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 811-22043
Van Kampen Dynamic Credit Opportunities Fund
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)
Jerry W. Miller
522 Fifth Avenue, New York, New York 10036
(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: 7/31/08
Item 1. Reports 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
Dynamic Credit Opportunities 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, 2008.
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 7/31/08
<Table>
<Caption>
DYNAMIC CREDIT OPPORTUNITIES FUND
SYMBOL: VTA
- ------------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (6/26/07) -8.26% -24.40%
1-year -6.82 -25.46
- ------------------------------------------------------------
</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 NAV per share is determined by dividing the value of the fund's portfolio
securities, cash and other assets, less all liabilities, by the total number of
common shares outstanding. The common share market price is the price the market
is willing to pay for shares of the fund at a given time. Common share market
price is influenced by a range of factors, including supply and demand and
market conditions. Total return assumes an investment at the beginning of the
period, reinvestment of all distributions for the period in accordance with the
fund's dividend reinvestment plan, and sale of all shares at the end of the
period.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED JULY 31, 2008
MARKET CONDITIONS
The U.S. economic picture weakened over the course of the 12-month reporting
period as the pace of growth slowed while inflationary pressures, particularly
rising food and oil prices, began to grow. These factors, coupled with the
declining housing market, weighed on consumers and translated into slower
earnings growth for many corporate borrowers in the senior loan market as demand
for their products and services declined. At the same time, the dislocations
stemming from the problems in the subprime mortgage sector permeated the capital
markets, leading to a significant contraction in credit and liquidity and
considerable losses for many financial firms.
The Federal Reserve (the "Fed") took several steps to help support both the
economy and market liquidity, including reducing the target federal funds rate a
total of 325 basis points during the period, bringing the rate to 2.0 percent by
the end of April. In the final months of the period the Fed held rates steady in
an effort to limit inflationary pressures, although concerns of an economic
recession remained.
In the aggregate, it was a volatile and challenging period for the financial
markets. The uncertain environment prompted many investors to shun riskier
assets, which resulted in diminished performance for most sectors of the market.
The senior loan market faced additional challenges. While demand for senior
loans was declining, the supply of loans coming to market--particularly in the
fourth quarter of 2007--was rising, creating a technical demand/supply imbalance
that put considerable pressure on prices, which reached a low for the period in
March. Tighter lending standards and increased selling by retail and relative
value investors also contributed to price declines. In April, the technical
picture began to improve as large underwriting banks made substantial progress
working down the inventory of underwritten but not yet syndicated leveraged
loans while low loan prices attracted new money into the asset class from
private equity and credit opportunity funds. As a result, loan prices rose,
reaching their highest level for the calendar year so far in mid-June. At the
end of June, however, the market reversed course again due in large part to
concerns about underlying credit fundamentals amid negative news regarding the
auto industry and mortgage lenders Fannie Mae (FNMA) and Freddie Mac (FHLMC).
Although the default rate in the senior loan market increased to approximately
three percent by period end, it still remained below the historical average.
Given the weaker economic outlook, we anticipate defaults may continue to rise,
but we believe the senior loan asset class remains compelling due to the senior
secured nature of loans and their attractive current yields.
2
PERFORMANCE ANALYSIS
The Fund's return can be calculated based upon either the market price or the
net asset value (NAV) of its shares. NAV per share is determined by dividing the
value of the Fund's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding, while market
price reflects the supply and demand for the shares. As a result, the two
returns can differ, as they did during the reporting period. For the 12 months
ended July 31, 2008, the Fund returned -25.46 percent on a market price basis
and -6.82 percent on an NAV basis.
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JULY 31, 2008
<Table>
<Caption>
- -----------------------------------
BASED ON BASED ON
NAV MARKET PRICE
-6.82% -25.46%
- -----------------------------------
</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. Investment return, net asset value and common share market price will
fluctuate and Fund shares, when sold, may be worth more or less than their
original cost. See Performance Summary for additional performance information.
Over the course of the period we positioned the portfolio defensively, generally
avoiding sectors or industries that we believe are vulnerable to cyclical
economic downturns. For example, the Fund remained underweighted in the auto and
airline industries because of their susceptibility to high fuel prices. As of
the end of the reporting period, approximately 35 percent of the Fund's
investments, including credit derivatives, were allocated internationally,
primarily in Europe, and continued to be managed by Van Kampen's subadvisor,
Avenue Capital. This exposure to non-dollar assets was entirely hedged into U.S.
dollars, effectively eliminating currency risk in the portfolio.
We began to opportunistically deploy leverage during the period in an effort to
enhance the Fund's yield. This involves borrowing at a floating short-term rate
and reinvesting the proceeds at a higher rate. Unlike other fixed-income asset
classes, using leverage in conjunction with senior loans does not involve the
same degree of risk from rising short-term interest rates since the income from
senior loans adjusts to changes in interest rates, as do the rates which
determine the Fund's borrowing costs. (Similarly, should short-term rates fall,
borrowing costs would also decline.)
The Fund continued to have limited exposure to distressed securities. With
default rates still low and credit quality generally strong, there have been few
opportunities to buy distressed debt where, in our view, the return potential
sufficiently compensated us for the risk involved. However, as we move through
this economic cycle we expect defaults may rise and opportunities in distressed
debt to increase. Should this occur, we may reposition the Fund to take
advantage of these opportunities.
3
Although it has been a difficult period, we believe it has created attractive
investment opportunities. Loans coming to market today are offering better
spreads and stronger credit structures than we have seen in the past few years.
These more investor-friendly terms may lead to attractive risk/reward
characteristics for investors going forward. Current prices and yields in the
secondary market also may offer compelling opportunities. In addition, merger
and acquisition activity continues, which has historically meant continued deal
flows for senior secured lenders. Overall, we believe the value in the senior
loan market remains compelling and because we are able to dynamically adjust the
portfolio investment mix to take advantage of opportunities as they arise, we
believe we have the ability to deliver competitive returns to our investors over
the economic cycle.
The Fund's procedure for reinvesting all dividends and distributions in common
shares is through purchases in the open market. This method helps support the
market value of the Fund's shares. In addition, we would like to remind you that
the Trustees have approved a share repurchase program whereby the Fund may, when
appropriate, purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.
4
<Table>
<Caption>
SUMMARY OF INVESTMENT BY INDUSTRY CLASSIFICATION AS OF 7/31/08
Printing & Publishing 8.9%
Hotels, Motels, Inns & Gaming 5.9
Broadcasting--Cable 5.7
Beverage, Food & Tobacco 5.6
Chemical, Plastics & Rubber 5.4
Containers, Packaging & Glass 5.3
Telecommunications--Equipment & Services 4.7
Buildings & Real Estate 4.4
Finance 4.4
Non-Durable Consumer Products 3.9
Telecommunications--Wireless 3.3
Retail--Stores 3.1
Entertainment & Leisure 3.0
Healthcare 3.0
Transportation--Cargo 2.7
Electronics 2.5
Broadcasting--Television 2.4
Automotive 2.2
Mining, Steel, Iron & Non-Precious Metals 2.1
Business Equipment & Services 2.0
Utilities 1.9
Insurance 1.8
Medical Products & Services 1.6
Retail--Specialty 1.4
Broadcasting--Radio 1.3
Construction Material 1.2
Education & Child Care 1.1
Home & Office Furnishings, Housewares & Durable Consumer
Products 0.9
Paper & Forest Products 0.9
Telecommunications--Local Exchange Carriers 0.8
Health & Beauty 0.8
Broadcasting--Diversified 0.7
Aerospace & Defense 0.6
Machinery 0.6
Retail--Oil & Gas 0.5
Restaurants & Food Service 0.4
Textiles & Leather 0.4
Ecological 0.4
Transportation--Personal 0.4
Diversified Manufacturing 0.3
Natural Resources 0.3
Farming & Agriculture 0.3
Pharmaceuticals 0.1
-----
Total Long-Term Investments 99.2
Total Short Term Investments 0.8
-----
Total Investments 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 total investments. 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.
5
PORTFOLIO MANAGEMENT CHANGES
Van Kampen Dynamic Credit Opportunities Fund is managed by members of the
Adviser's Senior Loan Group, which currently includes Howard Tiffen,
Senior Adviser of the Adviser, Philip Yarrow, Executive Director and
portfolio manager of the Adviser, Gerard Fogarty, Vice President and
assistant portfolio manager of the Adviser, and Jeffrey Scott, Vice
President and assistant portfolio manager of the Adviser. Mr. Yarrow, who
previously managed the Fund with Christina Jamieson, is primarily
responsible for the day-to-day management of the Fund's portfolio. Mr.
Tiffen is currently associated with the Adviser and members of the Senior
Loan Group in a senior adviser capacity.
Mr. Yarrow joined the Adviser in 2005 and began managing the Fund in June
2007. Mr. Yarrow has over 13 years of investment experience. Prior to
joining the Adviser, Mr. Yarrow was a credit analyst and a portfolio
manager at Bank One/JPMorgan. Mr. Yarrow received a bachelor's degree in
mathematics and economics from the University of Nottingham and an M.B.A.
in finance from Northwestern University. Mr. Yarrow also holds the
Chartered Financial Analyst designation.
Mr. Fogarty joined the Adviser in 2007 and began managing the Fund in
July 2008. Mr. Fogarty has approximately 11 years of investment
experience. From 2003 to 2007 and prior to joining the Adviser, Mr.
Fogarty was employed by JPMorgan and held a number of positions including
Director in the financial institutions group, and, most recently as a
Credit Executive in the commercial real estate group. Prior to joining
JPMorgan, Mr. Fogarty was employed as an Associate in the financial
institutions group at Bank of America. Mr. Fogarty received a B.S. from
Indiana University and an M.B.A. from the University of Chicago Graduate
School of Business.
Mr. Scott joined the Adviser in 2005 and began managing the Fund in July
2008. Mr. Scott has approximately 18 years of investment industry
experience. Prior to joining the Adviser, Mr. Scott was employed by State
Farm Insurance Companies where he served as an Assistant Vice President
in the Mutual Fund Group responsible for product development and strategy
as well as a Regional Vice President for Sales for the Financial Services
Division. Mr. Scott received a B.S. from Elmhurst College and an M.B.A.
from the University of Chicago Graduate School of Business. Mr. Scott
also holds the Chartered Financial Analyst designation.
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. The semiannual reports and the
annual reports are filed electronically with the Securities
6
and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR,
respectively. 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, D.C.
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) 341-2929.
7
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) 341-2929 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.
8
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
VARIABLE RATE** SENIOR LOAN INTERESTS 119.4%
AEROSPACE & DEFENSE 0.9%
$ 4,455 Decrane Aircraft Holdings,
Inc., Term Loan.............. 5.54% 02/21/13 $ 4,121,293
2,242 IAP Worldwide Services, Inc.,
Term Loan (a)................ 8.25 12/30/12 1,804,615
1,973 Sequa Corp., Term Loan....... 5.92 to 6.06 12/03/14 1,870,610
3,000 Wesco Aircraft Hardware
Corp., Term Loan............. 8.56 03/28/14 2,930,625
--------------
10,727,143
--------------
AUTOMOTIVE 3.2%
2,571 Delphi Corp., Term Loan...... 7.25 12/31/08 2,562,912
27,904 Ford Motor Co., Term Loan.... 5.46 12/15/13 22,044,123
4,564 Metokote Corp., Term Loan.... 5.47 to 5.80 11/27/11 4,290,347
1,333 Navistar International Corp.,
Revolving Credit Agreement... 5.90 to 6.05 01/19/12 1,238,333
3,667 Navistar International Corp.,
Term Loan.................... 6.05 to 6.29 01/19/12 3,405,417
1,012 Precision Partners, Inc.,
Term Loan.................... 10.00 10/27/13 999,668
3,221 Textron Fastening Systems,
Term Loan.................... 6.30 08/11/13 3,027,998
--------------
37,568,798
--------------
BEVERAGE, FOOD & TOBACCO 8.2%
10,939 Birds Eye Foods Investments,
Inc., Term Loan (a).......... 7.17 07/11/12 10,091,142
4,812 Coleman Natural Foods, LLC,
Term Loan.................... 6.96 to 8.50 08/22/12 4,343,028
8,907 Culligan International Co.,
Term Loan.................... 4.71 11/24/12 6,257,417
13,943 Dole Food Co., Inc., Term
Loan......................... 4.50 to 6.00 04/12/13 12,891,843
10,000 DSW Holdings, Inc., Term
Loan......................... 6.47 03/07/12 8,700,000
12,000 Farley's & Sathers Candy Co.,
Inc., Term Loan.............. 10.86 to 11.12 03/24/11 11,430,000
kr 27,307 Findus AB, Term Loan
(Sweden)..................... 7.38 to 7.88 03/23/15 to 03/23/16 4,465,430
E 3,185 Foodvest, Ltd. AB, Term Loan
(Sweden)..................... 7.24 to 7.74 03/23/15 to 03/23/16 4,918,324
5,000 FSB Holdings, Inc., Term
Loan......................... 8.44 03/29/14 4,350,000
E 1,977 Iglo Birds Eye, Term Loan
(United Kingdom)............. 6.55 to 7.39 12/31/14 to 12/31/15 2,976,105
E 3,594 Panrico, Inc., Term Loan
(Spain)...................... 7.27 to 7.64 05/31/14 to 05/31/15 5,368,766
</Table>
See Notes to Financial Statements 9
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 1,974 Pierre Foods, Inc., Term Loan
(b).......................... 6.97% 06/30/10 $ 1,573,965
16,845 Pinnacle Foods Finance, LLC,
Term Loan.................... 5.21 to 5.56 04/02/14 15,427,138
3,000 Van Houtte, Inc., Term Loan
(Canada)..................... 8.30 01/19/15 2,625,000
--------------
95,418,158
--------------
BROADCASTING--CABLE 5.4%
22,629 Charter Communications
Operating, LLC, Term Loan.... 4.67 to 5.30 03/06/14 to 09/06/14 19,593,166
12,690 CSC Holdings, Inc., Term
Loan......................... 3.46 02/24/12 11,975,953
1,489 CW Media Holdings, Inc., Term
Loan (Canada)................ 6.05 02/15/15 1,425,478
E 17,600 Kabel Baden-Wuerttemburg,
Term Loan (Germany).......... 7.38 to 7.88 06/09/14 to 06/09/15 25,342,894
4,972 Knology, Inc., Term Loan..... 5.04 06/30/12 4,624,337
--------------
62,961,828
--------------
BROADCASTING--DIVERSIFIED 1.0%
7,875 Alpha Topco Ltd., Term Loan
(United Kingdom)............. 4.71 to 6.63 12/31/13 to 06/30/14 7,130,533
997 Cumulus Media, Inc., Term
Loan......................... 4.21 06/11/14 861,140
3,576 NEP II, Inc., Term Loan...... 5.05 02/16/14 3,244,849
--------------
11,236,522
--------------
BROADCASTING--RADIO 2.0%
1,882 CMP KC, LLC, Term Loan....... 6.50 05/05/11 1,223,078
5,111 CMP Susquehanna Corp., Term
Loan......................... 4.49 05/05/13 4,216,791
7,955 Emmis Operating Co., Term
Loan......................... 4.46 to 4.80 11/01/13 7,025,325
1,963 Multicultural Radio
Broadcasting, Inc., Term
Loan......................... 5.42 12/18/12 1,787,671
1,984 Nextmedia Operating, Inc.,
Term Loan.................... 6.46 11/15/12 1,820,014
4,511 Nextmedia Operating, Inc.,
Term Loan (a)................ 10.46 11/15/13 3,609,100
3,974 Spanish Broadcasting Systems,
Inc., Term Loan.............. 4.56 06/11/12 3,119,861
--------------
22,801,840
--------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
BROADCASTING--TELEVISION 3.6%
$ 3,000 FoxCo Acquisition, LLC, Term
Loan......................... 7.25% 07/14/15 $ 2,955,000
11,654 New Vision Television, Term
Loan......................... 5.69 to 9.19 11/01/13 to 11/01/14 9,392,886
3,070 Newport Television, LLC, Term
Loan......................... 8.00 09/14/16 2,897,610
31,541 Univision Communications,
Inc., Term Loan.............. 4.71 to 5.05 03/29/09 to 09/29/14 26,110,896
--------------
41,356,392
--------------
BUILDINGS & REAL ESTATE 3.1%
2,000 El Ad IDB Las Vegas, LLC,
Term Loan.................... 6.46 02/10/09 1,850,000
7,479 Ginn LA CS Borrower, LLC,
Term Loan (a) (c)............ 5.97 to 13.50 06/08/11 to 06/08/12 2,157,988
3,533 Kuilima Resort Co., Term Loan
(c) (g)...................... 19.46 to 27.48 10/01/08 to 09/30/11 430,338
5,000 Kyle Acquisition Group, LLC,
Term Loan (c)................ 6.00 07/20/09 to 07/20/11 1,737,500
15,492 Lake at Las Vegas Joint
Venture, LLC, Term Loan (a)
(b) (c)...................... 16.10 06/20/12 3,098,429
3,000 Lake at Las Vegas Joint
Venture, LLC, Term Loan (b)
(d).......................... 12.00 03/17/08 3,000,000
1,806 Lake Las Vegas Resort,
Revolving Credit Agreement
(a) (b) (c).................. 16.10 06/20/12 361,111
2,690 Landsource Communities
Development, LLC, Term Loan
(a) (b) (c).................. 8.25 05/31/09 1,856,299
3,000 Metroflag BP, LLC, Term
Loan......................... 11.46 07/06/09 2,475,000
2,000 North Las Vegas, Term Loan... 10.71 05/30/12 600,000
4,994 Pivotal Promontory, LLC, Term
Loan (b) (c)................. 8.75 to 10.50 08/31/10 to 08/31/11 2,540,521
2,970 Realogy, Term Loan........... 5.46 10/10/13 2,442,825
3,936 Re/Max International, Inc.,
Term Loan.................... 6.29 12/17/12 3,463,289
4,582 Rhodes Ranch General
Partnership, Term Loan (a)... 10.30 to 11.55 11/21/10 to 11/21/11 2,454,703
1,655 Shea Capital I, LLC, Term
Loan......................... 4.46 to 5.00 10/27/11 1,174,780
2,338 Shea Mountain House, LLC,
Term Loan.................... 4.46 05/11/11 1,800,547
</Table>
See Notes to Financial Statements 11
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
BUILDINGS & REAL ESTATE (CONTINUED)
$ 2,000 Standard Pacific Corp., Term
Loan......................... 4.47% 05/05/13 $ 1,643,334
2,496 Tamarack Resorts, LLC, Term
Loan (c)..................... 8.05 05/19/11 1,647,506
1,499 WCI Communities, Inc, Term
Loan......................... 7.72 12/23/10 1,363,963
--------------
36,098,133
--------------
BUSINESS EQUIPMENT & SERVICES 2.9%
2,978 GSI Group, Term Loan......... 5.65 08/01/14 2,739,300
2,000 HydroChem Industrial
Services, Inc., Term Loan.... 8.47 07/12/14 1,950,000
3,934 NCO Financial Systems, Term
Loan......................... 6.89 to 7.06 05/15/13 3,827,894
6,890 RGIS Services, LLC, Term
Loan......................... 4.96 to 5.30 04/30/14 5,753,318
3,965 SMG Holdings, Inc., Term
Loan......................... 5.63 to 6.19 07/27/14 3,727,065
16,806 Nielsen Finance, LLC., Term
Loan......................... 4.73 08/09/13 15,663,309
--------------
33,660,886
--------------
CHEMICAL, PLASTICS & RUBBER 7.6%
5,809 Arizona Chemical Co., Term
Loan......................... 4.64 02/28/13 to 02/28/14 4,604,735
E 10,757 Borsodchem, Term Loan
(Hungary).................... 6.98 to 7.48 09/19/14 to 09/09/15 14,769,866
5,000 Brenntag Holdings, GMBH & Co.
KG, Term Loan (Germany)...... 7.07 07/17/15 4,075,000
4,927 Fibervisions Delaware Corp.,
Term Loan.................... 7.05 03/31/13 3,695,030
9,271 Foamex L.P., Term Loan....... 6.04 to 7.54 02/12/13 to 02/12/14 6,688,652
10,430 Hexion Specialty Chemicals,
Inc., Term Loan.............. 5.00 to 5.06 05/05/13 9,099,761
E 2,970 Ineos Group Holdings, Plc,
Term Loan (United Kingdom)... 7.24 to 7.74 12/23/13 to 12/23/14 3,903,227
4,156 Lyondell Chemical Co., Term
Loan......................... 7.00 12/20/14 3,492,406
1,250 Lyondell Chemical Co.,
Revolving Credit Agreement... 5.97 12/30/13 968,750
E 15,572 Momentive Performance, Term
Loan......................... 6.71 12/14/13 21,102,395
5,000 PQ Corp., Term Loan.......... 5.92 to 6.05 07/30/14 4,701,565
1,194 Solutia, Inc., Term Loan..... 8.50 02/28/14 1,138,405
</Table>
12 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
CHEMICAL, PLASTICS & RUBBER (CONTINUED)
$ 4,975 Univar, Inc., Term Loan...... 5.80% 10/11/14 $ 4,578,557
14,000 Wellman, Inc., Term Loan (b)
(c).......................... 7.24 to 9.99 02/10/09 to 02/10/10 4,900,000
--------------
87,718,349
--------------
CONSTRUCTION MATERIAL 1.6%
3,734 Axia, Inc., Term Loan (a).... 17.95 12/21/12 2,800,270
2,449 Beacon Sales Acquisition,
Inc., Term Loan.............. 4.65 to 4.78 09/30/13 2,203,915
6,948 Building Materials Corp. of
America, Term Loan........... 5.44 to 8.25 02/22/14 to 09/15/14 5,840,739
2,935 Building Materials Holding,
Corp., Term Loan............. 7.30 to 7.50 11/10/11 2,289,103
3,990 Contech Construction
Products, Inc., Term Loan.... 4.47 to 4.77 01/31/13 3,491,054
2,000 Custom Building Products,
Inc., Term Loan.............. 7.80 04/29/12 1,590,000
966 United Subcontractors, Inc.,
Term Loan.................... 5.79 to 6.14 12/27/12 590,533
--------------
18,805,614
--------------
CONTAINERS, PACKAGING & GLASS 2.3%
3,119 Anchor Glass Container Corp.,
Term Loan.................... 7.75 06/20/14 3,066,414
8,957 Berlin Packaging, LLC, Term
Loan......................... 5.46 to 9.46 08/17/14 to 08/17/15 8,150,251
3,960 Berry Plastics Group, Inc.,
Term Loan.................... 4.78 04/03/15 3,497,439
4,400 Berry Plastics Group, Inc.,
Term Loan (a)................ 9.04 06/05/14 2,640,024
5,977 Consolidated Container Co.,
LLC, Term Loan............... 4.71 to 8.30 03/28/14 to 09/28/14 3,805,277
688 Graphic Packaging
International, Inc.,
Revolving Credit Agreement... 2.25 to 5.04 05/16/13 639,375
2,492 Solo Cup, Co., Term Loan..... 5.97 to 6.14 02/27/11 2,435,248
2,970 Unifrax Corp., Term Loan..... 4.75 05/02/13 2,806,291
--------------
27,040,319
--------------
DIVERSIFIED MANUFACTURING 0.5%
6,794 Euramax International, Inc.,
Term Loan (g)................ 8.00 to 10.79 06/29/12 to 06/29/13 5,642,984
--------------
</Table>
See Notes to Financial Statements 13
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
ECOLOGICAL 0.6%
$ 10,250 Synagro Technologies, Inc.,
Term Loan.................... 7.44% 10/02/14 $ 7,021,250
167 Waste Services, Inc., Term
Loan......................... 5.15 03/31/11 165,623
--------------
7,186,873
--------------
EDUCATION & CHILD CARE 1.6%
3,000 Bright Horizons Family
Solutions, Inc., Term Loan... 7.50 05/28/15 2,959,689
9,925 Cengage Learning Holdings II,
Term Loan.................... 4.96 07/05/14 8,794,483
500 Educate Services, Inc., Term
Loan......................... 8.06 06/14/14 422,500
1,995 Education Management Corp.,
Term Loan.................... 4.56 06/01/13 1,832,020
5,000 Nelson Education Ltd., Term
Loan (Canada)................ 8.80 07/05/15 4,175,000
--------------
18,183,692
--------------
ELECTRONICS 3.7%
2,978 Ax Acquisition Corp., Term
Loan......................... 6.44 08/15/14 2,754,187
4,000 Dealer Computer Services,
Inc., Term Loan.............. 8.30 10/26/13 3,710,000
9,271 Edwards (Cayman Islands II)
Ltd, Term Loan............... 4.64 to 8.39 05/31/14 to 11/30/14 6,833,993
2,977 Infor Enterprise Solutions
Holdings, Inc., Term Loan.... 6.55 07/28/12 2,486,023
5,949 Kronos, Inc., Term Loan...... 5.05 to 8.55 06/11/14 to 06/11/15 5,270,185
7,920 Open Solutions, Inc., Term
Loan......................... 5.15 01/23/14 7,028,835
4,930 Stratus Technologies, Inc.,
Term Loan.................... 6.55 03/29/11 3,894,382
4,975 Sungard Data Systems, Inc.,
Term Loan.................... 4.51 02/28/14 4,702,370
5,377 Verint Systems, Inc., Term
Loan......................... 5.87 05/25/14 4,892,846
1,985 X-Rite, Inc., Term Loan...... 9.50 10/24/12 1,707,100
--------------
43,279,921
--------------
ENTERTAINMENT & LEISURE 4.4%
4,963 Bushnell, Inc., Term Loan.... 6.55 08/24/13 4,664,750
4,371 Fender Musical Instruments
Corp., Term Loan............. 5.05 to 5.17 06/09/14 4,042,867
10,153 Metro-Goldwyn-Mayer Studios,
Inc., Term Loan.............. 6.05 04/08/12 7,792,478
36,988 Metro-Goldwyn-Mayer Studios,
Inc., Term Loan (e).......... 6.05 04/08/12 28,388,495
</Table>
14 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (CONTINUED)
$ 4,949 Panavision, Inc., Term
Loan......................... 6.15 to 6.30% 03/30/11 $ 4,207,073
2,486 True Temper Sports, Inc.,
Term Loan.................... 5.89 to 6.05 03/15/11 2,261,902
--------------
51,357,565
--------------
FARMING & AGRICULTURE 0.4%
5,000 Wm. Bolthouse Farms, Inc.,
Term Loan.................... 8.30 12/16/13 4,775,000
--------------
FINANCE 6.4%
4,557 C.G. JCF Corp., Term Loan.... 5.81 08/01/14 4,283,617
2,537 DCS Business Services, Inc.,
Term Loan.................... 8.50 02/04/11 2,258,039
3,990 Dollar Financial Group, Inc.,
Term Loan.................... 5.56 10/30/12 3,391,371
20,847 First Data Corp., Term
Loan......................... 5.21 to 5.55 09/24/14 19,224,421
E 14,888 First Data Corp., Term
Loan......................... 7.71 09/28/14 20,958,105
6,282 National Processing Company
Group, Term Loan............. 5.47 to 9.30 09/29/12 to 09/29/14 5,196,476
3,325 Nuveen Investments, Term
Loan......................... 5.46 11/13/14 3,083,938
5,214 Oxford Acq. III Ltd., Term
Loan (United Kingdom)........ 4.55 05/11/14 4,746,469
9,963 RJO Holdings, Corp., Term
Loan......................... 5.47 to 9.22 07/12/14 to 07/12/15 6,224,687
5,470 Transfirst Holdings, Inc.,
Term Loan.................... 5.56 to 8.81 06/15/14 to 06/15/15 4,763,600
--------------
74,130,723
--------------
HEALTH & BEAUTY 1.1%
7,500 American Safety Razor Co.,
Term Loan.................... 8.72 to 8.89 01/30/14 6,900,000
7,014 Marietta Intermediate
Holdings, Term Loan (a)...... 7.67 to 12.00 12/17/10 to 12/17/11 1,750,689
4,950 Philosophy, Inc., Term
Loan......................... 4.47 03/16/14 4,356,000
--------------
13,006,689
--------------
HEALTHCARE 4.4%
2,721 Community Health Systems,
Inc., Term Loan.............. 4.71 to 4.90 07/25/14 2,580,286
4,980 Concentra, Inc., Term Loan... 5.05 to 8.30 06/25/14 to 06/25/15 3,682,650
1,990 FHC Health Systems, Term
Loan......................... 7.80 12/13/13 1,880,550
13,849 HCA, Inc., Term Loan......... 5.05 11/17/13 13,042,298
</Table>
See Notes to Financial Statements 15
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$ 5,680 Health Management Associates,
Inc., Term Loan.............. 4.55% 02/28/14 $ 5,262,996
1,727 HealthCare Partners, LLC,
Term Loan.................... 4.21 10/31/13 1,658,363
14,818 Manor Care, Inc., Term Loan.. 4.96 11/09/14 13,743,571
700 Surgical Care Affiliates,
LLC, Revolving Credit
Agreement.................... 2.25 to 5.05 06/29/13 581,000
5,962 Surgical Care Affiliates,
LLC, Term Loan............... 5.05 12/29/14 5,276,762
3,861 United Surgical Partners
International, Inc., Term
Loan......................... 4.47 to 5.02% 04/19/14 3,513,114
--------------
51,221,590
--------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER PRODUCTS 1.3%
8,801 Hunter Fan Co., Term Loan.... 5.18 to 9.47 04/16/14 to 10/16/14 6,425,068
988 Lenox, Inc., Term Loan....... 7.30 to 7.31 04/20/13 715,937
4,950 Mattress Holdings, Corp.,
Term Loan.................... 4.72 01/18/14 3,588,750
4,000 National Bedding Co., LLC,
Term Loan.................... 7.46 08/31/12 2,860,000
2,750 Quality Home Brands Holdings,
LLC, Term Loan............... 8.00 12/20/12 1,918,028
--------------
15,507,783
--------------
HOTELS, MOTELS, INNS & GAMING 8.4%
6,478 Cannery Casino Resorts, LLC,
Term Loan.................... 4.93 to 6.95 05/18/13 to 05/18/14 6,193,868
L 2,503 Gala Group Ltd., Term Loan
(United Kingdom)............. 8.56 10/07/12 4,352,738
4,697 Golden Nugget, Inc., Term
Loan......................... 4.46 to 5.72 06/30/14 to 12/31/14 3,168,106
842 Greektown Casino, LLC, Term
Loan (b)..................... 7.50 12/03/12 774,990
2,648 Greektown Holdings, LLC, Term
Loan......................... 9.75 06/01/09 2,661,606
4,995 Green Valley Ranch Gaming,
LLC, Term Loan............... 4.64 to 5.89 02/16/14 to 08/16/14 3,399,131
12,968 Harrah's Operating Co., Inc.,
Term Loan.................... 9.25 01/28/15 11,514,440
8,700 Magnolia Hill, LLC, Term
Loan......................... 5.72 to 14.00 10/30/13 to 04/24/14 8,453,000
10,000 New World Gaming Partners
Ltd, Term Loan............... 8.28 03/31/15 6,900,000
</Table>
16 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
$ 2,315 Penn National Gaming, Inc,
Term Loan.................... 4.55% 10/03/12 $ 2,227,066
E 22,500 Regency Entertainment, Term
Loan (Greece)................ 7.38 to 7.76 03/02/14 to 03/02/15 31,060,527
7,490 Wembley, Inc., Term Loan
(a).......................... 6.72 to 7.19 08/23/11 to 07/18/12 2,582,423
6,667 Wynn Resorts, Term Loan...... 4.72 06/21/21 6,233,333
7,577 Yonkers Racing Corp., Term
Loan......................... 10.50 08/12/11 7,539,333
--------------
97,060,561
--------------
INSURANCE 2.6%
5,624 Alliant Holdings I, Inc.,
Term Loan.................... 5.80 11/01/14 5,202,354
7,425 AmWins Group, Inc, Term
Loan......................... 4.96 to 5.15 06/08/13 6,051,375
3,069 Conseco, Inc., Term Loan..... 4.46 10/10/13 2,691,009
6,470 HMSC Holdings, Corp., Term
Loan......................... 5.04 to 8.29 04/03/14 to 10/03/14 4,665,244
5,860 Mitchell International, Inc.,
Term Loan.................... 8.06 03/28/15 5,596,300
6,000 Vertafore, Inc., Term Loan... 8.25 to 8.64 01/31/12 to 01/31/13 5,500,000
--------------
29,706,282
--------------
MACHINERY 0.8%
5,790 Goodman Global, Inc., Term
Loan......................... 7.50 02/13/14 5,728,481
3,970 Mold-Masters Luxembourg
Holdings, SA, Term Loan...... 6.00 10/11/14 3,612,700
--------------
9,341,181
--------------
MEDICAL PRODUCTS & SERVICES 2.4%
2,000 AGA Medical Corp., Term
Loan......................... 4.70 to 4.72 04/28/13 1,900,000
7,880 Biomet, Inc., Term Loan...... 5.80 03/25/15 7,750,411
1,870 Carestream Health, Inc., Term
Loan......................... 4.46 to 4.80 04/30/13 1,650,450
9,470 Inverness Medical
Innovations, Inc., Term
Loan......................... 4.81 to 7.06 06/26/14 to 06/26/15 8,932,900
4,955 Viant Holdings, Inc., Term
Loan......................... 5.05 06/25/14 4,261,268
3,000 VWR Funding, Inc., Term
Loan......................... 4.96 06/29/14 2,726,250
--------------
27,221,279
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 0.6%
7,412 John Maneely Co., Term Loan.. 6.02 to 6.04 12/08/13 6,806,344
--------------
</Table>
See Notes to Financial Statements 17
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
NATURAL RESOURCES 0.5%
$ 3,200 CDX Funding, LLC, Term Loan
(c).......................... 12.25% 03/31/13 $ 2,592,000
3,000 Dresser, Inc., Term Loan..... 8.47 05/04/15 2,880,000
--------------
5,472,000
--------------
NON-DURABLE CONSUMER PRODUCTS 5.8%
6,720 Amscan Holdings, Inc., Term
Loan......................... 4.89 to 5.05 05/25/13 5,913,556
5,970 Huish Detergents, Inc., Term
Loan......................... 4.81 to 7.06 04/26/14 to 10/26/14 5,347,401
9,382 KIK Custom Products, Inc.,
Term Loan.................... 4.72 to 7.46 05/31/14 to 11/30/14 4,837,820
2,980 Mega Brands, Inc., Term Loan
(Canada)..................... 8.25 07/26/12 2,607,143
990 Nice Pak Products, Inc., Term
Loan......................... 5.80 to 6.13 06/18/14 891,000
E 20,000 Ontex, Term Loan (Belgium)... 8.40 to 8.90 07/05/12 to 07/05/13 28,857,238
14,307 Spectrum Brands, Inc.,
Revolving Credit Agreement... 6.46 to 6.79 03/30/13 12,810,597
5,000 Targus Group International,
Inc., Term Loan.............. 11.35 05/22/13 3,912,500
1,985 Wilton Products, Inc., Term
Loan......................... 5.72 to 5.97 08/01/14 1,736,875
--------------
66,914,130
--------------
PAPER & FOREST PRODUCTS 1.3%
3,200 Ainsworth Lumber Co. Ltd.,
Term Loan.................... 7.50 06/26/14 2,844,000
7,463 New Page, Term Loan.......... 6.56 12/21/14 7,394,077
1,989 SP Newsprint, Term Loan...... 11.00 03/31/10 1,971,486
373 Verso Paper Holdings, LLC,
Term Loan.................... 9.03 08/01/13 310,806
3,461 White Birch Paper Co., Term
Loan (Canada)................ 5.56 05/08/14 2,544,039
--------------
15,064,408
--------------
PHARMACEUTICALS 0.2%
2,000 Generics International, Inc.,
Term Loan.................... 10.30 04/30/15 1,987,500
--------------
PRINTING & PUBLISHING 12.9%
1,985 Advanstar Communications,
Inc., Term Loan.............. 5.05 05/31/14 1,518,496
9,794 American Media Operations,
Inc., Term Loan.............. 5.99 01/31/13 9,133,237
1,835 Ascend Media Holdings, LLC,
Term Loan.................... 6.68 to 6.81 01/31/12 963,303
</Table>
18 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (CONTINUED)
$ 1,193 Canon Communications, LLC,
Term Loan.................... 5.46% 05/31/11 $ 1,157,334
995 DRI Holdings, Inc., Term
Loan......................... 5.81 07/03/14 885,622
4,000 Endurance Business Media,
Inc., Term Loan.............. 9.72 01/26/14 3,160,000
4,975 FSC Acquisition, LLC, Term
Loan......................... 4.71 03/08/14 3,930,250
5,000 Gatehouse Media, Inc, Term
Loan......................... 4.65 to 4.80 08/28/14 3,006,250
7,709 Haights Cross Operating Co.,
Term Loan.................... 6.18 to 7.18 08/20/08 7,477,328
10,000 Idearc, Inc., Term Loan...... 3.97 to 4.30 11/17/13 7,945,830
3,462 Intermedia Outdoor, Inc.,
Term Loan.................... 5.80 01/31/13 2,882,437
7,789 MediaNews Group, Inc., Term
Loan......................... 5.75 to 6.25 12/30/10 to 08/02/13 6,440,300
11,750 Merrill Communications, LLC,
Term Loan.................... 9.52 11/15/13 8,812,500
5,961 Penton Media, Inc., Term
Loan......................... 4.71 to 7.80 02/01/13 to 02/01/14 4,506,510
E 15,000 Primacom, Term Loan (Germany)
(g).......................... 8.14 to 9.39 09/25/10 23,397,761
4,478 Primedia, Inc., Term Loan.... 4.71 to 5.05 08/01/14 3,940,200
E 13,000 Prosiebensat.1 Media AG, Term
Loan (Germany)............... 6.73 07/03/15 15,866,478
3,219 R.H. Donnelley, Inc., Term
Loan......................... 6.43 to 6.75 06/30/11 3,072,647
4,487 Thomas Nelson, Inc., Term
Loan......................... 6.25 06/12/12 3,880,858
3,196 Thomson Medical Education,
Term Loan.................... 5.93 to 9.68 04/26/14 to 04/26/15 3,016,259
16,000 Tribune Co., Bridge Loan..... 8.29 12/01/15 9,600,000
35,530 Tribune Co., Term Loan....... 5.79 05/19/14 25,515,144
--------------
150,108,744
--------------
RESTAURANTS & FOOD SERVICE 0.7%
1,369 Advantage Sales & Marketing,
Inc., Term Loan.............. 4.46 to 4.81 03/29/13 1,283,719
1,584 Center Cut Hospitality, Inc.,
Term Loan.................... 5.16 07/06/14 1,441,440
992 Sagittarius Restaurants, LLC,
Term Loan.................... 9.50 03/29/13 781,504
4,533 Volume Services America,
Inc., Term Loan.............. 7.50 to 8.50 10/01/10 4,125,446
--------------
7,632,109
--------------
</Table>
See Notes to Financial Statements 19
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
RETAIL--OIL & GAS 0.7%
$ 9,432 Pantry, Inc. (The), Term
Loan......................... 4.22% 05/15/14 $ 8,489,183
--------------
RETAIL--SPECIALTY 2.0%
E 7,796 Travelport, Term Loan........ 7.21 08/23/13 10,290,477
E 8,500 Zapf, Term Loan (Germany)
(g).......................... 8.31 11/30/12 13,258,731
--------------
23,549,208
--------------
RETAIL--STORES 4.5%
15,000 Dollar General Corp., Term
Loan......................... 5.21 to 5.55 07/06/14 13,840,625
8,912 General Nutrition Centers,
Inc., Term Loan.............. 5.04 to 5.06 09/16/13 7,931,991
19,000 Guitar Center, Inc., Term
Loan......................... 5.96 10/09/14 16,577,500
9,874 Michael's Stores, Inc., Term
Loan......................... 4.75 10/31/13 7,971,501
2,000 Neiman Marcus Group, Inc.,
Term Loan.................... 4.42 04/06/13 1,869,178
2,000 Rite Aid Corp, Term Loan..... 6.00 06/04/14 1,820,000
1,980 Sally Holdings, Inc., Term
Loan......................... 4.71 to 4.89 11/16/13 1,894,604
--------------
51,905,399
--------------
TELECOMMUNICATIONS--EQUIPMENT & SERVICES 2.6%
E 10,000 Fibernet, Term Loan
(Bulgaria)................... 7.60 to 8.10 12/20/14 to 12/20/15 14,097,151
E 11,387 Orion, Term Loan (Germany)... 7.37 to 7.98 10/31/13 to 10/30/15 16,237,468
--------------
30,334,619
--------------
TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 1.2%
8,183 Global Tel*Link Corp., Term
Loan......................... 6.30 02/14/13 7,692,203
3,156 Hawaiian Telcom
Communications, Inc., Term
Loan......................... 5.30 06/01/14 2,504,434
2,772 NuVox Transition Subsidiary,
LLC, Term Loan............... 6.03 05/31/14 2,553,705
1,430 Sorenson Communications,
Inc., Term Loan.............. 5.30 04/27/14 1,356,331
--------------
14,106,673
--------------
</Table>
20 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--WIRELESS 1.7%
$ 3,960 Alltel Communications, Inc.
Term Loan.................... 5.21% 05/18/15 $ 3,945,797
4,897 Asurion Corp., Term Loan..... 5.78 07/03/14 4,619,919
11,784 MetroPCS Wireless, Inc., Term
Loan......................... 4.75 to 5.13 11/03/13 11,225,897
--------------
19,791,613
--------------
TEXTILES & LEATHER 0.6%
3,489 Gold Toe Investment Corp.,
Term Loan.................... 5.40 to 8.65 10/30/13 to 04/30/14 2,895,131
5,000 Levi Strauss & Co., Term
Loan......................... 4.71 03/27/14 4,321,875
--------------
7,217,006
--------------
TRANSPORTATION--CARGO 0.5%
9,000 JHCI Acquisitions, Inc., Term
Loan......................... 7.99 12/19/14 5,940,000
--------------
TRANSPORTATION--PERSONAL 0.5%
11,434 Coach America Holdings, Inc.,
Term Loan.................... 5.21 to 9.31 04/20/14 to 10/20/14 5,965,886
--------------
UTILITIES 2.7%
5,000 Bicent Power, LLC, Term
Loan......................... 6.81 12/31/14 4,187,500
4,900 First Light Power Resources,
Inc., Term Loan.............. 5.31 to 7.31 11/01/13 to 05/01/14 4,526,166
2,000 Mach Gen, LLC, Term Loan..... 4.64 to 4.80 02/22/13 to 02/22/14 1,920,500
5,353 NRG Energy, Inc., Term Loan.. 4.30 02/01/13 5,105,778
11,263 Texas Competitive Electric
Holdings, Co., LLC, Term
Loan......................... 5.96 to 6.48 10/13/14 10,615,621
6,000 TPF Generation Holdings, LLC,
Term Loan.................... 7.05 12/15/14 5,395,002
--------------
31,750,567
--------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 119.4%................ 1,386,051,494
--------------
NOTES 25.7%
BROADCASTING--CABLE 3.0%
5,000 Kabel Deutschland
(Germany).................... 10.63 07/01/14 5,137,500
E 18,500 Kabel Deutschland (Germany)
(f).......................... 10.75 07/01/14 29,193,886
--------------
34,331,386
--------------
</Table>
See Notes to Financial Statements 21
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PRINCIPAL
AMOUNT STATED
(000) BORROWER COUPON MATURITY* VALUE
- ------------------------------------------------------------------------------------------------
BUILDINGS & REAL ESTATE 3.3%
E 16,865 Eco-bat Finance PLC (United
Kingdom) (f)................. 10.13% 01/31/13 $ 27,030,321
E 8,000 Grohe Holding GmbH
(Germany).................... 7.84 01/15/14 10,840,962
--------------
37,871,283
--------------
CHEMICAL, PLASTICS & RUBBER 0.4%
5,000 Cognis GmbH (Germany) (f).... 4.81 09/15/13 4,493,750
--------------
CONSTRUCTION MATERIAL 0.1%
2,000 Compression Polymers
Corp. ....................... 9.90 07/01/12 1,550,000
--------------
CONTAINERS, PACKAGING & GLASS 5.4%
E 14,900 Ardagh Glass Finance BV
(Ireland) (f)................ 8.88 07/01/13 21,614,851
E 14,200 Ardagh Glass Finance
(Ireland) (f)................ 7.13 06/15/17 17,646,056
E 15,725 Pregis Corp. ................ 9.75 04/15/13 23,608,828
--------------
62,869,735
--------------
HOTELS, MOTELS, INNS & GAMING 0.2%
E 2,000 Codere Fin Luxembourg SA
(Luxembourg) (f)............. 8.25 06/15/15 2,636,148
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 2.5%
24,500 FMG Finance Pty Ltd
(Australia) (f).............. 10.63 09/01/16 28,542,500
--------------
TELECOMMUNICATIONS--EQUIPMENT & SERVICES 4.3%
E 15,825 Magyar Telecom (Invtel)
(Netherlands) (f)............ 10.75 08/15/12 23,789,819
E 19,000 Versatel AG (Germany) (f).... 7.71 06/15/14 26,228,890
--------------
50,018,709
--------------
TELECOMMUNICATIONS--WIRELESS 3.1%
16,000 Wind Acquisition Fin SA
(Italy) (f).................. 10.75 12/01/15 16,640,000
E 13,000 Wind Acquisition Fin SA
(Italy) (f).................. 9.75 12/01/15 19,973,888
--------------
36,613,888
--------------
TRANSPORTATION--CARGO 3.4%
E 25,450 Cb Bus AB (Sweden) (g)....... 9.13 08/01/09 39,499,709
--------------
TOTAL NOTES 25.7%................................................. 298,427,108
--------------
TOTAL LONG-TERM INVESTMENTS 145.1%
(Cost $1,870,761,256)......................................................... 1,684,478,602
--------------
</Table>
22 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
DESCRIPTION VALUE
- -------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENTS 1.0%
State Street Bank & Trust Co. ($12,400,000 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 1.82%, dated 7/31/08, to
be sold on 8/01/08 at $12,400,627) (e)........................................... $ 12,400,000
TIME DEPOSIT 0.1%
State Street Bank & Trust Corp. ($664,815 par, 0.20% coupon, dated 7/31/08, to be
sold on 8/01/08 at $664,819)................................................... 664,815
--------------
TOTAL SHORT-TERM INVESTMENTS 1.1%
(Cost $13,064,815)............................................................. 13,064,815
--------------
TOTAL INVESTMENTS 146.2%
(Cost $1,883,826,071).......................................................... 1,697,543,417
FOREIGN CURRENCY 1.4%
(Cost $16,203,333)............................................................. 16,224,460
BORROWINGS (43.9%).............................................................. (510,000,000)
LIABILITIES IN EXCESS OF OTHER ASSETS (3.7%).................................... (42,444,096)
--------------
NET ASSETS 100.0%............................................................... $1,161,323,781
==============
</Table>
Par amounts are denominated in US currency unless otherwise noted.
Percentages are calculated as a percentage of net assets.
(a) All or a portion of this security is payment-in-kind.
(b) This borrower has filed for protection in federal bankruptcy court.
(c) This Senior Loan interest is non-income producing.
(d) The borrower is in the process of restructuring or amending the terms of
this loan.
(e) All or a portion of this security is designated in connection with unfunded
loan commitments.
(f) 144A-Private Placement security which is exempt from registration under Rule
144A of the Securities Act of 1933, as amended. This security may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(g) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
* 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
See Notes to Financial Statements 23
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
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.
E--Euro
kr--Swedish Krona
L--Great Britain Pound
SWAP AGREEMENTS OUTSTANDING AS OF JULY 31, 2008:
CREDIT DEFAULT SWAPS
<Table>
<Caption>
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
Bank of America N.A. ...... Cognis GmbH Sell 3.90% 12/20/09 $ 7,799 0 $ 117,498
Bank of America N.A. ...... Seat Pagine
Gialle S.P.A. Sell 3.35 09/20/12 7,799 0 (1,218,625)
Bank of America N.A. ...... Seat Pagine
Gialle S.P.A. Sell 3.65 12/20/12 7,799 0 (1,218,314)
Citigroup Global Markets
Limited .................. Basell AF SCA Sell 4.05 12/20/09 7,799 0 (446,995)
Citigroup Global Markets
Limited .................. M-Real Oyj Sell 4.25 12/20/09 7,799 0 (1,194,151)
Credit Suisse
International ............ Codere Fin
Luxembourg S.A Sell 3.42 09/20/12 7,799 0 (555,689)
Deutsche Bank ............. M-Real Oyj Sell 4.15 12/20/09 7,799 0 (1,203,709)
Goldman Sachs Credit
Partners, L.P. ........... CDX.NA.HY.9 Sell 3.75 12/20/12 39,600 (1,541,500) (3,399,652)
Goldman Sachs Credit
Partners, L.P. ........... Citgo Petroleum
Corp. Sell 3.00 12/20/10 5,000 0 199,247
Goldman Sachs Credit
Partners, L.P. ........... Gala Group
Finance Sell 4.15 03/20/13 7,799 0 25,504
Goldman Sachs Credit
Partners, L.P. ........... Grohe Holding
GmbH Sell 4.25 12/20/09 15,599 0 (102,797)
Goldman Sachs Credit
Partners, L.P. ........... K. Hovnanian
Enterprises,Inc. Sell 4.69 09/20/12 5,000 0 (1,094,956)
</Table>
24 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
<Table>
<Caption>
PAY/
RECEIVE NOTIONAL
REFERENCE BUY/SELL FIXED EXPIRATION AMOUNT UPFRONT
COUNTERPARTY ENTITY PROTECTION RATE DATE (000) PAYMENTS VALUE
Goldman Sachs Credit
Partners, L.P. ........... LCDX.NA.9 Sell 2.25% 6/20/12 $50,000 (3,935,000) $ (2,093,750)
Goldman Sachs Credit
Partners, L.P. ........... M-Real Oyj Sell 3.10 09/20/08 7,799 0 (139,164)
Goldman Sachs Credit
Partners, L.P. ........... M-Real Oyj Sell 3.45 09/20/09 7,799 0 (1,062,490)
Goldman Sachs Credit
Partners, L.P. ........... Peermont Global
Limited Sell 3.50 09/20/12 7,799 0 (492,884)
Goldman Sachs Credit
Partners, L.P. ........... Standard
Pacific Corp Sell 4.77 09/20/12 5,000 0 (207,816)
Goldman Sachs Credit
Partners, L.P. ........... UPC Holding Sell 3.45 09/20/12 7,799 0 (328,172)
Goldman Sachs Credit
Partners, L.P. ........... Boston
Generating, LLC Sell 2.00 06/20/09 4,000 0 24,882
Goldman Sachs Credit
Partners, L.P. ........... British Energy
PLC Sell 3.50 12/20/12 23,398 0 2,026,367
Goldman Sachs
International............. CDX.NA.HY.10 Sell 5.00 06/20/13 40,000 (2,093,750) (2,248,517)
Goldman Sachs Credit
Partners, L.P. ........... Gala Group
Finance Sell 3.45 12/20/12 7,799 0 (120,588)
Goldman Sachs
International............. LCDX.NA.10 Sell 3.25 06/20/13 40,000 (875,000) (788,333)
Goldman Sachs Credit
Partners, L.P. ........... Texas
Competitive
Electric
Holdings
Company Sell 2.85 06/20/10 5,000 0 52,234
UBS AG..................... Rank Group
Finance Sell 4.25 12/20/12 15,598 0 (680,723)
------------
TOTAL CREDIT DEFAULT SWAPS............................................................... $(8,445,250) $(16,151,593)
=========== ============
SWAP COLLATERAL PLEDGED TO COUNTERPARTY
Goldman Sachs......................................................................................... 7,720,000
Bank of America, N.A. ................................................................................ 2,271,500
Citigroup Global Markets Limited...................................................................... 1,693,500
UBS AG................................................................................................ 1,450,000
Deutsche Bank AG...................................................................................... 1,270,000
Credit Suisse International........................................................................... 718,000
------------
TOTAL SWAP COLLATERAL PLEDGED.......................................................................... $ 15,123,000
------------
TOTAL SWAP AGREEMENTS.................................................................................. $ (1,028,593)
============
</Table>
See Notes to Financial Statements 25
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AS OF JULY 31, 2008:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
IN EXCHANGE FOR CURRENT VALUE DEPRECIATION
LONG CONTRACTS:
Euro
3,231,982 expiring 10/16/08............... US $ 5,020,726 $ 7,275
106,055 expiring 10/16/08................. US $ 164,751 143
2,787,352 expiring 10/16/08............... US $ 4,330,015 (31,355)
3,735,643 expiring 10/16/08............... US $ 5,803,139 (98,056)
194,560 expiring 10/16/08................. US $ 302,239 (1,488)
10,668,477 expiring 10/16/08.............. US $ 16,572,957 (92,804)
1,212,897 expiring 10/16/08............... US $ 1,884,176 (19,466)
5,327,869 expiring 10/16/08............... US $ 8,276,584 (164,892)
537,332 expiring 10/16/08................. US $ 834,719 (13,943)
1,893,183 expiring 10/16/08............... US $ 2,940,967 (23,379)
604,644 expiring 10/16/08................. US $ 939,286 (3,718)
-------------
Total Long Contracts...................................................... (441,683)
-------------
SHORT CONTRACTS:
Euro
329,223,748 expiring 10/16/08............. US $ 511,432,979 (3,391,352)
3,060,681 expiring 10/16/08............... US $ 4,754,618 40,551
1,021,383 expiring 10/16/08............... US $ 1,586,669 18,435
3,517,500 expiring 10/16/08............... US $ 5,464,264 52,934
10,144,458 expiring 10/16/08.............. US $ 15,758,919 (20,807)
-------------
(3,300,239)
-------------
Pound Sterling
2,303,430 expiring 10/16/08............... US $ 4,539,470 (27,972)
-------------
Swedish Krona
25,369,401 expiring 10/16/08.............. US $ 4,171,801 (8,924)
2,208,730 expiring 10/16/08............... US $ 363,208 (1,803)
-------------
(10,727)
-------------
Total Short Contracts..................................................... (3,338,938)
-------------
TOTAL FORWARD FOREIGN CURRENCY CONTRACTS...................................... $(3,780,621)
=============
</Table>
26 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS -- JULY 31, 2008 continued
SUMMARY OF LONG-TERM INVESTMENTS BY COUNTRY CLASSIFICATION (UNAUDITED)
<Table>
<Caption>
PERCENTAGE OF
LONG-TERM
COUNTRY VALUE INVESTMENTS
United States.............................................. 1,166,174,962 69.2%
Germany.................................................... 174,073,320 10.3
United Kingdom............................................. 50,139,394 3.0
Sweden..................................................... 48,883,463 2.9
Ireland.................................................... 39,260,907 2.3
Italy...................................................... 36,613,888 2.2
Greece..................................................... 31,060,527 1.9
Belgium.................................................... 28,857,238 1.7
Australia.................................................. 28,542,500 1.7
Netherlands................................................ 23,789,819 1.4
Hungary.................................................... 14,769,866 0.9
Canada..................................................... 13,376,660 0.8
Bulgaria................................................... 14,097,151 0.8
Cayman Islands............................................. 6,833,993 0.4
Spain...................................................... 5,368,766 0.3
Luxembourg................................................. 2,636,148 0.2
-------------- -----
$1,684,478,602 100.0%
============== =====
</Table>
RATINGS ALLOCATION AS OF 7/31/08 (UNAUDITED)
<Table>
BBB/Baa..................................................... 0.7%
BB/Ba....................................................... 27.7%
B/B......................................................... 40.6%
CCC/Caa..................................................... 8.1%
CC/Ca....................................................... 0.2%
Non-Rated................................................... 22.7%
</Table>
RATINGS ALLOCATIONS ARE AS A PERCENTAGE OF LONG-TERM DEBT OBLIGATIONS.
RATINGS ALLOCATIONS BASED UPON RATINGS AS ISSUED BY STANDARD AND POOR'S AND
MOODY'S, RESPECTIVELY. BANK LOANS RATED BELOW BBB BY STANDARD AND POOR'S OR BAA
BY MOODY'S ARE CONSIDERED TO BE BELOW INVESTMENT GRADE.
See Notes to Financial Statements 27
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
July 31, 2008
<Table>
ASSETS:
Total Investments (Cost $1,883,826,071)..................... $1,697,543,417
Foreign Currency (Cost $16,203,333)......................... 16,224,460
Restricted Cash............................................. 3,329,790
Receivables:
Interest.................................................. 15,832,283
Investments Sold.......................................... 6,848,495
Swap Contracts.............................................. 1,050,233
Forward Foreign Currency Contracts.......................... 119,339
Other....................................................... 61,427
--------------
Total Assets............................................ 1,741,009,444
--------------
LIABILITIES:
Payables:
Borrowings................................................ 510,000,000
Investments Purchased..................................... 54,936,730
Investment Advisory Fee................................... 1,779,562
Income Distributions...................................... 1,214,417
Other Affiliates.......................................... 262,001
Forward Foreign Currency Contracts.......................... 3,899,960
Unfunded Commitments........................................ 3,782,434
Swap Contracts.............................................. 2,078,826
Accrued Interest Expense.................................... 1,191,203
Trustees' Deferred Compensation and Retirement Plans........ 27,997
Accrued Expenses............................................ 512,533
--------------
Total Liabilities....................................... 579,685,663
--------------
NET ASSETS.................................................. $1,161,323,781
==============
NET ASSET VALUE PER COMMON SHARE ($1,161,323,781 divided by
74,005,236 shares outstanding)............................ $ 15.69
==============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 74,005,236 shares issued and
outstanding).............................................. $ 740,052
Paid in Surplus............................................. 1,411,907,128
Accumulated Net Realized Loss............................... (20,257,022)
Accumulated Undistributed Net Investment Income............. (30,110,711)
Net Unrealized Depreciation................................. (200,955,666)
--------------
NET ASSETS.................................................. $1,161,323,781
==============
</Table>
28 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended July 31, 2008
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 138,014,604
Other....................................................... 3,849,820
-------------
Total Income............................................ 141,864,424
-------------
EXPENSES:
Investment Advisory Fee..................................... 20,040,528
Professional Fees........................................... 851,587
Credit Line................................................. 823,834
Custody..................................................... 525,403
Reports to Shareholders..................................... 149,370
Accounting & Administrative Expenses........................ 140,307
Transfer Agent.............................................. 81,584
Registration Fees........................................... 57,584
Trustees' Fees and Related Expenses......................... 33,930
Other....................................................... 66,354
-------------
Total Operating Expense................................. 22,770,481
Interest Expense........................................ 12,551,648
-------------
Total Expenses............................................ 35,322,129
-------------
NET INVESTMENT INCOME....................................... $ 106,542,295
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (11,256,757)
Swap Contracts............................................ 90,492
Foreign Currency Transactions............................. 4,767,703
Forward Foreign Currency Contracts........................ (39,223,962)
-------------
Net Realized Loss........................................... (45,622,524)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (38,968,462)
-------------
End of the Period:
Investments............................................. (186,282,654)
Foreign Currency Translation............................ 596,386
Unfunded Commitments.................................... (3,782,434)
Forward Foreign Currency Contracts...................... (3,780,621)
Swap Contracts.......................................... (7,706,343)
-------------
(200,955,666)
-------------
Net Unrealized Depreciation During the Period............... (161,987,204)
-------------
NET REALIZED AND UNREALIZED LOSS............................ $(207,609,728)
=============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(101,067,433)
=============
</Table>
See Notes to Financial Statements 29
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE PERIOD
JUNE 26, 2007
FOR THE (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
JULY 31, 2008 JULY 31, 2007
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 106,542,295 $ 5,972,539
Net Realized Loss...................................... (45,622,524) (57,951)
Net Unrealized Depreciation During the Period.......... (161,987,204) (38,968,462)
-------------- --------------
Change in Net Assets from Operations................... (101,067,433) (33,053,874)
Distributions from Net Investment Income............... (117,202,092) -0-
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (218,269,525) (33,053,874)
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. -0- 1,412,900,000
Additional Cost from the 2007 Initial Public
Offering............................................. (252,820) -0-
-------------- --------------
NET CHANGE IN NET ASSETS............................... (218,522,345) 1,379,846,126
NET ASSETS:
Beginning of the Period................................ 1,379,846,126 -0-
-------------- --------------
End of the Period (Including accumulated undistributed
net investment income of $(30,110,711) and
$6,258,914, respectively)............................ $1,161,323,781 $1,379,846,126
============== ==============
</Table>
30 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
FINANCIAL STATEMENTS continued
Statement of Cash Flows
For the Year Ended July 31, 2008
<Table>
CHANGE IN NET ASSETS FROM OPERATIONS........................ (101,067,433)
--------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Provided by Operating Activities:
Purchases of Investments.................................. (1,631,839,202)
Principal Repayments/Sales of Investments................. 655,554,280
Net Sales of Short-Term Investments....................... 745,657,036
Purchases of Foreign Currency............................. (2,803,057,467)
Sales of Foreign Currency................................. 2,748,031,456
Amortization of Loan Fees................................. 2,894,108
Net Loan Fees Received.................................... 2,852,153
Accretion of Discount..................................... (6,854,907)
Net Realized Loss on Investments.......................... 11,256,757
Net Realized Gain on Foreign Currency Transactions........ (4,767,703)
Net Realized Loss on Forward Foreign Currency
Transactions............................................ 39,223,962
Net Change in Unrealized Depreciation on Investments...... 156,383,361
Net Change in Unrealized Appreciation on Foreign
Currency................................................ (47,436)
Net Change in Unrealized Depreciation on Forward Foreign
Currency Contracts...................................... 3,863,681
Decrease in Restricted Cash............................... 15,820,210
Increase in Interest Receivables and Other Assets......... (12,445,659)
Decrease in Receivable for Investments Sold............... 33,151,505
Increase in Accrued Expenses and Other Payables........... 1,599,381
Decrease in Custodian Bank Payable........................ (9,750,193)
Decrease in Investments Purchased Payable................. (233,121,597)
Net Change in Unrealized Depreciation in Swap Contracts... (1,302,240)
Net Change in Upfront Payments on Swap Contracts.......... 5,664,000
Net Change in Collateral for Swap Contracts............... (15,123,000)
Net Change in Unfunded Commitments........................ 3,665,442
--------------
Total Adjustments....................................... (292,692,072)
--------------
NET CASH USED FOR OPERATING ACTIVITIES...................... (393,759,505)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES
Additional Cost from the 2007 Initial Public Offering..... (252,820)
Cash Distributions Paid................................... (115,987,675)
Proceeds from and Repayments of Borrowings................ 510,000,000
--------------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 393,759,505
--------------
NET DECREASE IN CASH........................................ -0-
Cash at the Beginning of the Period......................... -0-
--------------
CASH AT THE END OF THE PERIOD............................... -0-
==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year for Interest...................... 11,360,445
==============
</Table>
See Notes to Financial Statements 31
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
JUNE 26, 2007
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
JULY 31, 2008 JULY 31, 2007
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................... $ 18.65 $ 19.10
-------- --------
Net Investment Income (a)................................ 1.44 0.08
Net Realized and Unrealized Loss......................... (2.82) (0.53)
-------- --------
Total from Investment Operations......................... (1.38) (0.45)
Less Distributions from Net Investment Income............ (1.58) -0-
-------- --------
NET ASSET VALUE, END OF THE PERIOD......................... $ 15.69 $ 18.65
======== ========
Common Share Market Price at End of the Period............. $ 13.30 $ 19.75
Total Return (b)........................................... -25.46% -1.25%*
Net Assets at End of the Period (In millions).............. $1,161.3 $1,379.8
Ratio to Average Net Assets excluding Borrowings:
Operating Expense...................................... 1.79% 1.54%
Interest Expense....................................... 0.99% N/A
Gross Expense.......................................... 2.78% 1.54%
Net Investment Income.................................. 8.38% 4.58%
Portfolio Turnover (c)..................................... 43% 0%*
SUPPLEMENTAL RATIOS:
Ratio to Average Net Assets including Borrowings:
Operating Expense...................................... 1.36% N/A
Interest Expense....................................... 0.75% N/A
Gross Expense.......................................... 2.11% N/A
Net Investment Income.................................. 6.37% N/A
SENIOR INDEBTEDNESS:
Total Borrowing Outstanding (In thousands)................. $510,000 -0-
Asset Coverage per $1,000 Unit of Senior Indebtedness
(d)...................................................... $ 3,277 N/A
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Total return based on common share market price assumes an investment at the
common share market price at the beginning of the period indicated,
reinvestment of all distributions for the period in accordance with the
Fund's dividend reinvestment plan, and sale of all shares at the closing
common share market price at the end of the period indicated.
(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.
N/A=Not Applicable
32 See Notes to Financial Statements
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Dynamic Credit Opportunities Fund (the "Fund") is a statutory trust
organized under the laws of the State of Delaware pursuant to an Agreement and
Declaration of Trust dated March 15, 2007. The Fund is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund's investment
objective is to seek a high level of current income, with a secondary objective
of capital appreciation. The Fund seeks to achieve its investment objectives by
opportunistically investing primarily in credit securities of issuers which
operate in a variety of industries and geographic regions located throughout the
world. The Fund will invest in a combination of (i) senior secured floating rate
and fixed rate loans; (ii) second lien or other subordinated or unsecured
floating rate loans or debt; (iii) other debt obligations, including high yield,
high risk obligations; and (iv) structured products including collateralized
debt and loan obligations. The Fund intends to borrow money for investment
purposes which will create the opportunity for enhanced return, but also should
be considered a speculative technique and may increase the Fund's volatility.
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 loans and debt obligations are valued by the
Fund following valuation guidelines established and periodically reviewed by the
Fund's Board of Trustees. Under the valuation guidelines, loans and debt
obligations 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, loans and debt obligations are valued, where possible, using
independent market indicators provided by independent pricing sources approved
by the Board of Trustees. Other loans and debt obligations 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
the 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, interest rate redetermination period and
maturity), the credit worthiness of the Borrower, the current interest rate, the
period until next interest rate redetermination and the maturity of such loan.
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 loans in the Fund's portfolio. The fair
value of loans are reviewed and approved by the Fund's Valuation Committee and
the Board of Trustees. Forward foreign currency contracts are valued using
quoted foreign exchange rates. Credit default swaps are valued using market
quotations obtained from brokers.
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.
33
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008 continued
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, 2008, the Fund had no when-issued or delayed delivery purchase
commitments.
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 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.
C. INVESTMENT INCOME Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Facility fees received are
treated as market discounts. Market premiums are amortized and discounts are
accreted over the stated life of each applicable loan or other debt obligation.
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.
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 may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable as the income is earned or
capital gains are recorded. The Fund adopted the provisions of the Financial
Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN 48") Accounting
for Uncertainty in Income Taxes on January 31, 2008. FIN 48 sets forth a minimum
threshold for financial statement recognition of the benefit of a tax position
taken or expected to be taken in a tax return. The implementation of FIN 48 did
not result in any unrecognized tax benefits in the accompanying financial
statements. If applicable, the Fund recognizes interest accrued related to
unrecognized tax benefits in "Interest Expense" and penalties in "Other"
expenses on the Statement of Operations. The Fund files tax returns with the
U.S. Internal Revenue Service and various states. Generally, each of the tax
years in the two year period ended July 31, 2008, remains subject to examination
by taxing authorities.
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 these losses against any future realized capital
gains. At July 31, 2008, the Fund had an
34
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008 continued
accumulated capital loss carryforward for tax purposes of $431,578 which will
expire according to the following schedule:
<Table>
<Caption>
AMOUNT EXPIRATION
$431,578 ............................................................ July 31, 2016
</Table>
At July 31, 2008, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $1,886,447,077
==============
Gross tax unrealized appreciation........................... $ 20,896,833
Gross tax unrealized depreciation........................... (209,800,492)
--------------
Net tax unrealized depreciation on investments.............. $ (188,903,659)
==============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund intends to declare and pay monthly
dividends from net investment income. Net realized gains, if any, are
distributed at least annually to its shareholders. 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 year ended July 31, 2008 and the period from June 26, 2007
(Commencement of Operations) to July 31, 2007, was as follows:
<Table>
<Caption>
2008 2007
Distributions paid from:
Ordinary income........................................... $115,987,675 $-0-
============ ====
</Table>
Permanent differences, primarily due to reclassification of swap and
currency gains and losses, resulted in the following reclassifications among the
Fund's components of net assets at July 31, 2008:
<Table>
<Caption>
ACCUMULATED UNDISTRIBUTED ACCUMULATED NET PAID IN
NET INVESTMENT REALIZED LOSS SURPLUS
$(25,709,828) $25,709,828 $-0-
</Table>
As of July 31, 2008, the components of distributable earnings on a tax basis
were as follows:
<Table>
Undistributed ordinary income............................... $441,291
</Table>
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of gains resulting from wash sale
transactions, gains and losses recognized on securities for tax purposes but not
for book purposes and post October losses which are not realized for tax
purposes until the first day of the following fiscal year.
35
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008 continued
F. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS The Fund may enter into
forward foreign currency exchange contracts to attempt to protect securities and
related receivables and payables against changes in future foreign currency
exchange rates. A currency exchange contract is an agreement between two parties
to buy or sell currency at a set price on a future date. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily and the change in market value is recorded by the Fund as
unrealized appreciation/depreciation on foreign currency translation.
Assets and liabilities denominated in foreign currencies and commitments
under forward foreign currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rate
of exchange prevailing when such securities were acquired or sold. Realized and
unrealized gains and losses on securities resulting from changes in exchange
rates are not segregated for financial reporting purposes from amounts arising
from the changes in market prices of securities. Realized gain and loss on
foreign currency transactions on the Statement of Operations includes the net
realized amount from the sale of foreign currency and the amount realized
between trade date and settlement date on securities transactions. Income and
expenses are translated at rates prevailing when accrued. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts. Risks may also arise from the unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide certain day-to-day investment management services to the Fund for an
annual fee of 1.25% of the average daily managed assets. Average daily managed
assets are defined as the average daily total asset value of the Fund minus the
sum of accrued liabilities other than the aggregate amount of borrowings for
investment purposes. The Adviser has entered into a subadvisory agreement with
Avenue Europe International Management, L.P. (the "Subadviser"). Under the
subadvisory agreement, the Adviser retains the Subadviser to manage that portion
of the Fund's assets that are allocated to the Subadviser. The Adviser will pay
the Subadviser an annual fee, payable monthly, in an amount equal to 1.25% of
the portion of the managed assets of the Fund managed by the Subadviser.
For the year ended July 31, 2008, the Fund recognized expenses of
approximately $278,700 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, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and 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, 2008, the
Fund recognized expenses of approximately $178,400 representing Van Kampen
Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and 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 "Professional Fees" on the Statement of Operations. Services provided
pursuant to the
36
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008 continued
Accounting and CCO Employment agreements are reported as part of "Accounting and
Administrative Expenses" on the Statement of Operations.
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 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.
At July 31, 2008, Van Kampen Investments Inc., an affiliate of the Adviser,
owned 5,236 shares of common stock at an aggregate purchase price of $100,000.
3. CAPITAL TRANSACTIONS
For the year ended July 31, 2008 and the period ended July 31, 2007,
transactions were as follows:
<Table>
<Caption>
YEAR ENDED PERIOD ENDED
JULY 31, 2008 JULY 31, 2007
Beginning Shares............................................ 74,005,236 -0-
Sales....................................................... -0- 74,005,236
---------- ----------
Ending Shares............................................... 74,005,236 74,005,236
========== ==========
</Table>
The Fund is authorized to issue an unlimited number of common shares of
beneficial interest, par value $0.01 per share. The Fund had no operations until
June 26, 2007, other than matters relating to its organization and registration
and sale and issuance to Van Kampen Investments Inc., an affiliate of the
Adviser, of 5,236 shares of common stock at an aggregate purchase price of
$100,000. The Adviser, on behalf of the Fund, will incur all of the Fund's
organizational cost, estimated at $10,000. The Adviser also has agreed to pay
the amount by which the offering costs of the Fund (other than the sales load)
exceed $0.04 per share of the Fund's common shares. On June 26, 2007, the Fund
sold 71,000,000 common shares in an initial public offering. Proceeds to the
Fund were $1,355,500,000 after deducting underwriting commissions and estimated
$600,000 of offering expenses. On July 23, 2007 the Fund sold 3,000,000 common
shares, pursuant to an over allotment agreement with the underwriters for net
proceeds of $57,300,000 after deducting underwriting commissions. For the year
ended July 31, 2008, the Fund incurred additional costs of $252,820 from the
2007 initial public offering.
The Board of Trustees have approved a share repurchase program whereby the
Fund may, when appropriate, repurchase its shares in the open market or in
privately negotiated transactions at a price not above market value or NAV,
whichever is lower at the time of purchase.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $1,631,839,202 and $655,554,280,
respectively.
37
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008 continued
5. COMMITMENTS
Pursuant to the terms of certain loan agreements, the Fund had unfunded loan
commitments of approximately $37,586,688 as of July 31, 2008. The Fund intends
to reserve against such contingent obligations by designating cash, liquid
securities and liquid loans as a reserve. The unrealized depreciation on these
commitments of $3,782,434 as of July 31, 2008 is reported as "Unfunded
Commitments" on the Statement of Assets and Liabilities.
6. BORROWINGS
The Fund may utilize financial leverage to the maximum extent allowable under
the 1940 Act. Under the 1940 Act, a Fund generally may not borrow money greater
than 33 1/3% of the Fund's total assets.
The Fund has entered into a $750 million revolving credit and security
agreement. This revolving credit agreement is secured by the assets of the Fund.
In connection with this agreement, for the year ended July 31, 2008, the Fund
incurred fees of approximately $823,800. For the year ended July 31, 2008, the
average daily balance of borrowings under the revolving credit and security
agreement was $401,606,557 with a weighted average interest rate of 3.69%.
7. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund may use derivative instruments for a variety of reasons, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/ depreciation. Risks may arise as
a result of the potential inability of the counterparties to meet the terms of
their contracts.
Summarized below are specific types of derivative financial instruments used
by the Fund.
A. FORWARD FOREIGN CURRENCY CONTRACTS Forward foreign currency contracts are
commitments to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original value of the contract and the closing value of such contract is
included as a component of realized gain/loss on forward foreign currency
contracts.
B. CREDIT DEFAULT SWAPS The Fund may enter into credit default swap contracts
for hedging purposes or to gain exposure to a credit in which the Fund may
otherwise invest. A credit default swap is an agreement between two parties to
exchange the credit risk of an issuer. A buyer of a credit default swap is said
to buy protection by paying periodic fees in return for a contingent payment
from the seller if the issuer has a credit event such as bankruptcy, a failure
to pay outstanding obligations or deteriorating credit while the swap is
outstanding. A seller of a credit default swap is said to sell protection and
thus collects the periodic fees and profits if the credit of the issuer remains
stable or improves while the swap is outstanding but the seller in a credit
default swap contract would be required to pay an agreed-upon amount, which
approximates the notional amount of the swap as disclosed in the table following
the
38
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008 continued
Portfolio of Investments, to the buyer in the event of an adverse credit event
of the issuer. The Fund accrues for the periodic fees on credit default swaps on
a daily basis with the net amount accrued recorded within unrealized
appreciation/depreciation of swap contracts. Upon cash settlement of the
periodic fees, the net amount is recorded as realized gain/loss on swap
contracts on the Statement of Operations. Net unrealized gains are recorded as
an asset or net unrealized losses are reported as a liability on the Statement
of Assets and Liabilities. The change in value of the swap contracts is reported
as unrealized gains or losses on the Statement of Operations. Payments received
or made upon entering into a credit default swap contract, if any, are recorded
as realized gain or loss on the Statement of Operations upon termination or
maturity of the swap. Credit default swaps may involve greater risks than if a
Fund had invested in the issuer directly. Credit default swaps are subject to
general market risk, counterparty risk and credit risk.
If there is a default by the counterparty to a swap agreement, the Fund will
have contractual remedies pursuant to the agreements related to the transaction.
Counterparties are required to pledge collateral daily (based on the valuation
of each swap) on behalf of the Fund with a value approximately equal to the
amount of any unrealized gain. Reciprocally, when the Fund has an unrealized
loss on a swap contract, the Fund has instructed the custodian to pledge cash or
liquid securities as collateral with a value approximately equal to the amount
of the unrealized loss. Collateral pledges are monitored and subsequently
adjusted if and when the swap valuations fluctuate. Cash collateral is disclosed
in the table following the Portfolio of Investments. Cash collateral has been
offset against open swap contracts under the provision of FASB Interpretation
No. 39: Offsetting of Amounts Related to Certain Contracts an interpretation of
APB Opinion No. 10 and FASB Statement No. 105 and are included within "Swap
Contracts" on the Statement of Assets and Liabilities. For cash collateral
received the Fund pays a monthly fee to the counterparty based on the effective
rate for Federal Funds. This fee, when paid, is included within realized loss on
swap contracts on the Statement of Operations.
8. 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.
9. ACCOUNTING PRONOUNCEMENTS
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (FAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. As of July 31, 2008 the Adviser does not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosures will be required about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported on
the Statement of Operations for a fiscal period.
On March 19, 2008, the FASB released Statement of Financial Accounting
Standards No. 161, Disclosures about Derivative Instruments and Hedging
Activities (FAS 161). FAS 161 requires qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures about fair value
amounts of and gains and losses on derivative
39
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2008 continued
instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. The application of FAS 161 is required for fiscal years
and interim periods beginning after November 15, 2008. At this time, management
is evaluating the implications of FAS 161 and its impact on the financial
statements has not yet been determined.
10. LEGAL MATTERS
The Fund is one of numerous defendants ("Lenders") that have been named in an
adversary proceeding pending in the Bankruptcy Court of the Southern District of
Florida. The action was filed on July 15, 2008, by the Official Committee of
Unsecured Creditors of home building companies to which the Lenders loaned money
through credit agreements. Plaintiff alleges that monies used to repay the
Lenders should be avoided as fraudulent and preferential transfers under the
bankruptcy laws. More specifically, Plaintiff alleges that subsidiaries of the
home building companies were allegedly forced to become co-borrowers and
guarantors of the monies used to repay the Lenders, and that the subsidiaries
did not receive fair consideration or reasonably equivalent value when they
transferred the proceeds to repay the Lenders. Plaintiff seeks to avoid the
transfers and other equitable relief. The Lenders have moved to dismiss the
complaint. That motion is now pending.
40
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen Dynamic Credit
Opportunities Fund
We have audited the accompanying statement of assets and liabilities of Van
Kampen Dynamic Credit Opportunities Fund (the "Fund"), including the portfolio
of investments, as of July 31, 2008, and the related statements of operations
and cash flows for the year then ended, and the statements of changes in net
assets and financial highlights the year then ended and for the period from June
26, 2007 (commencement of operations) to July 31, 2007. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits 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 also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of July 31, 2008, 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 Dynamic Credit Opportunities Fund as of July 31, 2008, the results of its
operations and its cash flows for the year then ended and 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 19, 2008
41
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
DIVIDEND REINVESTMENT PLAN
The dividend reinvestment plan (the "Plan") offers you a prompt and simple
way to reinvest your dividends and capital gains distributions into additional
shares of Van Kampen Dynamic Credit Opportunities Fund (the "Fund"). Under the
Plan, the money you earn from dividends and capital gains distributions will be
reinvested automatically in more shares of the Fund, allowing you to potentially
increase your investment over time. All shareholders in the Fund are
automatically enrolled in the Plan when shares are purchased.
PLAN BENEFITS
- - ADD TO YOUR ACCOUNT
You may increase your shares in the Fund easily and automatically with the Plan.
- - LOW TRANSACTION COSTS
Shareholders who participate in the Plan are able to buy shares at below-market
prices when the Fund is trading at a premium to its net asset value. In
addition, transaction costs are low because when new shares are issued by the
Fund, there is no brokerage fee, and when shares are bought in blocks on the
open market, the brokerage commission is shared among all participants.
- - CONVENIENCE
You will receive a detailed account statement from Computershare Trust Company,
N.A., which administers the Plan, whenever shares are reinvested for you. The
statement shows your total distributions, date of investment, shares acquired,
and price per share, as well as the total number of shares in your reinvestment
account. You can also access your account via the Internet. To do this, please
go to vankampen.com.
- - SAFEKEEPING
Computershare Trust Company, N.A. will hold the shares it has acquired for you
in safekeeping.
HOW TO PARTICIPATE IN THE PLAN
If you own shares in your own name, you can participate directly in the
Plan. If your shares are held in "street name"--in the name of your brokerage
firm, bank, or other financial institution--you must instruct that entity to
participate on your behalf. If they are unable to participate on your behalf,
you may request that they reregister your shares in your own name so that you
may enroll in the Plan.
If you choose to participate in the Plan, your dividends and capital gains
distributions will be promptly reinvested for you, automatically increasing your
shares. If the Fund is trading at a share price that is equal to its net asset
value
42
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
DIVIDEND REINVESTMENT PLAN continued
(NAV), you'll pay that amount for your reinvested shares. However, if the Fund
is trading above or below NAV, the price is determined by one of two ways:
1. PREMIUM If the Fund is trading at a premium--a market price that is higher
than its NAV--you'll pay either the NAV or 95 percent of the market price,
whichever is greater. When the Fund trades at a premium, you'll pay less for
your reinvested shares than an ordinary investor purchasing shares on the
stock exchange. Keep in mind, a portion of your price reduction may be
taxable because you are receiving shares at less than market price.
2. DISCOUNT If the Fund is trading at a discount--a market price that is lower
than its NAV--you'll pay the market price for your reinvested shares.
HOW TO ENROLL
To enroll in the Plan, please read the Terms and Conditions in the Plan
brochure. You can obtain a copy of the Plan Brochure and enroll in the Plan by
visiting vankampen.com, calling toll-free (800) 341-2929 or notifying us in
writing at Van Kampen Closed End Funds, Computershare Trust Company, N.A., P.O.
Box 43078, Providence, RI 02940-3078. Please include the Fund name and account
number and ensure that all shareholders listed on the account sign these written
instructions. Your participation in the Plan will begin with the next dividend
or capital gains distribution payable after Computershare Trust Company, N.A.
receives your authorization, as long as they receive it before the "record
date," which is generally ten business days before the dividend is paid. If your
authorization arrives after such record date, your participation in the Plan
will begin with the following dividend or distribution.
COSTS OF THE PLAN
There is no direct charge to you for reinvesting dividends and capital gains
distributions because the Plan's fees are paid by the Fund. However, when
applicable, you will pay your portion of any brokerage commissions incurred when
the new shares are purchased on the open market. These brokerage commissions are
typically less than the standard brokerage charges for individual transactions,
because shares are purchased for all participants in blocks, resulting in lower
commissions for each individual participant. Any brokerage commissions or
service fees are averaged into the purchase price.
TAX IMPLICATIONS
The automatic reinvestment of dividends and capital gains distributions does
not relieve you of any income tax that may be due on dividends or distributions.
You will receive tax information annually to help you prepare your federal and
state income tax returns.
43
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
DIVIDEND REINVESTMENT PLAN continued
Van Kampen does not offer tax advice. The tax information contained herein
is general and is not exhaustive by nature. It was not intended or written to be
used, and it cannot be used by any taxpayer, for avoiding penalties that may be
imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws
are complex and constantly changing. Shareholders should always consult a legal
or tax advisor for information concerning their individual situation.
HOW TO WITHDRAW FROM THE PLAN
To withdraw from the Plan please visit vankampen.com or call (800) 341-2929
or notify us in writing at the address below.
Van Kampen Closed-End Funds
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
All shareholders listed on the account must sign any written withdrawal
instructions. If you withdraw, you have three options with regard to the shares
held in your account:
1. If you opt to continue to hold your non-certificated shares, they will be
held by Computershare Trust Company N.A.
2. If you opt to sell your shares through Van Kampen, we will sell all full and
fractional shares and send the proceeds via check to your address of record
after deducting brokerage commissions and a $2.50 service fee.
3. You may sell your shares through your financial advisor through the Direct
Registration Systems ("DRS"). DRS is a service within the securities industry
that allows Fund shares to be held in your name in electronic format. You
retain full ownership of your shares, without having to hold a stock
certificate.
The Fund and Computershare Trust Company, N.A. may amend or terminate the Plan.
Participants will receive written notice at least 30 days before the effective
date of any amendment. In the case of termination, Participants will receive
written notice at least 30 days before the record date for the payment of any
dividend or capital gains distribution by the Fund. In the case of amendment or
termination necessary or appropriate to comply with applicable law or the rules
and policies of the Securities and Exchange Commission or any other regulatory
authority, such written notice will not be required.
TO OBTAIN A COMPLETE COPY OF THE DIVIDEND REINVESTMENT PLAN, PLEASE CALL OUR
CLIENT RELATIONS DEPARTMENT AT 800-341-2929 OR VISIT VANKAMPEN.COM.
44
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES 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
JERRY W. MILLER
President and Principal Executive Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
STUART N. SCHULDT
Chief Financial Officer and Treasurer
KEVIN KLINGERT
Vice President
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
522 Fifth Avenue
New York, New York 10036
SUBADVISER
AVENUE-EUROPE INTERNATIONAL MANAGEMENT, L.P.
535 Madison Avenue, 15th Floor
New York, New York 10022
CUSTODIAN
STATE STREET BANK
AND FUND COMPANY
One Lincoln Street
Boston, Massachusetts 02111
TRANSFER AGENT
COMPUTERSHARE FUND COMPANY, N.A.
c/o Computershare Investor Services
P.O. Box 43078
Providence, Rhode Island 02940-3078
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 60606-4301
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
45
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER INFORMATION
The business and affairs of each 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 each 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 EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (63) Trustee Trustee Chairman and Chief 71 Trustee/Director/Managing
Blistex Inc. since 2007 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 Director of the Heartland
manufacturer. Alliance, a nonprofit
organization serving
human needs based in
Chicago. Board member of
the Illinois
Manufacturers'
Association. Member of
the Board of Visitors,
Institute for the
Humanities, University of
Michigan.
</Table>
46
<Table>
<Caption>
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jerry D. Choate (70) Trustee Trustee Prior to January 1999, 71 Trustee/Director/Managing
33971 Selva Road since 2007 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 Valero Energy
to January 1995, Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
Rod Dammeyer (67) Trustee Trustee President of CAC, L.L.C., 71 Trustee/Director/Managing
CAC, L.L.C. since 2007 a private company General Partner of funds
4350 La Jolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Corporation, Stericycle,
Inc. and Trustee of The
Scripps Research
Institute. Prior to
February 2008, Director
of Ventana Medical
Systems, Inc. Prior to
April 2007, Director of
GATX Corporation. Prior
to April 2004, Director
of TheraSense, Inc. Prior
to January 2004, Director
of TeleTech Holdings Inc.
and Arris Group, Inc.
</Table>
47
<Table>
<Caption>
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy++ (60) Trustee Trustee Prior to February 2008, 71 Trustee/Director/Managing
4939 South Greenwood since 2007 Managing Partner of General Partner of funds
Chicago, IL 60615 Heidrick & Struggles, an in the Fund Complex.
international executive Trustee on the University
search firm. Prior to of Chicago Medical Center
1997, Partner of Ray & Board, Vice Chair of the
Berndtson, Inc., an Board of the YMCA of
executive recruiting Metropolitan Chicago and
firm. Prior to 1995, a member of the Women's
Executive Vice President Board of the University
of ABN AMRO, N.A., a bank of Chicago.
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (56) Trustee Trustee Director and President of 71 Trustee/Director/Managing
1744 R Street, NW since 2007 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S. Director of First Solar,
foundation created to Inc.
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 (72) Trustee Trustee Prior to 1998, President 71 Trustee/Director/Managing
14 Huron Trace since 2007 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>
48
<Table>
<Caption>
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (72) Trustee Trustee President of Nelson 71 Trustee/Director/Managing
423 Country Club Drive since 2007 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 Financial
Industry Regulatory
Authority ("FINRA"),
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 (67) Trustee Trustee President Emeritus and 71 Trustee/Director/Managing
1126 E. 59th Street since 2007 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Trustee of the University
Distinguished Service of Rochester and a member
Professor in the of its investment
Department of Economics committee. Member of the
at the University of National Academy of
Chicago. Prior to July Sciences, the American
2000, President of the Philosophical Society and
University of Chicago. a fellow of the American
Academy of Arts and
Sciences.
</Table>
49
<Table>
<Caption>
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Suzanne H. Woolsey, Ph.D. (66) Trustee Trustee Chief Communications 71 Trustee/Director/Managing
815 Cumberstone Road since 2007 Officer of the National General Partner of funds
Harwood, MD 20776 Academy of in the Fund Complex.
Sciences/National Trustee of Changing World
Research Council, an Technologies, Inc., an
independent, federally energy manufacturing
chartered policy company, since July 2008.
institution, from 2001 to Director of Fluor Corp.,
November 2003 and Chief an engineering,
Operating Officer from procurement and
1993 to 2001. Prior to construction
1993, Executive Director organization, since
of the Commission on January 2004. Director of
Behavioral and Social Intelligent Medical
Sciences and Education at Devices, Inc., a symptom
the National Academy of based diagnostic tool for
Sciences/National physicians and clinical
Research Council. From labs. Director of the
1980 through 1989, Institute for Defense
Partner of Coopers & Analyses, a federally
Lybrand. funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
California Institute of
Technology and the
Colorado College.
</Table>
50
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER 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 EACH FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (69) Trustee Trustee Partner in the law firm 71 Trustee/Director/Managing
333 West Wacker Drive since 2007 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>
- ------------------------------------
+ See Table D below.
++ As indicated above, prior to February 2008, Ms. Heagy was an employee of
Heidrick and Struggles, an international executive search firm ("Heidrick").
Heidrick has been (and may continue to be) engaged by Morgan Stanley from
time to time to perform executive searches. Such searches have been done by
professionals at Heidrick without any involvement by Ms. Heagy. Ethical wall
procedures exist to ensure that Ms. Heagy will not have any involvement with
any searches performed by Heidrick for Morgan Stanley. Ms. Heagy does not
receive any compensation, directly or indirectly, for searches performed by
Heidrick for Morgan Stanley.
* 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.
51
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER EACH FUND SERVED DURING PAST 5 YEARS
Jerry W. Miller (47) President and Officer President and Principal Executive Officer of funds in the
522 Fifth Avenue Principal Executive since 2008 Fund Complex since May 2008. President and Chief Executive
New York, NY 10036 Officer Officer of Van Kampen Investments since June 2008. Central
Division Director for Morgan Stanley's Global Wealth
Management Group from March 2006 to June 2008. Previously,
Chief Operating Officer of the global proprietary business
of Merrill Lynch Investment Management from 2002 to 2006.
Kevin Klingert (46) Vice President Officer Vice President of funds in the Fund Complex since March
522 Fifth Avenue since 2008 2008. Chief Operating Officer of the Fixed Income portion of
New York, NY 10036 Morgan Stanley Investment Management Inc. since March 2008.
Head of Global Liquidity Portfolio Management and co-Head of
Liquidity Credit Research of Morgan Stanley Investment
Management since December 2007. Managing Director of Morgan
Stanley Investment Management Inc. from December 2007 to
March 2008. Previously, Managing Director on the Management
Committee and head of Municipal Portfolio Management and
Liquidity at BlackRock from October 1991 to January 2007.
Assistant Vice President municipal portfolio manager at
Merrill Lynch from March 1985 to October 1991.
Amy R. Doberman (46) Vice President Officer Managing Director and General Counsel - U.S. Investment
522 Fifth Avenue since 2007 Management; Managing Director of Morgan Stanley Investment
New York, NY 10036 Management Inc., Morgan Stanley Investment Advisors 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 Yu (41) Vice President Officer Managing Director of Morgan Stanley Investment Management
522 Fifth Avenue and Secretary since 2007 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10036 Complex.
</Table>
52
<Table>
<Caption>
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
TRUSTEE AND OFFICER INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER EACH FUND SERVED DURING PAST 5 YEARS
John L. Sullivan (53) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza -- Suite Officer since 2007 August 2004. Prior to August 2004, Director and Managing
100 Director of Van Kampen Investments, the Adviser, Van Kampen
Oakbrook Terrace, IL 60181 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.
Stuart N. Schuldt (46) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza -- Suite and Treasurer since 2007 Inc. since June 2007. Chief Financial Officer and Treasurer
100 of funds in the Fund Complex since June 2007. Prior to June
Oakbrook Terrace, IL 60181 2007, Senior Vice President of Northern Trust Company,
Treasurer and Principal Financial Officer for Northern Trust
U.S. mutual fund complex.
</Table>
In accordance with Section 303A.12(a) of the New York Stock Exchange Listed
Company Manual, the Fund's Chief Executive Officer has certified to the New York
Stock Exchange that, as of June 25, 2008, he was not aware of any violation by
the Fund of NYSE corporate governance listing standards.
The certifications by the Fund's principal executive officer and principal
financial officer required by Rule 30a-2 under the 1940 Act were filed with the
Fund's report to the SEC on Form N-CSR and are available on the Securities and
Exchange Commission's web site at http://www.sec.gov.
53
Van Kampen Dynamic Credit Opportunities 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 Dynamic Credit Opportunities 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 Dynamic Credit Opportunities Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose
information about you to non-affiliated third parties include: for servicing
and processing transactions, to offer our own products and services, to
protect against fraud, for institutional risk control, to respond to
judicial process or to perform services on our behalf. When we share
personal information with these companies, they are required to limit their
use of personal information to the particular purpose for which it was
shared and they are not allowed to share personal information with others
except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
522 Fifth Avenue
New York, New York 10036
www.vankampen.com
Copyright (C)2008 Van Kampen Funds Inc.
All rights reserved. Member FINRA/SIPC
VTAANN 9/08
(VAN KAMPEN INVESTMENTS LOGO) IU08-04715P-Y07/08
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) Due to personnel changes at the Adviser, the list of covered officers set
forth in Exhibit B was amended in June 2008 and the general counsel's
designee set forth in Exhibit C was amended in January 2008. Both editions
of Exhibit B and both editions of Exhibit C are attached.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit 12(1).
(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, each of whom are
"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:
2008
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES ................. $81,255 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ...... $ 0 $215,000(2)
TAX FEES ................ $ 3,000(3) $ 0
ALL OTHER FEES .......... $ 0 $ 0
TOTAL NON-AUDIT FEES ....... $ 3,000 $215,000
TOTAL ...................... $84,255 $215,000
2007
REGISTRANT COVERED ENTITIES(1)
---------- -------------------
AUDIT FEES ................. $76,675 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ...... $ 0 $211,000(2)
TAX FEES ................ $ 2,575(3) $ 0
ALL OTHER FEES .......... $ 0 $ 0
TOTAL NON-AUDIT FEES ....... $ 2,575 $211,000
TOTAL ...................... $79,250 $211,000
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: R. Craig Kennedy, Jerry D. Choate, Rod Dammeyer
(b) Not applicable.
Item 6. Schedule of Investments.
(a) Please refer to Item #1.
(b) Not applicable.
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 an MSIM entity has authority to
vote proxies. This Policy is reviewed and updated as necessary to address new
and evolving proxy voting issues and standards.
The MSIM entities covered by this 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,
Van Kampen Asset Management, and Van Kampen Advisors Inc. (each an "MSIM
Affiliate" and collectively referred to as the "MSIM Affiliates" or as "we"
below).
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 pursuant to authority granted
under its applicable investment advisory agreement or, in the absence of such
authority, as authorized by the Board of Directors/Trustees of the MSIM Funds.
An 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 vote
proxies
in a prudent and diligent manner and 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 an MSIM Affiliate with a proxy voting
policy. In these situations, the MSIM Affiliate will comply with the client's
policy.
Proxy Research Services - RiskMetrics Group ISS Governance Services ("ISS") and
Glass Lewis (together with other proxy research providers as we 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 we may review and
utilize the recommendations of the Research Providers in making proxy voting
decisions, we are in no way obligated to follow such recommendations. In
addition to research, ISS provides vote execution, reporting, and recordkeeping.
Voting Proxies for Certain Non-U.S. Companies - Voting proxies of companies
located in some jurisdictions, particularly emerging markets, may involve
several problems that can restrict or prevent the ability to vote such proxies
or entail significant costs. 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 our voting instructions. As a
result, we vote clients' non-U.S. proxies on a best efforts basis only, after
weighing the costs and benefits of voting such proxies, consistent with the
Client Proxy Standard. ISS has been retained to provide assistance in connection
with voting non-U.S. proxies.
II. GENERAL PROXY VOTING GUIDELINES
To promote consistency in voting proxies on behalf of its clients, we follow
this Policy (subject to any exception set forth herein), including the
guidelines set forth below. These guidelines address a broad range of issues,
and provide general voting parameters on proposals that arise most frequently.
However, details of specific proposals vary, and those details affect particular
voting decisions, as do factors specific to a given company. Pursuant to the
procedures set forth herein, we may vote in a manner that is not in accordance
with the following general guidelines, provided the vote is approved by the
Proxy Review Committee (see Section III for description) and is consistent with
the Client Proxy Standard. Morgan Stanley AIP GP LP will follow the procedures
as described in Appendix A.
We endeavor to integrate governance and proxy voting policy with investment
goals and to follow the Client Proxy Standard for each client. At times, this
may result in split votes, for example when different clients have varying
economic interests in the outcome of a particular voting matter (such as a case
in which varied ownership interests in two companies involved in a merger result
in different stakes in the outcome). We also may split votes at times based on
differing views of portfolio managers, but such a split vote must be approved by
the Proxy Review Committee.
We may abstain on matters for which disclosure is inadequate.
A. ROUTINE MATTERS. We generally support routine management proposals. The
following are examples of routine management proposals:
- Approval of financial statements and auditor reports.
- General updating/corrective amendments to the charter, articles of
association or bylaws.
- Most proposals related to the conduct of the annual meeting, with the
following exceptions. We generally oppose proposals that relate to
"the transaction of such other business which may come before the
meeting," and open-ended requests for adjournment. However, where
management specifically states the reason for requesting an
adjournment and the requested
adjournment would facilitate passage of a proposal that would
otherwise be supported under this Policy (i.e. an uncontested
corporate transaction), the adjournment request will be supported.
We generally support shareholder proposals advocating confidential voting
procedures and independent tabulation of voting results.
B. BOARD OF DIRECTORS
1. Election of directors: In the absence of a proxy contest, we generally
support the board's nominees for director except as follows:
a. We consider withholding support from or voting against interested
directors if the company's board does not meet market standards
for director independence, or if otherwise we believe board
independence is insufficient. We refer to prevalent market
standards as promulgated by a stock exchange or other authority
within a given market (e.g., New York Stock Exchange or Nasdaq
rules for most U.S. companies, and The Combined Code on Corporate
Governance in the United Kingdom). Thus, for an NYSE company with
no controlling shareholder, we would expect that at a minimum a
majority of directors should be independent as defined by NYSE.
Where we view market standards as inadequate, we may withhold
votes based on stronger independence standards. Market standards
notwithstanding, we generally do not view long board tenure alone
as a basis to classify a director as non-independent, although
lack of board turnover and fresh perspective can be a negative
factor in voting on directors.
i. At a company with a shareholder or group that controls the
company by virtue of a majority economic interest in the
company, we have a reduced expectation for board
independence, although we believe the presence of
independent directors can be helpful, particularly in
staffing the audit committee, and at times we may withhold
support from or vote against a nominee on the view the board
or its committees are not sufficiently independent.
ii. We consider withholding support from or voting against a
nominee if he or she is affiliated with a major shareholder
that has representation on a board disproportionate to its
economic interest.
b. Depending on market standards, we consider withholding support
from or voting against a nominee who is interested and who is
standing for election as a member of the company's compensation,
nominating or audit committee.
c. We consider withholding support from or voting against a nominee
if we believe a direct conflict exists between the interests of
the nominee and the public shareholders, including failure to
meet fiduciary standards of care and/or loyalty. We may oppose
directors where we conclude that actions of directors are
unlawful, unethical or negligent. We consider opposing individual
board members or an entire slate if we believe the board is
entrenched and/or dealing inadequately with performance problems,
and/or acting with insufficient independence between the board
and management.
d. We consider withholding support from or voting against a nominee
standing for election if the board has not taken action to
implement generally accepted governance practices for which there
is a "bright line" test. For example, in the context of the U.S.
market, failure to eliminate a dead hand or slow hand poison
pills would be seen as a basis for opposing one or more incumbent
nominees.
e. In markets that encourage designated audit committee financial
experts, we consider voting against members of an audit committee
if no members are designated as such.
f. We consider withholding support from or voting against a nominee
who has failed to attend at least 75% of board meetings within a
given year without a reasonable excuse.
g. We consider withholding support from or voting against a nominee
who serves on the board of directors of more than six companies
(excluding investment companies). We also consider voting against
a director who otherwise appears to have too many commitments to
serve adequately on the board of the company.
2. Board independence: We generally support U.S. shareholder proposals
requiring that a certain percentage (up to 66 2/3%) of the company's
board members be independent directors, and promoting all-independent
audit, compensation and nominating/governance committees.
3. Board diversity: We consider on a case-by-case basis shareholder
proposals urging diversity of board membership with respect to social,
religious or ethnic group.
4. Majority voting: We generally support proposals requesting or
requiring majority voting policies in election of directors, so long
as there is a carve-out for plurality voting in the case of contested
elections.
5. Proxy access: We consider on a case-by-case basis shareholder
proposals to provide procedures for inclusion of shareholder nominees
in company proxy statements.
6. Proposals to elect all directors annually: We generally support
proposals to elect all directors annually at public companies (to
"declassify" the Board of Directors) where such action is supported by
the board, and otherwise consider the issue on a case-by-case basis
based in part on overall takeover defenses at a company.
7. Cumulative voting: We generally support proposals to eliminate
cumulative voting in the U.S. market context. (Cumulative voting
provides that shareholders may concentrate their votes for one or a
handful of candidates, a system that can enable a minority bloc to
place representation on a board). U.S. proposals to establish
cumulative voting in the election of directors generally will not be
supported.
8. Separation of Chairman and CEO positions: We vote on shareholder
proposals to separate the Chairman and CEO positions and/or to appoint
a non-executive Chairman based in part on prevailing practice in
particular markets, since the context for such a practice varies. In
many non-U.S. markets, we view separation of the roles as a market
standard practice, and support division of the roles in that context.
9. Director retirement age and term limits: Proposals recommending set
director retirement ages or director term limits are voted on a
case-by-case basis.
10. Proposals to limit directors' liability and/or broaden indemnification
of directors. Generally, we 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.
C. CORPORATE TRANSACTIONS AND PROXY FIGHTS. We examine proposals relating to
mergers, acquisitions and other special corporate transactions (i.e., takeovers,
spin-offs, sales of assets, reorganizations, restructurings and
recapitalizations) on a case-by-case basis. However, proposals for mergers or
other significant transactions that are friendly and approved by the Research
Providers generally will be supported and in those instances will not need to be
reviewed by the Proxy Review
Committee, where there is no portfolio manager objection and where there is no
material conflict of interest. We also analyze proxy contests on a case-by-case
basis.
D. CHANGES IN CAPITAL STRUCTURE.
1. We generally support the following:
- Management and shareholder proposals aimed at eliminating unequal
voting rights, assuming fair economic treatment of classes of
shares we hold.
- Management proposals to increase the authorization of existing
classes of common stock (or securities convertible into common
stock) if: (i) a clear business purpose is stated that we can
support and the number of shares requested is reasonable in
relation to the purpose for which authorization is requested;
and/or (ii) the authorization does not exceed 100% of shares
currently authorized and at least 30% of the total new
authorization will be outstanding.
- Management proposals to create a new class of preferred stock or
for issuances of preferred stock up to 50% of issued capital,
unless we have concerns about use of the authority for
anti-takeover purposes.
- Management proposals to authorize share repurchase plans, except
in some cases in which we believe there are insufficient
protections against use of an authorization for anti-takeover
purposes.
- Management proposals to reduce the number of authorized shares of
common or preferred stock, or to eliminate classes of preferred
stock.
- Management proposals to effect stock splits.
- Management 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.
- Management proposals for higher dividend payouts.
2. We generally oppose the following (notwithstanding management
support):
- Proposals to add classes of stock that would substantially dilute
the voting interests of existing shareholders.
- Proposals to increase the authorized or issued number of shares
of existing classes of stock that are unreasonably dilutive,
particularly if there are no preemptive rights for existing
shareholders.
- Proposals that authorize share issuance at a discount to market
rates, except where authority for such issuance is de minimis, or
if there is a special situation that we believe justifies such
authorization (as may be the case, for example, at a company
under severe stress and risk of bankruptcy).
- Proposals relating to changes in capitalization by 100% or more.
We consider on a case-by-case basis shareholder proposals to increase dividend
payout ratios, in light of market practice and perceived market weaknesses, as
well as individual company payout history and current circumstances. For
example, currently we perceive low payouts to shareholders as a
concern at some Japanese companies, but may deem a low payout ratio as
appropriate for a growth company making good use of its cash, notwithstanding
the broader market concern.
E. TAKEOVER DEFENSES AND SHAREHOLDER RIGHTS
1. Shareholder rights plans: We generally support proposals to require
shareholder approval or ratification of shareholder rights plans
(poison pills). In voting on rights plans or similar takeover
defenses, we consider on a case-by-case basis whether the company has
demonstrated a need for the defense in the context of promoting
long-term share value; whether provisions of the defense are in line
with generally accepted governance principles; and the specific
context if the proposal is made in the midst of a takeover bid or
contest for control.
2. Supermajority voting requirements: We generally oppose requirements
for supermajority votes to amend the charter or bylaws, unless the
provisions protect minority shareholders where there is a large
shareholder. In line with this view, in the absence of a large
shareholder we support reasonable shareholder proposals to limit such
supermajority voting requirements.
3. Shareholder rights to call meetings: We consider proposals to enhance
shareholder rights to call meetings on a case-by-case basis.
4. Reincorporation: We consider management and shareholder proposals to
reincorporate to a different jurisdiction on a case-by-case basis. We
oppose such proposals if we believe the main purpose is to take
advantage of laws or judicial precedents that reduce shareholder
rights.
5. Anti-greenmail provisions: 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.
6. Bundled proposals: We may consider opposing or abstaining on proposals
if disparate issues are "bundled" and presented for a single vote.
F. AUDITORS. We generally support management proposals for selection or
ratification of independent auditors. However, we may consider opposing such
proposals with reference to incumbent audit firms if the company has suffered
from serious accounting irregularities and we believe rotation of the audit firm
is appropriate, or if fees paid to the auditor for non-audit-related services
are excessive. Generally, to determine if non-audit fees are excessive, a 50%
test will be applied (i.e., non-audit-related fees should be less than 50% of
the total fees paid to the auditor). We generally vote against proposals to
indemnify auditors.
G. EXECUTIVE AND DIRECTOR REMUNERATION.
1. We generally support the following proposals:
- Proposals for employee equity compensation plans and other
employee ownership plans, provided that our research does not
indicate that approval of the plan would be against shareholder
interest. Such approval may be against shareholder interest if it
authorizes excessive dilution and shareholder cost, particularly
in the context of high usage ("run rate") of equity compensation
in the recent past; or if there are objectionable plan design and
provisions.
- Proposals relating to fees to outside directors, provided the
amounts are not excessive relative to other companies in the
country or industry, and provided that the structure is
appropriate within the market context. While stock-based
compensation to outside directors is positive if moderate and
appropriately structured, we are wary of significant stock option
awards or other performance-based awards for outside directors,
as well as provisions that could result in significant forfeiture
of value on a director's decision to resign from a board (such
forfeiture can undercut director independence).
- 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 retirement and
severance plans, provided that our research does not indicate
that approval of the plan would be against shareholder interest.
2. Shareholder proposals requiring shareholder approval of all severance
agreements will not be supported, but proposals that require
shareholder approval for agreements in excess of three times the
annual compensation (salary and bonus) generally will be supported. We
generally oppose shareholder proposals that would establish arbitrary
caps on pay. We consider on a case-by-case basis shareholder proposals
that seek to limit Supplemental Executive Retirement Plans (SERPs),
but support such proposals where we consider SERPs to be excessive.
3. Shareholder proposals advocating stronger and/or particular
pay-for-performance models will be evaluated on a case-by-case basis,
with consideration of the merits of the individual proposal within the
context of the particular company and its labor markets, and the
company's current and past practices. While we generally support
emphasis on long-term components of senior executive pay and strong
linkage of pay to performance, we consider whether a proposal may be
overly prescriptive, and the impact of the proposal, if implemented as
written, on recruitment and retention.
4. We consider shareholder proposals for U.K.-style advisory votes on pay
on a case-by-case basis.
5. We generally support proposals advocating reasonable senior executive
and director stock ownership guidelines and holding requirements for
shares gained in option exercises.
6. Management proposals effectively to re-price stock options are
considered on a case-by-case basis. Considerations include the
company's reasons and justifications for a re-pricing, the company's
competitive position, whether senior executives and outside directors
are excluded, potential cost to shareholders, whether the re-pricing
or share exchange is on a value-for-value basis, and whether vesting
requirements are extended.
H. SOCIAL, POLITICAL AND ENVIRONMENTAL ISSUES. We consider proposals relating to
social, political and environmental issues on a case-by-case basis to determine
whether they will have a financial impact on shareholder value. However, we
generally vote against proposals requesting reports that are duplicative,
related to matters not material to the business, or that would impose
unnecessary or excessive costs. We may abstain from voting on proposals that do
not have a readily
determinable financial impact on shareholder value. We generally oppose
proposals requiring adherence to workplace standards that are not required or
customary in market(s) to which the proposals relate.
I. 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.
III. ADMINISTRATION OF POLICY
The MSIM Proxy Review Committee (the "Committee") has overall responsibility for
creating and implementing the Policy, working with an MSIM staff group (the
"Corporate Governance Team"). The Committee, which is appointed by MSIM's Chief
Investment Officer of Global Equities ("CIO"), consists of senior investment
professionals who represent the different investment disciplines and geographic
locations of the firm. Because proxy voting is an investment responsibility and
impacts shareholder value, and because of their knowledge of companies and
markets, portfolio managers and other members of investment staff play a key
role in proxy voting, although the Committee has final authority over proxy
votes.
The Committee Chairperson is the head of the Corporate Governance Team, and is
responsible for identifying issues that require Committee deliberation or
ratification. The Corporate Governance Team, working with advice of investment
teams and the Committee, is responsible for voting on routine items and on
matters that can be addressed in line with these Policy guidelines. The
Corporate Governance Team has responsibility for voting case-by-case where
guidelines and precedent provide adequate guidance, and to refer other
case-by-case decisions to the Proxy Review Committee.
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.
A. COMMITTEE PROCEDURES
The Committee will meet at least monthly to (among other matters) address any
outstanding issues relating to the Policy or its implementation. The Corporate
Governance Team will timely communicate to ISS MSIM's Policy (and any amendments
and/or any additional guidelines or procedures the Committee may adopt).
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.
Members of 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, unless economic interests of the accounts differ. 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.
B. MATERIAL CONFLICTS OF INTEREST
In addition to the procedures discussed above, if the Committee determines that
an issue raises a 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 Chief Compliance Officer 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 relevant Chief Investment
Officer or his/her designee, and any other persons deemed necessary by the
Chairperson. The Special Committee may request the assistance of MSIM's General
Counsel or his/her designee who 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.
C. IDENTIFICATION OF MATERIAL CONFLICTS OF INTEREST
A potential material conflict of interest could exist in the following
situations, among others:
1. 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.
2. The proxy relates to Morgan Stanley common stock or any other security
issued by Morgan Stanley or its affiliates except if echo voting is
used, as with MSIM Funds, as described herein.
3. 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).
If the Chairperson of the Committee determines that an issue raises a potential
material conflict of interest, depending on the facts and circumstances, the
Chairperson will address the issue as follows:
1. If the matter relates to a topic that is discussed in this Policy, the
proposal will be voted as per the Policy.
2. If the matter is not discussed in this Policy or the Policy indicates
that the issue is to be decided case-by-case, the proposal will be
voted in a manner consistent with the Research Providers, provided
that all the Research Providers have the same recommendation, no
portfolio manager objects to that vote, and the vote is consistent
with MSIM's Client Proxy Standard.
3. If the Research Providers' recommendations differ, the Chairperson
will refer the matter to the Committee to vote on the proposal. If the
Committee determines that an issue raises a material conflict of
interest, the Committee will request a Special Committee to review and
recommend a course of action, as described above. Notwithstanding the
above, the Chairperson of the Committee may request a Special
Committee to review a matter at any time as he/she deems necessary to
resolve a conflict.
D. PROXY VOTING REPORTING
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 an MSIM Fund, the Committee and Special Committee, or their designee(s),
will report their decisions to each applicable Board of Trustees/Directors of
those Funds 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.
The Corporate Governance Team will timely communicate to applicable portfolio
managers and to ISS, decisions of the Committee and Special Committee so that,
among other things, ISS will vote proxies consistent with their decisions.
MSIM will promptly provide a copy of this Policy to any client requesting it.
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.
MSIM's Legal Department is responsible for filing an annual Form N-PX on behalf
of each MSIM Fund for which such filing is required, indicating how all proxies
were voted with respect to such Fund's holdings.
APPENDIX A
The following procedures apply to accounts managed by Morgan Stanley AIP GP LP
("AIP").
Generally, AIP will follow the guidelines set forth in Section II of MSIM's
Proxy Voting Policy and Procedures. To the extent that such guidelines do not
provide specific direction, or AIP determines that consistent with the Client
Proxy Standard, the guidelines should not be followed, the Proxy Review
Committee has delegated the voting authority to vote securities held by accounts
managed by AIP to the Liquid Markets investment team and the Private Markets
investment team of AIP. A summary of decisions made by the investment teams will
be made available to the Proxy Review Committee for its information at the next
scheduled meeting of the Proxy Review Committee.
In certain cases, AIP may determine to abstain from determining (or
recommending) how a proxy should be voted (and therefore abstain from voting
such proxy or recommending how such proxy should be voted), such as where the
expected cost of giving due consideration to the proxy does not justify the
potential benefits to the affected account(s) that might result from adopting or
rejecting (as the case may be) the measure in question.
Waiver of Voting Rights
For regulatory reasons, AIP may either 1) invest in a class of securities of an
underlying fund (the "Fund") that does not provide for voting rights; or 2)
waive 100% of its voting rights with respect to the following:
1. Any rights with respect to the removal or replacement of a director,
general partner, managing member or other person acting in a similar
capacity for or on behalf of the Fund (each individually a "Designated
Person," and collectively, the "Designated Persons"), which may
include, but are not limited to, voting on the election or removal of
a Designated Person in the event of such Designated Person's death,
disability, insolvency, bankruptcy, incapacity, or other event
requiring a vote of interest holders of the Fund to remove or replace
a Designated Person; and
2. Any rights in connection with a determination to renew, dissolve,
liquidate, or otherwise terminate or continue the Fund, which may
include, but are not limited to, voting on the renewal, dissolution,
liquidation, termination or continuance of the Fund upon the
occurrence of an event described in the Fund's organizational
documents; provided, however, that, if the Fund's organizational
documents require the consent of the Fund's general partner or
manager, as the case may be, for any such termination or continuation
of the Fund to be effective, then AIP may exercise its voting rights
with respect to such matter.
APPENDIX B
The following procedures apply to the portion of the Van Kampen Dynamic Credit
Opportunities Fund ("VK Fund") sub advised by Avenue Europe International
Management, L.P. ("Avenue"). (The portion of the VK Fund managed solely by Van
Kampen Asset Management will continue to be subject to MSIM's Policy.)
1. Generally: With respect to Avenue's portion of the VK Fund, the Board
of Trustees of the VK Fund will retain sole authority and
responsibility for proxy voting. The Adviser's involvement in the
voting process of Avenue's portion of the VK Fund is a purely
administrative function, and serves to execute and deliver the proxy
voting decisions made by the VK Fund Board in connection with the
Avenue portion of the VK Fund, which may, from time to time, include
related administrative tasks such as receiving proxies, following up
on missing proxies, and collecting data related to proxies. As such,
the Adviser shall not be deemed to have voting power or shared voting
power with Avenue with respect to Avenue's portion of the Fund.
2. Voting Guidelines: All proxies, with respect to Avenue's portion of
the VK Fund, will be considered by the VK Fund Board or such
subcommittee as the VK Fund Board may designate from time to time for
determination and voting approval. The VK Board or its subcommittee
will timely communicate to MSIM's Corporate Governance Group its proxy
voting decisions, so that among other things the votes will be
effected consistent with the VK Board's authority.
Administration: The VK Board or its subcommittee will meet on an
adhoc basis as may be required from time to time to review
proxies that require its review and determination. The VK Board
or its subcommittee will document in writing all of its decisions
and actions which will be maintained by the VK Fund, or its
designee(s), for a period of at least 6 years. If a subcommittee
is designated, a summary of decisions made by such subcommittee
will be made available to the full VK Board for its information
at its next scheduled respective meetings.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
VAN KAMPEN DYNAMIC CREDIT OPPORTUNITIES FUND
VAN KAMPEN SENIOR INCOME TRUST
FUND MANAGEMENT
PORTFOLIO MANAGEMENT. As of the date of this report, the Fund is managed by
members of the Adviser's Senior Loan Group, which currently includes Howard
Tiffen, Senior Adviser of the Adviser, Philip Yarrow, Executive Director and
portfolio manager of the Adviser, Gerard Fogarty, Vice President and assistant
portfolio manager of the Adviser, and Jeffrey Scott, Vice President and
assistant portfolio manager of the Adviser. Mr. Yarrow is primarily responsible
for the day-to-day management of the Fund.
Mr. Tiffen joined the Adviser in 1999 and is currently associated with the
Adviser and members of the Senior Loan Group in a senior adviser capacity. Mr.
Yarrow joined the Adviser in 2005 and began managing the Fund in July 2008.
Prior to joining the Adviser in 2005, Mr. Yarrow was a credit analyst and a
portfolio manager at Bank One/JPMorgan. Mr. Fogarty joined the Adviser in 2007
and began managing the Fund in July 2008. From 2003 to 2007 and prior to joining
the Adviser, Mr. Fogarty was employed by JP Morgan and held a number of
positions including Director in the financial institutions group, and, most
recently as a Credit Executive in the commercial real estate group. Prior to
joining JP Morgan, Mr. Fogarty was employed as an Associate in the financial
institutions group at Bank of America. Mr. Scott joined the Adviser in 2005 and
began managing the Fund in July 2008. Prior to joining the Adviser, Mr. Scott
was employed by State Farm Insurance Companies where he served as an Assistant
Vice President in the Mutual Fund Group responsible for product development and
strategy as well as a Regional Vice President for Sales for the Financial
Services Division.
The composition of the team may change from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
As of July 31, 2008, Mr. Tiffen managed six registered investment companies with
a total of approximately $6 billion in assets; no pooled investment vehicles
other than registered investment companies; and one other account with a total
of approximately $597.7 million in assets.
As of July 31, 2008, Phillip Yarrow managed three registered investment
companies with a total of approximately $4.3 billion in assets; no pooled
investment vehicles other than registered investment companies; and no other
accounts.
As of July 31, 2008, Gerard Fogarty managed three registered investment
companies with a total of approximately $4.3 billion in assets; no pooled
investment vehicles other than registered investment companies; and no other
accounts.
As of July 31, 2008, Jeffrey Scott managed three registered investment companies
with a total of approximately $4.3 billion in assets; no pooled investment
vehicles other than registered investment companies; and no other accounts.
Because the portfolio managers manages 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. In addition, a conflict of interest could exist to the extent the Adviser
has proprietary investments in certain accounts, where portfolio managers have
personal investments in certain accounts or when certain accounts are investment
options in the Adviser's employee benefits and/or deferred compensation plans.
The portfolio manager may have an incentive to favor these accounts over others.
If the Adviser manages accounts that engage in short sales of securities of the
type in which the Fund invests, the Adviser could be seen as harming the
performance of the Fund for the benefit of the accounts engaged in short sales
if the short sales cause the market value of the securities to fall. 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 MANAGERS 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 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 Long-Term Incentive Compensation Program 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 Alignment Plan (IMAP) 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 100% of the IMAP
deferral
into a combination of the designated open-end funds they manage that are
included in the IMAP Fund menu;
- - 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 an appropriate securities market
index (or indices) for the funds/accounts managed by the portfolio manager.
Other funds/accounts managed by the same portfolio manager may be measured
against this same index and same rankings or ratings, if appropriate, or
against other indices and other rankings or ratings that are deemed more
appropriate given the size and/or style of such funds/accounts as set forth
in such funds'/accounts' disclosure materials and guidelines. The assets
managed by the portfolio manager in funds, pooled investment vehicles and
other accounts are described in "Other Accounts Managed by the Portfolio
Manager" above. 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
Inc., 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, 2008, 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.
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 Dynamic Credit Opportunities Fund
By: /s/ Jerry W. Miller
----------------------------------
Name: Jerry W. Miller
Title: Principal Executive Officer
Date: September 18, 2008
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/ Jerry W. Miller
----------------------------------
Name: Jerry W. Miller
Title: Principal Executive Officer
Date: September 18, 2008
By: /s/ Stuart N. Schuldt
----------------------------------
Name: Stuart N. Schuldt
Title: Principal Financial Officer
Date: September 18, 2008