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
(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: 7/31/06
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, 2006.
THIS PIECE MUST BE PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS. 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.
PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT
RISKS.
AN INVESTMENT IN SENIOR LOANS IS SUBJECT TO CERTAIN RISKS SUCH AS LOAN
DEFAULTS AND ILLIQUIDITY DUE TO INSUFFICIENT COLLATERAL BACKING.
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 7/31/06
Current Distribution (July 31, 1996--July 31, 2006)
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
(CLASS IB) 3 MONTH T-BILL* (GENERIC)
--------------------------- -------------------------
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
4.60 3.50
4.78 3.54
4.80 3.88
4.91 3.94
5.83 4.08
5.25 4.47
5.48 4.62
5.95 4.61
5.95 4.76
6.29 4.84
6.60 4.98
7/06 6.63 5.07
</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>
A SHARES B SHARES C SHARES IB SHARES IC SHARES
since 2/18/2005 since 2/18/2005 since 2/18/2005 since 10/4/1989 since 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 4.25% 1.87% 3.49% 2.14% 3.49% 3.49% 5.89% 7.46%
10-year N/A N/A N/A N/A N/A N/A 4.63 N/A
5-year N/A N/A N/A N/A N/A N/A 5.22 N/A
1-year 4.39 0.95 3.63 0.67 3.63 2.64 4.38 4.50
- ------------------------------------------------------------------------------------------------------------------------------
</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. Effective 2/18/05,
contingent deferred sales charges for Class IB and Class IC shares are waived.
New investments are not available in Class IB and 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, 2006
MARKET CONDITIONS
The 12-month period ended July 31, 2006 was quite favorable for the senior loan
asset class. Economic growth was solid, inflation remained in check, and the
credit market showed overall strength with many corporations posting good
profits, increasing revenues and improving credit quality. In addition, interest
rates continued to climb as the Federal Open Market Committee (the "Fed") raised
the target federal funds rate by 25 basis points at each of its meetings during
the reporting period, bringing the target rate to 5.25 percent at the end of
June 2006. The rising-rate environment was particularly beneficial to the senior
loan market as the yields on the loans adjust in tandem to short-term interest
rates.
Yield spreads in the senior loan market were relatively steady during the first
half of the reporting year, then began to widen in March. These widening spreads
in the latter half of the period added to the attractiveness of senior loans,
spurring demand from both institutional and individual investors.
PERFORMANCE ANALYSIS
The fund returned 4.39 percent for the 12 months ended July 31, 2006 (Class A
shares, unadjusted for sales charges).
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JULY 31, 2006
<Table>
<Caption>
- -------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS IB CLASS IC
4.39% 3.63% 3.63% 4.38% 4.50%
- -------------------------------------------------------------
</Table>
The performance for the five 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.
We continued to follow our research-intensive investment approach, seeking to
balance yield with a stable net asset value. Our investment process remained
focused on identifying companies with strong management, solid and predictable
cash flows, and sufficient collateral in the event of default.
Throughout the reporting period, we maintained a high level of diversification
within the portfolio and continued to employ a bottom-up security selection
process driven by analysis of individual company fundamentals. We do, however,
analyze overall sector and industry trends as well, which led us to position the
fund somewhat defensively during the period. For example, we favored investments
in less cyclical sectors such as food and drug, cable, leisure
2
and entertainment, and the defense industry. These sectors have experienced
steady demand for goods and services. In addition, we generally avoided
investing in companies that we believed to be vulnerable to cyclical economic
downturns or rising fuel prices, particularly the auto and airline industries.
We also remained cautious about the health care sector, which has been
struggling due to reductions in Medicaid reimbursements.
In June, shareholders approved the use of leverage in the fund in an effort to
enhance the fund's dividend. We were able to immediately begin employing that
leverage, which involves borrowing at a short-term lending rate and reinvesting
the proceeds at a higher rate. The Fund may experience increased volatility as a
result of the use of leverage. We might reduce leverage in periods of weaker
credit quality conditions to prevent magnifying erosion of the fund's net asset
value.
There is no guarantee that any sectors mentioned will continue to perform well
or that securities in such sectors will be held by the fund in the future.
3
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 7/31/06
Broadcasting--Cable 11.4%
Chemicals, Plastics & Rubber 8.5
Entertainment & Leisure 7.4
Hotels, Motels, Inns & Gaming 7.1
Beverage, Food & Tobacco 6.3
Printing & Publishing 5.8
Buildings & Real Estate 5.7
Automotive 5.3
Healthcare 4.7
Aerospace/Defense 4.0
Ecological 3.5
Paper & Forest Products 3.5
Electronics 3.4
Personal & Miscellaneous Services 2.6
Health & Beauty 2.5
Construction Material 2.4
Containers, Packaging & Glass 2.3
Restaurants & Food Service 2.1
Telecommunications--Local Exchange Carriers 2.0
Finance 1.9
Insurance 1.9
Medical Products & Services 1.9
Natural Resources 1.4
Non-Durable Consumer Products 1.4
Broadcasting--Radio 1.4
Utilities 1.2
Telecommunications-Wireless 1.2
Diversified Manufacturing 1.2
Home & Office Furnishings, Housewares & Durable Consumer
Products 1.1
Pharmaceuticals 1.1
Machinery 1.0
Grocery 1.0
Retail--Specialty 0.9
Business Equipment & Services 0.9
Retail--Stores 0.8
Transportation-Rail Manufacturing 0.6
Mining, Steel, Iron & Non-Precious Metals 0.5
Transportation--Personal 0.5
Farming & Agriculture 0.5
Retail--Oil & Gas 0.4
Education & Child Care 0.4
Broadcasting--Diversified 0.4
Transportation--Cargo 0.4
Textiles & Leather 0.2
Telecommunications--Equipment & Services 0.2
Broadcasting--Television 0.2
Telecommunications--Long Distance 0.1
Retail--Office Products 0.1
-----
Total Long-Term Investments 115.3%
Short-Term Investments 2.7
Borrowings (11.0)
Liabilities in Excess of Other Assets (7.0)
-----
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 (800) SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 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 (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 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
6
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charges on redemptions of Class B and Class C
Shares; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other Fund expenses. This example is intended to help
you understand your ongoing cost (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 2/1/06 - 7/31/06.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the second line
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your cost would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
2/1/06 7/31/06 2/1/06-7/31/06
Class A
Actual...................................... $1,000.00 $1,025.68 $ 7.38
Hypothetical................................ 1,000.00 1,017.50 7.35
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,022.00 11.18
Hypothetical................................ 1,000.00 1,013.74 11.13
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,022.00 11.13
Hypothetical................................ 1,000.00 1,013.79 11.08
(5% annual return before expenses)
Class IB
Actual...................................... 1,000.00 1,025.66 7.43
Hypothetical................................ 1,000.00 1,017.46 7.40
(5% annual return before expenses)
Class IC
Actual...................................... 1,000.00 1,026.80 7.44
Hypothetical................................ 1,000.00 1,017.46 7.40
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.47%, 2.23%,
2.22%, 1.48% and 1.48% for Class A, B, C, IB and IC Shares, respectively,
multiplied by the average account value over the period, multiplied by
181/365 (to reflect the one-half year period). These ratios reflect an
expense waiver.
Assumes all dividends and distributions were reinvested.
7
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 22, 2006, 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 recent changes in the Fund's fundamental investment policies regarding
financial leverage and periodic repurchase offers. 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,
8
evaluated all of the foregoing and does not believe any single factor or group
of 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. 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, 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 and in
the Fund's prospectus. 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
9
together by the investment adviser with the oversight 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 its 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.
10
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
VARIABLE RATE** SENIOR LOAN INTERESTS 112.8%
AEROSPACE/DEFENSE 4.0%
$30,531 Alion Science and
Technology Corp., Term
Loan....................... B1 B+ 8.00% to 12/31/07 to $ 30,583,337
11.00 08/02/09
155 Alion Science and
Technology Corp., Revolving
Credit Agreement........... B1 B+ 10.00 08/02/09 151,125
2,550 AM General, LLC, Term Loan
(a)........................ NR NR 9.83 to 11/01/11 2,580,281
11.75
660 Apptis, Inc., Term Loan.... B2 B+ 8.65 01/05/10 664,698
2,213 ARINC, Inc., Term Loan..... Ba3 BB 7.11 03/10/11 2,220,345
1,390 DynCorp International, LLC,
Term Loan.................. Ba3 BB- 7.81 to 02/11/11 1,396,342
8.31
4,974 IAP Worldwide Services,
Inc., Term Loan............ B2 B- 8.50 to 12/30/12 to 5,034,660
13.50 06/30/13
3,600 ILC Industries, Inc., Term
Loan....................... NR NR 7.99 to 02/24/12 3,613,500
8.00
4,416 K&F Industries, Inc., Term
Loan....................... B2 B+ 7.40 11/18/12 4,423,263
938 Primus International, Inc.,
Revolving Credit
Agreement.................. NR NR 7.84 06/07/12 941,016
3,425 SI International, Inc.,
Term Loan.................. B1 NR 6.97 02/09/11 3,429,401
9,165 Spirit AeroSystems, Inc.,
Term Loan.................. B1 BB- 7.75 12/31/11 9,214,382
1,000 Standard Aero Holdings,
Inc., Term Loan............ B2 B+ 7.58 to 08/20/12 1,000,625
7.68
6,719 Wyle Laboratories, Inc.,
Term Loan.................. NR B+ 7.88 to 01/28/11 to 6,791,957
11.63 07/28/11
--------------
72,044,932
--------------
AUTOMOTIVE 5.3%
3,739 Accuride Corp., Term Loan
(a)........................ B1 B+ 7.31 01/31/12 3,749,537
1,000 Affinia Group, Inc., Term
Loan....................... B2 B 8.50 11/30/11 1,003,500
2,000 Dana Corp., Term Loan...... B3 BB- 7.45 04/13/08 2,003,958
19,235 Federal-Mogul Corp., Term
Loan (b)................... NR NR 9.15 12/09/06 19,378,807
</Table>
See Notes to Financial Statements 11
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
AUTOMOTIVE (CONTINUED)
$ 8,855 Federal-Mogul Corp.,
Revolving Credit Agreement
(b)........................ NR NR 9.15% 12/09/06 $ 8,882,444
2,331 Heartland Automotive
Holdings, Inc.,
Term Loan.................. NR NR 8.93 to 02/27/12 2,348,711
9.26
2,400 Lear Corp., Term Loan...... B2 B+ 7.93 04/25/12 2,386,750
10,369 MetoKote Corp.,
Term Loan.................. B2 B+ 8.68 to 11/27/11 10,401,152
8.74
1,044 Navistar International
Corp., Term Loan........... NR BB- 10.49 02/22/09 1,054,200
4,080 Polypore, Inc.,
Term Loan.................. B2 B 8.40 11/12/11 4,120,500
13,877 Safelite Glass Corp.,
Term Loan (c).............. NR NR 8.92 to 09/30/07 13,703,497
9.42
4,000 Sensata Technologies, Inc.,
Term Loan.................. B1 BB- 7.14 to 04/27/13 3,983,216
7.24
3,574 Tenneco Automotive, Inc.,
Term Loan.................. Ba3 BB- 7.19 12/12/10 3,601,214
15,523 TRW Automotive, Inc., Term
Loan....................... Ba2 BB+ 6.75 to 01/10/10 to 15,517,578
7.19 06/30/12
2,267 United Components, Inc.,
Term Loan.................. B2 BB- 7.41 to 06/30/12 2,278,082
7.66
--------------
94,413,146
--------------
BEVERAGE, FOOD & TOBACCO 6.3%
4,788 Advantage Sales &
Marketing, LLC,
Term Loan (a).............. NR NR 7.22 03/29/13 4,746,105
573 Atkins Nutritionals, Inc.,
Term Loan.................. NR NR 17.50 12/31/10 479,801
9,218 Birds Eye Foods, Inc.,
Term Loan (a).............. B1 B+ 8.15 to 06/30/08 9,264,585
8.18
1,006 Buffets Holdings, Inc.,
Term Loan (a).............. B1 B- 8.90 to 06/28/09 1,009,707
9.00
4,315 Commonwealth Brands, Inc.,
Term Loan.................. NR NR 7.75 12/22/12 4,342,253
</Table>
12 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 3,195 Culligan International Co.,
Term Loan.................. B1 B+ 7.37% 09/30/11 $ 3,195,674
16,973 Dole Food Co., Inc., Term
Loan....................... Ba3 B+ 5.37 to 04/12/13 16,646,935
9.00
7,155 DS Waters Enterprises, LP,
Term Loan.................. Caa3 CCC 9.81 to 11/07/09 7,171,029
11.50
2,178 Eight O'clock Coffee Co.,
Term Loan.................. NR NR 10.25 11/14/11 2,188,874
3,387 Farley's & Sathers Candy
Co., Inc., Term Loan....... NR NR 8.24 to 06/15/10 to 3,397,467
11.62 03/24/11
4,600 Fresh Start Bakeries, Inc.,
Term Loan.................. NR NR 7.75 to 06/27/13 4,605,750
7.88
2,987 Le-Nature's, Inc.,
Term Loan.................. B1 B 7.88 to 06/23/10 3,019,236
10.25
5,941 Luigino's, Inc.,
Term Loan.................. B1 B+ 8.25 to 04/02/11 5,991,554
8.44
1,031 Mafco Worldwide Corp., Term
Loan....................... B1 B+ 7.35 to 12/08/11 1,032,520
7.45
5,530 National Dairy Holdings,
LP, Term Loan.............. NR NR 7.40 03/15/12 5,551,170
2,640 National Distributing, Co.,
Inc., Term Loan............ NR NR 11.90 06/22/10 2,646,600
1,662 OSI Foods GMBH & Co. KG,
Term Loan.................. NR NR 7.25 09/02/11 1,659,896
5,816 OSI Group, LLC,
Term Loan.................. NR NR 7.25 09/02/11 5,809,635
4,351 PBM Products, LLC, Term
Loan....................... NR NR 8.40 07/26/11 4,381,006
4,565 Pierre Foods, Inc., Term
Loan....................... B1 B+ 6.93 06/30/10 4,573,893
3,838 Pinnacle Foods, Inc., Term
Loan....................... B1 B+ 7.45 to 11/25/10 3,841,312
7.48
750 Reddy Ice Group, Inc., Term
Loan....................... B1 B+ 7.25 08/09/12 749,531
4,000 Reynolds American, Inc.,
Term Loan.................. Ba1 BBB- 7.19 to 05/31/12 4,024,064
7.31
</Table>
See Notes to Financial Statements 13
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 5,000 Sturm Foods, Inc., Term
Loan....................... NR NR 7.75% to 05/26/11 $ 5,018,750
10.00
2,622 Sunny Delight Beverage Co.,
Term Loan.................. Caa1 CCC 11.19 to 08/20/10 2,597,508
11.52
3,950 Volume Services America,
Inc., Term Loan............ B2 NR 8.74 to 10/01/10 3,974,688
9.50
--------------
111,919,543
--------------
BROADCASTING--CABLE 11.4%
8,700 Century Cable Holdings,
LLC, Term Loan (b)......... NR NR 10.25 06/30/09 8,367,538
10,000 Cequel Communications, LLC,
Term Loan.................. B1 B+ 7.74 11/05/13 9,947,320
54,073 Charter Communications
Operating, LLC,
Term Loan.................. B2 B 8.13 04/28/13 54,218,323
19,975 CSC Holdings, Inc., Term
Loan....................... Ba3 BB 6.88 to 03/29/13 19,879,440
7.26
12,904 Frontiervision Operating
Partners, LP,
Term Loan (b) (j).......... NR NR 9.65 to 09/30/05 to 12,727,825
9.78 03/31/06
927 Frontiervision Operating
Partners, LP, Revolving
Credit Agreement (b) (j)... NR NR 9.65 06/30/06 912,575
12,959 Hilton Head Communications,
LP,
Term Loan (b).............. NR NR 9.50 03/31/08 12,359,883
18,340 Hilton Head Communications,
LP, Revolving Credit
Agreement (b).............. NR NR 8.25 09/30/07 17,361,873
759 Insight Midwest Holdings,
LLC, Revolving Credit
Agreement.................. Ba3 BB- 6.63 to 06/30/09 745,670
6.69
1,995 Knology, Inc., Term Loan... B1 B 7.99 06/29/10 2,007,126
7,572 MCC Iowa, LLC,
Term Loan.................. Ba3 BB- 6.90 to 01/31/15 5,949,638
7.37
1,600 Mediacom Broadband, LLC,
Term Loan.................. Ba3 BB- 7.38 01/31/15 3,190,000
</Table>
14 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
BROADCASTING--CABLE (CONTINUED)
$52,655 Olympus Cable Holdings,
LLC, Term Loan (b)......... NR NR 9.50% to 06/30/10 to $ 50,538,534
10.25 09/30/10
2,360 Parnassos, LP,
Term Loan.................. NR NR 8.25 06/30/07 2,338,904
2,640 Parnassos, LP, Revolving
Credit Agreement........... NR NR 8.25 06/30/07 2,617,346
--------------
203,161,995
--------------
BROADCASTING--DIVERSIFIED 0.4%
4,000 Cumulus Media, Inc., Term
Loan....................... Ba3 B 7.33 to 06/07/13 4,008,752
7.63
3,233 Entravision Communications
Corp., Term Loan........... Ba3 B+ 7.01 03/29/13 3,235,674
--------------
7,244,426
--------------
BROADCASTING--RADIO 1.4%
4,000 CMP KC, LLC, Term Loan..... Caa1 CCC 9.25 to 05/03/11 4,005,000
9.31
9,857 CMP Susquehanna Corp., Term
Loan....................... Ba3 B 7.25 to 05/05/13 9,861,766
7.38
1,197 LBI Media, Inc.,
Term Loan.................. B1 B 6.76 03/31/12 1,189,519
3,782 NextMedia Operating, Inc.,
Term Loan.................. B1 B 7.33 to 11/15/12 to 3,797,739
10.01 11/15/13
5,431 Spanish Broadcasting
Systems, Inc., Term Loan... B1 B+ 7.25 06/11/12 5,426,726
--------------
24,280,750
--------------
BROADCASTING--TELEVISION 0.2%
2,772 HIT Entertainment, Inc.,
Term Loan.................. B1 B 7.70 03/20/12 2,785,860
--------------
BUILDINGS & REAL ESTATE 5.7%
3,333 BioMed Realty, LP,
Term Loan (a).............. NR NR 7.60 05/30/10 3,341,667
8,791 Capital Automotive, LP,
Term Loan.................. Ba1 BB+ 7.10 12/16/10 8,800,792
676 Central Parking Corp., Term
Loan....................... Ba3 BB- 7.50 03/31/10 679,270
4,200 Edge-Star Partners, Term
Loan....................... NR NR 8.44 to 11/18/07 4,218,500
14.69
8,500 General Growth Properties,
Inc., Term Loan............ Ba2 BB+ 6.58 02/24/10 8,403,890
</Table>
See Notes to Financial Statements 15
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
BUILDINGS & REAL ESTATE (CONTINUED)
$14,000 Ginn LA CS Borrower, LLC,
Term Loan.................. B1 BB 8.29% to 06/08/11 to $ 13,830,000
12.35 06/08/12
10,000 Landsource Communities
Development, LLC, Term
Loan....................... NR NR 7.88 03/31/10 10,018,750
3,200 LNR Property Corp., Term
Loan....................... B2 B+ 8.11 07/12/11 3,219,334
1,596 London Arena & Waterfront
Finance, LLC, Term Loan.... NR NR 8.78 03/08/12 1,609,965
2,500 Macerich Partnership, LP,
Term Loan.................. NR NR 6.88 04/25/10 2,495,832
1,596 NCI Building Systems, Inc.,
Term Loan.................. Ba2 BB 6.71 06/18/10 1,598,837
1,845 Newkirk Master, LP, Term
Loan....................... Ba2 BB+ 7.10 to 08/11/08 1,850,707
8.75
3,796 North Las Vegas, Term
Loan....................... B2 B+ 8.25 to 05/09/11 to 3,824,989
12.50 05/30/12
2,400 Shea Capital I, LLC, Term
Loan....................... NR NR 7.49 10/27/11 2,391,000
2,494 Shea Mountain House, LLC,
Term Loan.................. NR NR 7.17 05/11/11 2,475,047
4,500 South Edge, LLC, Term
Loan....................... NR NR 7.19 to 10/31/07 to 4,511,041
7.44 10/31/09
1,978 Spanish Peaks, LLC, Term
Loan....................... B1 B+ 5.40 to 08/09/11 1,948,213
8.20
2,400 Standard Pacific Corp.,
Term Loan.................. NR NR 6.56 05/05/13 2,355,000
3,994 Tamarack Resort, LLC, Term
Loan....................... NR NR 8.33 to 05/19/11 4,011,474
8.75
6,000 Trizec Properties, Inc.,
Term Loan.................. NR BB+ 6.78 05/02/07 5,997,186
8,000 WCI Communities, Inc., Term
Loan....................... NR NR 7.44 12/23/10 7,960,000
6,089 Yellowstone Development,
LLC, Term Loan............. NR NR 7.78 09/30/10 6,069,254
--------------
101,610,748
--------------
</Table>
16 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES 0.9%
$ 1,192 Affiliated Computer
Services, Inc., Term Loan
(a)........................ Ba2 BB 7.40% to 03/20/13 $ 1,194,453
8.23
2,000 Contec, LLC, Term Loan..... NR NR 8.63 to 06/15/12 2,005,000
8.75
1,393 InfoUSA, Inc., Term Loan... Ba3 BB 7.25 02/14/12 1,394,741
3,200 Institutional Shareholder
Services, Inc., Term
Loan....................... NR NR 7.85 09/30/11 3,208,000
4,113 Katun Corp., Term Loan..... NR BB- 6.21 to 06/30/09 4,113,436
9.75
1,839 ProQuest Co., Revolving
Credit Agreement........... NR NR 7.89 to 01/31/10 1,800,380
8.89
1,628 Verifone, Inc., Term
Loan....................... B1 BB- 7.24 06/30/11 1,630,457
--------------
15,346,467
--------------
CHEMICALS, PLASTICS & RUBBER 8.4%
1,241 American Pacific Corp.,
Term Loan.................. B2 B 9.50 11/30/10 1,242,176
2,600 Basell North America
(Netherlands), Term Loan
(a)........................ Ba3 B+ 7.73 to 09/07/13 to 2,632,500
8.23 09/07/14
1,187 Becker-Underwood, Inc.,
Term Loan.................. NR NR 9.75 to 09/30/11 to 1,179,126
12.50 03/31/12
7,600 Brenntag Holdings GmbH &
Co. KG, Term Loan (a)...... B2 B+ 8.08 to 01/20/14 to 7,681,604
12.08 07/17/15
9,680 Celanese, AG (Germany),
Term Loan (a).............. B1 BB- 7.50 04/06/11 9,708,880
7,500 Ferro Corp., Revolving
Credit Agreement........... NR B+ 8.53 to 06/06/12 7,497,660
8.74
2,400 Fibervisions Delaware
Corp., Term Loan........... B2 B 9.00 03/31/13 2,406,000
16,000 Hexion Specialty Chemicals,
Inc., Term Loan............ B2 B+ 7.50 to 05/05/13 15,864,992
7.56
40,925 Huntsman International,
LLC, Term Loan............. Ba3 BB- 7.15 08/16/12 40,784,111
6,000 Ineos Holdings Ltd., Term
Loan....................... Ba3 B+ 7.34 to 12/16/13 to 6,043,752
7.84 12/23/14
</Table>
See Notes to Financial Statements 17
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
CHEMICALS, PLASTICS & RUBBER (CONTINUED)
$ 5,882 INVISTA (Netherlands), Term
Loan....................... Ba3 BB 7.00% 04/30/10 to $ 5,892,440
04/29/11
6,783 ISP Chemco, Inc., Term
Loan....................... Ba3 BB- 6.94 to 02/16/13 6,790,265
7.38
9,975 Kraton Polymers, LLC, Term
Loan....................... B1 B+ 7.44 05/12/13 9,975,000
5,700 Nalco Co., Term Loan....... B1 BB- 7.10 to 11/04/10 5,701,634
7.30
12,048 PQ Corp., Term Loan........ B1 B+ 7.50 02/10/12 12,072,595
10,658 Rockwood Specialties Group,
Inc., Term Loan............ B1 NR 7.49 12/13/13 10,693,877
3,200 Wellman, Inc., Term Loan... B2 B- 11.90 02/10/10 3,236,800
--------------
149,403,412
--------------
CONSTRUCTION MATERIAL 2.0%
7,960 AXIA, Inc., Term Loan...... B2 B 8.75 12/21/12 7,979,900
1,931 Brand Services, Inc., Term
Loan (a)................... B2 B 7.48 to 01/15/12 1,932,921
8.23
542 Builders FirstSource, Inc.,
Term Loan (a).............. B1 BB- 8.01 08/11/11 543,578
4,980 Contech Construction
Products, Inc.,
Term Loan.................. B1 B+ 7.22 to 01/31/13 4,989,611
9.25
1,500 Custom Building Products,
Inc., Term Loan............ NR NR 10.62 04/29/12 1,508,437
2,174 Gibraltar Industries, Inc.,
Term Loan.................. Ba1 BB 7.19 to 12/08/12 2,173,913
7.25
4,000 Interline Brands, Inc.,
Term Loan.................. B1 BB 7.21 to 06/23/13 4,015,000
7.26
1,798 Nortek, Inc., Term Loan.... B2 B 7.40 to 08/27/11 1,795,442
9.25
2,341 Panolam Industries
International, Inc.
(Canada), Term Loan........ B2 B+ 8.25 09/30/12 2,358,416
1,600 Pro-Build Holdings, Inc.,
Term Loan.................. Ba3 NR 7.25 06/29/13 1,600,501
3,800 Professional Paint, Inc.,
Term Loan.................. NR NR 7.69 to 05/31/12 to 3,821,000
11.38 05/31/13
</Table>
18 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
CONSTRUCTION MATERIAL (CONTINUED)
$ 1,596 Universal Building
Products, Inc., Term
Loan....................... NR NR 8.58% to 04/28/12 $ 1,611,960
9.01
1,118 Werner Holding Co., Inc.,
Term Loan (b) (d).......... NR D 11.25 to 06/11/09 1,111,914
17.25
658 Werner Holding Co., Inc.,
Term Loan (b) (f).......... NR D 11.25 to 12/11/09 598,860
17.25
--------------
36,041,453
--------------
CONTAINERS, PACKAGING & GLASS 2.3%
2,000 Anchor Glass Container
Corp., Term Loan........... NR NR 7.52 to 05/03/13 2,005,000
7.75
1,824 Berry Plastics Corp., Term
Loan (a)................... B1 B+ 7.15 12/02/11 1,823,884
1,232 Bluegrass Container
Holdings, LLC, Term Loan
(a)........................ Ba3 BB- 7.65 06/30/13 1,238,056
1,176 Consolidated Container Co.,
LLC, Term Loan............. B2 B- 8.38 12/15/08 1,182,370
3,200 Covalence Specialty
Materials Corp., Term
Loan....................... Ba3 B+ 7.44 to 05/18/13 to 3,211,626
8.63 08/16/13
1,200 Crown Americas, Inc., Term
Loan....................... Ba2 BB- 6.95 11/15/12 1,201,500
871 Fleming Packaging Corp.,
Term Loan (b) (d) (e)...... NR NR 8.00 to 08/31/04 8,711
12.25
100 Fleming Packaging Corp.,
Revolving Credit Agreement
(b) (d) (e)................ NR NR 4.50 to 03/31/03 1,000
8.75
3,895 Graham Packaging Co., Term
Loan....................... B2 B 7.56 to 10/07/11 to 3,928,441
9.75 04/07/12
8,117 Graphic Packaging
International Corp., Term
Loan....................... B1 B+ 7.62 to 08/08/10 8,191,349
8.14
369 Graphic Packaging
International Corp.,
Revolving Credit
Agreement.................. B1 B+ 8.40 to 08/08/09 358,615
10.25
</Table>
See Notes to Financial Statements 19
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING & GLASS (CONTINUED)
$ 5,000 Packaging Dynamics, Term
Loan....................... NR BB- 7.51% 06/09/13 $ 5,006,250
2,684 Ranpak Corp., Term Loan.... NR NR 7.83 12/14/11 2,690,568
5,050 Smurfit-Stone Container
Corp., Term Loan........... Ba3 B+ 7.50 to 11/01/11 5,078,736
9.50
398 Smurfit-Stone Container
Corp., Revolving Credit
Agreement.................. Ba3 B+ 9.75 11/01/09 387,888
1,000 Solo Cup, Inc., Term
Loan....................... B3 B- 9.66 03/31/12 1,010,000
3,990 Unifrax Corp., Term Loan... B2 B 7.69 05/02/13 3,996,236
--------------
41,320,230
--------------
DIVERSIFIED MANUFACTURING 1.2%
1,616 Arnold Magnetic
Technologies Corp., Term
Loan....................... NR NR 10.50 to 03/06/11 to 1,615,897
11.50 03/06/12
2,033 Chart Industries, Inc, Term
Loan....................... B1 B+ 7.56 10/17/12 2,036,184
3,500 Euramax International,
Inc., Term Loan............ Caa1 B- 12.49 06/29/13 3,518,962
9,397 Mueller Group, Inc., Term
Loan....................... B1 BB- 7.36 to 10/03/12 9,456,110
7.87
4,000 X-Rite, Inc., Term Loan.... B1 B+ 7.60 to 06/30/12 to 4,045,000
10.35 06/30/13
--------------
20,672,153
--------------
ECOLOGICAL 3.5%
26,016 Allied Waste North America,
Inc., Term Loan (a)........ B1 BB 6.72 to 01/15/12 25,923,174
7.27
3,381 Duratek, Inc.,
Term Loan.................. NR BB 7.65 to 06/07/13 3,410,717
7.77
7,819 Energy Solutions, LLC, Term
Loan....................... B2 BB 7.62 to 06/07/11 to 7,887,283
7.77 06/07/13
5,184 Environmental Systems
Products Holdings, Term
Loan....................... B3 NR 8.73 to 12/12/08 to 5,250,987
15.50 12/12/10
3,448 Great Lakes Dredge & Dock
Corp., Term Loan........... B2 CCC 7.99 to 12/22/10 3,460,513
8.62
</Table>
20 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
ECOLOGICAL (CONTINUED)
$ 2,587 LVI Services, Inc., Term
Loan....................... NR NR 8.25% to 11/16/11 $ 2,577,299
8.37
1,481 Safety-Kleen Corp., Term
Loan....................... NR NR 12.17 to 09/15/08 1,526,921
14.25
4,600 Synagro Technologies, Inc.,
Term Loan.................. NR BB- 7.76 to 06/21/12 4,611,500
7.77
5,453 Waste Services, Inc., Term
Loan....................... B2 B- 8.59 to 03/31/11 5,487,155
10.50
249 Waste Services, Inc.,
Revolving Credit
Agreement.................. B2 B- 9.37 04/29/09 245,156
2,000 WasteQuip, Inc.,
Term Loan.................. B3 NR 11.00 07/15/12 2,010,000
--------------
62,390,705
--------------
EDUCATION & CHILD CARE 0.4%
7,200 Education Management Corp.,
Term Loan.................. B2 B 8.06 06/01/13 7,246,123
--------------
ELECTRONICS 3.5%
3,682 Amkor Technology, Inc.,
Term Loan (a).............. B2 B- 9.69 10/27/10 3,812,983
4,191 Audio Visual Services
Corp., Term Loan........... B1 NR 8.00 05/18/11 4,212,332
796 Blackboard, Inc., Term
Loan....................... Ba3 B+ 7.65 to 02/28/12 803,960
9.00
2,148 DoubleClick, Inc., Term
Loan....................... B2 B 9.13 to 07/13/12 2,177,301
9.17
795 Eastman Kodak Co., Term
Loan....................... Ba3 B+ 7.44 to 10/18/12 795,557
7.76
1,995 Epicor Software Corp., Term
Loan....................... B1 B+ 7.71 to 03/30/12 2,011,209
9.15
1,000 GXS Worldwide, Inc., Term
Loan....................... B2 B+ 10.26 to 07/29/11 992,500
10.49
4,939 ON Semiconductor Corp.,
Term Loan.................. B3 B+ 7.75 12/15/11 4,939,815
</Table>
See Notes to Financial Statements 21
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
ELECTRONICS (CONTINUED)
$ 978 Open Solutions, Inc., Term
Loan....................... B1 B+ 7.78% to 09/03/11 to $ 987,557
11.78 11/30/11
15,860 Spectrum Brands, Inc., Term
Loan....................... B2 B- 7.67 to 02/06/12 15,880,081
8.51
400 Stratus Technologies, Inc.,
Term Loan.................. B1 B- 8.50 03/29/11 401,375
13,260 Sungard Data Systems, Inc.,
Term Loan.................. B1 B+ 7.66 02/11/13 13,334,682
11 Sungard Data
Systems, Inc., Revolving
Credit Agreement........... B1 B+ 9.75 08/11/11 10,539
11,024 UGS Corp., Term Loan....... B1 B+ 7.40 to 03/31/12 11,035,910
7.49
--------------
61,395,801
--------------
ENTERTAINMENT & LEISURE 6.4%
1,975 Alliance Atlantis
Communications, Inc., Term
Loan (a)................... Ba2 BB 7.00 12/20/11 1,973,766
1,990 AMC Entertainment, Inc.,
Term Loan (a).............. Ba3 B+ 7.53 01/26/13 1,998,593
4,000 Bombardier Capital, Inc.,
Term Loan (a).............. B1 B+ 8.24 06/28/13 3,997,500
1,600 Century Theatres, Inc.,
Term Loan.................. Ba3 B+ 7.11 03/01/13 1,603,400
10,497 Fender Musical Instruments
Corp., Term Loan........... Caa1 B- 7.87 to 03/30/12 to 10,565,759
11.12 09/30/12
42,064 Metro-Goldwyn-Mayer
Studios, Inc., Term Loan... NR NR 7.75 04/08/12 42,184,066
1,994 Mets, LP, Term Loan........ NR NR 7.56 07/25/10 2,016,721
320 Movie Gallery, Inc., Term
Loan....................... Caa1 CCC 10.50 04/27/10 312,756
2,993 Panavision, Inc., Term
Loan....................... B1 B 8.23 to 03/30/11 3,020,555
8.49
7,446 Pure Fishing, Inc., Term
Loan....................... B1 B+ 8.50 to 09/30/10 to 7,469,574
11.31 03/31/11
8,752 Regal Cinemas, Inc., Term
Loan....................... Ba2 BB- 7.07 to 11/10/10 8,715,346
7.25
</Table>
22 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (CONTINUED)
$ 6,358 Six Flags Theme Parks,
Inc., Term Loan............ B1 B- 7.41% to 06/30/09 $ 6,418,853
7.73
1,018 Six Flags Theme Parks,
Inc., Revolving Credit
Agreement.................. B1 B- 8.10 to 06/30/08 1,005,702
8.15
4,000 Southwest Sports Group,
LLC, Term Loan............. NR NR 7.80 to 12/22/10 4,002,500
8.00
2,760 Tigers Ballpark, LLC, Term
Loan....................... NR NR 7.13 08/15/10 2,766,900
8,450 True Temper Sports, Inc.,
Term Loan.................. B2 B 3.00 to 03/15/11 8,513,162
10.25
7,595 Universal City Development
Partners, LP, Term Loan.... Ba3 BB- 7.19 to 06/09/11 7,606,871
7.51
--------------
114,172,024
--------------
FARMING & AGRICULTURE 0.5%
998 Nutro Products, Inc., Term
Loan....................... B1 B 7.27 04/26/13 998,747
6,975 Wm. Bolthouse Farms, Inc.,
Term Loan (a).............. B3 B+ 7.81 to 12/16/12 to 7,053,756
11.00 12/16/13
--------------
8,052,503
--------------
FINANCE 1.9%
3,121 DCS Business Services,
Inc., Term Loan............ NR NR 9.40 to 02/04/11 to 3,113,211
10.89 08/04/11
1,772 Fidelity National
Information Solutions,
Inc., Term Loan............ Ba1 BB+ 7.10 03/09/13 1,774,686
2,394 iPayment, Inc., Term
Loan....................... B2 B 7.61 to 05/10/13 2,394,000
7.75
3,980 LPL Holdings, Inc., Term
Loan....................... B2 B 8.13 to 06/28/13 4,027,262
8.75
8,010 Outsourcing Solutions,
Inc., Term Loan............ NR NR 9.90 09/30/10 8,030,183
7,684 Refco Finance Holdings,
LLC, Term Loan (b) (d)..... B1 BB- 9.00 to 08/05/11 8,093,811
9.50
7,053 Transfirst Holdings, Inc.,
Term Loan.................. NR NR 8.50 to 03/31/10 to 7,144,239
13.00 03/31/11
--------------
34,577,392
--------------
</Table>
See Notes to Financial Statements 23
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
GROCERY 1.0%
$ 7,965 Roundy's Supermarkets,
Inc., Term Loan............ B2 B+ 8.17% to 11/03/11 $ 8,047,959
8.29
9,975 Supervalu, Inc.,
Term Loan.................. NR NR 7.06 06/02/12 9,952,836
--------------
18,000,795
--------------
HEALTH & BEAUTY 2.5%
13,987 Bare Escentuals Beauty,
Inc., Term Loan (a)........ B3 CCC 8.19 to 02/18/12 to 14,092,963
12.43 02/18/13
7,497 CEI Holdings, Inc., Term
Loan....................... NR NR 8.88 to 12/03/10 to 7,515,746
13.31 12/03/11
9,999 Marietta Intermediate
Holding Corp., Term Loan... NR NR 8.69 to 12/17/10 to 9,777,089
13.50 12/17/11
12,863 Prestige Brands Holdings,
Inc., Term Loan............ B1 B+ 7.23 to 04/06/11 12,905,827
9.50
--------------
44,291,625
--------------
HEALTHCARE 4.7%
798 AmeriPath, Inc., Term Loan
(a)........................ B1 BB- 7.39 10/31/12 797,900
3,249 AMN Healthcare Services,
Inc., Term Loan............ Ba2 BB- 7.50 11/02/11 3,263,663
1,824 Angiotech Pharmaceuticals,
Inc., Term Loan............ Ba3 BB- 6.93 to 03/23/13 1,802,254
7.00
7,184 Capella Healthcare, Inc.,
Term Loan.................. B3 CCC 8.24 to 11/30/12 to 7,225,890
11.24 11/30/13
2,420 Center for Diagnostic
Imaging (CDI), Term Loan... B2 B 9.00 12/31/10 2,238,334
11,856 Community Health Systems,
Inc., Term Loan............ Ba3 BB- 6.97 08/19/11 11,872,496
4,849 Concentra Operating Corp.,
Term Loan.................. B1 B+ 7.50 09/30/11 4,862,204
798 CRC Health Corp., Term
Loan....................... B1 B 7.75 02/06/13 797,002
988 Diagnostic Imaging Group,
LLC, Term Loan............. B2 B+ 8.38 to 05/04/12 950,469
10.75
5,988 FHC Health Systems, Inc.,
Term Loan.................. B2 B 11.23 to 12/18/09 6,197,432
13.23
</Table>
24 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$ 723 Genoa Healthcare Group,
LLC, Term Loan............. B2 B 8.61% to 08/10/12 $ 731,221
10.50
399 Golden Gate National Senior
Care, LLC, Term Loan....... B1 B+ 7.96 to 03/14/11 401,494
8.25
1,938 Harlan Sprague Dawley,
Inc., Term Loan............ B2 B+ 8.00 to 12/19/11 1,949,609
9.75
29,107 LifePoint Hospitals, Inc.,
Term Loan.................. Ba3 BB 7.13 04/15/12 29,024,524
388 Matria Healthcare, Inc.,
Term Loan.................. B1 BB- 7.44 to 01/19/07 to 386,655
7.75 01/19/12
4,870 Multiplan Inc., Term
Loan....................... B2 B+ 7.50 04/12/13 4,851,591
2,800 National Renal Institutes,
Inc., Term Loan............ NR NR 7.42 to 03/31/13 2,800,000
7.53
2,360 Sterigenics International,
Inc., Term Loan............ B2 B+ 8.33 to 06/14/11 2,366,289
10.25
400 US Oncology, Inc., Term
Loan....................... Ba3 B+ 7.94 08/20/11 401,875
--------------
82,920,902
--------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE
CONSUMER PRODUCTS 1.1%
1,995 Formica Corp., Term Loan... B2 B 8.17 to 03/15/13 2,001,234
8.50
3,683 Hunter Fan Co., Term Loan.. B1 B 7.76 03/24/12 3,678,729
7,400 National Bedding Co., Term
Loan....................... B3 B+ 10.49 08/31/12 7,534,125
3,596 Quality Home Brands
Holdings, LLC, Term Loan... B2 B 7.96 to 12/20/12 to 3,626,417
11.94 06/20/13
3,092 Sealy Mattress Co., Term
Loan....................... Ba3 BB- 6.98 to 04/06/12 3,097,654
8.75
--------------
19,938,159
--------------
HOTELS, MOTELS, INNS & GAMING 7.1%
9,600 Greektown Casino, LLC, Term
Loan....................... B1 B 8.00 12/03/12 9,648,000
4,888 Green Valley Ranch Gaming,
LLC, Term Loan............. NR NR 7.25 12/17/11 4,894,173
</Table>
See Notes to Financial Statements 25
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
$ 3,753 Herbst Gaming, Inc., Term
Loan....................... B1 B+ 7.11% to 01/31/11 $ 3,759,536
7.50
3,215 Interstate Operating Co.,
LP, Term Loan.............. B2 B 9.94 01/14/08 3,247,382
5,271 Kuilima Resort Co., Term
Loan....................... NR NR 11.90 09/30/11 4,967,638
1,000 MGM Mirage, Term Loan...... NR NR 6.28 to 04/25/10 998,125
8.75
13,705 MGM Mirage, Revolving
Credit Agreement........... NR NR 6.28 to 04/25/10 13,331,311
8.75
400 Pinnacle Entertainment,
Term Loan.................. B1 BB- 7.40 12/14/11 401,312
47,078 Planet Hollywood
International, Inc., Term
Loan....................... B3 B- 8.51 to 08/31/10 45,582,770
8.99
125 Planet Hollywood
International, Inc., Term
Loan (f)................... B3 B- 8.51 to 08/31/10 121,436
8.99
4,824 Resorts International Hotel
& Casino, Inc., Term
Loan....................... Caa1 CCC- 16.50 04/26/13 5,024,084
92 Resorts International Hotel
& Casino, Inc., Revolving
Credit Agreement........... Caa1 CCC- 8.25 to 04/26/10 91,213
8.37
1,995 Scientific Games Corp.,
Term Loan.................. Ba2 BB 6.65 12/23/09 1,996,871
502 Scientific Games Corp.,
Revolving Credit
Agreement.................. Ba2 BB 7.15 to 12/23/09 499,490
9.00
4,800 Venetian Casino Resorts,
LLC, Term Loan............. Ba3 BB- 7.25 06/15/11 4,800,374
2,890 Venetian Casino Resorts,
LLC, Revolving Credit
Agreement.................. Ba3 BB- 7.09 to 02/22/10 2,832,513
7.25
2,133 Venetian Macau, Ltd., Term
Loan....................... B1 BB- 8.20 05/26/12 to 2,143,334
05/26/13
2,000 Wembley, Inc., Term Loan... B1 B+ 6.99 08/23/11 to 2,000,625
07/18/12
</Table>
26 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
$16,938 Wynn Las Vegas, LLC, Term
Loan....................... B2 B+ 7.55% 12/14/11 $ 16,969,258
2,053 Yonkers Racing Corp., Term
Loan....................... NR NR 8.89 08/12/11 2,070,509
--------------
125,379,954
--------------
INSURANCE 1.9%
2,788 American Wholesale
Insurance Group, Inc., Term
Loan....................... NR B 8.40 to 10/27/11 to 2,794,970
12.75 04/27/12
5,984 ARG Holdings, LLC, Term
Loan....................... B2 NR 8.50 to 11/30/11 to 6,035,950
12.75 11/30/12
2,000 Audatex North America,
Inc., Term Loan (a)........ B1 B+ 7.75 04/13/13 2,010,000
2,560 CCC Information Services
Group, Inc., Term Loan..... NR NR 8.00 02/10/13 2,573,332
3,027 Conseco, Inc., Term Loan... Ba3 BB- 7.12 06/22/10 3,033,932
2,394 Hilb, Rogal & Hobbs Co.,
Term Loan.................. Ba2 BB 7.00 04/26/13 2,395,994
2,466 Mitchell International,
Inc., Term Loan............ B1 B+ 7.50 08/15/11 2,475,541
7,342 USI Holdings Corp., Term
Loan....................... B1 NR 7.75 03/24/11 7,396,825
4,622 Vertafore, Inc., Term
Loan....................... NR NR 7.73 to 01/31/12 to 4,681,110
11.23 01/31/13
--------------
33,397,654
--------------
MACHINERY 1.0%
4,200 Alliance Laundry Holdings,
LLC, Term Loan (a)......... B1 B 7.60 to 01/27/12 4,217,065
9.50
2,078 Douglas Dynamics, LLC, Term
Loan....................... B1 BB- 7.25 12/16/10 2,083,527
1,200 Gleason Corp.,
Term Loan.................. NR NR 7.81 06/30/13 1,207,126
8,145 Goodman Global Holdings,
Inc., Term Loan............ B1 B+ 6.94 12/23/11 8,136,012
2,444 United Rentals (North
America), Inc., Term
Loan....................... B2 BB- 7.40 02/14/11 2,450,732
--------------
18,094,462
--------------
</Table>
See Notes to Financial Statements 27
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES 1.9%
$ 1,592 Accellent, Inc., Term Loan
(a)........................ B2 BB- 7.23% 11/22/12 $ 1,590,341
2,594 AGA Medical Corp., Term
Loan....................... B2 B+ 7.38 04/28/13 2,597,554
998 Conmed Corp.,
Term Loan.................. Ba2 BB- 7.14 to 04/12/13 1,001,241
9.00
19,955 DaVita, Inc., Term Loan.... B1 BB- 7.11 to 10/05/12 20,019,459
7.69
1,197 DJ Orthopedics, LLC, Term
Loan....................... Ba3 BB- 6.94 to 04/07/13 1,192,511
7.06
5,985 Fresenius Medical Care
Holdings, Inc., Term
Loan....................... NR BB+ 6.78 to 03/31/13 5,939,700
6.87
827 Kinetics Concepts, Inc.,
Term Loan.................. Ba3 BB 7.25 08/11/10 831,962
--------------
33,172,768
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 0.5%
3,311 New Enterprise Stone & Lime
Co., Inc., Term Loan....... NR NR 7.72 to 07/30/10 3,327,309
9.50
3,606 Novelis, Inc., Term Loan... Ba2 BB- 6.88 to 01/07/12 3,631,238
7.38
2,078 Techs Industries, Inc.,
Term Loan.................. NR NR 9.50 01/14/10 2,080,827
--------------
9,039,374
--------------
NATURAL RESOURCES 1.3%
2,800 CDX Funding, LLC, Term
Loan....................... NR NR 10.75 03/31/13 2,842,000
397 Cheniere LNG Holdings, LLC,
Term Loan.................. NR BB 8.25 08/30/12 400,598
1,592 Key Energy Services Group,
Inc., Term Loan............ NR NR 8.40 to 06/30/12 1,599,629
8.90
1,938 SemCrude, LP, Term Loan.... Ba3 NR 7.58 to 03/16/11 1,946,180
9.00
16,249 Targa Resources, Inc., Term
Loan....................... Ba3 B+ 7.23 to 10/31/07 to 16,274,223
7.75 10/31/12
--------------
23,062,630
--------------
</Table>
28 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
NON-DURABLE CONSUMER PRODUCTS 1.2%
$ 8,792 Aearo Technologies, Inc.,
Term Loan (a).............. B2 CCC 7.96% to 03/24/13 to $ 8,922,982
11.96 09/24/13
3,096 Amscan Holdings, Inc., Term
Loan (a)................... B1 B+ 8.19 to 12/23/12 3,106,319
8.30
2,993 Easton-Bell Sports, Inc.,
Term Loan.................. B1 B+ 6.81 to 03/16/12 2,997,488
6.94
1,816 JohnsonDiversey, Inc., Term
Loan....................... B1 B 7.63 12/16/11 1,829,567
1,188 Mega Bloks, Inc. (Canada),
Term Loan.................. Ba3 BB- 6.94 to 07/26/12 1,187,629
7.25
1,800 Targus Group International,
Inc., Term Loan............ B3 CCC 12.80 05/22/13 1,743,750
1,995 UCG Paper Crafts, Inc.,
Term Loan.................. NR NR 8.65 02/17/13 1,999,988
--------------
21,787,723
--------------
PAPER & FOREST PRODUCTS 3.3%
45,174 Georgia-Pacific Corp., Term
Loan....................... Ba2 BB- 7.30 to 12/20/12 to 45,261,901
8.30 12/20/13
774 NewPage Corp., Term Loan... B1 B 8.50 05/02/11 779,921
5,204 White Birch Paper, Co.
(Canada), Term Loan........ B2 B+ 8.75 04/06/12 5,277,417
7,354 Xerium Technologies, Inc.,
Term Loan.................. B1 B+ 7.75 05/18/12 7,331,345
--------------
58,650,584
--------------
PERSONAL & MISCELLANEOUS SERVICES 2.6%
8,417 Affinion Group, Inc., Term
Loan (a)................... B1 B+ 7.92 to 10/17/12 8,466,679
8.12
1,692 Alderwoods Group, Inc.,
Term Loan (a).............. Ba3 BB 7.37 to 09/29/09 1,694,171
7.40
245 Alderwoods Group, Inc.,
Revolving Credit Agreement
(a)........................ Ba3 BB 10.00 09/29/08 241,960
6,786 Coinmach Laundry Corp.,
Term Loan.................. B2 B 7.69 to 12/19/12 6,842,831
7.88
8,480 Educate Operating Co., LLC,
Term Loan.................. B1 NR 8.50 03/31/12 8,522,208
</Table>
See Notes to Financial Statements 29
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
PERSONAL & MISCELLANEOUS SERVICES (CONTINUED)
$ 5,823 Hertz Corp., Term Loan..... Ba2 BB 7.41% to 12/21/12 $ 5,858,151
7.69
4,145 Iron Mountain, Inc., Term
Loan....................... Ba3 BB- 7.00 to 04/02/11 4,157,131
7.13
1,206 Omniflight Helicopters,
Inc., Term Loan............ NR NR 12.25 to 09/30/11 to 1,208,765
12.75 09/30/12
3,849 Sedgwick Claims Management
Services, Inc., Term
Loan....................... B1 B+ 7.43 to 01/31/13 3,843,313
7.50
6,098 WeightWatchers.com, Term
Loan....................... B1 B+ 7.62 to 12/16/10 to 6,138,295
10.36 06/16/11
--------------
46,973,504
--------------
PHARMACEUTICALS 1.1%
2,220 Bradley Pharmaceuticals,
Inc., Term Loan............ NR NR 9.18 to 11/14/10 2,244,975
11.25
18,005 Warner Chilcott Holding,
Co., Term Loan............. B2 B 7.61 to 01/18/12 18,047,707
8.00
--------------
20,292,682
--------------
PRINTING & PUBLISHING 5.8%
7,262 Adams Outdoor Advertising,
LP, Term Loan (a).......... B1 B+ 6.96 to 10/18/12 7,278,202
7.27
2,685 ALM Media Holdings, Inc.,
Term Loan.................. B3 B- 8.00 03/05/10 2,683,572
3,300 American Media Operations,
Inc., Term Loan (a)........ B1 B 8.12 01/31/13 3,330,112
2,543 American Reprographics Co.,
Term Loan (a).............. Ba3 BB- 7.14 to 06/18/09 2,546,246
9.00
1,170 Ascend Media Holdings, LLC,
Term Loan.................. NR NR 8.62 to 01/31/12 1,136,362
9.00
5,438 Canon Communications, LLC,
Term Loan.................. B3 B 8.50 to 05/31/11 5,451,466
8.62
2,399 Caribe Information
Investment, Inc., Term
Loan....................... B1 B 7.42 to 03/31/13 2,401,999
7.46
</Table>
30 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (CONTINUED)
$ 9,825 Cygnus Business Media,
Inc., Term Loan............ B3 CCC 10.01% 07/13/09 $ 9,775,875
9,423 Day International Group,
Inc., Term Loan............ B1 B 8.12 to 12/05/12 to 9,549,199
12.87 12/05/13
3,950 FSC Acquisition, LLC, Term
Loan....................... B2 B 7.42 to 08/01/12 3,953,623
7.60
3,600 GateHouse Media, Inc., Term
Loan....................... B1 BB- 7.39 12/06/13 3,596,627
8,412 Haights Cross
Communications, LLC, Term
Loan....................... B3 B- 8.67 to 08/20/08 8,493,426
9.67
2,442 MC Communications, LLC,
Term Loan.................. NR NR 7.44 12/31/10 2,456,223
668 MediaNews Group, Inc., Term
Loan....................... Ba3 BB- 6.65 to 12/30/10 667,387
8.50
8,203 Merrill Communications,
LLC, Term Loan............. B1 B+ 7.65 to 05/15/11 8,245,073
7.75
1,891 Network Communications,
Inc., Term Loan............ Ba3 B+ 7.28 to 11/30/12 1,899,952
8.12
7,454 New Publications, Inc.,
Term Loan.................. NR B 8.16 to 02/05/13 7,485,322
12.76
6,732 Primedia, Inc., Term
Loan....................... NR NR 7.88 09/30/13 6,647,009
542 Primedia, Inc., Revolving
Credit Agreement........... NR NR 7.88 06/30/08 521,324
11,203 R.H. Donnelley, Inc., Term
Loan....................... Ba3 BB 6.46 to 12/31/09 to 11,131,645
7.01 06/30/11
1,473 SGS International, Inc.,
Term Loan.................. B1 B+ 7.64 to 12/30/11 1,478,122
8.12
1,870 Source Media, Inc., Term
Loan....................... B1 NR 7.68 11/08/11 1,873,956
1,000 Thomas Nelson Publishers,
Inc., Term Loan............ B1 B 7.61 to 06/12/12 1,005,625
7.75
--------------
103,608,347
--------------
</Table>
See Notes to Financial Statements 31
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
RESTAURANTS & FOOD SERVICE 2.1%
$ 3,663 Arby's, LLC, Term Loan
(a)........................ B1 B+ 7.74% to 07/25/12 $ 3,665,034
7.75
5,359 Burger King Corp., Term
Loan....................... Ba2 B+ 7.00 06/30/12 5,345,911
5,299 Carrols Corp., Term Loan... B1 B+ 8.00 12/31/10 5,335,918
5,010 CBRL Group, Inc., Term
Loan....................... Ba2 BB 6.63 04/27/13 4,986,421
2,776 Denny's Corp., Term Loan... B2 B 8.19 to 09/30/09 to 2,800,744
10.75 09/30/10
552 Landry's Restaurants, Inc.,
Term Loan.................. Ba2 BB- 6.86 12/28/10 552,472
4,833 NPC International, Inc.,
Term Loan.................. B1 B+ 6.88 to 05/03/13 4,804,638
9.00
6,000 Quizno's, LLC, Term Loan... Caa1 B 7.75 to 05/05/13 to 6,012,251
11.25 11/05/13
2,998 Sagittarius Restaurants,
LLC, Term Loan............. B1 B 7.75 03/29/13 2,993,753
--------------
36,497,142
--------------
RETAIL--OFFICE PRODUCTS 0.1%
2,369
Buhrmann US, Inc., Term
Loan (a)................... Ba3 BB- 2,374,754
6.88 to 12/23/10 --------------
7.15
RETAIL--OIL & GAS 0.4%
1,791 The Pantry, Inc., Term
Loan....................... Ba3 BB 7.15 01/02/12 1,794,919
5,460 Travelcenters of America,
Inc., Term Loan............ B1 BB 6.86 to 12/01/11 5,464,809
7.25
--------------
7,259,728
--------------
RETAIL--SPECIALTY 0.9%
11,893 Nebraska Book Co., Inc.,
Term Loan.................. B2 B- 7.74 03/04/11 11,952,538
4,243 Visant Holding Corp., Term
Loan....................... B1 B+ 7.07 10/04/11 4,269,021
--------------
16,221,559
--------------
RETAIL--STORES 0.8%
12,342 Neiman Marcus Group, Inc.,
Term Loan.................. B1 B+ 7.77 04/06/13 12,456,452
798 Pep Boys--Manny, Moe &
Jack, Term Loan............ Ba2 B+ 8.21 01/27/11 804,484
--------------
13,260,936
--------------
</Table>
32 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--EQUIPMENT & SERVICES 0.2%
$ 4,000
Level 3 Communications,
Inc., Term Loan............ B3 B- $ 4,006,668
4.25% to 12/01/11 --------------
9.65
TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 1.8%
400 Alaska Communications
Systems Group, Inc., Term
Loan (a)................... B1 B+ 7.25 02/01/12 400,000
2,777 Cincinnati Bell, Inc., Term
Loan....................... Ba3 B+ 6.66 to 08/31/12 2,770,067
6.93
11,200 Fairpoint Communications,
Inc., Term Loan............ B1 BB- 7.25 02/08/12 11,151,000
3,892 Hawaiian Telecom, Inc.,
Term Loan.................. B1 B 7.75 04/30/12 to 3,911,927
10/31/12
6,579 Orius Corp., LLC, Term Loan
(b) (c) (e)................ NR NR 12.00 01/23/09 to 1,376,353
01/23/10
2,375 Orius Corp., LLC, Revolving
Credit Agreement (b) (c)
(e)........................ NR NR 4.00 to 01/31/06 2,042,647
10.75
6,865 Qwest Corp., Term Loan..... Ba3 BB 12.00 06/30/07 6,987,954
766 Sorenson Communications,
Inc., Term Loan............ NR NR 8.11 11/15/12 769,773
2,000 Windstream Corp., Term
Loan....................... Ba2 BBB- 7.26 07/17/13 2,008,928
--------------
31,418,649
--------------
TELECOMMUNICATIONS--LONG DISTANCE 0.1%
2,388
Time Warner Telecom, Inc.,
Term Loan.................. B1 B 2,405,910
7.82 to 11/30/12 --------------
8.00
TELECOMMUNICATIONS--WIRELESS 0.8%
8,708 Centennial Cellular, Inc.,
Term Loan.................. B1 B 7.23 to 02/09/11 8,749,541
7.75
6,200 Cricket Communications,
Inc., Term Loan............ B2 B 8.25 06/16/13 6,253,091
--------------
15,002,632
--------------
TEXTILES & LEATHER 0.2%
4,118 Propex Fabrics, Inc., Term
Loan....................... B1 BB- 7.76 07/31/12 4,123,022
--------------
</Table>
See Notes to Financial Statements 33
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
TRANSPORTATION--CARGO 0.4%
$ 2,773 Jacobson Acquisition Co.,
Term Loan.................. NR NR 10.00% to 04/07/09 to $ 2,779,941
10.75 04/07/11
796 Kenan Advantage Group,
Inc., Term Loan............ NR NR 8.50 12/16/11 800,975
941 Pacer International, Inc.,
Term Loan.................. Ba3 BB 6.81 to 06/10/10 938,824
8.75
2,177 Quality Distribution, Inc.,
Term Loan.................. B2 B- 8.39 to 11/13/09 2,188,205
8.40
340 Quality Distribution, Inc.,
Revolving Credit
Agreement.................. B2 B- 8.85 to 11/13/08 338,300
10.75
--------------
7,046,245
--------------
TRANSPORTATION--PERSONAL 0.5%
934 Neoplan USA Corp.,
Revolving Credit Agreement
(c) (d) (j) (k)............ NR NR 8.54 06/30/06 873,056
4,000 United Airlines, Inc., Term
Loan....................... B1 B+ 8.63 to 02/01/12 4,050,416
9.19
3,200 US Airways Group, Inc.,
Term Loan.................. B2 B 9.00 03/31/11 3,221,200
--------------
8,144,672
--------------
TRANSPORTATION--RAIL MANUFACTURING 0.6%
9,225 Helm Holding, Corp., Term
Loan....................... NR NR 7.66 to 07/08/11 to 9,299,041
11.66 07/08/12
1,333 Standard Steel, LLC, Term
Loan....................... B2 B+ 8.09 06/30/12 1,343,333
--------------
10,642,374
--------------
UTILITIES 1.2%
800 Astoria Generating Co.,
LLC, Term Loan (a)......... B3 B 9.20 08/23/13 811,700
11,982 NRG Energy, Inc., Term
Loan....................... Ba2 BB- 7.23 02/01/13 12,030,061
4,200 Primary Energy Operating,
LLC, Term Loan............. NR NR 7.98 08/24/09 4,213,999
1,734 Reliant Energy Resources
Corp., Term Loan........... B2 B 7.78 04/30/10 1,736,613
</Table>
34 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
- -----------------------------------------------------------------------------------------------
UTILITIES (CONTINUED)
$ 1,071 Reliant Energy Resources
Corp., Revolving Credit
Agreement.................. B2 NR 8.28% to 12/22/09 $ 1,055,600
10.13
1,910 Thermal North America,
Inc., Term Loan............ Ba3 BB- 7.25 10/12/13 1,907,397
--------------
21,755,370
--------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 112.8%............................ 2,006,850,487
--------------
</Table>
<Table>
<Caption>
DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------------
NOTES 1.5%
Boise Cascade, LLC ($2,800,000 par, 8.38% coupon, maturing 10/15/12) (g)..... 2,814,000
Builders FirstSource, Inc. ($6,300,000 par, 9.42% coupon, maturing 02/15/12)
(g)........................................................................ 6,426,000
Compression Polymers Corp. ($2,300,000 par, 12.39% coupon, maturing 07/01/12)
(g)........................................................................ 2,357,500
Del Laboratories, Inc. ($3,600,000 par, 10.15% coupon, maturing 11/01/11)
(g)........................................................................ 3,744,000
Qwest Corp. ($3,500,000 par, 8.58% coupon, maturing 06/15/13) (g)............ 3,762,500
Rogers Wireless Communications, Inc. ($6,000,000 par, 8.45% coupon, maturing
12/15/10) (Canada) (g)..................................................... 6,180,000
Verso Paper Holdings, LLC ($1,500,000 par, 9.24% coupon, maturing 08/01/14)
(g) (l) (m)................................................................ 1,500,000
--------------
TOTAL NOTES.................................................................. 26,784,000
--------------
EQUITIES 1.0%
Aladdin Gaming Holdings, LLC (8.63% ownership interest, Acquisition date
09/03/04, Cost $240,062) (h) (i)........................................... 66,847
DecorateToday.com (198,600 common shares, Acquisition date 12/31/98, Cost
$3,505,909) (c) (h) (i).................................................... 0
Environmental Systems Products Holdings, Inc. (2,183 common shares,
Acquisition date 06/22/04, Cost $0) (h) (i)................................ 55,972
IDT Corp. (22,898 common shares) (h)......................................... 306,375
London Clubs International (Warrants for 141,981 common shares, Acquisition
date 10/15/04, Cost $260,910) (h) (i)...................................... 255,938
London Fog Industries, Inc. (515,922 common shares) (c) (h).................. 0
Neoplan USA Corp. (2,262 preferred shares, Acquisition date 09/04/03, Cost
$1,074,522) (c) (h) (i) (k)................................................ 0
Neoplan USA Corp. (8,517 common shares, Acquisition date 09/04/03, Cost $85)
(c) (h) (i) (k)............................................................ 0
Orius Corp. (1,211,236 common shares, Acquisition date 02/03/03, Cost $0) (b)
(c) (h) (i)................................................................ 0
</Table>
See Notes to Financial Statements 35
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
<Table>
<Caption>
DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------------
EQUITIES (CONTINUED)
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
Trans World Entertainment Corp. (2,982,699 on shares, Acquisition date
03/03/98, Cost $60,310,984) (c) (h) (i).................................... 16,553,979
--------------
TOTAL EQUITIES 1.0%.......................................................... 17,239,111
--------------
TOTAL LONG-TERM INVESTMENTS 115.3%
(Cost $2,141,576,856)...................................................... 2,050,873,598
--------------
SHORT-TERM INVESTMENTS 2.7%
REPURCHASE AGREEMENT 1.6%
State Street Bank & Trust Corp. ($29,000,000 par, collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.12.%
dated 07/31/06, to be sold on 08/01/06 at $29,004,124) (a)................. 29,000,000
TIME DEPOSIT 1.1%
State Street Bank & Trust Corp. ($20,251,305 par, 4.05% coupon, dated
07/31/06, to be sold on 08/01/06 at $20,253,583) (a)....................... 20,251,305
--------------
TOTAL SHORT-TERM INVESTMENTS 2.7%
(Cost $49,251,305)......................................................... 49,251,305
--------------
TOTAL INVESTMENTS 118.0%
(Cost $2,190,828,161)...................................................... 2,100,124,903
BORROWINGS (11.0%).......................................................... (195,000,000)
LIABILITIES IN EXCESS OF OTHER ASSETS (7.0%)................................ (125,433,268)
--------------
NET ASSETS 100.0%........................................................... $1,779,691,635
==============
</Table>
NR--Not rated
+ Bank Loans rated below Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade. Bank
loan ratings are unaudited.
Industry percentages are calculated as a percentage of net assets.
(a) All or a portion of this security is designated in connection with unfunded
loan commitments.
36 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
(b) This borrower has filed for protection in federal bankruptcy court.
(c) Affiliated company. (See Notes to Financial Statements.)
(d) This Senior Loan interest is non-income producing.
(e) This borrower is currently in liquidation.
(f) Payment-in-kind security.
(g) Variable rate security. Interest rate shown is that in effect at July 31,
2006.
(h) Non-income producing security as this stock or warrant currently does not
declare dividends.
(i) Restricted security. Securities were acquired through the restructuring of
senior loans. These securities are restricted as they are not allowed to be
deposited via the Depository Trust Company. If at a later point in time,
the company wishes to register, the issuer will bear the costs associated
with registration. The aggregate value of restricted securities represents
1.0% of the net assets of the Fund.
(j) The borrower is in the process of restructuring or amending the terms of
this loan.
(k) Subsequent to July 31, 2006, this borrower has filed for protection in
federal bankruptcy court.
(l) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933, as amended. These securities may only
be resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(m) Security purchased on a when-issued or delayed delivery basis.
* Senior Loans in the Fund's portfolio generally are subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment
conditions and because there may be significant economic incentives for a
Borrower to prepay, prepayments of Senior Loans in the Fund's portfolio may
occur. As a result, the actual remaining maturity of Senior Loans held in
the Fund's portfolio may be substantially less than the stated maturities
shown. Although the Fund is unable to accurately estimate the actual
remaining maturity of individual Senior Loans, the Fund estimates that the
actual average maturity of the Senior Loans held in its portfolio will be
approximately 18-24 months.
** Senior Loans in which the Fund invests generally pay interest at rates
which are periodically redetermined by reference to a base lending rate
plus a premium. These base lending rates are generally (i) the lending rate
offered by one or more major European banks, such as the London Inter-Bank
Offered Rate ("LIBOR"), (ii) the prime rate offered by one or more major
United States banks or (iii) the certificate of deposit rate. Senior Loans
are generally considered to be restricted in that the Fund ordinarily is
contractually obligated to receive approval from the Agent Bank and/or
Borrower prior to the disposition of a Senior Loan.
See Notes to Financial Statements 37
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
July 31, 2006
<Table>
ASSETS:
Investments in Unaffiliated Securities (Cost
$2,067,299,729)............................................ $ 2,065,575,371
Investments in Affiliated Securities (Cost $123,528,432).... 34,549,532
---------------
Total Investments (Cost $2,190,828,161).................. 2,100,124,903
Receivables:
Interest and Fees.......................................... 13,923,877
Fund Shares Sold........................................... 3,722,320
Investments Sold........................................... 3,605,500
Other....................................................... 48,272
---------------
Total Assets............................................. 2,121,424,872
---------------
LIABILITIES:
Payables:
Borrowings................................................. 195,000,000
Investments Purchased...................................... 135,146,562
Income Distributions....................................... 1,976,256
Fund Shares Repurchased.................................... 1,865,734
Investment Advisory Fee.................................... 1,362,635
Distributor and Affiliates................................. 804,121
Administrative Fee......................................... 396,834
Unfunded Commitments........................................ 2,009,751
Accrued Expenses............................................ 1,726,712
Trustees' Deferred Compensation and Retirement Plans........ 1,238,740
Accrued Interest Expense.................................... 205,892
---------------
Total Liabilities........................................ 341,733,237
---------------
NET ASSETS.................................................. $ 1,779,691,635
===============
NET ASSETS CONSIST OF:
Capital..................................................... $ 2,962,496,820
Accumulated Undistributed Net Investment Income............. 1,719,850
Net Unrealized Depreciation................................. (92,713,009)
Accumulated Net Realized Loss............................... (1,091,812,026)
---------------
NET ASSETS.................................................. $ 1,779,691,635
===============
NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value per share (Based on net assets of
$90,951,279 and 10,111,364 shares of beneficial interest
issued and outstanding).................................. $ 8.99
Maximum sales charge (3.25%* of offering price).......... 0.30
---------------
Maximum offering price to public......................... $ 9.29
===============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $17,758,583 and 1,974,589 shares of
beneficial interest issued and outstanding).............. $ 8.99
===============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $72,458,738 and 8,057,053 shares of
beneficial interest issued and outstanding).............. $ 8.99
===============
Class IB Shares:
Net asset value and offering price per share (Based on
net assets of $1,307,241,724 and 145,167,785 shares of
beneficial interest issued and outstanding).............. $ 9.01
===============
Class IC Shares:
Net asset value and offering price per share (Based on
net assets of $291,281,311 and 32,355,398 shares of
beneficial interest issued and outstanding).............. $ 9.00
===============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
38 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended July 31, 2006
<Table>
INVESTMENT INCOME:
Interest from Unaffiliated Securities....................... $144,086,436
Interest from Affiliated Securities......................... 2,222,881
Other....................................................... 2,919,081
------------
Total Income............................................ 149,228,398
------------
EXPENSES:
Investment Advisory Fee..................................... 17,347,357
Administrative Fee.......................................... 5,067,381
Shareholder Services........................................ 1,770,836
Distribution and Service Fees (Attributed to Classes A, B, C
and IC of $180,981, $138,556, $688,790 and $563,753,
respectively)............................................. 1,572,080
Legal....................................................... 1,010,037
Custody..................................................... 556,840
Trustees' Fees and Related Expenses......................... 138,783
Other....................................................... 2,408,407
------------
Total Operating Expenses................................ 29,871,721
Service Fee Reimbursement............................... 951,571
Less Credits Earned on Cash Balances.................... 87,117
------------
Net Operating Expenses.................................. 28,833,033
Interest Expense........................................ 1,977,238
Total Expense........................................... 30,810,271
------------
NET INVESTMENT INCOME....................................... $118,418,127
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss on Unaffiliated Securities................ $ (6,154,095)
Net Realized Gain on Affiliated Securities.................. 1,173,840
------------
(4,980,255)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (68,354,134)
------------
End of the Period:
Investments............................................. (90,703,258)
Unfunded Commitments.................................... (2,009,751)
------------
(92,713,009)
------------
Net Unrealized Depreciation During the Period............... (24,358,875)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(29,339,130)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 89,078,997
============
</Table>
See Notes to Financial Statements 39
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, 2006 JULY 31, 2005
-------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................................... $ 118,418,127 $ 88,510,259
Net Realized Loss......................................... (4,980,255) (15,723,278)
Net Unrealized Appreciation/Depreciation During the
Period.................................................. (24,358,875) 32,662,107
-------------- --------------
Change in Net Assets from Operations...................... 89,078,997 105,449,088
-------------- --------------
Distributions from Net Investment Income:
Class A Shares.......................................... (4,106,348) (640,250)
Class B Shares.......................................... (689,736) (109,825)
Class C Shares.......................................... (3,401,184) (511,679)
Class IB Shares......................................... (83,511,213) (64,404,166)
Class IC Shares......................................... (20,911,291) (15,299,318)
-------------- --------------
Total Distributions....................................... (112,619,772) (80,965,238)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....... (23,540,775) 24,483,850
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................. 115,282,367 563,529,321
Net Asset Value of Shares Issued Through Dividend
Reinvestment............................................ 59,986,676 42,159,249
Cost of Shares Repurchased................................ (557,406,980) (479,983,896)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........ (382,137,937) 125,704,674
-------------- --------------
TOTAL INCREASE/DECREASE IN NET ASSETS..................... (405,678,712) 150,188,524
NET ASSETS:
Beginning of the Period................................... 2,185,370,347 2,035,181,823
-------------- --------------
End of the Period (Including accumulated undistributed net
investment income of $1,719,850 and ($1,209,028),
respectively)........................................... $1,779,691,635 $2,185,370,347
============== ==============
</Table>
40 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL STATEMENTS continued
Statement of Cash Flows
For the Year Ended July 31, 2006
<Table>
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 89,078,997
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Provided by Operating Activities:
Decrease in Investments at Value.......................... 227,493,696
Increase in Interest and Fees Receivables................. (2,630,248)
Decrease in Receivable for Investments Sold............... 12,259,887
Increase in Other Assets.................................. (2,419)
Decrease in Investment Advisory Fee Payable............... (281,188)
Increase in Payable for Investments Purchased............. 95,948,243
Decrease in Administrative Fee Payable.................... (85,209)
Change in Unfunded Commitments............................ 2,353
Increase in Distributor and Affiliates Payable............ 59,155
Increase in Accrued Expenses.............................. 510,907
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 108,853
-------------
Total Adjustments....................................... 333,384,030
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 422,463,027
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Shares Sold................................... 113,280,515
Change in Bank Borrowings................................... 72,000,000
Change in Accrued Interest Expense.......................... 66,527
Payments on Shares Repurchased.............................. (555,543,136)
Cash Distributions Paid..................................... (52,268,036)
-------------
Net Cash Used for Financing Activities.................. (422,464,130)
-------------
NET DECREASE IN CASH........................................ (1,103)
Cash at Beginning of the Period............................. 1,103
-------------
CASH AT THE END OF THE PERIOD............................... $ -0-
=============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year for Interest...................... $ 1,910,711
=============
</Table>
See Notes to Financial Statements 41
VAN KAMPEN SENIOR LOAN FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
FEBRUARY 18, 2005
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
CLASS A SHARES JULY 31, JULY 31,
2006 2005
------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 9.10 $ 9.12
-------- --------
Net Investment Income (a)................................. .54 .18
Net Realized and Unrealized Loss.......................... (.15) (.04)
-------- --------
Total from Investment Operations............................ .39 .14
Less Distributions from Net Investment Income............... .50 .16
-------- --------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 8.99 $ 9.10
======== ========
Total Return (b)............................................ 4.39% 1.75%**
Net Assets at End of the Period (In millions)............... $ 91.0 $ 54.0
Ratios to Average Net Assets excluding Borrowings:*
Operating Expense......................................... 1.39% 1.42%
Interest Expense.......................................... .10% .04%
Total Net Expense......................................... 1.49% 1.46%
Net Investment Income..................................... 5.95% 4.44%
Portfolio Turnover (c)...................................... 84% 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:
Ratios to Average Net Assets excluding Borrowings:
Operating Expense......................................... 1.64% 1.67%
Interest Expense.......................................... 0.10% .04%
Total Gross Expense....................................... 1.74% 1.71%
Net Investment Income..................................... 5.70% 4.19%
SENIOR INDEBTEDNESS:
Total Borrowing Outstanding (In thousands)................ $195,000 $123,000
Asset Coverage Per $1,000 Unit of Senior Indebtedness
(d)..................................................... 10,127 18,767
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) 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 service 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.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
(d) Calculated by subtracting the Fund's total liabilities (not including the
Borrowings) from the Fund's total assets and dividing by the total number of
senior indebtedness units, where one unit equals $1,000 of senior
indebtedness.
42 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>
FEBRUARY 18, 2005
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
CLASS B SHARES JULY 31, JULY 31,
2006 2005
------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 9.10 $ 9.12
-------- --------
Net Investment Income (a)................................. .47 .14
Net Realized and Unrealized Loss.......................... (.14) (.03)
-------- --------
Total from Investment Operations............................ .33 .11
Less Distributions from Net Investment Income............... .44 .13
-------- --------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 8.99 $ 9.10
======== ========
Total Return (b)............................................ 3.63% 1.41%**
Net Assets at End of the Period (In millions)............... $ 17.8 $ 10.8
Ratios to Average Net Assets excluding Borrowings:*
Operating Expense......................................... 2.14% 2.18%
Interest Expense.......................................... .10% .04%
Total Net Expense......................................... 2.24% 2.22%
Net Investment Income..................................... 5.24% 3.73%
Portfolio Turnover (c)...................................... 84% 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:
Ratios to Average Net Assets excluding Borrowings:
Operating Expense......................................... 2.39% 2.43%
Interest Expense.......................................... .10% .04%
Total Gross Expense....................................... 2.49% 2.47%
Net Investment Income..................................... 4.99% 3.48%
SENIOR INDEBTEDNESS:
Total Borrowing Outstanding (In thousands)................ $195,000 $123,000
Asset Coverage Per $1,000 Unit of Senior Indebtedness
(d)..................................................... 10,127 18,767
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) 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 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.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
(d) Calculated by subtracting the Fund's total liabilities (not including the
Borrowings) from the Fund's total assets and dividing by the total number of
senior indebtedness units, where one unit equals $1,000 of senior
indebtedness.
See Notes to Financial Statements 43
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>
FEBRUARY 18, 2005
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
CLASS C SHARES JULY 31, JULY 31,
2006 2005
------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 9.10 $ 9.12
-------- --------
Net Investment Income (a)................................. .47 .14
Net Realized and Unrealized Loss.......................... (.14) (.03)
-------- --------
Total from Investment Operations............................ .33 .11
Less Distributions from Net Investment Income............... .44 .13
-------- --------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 8.99 $ 9.10
======== ========
Total Return (b)............................................ 3.63% 1.41%**
Net Assets at End of the Period (In millions)............... $ 72.5 $ 55.7
Ratios to Average Net Assets excluding Borrowings:*
Operating Expense......................................... 2.14% 2.17%
Interest Expense.......................................... .10% .04%
Total Net Expense......................................... 2.24% 2.21%
Net Investment Income..................................... 5.19% 3.66%
Portfolio Turnover (c)...................................... 84% 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:
Ratios to Average Net Assets excluding Borrowings:
Operating Expense......................................... 2.39% 2.42%
Interest Expense.......................................... .10% .04%
Total Gross Expense....................................... 2.49% 2.46%
Net Investment Income..................................... 4.94% 3.41%
SENIOR INDEBTEDNESS:
Total Borrowing Outstanding (In thousands)................ $195,000 $123,000
Asset Coverage Per $1,000 Unit of Senior Indebtedness
(d)..................................................... 10,127 18,767
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) 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.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
(d) Calculated by subtracting the Fund's total liabilities (not including the
Borrowings) from the Fund's total assets and dividing by the total number of
senior indebtedness units, where one unit equals $1,000 of senior
indebtedness.
44 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>
YEAR ENDED JULY 31,
CLASS IB SHARES --------------------------------------------------------
2006 2005 2004 2003 2002
--------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $ 9.11 $ 9.00 $ 8.29 $ 8.09 $ 8.61
-------- -------- -------- -------- --------
Net Investment Income (a)......... .54 .37 .30 .33 .41
Net Realized and Unrealized
Loss............................ (.14) .08 .68 .19 (.55)
-------- -------- -------- -------- --------
Total from Investment Operations.... .40 .45 .98 .52 (.14)
-------- -------- -------- -------- --------
Less:
Distributions from Net Investment
Income.......................... .50 .34 .25 .29 .38
Return of Capital Distributions... -0- -0- .02 .03 -0-
-------- -------- -------- -------- --------
Total Distributions................. .50 .34 .27 .32 .38
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD............................ $ 9.01 $ 9.11 $ 9.00 $ 8.29 $ 8.09
======== ======== ======== ======== ========
Total Return (b).................... 4.38% 5.18% 12.03% 6.58% -1.61%
Net Assets at End of the Period (In
millions)......................... $1,307.2 $1,639.0 $1,703.1 $1,876.1 $2,558.7
Ratios to Average Net Assets
excluding Borrowings:
Operating Expense................. 1.39% 1.38% 1.48% 1.54% 1.43%
Interest Expense.................. .10% .04% 0.00%(e) 0.00%(e) N/A
Total Net Expense................. 1.49% 1.42% 1.48% 1.54% 1.43%
Net Investment Income............. 5.87% 4.09% 3.44% 4.21% 4.85%
Portfolio Turnover (c).............. 84% 90% 94% 49% 36%
SENIOR INDEBTEDNESS:
Total Borrowing Outstanding (In
thousands)...................... $195,000 $123,000 0.00 0.00 0.00
Asset Coverage Per $1,000 Unit of
Senior Indebtedness (d)......... 10,127 18,767 N/A N/A N/A
</Table>
(a) Based on average shares outstanding.
(b) 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.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
(d) Calculated by subtracting the Fund's total liabilities (not including the
Borrowings) from the Fund's total assets and dividing by the total number of
senior indebtedness units, where one unit equals $1,000 of senior
indebtedness.
(e) Amount is less than 0.01%
N/A=Not Applicable
See Notes to Financial Statements 45
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 JULY 31, (COMMENCEMENT OF
CLASS IC SHARES ---------------------------- OPERATIONS) TO
2006 2005 2004 JULY 31, 2003
-----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $ 9.11 $ 9.00 $ 8.29 $ 8.16
-------- -------- ------ ------
Net Investment Income (a)................. .54 .37 .28 .04
Net Realized and Unrealized Gain/Loss..... (.15) .07 .69 .12
-------- -------- ------ ------
Total from Investment Operations............ .39 .44 .97 .16
-------- -------- ------ ------
Less:
Distributions from Net Investment
Income.................................. .50 .33 .24 .03
Return of Capital Distributions........... -0- -0- .02 -0-
-------- -------- ------ ------
Total Distributions......................... .50 .33 .26 .03
-------- -------- ------ ------
NET ASSET VALUE, END OF THE PERIOD.......... $ 9.00 $ 9.11 $ 9.00 $ 8.29
======== ======== ====== ======
Total Return (b)............................ 4.50% 4.98% 11.86% 2.02%**
Net Assets at End of the Period (In
millions)................................. $ 291.3 $ 426.0 $332.0 $246.1
Ratios to Average Net Assets excluding
Borrowings:*
Operating Expense......................... 1.39% 1.44% 1.62% 1.56%
Interest Expense.......................... .10% 0.04% 0.00%(e) 0.00%(e)
Total Net Expense......................... 1.49% 1.48% 1.62% 1.56%
Net Investment Income..................... 5.85% 4.07% 3.26% 3.89%
Portfolio Turnover (c)...................... 84% 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:
Ratios to Average Net Assets excluding Borrowings:
Operating Expense......................... 1.54% 1.52% N/A N/A
Interest Expense.......................... .10% 0.04% N/A N/A
Total Gross Expense....................... 1.64% 1.56% N/A N/A
Net Investment Income..................... 5.70% 3.99% N/A N/A
SENIOR INDEBTEDNESS:
Total Borrowing Outstanding (In
thousands).............................. $195,000 $123,000 0.00 0.00
Asset Coverage Per $1,000 Unit of Senior
Indebtedness (d)........................ 10,127 18,767 N/A N/A
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) 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.
(c) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
(d) Calculated by subtracting the Fund's total liabilities (not including the
Borrowings) from the Fund's total assets and dividing by the total number of
senior indebtedness units, where one unit equals $1,000 of senior
indebtedness.
(e) Amount is less than 0.01%
N/A=Not Applicable
46 See Notes to Financial Statements
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006
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. The Fund continuously offers Class A
Shares, Class B Shares and Class C Shares. Class IB Shares and Class IC Shares
are not continuously offered. Each class of shares differs by its initial sales
load, contingent deferred sales charges, the allocation of class-specific
expenses and voting rights on matters affecting a single class.
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 and notes are valued by the Fund
following valuation guidelines established and periodically reviewed by the
Fund's Board of Trustees. Under the valuation guidelines, Senior Loans and notes
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 and notes are valued, where possible, using independent market
indicators provided by independent pricing sources approved by the Board of
Trustees. Other Senior Loans and notes are valued by independent pricing sources
approved by the Board of Trustees based upon pricing models developed,
maintained and operated by those pricing sources or valued by Van Kampen Asset
Management (the "Adviser") by considering a number of factors including
consideration of market indicators, transactions in instruments which the
Adviser believes may be comparable (including comparable credit quality,
interest rate redetermination period and maturity), the credit worthiness of the
Borrower, the current interest rate, the period until the next interest rate
redetermination and the maturity of such Senior Loans. Consideration of
comparable instruments may include commercial paper, negotiable certificates of
deposit and short-term variable rate securities which have adjustment periods
comparable to the Senior Loans in the Fund's portfolio. The fair value of Senior
Loans are reviewed and approved by the Fund's Valuation Committee and Board of
Trustees.
Equity securities are valued on the basis of prices furnished by pricing
services or at fair value as determined in good faith by the Adviser under the
direction of the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. Short-term loan
participations are valued at cost in the absence of any indication of
impairment. The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified
47
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
price. Repurchase agreements are fully collateralized by the underlying debt
security. The Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of the custodian
bank. The seller is required to maintain the value of the underlying security at
not less than the repurchase proceeds due the Fund.
B. SECURITY TRANSACTIONS Investment transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
Legal expenditures that are expected to result in the restructuring of or a plan
of reorganization for an investment are recorded as realized losses. The Fund
may purchase and sell securities on a "when-issued" or "delayed delivery" basis,
with settlement to occur at a later date. The value of the security so purchased
is subject to market fluctuations during this period. The Fund will segregate
assets with the custodian having an aggregate value at least equal to the amount
of the when-issued or delayed delivery purchase commitments until payment is
made. At July 31, 2006, the Fund had $1,500,00 of when-issued or delayed
delivery purchase commitments.
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, 2006, the Fund had an accumulated capital loss carryforward
for tax purposes of $1,049,335,119, which will expire according to the following
schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$ 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
21,900,119................................................ July 31, 2014
</Table>
48
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
At July 31, 2006, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $2,215,143,002
==============
Gross tax unrealized appreciation........................... (17,020,834)
Gross tax unrealized depreciation........................... (97,997,265)
--------------
Net tax unrealized depreciation on investments.............. $ (115,018,099)
==============
</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, 2006
and 2005 were as follows:
<Table>
<Caption>
2006 2005
Distributions paid from:
Ordinary income........................................... $112,254,712 $80,556,679
Long-term capital gain.................................... -0- -0-
------------ -----------
$112,254,712 $80,556,679
============ ===========
</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 2006 fiscal year have been
identified and appropriately reclassified on the Statement of Assets and
Liabilities. A permanent difference relating to the portion of capital loss
carryforward expiring in the current year totaling $230,325 was reclassified
from accumulated net realized loss to capital. Also, a permanent difference of
$2,869,644 relating to book to tax amortization differences were reclassified
from accumulated undistributed net investment income to accumulated net realized
loss. Lastly, a permanent book and tax basis difference relating to currency
gains totaling $167 was reclassified from accumulated net realized loss to
accumulated undistributed net investment income.
As of July 31, 2006, the components of distributable earnings on a tax basis
were as follows:
<Table>
Undistributed ordinary income............................... $5,015,308
</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 and post October losses which may not be recognized for tax
purposes until the first day of the following fiscal year.
F. CREDITS EARNED ON CASH BALANCES During the year ended July 31, 2006, the
Fund's custody fee was reduced by $87,117 as a result of credits earned on cash
balances.
49
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 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, 2006, the Fund recognized expenses of
approximately $535,600 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a Trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
Under separate 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, 2006, the Fund recognized expenses of approximately
$230,600 representing Van Kampen Investments 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, 2006, the Fund recognized expenses of approximately $1,509,100 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.
For the year ended July 31, 2006, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A Shares of approximately
$45,500 and contingent
50
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
deferred sales charge (CDSC) on redeemed shares of approximately $168,500. Sales
charges do not represent expenses of the Fund.
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 7/31/06 COST
DecorateToday.com--Common Shares... 198,600 $ 0 $ 0 $ 3,505,909
London Fog Industries, Inc.--
Common Shares.................... 515,922 0 0 33,576,536
Neoplan USA Corp.--Revolver........ $ 933,750 $ 82,020 873,056 933,750
Neoplan USA Corp.--Common Shares... 8,517 0 0 85
Neoplan USA Corp.--Preferred
Shares........................... 2,262 0 0 1,074,522
Orius Corp.--Term Loan............. $ 6,579,313 638,858 1,376,353 3,962,329
Orius Corp.--Revolver.............. $ 2,375,171 193,534 2,042,647 2,375,171
Orius Corp.--Common Shares......... 1,211,236 0 0 0
Safelite Glass Corp.--Term Loan.... $13,876,959 1,308,469 13,703,497 13,876,959
Safelite Glass Corp.--Common
Shares........................... 724,479 0 0 3,912,187
Safelite Realty--Common Shares..... 48,903 0 0 0
Trans World Entertainment Corp.--
Common Shares.................... 2,982,699 0 16,553,979 60,310,984
---------- ----------- ------------
$2,222,881 $34,549,532 $123,528,432
========== =========== ============
</Table>
* Shares were acquired through the restructuring of senior loan interests.
51
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
Affiliate transactions during the year ended July 31, 2006 were as follows:
<Table>
<Caption>
PAR/SHARES PAR/SHARES REALIZED
AS OF GROSS GROSS AS OF GAIN/
NAME 7/31/05 ADDITIONS REDUCTIONS 7/31/06 (LOSS)
Chart Industries, Term
Loan**.............. $ 5,285,257 $4,400,000 $(7,652,250) $ 2,033,007 $ (783,948)
Chart Industries,
Common Shares**..... 280,454 0 (280,454) 0 12,200,819
Imperial Home Decor
Group, Inc., Term
Loan................ $ 4,893,497 0 $(4,893,497) 0 (4,445,929)
Imperial Home Decor
Group, Inc., Common
Shares.............. 1,816,143 0 (1,816,143) 0 (1,843,162)
Orius Corp.,
Term Loan........... $ 6,481,269 $ 98,044 0 $ 6,579,313 0
Orius Corp., LLC,
Revolver............ $ 4,330,904 0 $(1,955,733) $ 2,375,171 0
Safelite Glass Corp.,
Term Loan........... $16,441,720 0 $(2,564,761) $13,876,959 3,181
Trans World
Entertainment Corp.,
Common Shares....... 3,288,962 0 (306,263) 2,982,699 (3,957,121)
-----------
$ 1,173,840
===========
</Table>
** Due to transactions during the year, the issue is no longer an affiliated
security.
52
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
3. CAPITAL TRANSACTIONS
For the years ended July 31, 2006 and 2005, transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 2006 JULY 31, 2005
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A....................... 6,742,273 $ 60,997,257 6,457,801 $ 58,942,482
Class B....................... 1,080,970 9,778,004 1,272,717 11,617,443
Class C....................... 3,980,684 36,028,686 6,219,523 56,760,288
Class IB...................... 521,304 4,723,809 29,709,650 270,363,646
Class IC...................... 414,647 3,754,611 18,287,687 165,845,462
----------- ------------- ----------- -------------
Total Sales..................... 12,739,878 $ 115,282,367 61,947,378 $ 563,529,321
=========== ============= =========== =============
Dividend Reinvestment:
Class A....................... 263,133 $ 2,380,078 39,840 $ 362,784
Class B....................... 45,840 414,650 6,754 61,502
Class C....................... 174,345 1,577,151 26,118 237,778
Class IB...................... 5,101,091 46,209,105 3,810,505 34,609,287
Class IC...................... 1,038,754 9,405,692 757,994 6,887,898
----------- ------------- ----------- -------------
Total Dividend Reinvestment..... 6,623,163 $ 59,986,676 4,641,211 $ 42,159,249
=========== ============= =========== =============
Repurchases:
Class A....................... (2,823,718) $ (25,525,490) (567,965) $ (5,178,140)
Class B....................... (334,884) (3,026,298) (96,808) (883,120)
Class C....................... (2,216,956) (20,010,345) (126,661) (1,154,058)
Class IB...................... (40,369,751) (365,337,480) (42,836,274) (389,295,735)
Class IC...................... (15,875,976) (143,507,367) (9,172,693) (83,472,843)
----------- ------------- ----------- -------------
Total Repurchases............... (61,621,285) $(557,406,980) (52,800,401) $(479,983,896)
=========== ============= =========== =============
</Table>
4. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $1,712,763,818 and
$1,913,822,121, respectively.
5. REPURCHASE OF SHARES
The Fund 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 have been made at quarterly intervals.
On June 23, 2006, the shareholders of the Fund approved an amendment to the
Fund's fundamental policy regarding the Fund's offer to repurchase its shares to
allow the Fund to repurchase its shares on a monthly basis. In addition, on June
7, 2006, the Fund obtained exemptive relief from the Securities and Exchange
Commission to enable the Fund to conduct
53
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
monthly repurchase offers, subject to certain conditions. The Fund expects to
begin conducting monthly offers to repurchase its outstanding shares commencing
in October 2006.
The Repurchase Offers will continue to be for between 5% and 25% of the
Fund's outstanding shares; however, whereas the Fund's present intent for
quarterly offers was 15%, the Fund's present intent for monthly offers is 5%
(although the initial one or more monthly repurchase offers may be for more than
5%, provided, however, the aggregate percentage of common shares subject to
repurchase in any 3-month period will not exceed 25%). The repurchase request
deadline will be the third Friday of each calendar month (or the preceding
business day if such third Friday is not a business day). To accommodate doing
monthly Repurchase Offers, the Fund will have shorter notice periods before each
offer and shorter payment periods after each offer. During the year ended July
31, 2006, the Fund made four Repurchase offers pursuant to Rule 23c-3(b) as
follows: During the Repurchase Offer period ended October 21, 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 16,604,499 shares or 6.8% of the Fund's outstanding shares. During
the Repurchase Offer period ended January 20, 2006 (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 15,457,719
shares or 6.7% of the Fund's outstanding shares. During the Repurchase Offer
period ended April 21, 2006 (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 14,903,271 shares or 6.8%
of the Fund's outstanding shares. During the Repurchase Offer period ended July
21, 2006 (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 14,655,798 shares or 6.9% of the Fund's outstanding
shares.
6. COMMITMENTS
Pursuant to the terms of certain of the Senior Loan agreements, the Fund had
unfunded loan commitments of approximately $118,293,322 as of July 31, 2006. 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 $2,009,751 as of July 31, 2006 is reported
as "Unfunded Commitments" on the Statement of Assets and Liabilities.
7. BORROWINGS
The Fund entered into a revolving credit and security agreement dated November
13, 2003 for an aggregate of $300,000,000, which was terminated on July 14,
2006. The proceeds of any borrowing by the Fund under this revolving credit
agreement was used for temporary liquidity purposes and funding of shareholder
repurchases.
On June 23, 2006, the shareholders of the Fund approved the amendment of the
Fund's fundamental policy regarding the Fund's use of financial leverage to
allow the Fund to use leverage to the maximum extent allowable under the
Investment Company Act of 1940, as amended. As of July 14, 2006, the Fund
entered into an Amended and Restated Revolving Credit and Security Agreement
(which in effect replaces the Fund's existing Revolving Credit and Security
Agreement dated November 13, 2003 as described above).
54
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
Under the Amended and Restated Revolving Credit and Security Agreement, the
Fund may borrow up to $700 million and the purposes of any advances under the
amended facility include financing the repurchases of shares and/or borrowing
for investment purposes. This revolving credit agreement is secured by the
assets of the Fund.
Annual commitment fees of .13% were charged on the unused portion of both
credit lines. For the year ended July 31, 2006, the Fund recognized commitment
fee expenses of approximately $596,100. For the year ended July 31, 2006, when
in use, the average daily balance of borrowings under the Revolving Credit and
Security Agreement dated November 13, 2003 was $88,514,970 with a weighted
average interest rate of 4.31%. For the year ended July 31, 2006, when in use,
the average daily balance of borrowings under the Amended and Restated Revolving
Credit and Security Agreement dated July 14, 2006, was $125,000,000 with a
weighted average interest rate of 5.39%.
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, 2006, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Fund on a participation
basis.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
(000) (000)
SELLING PARTICIPANT
General Electric............................................ $5,000 $4,978
------ ------
</Table>
9. DISTRIBUTION AND SERVICE PLAN
Shares of the Fund are distributed by Van Kampen Funds, Inc. ("the
Distributor"), an affiliate of the Adviser. The Fund has adopted a distribution
plan (the "Distribution Plan") with respect to each of its Class A Shares, Class
B Shares and Class C Shares and in so doing has agreed to comply with rule 12b-1
under the 1940 Act, as amended, 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 Class A Shares, Class B Shares, 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 Class A Shares, Class B Shares, Class C Shares and
Class IC Shares are currently being waived. For the year ended July 31, 2006,
the Distributor waived service fees of $951,571. 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.
55
VAN KAMPEN SENIOR LOAN FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
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 Class A Shares, Class B Shares, 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 Class A Shares, Class B
Shares, 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
Class B and Class C Shares are paid monthly to the Distributor. The amount of
distribution expenses incurred by the Distributor and not yet reimbursed
("unreimbursed receivable") was approximately $222,400 and $149,300 for Class B
and Class C Shares, respectively. These amounts 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 to the Fund on a
quarterly basis.
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, alleged 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 was 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 was
held on November 16, 2005. Under the terms of the proposed settlement, the Fund
is not responsible for the settlement amount. On January 20, 2006, the Court
approved a settlement and the cause of action was dismissed with prejudice.
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.
12. NEW ACCOUNTING PRONOUNCEMENT
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The impact to the Fund's financial
statements, if any, is currently being assessed.
56
VAN KAMPEN SENIOR LOAN FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen Senior Loan Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Senior Loan Fund (the "Fund"), including the portfolio of investments, as
of July 31, 2006, and the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included 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 includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of July 31, 2006, 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, 2006, the results of its operations, its
cash flows, the changes in its net assets and the financial highlights for the
respective stated periods, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
September 14, 2006
57
VAN KAMPEN SENIOR LOAN FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
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
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
58
VAN KAMPEN SENIOR LOAN FUND
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of the Shareholders of the Fund was held on June 23, 2006,
where shareholders voted on the election of trustees.
With regard to the election of the following trustees by common shareholders of
the Fund:
<Table>
<Caption>
# OF SHARES
--------------------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------------------------
Jerry D. Choate......................................... 141,865,279 3,790,407
Linda Hutton Heagy...................................... 141,949,061 3,706,626
R. Craig Kennedy........................................ 141,857,415 3,798,271
Jack E. Nelson.......................................... 141,876,981 3,778,706
Suzanne H. Woolsey...................................... 141,897,847 3,757,840
</Table>
The other trustees of the Fund whose terms did not expire in 2006 are David C.
Arch, Rod Dammeyer, Howard J Kerr, Hugo F. Sonnenschein, and Wayne W. Whalen.
With regard to an amendment to the Fund's fundamental investment restriction to
allow the fund the use of financial leverage, a meeting was held on June 23,
2006, and the results of the votes from the common shareholders is as follows:
<Table>
<Caption>
# OF SHARES
------------------------------------------------------
AFFIRMATIVE AGAINST ABSTAINING
------------------------------------------------------
97,796,567 6,215,033 5,544,001
</Table>
With regard to an amendment to the Fund's fundamental investment restriction to
allow the fund to repurchase its shares on a monthly basis, a meeting was held
on June 23, 2006, and the results of the votes from the common shareholders is
as follows:
<Table>
<Caption>
# OF SHARES
------------------------------------------------------
AFFIRMATIVE AGAINST ABSTAINING
------------------------------------------------------
101,433,271 3,340,522 4,781,807
</Table>
59
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES AND OFFICERS INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and 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 Fund 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 (61) Trustee Trustee Chairman and Chief 68 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.
Jerry D. Choate (67) Trustee Trustee Prior to January 1999, 68 Trustee/Director/Managing
33971 Selva Road since 2006 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
60
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES 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 (65) Trustee Trustee President of CAC, L.L.C., 68 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 Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
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>
61
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES 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
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 68 Trustee/Director/Managing
Heidrick & Struggles since 2006 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 68 Trustee/Director/Managing
1744 R Street, NW since 2006 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (70) Trustee Trustee Prior to 1998, President 68 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.
</Table>
62
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES 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
Jack E. Nelson (70) Trustee Trustee President of Nelson 68 Trustee/Director/Managing
423 Country Club Drive since 2006 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (65) Trustee Trustee President Emeritus and 68 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.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 68 Trustee/Director/Managing
(64) since 2006 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
63
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES AND OFFICERS INFORMATION continued
INTERESTED TRUSTEE:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 68 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>
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) 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.
64
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES 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 (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan
Stanley & Co. Incorporated. Managing Director and Director
of Morgan Stanley Investment Management Inc. Chief
Administrative Officer, Managing Director and Director of
Morgan Stanley Investment Advisors Inc. and Morgan Stanley
Services Company Inc. Managing Director and Director of
Morgan Stanley Distributors Inc. and Morgan Stanley
Distribution 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 of Morgan Stanley Investment
Management Inc. and Executive Vice President of funds in the
Fund Complex from May 2003 to September 2005.
Amy R. Doberman (44) 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 since 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 (39) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
</Table>
65
<Table>
<Caption>
VAN KAMPEN SENIOR LOAN FUND
TRUSTEES 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 (51) 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 Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
Phillip G. Goff (42) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza and Treasurer since 2005 Inc. since June 2005. Chief Financial Officer and Treasurer
Oakbrook Terrace, IL 60181 of 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 (58) 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>
66
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)2006 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
59, 359
SLF ANR 9/06
(VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-02433P-Y07/06
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.
Due to personnel changes at the Adviser, the list of Covered Officers set forth
in Exhibit B was amended in September 2005. Both 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 three "audit committee
financial experts" serving on its audit committee, "independent" Trustees Rod
Dammeyer, Jerry D. Choate and R. Craig Kennedy. 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:
2006 REGISTRANT COVERED ENTITIES(1)
- ---- ---------- -------------------
AUDIT FEES ............. $118,300 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES .. $ 0 $244,200(2)
TAX FEES ............ $ 2,200(3) $ 0
ALL OTHER FEES ...... $ 0 $ 0
TOTAL NON-AUDIT FEES ... $ 2,200 $244,200
TOTAL .................. $120,500 $244,200
2005 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
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
C. Arch, Rod Dammeyer, Howard J Kerr, Hugo F. 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 under this Policy (except for the Morgan Stanley KLD
Social Index Fund, which votes proxies pursuant to the Institutional Shareholder
Services' Social Investment Research Proxy Voting Guidelines) 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.
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. Morgan Stanley AIP
GP LP will follow the procedures as described in Appendix A. 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:
- Approval of financial statements, director and auditor reports.
- General updating/corrective amendments to the charter.
- 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:
- Proposals requiring that a certain percentage (up to 66 2/3%) of
the company's board members be independent directors.
- 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
disinsterested 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 fees paid to auditors are excessive. Generally, to
determine if such fees are excessive, a 50% test will be applied:
i.e., non-audit fees should be less than 50% of the total fees paid to
the auditor.
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:
- Proposals relating to capitalization changes that eliminate other
classes of stock and/or eliminate unequal voting rights.
- Proposals to increase the authorization of existing classes of
common stock (or securities convertible into common stock) if:
(i) a clear and legitimate business purpose is stated; (ii) the
number of shares requested is reasonable in relation to the
purpose for which authorization is requested; and (iii) the
authorization does not exceed 100% of shares currently authorized
and at least 30% of the new authorization will be outstanding.
- Proposals to create a new class of preferred stock or for
issuances of preferred stock up to 50% of issued capital.
- Proposals for share repurchase plans.
- Proposals to reduce the number of authorized shares of common or
preferred stock, or to eliminate classes of preferred stock.
- Proposals to effect stock splits.
- Proposals to effect reverse stock splits if management
proportionately reduces the authorized share amount set forth in
the corporate charter. Reverse stock splits that do not adjust
proportionately to the authorized share amount 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).
- Proposals relating to capitalization changes that add classes of
stock which substantially dilute the voting interests of existing
shareholders.
- Proposals to increase the authorized number of shares of existing
classes of stock that carry preemptive rights or supervoting
rights.
- Proposals to create "blank check" preferred stock.
- 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:
- Proposals relating to director fees, provided the amounts are not
excessive relative to other companies in the country or industry.
- 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.
- 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.
- 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
- 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 and approved
by the Research Providers generally will be supported where there
is no portfolio manager objection and where there is no material
conflict of interest and in those instances will not need to be
reviewed by the Proxy Review Committee.
ii. Compensation
- 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.
- 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.
- Compensation proposals that allow for discounted stock options
that have not been offered to employees in general.
iii. Other
- Proposals for higher dividend payouts.
- Proposals recommending set retirement ages or requiring specific
levels of stock ownership by directors.
- 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.
- Proposals requiring diversity of board membership relating to
broad based social, religious or ethnic groups.
- 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.
F. FUND OF FUNDS. Certain Funds advised by an MSIM Affiliate invest only in
other MSIM funds. If an underlying fund has a shareholder meeting, in order to
avoid any potential conflict of interest, such proposals will be voted in the
same proportion as the votes of the other shareholders of the underlying fund,
unless otherwise determined by the Proxy Review Committee.
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.
VAN KAMPEN SENIOR LOAN FUND
FUND MANAGEMENT
PORTFOLIO MANAGEMENT. As of the date of this report, the Fund is managed by
members of the Taxable Fixed Income team. The team consists of portfolio
managers and analysts. Current members of the team jointly and primarily
responsible for the day-to-day management of the Fund's portfolio and the
overall execution of the strategy of the Fund are Howard T. Tiffen, a Managing
Director of the Adviser and Christina Jamieson, an Executive Director of the
Adviser.
Mr. Tiffen has been associated with the Adviser in an investment management
capacity since December 1999 and began managing the Fund in December 1999. Ms.
Jamieson has been associated with the Adviser in an investment management
capacity since March 2000 and began managing the Fund in June 2005.
The composition of the team may change from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
The following information is as of July 31, 2006.
As of July 31, 2006, Mr. Tiffen managed 6 mutual funds with a total of
approximately $5.7 billion in assets; no pooled investment vehicles other than
mutual funds; and 2 other accounts with a total of approximately $585.2 million
in assets.
As of June 30, 2006, Ms. Jamieson managed two mutual funds with a total of
approximately $4.0 billion in assets; no pooled investment vehicles other than
mutual funds; and no other accounts.
Because the portfolio managers manage assets for other investment companies,
pooled investment vehicles, and/or other accounts (including institutional
clients, pension plans and certain high net worth individuals), there may be an
incentive to favor one client over another resulting in conflicts of interest.
For instance, the Adviser may receive fees from certain accounts that are higher
than the fee it receives from the Fund, or it may receive a performance-based
fee on certain accounts. In those instances, the portfolio manager may have an
incentive to favor the higher and/or performance-based fee accounts over the
Fund. The Adviser has adopted trade allocation and other policies and procedures
that it believes are reasonably designed to address these and other conflicts of
interest.
PORTFOLIO MANAGER COMPENSATION STRUCTURE
Portfolio managers receive a combination of base compensation and discretionary
compensation, comprised of a cash bonus and several deferred compensation
programs described below. The methodology used to determine portfolio manager
compensation is applied across all funds/accounts managed by the portfolio
manager.
Base salary compensation. Generally, portfolio managers receive base salary
compensation based on the level of their position with the Adviser.
Discretionary compensation. In addition to base compensation, portfolio managers
may receive discretionary compensation.
Discretionary compensation can include:
- - Cash Bonus.
- - Morgan Stanley's Equity Incentive Compensation Program (EICP) awards -- a
mandatory program that defers a portion of discretionary year-end
compensation into restricted stock units or other awards based on Morgan
Stanley common stock that are subject to vesting and other conditions.
- - Investment Management Deferred Compensation Plan (IMDCP) awards -- a
mandatory program that defers a portion of discretionary year-end
compensation and notionally invests it in designated Funds advised by the
Adviser or its affiliates. The award is subject to vesting and other
conditions. Portfolio managers must notionally invest a minimum of 25% to a
maximum of 75% of the IMDCP deferral into a combination of the designated
open-end mutual funds they manage that are included in the IMDCP Fund menu,
which may or may not include the Fund.
- - Voluntary Deferred Compensation Plans -- voluntary programs that permit
certain employees to elect to defer a portion of their discretionary
year-end compensation and directly or notionally invest the deferred
amount: (1) across a range of designated investment Funds, including Funds
advised by the Adviser or its affiliates; and/or (2) in Morgan Stanley
stock units.
Several factors determine discretionary compensation, which can vary by
portfolio management team and circumstances. In order of relative importance,
these factors include:
- - Investment performance. A portfolio manager's compensation is linked to the
pre-tax investment performance of the funds/accounts managed by the
portfolio manager. Investment performance is calculated for one-, three-
and five-year periods measured against a fund's/account's primary
benchmark, indices and/or peer groups where applicable. Generally, the
greatest weight is placed on the three- and five-year periods.
- - Revenues generated by the investment companies, pooled investment vehicles
and other accounts managed by the portfolio manager.
- - Contribution to the business objectives of the Adviser.
- - The dollar amount of assets managed by the portfolio manager.
- - Market compensation survey research by independent third parties.
- - Other qualitative factors, such as contributions to client objectives.
- - Performance of Morgan Stanley and Morgan Stanley Investment Management, and
the overall performance of the investment team(s) of which the portfolio
manager is a member.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of July 31, 2006, the portfolio managers did not own any shares of the Fund.
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 second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) 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 21, 2006
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 21, 2006
By: /s/ James W. Garrett
--------------------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: September 21, 2006