UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5845
Van Kampen Senior Loan Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas New York, New York 10020
- --------------------------------------------------------------------------------
(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: 7/31/05
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, 2005.
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 7/31/05
Current Distribution (July 31, 1995--July 31, 2005)
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND 3-MONTH TREASURY BILL*
--------------------------- ----------------------
7/95 8.02 5.65
8.01 5.51
8.02 5.48
8.03 5.58
8.03 5.56
10.02 5.14
5.54 5.11
7.31 5.09
7.26 5.20
7.12 5.22
6.94 5.24
6.80 5.22
7/96 6.80 5.37
6.80 5.35
7.00 5.09
7.01 5.21
7.01 5.19
8.60 5.23
5.43 5.21
7.02 5.28
7.02 5.39
7.03 5.30
7.78 5.00
6.27 5.23
7/97 6.80 5.30
6.80 5.28
6.80 5.16
6.80 5.26
6.79 5.26
8.38 5.41
6.79 5.24
6.78 5.38
6.80 5.18
6.80 5.03
6.79 5.07
6.78 5.14
7/98 6.78 5.13
7.24 4.88
6.95 4.40
7.37 4.36
6.46 4.53
7.03 4.50
4.85 4.50
6.20 4.72
6.21 4.52
7.26 4.58
5.44 4.68
6.44 4.83
7/99 6.90 4.80
6.15 5.02
7.22 4.91
5.95 5.15
6.82 5.37
6.84 5.39
5.48 5.77
6.96 5.86
7.35 5.95
7.04 5.91
7.26 5.69
8.03 5.94
7/00 7.11 6.31
7.61 6.40
8.05 6.30
8.35 6.49
8.80 6.29
8.22 5.98
9.06 5.05
9.32 4.91
7.96 4.33
6.76 3.92
6.74 3.64
6.52 3.68
7/01 6.30 3.55
6.14 3.39
5.45 2.38
5.29 2.02
4.99 1.73
4.31 1.73
4.06 1.76
3.97 1.76
3.92 1.78
3.90 1.77
4.05 1.73
3.83 1.69
7/02 4.15 1.70
4.61 1.68
4.10 1.55
4.50 1.45
4.34 1.21
4.02 1.19
4.08 1.17
3.98 1.19
4.10 1.11
3.79 1.11
3.95 1.10
3.45 0.85
7/03 3.53 0.94
3.38 0.97
3.33 0.94
3.28 0.95
3.24 0.93
3.22 0.92
3.19 0.91
3.07 0.94
3.06 0.94
2.98 0.96
2.98 1.06
2.96 1.26
7/04 2.96 1.43
3.00 1.58
3.16 1.71
3.32 1.90
3.31 2.23
3.50 2.22
3.71 2.46
3.89 2.75
3.88 2.77
3.89 2.89
4.15 2.95
4.40 3.12
7/05 4.39 3.40
</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>
IB SHARES IC SHARES
A SHARES B SHARES C SHARES SINCE SINCE
since 2/18/2005 since 2/18/2005 since 2/18/2005 10/04/1989 6/13/2003
- ----------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/O SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 1.75% -1.60% 1.41% -1.59% 1.41% 0.41% 5.99% 8.88%
10-year N/A N/A N/A N/A N/A N/A 4.91 N/A
5-year N/A N/A N/A N/A N/A N/A 3.88 N/A
1-year N/A N/A N/A N/A N/A N/A 5.18 4.98
- ----------------------------------------------------------------------------------------------------------------
</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 REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
The returns shown in this report do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Performance of share classes will vary due to differences in sales charges and
expenses. Average annual total return with sales charges includes payment of the
maximum sales charge of 3.25 percent for Class A shares, an early withdrawal
charge of 3.00 percent for Class B shares (in year one and declining to zero
after year five), an early withdrawal charge of 1.00 percent for Class C shares
in year one, and combined distribution fees and service fees of up to 0.25
percent for Class A shares and up to 1.00 percent for Class B and C shares and a
service fee of up to 0.15 percent for Class IC shares. Figures shown above
assume reinvestment of all distributions. The fund's adviser has waived or
reimbursed fees and expenses from time to time; absent such
waivers/reimbursements, the fund's returns would have been lower.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED JULY 31, 2005
Van Kampen Senior Loan Fund is managed by the Adviser's Senior Loans team, led
by Howard Tiffen, Managing Director of the Adviser and Christina Jamieson,
Executive Director of the Advisor.(1)
MARKET OVERVIEW
The senior loan market demonstrated continued strength for the 12-month period
ended July 31, 2005. Despite rising oil prices, the pace of economic growth
stayed on track and inflation remained contained. Many corporations posted
earnings announcements that reflected healthy balance sheets and well-executed
strategies. A weakening U.S. dollar further benefited a number of companies
within the senior loan market, including those in the chemical, steel, and
forest product and paper industries. (A weaker dollar makes U.S. exports more
competitive in foreign markets, while making foreign imports more expensive to
U.S. consumers). Against this backdrop of enhanced profitability, the credit
quality of corporate debt improved and helped to boost the senior loan market.
Companies actively took advantage of this favorable environment and issued a
significant amount of new senior loans during the period. This issuance was more
than met by investor demand, which was strong across both the primary and
secondary markets. Continuing the trends of recent years, improving credit
qualities and significantly lower default rates encouraged increased
participation in the senior loan market, particularly among institutional
investors. The sector's appeal was further enhanced by rising short- and
intermediate-term interest rates, which buoyed the yields of senior loans and
underscored the defensive characteristics of the asset class. (The yields of
senior loans adjust in response to changes in short-term interest rates.)
PERFORMANCE ANALYSIS
The fund returned 5.18 percent for the 12 months ended July 31, 2005, (Class IB
shares, unadjusted for sales charges).
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JULY 31, 2005
<Table>
<Caption>
- -------------------------------
CLASS IB CLASS IC
5.18% 4.98%
- -------------------------------
</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 from time to time.
2
Seeking to balance attractive yields with a relatively stable net asset value,
we followed a disciplined investment approach which was anchored by our rigorous
fundamental research. Consistent with our long-standing practice, the portfolio
construction process focused upon identifying companies with strong management,
solid and predictable cash flows, and sufficient collateral in the event of
default. It is our view that the merits of this approach are reflected in the
portfolio's performance for the 12-month period and likely would be further
evidenced during a cyclical downturn.
To help manage overall risk, we diversified the portfolio's assets across both
individual securities and sectors. While individual security selection drives
the investment process, we also carefully weighed broader sectors. As we have
historically, we generally eschewed the debt of cyclical companies, whose
fortunes may be particularly vulnerable to changes in the economy, preferring
instead senior loans from sectors with greater potential stability throughout
the economic cycle.
Accordingly, our investment discipline led us to more-defensive segments of the
market. We favored the defense industry, where long-term demand trends remain
supportive and companies hold considerable hard assets. We emphasized companies
that offer goods and services used on a regular basis, including food, drug and
beverage companies and ecological (waste management) companies. Meanwhile, we
were particularly cautious with automotive debt. Given the ongoing travails of
the auto sector, the outlook for specific automotive manufacturers and their
suppliers remains clouded. We avoided homebuilders due to their extreme
vulnerability to the fortunes of the real estate market; as well as clothing
manufacturers, where overseas competition has increased sharply. We were
similarly circumspect in regard to the telecommunications sector. Here too,
competition has been fierce, dominant technologies have changed rapidly, and
companies tend not to hold significant hard-asset collateral.
While the bulk of the portfolio was invested in senior loans, the fund also
included a small stake in equities, which it held as the result of company
restructurings. During the period, equity exposure contributed some volatility.
As of the close of the reporting period, our analysis suggests continued bright
prospects for the senior loan market, and we look forward to pursuing the most
compelling opportunities. The economy has shown continued signs of growth, and
corporate profits and pricing power have remained largely intact for the
borrowers in the senior loan market. Such factors, in our view, support a
favorable environment for continued free cash flow and our expectation that
credit quality will not weaken significantly. That said, we intend to view with
added caution those companies that are heavily exposed to fuel prices.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the fund in the future.
3
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 7/31/05
Entertainment & Leisure 8.7%
Hotels, Motels, Inns & Gaming 8.6
Broadcasting--Cable 7.8
Chemicals, Plastics & Rubber 7.1
Printing & Publishing 6.4
Healthcare 6.0
Beverage, Food & Tobacco 6.0
Containers, Packaging & Glass 4.3
Automotive 3.9
Buildings & Real Estate 3.8
Electronics 3.2
Natural Resources 3.0
Aerospace/Defense 3.0
Ecological 2.6
Finance 2.2
Utilities 2.1
Healthcare & Beauty 1.9
Diversified Manufacturing 1.8
Telecommunications--Local Exchange Carriers 1.7
Insurance 1.6
Pharmaceuticals 1.6
Retail--Stores 1.4
Retail--Oil & Gas 1.4
Restaurants & Food Services 1.4
Mining, Steel, Iron & Non-Precious Metals 1.2
Home & Office Furnishings, Housewares & Durable Consumer
Products 1.2
Medical Products & Services 1.2
Retail--Specialty 1.1
Personal & Miscellaneous Services 1.1
Construction Material 1.0
Telecommunications--Wireless 1.0
Machinery 0.9
Transportation--Cargo 0.7
Non-Durable Consumer Products 0.7
Business Equipment 0.6
Paper & Forest Products 0.6
Broadcasting--Radio 0.4
Textiles & Leather 0.3
Transportation--Rail Manufacturing 0.3
Broadcasting--Television 0.2
Telecommunications--Long Distance 0.2
Broadcasting--Diversified 0.1
Transportation--Personal 0.0
-----
Total Long-Term Investments 104.3%
Short-Term Investments 2.2
Borrowings (5.6)
Liabilities in Excess of Other Assets (0.9)
-----
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 sectors shown above. Summary of investments by industry
classification percentages are as a percentage of net assets. Securities are
classified by sectors that represent broad groupings of related industries. 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 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
5
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 1-800-341-2911 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 POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free 800-847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 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
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 25, 2005, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. Finally, the Board considered materials it had received in
approving a change in the advisory fee rate effective June 1, 2004. The Board of
Trustees considered the contract over a period of several months and the non-
management trustees held sessions both with the investment adviser and separate
from the investment adviser in reviewing and considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
existing and alternative breakpoints in the Fund's investment advisory fee
schedule. The Board of Trustees considered comparative advisory fees of the Fund
and other investment companies and/or other products at different asset levels,
and considered the trends in the industry versus historical and projected assets
of the Fund. The Board of Trustees evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of
7
factors control or dominate the review process, and, after considering all
factors together, has determined, in the exercise of its business judgment, that
approval of the investment advisory agreement is in the best interests of the
Fund and its shareholders. The following summary provides more detail on certain
matters considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The Fund discloses
information about its portfolio management team members and their experience in
its prospectus. The trustees also discuss certain other services which are
provided on a cost-reimbursement basis by the investment adviser or its
affiliates to the Van Kampen funds including certain accounting, administrative
and legal services. The Board has determined that the nature, extent and quality
of the services provided by the investment adviser support its decision to
approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, a performance committee of the
Board spends more focused time on the performance of the Fund and other funds in
the Van Kampen complex, paying specific attention to underperforming funds. The
trustees discuss with the investment adviser the performance goals and the
actual results achieved in managing the Fund. When considering a fund's
performance, the trustees and the investment adviser place emphasis on trends
and longer-term returns (focusing on one-year, three-year and five-year
performance with special attention to three-year performance) and, when a fund's
weighted performance is under the fund's benchmark, they discuss the causes and
where necessary seek to make specific changes to investment strategy or
investment personnel. The Fund discloses more information about its performance
elsewhere in this report. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Fund discloses more information about its fees and expenses in its prospectus.
The Board has determined that the performance, fees and expenses of the Fund
support its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put
8
together by the investment adviser with the oversight of a special ad hoc
committee of the Board. The trustees discuss with the investment adviser its
revenues and expenses, including among other things, revenues for advisory
services, portfolio management-related expenses, revenue sharing arrangement
costs and allocated expenses both on an aggregate basis and per fund. The Board
has determined that the analysis of the investment adviser's expenses and
profitability support its decision to approve the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
and growth prospects of the Fund and how that relates to the Fund's expense
ratio and particularly the Fund's advisory fee rate. In conjunction with its
review of the investment adviser's profitability, the trustees discuss with the
investment adviser how more (or less) assets can affect the efficiency or
effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current and projected asset levels and/or
whether the advisory fee structure reflects economies of scale as asset levels
change. The Board has determined that its review of the actual and potential
economies of scale of the Fund support its decision to approve the investment
advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and it affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
9
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
VARIABLE RATE** SENIOR LOAN INTERESTS 101.0%
AEROSPACE/DEFENSE 3.0%
$ 8,674 Alion Science and
Technology Corp., Term 5.63 to
Loan...................... B1 B+ 5.74% 08/02/09 $ 8,695,766
2,850 AM General, LLC, Term Loan 7.91 to
(a)....................... NR NR 8.11 11/01/11 2,972,906
1,884 Anteon International
Corp., Term Loan (a)...... Ba2 BB 5.24 12/31/10 1,907,667
2,496 Apptis, Inc., Term Loan... B2 B+ 6.68 01/05/10 2,513,160
3,654 ARINC, Inc., Term Loan.... Ba3 BB 5.48 03/10/11 3,710,840
2,779 Ceradyne, Inc., Term
Loan...................... Ba3 BB- 5.63 08/18/11 2,817,211
1,650 DRS Technologies, Inc., 5.04 to
Term Loan................. Ba3 BB- 5.65 11/04/10 1,667,547
6,185 DynCorp International,
LLC., Term Loan........... B2 B+ 6.06 02/11/11 6,263,093
2,187 ILC Industries, Inc., Term
Loan...................... NR NR 6.24 08/05/10 2,200,131
9,899 K&F Industries, Inc., Term 5.98 to
Loan...................... B2 B+ 6.15 11/16/12 10,048,784
4,190 SI International, Inc., 5.78 to
Term Loan................. B1 B+ 5.99 02/09/11 4,262,816
10,600 Spirit AeroSystems, Inc.,
Term Loan................. B1 BB- 5.58 12/31/11 10,792,125
1,478 TransDigm, Inc.,
Term Loan................. B1 B+ 5.80 07/22/10 1,501,557
4,963 Wyle Laboraties, Inc.,
Term Loan................. NR B+ 5.96 01/28/11 5,044,757
--------------
64,398,360
--------------
AUTOMOTIVE 3.9%
6,467 Accuride Corp., Term Loan 5.50 to
(a)....................... B2 B+ 5.69 01/31/12 6,529,928
2,388 Affinia Group, Inc., Term
Loan (a).................. B2 BB 6.40 11/30/11 2,400,687
19,234 Federal-Mogul Corp., Term
Loan (b).................. NR NR 7.24 12/09/05 19,282,634
8,855 Federal-Mogul Corp.,
Revolving Credit Agreement
(b)....................... NR NR 7.24 12/09/05 8,887,978
2,373 Heartland Automotive
Holdings,Inc., Term 6.59 to 01/31/10 to
Loan...................... NR NR 10.34 01/31/12 2,372,635
10,474 MetoKote Corp., 6.42 to
Term Loan................. B2 B+ 6.68 11/27/11 10,539,211
4,301 Polypore, Inc., Term
Loan...................... B1 B 5.74 11/12/11 4,331,464
16,442 Safelite Glass
Corporation, Term Loan 8.50 to
(c)....................... NR NR 9.00 09/30/07 15,208,591
</Table>
10 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
AUTOMOTIVE (CONTINUED)
$ 3,574 Tenneco Automotive, Inc.,
Term Loan................. B1 B+ 5.54% 12/12/10 $ 3,624,595
9,055 TRW Automotive, Inc., Term 4.94 to 10/29/10 to
Loan...................... Ba2 BB+ 5.25 06/30/12 9,137,704
1,808 United Components, Inc.,
Term Loan................. B1 BB- 5.75 06/30/10 1,838,285
--------------
84,153,712
--------------
BEVERAGE, FOOD & TOBACCO 5.9%
5,955 Acosta Sales Co., Inc., 5.27 to
Term Loan (a)............. NR NR 6.75 08/10/10 6,038,745
9,319 Birds Eye Foods, Inc.,
Term Loan (a)............. B1 B+ 6.24 06/30/08 9,445,552
2,697 Commonwealth Brands, Inc.,
Term Loan (a)............. NR NR 6.81 08/28/07 2,747,439
5,755 Constellation Brands, 4.75 to
Inc., Term Loan........... Ba2 BB 5.69 11/30/11 5,851,316
1,300 Culligan International
Co., Term Loan............ B1 B+ 5.88 09/30/11 1,318,688
6,451 Doane Pet Care Co., Term 7.38 to
Loan...................... B2 B+ 7.43 11/05/09 6,574,901
9,157 Dole Food Co., Inc., Term 4.88 to 07/22/10 to
Loan...................... Ba3 BB 8.69 04/18/12 9,357,508
11,802 DS Waters Enterprises, LP,
Term Loan................. Caa2 CCC 7.99 11/07/09 11,477,566
6,009 Luigino's, Inc., Term 6.38 to
Loan...................... B1 B+ 6.50 04/02/11 6,069,444
8,205 Michael Foods, Inc., Term 5.09 to 11/21/10 to
Loan...................... B1 B+ 7.50 11/20/11 8,358,274
7,237 National Dairy Holdings,
LP, Term Loan............. B1 NR 5.49 03/15/12 7,340,905
3,000 National Distributing Co.,
Inc., Term Loan........... NR NR 9.96 06/22/10 3,007,500
1,323 OSI Foods GMBH & Co. KG,
Term Loan................. NR NR 5.74 09/02/11 1,342,081
4,632 OSI Group, LLC,
Term Loan................. NR NR 5.74 09/02/11 4,697,283
5,509 Pierre Foods, Inc., Term
Loan...................... B1 B+ 5.69 06/30/10 5,590,827
28,213 Pinnacle Foods, Inc., Term 6.22 to
Loan...................... B1 B+ 6.76 11/25/10 28,534,536
7,000 Sturm Foods, Inc., Term 6.25 to 05/26/11 to
Loan...................... NR NR 10.69 05/26/12 7,071,250
</Table>
See Notes to Financial Statements 11
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 957 Sunny Delight Beverage
Co., Term Loan............ B1 B+ 7.54% 08/20/10 $ 964,533
3,990 Volume Services America, 6.92 to
Inc., Term Loan........... B2 NR 7.50 10/01/10 4,029,900
--------------
129,818,248
--------------
BROADCASTING--CABLE 7.8%
5,333 Cebridge Connections, 6.40 to
Inc., Term Loan........... NR NR 8.50 02/23/09 5,352,497
8,700 Century Cable Holdings,
LLC, Term Loan (b)........ NR NR 8.25 06/30/09 8,623,101
56,470 Charter Communications
Operating, LLC, Term Loan 6.68 to 04/27/10 to
(a)....................... B2 B 6.93 04/07/11 56,268,227
10,904 Frontiervision Operating
Partners, LP, 7.65 to 09/30/05 to
Term Loan (b)............. NR NR 7.78 03/31/06 10,935,404
927 Frontiervision Operating
Partners, LP, Revolving
Credit Agreement (b)...... NR NR 7.65 10/31/05 928,762
12,959 Hilton Head
Communications, LP, Term
Loan (b).................. NR NR 7.50 03/31/08 12,712,219
14,740 Hilton Head
Communications, LP,
Revolving Credit Agreement
(b)....................... NR NR 6.25 09/30/07 14,389,925
2,893 Insight Midwest Holdings,
LLC, Term Loan............ Ba3 BB- 5.63 12/31/09 2,932,976
4,406 MCC Iowa, LLC, 5.35 to
Term Loan................. Ba3 BB- 5.51 02/01/14 4,464,019
44,255 Olympus Cable Holdings, 7.50 to 06/30/10 to
LLC, Term Loan (b)........ NR NR 8.25 09/30/10 43,771,832
7,039 Parnassos, LP, Term Loan
(b)....................... NR NR 6.25 06/30/07 7,005,009
3,961 Parnassos, LP, Revolving
Credit Agreement (b)...... NR NR 6.25 06/30/07 3,941,366
--------------
171,325,337
--------------
BROADCASTING--DIVERSIFIED 0.1%
2,600 Entravision Communications
Corp., Term Loan.......... B1 B+ 5.24 02/24/12 2,625,666
--------------
BROADCASTING--RADIO 0.4%
8,986 Spanish Broadcasting
Systems, Inc., Term 5.49 to 06/10/12 to
Loan...................... B1 B+ 7.03 06/10/13 9,118,856
--------------
</Table>
12 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
BROADCASTING--TELEVISION 0.2%
$ 3,570 NEP Supershooters, LP, 7.21 to
Term Loan................. B1 B 7.49% 02/03/11 $ 3,638,070
--------------
BUILDINGS & REAL ESTATE 3.8%
4,000 AIMCO Properties, LP, Term 5.16 to 11/02/09 to
Loan (a).................. NR NR 5.21 11/09/09 4,057,126
3,333 Biomed Realty, Inc., Term
Loan (a).................. NR NR 5.59 05/30/10 3,337,500
2,639 CB Richard Ellis Services, 5.03 to
Inc., Term Loan (a)....... Ba3 BB- 7.25 03/31/10 2,665,636
3,589 Central Parking Corp.,
Term Loan................. Ba3 BB- 5.49 03/31/10 3,610,565
2,894 Corrections Corp. of 5.25 to
America, Term Loan........ Ba3 BB 5.41 03/31/08 2,940,952
140 Corrections Corp. of
America, Revolving Credit
Agreement................. Ba3 BB 4.91 03/31/06 139,125
1,790 Crescent Real Estate
Funding XII, LP,
Term Loan................. NR NR 5.59 01/12/06 1,807,470
34,253 General Growth Properties, 5.49 to 11/12/07 to
LLC, Term Loan............ Ba2 BB+ 5.59 11/12/08 34,704,149
1,807 GEO Group, Inc., 5.96 to
Term Loan................. Ba3 BB- 5.99 07/09/09 1,829,701
6,000 Landsource Communities
Development, LLC, Term
Loan...................... NR NR 5.94 03/31/10 6,031,878
14,500 Macerich Partnership, LP, 4.89 to 04/25/06 to
Term Loan................. NR NR 6.75 04/25/10 14,536,875
2,500 Shea Mountain House, LLC,
Term Loan................. NR NR 5.27 05/11/11 2,509,375
4,500 South Edge, LLC, Term 5.31 to 10/31/07 to
Loan...................... NR NR 5.56 10/31/09 4,534,584
--------------
82,704,936
--------------
BUSINESS EQUIPMENT 0.6%
5,851 General Binding Corp., 7.64 to
Term Loan................. B2 B+ 7.99 01/15/08 5,862,150
4,506 Katun Corp., Term Loan.... NR B+ 7.74 06/30/09 4,517,393
3,660 Verifone, Inc., Term
Loan...................... B1 B+ 5.68 06/30/11 3,688,961
--------------
14,068,504
--------------
CHEMICALS, PLASTICS & RUBBER 7.0%
3,900 BCP Holding Corp., Term 5.60 to
Loan (a).................. B1 B+ 5.77 12/02/11 3,965,325
1,195 Becker-Underwood, Inc., 7.74 to 09/30/11 to
Term Loan................. NR NR 10.49 03/31/12 1,194,600
</Table>
See Notes to Financial Statements 13
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
CHEMICALS, PLASTICS & RUBBER (CONTINUED)
$ 6,500 Brenntag, AG (Germany),
Term Loan (a)............. B1 BB- 5.88% 02/27/12 $ 6,582,550
12,419 Celanese, AG (Germany),
Term Loan (a)............. B1 B+ 5.74 04/06/11 12,589,884
5,436 Hercules, Inc., Term 5.24 to
Loan...................... Ba1 BB 5.31 10/08/10 5,508,909
19,078 Huntsman ICI Chemicals,
LLC, Term Loan............ Ba3 BB- 5.75 12/31/10 19,137,457
26,909 Huntsman, LLC,
Term Loan................. B1 BB- 6.40 03/31/10 27,009,691
17,106 INVISTA (Netherlands), 5.24 to 04/30/10 to
Term Loan................. Ba3 BB 5.75 04/29/11 17,388,122
6,830 Kraton Polymers, LLC, Term 5.75 to
Loan...................... B1 B+ 6.44 12/23/10 6,941,052
5.45 to 11/04/09 to
21,286 Nalco Co., Term Loan...... B1 BB- 5.96 11/04/10 21,659,500
12,170 PQ Corp., Term Loan....... B1 B+ 5.50 02/11/12 12,317,822
16,119 Rockwood Specialties
Group, Inc., Term Loan.... B1 B+ 5.93 07/30/12 16,407,804
3,171 Unifrax Corp., Term
Loan...................... B1 B+ 5.75 03/29/12 3,216,854
--------------
153,919,570
--------------
CONSTRUCTION MATERIAL 1.0%
1,220 Builders FirstSource, 5.82 to
Inc., Term Loan (a)....... B1 BB- 6.19 08/11/11 1,233,216
1,960 Building Materials Holding
Corp., Term Loan (a)...... Ba2 BB- 5.00 06/30/10 1,969,800
4,823 Contech Construction
Products, Inc., Term 5.66 to
Loan...................... Ba3 BB- 7.50 12/07/10 4,892,774
3,731 Interline Brands, Inc.,
Term Loan................. B1 BB 5.74 12/31/10 3,777,891
5.06 to
432 Itron, Inc., Term Loan.... Ba3 BB- 7.50 07/01/11 436,663
1,600 Juno Lighting, Inc., Term 5.71 to
Loan...................... B1 B+ 7.75 11/21/10 1,608,000
1,540 Professional Paint, Inc., 6.63 to
Term Loan................. NR NR 6.94 09/30/11 1,563,100
5,290 Werner Holding Co., Inc., 7.35 to 06/11/09 to
Term Loan (f)............. B2 B- 13.25 12/11/09 5,285,808
--------------
20,767,252
--------------
CONTAINERS, PACKAGING & GLASS 4.3%
2,083 BWAY Corp.,
Term Loan (a)............. B1 B+ 5.75 06/30/11 2,115,425
1,188 Consolidated Container
Co., LLC, Term Loan....... B2 B- 6.69 12/15/08 1,203,593
</Table>
14 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING & GLASS (CONTINUED)
$18,913 Dr. Pepper/Seven Up
Bottling Group, Inc., Term 5.34 to
Loan...................... B1 NR 5.54% 12/19/10 $ 19,201,745
871 Fleming Packaging Corp.,
Term Loan (b) (d) (e)..... NR NR N/A 08/31/04 8,711
100 Fleming Packaging Corp.,
Revolving Credit Agreement
(b) (d) (e)............... NR NR N/A 03/31/03 1,000
7,107 Graham Packaging Co., Term 5.94 to 10/07/11 to
Loan...................... B2 B 7.75 04/07/12 7,259,698
15,492 Graphic Packaging
International Corp., Term 5.76 to
Loan...................... B1 B+ 6.19 06/30/10 15,719,273
271 Graphic Packaging
International Corp.,
Revolving Credit 6.49 to
Agreement................. B1 B+ 6.50 08/08/09 264,113
4,276 Impress Metal Packaging
Holding B.V.
(Netherlands), Term
Loan...................... NR B+ 6.91 12/31/06 4,286,593
3,663 Kranson Industries, Inc.,
Term Loan................. NR NR 6.24 07/30/11 3,708,788
13,387 Owens-Illinois, Inc., Term 5.12 to 04/01/07 to
Loan...................... B1 BB- 5.27 04/01/08 13,517,461
8,198 Packaging Dynamics, Term 5.49 to 09/29/08 to
Loan...................... NR NR 5.74 09/29/09 8,217,589
7,075 Smurfit-Stone Container 5.38 to
Corp., Term Loan.......... Ba3 BB- 5.56 11/01/11 7,192,386
2,759 Smurfit-Stone Container
Corp., Revolving Credit 5.63 to
Agreement................. Ba3 BB- 7.50 11/01/09 2,722,214
1,130 Solo Cup, Inc., Term 5.32 to
Loan...................... B1 B+ 5.49 02/27/11 1,144,500
6,927 U.S. Can Corp., Term 7.32 to
Loan...................... B3 B 7.65 01/15/10 6,962,024
--------------
93,525,113
--------------
DIVERSIFIED MANUFACTURING 1.0%
5,285 Chart Industries, Inc,
Term Loan (c)............. NR NR 6.94 09/15/09 5,298,470
7,900 Euramax International, 5.88 to 06/29/12 to
Inc., Term Loan........... B1 B- 10.55 06/29/13 8,011,750
9,423 Mueller Group, Inc., Term 6.07 to
Loan...................... B2 B+ 6.24 04/23/11 9,505,349
--------------
22,815,569
--------------
</Table>
See Notes to Financial Statements 15
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
ECOLOGICAL 2.6%
$21,873 Allied Waste North
America, Inc., Term Loan 5.37 to
(a)....................... B1 BB 5.67% 01/15/12 $ 22,048,852
6,435 Duratek, Inc., Term 6.55 to
Loan...................... B1 BB- 6.75 12/16/09 6,446,793
9,191 Envirocare of Utah, LLC, 6.11 to
Term Loan................. NR NR 8.86 04/13/10 9,262,040
3,065 Environmental Systems
Products Holdings, Term 6.82 to 12/12/08 to
Loan...................... Caa1 NR 13.68 12/12/10 3,132,464
3,884 Great Lakes Dredge & Dock 6.60 to
Corp., Term Loan.......... B3 CCC 7.40 12/22/10 3,874,702
1,496 Safety-Kleen Corp., Term 10.25 to
Loan...................... NR NR 10.49 09/15/08 1,522,434
2,914 Synagro Technologies,
Inc., Term Loan........... B2 BB- 5.68 06/21/12 2,937,964
2,370 Waste Services, Inc., Term 7.77 to
Loan...................... Caa1 B- 8.02 03/31/11 2,404,069
529 Waste Services, Inc.,
Revolving 7.77 to
Credit Agreement.......... Caa1 B- 7.98 04/29/09 518,311
5,486 WCA Waste Systems, Inc.,
Term Loan................. B3 B 6.55 04/28/11 5,499,966
--------------
57,647,595
--------------
ELECTRONICS 3.2%
5,985 AMI Semiconductor, Inc.,
Term Loan (a)............. Ba3 BB- 4.99 04/01/12 6,019,911
8,000 Amkor Technology, Inc.,
Term Loan (a)............. B1 B 7.79 10/27/10 8,240,000
4,988 Audio Visual Services
Corp., Term Loan.......... B1 NR 6.23 05/18/11 5,034,258
750 DoubleClick, Inc., Term
Loan...................... B2 B 7.38 07/13/12 761,250
1,136 Fairchild Semiconductor 5.25 to
Corp., Term Loan.......... Ba3 BB- 5.44 12/31/10 1,154,960
8,007 Knowles Electronics, Inc.,
Term Loan................. B3 NR 8.40 06/29/07 8,066,662
360 Knowles Electronics, Inc.,
Revolving
Credit Agreement.......... B3 NR 7.25 06/30/06 354,600
14,726 ON Semiconductor Corp.,
Term Loan................. B3 B+ 6.50 12/15/11 14,935,389
14,973 Spectrum Brands, Inc., 5.27 to
Term Loan................. B1 B+ 5.56 02/06/12 15,184,615
</Table>
16 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
ELECTRONICS (CONTINUED)
$ 6,724 UGS Corp., Term Loan...... B1 B+ 5.49% 03/31/12 $ 6,825,027
3,582 Viasystems, Inc.,
Term Loan................. B2 NR 7.64 09/30/09 3,617,820
--------------
70,194,492
--------------
ENTERTAINMENT & LEISURE 7.1%
5,000 24 Hour Fitness Worldwide,
Inc., Term Loan (a)....... B2 B 6.78 06/08/12 5,082,815
1,995 Alliance Atlantis
Communications, Inc., Term 5.21 to
Loan (a).................. Ba2 BB 7.00 12/20/11 2,026,172
2,555 Detroit Red Wings, Inc.,
Term Loan................. NR NR 6.24 08/30/06 2,561,880
8,994 Fender Musical Instruments 5.46 to 03/30/12 to
Corp., Term Loan.......... B1 B- 7.71 09/30/12 9,112,406
1,994 Festival Fun Parks, LLC, 8.14 to 06/30/07 to
Term Loan................. NR NR 8.64 12/31/07 1,985,332
50,000 Metro-Goldwyn-Mayer
Studios, Inc., Term
Loan...................... NR NR 5.74 04/08/12 50,600,000
1,692 Metro-Goldwyn-Mayer
Studios, Inc., Revolving 5.84 to
Credit Agreement.......... NR NR 5.99 04/08/10 1,637,308
4,000 New Jersey Basketball,
LLC, Term Loan............ NR NR 7.00 08/16/08 4,000,000
2,132 Panavision, Inc., 9.56 to
Term Loan................. B3 CCC 9.64 01/12/07 2,181,794
7,691 Pure Fishing, Inc., Term 6.48 to 09/30/10 to
Loan...................... B2 B- 9.39 03/31/11 7,786,416
20,013 Regal Cinemas, Inc., Term
Loan...................... Ba3 BB- 5.24 11/10/10 20,250,780
8,378 Six Flags Theme Parks, 5.97 to
Inc., Term Loan........... B1 B- 6.28 06/30/09 8,503,699
267 Six Flags Theme Parks,
Inc., Revolving Credit 6.09 to
Agreement................. B1 B- 6.24 06/30/08 262,167
3,750 Tiger Ballpark, LLC, Term
Loan...................... NR NR 6.13 12/01/06 3,756,967
7,611 True Temper Sports, Inc., 5.99 to
Term Loan................. B2 B 8.25 03/15/11 7,648,962
7,711 Universal City Development 5.27 to
Partners, LP, Term Loan... Ba3 BB- 5.6 06/09/11 7,814,064
13,952 WMG Acquisition Corp., 5.29 to
Term Loan................. B1 B+ 5.64 02/28/11 14,103,551
</Table>
See Notes to Financial Statements 17
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (CONTINUED)
$ 4,371 Worldwide Sports &
Recreation, Inc.,
Term Loan................. NR NR 7.24% 12/31/06 $ 4,381,896
1,509 Yankees Holdings, LP, Term 5.71 to
Loan...................... NR NR 5.83 06/25/07 1,519,886
--------------
155,216,095
--------------
FINANCE 2.2%
3,872 DCS Business Services, 6.99 to
Inc., Term Loan........... NR NR 8.99 02/04/11 3,881,346
17,413 Fidelity National
Information Solutions,
Inc., Term Loan........... Ba3 BB 5.1 03/09/13 17,468,464
8,500 Outsourcing Solutions,
Term Loan................. NR B- 7.92 09/30/10 8,563,750
5,398 Rent-A-Center, Inc., Term 5.17 to
Loan...................... Ba2 BB+ 5.38 06/30/10 5,463,272
4,774 Risk Management Assurance
Co., Term Loan (b) (d).... NR NR N/A 12/21/06 4,535,176
7,160 Transfirst Holdings, Inc., 03/31/10 to
Term Loan................. NR NR 7.5 to 03/31/11 7,202,650
--------------
47,114,658
--------------
HEALTHCARE 6.0%
4,003 Ameripath, Inc.,
Term Loan................. B2 B+ 6.58 03/27/10 4,038,420
2,678 AMN Healthcare Services,
Inc., Term Loan........... Ba2 BB- 6.49 10/02/08 2,718,445
29,164 Community Health Systems,
Inc., Term Loan (a)....... Ba3 BB- 5.07 08/19/11 29,592,344
5,828 Concentra Operating Corp., 5.80 to
Term Loan (a)............. B1 B+ 6.02 06/30/10 5,912,151
998 Diagnostic Imaging Group,
LLC, Term Loan............ B2 B+ 6.75 05/04/12 992,512
9,188 FHC Health Systems, Inc., 9.33 to 12/18/09 to
Term Loan................. B2 B 12.33 02/09/11 9,267,236
3,657 Healthtronics, Inc., Term
Loan...................... Ba3 BB- 5.25 03/23/11 3,693,233
42,640 LifePoint Hospitals, Inc.,
Term Loan................. Ba3 BB 5.01 04/15/12 43,074,033
2,774 Medcath Holdings Corp.,
Term Loan................. B2 B+ 5.88 06/30/11 2,805,197
2,431 Multiplan, Inc.,
Term Loan................. Ba3 B+ 6.24 03/04/09 2,447,266
</Table>
18 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$ 4,137 Pacificare Health Systems, 4.94 to
Inc., Term Loan........... Ba2 BBB- 5.19% 12/13/10 $ 4,156,859
20,113 Select Medical Corp., Term
Loan...................... B1 BB- 5.04 to 02/24/12 20,220,212
1,167 Select Medical Corp.,
Revolving 5.79 to
Credit Agreement.......... B1 BB- 6.15 02/24/11 1,160,834
1,980 Sterigenics International,
Inc., Term Loan........... B2 B+ 6.41 06/14/11 2,004,750
--------------
132,083,492
--------------
HEALTHCARE & BEAUTY 1.9%
5,189 American Safety Razor Co., 5.88 to 02/28/12 to
Term Loan (a)............. B2 CCC 9.38 08/28/12 5,249,863
96 American Safety Razor Co.,
Revolving Credit Agreement
(a)....................... B2 CCC 8.25 02/28/10 94,080
8,245 CEI Holdings, Inc., Term 6.01 to 12/03/10 to
Loan...................... NR NR 9.93 12/03/11 8,125,128
6,418 Del Laboratories, Inc., 5.96 to
Term Loan................. B2 B 6.48 07/27/11 6,377,639
5,977 Marietta Intermediate
Holding Corp., Term 6.6 to 12/17/10 to
Loan...................... NR NR 10.6 12/17/11 6,047,909
7,416 MD Beauty, Inc., 6.60 to 02/18/12 to
Term Loan................. B2 B 9.90 02/18/13 7,518,831
8,242 Prestige Brands Holdings, 5.18 to
Inc., Term Loan........... B1 B+ 7.50 04/06/11 8,331,784
--------------
41,745,234
--------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE
CONSUMER PRODUCTS 1.2%
6,132 Formica Corp., 8.27 to
Term Loan................. NR NR 9.75 06/10/10 6,162,998
4,239 Hunter Fan Co., 5.91 to
Term Loan................. B1 B 6.18 03/24/12 4,223,477
4,893 Imperial Home Decor Group,
Inc., Term Loan (c) (d)
(e)....................... NR NR N/A 04/04/06 122,337
3,751 National Bedding Co., Term 5.38 to
Loan...................... Ba3 BB- 5.74 12/31/10 3,803,802
11,516 Sealy Mattress Co., Term 5.08 to
Loan...................... B1 B+ 5.17 04/06/12 11,630,714
--------------
25,943,328
--------------
</Table>
See Notes to Financial Statements 19
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING 8.5%
$ 1,617 Alliance Gaming Corp.,
Term Loan (a)............. Ba3 BB- 6.77% 09/04/09 $ 1,620,923
2,096 CNL Hospitality Partners,
LP, Term Loan (a)......... NR NR 5.85 10/13/06 2,101,236
7,500 CNL Hotels & Resorts,
Inc., Term Loan (a)....... NR NR 5.47 02/09/08 7,518,750
4,286 Global Cash Access, LLC,
Term Loan................. B2 B+ 5.74 03/10/10 4,356,938
5,130 Greektown Casino, LLC,
Term Loan................. NR NR 6.99 12/31/05 5,158,951
4,938 Green Valley Ranch Gaming,
LLC, Term Loan............ B1 NR 5.49 12/17/11 5,002,495
3,791 Herbst Gaming, Inc., Term 5.38 to
Loan...................... B1 B+ 5.49 01/31/11 3,839,068
3,811 Interstate Operating Co.,
LP, Term Loan............. B2 B 9.00 01/14/08 3,816,085
605 Isle of Capri Casinos, 4.97 to
Inc., Term Loan........... Ba2 BB- 5.31 02/04/11 612,037
4,791 Kuilima Resort Co., Term 5.6 to 06/29/07 to
Loan...................... NR NR 6.38 09/29/07 4,779,380
2,092 Marina District Finance 5.13 to
Co., Term Loan............ NR NR 5.24 10/20/11 2,110,740
6,696 MGM Mirage, Term Loan..... Ba2 BB 5.13 04/25/10 6,745,815
16,206 MGM Mirage, Revolving 4.95 to
Credit Agreement.......... Ba2 BB 5.28 04/25/10 16,056,802
115 Planet Hollywood
International, Inc., Term
Loan (f).................. B3 B- 7.50 08/31/10 115,385
47,172 Planet Hollywood
International, Inc., Term
Loan...................... B3 B- 6.50 08/31/10 47,319,088
11,345 Resorts International
Hotel & Casino, Inc., Term 5.99 to 04/26/12 to
Loan...................... B3 B- 9.23 04/26/13 11,477,725
8,060 Scientific Games Corp.,
Term Loan................. Ba2 BB 5.24 12/23/09 8,166,957
2,800 Seminole Tribe of Florida,
Inc., Term Loan........... NR BB 5.81 09/30/11 2,845,500
11,749 Venetian Casino Resorts,
LLC, Term Loan............ B1 BB- 5.24 06/15/11 11,908,160
18,028 Wyndham International, 6.63 to 05/10/11 to
Inc., Term Loan........... Caa1 B 11.38 12/10/11 18,352,189
</Table>
20 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
$ 349 Wyndham International,
Inc., Revolving Credit
Agreement................. Caa1 B 6.63% 05/10/11 $ 347,422
21,938 Wynn Las Vegas, LLC, Term
Loan...................... B2 B+ 5.62 12/14/11 22,203,492
--------------
186,455,138
--------------
INSURANCE 1.6%
5,940 Alliant Resources Group, 6.88 to
Inc., Term Loan........... B2 B 8.75 08/31/11 5,984,550
1,911 CCC Information Services
Group, Inc., Term Loan.... B1 B+ 6.24 08/20/10 1,939,794
7,671 Conseco, Inc., Term
Loan...................... B2 BB- 6.99 06/22/10 7,746,322
5,580 Hilb, Rogal & Hamilton 5.25 to 12/15/09 to
Co., Term Loan............ Ba3 BB 5.75 12/15/11 5,621,014
1,046 Mitchell International,
Inc., Term Loan........... B1 B+ 6.24 08/15/11 1,062,202
9,676 USI Holdings Corp., Term
Loan...................... B1 BB- 6.18 08/11/08 9,718,450
3,521 Vertafore, Inc., 6.04 to 12/22/10 to
Term Loan................. NR NR 9.51 12/22/11 3,556,774
--------------
35,629,106
--------------
MACHINERY 0.9%
4,680 Alliance Laundry Holdings,
LLC, Term Loan (a)........ B1 B 5.59 01/27/12 4,756,050
1,592 Douglas Dynamics, LLC,
Term Loan................. B1 BB- 5.48 12/16/10 1,611,900
691 Flowserve Corp., Term
Loan...................... Ba3 BB- 5.25 06/30/06 694,316
9,161 Goodman Global Holdings,
Inc., Term Loan........... B2 B+ 5.88 12/23/11 9,301,265
2,469 United Rentals (North
America), Inc., Term
Loan...................... B1 BB 5.73 02/14/11 2,501,461
--------------
18,864,992
--------------
MEDICAL PRODUCTS & SERVICES 1.2%
3,582 American Medical
Instruments Holdings, 6.49 to
Inc., Term Loan........... B2 B+ 6.90 12/09/10 3,605,509
4,362 Center for Diagnostic
Imaging, Term Loan........ B2 B+ 6.99 12/31/10 4,340,522
1,657 Colgate Medical, Ltd 5.48 to
(England), Term Loan...... Ba2 BB- 5.49 12/30/08 1,674,422
9,614 Insight Health Services 7.24 to
Corp., Term Loan.......... B1 B 7.49 10/17/08 9,654,456
3,548 Kinetics Concepts, Inc.,
Term Loan................. Ba3 BB 5.24 08/11/10 3,589,695
</Table>
See Notes to Financial Statements 21
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES (CONTINUED)
$ 460 Rotech Healthcare, Inc.,
Term Loan................. Ba2 BB 6.49% 03/31/08 $ 463,554
2,400 The Cooper Cos., Term
Loan...................... Ba3 BB 5.00 01/06/12 2,416,500
--------------
25,744,658
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 1.2%
8,693 CII Carbon, LLC,
Term Loan................. NR NR 5.59 06/25/08 8,605,627
3,703 New Enterprise Stone &
Lime Co., Inc., Term 6.31 to
Loan...................... NR NR 8.25 07/30/10 3,722,013
11,432 Novelis, Inc., Term
Loan...................... Ba2 BB- 4.96 01/06/12 11,595,954
2,344 Techs Industries, Inc.,
Term Loan................. NR NR 5.74 01/14/10 2,349,609
--------------
26,273,203
--------------
NATURAL RESOURCES 3.0%
1,540 Coffeyville Resources,
LLC., Term Loan (a)....... B1 BB- 6.06 06/24/12 1,568,233
14,193 El Paso Corp., Term
Loan...................... B3 B 6.24 11/23/09 14,382,883
1,966 Foundation PA Coal Co., 5.38 to
Term Loan................. Ba3 BB- 5.66 07/30/11 2,001,726
35,000 Kerr-McGee Corp., Term
Loan...................... Ba3 BB+ 5.79 05/24/11 35,646,310
1,525 LYONDELL-CITGO Refining, 5.3 to
LP, Term Loan............. NR NR 5.51 05/21/07 1,548,422
3,842 Semcrude, LP, 5.89 to
Term Loan................. Ba2 NR 7.25 03/16/11 3,884,588
5,586 Universal Compression,
Inc., Term Loan........... Ba2 BB 5.24 02/15/12 5,663,679
--------------
64,695,841
--------------
NON-DURABLE CONSUMER PRODUCTS 0.6%
4,950 Amscan Holdings, Inc., 6.13 to
Term Loan (a)............. B1 B+ 6.56 04/30/12 4,999,500
2,705 Church & Dwight Co., Inc.,
Term Loan (a)............. Ba2 BB 5.24 05/30/11 2,736,538
5,115 JohnsonDiversey, Inc., 4.96 to
Term Loan................. B1 BB- 5.09 11/03/09 5,167,690
--------------
12,903,728
--------------
PAPER & FOREST PRODUCTS 0.6%
1,945 Boise Cascade, LLC, Term
Loan (a).................. Ba3 BB 5.25 10/29/11 1,976,965
1,000 NewPage, Inc., 6.25 to
Term Loan................. B1 B 6.49 05/02/11 1,020,000
</Table>
22 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (CONTINUED)
$ 4,252 White Birch Paper, Co. 6.60 to
(Canada), Term Loan....... B2 B+ 6.66% 04/08/12 $ 4,315,621
6,000 Xerium Technologies, Inc.,
Term Loan................. B1 BB- 5.49 05/18/12 6,091,878
--------------
13,404,464
--------------
PERSONAL & MISCELLANEOUS SERVICES 1.1%
2,057 Alderwoods Group, Inc., 5.08 to
Term Loan (a)............. B1 BB- 5.84 09/29/09 2,085,148
2,192 Coinmach Laundry Corp., 6.38 to
Term Loan (a)............. B2 B 6.50 07/25/09 2,220,774
5,835 Educate Operating Co.,
LLC, Term Loan............ B1 B+ 5.49 03/31/12 5,839,022
2,970 Global Imaging Systems, 4.75 to
Inc., Term Loan........... Ba3 BB- 4.99 05/10/10 2,993,205
1,875 InfoUSA, Inc., Term
Loan...................... Ba3 BB 5.99 03/25/09 1,879,687
3,184 Iron Mountain, Inc., Term
Loan...................... B2 BB- 5.16 to 04/02/11 3,220,482
4,628 Stewart Enterprises, Inc., 4.75 to
Term Loan................. Ba3 BB 5.39 11/19/11 4,671,698
760 United Online, Inc., Term 6.56 to
Loan...................... B1 B+ 6.88 12/13/08 763,800
--------------
23,673,816
--------------
PHARMACEUTICALS 1.6%
3.72 to
6,571 Medco Health, Term Loan... Ba1 BBB 4.68 08/13/08 6,614,557
11,055 MedPointe, Inc., 7.72 to 09/30/07 to
Term Loan................. B2 B 8.47 09/30/08 11,168,157
1,500 Mylan Laboratories, Inc.,
Term Loan................. Ba1 BBB- 6.75 06/30/10 1,520,625
15,026 Warner Chilcott Holding 5.96 to
Co., Term Loan............ B2 B 6.18 01/18/12 15,204,679
--------------
34,508,018
--------------
PRINTING & PUBLISHING 6.4%
6,790 Adams Outdoor Advertising, 5.44 to
LP, Term Loan (a)......... B1 B+ 5.64 10/18/12 6,895,836
3,156 American Media Operations,
Inc., Term Loan (a)....... B1 B 6.25 04/01/07 3,198,396
5,797 American Reprographics 5.31 to
Co., Term Loan (a)........ Ba2 BB 5.52 06/18/09 5,840,981
800 Ascend Media Holdings, 5.96 to
LLC, Term Loan............ NR NR 6.26 01/31/12 803,000
3,000 Canon Communications, LLC,
Term Loan................. B3 B 7.24 05/31/11 3,000,000
</Table>
See Notes to Financial Statements 23
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (CONTINUED)
$ 714 CanWest Media, Inc.
(Canada), Term Loan (a)... Ba2 B+ 5.64% 08/15/09 $ 724,411
9,925 Cygnus Business Media,
Inc., Term Loan........... B3 B- 7.51 07/13/09 9,925,000
3,658 Day International Group,
Inc., Term Loan........... B1 B 6.99 09/16/09 3,692,047
1,104 Dex Media East, LLC, Term 4.75 to
Loan...................... Ba2 BB 5.33 05/08/09 1,119,637
10,535 Dex Media West, LLC, Term 4.75 to
Loan...................... Ba2 BB 5.33 03/09/10 10,693,795
3,750 Endurance Business Media,
Inc., Term Loan........... B1 B 6.13 03/08/12 3,808,594
1,200 Enterprise NewsMedia, LLC,
Term Loan................. NR NR 6.34 06/30/12 1,215,750
5,089 F&W Publications, Inc., 7.09 to
Term Loan................. NR NR 7.10 12/31/09 5,121,110
3,279 Freedom Communications,
Term Loan................. Ba2 BB 4.83 05/01/13 3,319,019
7,690 Haights Cross
Communications, LLC, Term 6.77 to
Loan...................... B3 B- 7.77 08/20/08 7,824,961
5,763 Herald Media, Inc., Term 5.99 to 07/22/11 to
Loan...................... NR NR 8.99 01/22/12 5,816,974
2,555 Journal Register Co., Term 5.00 to
Loan...................... Ba2 BB 5.18 08/12/12 2,577,356
708 Lamar Media Corp., Term
Loan...................... Ba2 BB- 5.06 06/30/10 716,312
7,191 Liberty Group Operating, 5.62 to
Inc., Term Loan........... B1 B 5.63 02/28/12 7,264,131
1,947 MC Communications, LLC, 7.58 to
Term Loan................. NR NR 8.06 12/31/10 1,975,867
7,736 Merrill Communications,
LLC, Term Loan............ B1 B 5.99 to 07/30/09 7,803,346
8,259 Morris Publishing Group,
LLC, Term Loan............ Ba1 BB 5.25 03/31/11 8,359,155
4,937 Network Communications, 5.71 to 06/30/11 to
Inc., Term Loan........... NR NR 6.48 12/31/11 4,957,287
6,561 Primedia, Inc., Term 5.50 to 06/30/08 to
Loan...................... B2 B 6.31 06/30/09 6,564,614
567 Primedia, Inc., Revolving 5.50 to
Credit Agreement.......... B2 B 5.56 06/30/08 554,588
</Table>
24 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (CONTINUED)
$22,656 R.H. Donnelley, Inc., Term 5.10 to 12/31/09 to
Loan...................... Ba3 BB 5.49% 06/30/11 $ 22,983,708
3,106 Source Media, Inc., Term 5.74 to 11/08/11 to
Loan...................... B2 NR 8.87 08/30/12 3,156,913
--------------
139,912,788
--------------
RESTAURANTS & FOOD SERVICE 1.4%
10,200 Burger King Corp., Term
Loan (a).................. Ba2 B+ 5.19 06/30/12 10,371,064
1,376 Captain D's, LLC, Term
Loan...................... NR NR 7.24 12/27/10 1,396,992
5,988 Carrols Corp., Term Loan
(a)....................... B1 CCC 6.00 12/31/10 6,079,075
3,192 Denny's Corp., Term 6.48 to 09/30/09 to
Loan...................... B3 CCC 9.00 09/30/10 3,285,792
2,270 Landry's Restaurants,
Inc., Term Loan........... Ba2 BB- 5.24 12/28/10 2,300,515
1,924 Ruth's Chris Steak House,
Inc., Term Loan........... NR NR 6.50 03/11/11 1,928,619
4,000 Triarc Cos., Inc.,
Term Loan................. B1 B+ 5.73 07/25/12 4,054,584
--------------
29,416,641
--------------
RETAIL--OIL & GAS 1.4%
401 Barjan Products, LLC, Term
Loan...................... NR NR 9.25 04/30/07 401,027
606 Barjan Products, LLC, Term
Loan (f).................. NR NR 11.00 04/30/07 21,808
742 Barjan Products, LLC,
Revolving
Credit Agreement.......... NR NR 8.75 04/30/07 741,665
4,652 Getty Petroleum Marketing,
Inc., Term Loan........... B1 BB- 6.49 05/19/10 4,710,549
14,009 The Pantry, Inc.,
Term Loan................. B1 B- 5.74 03/12/11 14,219,493
10,500 Travelcenters of America,
Inc., Term Loan........... B1 BB 5.09 12/01/11 10,632,888
--------------
30,727,430
--------------
RETAIL--SPECIALTY 1.1%
11,409 Nebraska Book Co., Inc.,
Term Loan................. B2 B 5.88 03/04/11 11,565,471
11,225 Visant Holding Corp., Term 5.75 to 10/04/10 to
Loan...................... B1 B+ 6.00 03/04/11 11,393,607
--------------
22,959,078
--------------
</Table>
See Notes to Financial Statements 25
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
RETAIL--STORES 1.4%
$ 2,791 Advance Stores Co., Inc., 4.94 to
Term Loan (a)............. Ba2 BB+ 5.25% 09/30/10 $ 2,819,105
2,469 Murray's Discount Auto
Stores, Inc., Term Loan... NR NR 7.84 08/08/09 2,478,056
25,298 Rite Aid Corp., Term 5.08 to
Loan...................... B2 B+ 5.13 08/31/09 25,540,736
142 Rite Aid Corp., Revolving
Credit Agreement.......... B2 B+ 7.00 09/20/09 142,043
--------------
30,979,940
--------------
TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 1.6%
11,200 Fairpoint Communications, 5.44 to
Inc., Term Loan........... B1 BB- 5.56 02/08/12 11,361,000
3,500 Hawaiian Telcom, Inc.,
Term Loan................. B1 B+ 5.73 10/31/12 3,550,858
6,481 Orius Corp., LLC, Term 7.85 to 01/23/09 to
Loan (c).................. NR NR 8.36 01/23/10 1,724,334
4,331 Orius Corp., LLC,
Revolving Credit Agreement
(c)....................... NR NR 6.00 01/31/06 3,876,159
9,865 Qwest Corp., Term Loan.... Ba3 BB- 8.10 06/30/07 10,203,586
2,900 Valor Telecommunications,
LLC, Term Loan............ Ba3 BB- 5.49 02/14/12 2,938,582
7,500 WCI Capital Corp., Term
Loan (b) (d) (e).......... NR NR N/A 09/30/07 112,500
1,216 WCI Capital Corp., DIP
Term Loan (b) (d) (e)
(f)....................... NR NR N/A 12/31/04 50,103
--------------
33,817,122
--------------
TELECOMMUNICATIONS--LONG DISTANCE 0.2%
3,173 WilTel Communications,
LLC, Term Loan............ B2 NR 6.99 06/30/10 3,216,267
--------------
TELECOMMUNICATIONS--WIRELESS 0.6%
1,584 Cellular South, Inc., Term 5.00 to
Loan (a).................. NR NR 6.75 05/04/11 1,603,800
9,381 Centennial Cellular, Inc., 5.57 to
Term Loan (a)............. B1 B- 5.77 02/09/11 9,534,530
2,388 Spectrasite
Communications, Inc., Term
Loan...................... Ba3 BBB 4.91 05/19/12 2,413,124
--------------
13,551,454
--------------
TEXTILES & LEATHER 0.3%
7,200 The William Carter Co., 5.24 to
Term Loan................. B1 BB 5.65 07/14/12 7,310,254
--------------
</Table>
26 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
TRANSPORTATION--CARGO 0.7%
$ 3,134 Havco Wood Products, Inc., 5.88 to
Term Loan................. NR NR 5.99% 06/30/06 $ 2,820,482
1,911 Jacobson Acquistion Co., 7.25 to 04/07/09 to
Term Loan................. NR NR 7.75 04/07/11 1,915,889
7,208 Pacer International, Inc., 5.31 to
Term Loan................. B1 BB 7.25 06/10/10 7,324,812
2,223 Quality Distribution, 6.41 to
Inc., Term Loan........... Caa1 B- 6.49 11/13/09 2,234,516
200 Quality Distribution,
Inc., Revolving
Credit Agreement.......... Caa1 B- 8.75 11/13/08 200,000
1,322 Transport Industries, LP,
Term Loan................. B2 B+ 7.50 06/13/10 1,331,349
--------------
15,827,048
--------------
TRANSPORTATION--PERSONAL 0.0%
934 Neoplan USA Corp.,
Revolving
Credit Agreement (c)
(e)....................... NR NR 7.52 06/30/06 933,750
--------------
TRANSPORTATION--RAIL MANUFACTURING 0.3%
7,100 Helm Holding Corp., Term 5.84 to 07/08/11 to
Loan...................... NR NR 9.84 07/08/12 7,215,563
--------------
UTILITIES 2.1%
14,644 Allegheny Energy, Inc.,
Term Loan (a)............. Ba2 BB 5.18 03/08/11 14,844,865
3,000 Cogentrix Delaware
Holdings, Inc., Term Loan
(a)....................... Ba2 BB+ 5.24 04/14/12 3,038,012
2,718 Coleto Creek WLE, LP, Term 5.68 to 06/30/11 to
Loan (a).................. Ba3 BB- 6.52 06/30/12 2,768,037
4,747 Pike Electric, Inc., Term 5.63 to 07/01/12 to
Loan...................... NR NR 5.69 12/10/12 4,806,000
7,960 Reliant Energy Resources 5.84 to
Corp., Term Loan.......... B1 B+ 6.09 04/30/10 8,060,121
12,917 Texas Genco, LLC, Term 5.41 to
Loan...................... Ba2 BB 5.49 12/14/11 13,126,121
--------------
46,643,156
--------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS................................... 2,207,487,542
--------------
</Table>
See Notes to Financial Statements 27
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------------
NOTES 0.7%
Barjan Products, LLC ($1,051,806 par, 5.00% coupon, maturing 04/30/07) (f)... 0
Builders FirstSource, Inc. ($1,500,000 par, 7.52% coupon, maturing 02/15/12)
(g)........................................................................ 1,522,500
Commonwealth Brands, Inc. ($1,500,000 par, 10.83% coupon, maturing 04/15/08)
(g)........................................................................ 1,569,375
Compression Polymers ($1,500,00 par, 10.46% coupon, maturing 07/01/12) (g)... 1,515,000
Qwest Corp. ($3,500,000 par, 6.25% coupon, maturing 06/15/13) (g)............ 3,675,000
Rogers Wireless Communications, Inc. ($6,000,000 par, 6.54% coupon, maturing
12/15/10) (Canada) (g)..................................................... 6,277,500
US Unwired, Inc. ($800,000 par, 7.66% coupon, maturing 06/15/10) (g)......... 834,000
--------------
TOTAL NOTES.................................................................. 15,393,375
--------------
EQUITIES 2.6%
Aladdin Gaming Holdings, LLC (8.63% ownership interest, acquired 09/03/04,
Cost $240,062) (h) (i)..................................................... 339,116
Barjan Products, LLC (1,962,870 preferred shares, Acquisition date 06/21/04,
Cost $2,767,934) (h) (i)................................................... 0
Chart Industries, Inc. (280,454 common shares, Acquisition date 09/25/03,
Cost $5,958,577) (c) (h) (i)............................................... 16,546,786
DecorateToday.com (198,600 common shares, Acquisition date 12/31/98, Cost
$3,505,909) (c) (h) (i).................................................... 2,049,552
Environmental Systems Products Holdings, Inc. (2,183 common shares,
Acquisition date 06/22/04, Cost $0) (h) (i)................................ 57,588
Havco Wood Products, Inc. (30 common shares) (h)............................. 0
IDT Corp. (22,898 common shares) (h)......................................... 297,445
Imperial Home Dcor Group, Inc. (1,816,143 common shares, Acquisition date
04/26/01, Cost $1,852,465) (c) (h) (i)..................................... 0
London Clubs International (Warrants for 141,981 common shares, Acquisition
date 10/15/04, Cost $260,910) (h) (i)...................................... 271,997
London Fog Industries, Inc. (515,922 common shares) (c) (h).................. 1,970,822
Neoplan USA Corp. (2,262 preferred shares, Acquisition date 09/04/03, Cos
$1,074,522) (c) (h) (i).................................................... 23
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
Planet Hollywood International, Inc. (Warrants for 95,324 common shares,
Acquisition date 09/03/04, Cost $0) (h) (i)................................ 0
RailWorks Corp. (Warrants for 1,037 common shares, Acquisition date 07/28/05,
Cost $2,560,327) (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).................................................... 0
Safelite Realty (48,903 common shares, Acquisition date 10/20/00, Cost $0)
(c) (h) (i)................................................................ 0
</Table>
28 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------------
EQUITIES (CONTINUED)
xTargus Group International (Warrants for 66,824 common shares, Acquisition
date 01/30/04, Cost $0) (h) (i)............................................ $ 20,047
Trans World Entertainment Corp. (3,288,962 common shares, Acquisition date
03/03/98, $60,310,984) (c) (h) (i)......................................... 34,534,101
TOTAL EQUITIES 2.6%......................................................... 56,087,562
--------------
TOTAL LONG-TERM INVESTMENTS 104.3%
(Cost $2,345,315,215)...................................................... 2,278,968,479
--------------
SHORT-TERM INVESTMENTS 2.2%
REPURCHASE AGREEMENT 1.6%
State Street Bank & Trust Corp. ($36,000,000 par collateralized by U.S.
Government Obligations in a pooled cash account, interest rate of 3.20%,
dated 07/31/05, to be sold on 08/01/05 at $36,003,200) (a)................. 36,000,000
TIME DEPOSIT 0.6%
State Street Bank & Trust Corp. ($12,650,120 par collateralized by U.S.
Government Obligations in a pooled cash account, 2.65% coupon, dated
07/31/05, to be sold on 08/01/05 at $12,651,051) (a)....................... 12,650,120
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $48,650,120)......................................................... 48,650,120
--------------
TOTAL INVESTMENTS 106.5%
(Cost $2,393,965,335)...................................................... 2,327,618,599
BORROWINGS (5.6%)........................................................... (123,000,000)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.9%)................................ (19,248,252)
--------------
NET ASSETS 100.0%........................................................... $2,185,370,347
==============
</Table>
NR--Not rated
N/A--Not applicable
+ 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) All or a portion of this security is designated in connection with unfunded
loan commitments.
(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.
See Notes to Financial Statements 29
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2005 continued
(e) This borrower is currently in liquidation.
(f) Payment-in-kind security.
(g) Variable rate security. Interest rate shown is that in effect at July 31,
2005.
(h) Non-income producing security as this stock 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 2.4%
of the net assets of the Fund.
* 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.
30 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
July 31, 2005
<Table>
ASSETS:
Investments in unaffiliated securities (Cost
$2,258,439,539)........................................... $ 2,245,353,589
Investments in affiliated securities (Cost $135,525,796).... 82,265,010
---------------
Total Investments (cost $2,393,965,335) 2,327,618,599
Cash........................................................ 1,103
Receivables:
Investments Sold.......................................... 15,865,387
Interest and Fees......................................... 11,293,629
Fund Shares Sold.......................................... 1,720,468
Other....................................................... 45,853
---------------
Total Assets................................................ 2,356,545,039
---------------
LIABILITIES:
Payables:
Borrowings................................................ 123,000,000
Investments Purchased..................................... 39,198,319
Investment Advisory Fee................................... 1,643,823
Income Distributions...................................... 1,611,196
Distributor and Other Affiliates.......................... 744,966
Administrative Fee........................................ 482,043
Fund Shares Repurchased................................... 1,890
Unfunded Commitments........................................ 2,007,398
Accrued Expenses............................................ 1,215,805
Trustees' Deferred Compensation and Retirement Plans........ 1,129,887
Accrued Interest Expense.................................... 139,365
---------------
Total Liabilities....................................... 171,174,692
---------------
NET ASSETS.................................................. $ 2,185,370,347
===============
NET ASSETS CONSIST OF:
Capital..................................................... 3,344,865,082
Accumulated Undistributed Net Investment Income............. (1,209,028)
Net Unrealized Depreciation................................. (68,354,134)
Accumulated Net Realized Loss............................... (1,089,931,573)
---------------
NET ASSETS.................................................. $ 2,185,370,347
===============
NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value per share (Based on net assets of
$53,963,797 and 5,929,676 shares of beneficial interest
issued and outstanding)................................. $ 9.10
Maximum sales charge (3.25%* of offering price)......... 0.30
---------------
Maximum offering price to public........................ 9.40
===============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $10,762,919 and 1,182,663 shares of
beneficial interest issued and outstanding)............. $ 9.10
===============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $55,681,047 and 6,118,980 shares of
beneficial interest issued and outstanding)............. $ 9.10
===============
Class IB Shares:
Net asset value per share (Based on net assets of
$1,638,975,892 and 179,915,141 shares of beneficial
interest issued and outstanding)........................ $ 9.11
===============
Class IC Shares:
Net asset value per share (Based on net assets of
$425,986,692 and 46,777,973 shares of beneficial
interest issued and outstanding)........................ $ 9.11
===============
</Table>
* On sales of $25,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 31
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended July 31, 2005
<Table>
INVESTMENT INCOME:
Interest from unaffiliated securities....................... $ 112,261,936
Interest from affiliated securities......................... 2,388,338
Dividends................................................... 1,413,819
Other....................................................... 3,631,625
-------------
Total Income.......................................... 119,695,718
-------------
EXPENSES:
Investment Advisory Fee..................................... 18,518,502
Administrative Fee.......................................... 5,422,273
Shareholder Services........................................ 2,231,506
Legal....................................................... 1,255,917
Distribution and Service Fees (Attributed to Classes A, B, C
and IC of $38,040, $31,507, $147,374 and $617,479,
respectively)............................................. 834,400
Custody..................................................... 648,707
Interest Expense............................................ 345,847
Trustees' Fees and Related Expenses......................... 150,346
Other....................................................... 2,259,940
-------------
Total Expenses........................................ 31,667,438
Service Fee Reimbursement............................. 396,473
Less Credits Earned on Cash Balances.................. 85,506
-------------
Net Expenses.......................................... 31,185,459
-------------
NET INVESTMENT INCOME....................................... $ 88,510,259
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss on unaffiliated securities................ $ (11,748,967)
Net Realized Loss on affiliated securities.................. (3,974,311)
-------------
(15,723,278)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (101,016,241)
-------------
End of the Period
Investments............................................. (66,346,736)
Unfunded Commitments.................................... (2,007,398)
-------------
(68,354,134)
-------------
Net Unrealized Appreciation During the Period............... 32,662,107
-------------
NET REALIZED AND UNREALIZED GAIN............................ $ 16,938,829
=============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 105,449,088
=============
</Table>
32 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, 2005 JULY 31, 2004
--------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 88,510,259 $ 72,149,267
Net Realized Gain/Loss.................................. (15,723,278) 3,283,192
Net Unrealized Appreciation During the Period........... 32,662,107 165,681,058
-------------- --------------
Change in Net Assets from Operations.................... 105,449,088 241,113,517
-------------- --------------
Distributions from Net Investment Income:
Class A Shares........................................ (640,250) -0-
Class B Shares........................................ (109,825) -0-
Class C Shares........................................ (511,679) -0-
Class IB Shares....................................... (64,404,166) (53,435,973)
Class IC Shares....................................... (15,299,318) (7,235,174)
-------------- --------------
(80,965,238) (60,671,147)
-------------- --------------
Return of Capital Distribution:
Class A Shares........................................ -0- -0-
Class B Shares........................................ -0- -0-
Class C Shares........................................ -0- -0-
Class IB Shares....................................... -0- (4,687,687)
Class IC Shares....................................... -0- (913,897)
-------------- --------------
-0- (5,601,584)
-------------- --------------
Total Distributions..................................... (80,965,238) (66,272,731)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 24,483,850 174,840,786
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................... 563,529,321 154,047,111
Net Asset Value of Shares Issued Through Dividend
Reinvestment.......................................... 42,159,249 34,951,648
Cost of Shares Repurchased.............................. (479,983,896) (450,817,629)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... 125,704,674 (261,818,870)
-------------- --------------
TOTAL INCREASE/DECREASE IN NET ASSETS................... 150,188,524 (86,978,084)
NET ASSETS:
Beginning of the Period................................. 2,035,181,823 2,122,159,907
-------------- --------------
End of the Period (Including accumulated undistributed
net investment income of ($1,209,028) and
($3,395,731), respectively)........................... $2,185,370,347 $2,035,181,823
============== ==============
</Table>
See Notes to Financial Statements 33
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS continued
Statement of Cash Flows
For the Year Ended July 31, 2005
<Table>
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 105,449,088
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash provided by Operating Activities:
Increase in Investments at Value.......................... (265,960,996)
Increase in Receivable for Investments Sold............... (11,434,071)
Increase in Interest and Fees Receivables................. (4,163,674)
Decrease in Other Assets.................................. 8,160
Increase in Payable for Investments Purchased............. 1,087,399
Increase in Investment Advisory Fee Payable............... 136,870
Increase in Distributor and Other Affiliates Payable...... 58,420
Increase in Administrative Fee Payable.................... 41,432
Change in Unfunded Commitments............................ 2,007,398
Increase in Accrued Expenses.............................. 200,393
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 114,001
-------------
Total Adjustments....................................... (277,904,668)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... (172,455,580)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Shares Sold................................... 567,711,164
Change in Bank Borrowings................................... 123,000,000
Change in Intra-day Credit Line with Custodian Bank......... (1,758)
Payments on Shares Repurchased.............................. (479,994,658)
Change in Accrued Interest Expense.......................... 139,365
Cash Dividends Paid......................................... (38,397,430)
-------------
Net Cash Used for Financing Activities.................. 172,456,683
-------------
NET INCREASE IN CASH........................................ 1,103
Cash at Beginning of the Period............................. -0-
-------------
CASH AT THE END OF THE PERIOD............................... $ 1,103
=============
</Table>
34 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<Table>
<Caption>
FEBRUARY 18, 2005
(COMMENCEMENT
OF INVESTMENT
CLASS A SHARES OPERATIONS) TO
JULY 31, 2005
-----------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $9.12
-----
Net Investment Income (b)................................. .18
Net Realized and Unrealized Gain/Loss..................... (.04)
-----
Total from Investment Operations............................ .14
Less Distributions from Net Investment Income............... .16
-----
NET ASSET VALUE, END OF THE PERIOD.......................... $9.10
=====
Total Return (a)............................................ 1.75%**
Net Assets at End of the Period (In millions)............... $54.0
Ratio of Expenses to Average net Assets..................... 1.46%*
Ratio of Net Investment Income to Average Net Assets........ 4.44%*
Portfolio Turnover (c)...................................... 90%
* If certain expenses had not been voluntarily assumed by Van Kampen, total
return would have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets.................. 1.71%
Ratio of Net Investment Income to Average Net Assets..... 4.19%
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 3.25% or early withdrawal
charge. On purchases of $1 million or more, an early withdrawal charge of 1%
may be imposed on certain repurchases by the Fund made within eighteen
months of purchase. If the sales charges were included total returns would
be lower. These returns include combined distribution and services fees of
up to .25% and do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the repurchases by the Fund of Fund
shares.
(b) Based on average shares outstanding.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
See Notes to Financial Statements 35
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<Table>
<Caption>
FEBRUARY 18, 2005
(COMMENCEMENT
OF INVESTMENT
CLASS B SHARES OPERATIONS) TO
JULY 31, 2005
-----------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $9.12
-----
Net Investment Income (b)................................. .14
Net Realized and Unrealized Gain/Loss..................... (.03)
-----
Total from Investment Operations............................ .11
Less Distributions from Net Investment Income............... .13
-----
NET ASSET VALUE, END OF THE PERIOD.......................... $9.10
=====
Total Return (a)............................................ 1.41%**
Net Assets at End of the Period (In millions)............... $10.8
Ratio of Expenses to Average net Assets..................... 2.22%*
Ratio of Net Investment Income to Average Net Assets........ 3.73%*
Portfolio Turnover (c)...................................... 90%
* If certain expenses had not been voluntarily assumed by Van Kampen, total
return would have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets.................. 2.47%
Ratio of Net Investment Income to Average Net Assets..... 3.48%
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum early withdrawal charge of 3%, charged on
certain repurchases by the Fund made within one year of purchase and
declining to 0% after the fifth year. If the sales charge was included,
total return would be lower. This return includes combined distribution and
service fees of up to 1% and does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the repurchases by the Fund
of Fund shares.
(b) Based on average shares outstanding.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
36 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIOD INDICATED.
<Table>
<Caption>
FEBRUARY 18, 2005
(COMMENCEMENT
OF INVESTMENT
CLASS C SHARES OPERATIONS) TO
JULY 31, 2005
-----------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $9.12
-----
Net Investment Income (b)................................. .14
Net Realized and Unrealized Gain/Loss..................... (.03)
-----
Total from Investment Operations............................ .11
Less Distributions from Net Investment Income............... .13
-----
NET ASSET VALUE, END OF THE PERIOD.......................... $9.10
=====
Total Return (a)............................................ 1.41%**
Net Assets at End of the Period (In millions)............... $55.7
Ratio of Expenses to Average net Assets..................... 2.21%*
Ratio of Net Investment Income to Average Net Assets........ 3.66%*
Portfolio Turnover (c)...................................... 90%
* If certain expenses had not been voluntarily assumed by Van Kampen, total
return would have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets.................. 2.46%
Ratio of Net Investment Income to Average Net Assets..... 3.41%
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum early withdrawal charge of 1%, charged on
certain repurchases by the Fund made within one year of purchase. If the
sales charge was included, total returns would be lower. These returns
include combined distribution and service fees of up to 1% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the repurchases by the Fund of Fund shares.
(b) Based on average shares outstanding.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
See Notes to Financial Statements 37
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED JULY 31,
CLASS IB SHARES --------------------------------------------------------
2005 2004 2003 2002 2001
--------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................. $ 9.00 $ 8.29 $ 8.09 $ 8.61 $ 9.50
-------- -------- -------- -------- --------
Net Investment Income (b).......... .37 .30 .33 .41 .66
Net Realized and Unrealized
Gain/Loss........................ .08 .68 .19 (.55) (.86)
-------- -------- -------- -------- --------
Total from Investment Operations..... .45 .98 .52 (.14) (.20)
-------- -------- -------- -------- --------
Less:
Distributions from Net Investment
Income........................... .34 .25 .29 .38 .69
Return of Capital Distributions.... -0- .02 .03 -0- -0-
-------- -------- -------- -------- --------
Total Distributions.................. .34 .27 .32 .38 .69
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE PERIOD... $ 9.11 $ 9.00 $ 8.29 $ 8.09 $ 8.61
======== ======== ======== ======== ========
Total Return (a)..................... 5.18% 12.03% 6.58% -1.61% -2.11%
Net Assets at End of the Period (In
millions).......................... $1,639.0 $1,703.1 $1,876.1 $2,558.7 $3,989.7
Ratio of Expenses to Average net
Assets............................. 1.42% 1.48% 1.54% 1.43% 1.43%
Ratio of Net Investment Income to
Average Net Assets................. 4.09% 3.44% 4.21% 4.85% 7.34%
Portfolio Turnover (c)............... 90% 94% 49% 36% 42%
</Table>
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum early withdrawal charge of 3%, charged on
repurchases by the Fund made within one year of purchase and declining to 0%
after the fifth year. If the sales charge was included, total returns would
be lower. These returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or repurchases by the Fund of
Fund shares. The early withdrawal charge was terminated effective February
18, 2005.
(b) Based on average shares outstanding.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
38 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
JUNE 13, 2003
YEAR ENDED (COMMENCEMENT
JULY 31, OF INVESTMENT
CLASS IC SHARES ---------------- OPERATIONS) TO
2005 2004 JULY 31, 2003
----------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD............... $ 9.00 $ 8.29 $ 8.16
------ ------ ------
Net Investment Income (b)............................ .37 .28 .04
Net Realized and Unrealized Gain..................... .07 .69 .12
------ ------ ------
Total from Investment Operations....................... .44 .97 .16
------ ------ ------
Less:
Distributions from Net Investment Income............. .33 .24 .03
Return of Capital Distributions...................... -0- .02 -0-
------ ------ ------
Total Distributions.................................... .33 .26 .03
------ ------ ------
NET ASSET VALUE, END OF THE PERIOD..................... $ 9.11 $ 9.00 $ 8.29
====== ====== ======
Total Return (a)....................................... 4.98% 11.86% 2.02%**
Net Assets at End of the Period (In millions).......... $426.0 $332.0 $246.1
Ratio of Expenses to Average net Assets................ 1.48%* 1.62% 1.56%
Ratio of Net Investment Income to Average Net Assets... 4.07%* 3.26% 3.89%
Portfolio Turnover (c)................................. 90% 94% 49%
* If certain expenses had not been voluntarily assumed by Van Kampen, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets............. 1.56% N/A N/A
Ratio of Net Investment Income to Average Net
Assets............................................ 3.99% N/A N/A
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum early withdrawal charge of 1%, charged on
repurchases by the Fund made within one year of purchase. If the sales
charge was included, total returns would be lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or repurchases by the Fund of Fund shares. The early
withdrawal charge was terminated effective February 18, 2005.
(b) Based on average shares outstanding.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
N/A=Not Applicable
See Notes to Financial Statements 39
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005
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's investment objective is to provide
a high level of current income, consistent with preservation of capital. 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 February 18, 2005, the Van Kampen Senior Loan Fund Class B and
Class C share classes were renamed Class IB and Class IC Shares, respectively.
Also, effective February 18, 2005, the Fund issued new Class A, Class B and
Class C Shares. The Class IB Shares and Class IC Shares are not continuously
offered.
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
40
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
agreements, which are short-term investments in which the Fund acquires
ownership of a debt security and the seller agrees to repurchase the security at
a future time and specified price. Repurchase agreements are fully
collateralized by the underlying debt security. The Fund will make payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of the custodian bank. The seller is required to maintain the
value of the underlying security at not less than the repurchase proceeds due
the Fund.
B. SECURITY TRANSACTIONS Investment transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
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
distribution and service fees, which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At July 31, 2005, the Fund had an accumulated capital loss carryforward
for tax purposes of $1,027,665,325, which will expire according to the following
schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$ 230,325................................................ July 31, 2006
25,341,287................................................ July 31, 2007
28,927,103................................................ July 31, 2008
90,868,001................................................ July 31, 2009
445,144,583................................................ July 31, 2010
215,755,020................................................ July 31, 2011
153,257,861................................................ July 31, 2012
68,141,145................................................ July 31, 2013
</Table>
41
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
At July 31, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $2,421,156,338
==============
Gross tax unrealized appreciation........................... 30,040,174
Gross tax unrealized depreciation........................... (123,577,913)
--------------
Net tax unrealized depreciation on investments.............. $ (93,537,739)
==============
</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.
The tax character of distributions paid during the years ended July 31, 2005
and 2004 was as follows:
<Table>
<Caption>
2005 2004
Distributions paid from:
Ordinary income........................................... $80,556,679 $60,620,611
Return of Capital......................................... -0- 5,601,584
----------- -----------
$80,556,679 $66,222,195
=========== ===========
</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 2005 fiscal year have been
identified and appropriately reclassified on the Statement of Assets and
Liabilities. Permanent differences relating to excise taxes paid which are not
deductible for tax purposes totaling $2,136 were reclassified from accumulated
undistributed net investment income to capital. Also, a permanent difference of
$5,179,271 relating to book to tax amortization differences were reclassified
from accumulated undistributed net investment income to accumulated net realized
loss. Finally, $181,183 relating to book to tax amortization differences were
reclassified from accumulated undistributed net investment income to capital.
As of July 31, 2005, the component of distributable earnings on a tax basis
was as follows:
<Table>
Undistributed ordinary income............................... $2,022,532
</Table>
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, 2005, the
Fund's custody fee was reduced by $85,506 as a result of credits earned on cash
balances.
42
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
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>
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, 2005, the Fund recognized expenses of
approximately $839,200 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a Trustee of the Fund
is a partner of such firm and he and his law firm provide legal services as
legal counsel to the Fund.
Under separate Legal Services and Chief Compliance Officer ("CCO")
Employment agreements, the Adviser provides legal services and the CCO provides
compliance services to the Fund. The costs of these services are allocated to
each Fund. For the year ended July 31, 2005, the Fund recognized expenses of
approximately $166,500, representing Van Kampen Investment Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing legal services to the
Fund, as well as, the salary, benefits, and related costs of the CCO and related
support staff paid by Van Kampen. Services provided pursuant to the Legal
Services agreement are reported as part of "Legal" expenses on the Statement of
Operations. Services provided pursuant to the CCO Employment agreement are
reported as part of "Other" expenses on 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, 2005, the Fund recognized expenses for these services of approximately
$1,708,800 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 also
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
Trustees who are not officers of Van Kampen. Under the deferred compensation
plan, Trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable upon retirement for a
ten-year period and are based upon each Trustee's years of service to the Fund.
The maximum annual benefit per Trustee under the plan is $2,500.
43
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 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/ MARKET
PAR/ DIVIDEND VALUE
NAME SHARES* INCOME 7/31/05 COST
Chart Industries, Inc. -- Term Loan...... $ 5,285,257 $ 334,818 $ 5,298,470 $ 6,135,542
Chart Industries, Inc. -- Common
Shares................................. 280,454 0 16,546,786 5,958,578
DecorateToday.com -- Common Shares....... 198,600 0 2,049,552 3,505,909
Imperial Home Decor Group, Inc. -- Term
Loan................................... $ 4,893,497 0 122,337 4,870,481
Imperial Home Decor Group, Inc. -- Common
Shares................................. 1,816,143 0 0 1,852,465
London Fog Industries, Inc. -- Common
Shares................................. 515,922 0 1,970,822 33,576,536
Neoplan USA Corp. -- Revolver............ $ 933,750 64,374 933,750 933,750
Neoplan USA Corp. -- Common Shares....... 8,517 0 85 85
Neoplan USA Corp. -- Preferred Shares.... 2,262 0 23 1,074,522
Orius Corp. -- Term Loan................. $ 6,481,269 462,344 1,724,334 3,575,045
Orius Corp. -- Revolver.................. $ 4,330,904 224,042 3,876,159 4,330,904
Orius Corp. -- Common Shares............. 1,211,236 0 0 0
Safelite Glass Corp. -- Term Loan........ $16,441,720 1,302,760 15,208,591 5,488,809
Safelite Glass Corp. -- Common Shares.... 724,479 0 0 3,912,187
Safelite Reality -- Common Shares........ 48,903 0 0 0
Transworld Entertainment Corp. -- Common
Shares................................. 3,288,962 0 34,534,101 60,310,983
---------- ----------- ------------
$2,388,338 $82,265,010 $135,525,796
========== =========== ============
</Table>
* Shares were acquired through the restructuring of senior loan interests.
Affiliate transactions during the year ended July 31, 2005 were as follows:
<Table>
<Caption>
PAR/SHARES PAR/SHARES REALIZED
AS OF GROSS GROSS AS OF GAIN/
NAME 7/31/04 ADDITIONS REDUCTIONS 7/31/05 (LOSS)
Aspen Marketing Group,
Term Loan............... $ 2,508,426 0 $(2,508,426) $ 0 $(1,956,129)
Aspen Marketing Group,
Revolver................ $ 7,620,725 $181,818 $(7,802,543) $ 0 2,745,253
Aspen Marketing Group,
Common Shares........... 166,871 0 (166,871) 0 (3,863,697)
Chart Industries, Term
Loan.................... $ 6,770,456 0 $(1,485,199) $ 5,285,257 (280,208)
Chart Industries, Common
Shares.................. 345,454 0 (65,000) 280,454 2,043,958
Imperial Home Decor Group,
Inc. Term Loan.......... $ 5,044,842 0 $ (151,345) $ 4,893,497 0
</Table>
44
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
<Table>
<Caption>
PAR/SHARES PAR/SHARES REALIZED
AS OF GROSS GROSS AS OF GAIN/
NAME 7/31/04 ADDITIONS REDUCTIONS 7/31/05 (LOSS)
Neoplan USA Corp.,
Revolver................ $ 911,250 $ 56,250 $ (33,750) $ 933,750 0
Orius Corp. Term Loan..... $ 6,608,678 $303,833 $ (431,242) $ 6,481,269 236,327
Safelite Glass Corp., Term
Loan.................... $17,889,124 0 $(1,447,404) $16,441,720 23,074
Transworld Entertainment
Corp, Common Shares..... 3,789,962 0 (501,000) 3,288,962 (2,929,603)
-----------
$(3,974,311)
===========
</Table>
3. CAPITAL TRANSACTIONS
At July 31, 2005, capital aggregated $54,131,547, $10,796,707, $55,848,570,
$2,642,614,135 and $581,474,123 for Classes A, B, C, IB and IC, respectively.
For the year ended July 31, 2005, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 6,457,801 58,942,482
Class B................................................... 1,272,717 11,617,443
Class C................................................... 6,219,523 56,760,288
Class IB.................................................. 29,709,650 270,363,646
Class IC.................................................. 18,287,687 165,845,462
----------- -------------
Total Sales................................................. 61,947,378 $ 563,529,321
=========== =============
Dividend Reinvestment:
Class A................................................... 39,840 362,784
Class B................................................... 6,754 61,502
Class C................................................... 26,118 237,778
Class IB.................................................. 3,810,505 34,609,287
Class IC.................................................. 757,994 6,887,898
----------- -------------
Total Dividend Reinvestment................................. 4,641,211 $ 42,159,249
=========== =============
Repurchases:
Class A................................................... (567,965) (5,178,140)
Class B................................................... (96,808) (883,120)
Class C................................................... (126,661) (1,154,058)
Class IB.................................................. (42,836,274) (389,295,735)
Class IC.................................................. (9,172,693) (83,472,843)
----------- -------------
Total Repurchases........................................... (52,800,401) $(479,983,896)
=========== =============
</Table>
45
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
At July 31, 2004, capital aggregated $2,726,802,656 and $492,178,705 for
Classes IB and IC, respectively. For the year ended July 31, 2004, transactions
were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class IB.................................................. 4,640,807 40,897,370
Class IC.................................................. 12,758,204 113,149,741
----------- -------------
Total Sales................................................. 17,399,011 $ 154,047,111
=========== =============
Dividend Reinvestment:
Class IB.................................................. 3,570,320 31,188,668
Class IC.................................................. 430,382 3,762,980
----------- -------------
Total Dividend Reinvestment................................. 4,000,702 $ 34,951,648
=========== =============
Repurchases:
Class IB.................................................. (45,234,810) (398,226,471)
Class IC.................................................. (5,969,999) (52,591,158)
----------- -------------
Total Repurchases........................................... (51,204,809) $(450,817,629)
=========== =============
</Table>
Class B Shares purchased on or after February 18, 2005, including Class B
shares received from reinvestment of distributions through the dividend
reinvestment plan on such Shares, automatically convert to Class A Shares eight
years after the end of the calendar month in which the Shares were purchased.
4. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $2,215,276,976 and
$1,911,560,980, respectively.
5. TENDER OF SHARES
The Fund has adopted the following fundamental policies in relation to its
repurchase offers, which cannot be changed without the approval of the holders
of a majority of the Fund's outstanding shares: the Fund has a policy of making
periodic repurchase offers ("Repurchase Offers") for the Fund's common shares
pursuant to Rule 23c-3(b) of the Investment Company Act of 1940, as amended (the
"1940 Act"); Repurchase Offers will be made at periodic intervals of, initially,
quarterly (the "Periodic Interval"); provided, that the Periodic Interval shall
become one month without any additional action by the Board of Trustees, and
without the requirement of a shareholder vote, upon the Securities and Exchange
Commission granting exemptive relief to the Fund from the provisions of Rule
23c-3 of the 1940 Act; the repurchase request deadline will be the third Friday
of each month (or the preceding business day if such third Friday is not a
business day) in which a Repurchase Offer ends (the "Request Deadline"); and the
repurchase pricing date for a Repurchase Offer shall occur no later than the
fourteenth calendar day after such Repurchase Offer's Request Deadline (or the
next business day after such fourteenth calendar day if the fourteenth calendar
day is not a business day). So long as the Periodic Interval is quarterly, the
Fund's Repurchase Offers will end in the months of January, April, July and
October.
46
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
During the fiscal year ended July 31, 2005, the Fund made two Repurchase
Offers pursuant to Rule 23c-3(b) as follows: During the Repurchase Offer period
ended April 15, 2005 (the Request Deadline), the Fund offered to repurchase up
to 15% of the aggregate of its outstanding shares and the total amount tendered
in such Repurchase Offer amounted to 13,348,016 shares or 5.2% of the Fund's
outstanding shares. During the Repurchase Offer period ended July 15, 2005 (the
Request Deadline), the Fund offered to repurchase up to 15% of the aggregate of
its outstanding shares and the total amount tendered in such Repurchase Offer
amounted to 17,547,489 shares or 6.9% of the Fund's outstanding shares.
During the fiscal year ended July 31, 2005, and prior to adopting the
fundamental policy referred to above, the Fund also conducted tender offers for
its shares pursuant to Rule 13e-4 under the Securities Exchange Act of 1934. In
total, in these tender offers and in the Repurchase Offers referred to above,
the Fund repurchased 52,800,401 shares.
6. EARLY WITHDRAWAL CHARGE
An early withdrawal charge to recover offering expenses will be imposed in
connection with most Class B Shares and Class IB Shares held for less than five
years and Class C Shares and Class IC Shares held less than one year which are
repurchased by the Fund. 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>
EARLY WITHDRAWAL
CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT TO CHARGE
------------------------------
CLASSES C
YEAR OF REDEMPTION CLASS IB CLASS B AND IC
First....................................................... 3.0% 3.0% 1.0%
Second...................................................... 2.5% 2.0% --
Third....................................................... 2.0% 1.5% --
Fourth...................................................... 1.5% 1.0% --
Fifth....................................................... 1.0% 0.5% --
Sixth and following......................................... -- -- --
</Table>
Effective February 18, 2005 the early withdrawal charge for Class IB Shares
and Class IC Shares was terminated. For the year ended July 31, 2005, Van Kampen
received early withdrawal charges of approximately $261,500, in connection with
tendered and repurchased 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 $147,392,000 as of July 31, 2005. The
Fund intends to reserve against such contingent obligations by designating cash,
liquid securities, and liquid senior loans as a reserve. The unrealized
depreciation on these commitments of $2,007,398 as of July 31, 2005 is reported
as "Unfunded Commitments" on the Statement of Assets and Liabilities.
The Fund has entered into a revolving credit agreement for an aggregate of
$300,000,000, which will terminate on November 12, 2005. The proceeds of any
borrowing by
47
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
the Fund under the revolving credit agreement shall be used for temporary
liquidity purposes and funding of shareholder repurchases. Annual commitment
fees of .13% are charged on the unused portion of the credit line. For the year
ended July 31, 2005, the Fund recognized commitment fee expenses of
approximately $539,700.
Borrowings under this facility will bear interest at the Eurodollar rate
plus 1.00%. For the year ended July 31, 2005, when in use, the average daily
balance of borrowings under the revolving credit agreement was $71,034,483 with
a weighted average interest rate of 3.02%.
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, 2005, the Fund had no selling participants with respect to
investments in senior loans purchased by the Fund on a participation basis.
9. DISTRIBUTION AND SERVICE PLANS
Effective February 18, 2005, the Fund has adopted a distribution plan (the
"Distribution Plan") with respect to each of its new Class A Shares, new Class B
Shares and new Class C Shares and in so doing has agreed to comply with rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), as
if the Fund were an open-end investment company. The Fund also has adopted a
service plan (the "Service Plan") with respect to each of its new Class A
Shares, new Class B Shares, new Class C Shares and Class IC Shares. There is no
Distribution Plan or Service Plan for the Class IB Shares and no Distribution
Plan for the Class IC Shares. All service fees under the Service Plan applicable
to new Class A Shares, new Class B Shares, new Class C Shares and Class IC
Shares are currently being waived. For the year ended July 31, 2005, the
Distributor waived service fees of $396,473. This waiver is voluntary in nature
and can be discontinued at any time. Under the Distribution Plan and Service
Plan, the Fund pays distribution fees in connection with the sale and
distribution of its Shares and service fees in connection with the provision of
ongoing services to shareholders of each such class and the maintenance of
shareholder accounts.
Under the Distribution Plan and Service Plan, the Fund may spend up to a
total of 0.25%, 1.00%, 1.00%, and 0.15% (0.25% maximum) per year of the average
daily net assets of new Class A Shares, new Class B Shares, new Class C Shares,
and Class IC Shares respectively. Due to voluntary fee waivers by the
Distributor, the aggregate distribution and service fees are currently 0.00%,
0.75%, 0.75%, and 0.00% per year of the average daily net assets for new Class A
Shares, new Class B Shares, new Class C Shares, and Class IC Shares
respectively. Annual fees under the Distribution Plan and Service Plan are
accrued daily. The net annual fees for new Class B Shares and new Class C Shares
are paid monthly. The amount of distribution expenses incurred by Van Kampen and
not yet reimbursed ("unreimbursed receivable") was approximately $121,500 and
$248,600 for new Class B Shares and new Class C Shares, respectively. This
amount may be recovered from future payments under the distribution plan. To the
extent the unreimbursed receivable has been fully recovered, any excess fees
will be refunded on a quarterly basis.
48
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2005 continued
Included in the fees for the year ended July 31, 2005 are payments made to
Morgan Stanley DW Inc., an affiliate of the Advisor of approximately $373,100.
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.). On June 3,
2005, the Court preliminarily approved a pretrial settlement of this class
action in the amount of $31,500,000. A fairness hearing on the settlement has
been scheduled for November 16, 2005. Under the terms of the proposed
settlement, the Fund will not be responsible for the settlement amount.
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.
49
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, including
the portfolio of investments, of Van Kampen Senior Loan Fund (the "Fund"), as of
July 31, 2005, 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits include consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of July 31, 2005 by correspondence with the Fund's
custodian, brokers, and selling or agent banks; where replies were not received,
we performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Senior Loan Fund as of July 31, 2005, the results of its operations and
its cash flows for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
September 12, 2005
50
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*
OFFICERS
MITCHELL M. MERIN
President and Chief Executive Officer
RONALD E. ROBISON
Executive Vice President and
Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and
Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
PHILLIP G. GOFF
Chief Financial Officer and Treasurer
HOWARD TIFFEN
Vice President
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 REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60601
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
51
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the 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 (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 as of the date of this Annual Report. Trustees of the Funds generally
serve three year terms 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 (60) Trustee Trustee Chairman and Chief 79 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
Manufacturers'
Association.
</Table>
52
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFfiCERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (64) Trustee Trustee President of CAC, L.L.C., 79 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., Ventana Medical
to February 2001, Vice Systems, Inc., and GATX
Chairman and Director of Corporation, and Trustee
Anixter International, of The Scripps Research
Inc., a global Institute. Prior to
distributor of wire, January 2005, Trustee of
cable and communications the University of Chicago
connectivity products. Hospitals and Health
Prior to July 2000, Systems. Prior to April
Managing Partner of 2004, Director of
Equity Group Corporate TheraSense, Inc. Prior to
Investment (EGI), a January 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, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
53
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFfiCERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Howard J Kerr (69) Trustee Trustee Prior to 1998, President 79 Trustee/Director/Managing
14 Huron Trace since 1992 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
Hugo F. Sonnenschein (64) Trustee Trustee President Emeritus and 79 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>
54
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICERS 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 INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Richard F. Powers, III* (59) Trustee Trustee Advisory Director of 79 Trustee/Director/Managing
1221 Avenue of the Americas since 1999 Morgan Stanley. Prior to General Partner of funds
New York, NY 10020 December 2002, Chairman, in the Fund Complex.
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* (66) Trustee Trustee Partner in the law firm 79 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 Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
</Table>
* Such trustee is an "interested person" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. Powers is an interested person of funds in
the Fund Complex and the Adviser by reason of his current or former
positions with Morgan Stanley or its affiliates. Mr. Whalen is an interested
person of certain funds in the Fund Complex by reason of he and his firm
currently providing legal services as legal counsel to such funds in the
Fund Complex.
55
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFFICERS 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
Ronald E. Robison (66) Executive Vice Officer Executive Vice President and Principal Executive Officer of
1221 Avenue of the Americas President and since 2003 funds in the Fund Complex. Chief Executive Officer and
New York, NY 10020 Principal Chairman of Investor Services. Managing Director of Morgan
Executive Stanley. Chief Administrative Officer, Managing Director and
Officer 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.
Joseph J. McAlinden (62) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas President and since 2002 Stanley Investment Advisors Inc., and Morgan Stanley
New York, NY 10020 Chief Investment Investment Management Inc. and Director of Morgan Stanley
Officer 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.
Amy R. Doberman (43) 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 Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (38) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Secretary since 2003 Vice President and Secretary of funds in the Fund Complex.
New York, NY 10020
</Table>
56
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEE AND OFfiCERS INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
John L. Sullivan (50) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1998 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management. Prior
to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
Phillip G. Goff (41) Chief Financial Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza Officer and since 2005 since June 2005. Chief Financial Officer and Treasurer of
Oakbrook Terrace, IL 60181 Treasurer funds in the Fund Complex since August 2005. Prior to June
2005, Vice President and Chief Financial Officer of
Enterprise Capital Management, Inc., an investment holding
company.
Howard Tiffen (57) 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>
57
Van Kampen Senior Loan Fund
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen Senior Loan Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen Senior Loan Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
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
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
59, 359
SLF ANR 9/05
(VAN KAMPEN INVESTMENTS SHINE LOGO) RA05-00734P-Y07/05
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 to delete from the end of the
following paragraph on page 2 of the Code the phrase "to the detriment of the
Fund.":
"Each Covered Officer must not use his personal influence or personal
relationship improperly to influence investment decisions or financial reporting
by the Fund whereby the Covered Officer would benefit personally (directly or
indirectly)."
Further, due to personnel changes at the Adviser, the list of Covered Officers
set forth in Exhibit B and the General Counsel designee to whom questions about
the application of the Code should be referred in Exhibit C were amended during
the period. Exhibit B was then amended again in March 2005 and a third time in
August 2005. All three editions of Exhibit B are attached.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit
12A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Trust'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:
2005
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES........................ $114,850 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES...... $0 $321,000(2)
TAX FEES................ $2,200(3) $0
ALL OTHER FEES.......... $0 $0
TOTAL NON-AUDIT FEES.............. $2,200 $321,000
TOTAL............................. $117,050 $321,000
</Table>
2004
<Table>
<Caption>
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
ALL OTHER FEES.......... $0 $0
TOTAL NON-AUDIT FEES.............. $2,100 $230,000
TOTAL............................. $110,180 $230,000
</Table>
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors)
and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically
attestation services provided in connection with a SAS 70
Report.
(3) Tax Fees represent tax advice and compliance services provided
in connection with the review of the Registrant's tax.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider
whether such services are consistent with the SEC's rules on auditor
independence. The Audit Committee will also consider whether the Independent
Auditors are best positioned to provide the most effective and efficient
services, for reasons such as its familiarity with the Fund's business, people,
culture, accounting systems, risk profile and other factors, and whether the
service might enhance the Fund's ability to manage or control risk or improve
audit quality. All such factors will be considered as a whole, and no one factor
should necessarily be determinative.
The Audit Committee is also mindful of the relationship between fees
for audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax
and All Other services that have the general pre-approval of the Audit
Committee. The term of any general pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee considers and provides a different
period and states otherwise. The Audit Committee will annually review and
pre-approve the services that may be provided by the Independent Auditors
without obtaining specific pre-approval
- -------------------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval
Policy and Procedures (the "Policy"), amended as of the date above,
supercedes and replaces all prior versions that may have been
amended from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have
the meanings as defined in the Joint Audit Committee Charter.
from the Audit Committee. The Audit Committee will add to or subtract from the
list of general pre-approved services from time to time, based on subsequent
determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes
that implementation of the Policy will not adversely affect the Independent
Auditors' independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the
Audit Committee, the Audit Committee may grant general pre-approval to other
Audit services, which are those services that only the Independent Auditors
reasonably can provide. Other Audit services may include statutory audits and
services associated with SEC registration statements (on Forms N-1A, N-2, N-3,
N-4, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix
B.1. All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in
Appendix B.2. All other Audit-related services not listed in Appendix B.2 must
be specifically pre-approved by the Audit Committee (or by any member of the
Audit Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide
Tax services to the Fund and, to the extent they are Covered Services, the
Covered Entities, such as tax compliance, tax planning and tax advice without
impairing the auditor's independence, and the SEC has stated that the
Independent Auditors may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax services that have
historically been provided by the Independent Auditors, that the Audit Committee
has reviewed and believes would not impair the independence of the Independent
Auditors, and that are consistent with the SEC's rules on auditor independence.
The Audit Committee will not permit the retention of the Independent Auditors in
connection with a transaction initially recommended by the Independent Auditors,
the sole business purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code and related regulations.
The Audit Committee will consult with Director of Tax or outside counsel to
determine that the tax planning and reporting positions are consistent with this
policy.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the Tax Services in Appendix B.3. All Tax services involving large
and complex transactions not listed in Appendix B.3 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated), including tax services proposed to be
provided by the Independent Auditors to any executive officer or
trustee/director/managing general partner of the Fund, in his or her individual
capacity, where such services are paid for by the Fund (generally applicable
only to internally managed investment companies).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix B.5. The SEC's rules and relevant guidance should be
consulted to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be
provided by the Independent Auditors will be established annually by the Audit
Committee. Any proposed services exceeding these levels or amounts will require
specific pre-approval by the Audit Committee. The Audit Committee is mindful of
the overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the
Independent Auditors that do not require specific approval by the Audit
Committee will be submitted to the Fund's Chief Financial Officer and must
include a detailed description of the services to be rendered. The Fund's Chief
Financial Officer will determine whether such services are included within the
list of services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be informed on a timely basis of any such
services rendered by the Independent Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Fund's
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer
to monitor the performance of all services provided by the Independent Auditors
and to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. A sample report is included as Appendix
B.7. Both the Fund's Chief Financial Officer and management will immediately
report to the chairman of the Audit Committee any breach of this Policy that
comes to the attention of the Fund's Chief Financial Officer or any member of
management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an
annual basis to meet its responsibility to oversee the work of the Independent
Auditors and to assure the auditor's independence from the Fund, such as
reviewing a formal written statement from the Independent Auditors delineating
all relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any
entity controlling, controlled by or under common control with the Fund's
investment adviser(s) that provides ongoing services to the Fund(s). Beginning
with non-audit service contracts entered into on or after May 6, 2003, the
Fund's audit committee must pre-approve non-audit services provided not only to
the Fund but also to the Covered Entities if the engagements relate directly to
the operations and financial reporting of the Fund. This list of Covered
Entities would include:
- Van Kampen Investments Inc.
- Van Kampen Asset Management
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Investor Services Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Trust Company
- Morgan Stanley Investment Management Ltd.
- Morgan Stanley Investment Management Company
- Morgan Stanley Asset & Investment Trust Management Company Ltd.
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services
are determined to have a direct impact on the operations or financial reporting
of the Registrant. 100% of such services were pre-approved by the audit
committee pursuant to the Audit Committee's pre-approval policies and procedures
(included herein).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: David
Arch, Rod Dammeyer, Howard Kerr, Hugo Sonnenschein.
(b) Not applicable.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Fund's and its investment advisor's Proxy Voting Policies and Procedures are
as follows:
MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND PROCEDURES
I. POLICY STATEMENT
Introduction - Morgan Stanley Investment Management's ("MSIM") policy and
procedures for voting proxies ("Policy") with respect to securities held in the
accounts of clients applies to those MSIM entities that provide discretionary
investment management services and for which a MSIM entity has authority to vote
proxies. The Policy will be reviewed and, updated, as necessary, to address new
or revised proxy voting issues. The MSIM entities covered by the Policy
currently include the following: Morgan Stanley Investment Advisors Inc., Morgan
Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley
Investment Management Limited, Morgan Stanley Investment Management Company,
Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley
Investment Management Private Limited, Morgan Stanley Hedge Fund Partners GP LP,
Morgan Stanley Hedge Fund Partners LP, Van Kampen Asset Management, and Van
Kampen Advisors Inc. (each an "MSIM Affiliate" and collectively referred to as
the "MSIM Affiliates").
Each MSIM Affiliate will use its best efforts to vote proxies as part of its
authority to manage, acquire and dispose of account assets. With respect to the
MSIM registered management investment companies (Van Kampen, Institutional and
Advisor Funds)(collectively referred to herein as the "MSIM Funds"), each MSIM
Affiliate will vote proxies pursuant to authority granted under its applicable
investment advisory agreement or, in the absence of such authority, as
authorized by the Board of Directors or Trustees of the MSIM Funds. A MSIM
Affiliate will not vote proxies if the "named fiduciary" for an ERISA
account has reserved the authority for itself, or in the case of an account not
governed by ERISA, the investment management or investment advisory agreement
does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in
a prudent and diligent manner, vote proxies in the best interests of clients,
including beneficiaries of and participants in a client's benefit plan(s) for
which the MSIM Affiliates manage assets, consistent with the objective of
maximizing long-term investment returns ("Client Proxy Standard"). In certain
situations, a client or its fiduciary may provide a MSIM Affiliate with a proxy
voting policy. In these situations, the MSIM Affiliate will comply with the
client's policy unless to do so would be inconsistent with applicable laws or
regulations or the MSIM Affiliate's fiduciary responsibility.
Proxy Research Services - Institutional Shareholder Services ("ISS") and Glass
Lewis (together with other proxy research providers as MSIM Affiliates may
retain from time to time, the "Research Providers") are independent advisers
that specialize in providing a variety of fiduciary-level proxy-related services
to institutional investment managers, plan sponsors, custodians, consultants,
and other institutional investors. The services provided include in-depth
research, global issuer analysis, and voting recommendations. While the MSIM
Affiliates may review and utilize the recommendations of the Research Providers
in making proxy voting decisions, they are in no way obligated to follow such
recommendations. In addition to research, ISS provides vote execution,
reporting, and recordkeeping. MSIM's Proxy Review Committee (see Section IV.A.
below) will carefully monitor and supervise the services provided by the
Research Providers.
Voting Proxies for Certain Non-U.S. Companies - While the proxy voting process
is well established in the United States and other developed markets with a
number of tools and services available to assist an investment manager, voting
proxies of non-U.S. companies located in certain jurisdictions, particularly
emerging markets, may involve a number of problems that may restrict or prevent
a MSIM Affiliate's ability to vote such proxies. These problems include, but are
not limited to: (i) proxy statements and ballots being written in a language
other than English; (ii) untimely and/or inadequate notice of shareholder
meetings; (iii) restrictions on the ability of holders outside the issuer's
jurisdiction of organization to exercise votes; (iv) requirements to vote
proxies in person, (v) the imposition of restrictions on the sale of the
securities for a period of time in proximity to the shareholder meeting; and
(vi) requirements to provide local agents with power of attorney to facilitate
the MSIM Affiliate's voting instructions. As a result, clients' non-U.S. proxies
will be voted on a best efforts basis only, after weighing the costs and
benefits to MSIM's clients of voting such proxies, consistent with the Client
Proxy Standard. ISS has been retained to provide assistance to the MSIM
Affiliates in connection with voting their clients' non-U.S. proxies.
II. GENERAL PROXY VOTING GUIDELINES
To ensure consistency in voting proxies on behalf of its clients, MSIM
Affiliates will follow (subject to any exception set forth herein) this Policy,
including the guidelines set forth below. These guidelines address a broad range
of issues, including board size and composition, executive compensation,
anti-takeover proposals, capital structure proposals and social responsibility
issues and are meant to be general voting parameters on issues that
arise most frequently. The MSIM Affiliates, however, may, pursuant to the
procedures set forth in Section IV. below, vote in a manner that is not in
accordance with the following general guidelines, provided the vote is approved
by the Proxy Review Committee and is consistent with the Client Proxy Standard.
A MSIM Affiliate will not generally vote a proxy if it has sold the affected
security between the record date and the meeting date.
III. GUIDELINES
A. CORPORATE GOVERNANCE MATTERS. The following proposals will generally
be voted as indicated below, unless otherwise determined by the Proxy Review
Committee.
i. General.
1. Generally, routine management proposals will be supported. The
following are examples of routine management proposals:
o Approval of financial statements, director and auditor
reports.
o General updating/corrective amendments to the charter.
o Proposals related to the conduct of the annual meeting,
except those proposals that relate to the "transaction of
such other business which may come before the meeting."
2. Proposals to eliminate cumulative voting generally will be
supported; proposals to establish cumulative voting in the
election of directors will not be supported.
3. Proposals requiring confidential voting and independent
tabulation of voting results will be supported.
4. Proposals requiring a U.S. company to have a separate Chairman
and CEO will not be supported. Proposals requiring non-U.S.
companies to have a separate Chairman and CEO will be
supported.
5. Proposals by management of non-U.S. companies regarding items
that are clearly related to the regular course of business
will be supported.
6. Proposals to require the company to expense stock options will
be supported.
7. Open-ended requests for adjournment generally will not be
supported. However, where management specifically states the
reason for requesting an adjournment and the requested
adjournment is necessary to permit a proposal that would
otherwise be supported under this Policy to be carried out
(i.e. an uncontested corporate transaction), the adjournment
request will be supported.
8. Proposals to declassify the Board of Directors (if management
supports a classified board) generally will not be supported.
9. Proposal requiring that the company prepare reports that are
costly to provide or that would require duplicative efforts or
expenditures that are of a non-business nature or would
provide no pertinent information from the perspective of
institutional shareholders generally will not be supported.
ii. Election of Directors. In situations where no conflict exists
and where no specific governance deficiency has been noted, unless otherwise
determined by the Proxy Review Committee, proxies will be voted in support of
nominees of management.
1. The following proposals generally will be supported:
o Proposals requiring that a certain percentage (up to 66
2/3%) of the company's board members be independent
directors.
o Proposals requiring that members of the company's
compensation, nominating and audit committees be comprised
of independent or unaffiliated directors.
2. Unless otherwise determined by the Proxy Review Committee, a
withhold vote will be made in the following circumstances:
(a) If a company's board is not comprised of a majority of
disinterested directors, a withhold vote will be made
for interested directors. A director nominee may be
deemed to be interested if the nominee has, or any time
during the previous five years had, a relationship with
the issuer (e.g., investment banker, counsel or other
professional service provider, or familial relationship
with a senior officer of the issuer) that may impair his
or her independence;
(b) If a nominee who is interested is standing for election
as a member of the company's compensation, nominating or
audit committees;
(c) A direct conflict exists between the interests of the
nominee and the public shareholders;
(d) Where the nominees standing for election have not taken
action to implement generally accepted governance
practices for which there is a "bright line" test. These
would include elimination of dead hand or slow hand
poison pills, requiring audit, compensation or nominating
committees to be composed of independent directors and
requiring a majority independent board;
(e) A nominee has failed to attend at least 75% of board
meetings within a given year without a reasonable excuse;
or
(f) A nominee serves on the board of directors for more than
six companies (excluding investment companies).
iii. Auditors
1. Generally, management proposals for selection or ratification
of auditors will be supported. However, such proposals may not
be supported if the audit fees are excessive. Generally, to
determine if audit fees are excessive, a 50% test will be
applied for audit fees in excess of $1 million: if audit fees
are $1 million or more, non-audit fees should less than 50% of
the total fees paid to the auditor. If audit fees are less
than $1 million, the fees will be reviewed case by case by the
Proxy Review Committee.
2. Proposals requiring auditors to attend the annual meeting of
shareholders will be supported.
3. Proposals to indemnify auditors will not be supported.
iv. Anti-Takeover Matters
1. Proposals to modify or rescind existing supermajority vote
requirements to amend the charter or bylaws will be supported;
proposals to amend by-laws to require a supermajority
shareholder vote to pass or repeal certain provisions will not
be supported.
2. Proposals relating to the adoption of anti-greenmail
provisions will be supported, provided that the proposal: (i)
defines greenmail; (ii) prohibits buyback offers to large
block holders (holders of at least 1% of the outstanding
shares and in certain cases, a greater amount, as determined
by the Proxy Review Committee) not made to all shareholders or
not approved by disinterested shareholders; and (iii) contains
no anti-takeover measures or other provisions restricting the
rights of shareholders.
3. Proposals requiring shareholder approval or ratification of a
shareholder rights plan or poison pill will be supported.
B. CAPITALIZATION CHANGES. The following proposals generally will be
voted as indicated below, unless otherwise determined by the Proxy Review
Committee.
1. The following proposals generally will be supported:
o Proposals relating to capitalization changes that eliminate
other classes of stock and/or eliminate unequal voting
rights.
o Proposals to increase the authorization of existing classes
of common stock (or securities convertible into common
stock) if: (i) a clear and legitimate business purpose is
stated; (ii) the number of shares requested is reasonable in
relation to the purpose for which authorization is
requested; and (iii) the authorization does not exceed 100%
of shares currently authorized and at least 30% of the new
authorization will be outstanding.
o Proposals to create a new class of preferred stock or for
issuances of preferred stock up to 50% of issued capital.
o Proposals for share repurchase plans.
o Proposals to reduce the number of authorized shares of
common or preferred stock, or to eliminate classes of
preferred stock.
o Proposals to effect stock splits.
o Proposals to effect reverse stock splits if management
proportionately reduces the authorized share amount set
forth in the corporate charter. Reverse stock splits that do
not adjust proportionately to the authorized share amount
generally will be approved if the resulting increase in
authorized shares coincides with the proxy guidelines set
forth above for common stock increases.
2. The following proposals generally will not be supported
(notwithstanding management support).
o Proposals relating to capitalization changes that add
classes of stock which substantially dilute the voting
interests of existing shareholders.
o Proposals to increase the authorized number of shares of
existing classes of stock that carry preemptive rights or
supervoting rights.
o Proposals to create "blank check" preferred stock.
o Proposals relating to changes in capitalization by 100% or
more.
C. COMPENSATION. The following proposals generally will be voted as
indicated below, unless otherwise determined by the Proxy Review Committee.
1. The following proposals generally will be supported:
o Proposals relating to director fees, provided the amounts
are not excessive relative to other companies in the country
or industry.
o Proposals for employee stock purchase plans that permit
discounts up to 15%, but only for grants that are part of a
broad-based employee plan, including all non-executive
employees.
o Proposals for the establishment of employee stock option
plans and other employee ownership plans, provided that our
research does not indicate that approval of the plan would
be against shareholder interest.
o Proposals for the establishment of employee retirement and
severance plans, provided that our research does not
indicate that approval of the plan would be against
shareholder interest.
2. Blanket proposals requiring shareholder approval of all severance
agreements will not be supported, however, proposals that require
shareholder approval for agreements in excess of three times the annual
compensation (salary and bonus) generally will be supported.
3. Blanket proposals requiring shareholder approval of executive compensation
generally will not be supported.
4. Proposals that request or require disclosure of executive
compensation in addition to the disclosure required by the
Securities and Exchange Commission ("SEC") regulations
generally will not be supported.
D. OTHER RECURRING ITEMS. The following proposals generally will be voted
as indicated below, unless otherwise determined by the Proxy Review Committee.
1. Proposals to add restrictions related to social, political,
environmental or special interest issues that do not relate
directly to the business of the company and which do not
appear to be directed specifically to the business or
financial interest of the company generally will not be
supported.
2. Proposals requiring adherence to workplace standards that are
not required or customary in market(s) to which the proposals
relate will not be supported.
E. ITEMS TO BE REVIEWED BY THE PROXY REVIEW COMMITTEE
The following types of non-routine proposals, which potentially may have a
substantive financial or best interest impact on an issuer, will be voted as
determined by the Proxy Review Committee.
I. CORPORATE TRANSACTIONS
o Proposals relating to mergers, acquisitions and other
special corporate transactions (i.e., takeovers, spin-offs,
sales of assets, reorganizations, restructurings and
recapitalizations) will be examined on a case-by-case basis.
In all cases, Research Providers' research and analysis will
be used along with MSIM Affiliates' research and analysis,
including, among other things, MSIM internal
company-specific knowledge. Proposals for mergers or other
significant transactions that are friendly, approved by the
Research Providers, and where there is no portfolio manager
objection, generally will be supported.
ii. Compensation
o Proposals relating to change-in-control provisions in
non-salary compensation plans, employment contracts, and
severance agreements that benefit management and would be
costly to shareholders if triggered. With respect to
proposals related to severance and change of control
situations, MSIM Affiliates will support a maximum of three
times salary and bonus.
o Proposals relating to Executive/Director stock option
plans. Generally, stock option plans should be incentive
based. The Proxy Review Committee will evaluate the the
quantitative criteria used by a Research Provider when
considering such Research Provider's recommendation. If the
Proxy Review Committee determines that the criteria used by
the Research Provider is reasonable, the proposal will be
supported if it falls within a 5% band above the Research
Provider's threshold.
o Compensation proposals that allow for discounted stock
options that have not been offered to employees in general.
iii. Other
o Proposals for higher dividend payouts.
o Proposals recommending set retirement ages or requiring
specific levels of stock ownership by directors.
o Proposals for election of directors, where a director
nominee is related to MSIM (i.e. on an MSIM Fund's Board of
Directors/Trustees or part of MSIM senior management) must
be considered by the Proxy Review Committee. If the proposal
relates to a director nominee who is on a Van Kampen Fund's
Board of Directors/Trustees, to the extent that the shares
of the relevant company are held by a Van Kampen Fund, the
Van Kampen Board shall vote the proxies with respect to
those shares, to the extent practicable. In the event that
the Committee cannot contact the Van Kampen Board in advance
of the shareholder meeting, the Committee will vote such
shares pursuant to the Proxy Voting Policy.
o Proposals requiring diversity of board membership relating
to broad based social, religious or ethnic groups.
o Proposals to limit directors' liability and/or broaden
indemnification of directors. Generally, the Proxy Review
Committee will support such proposals provided that the
officers and directors are eligible for indemnification and
liability protection if they have acted in good faith on
company business and were found innocent of any civil or
criminal charges for duties performed on behalf of the
company.
IV. ADMINISTRATION OF POLICY
A. PROXY REVIEW COMMITTEE
1. The MSIM Proxy Review Committee ("Committee") is responsible
for creating and implementing the Policy and, in this
regard, has expressly adopted it.
(a) The Committee, which is appointed by MSIM's Chief
Investment Officer ("CIO"), consists of senior
investment professionals who represent the different
investment disciplines and geographic locations of
the firm. The Committee is responsible for
establishing MSIM's Policy and determining how MSIM
will vote proxies on an ongoing basis.
(b) The Committee will periodically review and have the
authority to amend, as necessary, the Policy and
establish and direct voting positions consistent with
the Client Proxy Standard.
(c) The Committee will meet at least monthly to (among
other matters): (1) address any outstanding issues
relating to the Policy and (2) review proposals at
upcoming shareholder meetings of MSIM portfolio
companies in accordance with this Policy including,
as appropriate, the voting results of prior
shareholder meetings of the same issuer where a
similar proposal was presented to shareholders. The
Committee, or its designee, will timely communicate
to ISS MSIM's Policy (and any amendments to them
and/or any additional guidelines or procedures it may
adopt).
(d) The Committee will meet on an ad hoc basis to (among
other matters): (1) authorize "split voting" (i.e.,
allowing certain shares of the same issuer that are
the subject of the same proxy solicitation and held
by one or more MSIM portfolios to be voted
differently than other shares) and/or "override
voting" (i.e., voting all MSIM portfolio shares in a
manner contrary to the Policy); (2) review and
approve upcoming votes, as appropriate, for matters
for which specific direction has been provided in
this Policy; and (3) determine how to vote matters
for which specific direction has not been provided in
this Policy. Split votes generally will not be
approved within a single Global Investor Group
investment team. The Committee may take into account
Research Providers' recommendations and research as
well as any other relevant information they may
request or receive, including portfolio manager
and/or analyst research, as applicable. Generally,
proxies related to securities held in accounts that
are managed pursuant to quantitative, index or
index-like strategies ("Index Strategies") will be
voted in the same manner as those held in actively
managed accounts. Because accounts managed using
Index Strategies are passively managed accounts,
research from portfolio managers and/or analysts
related to securities held in these accounts may not
be available. If the affected securities are held
only in accounts that are managed pursuant to Index
Strategies, and the proxy relates to a matter that is
not described in this Policy, the Committee will
consider all available information from the Research
Providers, and to the extent that the holdings are
significant, from the portfolio managers and/or
analysts.
(e) In addition to the procedures discussed above, if the
Committee determines that an issue raises a potential
material conflict of interest, or gives rise to the
appearance of a potential material conflict of
interest, the Committee will request a special
committee to review, and recommend a course of action
with respect to, the conflict(s) in question
("Special Committee"). The Special Committee shall be
comprised of the Chairperson of the Proxy Review
Committee, the Compliance Director for the area of
the firm involved or his/her designee, a senior
portfolio manager (if practicable, one who is a
member of the Proxy Review Committee) designated by
the Proxy Review Committee, and MSIM's Chief
Investment Officer or his/her designee. The Special
Committee may request the assistance of MSIM's
General Counsel or his/her designee and will have
sole discretion to cast a vote. In addition to the
research provided by Research Providers, the Special
Committee may request analysis from MSIM Affiliate
investment professionals and outside sources to the
extent it deems appropriate.
(f) The Committee and the Special Committee, or their
designee(s), will document in writing all of their
decisions and actions, which documentation will be
maintained by the Committee and the Special
Committee, or their designee(s), for a period of at
least 6 years. To the extent these decisions relate
to a security held by a MSIM U.S. registered
investment company, the Committee and Special
Committee, or their designee(s), will report their
decisions to each applicable Board of
Trustees/Directors of those investment companies at
each Board's next regularly scheduled Board meeting.
The report will contain information concerning
decisions made by the Committee and Special Committee
during the most recently ended calendar quarter
immediately preceding the Board meeting.
(g) The Committee and Special Committee, or their
designee(s), will timely communicate to applicable
portfolio managers, the Compliance Departments and,
as necessary, to ISS, decisions of the Committee and
Special Committee so that, among other things, ISS
will vote proxies consistent with their decisions.
B. IDENTIFICATION OF MATERIAL CONFLICTS OF INTEREST
1. If there is a possibility that a vote may involve a material \
conflict of interest, the vote must be decided by the Special
Committee in consultation with MSIM's General Counsel or
his/her designee.
2. A material conflict of interest could exist in the following
situations, among others:
(a) The issuer soliciting the vote is a client of MSIM or an
affiliate of MSIM and the vote is on a material matter
affecting the issuer;
(b) The proxy relates to Morgan Stanley common stock or any
other security issued by Morgan Stanley or its affiliates;
or
(c) Morgan Stanley has a material pecuniary interest in the
matter submitted for a vote (e.g., acting as a financial
advisor to a party to a merger or acquisition for which
Morgan Stanley will be paid a success fee if completed).
C. PROXY VOTING REPORTS
(a) MSIM will promptly provide a copy of this Policy to any
client requesting them. MSIM will also, upon client
request, promptly provide a report indicating how each
proxy was voted with respect to securities held in that
client's account.
(b) MSIM's legal department is responsible for filing an
annual Form N-PX on behalf of each registered management
investment company for which such filing is required,
indicating how all proxies were voted with respect to such
investment company's holdings.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Applicable only for reports covering fiscal years on or after December 31, 2005.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11. Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the 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 12. Exhibits.
(1) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
(3) Written solicitations to purchase securities under Rule 23c-1 during the
period are attached hereto.
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 19, 2005
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 19, 2005
By: /s/ Phillip G. Goff
-------------------
Name: Phillip G. Goff
Title: Principal Financial Officer
Date: September 19, 2005