.3
Transportation--Rail Manufacturing 0.1
--------
Total Long-Term Investments 96.6%
Short-Term Investments 4.7
Liabilities in Excess of Other Assets (1.3)
========
Total Net Assets 100.0%
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. All percentages are as a percentage of
net assets. Van Kampen is a wholly owned subsidiary of a global securities firm
which is engaged in a wide range of financial services including, for example,
securities trading and brokerage activities, investment banking, research and
analysis, financing and financial advisory services.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings in its
semiannual and annual reports within 60 days of the end of the fund's second and
fourth fiscal quarters by filing the schedule electronically with the Securities
and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS
and the annual reports are filed on Form N-CSR. Van Kampen also delivers the
semiannual and annual reports to fund shareholders, and makes these reports
available on its public web site, www.vankampen.com. In addition to the
semiannual and annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public web site, each fund files a complete
schedule of portfolio holdings with the SEC for the fund's first and third
fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the
first and third fiscal quarters to shareholders, nor are the reports posted to
the Van Kampen public web site. You may, however, obtain the Form N-Q filings
(as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the SEC's
Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. You
can also request copies of these materials, upon payment of a duplicating fee,
by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by
writing the Public Reference section of the SEC, Washington, DC 20549-0102.
In addition to filing a complete schedule of portfolio holdings with the SEC
each fiscal quarter, each Van Kampen fund makes portfolio holdings information
available by periodically providing the information on its public web site,
www.vankampen.com. Each Van Kampen fund provides a complete schedule of
portfolio holdings on the public web site on a calendar-quarter basis
approximately 30 days after the close of the calendar quarter. Furthermore, each
Van Kampen fund provides partial lists of its portfolio holdings (such as top 10
or top 15 fund holdings) to the public web site each with a delay of
approximately 15 days.
You may obtain copies of a fund's fiscal quarter filings, or its monthly or
calendar-quarter web site postings, by contacting Van Kampen Client Relations at
1-800-847-2424.
5
ANNUAL HOUSEHOLDING NOTICE
To reduce fund 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 prospectuses
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 AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by calling 1-800-847-2424 or by visiting our web site at
www.vankampen.com. This information is also available on the Securities
and Exchange Commission's web site at http://www.sec.gov.
6
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
VARIABLE RATE** SENIOR LOAN INTERESTS 90.4%
AEROSPACE/DEFENSE 1.8%
$ 2,494 ARINC, Inc., Term Loan........ Ba3 BB 03/10/11 $ 2,528,039
1,995 CACI International, Inc., Term
Loan.......................... Ba2 BB 05/03/11 2,004,975
2,804 ILC Industries, Inc., Term
Loan.......................... NR NR 08/05/10 2,853,379
21,298 The Titan Corp., Term Loan.... Ba3 BB- 06/30/09 21,409,083
1,604 The Titan Corp., Revolving
Credit Agreement.............. Ba3 BB- 05/23/08 1,567,513
1,493 Transdigm, Inc., Term Loan.... B1 B+ 07/22/10 1,513,731
4,238 Vought Aircraft Industries,
Inc., Term Loan............... Ba3 B+ 12/31/06 to 06/30/08 4,284,696
--------------
36,161,416
--------------
AUTOMOTIVE 5.1%
1,844 AMCAN Consolidate
Technologies, Inc., Term
Loan.......................... NR NR 03/28/07 1,576,873
4,772 Citation Corp., Term Loan
(a)........................... NR B- 12/01/05 to 12/01/07 4,229,208
955 Eagle Picher Industries, Term
Loan.......................... B2 B+ 08/07/09 963,492
29,571 Federal-Mogul Corp., Term Loan
(b)........................... NR NR 02/05/05 to 02/24/05 29,373,027
8,742 Federal-Mogul Corp., Revolving
Credit Agreement (b).......... NR NR 02/05/05 8,719,724
11,329 Goodyear Tire & Rubber Co.,
Term Loan..................... B1 BB 03/31/06 11,502,223
9,950 MetoKote Corp., Term Loan..... B1 B+ 08/13/10 10,099,250
3,200 Polypore, Inc., Term Loan..... B1 B+ 11/12/11 3,258,000
17,889 Safelite Glass Corp., Term
Loan (c)...................... NR NR 09/30/07 17,218,281
3,482 Tenneco Automotive, Inc., Term
Loan.......................... B1 B+ 12/12/10 3,551,426
7,109 ThermaSys Corp., Term Loan
(d)........................... NR NR 08/25/07 3,518,865
6,464 TRW Automotive, Inc. Term
Loan.......................... Ba2 BB+ 02/28/09 to 02/28/11 6,574,222
2,142 United Components, Inc., Term
Loan.......................... B1 BB- 06/30/10 2,172,453
--------------
102,757,044
--------------
BEVERAGE, FOOD & TOBACCO 5.6%
9,739 B & G Foods, Inc., Term
Loan.......................... B1 B 08/31/09 9,811,948
8,673 Birds Eye Foods, Inc., Term
Loan.......................... B1 B+ 06/30/08 8,790,895
4,938 Burns Philp, Inc., Term
Loan.......................... B1 B+ 02/20/09 5,005,391
3,820 Commonwealth Brands, Inc.,
Term Loan..................... NR NR 08/28/07 3,887,192
</Table>
See Notes to Financial Statements 7
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 1,250 Constellation Brands, Inc.,
Term Loan..................... Ba1 BB 11/30/08 $ 1,269,420
2,444 Del Monte Corp., Term Loan.... Ba3 BB- 12/20/10 2,482,888
8,007 Doane Pet Care Co., Term
Loan.......................... B1 B- 03/31/05 to 12/29/06 8,059,620
488 Doane Pet Care Co., Revolving
Credit Agreement.............. B1 B- 12/29/05 474,653
9,678 Dole Food Co., Inc., Term
Loan.......................... Ba3 BB 09/28/08 to 07/21/10 9,756,367
7,800 DS Waters Enterprises, LP,
Term Loan..................... B1 B+ 11/07/09 7,704,941
7,873 Land O' Lakes, Inc., Term
Loan.......................... B1 B+ 10/10/08 8,012,655
4,988 Luigino's, Inc., Term Loan.... B1 B+ 04/02/11 5,068,547
2,110 Mafco Worldwide Corp., Term
Loan.......................... NR NR 03/31/06 2,088,724
5,970 Michael Foods, Inc., Term
Loan.......................... B1 B+ 11/21/10 6,068,881
3,000 Pierre Foods, Inc., Term
Loan.......................... B1 B+ 06/30/10 3,038,439
24,938 Pinnacle Foods, Inc., Term
Loan.......................... B1 BB- 11/25/10 25,303,782
2,731 Southern Wine & Spirits of
America, Inc., Term Loan...... NR NR 07/02/08 2,764,388
4,941 Swift & Co., Term Loan........ Ba2 BB 09/19/08 4,978,458
--------------
114,567,189
--------------
BROADCASTING--CABLE 6.1%
2,244 Cebridge Connections, Inc.,
Term Loan..................... NR NR 02/23/09 2,272,430
52,000 Charter Communications
Operating, LLC, Term Loan..... B2 B 04/27/10 to 04/27/11 51,305,205
10,904 Frontiervision Operating
Partners, LP, Term Loan (b)... NR NR 09/30/05 to 03/31/06 10,920,107
927 Frontiervision Operating
Partners, LP, Revolving Credit
Agreement (b)................. NR NR 10/31/05 927,941
4,661 Hilton Head Communications,
LP, Term Loan (b)............. NR NR 03/31/08 4,461,980
5,700 Hilton Head Communications,
LP, Revolving Credit Agreement
(b)........................... NR NR 09/30/07 5,432,140
7,960 Insight Midwest Holdings, LLC,
Term Loan..................... Ba3 BB+ 12/31/09 8,089,899
4,450 MCC Iowa, LLC, Term Loan...... Ba3 BB+ 09/30/10 4,502,497
</Table>
8 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
BROADCASTING--CABLE (CONTINUED)
$ 1,469 Mediacom Illinois, LLC, Term
Loan.......................... Ba3 BB+ 12/31/08 $ 1,483,486
1,370 Mediacom Illinois, LLC,
Revolving Credit Agreement.... Ba3 BB+ 06/30/08 1,319,106
516 Mediacom Southeast, LLC, Term
Loan.......................... Ba3 BB+ 09/30/08 523,044
4,175 Mediacom Southeast, LLC,
Revolving Credit Agreement.... Ba3 BB+ 03/31/08 4,007,661
18,755 Olympus Cable Holdings, LLC,
Term Loan (b)................. NR NR 06/30/10 to 09/30/10 18,133,070
4,680 Parnassos, LP, Term Loan
(b)........................... NR NR 06/30/07 4,629,636
1,320 Parnassos, LP, Revolving
Credit Agreement (b).......... NR NR 06/30/07 1,305,372
4,461 Rainbow Media Group, Term
Loan.......................... Ba2 BB+ 03/31/09 4,480,289
--------------
123,793,863
--------------
BROADCASTING--DIVERSIFIED 0.3%
5,781 DirecTV Holdings, LLC, Term
Loan.......................... Ba2 BB 03/06/10 5,868,150
--------------
BROADCASTING--RADIO 0.5%
10,696 Spanish Broadcasting Systems,
Term Loan..................... B1 B+ 10/30/09 10,870,064
--------------
BUILDINGS & REAL ESTATE 1.9%
3,000 AIMCO Properties, LP, Term
Loan.......................... NR NR 05/30/08 3,028,125
6,396 CB Richard Ellis Services,
Inc., Term Loan............... B1 B+ 03/31/10 6,438,125
5,243 Central Parking Corp., Term
Loan.......................... Ba3 BB- 03/31/10 5,311,957
5,612 Corrections Corp. of America,
Term Loan..................... Ba3 BB- 03/31/08 5,701,410
5,206 Crescent Real Estate Equities
Co., Term Loan................ NR NR 01/12/06 5,260,959
1,583 GEO Group, Inc., Term Loan.... Ba3 BB- 07/09/09 1,601,306
6,000 Landsource Communities
Development, LLC, Term Loan... NR NR 03/31/10 6,093,750
1,474 Ventas, Inc., Term Loan....... NR NR 04/17/07 1,481,864
3,077 Ventas, Inc., Revolving Credit
Agreement..................... NR NR 04/17/05 3,038,776
--------------
37,956,272
--------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT 0.9%
$ 7,128 General Binding Corp., Term
Loan.......................... B2 B+ 01/15/08 $ 7,146,154
4,900 Katun Corp., Term Loan........ NR B+ 06/30/09 4,896,937
2,800 Verifone, Inc., Term Loan..... B1 B+ 06/30/11 to 12/31/11 2,852,250
4,330 Vertafore, Inc., Term Loan.... NR NR 03/30/08 to 03/30/10 4,367,888
--------------
19,263,229
--------------
CHEMICALS, PLASTICS & RUBBER 6.2%
6,500 Brenntag AG, Term Loan........ B1 BB- 02/27/12 6,607,659
5,035 Celanase, Term Loan........... B1 B+ 04/06/11 to 12/08/11 5,155,173
8,514 CP Kelco ApS, Term Loan....... B3 B 09/30/06 to 09/30/08 8,563,834
1,496 Hercules, Inc., Term Loan..... Ba1 BB 10/08/10 1,507,472
22,934 Huntsman Corp., Term Loan..... B2 B 03/31/07 23,058,472
22,500 Huntsman ICI Chemicals, LLC,
Term Loan..................... B1 B 12/31/10 22,868,437
2,933 Jet Plastica Industries, Inc.,
Term Loan..................... NR NR 02/28/05 2,786,475
834 Jet Plastica Industries, Inc.,
Revolving Credit Agreement.... NR NR 02/28/05 792,266
14,500 KOSA B.V., Term Loan.......... Ba3 BB 04/29/11 14,726,563
7,798 Krayton Polymers, LLC, Term
Loan.......................... B1 BB- 12/23/10 7,929,216
16,312 Nalco Co., Term Loan.......... B1 BB- 11/04/09 to 11/04/10 16,576,027
4,427 Nutrasweet Acquisition Corp.,
Term Loan..................... NR NR 06/30/06 to 05/25/09 4,390,053
5,358 Rhodia, Inc., Term Loan....... B2 NR 06/27/06 5,294,657
6,495 Unifrax Corp., Term Loan...... B1 B+ 05/19/10 6,596,371
--------------
126,852,675
--------------
CONSTRUCTION MATERIAL 1.6%
10,474 Builders FirstSource, Inc.,
Term Loan..................... NR NR 02/25/10 10,565,395
1,980 Building Materials Holding
Corp., Term Loan.............. Ba2 BB- 08/21/10 1,987,425
2,993 Compression Polymers Corp.,
Term Loan..................... B1 B 03/12/10 3,009,333
4,750 Interline Brands, Inc., Term
Loan.......................... B2 B+ 11/30/09 4,782,656
2,000 Itron, Inc., Term Loan........ Ba3 BB- 06/28/11 2,020,000
2,985 St. Mary's Cement, Inc., Term
Loan.......................... B1 BB- 12/04/09 3,026,044
6,897 Werner Holding Co., Inc., Term
Loan.......................... B1 B 06/11/09 6,720,187
--------------
32,111,040
--------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING & GLASS 5.0%
$ 2,400 BWAY Corp., Term Loan......... B1 B+ 06/30/11 $ 2,441,251
8,006 Crown Cork & Seal Co., Inc.,
Term Loan..................... Ba3 BB 02/26/08 8,135,103
17,345 Dr. Pepper/Seven Up Bottling
Group, Inc., Term Loan........ B1 NR 12/19/10 17,551,394
1,213 Fleming Packaging Corp., Term
Loan (b) (d).................. NR NR 08/31/04 223,180
143 Fleming Packaging Corp.,
Revolving Credit Agreement (b)
(d) (e)....................... NR NR 03/31/03 26,277
13,823 Graphic Packaging
International Corp., Term
Loan.......................... B1 B+ 08/08/09 to 08/09/10 14,044,264
148 Graphic Packaging
International Corp., Revolving
Credit Agreement.............. B1 B+ 08/08/09 142,708
4,276 Impress Metal Packaging
Holding B.V., Term Loan....... NR B+ 12/31/06 4,286,593
38,310 Owens-Illinois, Inc., Term
Loan.......................... B2 BB- 04/01/07 to 04/01/08 38,729,097
5,356 Packaging Dynamics, Term
Loan.......................... NR NR 09/29/08 to 09/29/09 5,367,391
267 Smurfit-Stone Container Corp.,
Revolving Credit Agreement.... NR NR 12/31/05 263,320
1,988 Solo Cup, Inc., Term Loan..... B1 B+ 02/27/11 2,013,173
1,116 Tekni-Plex, Inc., Term Loan... B1 B+ 06/21/08 1,124,160
3,390 Tekni-Plex, Inc., Revolving
Credit Agreement.............. B1 B+ 06/21/06 3,339,534
3,990 U.S. Can Corp., Term Loan..... B2 B 01/10/10 4,037,381
--------------
101,724,826
--------------
DIVERSIFIED MANUFACTURING 0.9%
990 Amsted Industries, Inc., Term
Loan.......................... B1 BB- 10/15/10 1,013,513
6,770 Chart Industries, Inc, Term
Loan (c)...................... NR NR 09/15/09 6,757,762
1,927 Juno Lighting, Inc., Term
Loan.......................... B1 B+ 11/21/10 1,956,182
9,450 Mueller Group, Inc., Term
Loan.......................... B2 B+ 04/23/11 9,546,994
--------------
19,274,451
--------------
ECOLOGICAL 2.3%
25,658 Allied Waste North America,
Inc., Term Loan............... Ba2 BB 01/15/10 26,038,089
7,609 Duratek, Inc., Term Loan...... B1 BB- 12/16/09 7,608,696
</Table>
See Notes to Financial Statements 11
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
ECOLOGICAL (CONTINUED)
$ 2,572 Environmental Systems Products
Holdings, Term Loan........... B2 NR 12/12/08 to 12/12/10 $ 2,612,730
3,499 Great Lakes Dredge & Dock
Corp., Term Loan.............. B2 B- 12/22/10 3,498,673
2,977 IESI Corp., Term Loan......... B1 B+ 09/30/10 3,030,538
1,739 Safety-Kleen Corp., Term
Loan.......................... NR NR 12/24/08 1,043,209
2,394 Waste Services, Inc., Term
Loan.......................... B1 B+ 03/31/11 2,411,955
--------------
46,243,890
--------------
ELECTRONICS 2.2%
10,059 Audio Visual Services Corp.,
Term Loan..................... NR NR 03/04/06 10,612,630
5,410 Knowles Electronics, Inc.,
Term Loan..................... B3 NR 06/29/07 5,451,621
3,080 Memec Group Ltd., Term Loan... Ba3 B 06/15/09 to 06/15/10 3,079,900
10,421 Rayovac Corp., Term Loan...... B1 B+ 09/30/09 10,559,569
7,773 Semiconductor Components
Industries, LLC, Term Loan.... B3 B 08/04/09 7,851,881
3,600 UGS Corp., Term Loan.......... B1 B+ 05/27/11 3,639,377
3,533 Viasystems, Inc., Term Loan... NR NR 09/30/08 3,570,963
--------------
44,765,941
--------------
ENTERTAINMENT & LEISURE 5.6%
2,249 Bell Sports, Inc., Term
Loan.......................... Ba3 NR 12/31/05 2,137,973
4,619 Detroit Red Wings, Inc., Term
Loan.......................... NR NR 08/30/06 4,630,891
2,122 Festival Fun Parks, LLC, Term
Loan.......................... NR NR 06/30/07 to 12/31/07 2,112,872
2,487 Fitness Holdings Worldwide,
Inc., Term Loan............... B1 B 07/01/09 2,518,594
1,970 Kerasotes Theatres, Inc., Term
Loan.......................... NR NR 12/31/08 1,992,163
25,000 Metro-Goldwyn-Mayer, Inc.,
Term Loan..................... NR NR 04/30/11 25,150,000
2,958 Mets II, LLC, Term Loan....... NR NR 10/31/06 2,980,521
4,000 New Jersey Basketball LLC,
Term Loan..................... NR NR 10/16/04 4,005,000
9,183 Playcore Wisconsin, Inc., Term
Loan.......................... NR NR 07/01/07 9,167,969
4,738 Pure Fishing, Term Loan....... B1 BB- 09/30/10 4,815,120
15,475 Regal Cinemas, Inc., Term
Loan.......................... NR BB- 11/10/10 15,678,263
</Table>
12 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (CONTINUED)
$ 2,359 Riddell Sports Group, Inc.,
Term Loan..................... NR NR 06/30/08 $ 2,361,588
8,463 Six Flags Theme Parks, Inc.,
Term Loan..................... Ba3 B+ 06/30/09 8,568,439
100 Six Flags Theme Parks, Inc.,
Revolving Credit Agreement.... Ba3 B+ 06/30/08 97,000
7,731 True Temper, Inc., Term
Loan.......................... B1 B+ 03/15/11 7,827,258
12,469 Warner Music Group, Term
Loan.......................... B1 B+ 02/28/11 12,664,684
4,571 Worldwide Sports & Recreation,
Inc., Term Loan............... NR NR 12/31/06 4,597,758
1,371 YankeeNets, LLC, Term Loan.... NR NR 06/25/07 1,388,571
629 Yankees Holdings, LP, Term
Loan.......................... NR NR 06/25/07 636,428
--------------
113,331,092
--------------
FARMING & AGRICULTURE 0.3%
2,000 Ames True Temper, Inc., Term
Loan.......................... B2 B 07/02/11 2,032,916
4,090 United Industries Corp., Term
Loan.......................... B1 B+ 04/29/11 4,158,765
--------------
6,191,681
--------------
FINANCE 1.4%
3,359 DCS Business Services, Inc.,
Term Loan..................... NR NR 12/31/08 to 12/31/09 3,367,147
8,306 Outsourcing Solutions, Term
Loan.......................... NR NR 12/09/08 8,264,937
15 Outsourcing Solutions,
Revolving Credit Agreement.... NR NR 12/09/08 14,943
5,453 Rent-A-Center, Inc., Term
Loan.......................... Ba2 BB+ 06/30/10 5,524,591
4,799 Risk Management Assurance Co.,
Term Loan..................... NR NR 12/21/06 4,826,546
7,200 Transfirst Holdings, Inc.,
Term Loan..................... NR NR 03/31/10 to 03/31/11 7,243,000
--------------
29,241,164
--------------
GROCERY 0.3%
4,107 Fleming Cos., Inc., Term Loan
(b)........................... NR NR 06/18/08 4,091,495
1,612 Fleming Cos., Inc., Revolving
Credit Agreement (b).......... NR NR 06/18/07 1,602,364
--------------
5,693,859
--------------
HEALTHCARE 2.9%
3,782 Ameripath, Inc., Term Loan.... B2 B+ 03/27/10 3,810,589
3,720 AMN Healthcare, Inc., Term
Loan.......................... Ba2 BB- 10/02/08 3,743,128
</Table>
See Notes to Financial Statements 13
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$24,366 Community Health Systems,
Inc., Term Loan............... Ba3 BB- 07/16/10 to 01/16/11 $ 24,474,770
1,485 Concentra Operating Corp.,
Term Loan..................... B1 B+ 06/30/09 1,506,347
5,988 FHC Health Systems, Inc., Term
Loan.......................... B2 B 10/31/06 6,044,654
4,019 Genesis Healthcare Corp., Term
Loan.......................... Ba3 BB- 12/01/10 4,073,876
8,280 InteliStaf Group, Inc., Term
Loan.......................... NR NR 10/31/05 to 10/31/07 8,217,765
1,600 Medcath Holdings Corp., Term
Loan.......................... B2 B+ 06/30/11 1,623,501
3,491 Multiplan, Inc., Term Loan.... NR B+ 03/04/09 3,526,163
2,000 Sterigenics International,
Inc., Term Loan............... B2 B+ 06/14/11 2,025,000
--------------
59,045,793
--------------
HEALTHCARE & BEAUTY 1.2%
4,190 American Safety Razor Co.,
Term Loan..................... B2 B 04/29/11 4,239,250
3,281 Jafra Cosmetics International,
Inc., Term Loan............... B1 B+ 05/20/08 3,279,199
356 Mary Kay, Inc., Term Loan..... Ba2 BB 10/03/07 359,086
16,481 Prestige Brands Holdings,
Inc., Term Loan............... B1 B 04/06/11 to 10/06/11 16,708,746
--------------
24,586,281
--------------
HOME & OFFICE FURNISHINGS,
HOUSEWARES & DURABLE CONSUMER
PRODUCTS 1.4%
6,274 Formica Corp., Term Loan...... NR NR 06/10/10 6,368,503
1,600 Holmes Group, Inc., Term
Loan.......................... B1 B 11/08/10 1,616,000
2,843 Hunter Fan Co., Term Loan..... NR NR 04/30/10 2,890,467
5,045 Imperial Home Decor Group,
Inc., Term Loan (c) (d)....... NR NR 04/04/06 126,121
3,020 National Bedding Co., Term
Loan.......................... Ba3 BB- 08/31/08 3,055,684
14,112 Sealy Mattress Co., Term
Loan.......................... B2 B+ 04/06/12 14,343,856
--------------
28,400,631
--------------
HOTELS, MOTELS, INNS & GAMING 7.8%
41,792 Aladdin Gaming, LLC, Term Loan
(b) (k)....................... NR NR 02/25/05 to 02/26/08 42,001,341
5,700 Alliance Gaming Corp., Term
Loan.......................... Ba3 BB- 09/04/09 5,774,813
</Table>
14 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
$ 5,000 Boyd Gaming Corp., Term Loan.. Ba2 BB 06/30/11 $ 5,066,405
28,992 CNL Hospitality Partners, LP,
Term Loan..................... NR NR 01/03/05 28,991,746
2,963 Global Cash Access, LLC, Term
Loan.......................... B2 B+ 03/10/10 3,012,492
2,973 Greektown Casino, LLC, Term
Loan.......................... NR NR 12/31/05 2,983,972
1,990 Green Valley Ranch Gaming,
LLC, Term Loan................ B1 B+ 12/24/10 2,014,875
10,315 Mandalay Resort Group, Term
Loan.......................... NR NR 06/30/08 10,327,589
1,007 Marina District Finance Co.,
Term Loan..................... B2 B+ 12/15/07 1,017,899
2,700 Penn National Gaming, Inc.,
Term Loan..................... Ba3 BB- 09/01/07 2,745,536
4,800 Ruffin Gaming, LLC, Term
Loan.......................... NR NR 07/14/07 4,806,000
13,979 Scientific Games Corp., Term
Loan.......................... Ba3 BB- 12/31/09 14,176,540
3,697 United Auburn Indian
Community, Term Loan.......... Ba3 BB 01/24/09 3,715,396
30,804 Wyndham International, Inc.,
Term Loan..................... NR NR 04/01/06 to 06/30/06 30,661,987
1,339 Wyndham International, Inc.,
Revolving Credit Agreement.... NR NR 04/01/06 1,320,753
--------------
158,617,344
--------------
INSURANCE 1.1%
5,000 Alea Group Holdings, Term
Loan.......................... NR BBB- 03/31/07 5,012,500
4,625 Brera Gab Robins, Inc., Term
Loan.......................... NR NR 12/31/05 4,393,750
8,000 Conseco, Inc., Term Loan...... B3 BB- 06/22/10 8,122,504
2,765 Universal American Financial
Corp., Term Loan.............. NR BBB- 03/31/09 2,771,912
1,980 USI Holdings Corp., Term
Loan.......................... B1 BB- 08/11/08 2,002,275
--------------
22,302,941
--------------
MACHINERY 0.6%
1,849 Alliance Laundry Holdings,
LLC, Term Loan................ B1 B 08/02/07 1,855,513
3,961 Ashtead Group, PLC, Term
Loan.......................... NR NR 06/01/07 3,901,100
899 Douglas Dynamics, LLC, Term
Loan.......................... NR B+ 03/31/10 910,280
</Table>
See Notes to Financial Statements 15
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
MACHINERY (CONTINUED)
$ 1,245 Goodman Global Holdings, Inc.,
Term Loan..................... NR NR 11/21/09 $ 1,262,897
2,192 SWT Finance B.V., Term Loan... NR NR 09/30/05 2,109,495
2,494 United Rentals (North
America), Inc., Term Loan..... Ba3 BB 02/14/11 2,541,131
--------------
12,580,416
--------------
MEDICAL PRODUCTS & SERVICES 1.5%
2,000 Advanced Medical Optics, Inc.,
Term Loan..................... B1 BB- 06/25/09 2,031,876
2,541 Alliance Imaging, Inc., Term
Loan.......................... B1 B+ 06/10/08 2,530,648
2,850 Colgate Medical, Ltd., Term
Loan.......................... Ba2 BB- 12/30/08 2,881,173
7,711 Dade Behring, Inc., Term
Loan.......................... Ba3 BB 10/03/08 7,812,161
1,055 DaVita, Inc., Term Loan....... Ba2 BB 03/31/09 1,067,278
4,244 Insight Health, Term Loan..... B1 B+ 10/17/08 4,270,054
6,212 Kinetics Concepts, Inc., Term
Loan.......................... Ba3 BB- 08/11/10 6,301,805
465 Rotech Healthcare, Inc., Term
Loan.......................... Ba2 BB 03/31/08 470,817
3,820 Symmetry Medical, Inc., Term
Loan.......................... NR NR 06/30/08 to 06/30/09 3,821,488
--------------
31,187,300
--------------
MINING, STEEL, IRON &
NON-PRECIOUS METALS 1.4%
14,581 Carmeuse Lime, Inc., Term
Loan.......................... Ba3 NR 03/31/06 14,544,603
7,271 CII Carbon, LLC, Term Loan.... NR NR 06/25/08 6,998,402
4,427 Fairmount Minerals, Ltd., Term
Loan.......................... NR NR 04/07/10 4,449,009
2,469 Techs Industries, Inc., Term
Loan.......................... NR NR 01/14/10 2,474,922
--------------
28,466,936
--------------
NATURAL RESOURCES 2.0%
4,148 El Paso Corp., Revolving
Credit Agreement.............. B3 NR 06/30/05 4,128,602
5,616 La Grange Acquisition, LP,
Term Loan..................... NR NR 01/18/08 5,705,508
20,000 Ocean Rig ASA--(Norway), Term
Loan.......................... B3 CCC 06/01/08 18,800,000
921 Peabody Energy Corp., Term
Loan.......................... Ba1 BB+ 03/21/10 931,914
</Table>
16 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
NATURAL RESOURCES (CONTINUED)
$ 7,500 Transwestern Pipeline Co.,
Term Loan..................... B1 BB 04/30/09 $ 7,567,185
2,676 U.S. Synthetic Corp., Term
Loan.......................... NR NR 05/31/05 2,555,234
--------------
39,688,443
--------------
NON-DURABLE CONSUMER
PRODUCTS 0.6%
1,647 Aero Products International,
Inc., Term Loan............... NR NR 12/19/08 1,560,321
5,000 Amscan Holdings, Inc., Term
Loan.......................... B1 B+ 04/30/12 5,081,250
4,000 Church & Dwight Co., Inc.,
Term Loan..................... Ba2 BB 05/30/11 4,055,000
1,484 JohnsonDiversey, Inc., Term
Loan.......................... Ba3 BB- 11/03/09 1,509,304
--------------
12,205,875
--------------
PERSONAL & MISCELLANEOUS
SERVICES 1.3%
2,326 Alderwoods Group, Inc., Term
Loan.......................... B1 BB- 09/29/08 2,363,651
2,508 Aspen Marketing Group, Term
Loan (c)...................... NR NR 09/30/04 1,881,319
7,621 Aspen Marketing Group,
Revolving Credit Agreement
(c)........................... NR NR 09/30/04 5,715,544
2,311 Coinmach Laundry Corp., Term
Loan.......................... B1 B+ 07/25/09 2,337,148
2,000 Coinstar, Inc., Term Loan..... Ba3 BB- 07/07/11 2,035,000
5,786 Educate Operating Co., LLC,
Term Loan..................... B1 B+ 03/31/11 5,854,203
2,701 Encompass Service Corp., Term
Loan (b) (d) (l).............. Caa1 NR 02/22/06 to 05/10/07 189,088
2,993 Global Imaging Systems, Inc.,
Term Loan..................... Ba3 BB- 05/10/10 3,026,166
2,300 InfoUSA, Inc., Term Loan...... Ba3 BB 03/25/09 2,328,750
606 Stewart Enterprises, Inc.,
Term Loan..................... Ba3 BB 01/31/06 610,563
--------------
26,341,432
--------------
PHARMACEUTICALS 0.5%
10,008 MedPointe, Inc., Term Loan.... B1 B 09/30/07 to 09/30/08 10,032,167
--------------
PRINTING & PUBLISHING 6.4%
4,752 21st Century Newspapers, Term
Loan.......................... NR NR 08/27/08 4,751,923
5,500 Adams Outdoor Advertising, LP,
Term Loan..................... B1 B+ 10/15/11 to 04/15/12 5,573,075
</Table>
See Notes to Financial Statements 17
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (CONTINUED)
$ 593 Advanstar Communications,
Inc., Term Loan............... B2 B 10/11/07 $ 596,593
7,462 American Reprographics Co.,
Term Loan..................... B1 BB- 06/18/09 7,574,438
1,485 Canwest Media, Inc., Term
Loan.......................... Ba3 B+ 08/15/09 1,505,957
10,000 Cygnus Business Media, Inc.,
Term Loan..................... B3 B 07/13/09 9,975,000
1,652 Daily News, LP, Term Loan..... NR NR 03/19/08 1,660,336
3,004 Day International Group, Inc.,
Term Loan..................... B1 B 09/16/09 3,028,200
2,631 Dex Media East, Term Loan..... Ba2 BB- 11/08/08 to 05/08/09 2,668,163
24,386 Dex Media West, LLC, Term
Loan.......................... Ba2 BB- 09/09/09 to 03/09/10 24,821,456
5,346 F&W Publications, Inc., Term
Loan.......................... NR NR 12/31/09 5,402,343
7,500 Freedom Communications, Term
Loan.......................... Ba3 BB 05/18/12 7,623,045
6,563 Haights Cross Communications,
LLC, Term Loan................ B3 B- 08/20/08 6,742,969
2,700 Herald Media, Inc., Term
Loan.......................... NR NR 07/31/11 to 01/31/12 2,734,750
1,210 Liberty Group Operating, Inc.,
Term Loan..................... B1 B 03/31/07 1,220,817
7,000 Morris Publishing Group, LLC,
Term Loan..................... Ba1 BB 03/31/11 7,089,691
7,200 Network Communications, Inc.,
Term Loan..................... NR NR 06/30/11 7,281,000
6,915 Primedia, Inc., Term Loan..... B3 B 06/30/08 to 06/30/09 6,636,250
5,673 R.H. Donnelley Corp., Term
Loan.......................... Ba3 BB 12/31/08 to 06/30/10 5,746,865
6,208 Transwestern Publishing Co.,
Term Loan..................... B1 BB- 02/25/11 6,290,916
2,400 Vutek, Inc., Term Loan........ B1 NR 06/25/10 2,422,500
8,908 Ziff-Davis Media, Inc., Term
Loan.......................... B3 CCC 03/31/07 8,831,398
--------------
130,177,685
--------------
RETAIL--OIL & GAS 1.1%
1,102 Barjan Products, LLC, Term
Loan.......................... NR NR 04/30/07 897,102
791 Barjan Products, LLC,
Revolving Credit Agreement.... NR NR 04/30/07 791,390
</Table>
18 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
RETAIL--OIL & GAS (CONTINUED)
$ 5,000 Getty Petroleum Marketing,
Inc., Term Loan............... B1 B+ 05/19/10 $ 5,084,375
14,826 The Pantry, Inc., Term Loan... B1 B+ 03/12/11 15,048,478
--------------
21,821,345
--------------
RETAIL--SPECIALTY 0.7%
3,177 DRL Acquisition, Inc., Term
Loan.......................... NR NR 04/30/09 3,168,933
1,984 Home Interiors & Gifts, Inc.,
Term Loan..................... B2 B 03/31/11 1,919,264
8,678 Nebraska Book Co., Inc., Term
Loan.......................... B2 B 03/04/11 8,781,304
--------------
13,869,501
--------------
RETAIL--STORES 2.3%
95 Advance Stores Company, Inc.,
Term Loan..................... Ba2 BB 11/30/06 96,390
3,234 CSK Auto, Inc., Term Loan..... Ba3 B+ 06/19/09 3,279,226
3,413 Murray's Discount Auto Stores,
Inc., Term Loan............... NR NR 08/08/09 3,416,766
39,046 Rite Aid Corp., Term Loan..... Ba3 BB 04/30/08 39,933,913
--------------
46,726,295
--------------
TELECOMMUNICATIONS--LOCAL
EXCHANGE CARRIERS 1.2%
8,980 Cincinnati Bell, Inc., Term
Loan.......................... B1 B+ 06/30/08 9,087,265
2,000 Fairpoint Communications,
Inc., Term Loan............... B1 BB- 03/31/07 2,007,500
6,608 Orius Corp., Term Loan (c).... NR NR 01/23/09 to 01/23/10 1,927,561
4,331 Orius Corp., Revolving Credit
Agreement (c)................. NR NR 01/23/05 3,356,450
8,181 Qwest Corp., Term Loan........ Ba3 BB- 06/30/07 8,500,525
7,500 WCI Capital Corp., Term Loan
(b) (d)....................... NR NR 09/30/07 18,750
1,747 WCI Capital Corp., Revolving
Credit Agreement (b) (d)...... NR NR 12/31/04 61,153
--------------
24,959,204
--------------
TELECOMMUNICATIONS--LONG
DISTANCE 0.5%
2,000 360networks Holdings, Inc.,
Term Loan..................... NR NR 11/12/07 1,960,000
29,720 Pacific Crossing, Ltd., Term
Loan (b) (d).................. NR NR 07/28/06 1,968,976
6,691 Williams Communications LLC,
Term Loan..................... NR NR 09/08/06 6,682,636
--------------
10,611,612
--------------
</Table>
See Notes to Financial Statements 19
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--WIRELESS 3.9%
$ 1,600 American Tower LP, Term
Loan.......................... B1 B 08/31/11 $ 1,625,501
1,600 Cellular South, Inc., Term
Loan.......................... NR NR 05/04/11 1,623,000
9,476 Centennial Cellular, Inc.,
Term Loan..................... B2 B- 02/09/11 9,534,633
3,970 Crown Castle International
Corp., Term Loan.............. B1 B- 09/30/10 3,986,817
8,936 Dobson Cellular Systems, Inc.,
Term Loan..................... B1 B- 03/31/10 8,965,551
6,913 Microcell Solutions, Inc.,
Term Loan..................... B3 B- 03/17/11 6,949,945
24,584 Nextel Finance Co., Term
Loan.......................... Ba1 BBB 12/15/10 24,780,885
6,800 Nextel Partners, Inc., Term
Loan.......................... B1 B+ 05/31/11 6,918,150
3,730 Spectrasite Communications,
Inc., Term Loan............... B1 B+ 06/30/07 3,786,165
2,641 Syniverse Holding, LLC., Term
Loan.......................... Ba3 B+ 12/31/06 2,678,985
8,000 Western Wireless Corp., Term
Loan.......................... B2 B- 05/31/11 8,124,288
--------------
78,973,920
--------------
TRANSPORTATION--CARGO 0.8%
5,462 American Commercial Lines,
LLC, Term Loan (b)............ Caa1 NR 07/31/04 to 06/30/07 5,319,536
3,573 Havco Wood Products, Inc.,
Term Loan..................... NR NR 06/30/06 2,232,969
648 Horizon Lines, LLC, Revolving
Credit Agreement.............. B2 B+ 07/07/09 626,940
5,382 Pacer International, Inc.,
Term Loan..................... B1 BB- 06/10/10 5,459,724
1,489 Quality Distribution, Inc.,
Term Loan..................... B2 B+ 11/13/09 1,481,306
1,600 Transport Industries, LP, Term
Loan.......................... B2 B+ 06/13/10 1,603,000
--------------
16,723,475
--------------
TRANSPORTATION--PERSONAL 1.1%
15,326 Laidlaw Investments Ltd., Term
Loan.......................... Ba3 BB+ 06/19/09 15,623,268
911 Neoplan USA Corp., Revolving
Credit Agreement (c).......... NR NR 06/30/06 911,250
5,855 Transcore Holdings, Inc., Term
Loan.......................... NR NR 01/05/08 5,928,155
--------------
22,462,673
--------------
</Table>
20 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
TRANSPORTATION--RAIL
MANUFACTURING 0.1%
$ 2,000 Helm, Inc., Term Loan......... NR NR 07/02/10 $ 2,025,416
--------------
UTILITIES 2.0%
3,843 AES Corp., Term Loan.......... Ba3 B+ 04/30/08 3,897,756
18,952 Allegheny Energy, Inc., Term
Loan.......................... B1 B 03/08/11 to 06/08/11 19,297,017
2,512 CenterPoint Energy, Inc., Term
Loan.......................... Ba1 BBB- 10/07/06 2,506,523
12,381 Mission Energy Holdings Co.,
Term Loan..................... Caa2 CCC 12/11/06 12,442,422
3,176 Pike Electric, Inc., Term
Loan.......................... NR NR 07/01/12 3,235,550
--------------
41,379,268
--------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 90.4%.............................. 1,839,853,799
--------------
</Table>
<Table>
NOTES 0.9%
Alderwoods Group, Inc. ($1,232,200 par, 12.25% coupon, maturing 01/02/09)...... 1,366,202
American Home Patient, Inc. ($795,579 par 6.79% to 8.57% coupon, maturing
07/01/09).................................................................... 613,922
Barjan Products, LLC ($1,000,819 par, 5.00% coupon, maturing 04/30/07) (a)..... 0
Commonwealth Brands, Inc. ($1,500,000 par, 8.74% coupon, maturing 04/15/08)
(f).......................................................................... 1,567,500
Dade Behring, Inc. ($4,781,084 par, 11.91% coupon, maturing 10/03/10).......... 5,330,909
Pioneer Cos., Inc. ($1,515,821 par, 5.09% coupon, maturing 12/31/06) (f)....... 1,440,030
Satelites Mexicanos, 144A Private Placement ($8,690,000 par, 5.84% coupon,
maturing 06/30/04) (e) (f) (g)............................................... 7,516,850
US Unwired, Inc. ($800,000 par, 5.79% coupon, maturing 06/15/10) (f)........... 810,000
--------------
TOTAL NOTES.................................................................... 18,645,413
--------------
EQUITIES 5.3%
Aspen Marketing (166,871 common shares) (Acquisition date 02/12/03, Cost
$3,865,366) (c) (h) (i)...................................................... 0
Barjan Products (1,962,870 preferred shares) (Acquisition date 06/21/04, Cost
$2,767,934) (h) (i).......................................................... 0
Best Products Co., Inc. (297,480 common shares) (h)............................ 0
Chart Industries, Inc. (345,454 common shares) (Acquisition date 09/25/03, Cost
$7,339,580) (c) (h) (i)...................................................... 13,818,160
Dade Behring Holdings, Inc. (157,928 common shares) (h)........................ 7,847,442
DecorateToday.com (198,600 common shares) (Acquisition date 12/31/98, Cost
$3,505,909) (c) (h) (i)...................................................... 2,653,296
Environmental Systems Products Holdings, Inc. (2,183 common shares)
(Acquisition date 06/22/04, Cost $0) (h) (i)................................. 22
Gentek, Inc. (119,649 common shares) (h)....................................... 5,264,556
Gentek, Inc. (Warrants for 173 common shares) (h).............................. 0
</Table>
See Notes to Financial Statements 21
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------
Havco Wood Products, Inc. (30 common shares) (Acquisition date 02/10/03, Cost
$2,545,510) (h).............................................................. $ 0
Holmes Group, Inc. (Warrants for 950 common shares) (Acquisition date 05/24/04,
Cost $0) (i)................................................................. 2,660
IDT Corp. (22,898 common shares) (Acquisition date 01/29/04, Cost $466,890)
(h).......................................................................... 360,644
Imperial Home Decor Group, Inc. (1,816,143 common shares) (Acquisition date
04/26/01, Cost $1,852,465) (c) (h) (i)....................................... 0
London Fog Industries, Inc. (515,922 common shares) (c)........................ 4,473,044
NeighborCare, Inc. (815,822 common shares) (h)................................. 20,917,676
Neoplan USA Corp. (2,262 preferred shares) (Acquisition date 09/04/03, Cost
$1,074,522) (c) (h) (i)...................................................... 1,072,775
Neoplan USA Corp. (8,517 common shares) (Acquisition date 09/04/03, Cost $85)
(c) (h) (i).................................................................. 85
Orius Corp. (1,211,236 common shares) (Acquisition date 02/03/03, Cost $0) (c)
(h) (i)...................................................................... 0
Outsourcing Solutions, Inc. (161,107 common shares) (Acquisition date 01/30/04,
Cost $8,050,253) (h) (i)..................................................... 5,638,745
RailWorks Corp. (223 preferred shares) (Acquisition date 02/10/03, Cost
$2,557,518) (h) (i).......................................................... 0
RailWorks Corp. (Warrants for 3,935 common shares) (Acquisition date 02/10/03,
Cost $0) (h) (i)............................................................. 0
Rotech Medical Corp. (94,289 common shares) (Acquisition date 06/12/02, Cost
$377,156) (h) (i)............................................................ 0
Safelite Glass Corp. (724,479 common shares) (Acquisition date 10/20/00, Cost
$3,912,187) (c) (h) (i)...................................................... 6,860,816
Safelite Realty (48,903 common shares) (Acquisition date 10/20/00, Cost $0) (c)
(i).......................................................................... 0
Safety-Kleen Holdings, Inc. (306,849 common shares) (Acquisition date 01/14/04,
Cost $1,215,122) (h) (i)..................................................... 0
SK Holding Co. (5,227 preferred shares) (Acquisition date 01/14/04, Cost
$126,598) (h) (i)............................................................ 0
Stellex (33,390 common shares) (Acquisition date 09/28/01, Cost $4,521,719) (h)
(i).......................................................................... 280,142
Targus Group International (Warrants for 66,824 common shares) (Acquisition
date 01/30/04, Cost $0) (h) (i).............................................. 2,673
Trans World Entertainment Corp. (3,789,962 common shares) (Acquisition date
03/03/98, Cost $69,498,017) (c) (h) (i)...................................... 37,634,323
--------------
TOTAL EQUITIES 5.3%............................................................ 106,827,059
--------------
TOTAL LONG-TERM INVESTMENTS 96.6%
(Cost $2,066,342,512)........................................................ 1,965,326,271
--------------
</Table>
22 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
<Table>
<Caption>
DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 4.7%
REPURCHASE AGREEMENT 3.4%
State Street Bank & Trust Corp. ($69,800,000 par collateralized by U.S.
Government Obligations in a pooled cash account, interest rate of 1.25%,
dated 07/30/04, to be sold on 08/02/04 at $69,807,271) (j)................... $ 69,800,000
--------------
TIME DEPOSIT 1.3%
State Street Bank & Trust Corp. ($26,531,332 par collateralized by U.S.
Government Obligations in a pooled cash account, 0.75% coupon, dated
07/30/04, to be sold on 08/02/04 at $26,532,990) (j)......................... 26,531,332
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $96,331,332)........................................................... 96,331,332
--------------
TOTAL INVESTMENTS 101.3%
(Cost $2,162,673,844)........................................................ 2,061,657,603
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3%).................................. (26,475,780)
--------------
NET ASSETS 100.0%............................................................. $2,035,181,823
==============
</Table>
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.
Industry percentages are calculated as a percentage of net assets.
(a) Payment-in-kind security.
(b) This borrower has filed for protection in federal bankruptcy court.
(c) Affiliated company. See Notes to Financial Statements.
(d) This Senior Loan interest is non-income producing.
(e) This borrower is in the process of restructuring or amending the terms of
this loan.
(f) Variable rate security. Interest rate shown is that in effect at July 31,
2004.
(g) 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.
(h) Non-income producing security as this stock or warrant currently does not
declare dividends.
(i) Restricted security. Securities were acquired through the restructuring of
senior loans. These securities are restricted as they are not allowed to be
deposited via the Depository Trust Company. If at a later point in time, the
company wishes to register, the issuer will bear the costs associated with
registration. The aggregate value of restricted securities represents 3.4%
of the net assets of the Fund.
See Notes to Financial Statements 23
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2004 continued
(j) A portion of this security is designated in connection with unfunded loan
commitments.
(k) Subsequent to July 31, 2004, this borrower has emerged from bankruptcy.
(l) This borrower is currently in liquidation.
* 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.
24 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
July 31, 2004
<Table>
ASSETS:
Total Investments (Cost $2,162,673,844)..................... $2,061,657,603
Receivables:
Interest and Fees......................................... 7,129,955
Fund Shares Sold.......................................... 5,902,311
Investments Sold.......................................... 4,431,316
Other....................................................... 54,013
--------------
Total Assets............................................ 2,079,175,198
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 38,110,920
Investment Advisory Fee................................... 1,506,953
Income Distributions...................................... 1,202,637
Distributor and Other Affiliates.......................... 686,546
Administrative Fee........................................ 440,611
Fund Shares Repurchased................................... 12,652
Custodian Bank............................................ 1,758
Trustees' Deferred Compensation and Retirement Plans........ 1,015,886
Accrued Expenses............................................ 1,015,412
--------------
Total Liabilities....................................... 43,993,375
--------------
NET ASSETS.................................................. $2,035,181,823
==============
NET ASSETS CONSIST OF:
Capital..................................................... $3,218,981,361
Accumulated Undistributed Net Investment Income............. (3,395,731)
Net Unrealized Depreciation................................. (101,016,241)
Accumulated Net Realized Loss............................... (1,079,387,566)
--------------
NET ASSETS.................................................. $2,035,181,823
==============
NET ASSET VALUE PER COMMON SHARE:
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,703,142,260 and 189,231,260 shares of
beneficial interest issued and outstanding)............. $ 9.00
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $332,039,563 and 36,904,985 shares of
beneficial interest issued and outstanding)............. $ 9.00
==============
</Table>
See Notes to Financial Statements 25
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended July 31, 2004
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 96,826,905
Dividends................................................... 2,045,639
Other....................................................... 4,954,200
-------------
Total Income............................................ 103,826,744
-------------
EXPENSES:
Investment Advisory Fee..................................... 19,720,408
Administrative Fee.......................................... 5,276,248
Shareholder Services........................................ 2,198,227
Legal....................................................... 1,249,978
Custody..................................................... 622,560
Service Fees--Class C....................................... 408,137
Trustees' Fees and Related Expenses......................... 171,564
Other....................................................... 2,041,372
-------------
Total Operating Expenses................................ 31,688,494
Less Credits Earned on Cash Balances.................... 25,692
-------------
Net Operating Expenses.................................. 31,662,802
-------------
Interest Expense........................................ 14,675
-------------
Total Expenses.......................................... 31,677,477
-------------
NET INVESTMENT INCOME....................................... $ 72,149,267
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 3,283,192
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (266,697,299)
End of the Period......................................... (101,016,241)
-------------
Net Unrealized Appreciation During the Period............... 165,681,058
-------------
NET REALIZED AND UNREALIZED GAIN............................ $ 168,964,250
=============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 241,113,517
=============
</Table>
26 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 2004 JULY 31, 2003
-------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................................... $ 72,149,267 $ 91,410,098
Net Realized Gain/Loss.................................... 3,283,192 (180,662,448)
Net Unrealized Appreciation During the Period............. 165,681,058 202,756,414
-------------- --------------
Change in Net Assets from Operations...................... 241,113,517 113,504,064
-------------- --------------
Distributions from Net Investment Income:
Class B Shares.......................................... (53,435,973) (80,101,306)
Class C Shares.......................................... (7,235,174) (1,067,561)
-------------- --------------
(60,671,147) (81,168,867)
-------------- --------------
Return of Capital Distribution:
Class B Shares.......................................... (4,687,687) (7,342,843)
Class C Shares.......................................... (913,897) -0-
-------------- --------------
(5,601,584) (7,342,843)
-------------- --------------
Total Distributions....................................... (66,272,731) (88,511,710)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....... 174,840,786 24,992,354
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................. 154,047,111 267,313,569
Net Asset Value of Shares Issued Through Dividend
Reinvestment............................................ 34,951,648 44,870,091
Cost of Shares Repurchased................................ (450,817,629) (773,706,504)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........ (261,818,870) (461,522,844)
-------------- --------------
TOTAL DECREASE IN NET ASSETS.............................. (86,978,084) (436,530,490)
NET ASSETS:
Beginning of the Period................................... 2,122,159,907 2,558,690,397
-------------- --------------
End of the Period (Including accumulated undistributed net
investment income of ($3,395,731) and ($8,537,236),
respectively)........................................... $2,035,181,823 $2,122,159,907
============== ==============
</Table>
See Notes to Financial Statements 27
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS continued
Statement of Cash Flows
For the Year Ended July 31, 2004
<Table>
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 241,113,517
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash provided by Operating Activities:
Decrease in Investments at Value.......................... 103,064,268
Decrease in Interest and Fees Receivables................. 1,035,880
Decrease in Receivable for Investments Sold............... 17,347,157
Increase in Other Assets.................................. (23,483)
Decrease in Payable for Investments Purchased............. (29,144,829)
Decrease in Investment Advisory Fee Payable............... (271,777)
Increase in Distributor and Affiliates Payable............ 137,089
Decrease in Administrative Fee Payable.................... (27,476)
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 130,584
Decrease in Accrued Expenses.............................. (470,410)
-------------
Total Adjustments....................................... 91,777,003
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 332,890,520
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Shares Sold................................... 149,585,880
Payments on Shares Repurchased.............................. (450,965,332)
Change in Intra-day Credit Line with Custodian Bank......... (240,522)
Cash Dividends Paid......................................... (31,270,546)
-------------
Net Cash Used for Financing Activities.................. (332,890,520)
-------------
NET INCREASE IN CASH........................................ -0-
Cash at Beginning of the Period............................. -0-
-------------
CASH AT THE END OF THE PERIOD............................... $ -0-
=============
</Table>
Supplemental disclosure of cash flow information: Non cash financing
activities not included herein consist of reinvestment of dividends and
distributions of $34,951,648.
28 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED JULY 31,
CLASS B SHARES --------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $ 8.29 $ 8.09 $ 8.61 $ 9.50 $ 9.85
-------- -------- -------- -------- --------
Net Investment Income...................... .30(c) .33(c) .41(c) .66(c) .68
Net Realized and Unrealized Gain/Loss...... .68 .19 (.55) (.86) (.36)
-------- -------- -------- -------- --------
Total from Investment Operations............ .98 .52 (.14) (.20) .32
-------- -------- -------- -------- --------
Less:
Distributions from Net Investment Income... .25 .29 .38 .69 .67
Return of Capital Distributions............ .02 .03 -0- -0- -0-
-------- -------- -------- -------- --------
Total Distributions......................... .27 .32 .38 .69 .67
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE PERIOD.......... $ 9.00 $ 8.29 $ 8.09 $ 8.61 $ 9.50
======== ======== ======== ======== ========
Total Return (a)............................ 12.03% 6.58% -1.61% -2.11% 3.15%
Net Assets at End of the Period
(In millions).............................. $1,703.1 $1,876.1 $2,558.7 $3,989.7 $6,458.0
Ratio of Expenses to Average Net Assets..... 1.48% 1.54% 1.43% 1.43% 1.34%
Ratio of Net Investment Income to Average
Net Assets................................. 3.44% 4.21% 4.85% 7.34% 6.97%
Portfolio Turnover (b)...................... 94% 49% 36% 42% 36%
</Table>
(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.
See Notes to Financial Statements 29
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
JUNE 13, 2003
YEAR (COMMENCEMENT
ENDED OF INVESTMENT
CLASS C SHARES JULY 31, OPERATIONS) TO
2004 JULY 31, 2003
-------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 8.29 $ 8.16
------ ------
Net Investment Income..................................... .28(c) .04(c)
Net Realized and Unrealized Gain.......................... .69 .12
------ ------
Total from Investment Operations............................ .97 .16
Less:
Distributions from Net Investment Income.................. .24 .03
Return of Capital Distributions........................... .02 -0-
------ ------
Total Distributions......................................... .26 .03
------ ------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 9.00 $ 8.29
====== ======
Total Return (a)............................................ 11.86% 2.02%*
Net Assets at End of the Period (In millions)............... $332.0 $246.1
Ratio of Expenses to Average Net Assets..................... 1.62% 1.56%
Ratio of Net Investment Income to Average Net Assets........ 3.26% 3.89%
Portfolio Turnover (b)...................................... 94% 49%
</Table>
(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.
* Non-annualized
30 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Senior Loan Fund (the "Fund") is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940 (the "1940 Act"), as amended. The Fund 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. Effective November 30, 2003, the
Fund's investment adviser, Van Kampen Investment Advisory Corp. merged into Van
Kampen Asset Management.
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 Asset Management (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 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
31
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
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.
Legal expenditures that are expected to result in the restructuring of or a plan
of reorganization for an investment are recorded as realized losses.
C. INVESTMENT INCOME 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, 2004, the Fund had an accumulated capital loss carryforward
for tax purposes of $959,524,180, which will expire between July 31, 2006 and
July 31, 2012.
At July 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $2,206,260,431
==============
Gross tax unrealized appreciation........................... 62,023,673
Gross tax unrealized depreciation........................... (206,626,501)
--------------
Net tax unrealized depreciation on investments.............. $ (144,602,828)
==============
</Table>
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.
32
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
The tax character of distributions paid during the years ended July 31, 2004
and 2003 was as follows:
<Table>
<Caption>
2004 2003
Distributions paid from:
Ordinary income........................................... $60,620,611 $81,893,753
Return of capital......................................... 5,601,584 7,342,843
----------- -----------
$66,222,195 $89,236,596
=========== ===========
</Table>
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 2004 fiscal year have been
identified and appropriately reclassified on the Statement of Assets and
Liabilities. Permanent differences relating to return of capital distributions
totaling $5,601,584 were reclassified from accumulated undistributed net
investment income to capital. Also, permanent differences relating to book to
tax amortization differences totaling $6,336,615 were reclassified from
accumulated undistributed net investment income to accumulated net realized
loss. A permanent book-to-tax difference related to capital losses brought
forward from the Target Fund of $82,383,366 was reclassified from accumulated
net realized loss to capital. Finally, $3,643,444 relating to a portion of the
capital loss carryforward that expired during the year was reclassified from
accumulated net realized loss to capital.
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, 2004, the
Fund's custody fee was reduced by $25,692 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:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .900%
Next $1.0 billion........................................... .850%
Next $1.0 billion........................................... .825%
Next $500 million........................................... .800%
Over $3.0 billion........................................... .775%
</Table>
Effective June 1, 2004 the management fee was reduced from .95% for the
first $4.0 billion, .90% for the next $3.5 billion, .875% for the next $2.5
billion, and .85% for any average daily net assets greater than $10.0 billion.
33
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
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 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.
For the year ended July 31, 2004, the Fund recognized expenses of
approximately $667,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, 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, 2004, the Fund recognized expenses of approximately $78,700
representing Van Kampen Investments Inc.'s or its affiliates (collectively "Van
Kampen") cost of providing legal services to the Fund, which are reported as
part of the "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, 2004, the Fund recognized expenses for these services of approximately
$1,821,200 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.
34
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
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.
<Table>
<Caption>
INTEREST/
PAR/ REALIZED DIVIDEND MARKET VALUE
NAME SHARES* GAIN/(LOSS) INCOME 7/31/04 COST
Aspen Marketing Group--
Term Loan................ $ 2,508,426 $1,003,370 $ 121,053 $ 1,881,319 $ 2,508,426
Aspen Marketing
Group--Revolver.......... $ 7,620,725 207,345 390,729 5,715,544 4,875,472
Aspen Marketing Group--
Common Shares............ 166,871 0 0 0 3,865,366
Chart Industries, Inc.--
Term Loan................ $ 6,770,456 (309,728) 384,817 6,757,762 8,123,667
Chart Industries, Inc.--
Common Shares............ 345,454 0 0 13,818,160 7,339,580
DecorateToday.com--Common
Shares................... 198,600 0 0 2,653,296 3,505,909
Imperial Home Decor Group,
Inc.--Term Loan.......... $ 5,044,842 0 0 126,121 5,015,112
Imperial Home Decor Group,
Inc.--Common Shares...... 1,816,143 0 0 0 1,852,465
London Fog Industries,
Inc.--Common Shares...... 515,922 0 1,960,504 4,473,044 33,576,536
Neoplan USA
Corp.--Revolver.......... $ 911,250 0 29,987 911,250 911,250
Neoplan USA Corp.--Common
Shares................... 8,517 0 0 85 85
Neoplan USA Corp.--
Preferred Shares......... 2,262 0 0 1,072,775 1,074,522
Orius Corp.--Term Loan..... $ 6,608,678 392,180 415,966 1,927,561 2,908,070
Orius Corp.--Revolver...... $ 4,330,904 0 150,883 3,356,450 3,418,256
Orius Corp.--Common
Shares................... 1,211,236 0 0 0 0
Safelite Glass Corp.--Term
Loan..................... $17,889,124 0 898,988 17,218,281 17,849,775
Safelite Glass Corp.--
Common Shares............ 724,479 0 0 6,860,816 3,912,187
Safelite Reality--Common
Shares................... 48,903 0 268,966 0 0
Trans World Entertainment
Corp.--Common Shares..... 3,789,962 0 0 37,634,323 69,498,017
---------- ----------
1,293,167 4,621,893
---------- ----------
</Table>
* Shares were acquired through the restructuring of senior loan interests.
35
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
Affiliate transactions during the year ended July 31, 2004 were as follows:
<Table>
<Caption>
PAR/SHARES PAR/SHARES REALIZED
AS OF GROSS GROSS AS OF GAIN/
NAME 7/31/03 ADDITIONS REDUCTIONS 7/31/04 (LOSS)
American Blind & Wallpaper
Factory, Inc., Term
Loan..................... $ 1,048,652 -- $ (1,048,652) $ -- $ 0
Aspen Marketing Group, Term
Loan..................... -- $2,508,426 -- $2,508,426 0
Aspen Marketing Group,
Revolver................. -- $7,620,725 -- $7,620,725 0
Aspen Marketing Group,
Common Shares............ -- 166,871 -- 166,871 0
Chart Industries, Term
Loan..................... -- $6,770,456 -- $6,770,456 0
Chart Industries, Common
Shares................... -- 345,454 -- 345,454 0
Imperial Home Decor Realty,
Inc., Common Shares...... 1,816,143 -- (1,816,143) -- 205,511
Kindred Healthcare, Inc.,
Term Loan................ $22,205,934 $5,958,284 $(28,164,218) $ -- 1,305,137
Kindred Healthcare, Inc.,
Common Shares............ 1,033,585 -- (1,033,585) -- 9,560,235
Neoplan USA Corp.,
Revolver................. -- $ 911,250 -- $ 911,250 0
Neoplan USA Corp., Common
Shares................... -- 8,517 -- 8,517 0
Neoplan USA Corp.,
Preferred Shares......... -- 2,262 -- 2,262 0
Orius Corp., Term Loan..... $ 7,405,983 -- $ (797,305) $6,608,678 392,180
United Fixtures Holdings,
Inc., Term Loan.......... $ 3,395,671 -- $ (3,395,671) $ -- (1,971,239)
United Fixtures Holdings,
Inc., Common and
Preferred Shares......... 249,830 -- (249,830) -- (535,486)
-----------
$ 8,956,338
</Table>
36
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
3. CAPITAL TRANSACTIONS
At July 31, 2004, capital aggregated $2,726,802,656 and $492,178,705 for
Classes B and C, respectively. For the year ended July 31, 2004, transactions
were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class B................................................... 4,640,807 $ 40,897,370
Class C................................................... 12,758,204 113,149,741
----------- -------------
Total Sales................................................. 17,399,011 $ 154,047,111
=========== =============
Dividend Reinvestment:
Class B................................................... 3,570,320 $ 31,188,668
Class C................................................... 430,382 3,762,980
----------- -------------
Total Dividend Reinvestment................................. 4,000,702 $ 34,951,648
=========== =============
Repurchases:
Class B................................................... (45,234,810) $(398,226,471)
Class C................................................... (5,969,999) (52,591,158)
----------- -------------
Total Repurchases........................................... (51,204,809) $(450,817,629)
=========== =============
</Table>
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:
<Table>
<Caption>
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)
=========== =============
</Table>
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 carryforward of
$171,295,614 of which $88,912,248 can be utilized by Senior Loan Fund,
37
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
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 $1,876,994,136 and
$2,154,206,365, 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, 2004, 51,204,809 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 Class B shares held for less than five years and Class C
shares held less than one year 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.
<Table>
<Caption>
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% --
</Table>
For the year ended July 31, 2004, Van Kampen received early withdrawal
charges of approximately $616,700, 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 $79,061,093 as of July 31, 2004. The
Fund generally will maintain with its custodian short-term investments having an
aggregate value at least equal to the amount of unfunded loan commitments.
The Fund has entered into a revolving credit agreement with a syndicate led
by Bank One for an aggregate of $300,000,000, which will terminate on October
12, 2006. 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
38
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
commitment fees of .13% are charged on the unused portion of the credit line.
For the year ended July 31, 2004, the Fund recognized commitment fee expenses of
approximately $512,400. Borrowings under this facility will bear interest at the
Eurodollar rate plus 1.00%. For the year ended July 31, 2004, the average daily
balance of borrowings under the revolving credit agreement was $1,338,798 with a
weighted average interest rate of 1.08%.
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, 2004, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Fund on a participation
basis.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SELLING PARTICIPANT (000) (000)
Bank of America............................................. $3,967 $3,715
------ ------
Total....................................................... $3,967 $3,715
====== ======
</Table>
9. 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.
Annual fees under the Plan of .15% (.25% maximum) of average daily net
assets are accrued daily and paid monthly to Van Kampen for Class C. Of this
amount, Van Kampen paid Morgan Stanley DW Inc., an affiliate of the Advisor,
approximately $62,500 for the year ended July 31, 2004.
10. 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.). The ultimate
outcome of this action is not presently determinable and no provision has been
made in the Fund's financial statements for the effect, if any, of this action.
39
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2004 continued
11. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
40
VAN KAMPEN SENIOR LOAN FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, and the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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, 2004, 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 provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Senior Loan Fund as of July 31, 2004, the results of its operations, its
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 10, 2004
41
VAN KAMPEN SENIOR LOAN FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
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 LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
42
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments
Inc. ("Van Kampen Investments"), Van Kampen Asset Management ("Asset Management"
or the "Adviser"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen
Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc.
("Investor Services"). The term "Fund Complex" includes each of the investment
companies advised by the Adviser or its 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:
<Table>
<Caption>
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 85 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. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturer's
Association.
</Table>
43
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (63) Trustee Trustee President of CAC, L.L.C., 85 Trustee/Director/Managing
CAC, L.L.C. since 1988 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Stericycle,
San Diego, CA 92122-6223 advisory services. Prior Inc., TheraSense, Inc.,
to February 2001, Vice GATX Corporation, Vantana
Chairman and Director of Medical Systems, Inc. and
Anixter International, Trustee of The Scripps
Inc. and IMG Global Inc. Research Institute and
Prior to July 2000, the University of Chicago
Managing Partner of Hospitals and Health
Equity Group Corporate Systems. Prior to January
Investment (EGI), a 2004, Director of
company that makes TeleTech Holdings Inc.
private investments in and Arris Group, Inc.
other companies. 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.
</Table>
44
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Howard J Kerr (68) Trustee Trustee Prior to 1998, President 85 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.
Hugo F. Sonnenschein (63) Trustee Trustee President Emeritus and 85 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.
</Table>
45
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEES:*
<Table>
<Caption>
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* (58) Trustee Trustee Advisory Director of 85 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* (65) Trustee Trustee Partner in the law firm 85 Trustee/Director/Managing
333 West Wacker Drive since 1988 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the
Fund Complex.
</Table>
* 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 Adviser by reason of
their current or former positions with Morgan Stanley or its affiliates.
46
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS
<Table>
<Caption>
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
Stefanie V. Chang (37) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Secretary since 2003 Vice President of funds in the Fund Complex.
New York, NY 10020
Amy Doberman (42) Vice President Officer Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management, Inc., Morgan Stanley Investment Advisers Inc.
and the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex as of August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeitus Investment Management,
Inc from January 1997 to July 2000.
James M. Dykas (38) Chief Financial Officer Officer Executive Director of Van Kampen Asset Management and Morgan
1 Parkview Plaza and Treasurer since 1999 Stanley Investment Management. Chief Financial Officer and
Oakbrook Terrace, IL 60181 Treasurer of funds in the Fund Complex. Prior to August
2004, Assistant Treasurer of funds in the Fund Complex.
Joseph J. McAlinden (61) 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 Adviser and Van Kampen
Advisors Inc. since December 2002.
</Table>
47
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Ronald E. Robison (65) Executive Vice Officer Principal Executive Officer--office of the Funds (since
1221 Avenue of the Americas President and since 2003 November 2003). Chief Executive Officer and Chairman of
New York, NY 10020 Principal Executive Investor Services. Executive Vice President and Principal
Officer Executive Officer of funds in the Fund Complex. Managing
Director of Morgan Stanley. Chief Administrative Officer,
Managing Director and Director of Morgan Stanley Investment
Advisors Inc., Morgan Stanley Services Company Inc. and
Managing Director and Director of Morgan Stanley
Distributors Inc. Chief Executive Officer and Director of
Morgan Stanley Trust. Executive Vice President and Principal
Executive Officer of the Institutional and Retail Morgan
Stanley Funds; Director of Morgan Stanley SICAV; previously
Chief Global Operations Officer and Managing Director of
Morgan Stanley Investment Management Inc.
James L. Sullivan (49) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1998 August 2004. Director and Managing Director of Van Kampen
Oakbrook Terrace, IL 60181 Investments, the Adviser, Van Kampen Advisors Inc. and
certain other subsidiaries of Van Kampen Investments. Prior
August 2004, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management. Prior
to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
Howard Tiffen (56) 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.
</Table>
48
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
The Statement of Additional Information includes additional information about
Fund trustees and is available, without charge, upon request by calling
1-800-847-2424.
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)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 59, 359
SLF ANR 9/04 RN04-01954P-Y07/04
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 not 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 11A.
(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, "independent" Trustee Rod
Dammeyer. Under applicable securities laws, a person who is determined to be an
audit committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2004
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES........................... $108,080 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES......... $0 $230,000(2)
TAX FEES................... $ 2,100(3) $0(4)
ALL OTHER FEES............. $0 $0(5)
TOTAL NON-AUDIT FEES................. $ 2,100 $230,000
TOTAL................................ $110,180 $230,000
2003
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES........................... $121,050 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES......... $ 3,750(7) $95,000(2)
TAX FEES................... $ 2,000(3) $0(4)
ALL OTHER FEES............. $0 $0(6)
TOTAL NON-AUDIT FEES................. $ 5,750 $95,000
TOTAL................................ $126,800 $95,000
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors)
and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically
attestation services provided in connection with a SAS 70
Report.
(3) Tax Fees represent tax advice and compliance services provided
in connection with the review of the Registrant's tax.
(4) Tax Fees represent tax advice services provided to Covered
Entities, including research and identification of PFIC
entities.
(5) All Other Fees represent attestation services provided in
connection with performance presentation standards.
(6) All Other Fees represent attestation services provided in
connection with performance presentation standards, general
industry education seminars provided, and a regulatory review
project performed.
(7) Audit-Related Fees represent agreed upon procedures related to
the Registrant's letter of credit agreement.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider
whether such services are consistent with the SEC's rules on auditor
independence. The Audit Committee will also consider whether the Independent
Auditors are best positioned to provide the most effective and efficient
services, for reasons such as its familiarity with the Fund's business, people,
culture, accounting systems, risk profile and other factors, and whether the
service might enhance the Fund's ability to manage or control risk or improve
audit quality. All such factors will be considered as a whole, and no one factor
should necessarily be determinative.
The Audit Committee is also mindful of the relationship between fees
for audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax
and All Other services that have the general pre-approval of the Audit
Committee. The term of any general pre-approval is 12 months
- ----------------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval
Policy and Procedures (the "Policy"), adopted as of the date above, supercedes
and replaces all prior versions that may have been adopted from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have the
meanings as defined in the Joint Audit Committee Charter.
from the date of pre-approval, unless the Audit Committee considers and provides
a different period and states otherwise. The Audit Committee will annually
review and pre-approve the services that may be provided by the Independent
Auditors without obtaining specific pre-approval from the Audit Committee. The
Audit Committee will add to or subtract from the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes
that implementation of the Policy will not adversely affect the Independent
Auditors' independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the
Audit Committee, the Audit Committee may grant general pre-approval to other
Audit services, which are those services that only the Independent Auditors
reasonably can provide. Other Audit services may include statutory audits and
services associated with SEC registration statements (on Forms N-1A, N-2, N-3,
N-4, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the following Audit services. All
other Audit services not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
- Statutory audits or financial audits for the Fund
- Services associated with SEC registration statements (including new
funds), periodic reports and other documents filed with the SEC or
other documents issued in connection with securities offerings (e.g.,
comfort letters for closed-end fund offerings, consents), and
assistance in responding to SEC comment letters
- Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or standard
setting bodies (Note: Under SEC rules, some consultations may be "audit
related" services rather than "audit" services)
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the following Audit-related
services. All other Audit-related services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Attest procedures not required by statute or regulation (including
agreed upon procedures related to the Closed-End Fund asset coverage
tests required by the rating agencies and/or lenders)
- Due diligence services pertaining to potential fund mergers
- Issuance of SAS-70 reports on internal controls of Morgan Stanley
Trust Co. and MSIM Trade Operations
- Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or
standard-setting bodies (Note: Under SEC rules, some consultations may
be "audit" services rather than "audit-related" services)
- Information systems reviews not performed in connection with the audit
(e.g., application data center and technical reviews)
- General assistance with implementation of the requirements of SEC rules
or listing standards promulgated pursuant to the Sarbanes-Oxley Act
- Audit of record keeping services performed by Morgan Stanley Trust Fund
related to the New Jersey State Retirement Plan
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide
Tax services to the Fund and, to the extent they are Covered Services, the
Covered Entities, such as tax compliance, tax planning and tax advice without
impairing the auditor's independence, and the SEC has stated that the
Independent Auditors may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax services that have
historically been provided by the Independent Auditors, that the Audit Committee
has reviewed and believes would not impair the independence of the Independent
Auditors, and that are consistent with the SEC's rules on auditor independence.
The Audit Committee will not permit the retention of the Independent Auditors in
connection with a transaction initially recommended by the Independent Auditors,
the sole business purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code and related regulations.
The Audit Committee will consult with Director of Tax or outside counsel to
determine that the tax planning and reporting positions are consistent with this
policy.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the following Tax Services. All Tax services involving large and
complex transactions not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any
executive officer or trustee/director/managing general partner of the Fund, in
his or her individual capacity, where such services are paid for by the Fund
(generally applicable only to internally managed investment companies):
- U.S. federal, state and local tax planning and advice
- U.S. federal, state and local tax compliance
- International tax planning and advice
- International tax compliance
- Review of federal, state, local and international income, franchise,
and other tax returns
- Identification of Passive Foreign Investment Companies
- Review of closed-end funds pro rata allocation of taxable income and
capital gains to common and preferred shares.
- Domestic and foreign tax planning, compliance, and advice
- Assistance with tax audits and appeals before the IRS and similar
state, local and foreign agencies
- Tax advice and assistance regarding statutory, regulatory or
administrative developments (e.g., excise tax reviews, evaluation of
Fund's tax compliance function)
- Review the calculations of taxable income from corporate actions
including reorganizations related to bankruptcy filings and provide
guidance related to the foregoing
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the following All Other services.
Permissible All Other services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Risk management advisory services, e.g., assessment and testing of
security infrastructure controls
The following is a list of the SEC's prohibited non-audit services. The
SEC's rules and relevant guidance should be consulted to determine the precise
definitions of these services and the applicability of exceptions to certain of
the prohibitions:
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions or contribution-in-
kind reports
- Actuarial services
- Internal audit outsourcing services
- Management functions
- Human resources
- Broker-dealer, investment adviser or investment banking services
- Legal services
- Expert services unrelated to the audit
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be
provided by the Independent Auditors will be established annually by the Audit
Committee. Any proposed services exceeding these
levels or amounts will require specific pre-approval by the Audit Committee. The
Audit Committee is mindful of the overall relationship of fees for audit and
non-audit services in determining whether to pre-approve any such services. For
each fiscal year, the Audit Committee may determine the appropriate ratio
between the total amount of fees for Audit, Audit-related, and Tax services for
the Fund (including any Audit-related or Tax services fees for Covered Entities
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the
Independent Auditors that do not require specific approval by the Audit
Committee will be submitted to the Fund's Chief Financial Officer and must
include a detailed description of the services to be rendered. The Fund's Chief
Financial Officer will determine whether such services are included within the
list of services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be informed on a timely basis of any such
services rendered by the Independent Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Fund's
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer
to monitor the performance of all services provided by the Independent Auditors
and to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. Both the Fund's Chief Financial Officer
and management will immediately report to the chairman of the Audit Committee
any breach of this Policy that comes to the attention of the Fund's Chief
Financial Officer or any member of management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an
annual basis to meet its responsibility to oversee the work of the Independent
Auditors and to assure the auditor's independence from the Fund, such as
reviewing a formal written statement from the Independent Auditors delineating
all relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any
entity controlling, controlled by or under common control with the Fund's
investment adviser(s) that provides ongoing services to the Fund(s). Beginning
with non-audit service contracts entered into on or after May 6, 2003, the
Fund's audit committee must pre-approve non-audit services provided not only to
the Fund but also to the Covered Entities if the engagements relate directly to
the operations and financial reporting of the Fund. This list of Covered
Entities would include:
- Van Kampen Investments, Inc.
- Van Kampen Investment Advisory Corporation
- Van Kampen Asset Management Inc.
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Trust Company
- Van Kampen Investor Services Inc.
- Van Kampen Management Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Investments LP
- Morgan Stanley Trust Company
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Fund invests in exclusively non-voting securities and therefore this item is
not applicable to the Fund.
Item 8. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not Applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 10. 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 most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Senior Loan Fund
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: September 20, 2004
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 20, 2004
By: /s/ James M. Dykas
------------------
Name: James M. Dykas
Title: Principal Financial Officer
Date: September 20, 2004