<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 12
Statement of Operations.......................... 13
Statement of Changes in Net Assets............... 14
Statement of Cash Flows.......................... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 17
Report of Independent Accountants................ 21
</TABLE>
SFR ANR 9/98
<PAGE> 2
LETTER TO SHAREHOLDERS
August 26, 1998
Dear Shareholder,
Recently, we decided to
consolidate all Van Kampen American
Capital funds under the single name of
Van Kampen Funds. This move accompanies
the change in the legal name of our
firm to Van Kampen Funds Inc. You can
be assured that the change in your
Fund's name will not affect its
management or daily operations. If you
have any questions regarding your
investment or our new name, please
contact your financial adviser.
ECONOMIC REVIEW
The economic conditions of the
past five years have been quite
favorable, and they have continued to
be so since the Fund's inception. With a high level of employment and a low rate
of inflation preserving the consumer's buying power, consumer confidence has
been high. In general, businesses have enjoyed a steady run of solid corporate
earnings. Add to this scenario the prospect of a balanced federal budget--even
the potential for a large budget surplus--and the strength of the financial
markets is not difficult to understand.
On the other hand, the recent currency collapse in Southeast Asia reminds
us once again that no investment environment is without risk. The resulting
market turmoil took investors for a wild ride in the financial markets, as
market participants speculated on the impact of the Asian financial crisis on
American companies and consumers. Stock prices have fluctuated sharply in recent
weeks and months, spurring talk of the current bull market's near-term
prospects.
Going forward, the real challenge will be assessing the true impact of
the Asian situation on our own economy. The Federal Reserve Board has held firm
on short-term interest rates, seeing that inflation remains in check and that
economic growth continues at a moderate pace.
MARKET REVIEW
The senior loan market, in our opinion, has demonstrated that it is an
integral part of our expanding economy. Corporate borrowing has helped to fuel
the business activity that is driving economic growth. In the trillion-dollar
corporate arena, last year's new issue volume of leveraged senior loans was in
the range of $194 billion, ample evidence that corporations are actively
pursuing their goals.
This is not to say that the senior loan market offers any guarantees.
Clearly, the fortunes of the companies we invest in are closely tied to the
fortunes of the consumers who purchase their goods and services. We believe the
burden of consumer debt--in the form of credit card balances and high mortgage
payments, for example--is high enough to be worrisome and will warrant vigilant
monitoring.
Continued on page two
1
Photo of McDonnell & Powell
DENNIS J. MCDONNELL AND DON G. POWELL
<PAGE> 3
As always, the careful evaluation of corporate credit risk is an absolute
requirement when investing in senior loans, particularly those that involve more
speculative companies. Our approach is to build a senior loan portfolio around a
core of companies that offer basic goods and services--ideally, to focus on
companies that are fundamental to the consumer's everyday life. For a listing of
portfolio holdings (including credit ratings, where applicable), see the
Portfolio of Investments included in this report.
OUTLOOK
We believe economic growth is likely to be moderate in coming months,
with the impact of the Asian economic crisis becoming much more evident. If
worsening global economic conditions continue, we would expect the Fed to lower
short-term interest rates soon.
While this asset class has little chance of outperforming equity
securities in a bull market, we will seek to assemble an array of senior loan
holdings that have the potential to provide the Fund with a relative degree of
stability over an extended period of time and in a variety of market conditions.
Of course, it would be reckless to predict smooth sailing indefinitely. It is
inevitable that our senior loan portfolios will encounter rough spots from time
to time. What bolsters our confidence is the belief that senior corporate loans
have characteristics--such as their status as senior corporate debt--that can
make them an ideal complement to the more aggressive components of an investor's
portfolio. In addition, we believe our research capabilities are unmatched
within the industry.
To better understand the outlook for your investment, please see the
commentary of your Fund's portfolio management team on the pages that follow. We
thank you for entrusting a portion of your assets to our care.
Sincerely,
[SIG.]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JULY 31, 1998
VAN KAMPEN SENIOR FLOATING RATE FUND
<TABLE>
<S> <C>
TOTAL RETURNS
Life-of-Fund cumulative total return(1)..................... 2.52%
Commencement date........................................... 03/27/98
Distribution rate(2)........................................ 6.57%
SHARE VALUATIONS
Net asset value on 07/31/98................................. $10.04
Since inception high net asset value (07/31/98)............. $10.04
Since inception low net asset value (03/27/98).............. $10.00
</TABLE>
(1) Total return assumes an investment at the beginning of the period indicated,
reinvestment of all distributions for the period and tender of all shares at the
end of the period indicated, excluding payment of any early withdrawal charges.
(2) Distribution rate is based upon the July 24, 1998 offering price of $10.04
and the current monthly dividend of $.0550 per share.
Past performance does not guarantee future results. Distribution rates and net
asset value may fluctuate with market conditions. Fund shares, when tendered,
may be worth more or less than their original cost.
This report is intended for shareholders of the Fund and may not be used as
sales literature with prospective investors unless it is preceded or accompanied
by the Fund's current prospectus, which gives more complete information about
charges and expenses, investment objectives and operating policies. Prospective
investors should read the prospectus carefully before investing or sending
money.
3
<PAGE> 5
GLOSSARY OF TERMS
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality issues.
Normally, lower-quality issues provide higher yields to compensate investors for
the additional credit risk.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or contingent
deferred sales charge.
SECONDARY MARKET: A market where securities are traded after they are initially
offered.
SENIOR LOANS: Loans or other debt securities that are given preference to junior
securities of the borrower. In the event of bankruptcy, payments to holders of
senior loan obligations are given priority over payments to shareholders of
subordinated debt, as well as shareholders of preferred and common stock. Senior
loans may share priority status with other senior securities of the borrower,
and such status is not a guarantee that monies to which the Fund is entitled
will be paid.
YIELD: The annual rate of return on an investment, expressed as a percentage.
For bonds and notes, the yield is the annual interest divided by the market
price.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN SENIOR FLOATING RATE FUND
We recently spoke with the portfolio manager of the Van Kampen Senior Floating
Rate Fund about the key events and economic forces that shaped the markets since
the Fund's inception on March 27, 1998. The Fund's portfolio manager, Jeffrey W.
Maillet, senior vice president of Van Kampen Investment Advisory Corp., has been
responsible for the day-to-day management of the Fund's portfolio since its
inception. The following excerpts reflect his views on the Fund's performance
from inception on March 27, 1998 to July 31, 1998.
Q HOW DID CONDITIONS IN THE SENIOR LOAN MARKET AFFECT YOUR INVESTMENT OF
THE FUND'S ASSETS SINCE ITS INCEPTION?
A The senior loan market continued to benefit from the strong U.S. economy,
which supported corporate profits and helped many companies make their
loan payments on schedule. According to Loan Pricing Corporation, more
than $194 billion in new issues were introduced to the leveraged senior loan
market last year, and supply continues to be strong in 1998. As such, we've had
plenty of securities to choose from in investing the Fund's new assets.
Q WHAT AREAS PROVIDED THE BEST OPPORTUNITIES FOR THE FUND?
A Most of the senior loans in the portfolio are made to providers of basic
goods and services. The Fund's assets ranged across many industries,
including automotive, wireless communications, and manufacturing. We
financed loans to Breed Technologies, an airbag manufacturer, and Numatics, a
maker of pneumatic fluid power equipment. We also provided the financing that
allowed Bridge Information Systems, a global market data company, to purchase
several Dow Jones news retrieval and information services. In addition, we are
providing the senior lending for a deal between BellSouth and Safra, a Brazilian
firm, to create BCP SP Ltd., a wireless communications company in Sao Paulo. We
encourage you to look at the complete listing of the Fund's investments--you'll
probably see familiar companies whose products and services you use every day.
Keep in mind that not every loan in the portfolio will produce positive results,
and all of the loans are subject to credit risk.
Q HOW HAS THE FUND PERFORMED?
A The Fund's cumulative total return between March 27, 1998 and July 31,
1998, was 2.52 percent(1) at net asset value (NAV). During the reporting
period, the Fund's NAV remained within a very narrow range of $10.00 and
$10.04 per share. Based on the July 24, 1998, public offering price of $10.04
per share, the Fund's current monthly dividend of $0.0550 represents a
distribution rate of 6.57 percent(2). For more information on the Fund's
performance, please refer to the chart on page three.
Q ARE YOU PLEASED WITH THE FUND'S PERFORMANCE?
A Yes, we are. Its NAV has fluctuated four cents since its inception, and
its distribution rate of 6.57 percent(2) compared favorably to the
3-month Treasury bill's yield of 5.07 percent, as well as the 30-year
Treasury bond's yield of 5.71 percent at the end of the reporting period.*
Of course, the Fund should never be viewed as a substitute for
government-backed investments, like Treasury bonds--Treasuries don't have the
same credit risks that senior loans have. But it's important to remember that
investment risk and return have typically been correlated. Senior loans have the
potential to offer greater returns but greater risk than Treasury securities.
Over time, however, they may also provide greater relative stability but lower
returns than stocks. Senior loans are discussed in more detail in "A Focus on
Senior Loans" on page seven.
5
<PAGE> 7
Q
WHAT IS YOUR OUTLOOK FOR INTEREST RATES?
A
We believe short-term rates are going to head lower. The Fed had expected
that the economic crisis in Asia would put a much-needed damper on the
U.S. economy, slowing it down to more controllable levels and heading off
the threat of inflation. This has happened. However, Asia's economic problems
have destabilized world markets to a larger degree than was previously expected.
This will probably lead to a more dramatic decline for the U.S. markets. To
counteract the effect of a potentially worsening worldwide economic slowdown, we
believe the Fed is going to have to lower interest rates soon.
Q
IF INTEREST RATES DO CHANGE, HOW IS THE FUND POSITIONED IN THE EVENT OF AN
ECONOMIC SLOWDOWN?
A
First, senior loans have the ability to adjust their interest payments
over time with changes in interest rates. That means changes in interest
rates could lead to a corresponding increase or decrease in income for the
Fund. Next, with regard to an economic slowdown, we've constructed a portfolio
that we believe can withstand an economic slowdown. We deal in higher-yielding,
higher-risk securities, so we're always mindful of the threat of a slowdown. But
keep in mind that our holdings are senior loans. This means that if one of the
companies in our portfolio runs into earnings trouble, we have priority claim on
the assets before that company's equity and bond investors, although we can't
promise that every loan in the Fund will be repaid.
If the economy slows, we would definitely expect some defaults among the
Fund's loans, but we are confident in our management abilities to handle such a
scenario. Our team has successfully navigated senior loan products through a
variety of economic conditions, and we believe we are prepared to handle
whatever challenges the economy presents.
[SIG]
Jeffrey W. Maillet
Portfolio Manager
* U.S. Treasuries are backed by the full faith and credit of the U.S.
government, while the Fund is not; the Fund is subject to credit risks. U.S.
Treasury bills are short-term obligations of the U.S. government that are
purchased at a discount and mature at face value. Past performance does not
guarantee future results.
Please see footnotes on page three
6
<PAGE> 8
A FOCUS ON SENIOR LOANS
The Senior Floating Rate Fund invests primarily in senior collateralized
loans to corporations, partnerships, and other business entities that operate in
a variety of industries and geographic locations. Senior loans have a number of
characteristics that, in the opinion of the Fund's management team, are
important to the integrity of the Fund's portfolio. These include:
SENIOR STANDING
With respect to interest payments, senior loans generally have priority
over other classes of loans, preferred stock, or common stocks, though they may
have equal status with other securities of the borrower. This status is not a
guarantee, however, that monies to which the Fund is entitled will be paid. For
more details, please refer to the prospectus.
COLLATERAL BACKING
Senior loans are often secured by collateral that has been pledged by the
borrower under the terms of a loan agreement. Forms of collateral include
accounts receivable or inventory, buildings, and real estate, among others.
Under certain circumstances, collateral might not be entirely sufficient to
satisfy the borrower's obligations in the event of non-payment of scheduled
interest or principal, and in some instances may be difficult to liquidate on a
timely basis.
Additionally, a decline in the value of the collateral could cause the
loan to become substantially unsecured, and circumstances could arise (such as
bankruptcy of a borrower) that could cause the Fund's security interest in the
loan's collateral to be invalidated.
CREDIT QUALITY
Many senior loans carry provisions designed to protect the lender in
certain circumstances. In addition, the variable-rate nature of the portfolio is
expected to lessen the fluctuation in the Fund's net asset value. However, the
net asset value will still be subject to the influence of changes in the real or
perceived credit quality of the loans in which the Fund invests. This may occur
in the event of a sudden or extreme increase in prevailing interest rates, a
default in a loan in which the Fund holds an interest, or a substantial
deterioration in the borrower's creditworthiness. From time to time, the Fund's
net asset value may be more or less than at the time of the investment.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN SENIOR FLOATING RATE FUND
TOP FIVE PORTFOLIO SECTORS*
AS OF JULY 31, 1998
<TABLE>
<S> <C>
Telecommunications -- Cellular.............................. 11.3%
Finance..................................................... 11.1%
Health Care................................................. 6.1%
Machinery................................................... 5.9%
Broadcasting -- Television.................................. 5.7%
</TABLE>
*As a Percentage of Variable Rate Senior Loan Interests
TOP FIVE HOLDINGS AS A PERCENTAGE OF VARIABLE RATE SENIOR LOAN INTERESTS
<TABLE>
<CAPTION>
AS OF JULY 31, 1998
<S> <C>
BCP SP Ltd. ................................................ 10.4%
Vencor, Inc. ............................................... 6.1%
Ocean Rig (Norway) ......................................... 4.6%
Le Group Forex, Inc. ....................................... 4.6%
Intesys Technologies, Inc. ................................. 3.5%
</TABLE>
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Bank Loan Ratings+
Amount Moody's S&P
(000) Borrower (Unaudited) Stated Maturity* Value
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
VARIABLE RATE** SENIOR LOAN INTERESTS 79.5%
AEROSPACE/DEFENSE 1.5%
$ 4,990 Aerostructures Corp., Term Loan.......................... NR NR 12/31/03 $ 4,990,387
981 Whittaker Corp., Term Loan............................... NR NR 05/31/03 980,770
300 Whittaker Corp., Revolving Credit........................ NR NR 05/31/01 300,000
------------
6,271,157
------------
AUTOMOTIVE 1.2%
5,111 Breed Technologies, Inc., Term Loan...................... B1 BB 04/27/04 to 04/27/06 5,111,156
------------
BROADCASTING -- CABLE 1.2%
5,000 Insight Communication Co., L.P., Term Loan............... NR NR 03/31/05 5,001,861
------------
BROADCASTING -- TELEVISION 4.6%
8,684 NTL (UK) Group, Term Loan................................ NR NR 12/31/05 8,684,233
10,000 Sinclair Broadcasting, Term Loan......................... Ba2 BB- 09/15/05 10,000,067
------------
18,684,300
------------
CHEMICALS, PLASTICS AND RUBBER 3.3%
6,500 High Performance Plastics, Inc., Term Loan............... NR NR 03/31/05 6,500,000
7,172 Sterling Pulp Chemicals, Inc., Term Loan................. Ba3 NR 09/30/04 7,171,585
------------
13,671,585
------------
CONSTRUCTION MATERIALS 1.3%
5,217 Enclosures Holding Corp., Term Loan...................... NR NR 02/28/05 5,217,216
------------
CONTAINERS, PACKAGING AND GLASS 3.4%
5,985 American Bottling, Term Loan............................. NR NR 05/01/07 5,985,000
1,651 Huntsman Packaging Corp., Term Loan...................... Ba2 BB- 12/31/02 1,650,698
2,365 Huntsman Packaging Corp., Revolving Credit............... Ba2 BB- 12/31/02 2,365,445
4,162 Stone Container Corp., Term Loan......................... Ba3 B+ 10/01/03 4,161,672
------------
14,162,815
------------
DIVERSIFIED MANUFACTURING 2.8%
10,833 Intesys Technologies, Inc., Term Loan.................... NR NR 06/30/04 to 06/30/06 10,833,351
763 Intesys Technologies, Inc., Revolving Credit............. NR NR 06/30/04 762,671
------------
11,596,022
------------
ECOLOGICAL 0.8%
3,236 Safety-Kleen Corp., Term Loan............................ Ba3 BB 04/03/05 to 04/03/06 3,236,282
------------
ELECTRONICS 1.8%
7,500 Amphenol Corp., Term Loan................................ Ba3 B+ 05/19/04 7,506,835
------------
FARMING & AGRICULTURE 2.4%
4,995 Seminis, Inc., Term Loan................................. NR NR 12/31/03 to 12/31/04 4,994,995
4,937 Walco International, Term Loan........................... NR NR 03/31/04 4,968,246
------------
9,963,241
------------
FINANCE 8.9%
10,000 Bridge Information Systems, Inc., Term Loan.............. NR NR 05/27/05 10,000,000
9,375 Meditrust Corp., Term Loan............................... NR NR 07/15/99 9,375,162
6,992 OSI Holdings Corp., Term Loan............................ B2 NR 10/15/04 6,991,941
10,000 Paul G. Allen, Term Loan................................. NR NR 06/10/03 9,999,827
------------
36,366,930
------------
HEALTHCARE 4.9%
20,000 Vencor, Inc., Term Loan.................................. B1 B+ 01/15/05 20,000,035
------------
HOME & OFFICE FURNISHINGS 1.6%
6,500 Imperial Home Decor Group, Inc., Term Loan............... B1 B+ 03/13/05 to 03/13/06 6,500,000
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Bank Loan Ratings+
Amount Moody's S&P
(000) Borrower (Unaudited) Stated Maturity* Value
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
HOTELS, MOTELS, INNS, AND GAMING 2.4%
$10,000 Aladdin Gaming, LLC., Term Loan.......................... B2 NR 08/26/06 $ 10,000,279
------------
MACHINERY 4.7%
4,455 Numatics, Inc., Term Loan................................ Ba3 B+ 03/19/04 to 09/19/05 4,454,386
15,000 Ocean Rig (Norway), Term Loan............................ NR NR 06/01/08 15,000,701
------------
19,455,087
------------
PAPER AND FOREST PRODUCTS 3.7%
15,000 Le Group Forex, Inc., Term Loan.......................... NR BB 06/30/05 15,000,000
------------
PERSONAL/NON-DURABLE 1.5%
6,305 Boyd's Collection, Ltd., Term Loan....................... Ba3 B+ 04/21/06 6,305,006
------------
PRINTING AND PUBLISHING 2.8%
6,500 Advanstar Communications, Term Loan...................... Ba3 B+ 04/30/05 6,500,000
4,967 TransWestern Publishing, L.P., Term Loan................. Ba3 B+ 10/01/04 4,966,575
------------
11,466,575
------------
RESTAURANTS AND FOOD SERVICE 1.2%
4,866 Americas Favorite Chicken, Inc., Term Loan............... Ba3 NR 06/30/02 4,865,998
------------
RETAIL -- OFFICE PRODUCTS 2.4%
10,000 U.S. Office Products Co., Term Loan...................... B1 B- 06/09/06 10,000,052
------------
TELECOMMUNICATIONS -- CELLULAR 9.0%
34,300 BCP SP, Ltd., Term Loan.................................. NR NR 03/31/00 33,969,244
3,000 Cellular, Inc. Financial Corp. (CommNet), Term Loan...... B1 B 09/30/05 3,000,044
------------
36,969,288
------------
TELECOMMUNICATIONS -- HYBRID 0.5%
2,000 Nextel Finance Co., Term Loan............................ Ba3 B- 09/30/06 2,000,800
------------
TELECOMMUNICATIONS -- PERSONAL COMMUNICATIONS SYSTEMS2.4%
9,975 Omnipoint Communications, Inc., Term Loan................ B2 B 02/17/06 9,975,000
------------
TELECOMMUNICATIONS -- WIRELESS MESSAGING 2.7%
11,000 TSR Wireless, LLC, Term Loan............................. NR NR 06/30/05 11,000,000
------------
TEXTILES AND LEATHER 3.2%
8,279 American Marketing Industries, Inc., Term Loan........... NR NR 11/30/04 to 11/30/05 8,279,243
4,986 Joan Fabrics Corp., Term Loan............................ NR NR 06/30/05 to 06/30/06 4,985,511
------------
13,264,754
------------
TRANSPORTATION 3.3%
4,450 Gemini Air Cargo, Inc., Term Loan........................ B1 NR 12/12/02 4,450,000
9,000 OmniTRAX Railroads, LLC., Term Loan...................... NR NR 05/14/05 9,000,059
------------
13,450,059
------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 79.5%
(Cost $326,481,619)............................................................................................ 327,042,333
------------
SHORT-TERM INVESTMENTS 16.1%
COMMERCIAL PAPER 7.5%
CSX Corp. ($7,000,000 par, maturing 08/06/98, yielding 5.77%).................................................. 6,994,390
Case Credit Corp. ($10,000,000 par, maturing 08/03/98, yielding 5.82%)......................................... 9,996,767
Illinois Power Co. ($790,000 par, maturing 08/04/98, yielding 5.85%)........................................... 789,615
Western Resources, Inc. ($13,400,000 par, maturing 08/03/98 to 08/13/98, yielding 5.72% to 5.75%).............. 13,397,444
------------
31,178,216
------------
SHORT-TERM LOAN PARTICIPATIONS 8.6%
Anadarko (Pete.) Corp. ($2,500,000 par, maturing 08/05/98, yielding 5.69%)..................................... 2,500,000
Englehard Corp. ($5,000,000 par, maturing 08/04/98, yielding 5.69%)............................................ 5,000,000
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
SHORT-TERM LOAN PARTICIPATIONS (CONTINUED)
Enron Oil & Gas Co. ($11,800,000 par, maturing 08/03/98, yielding 5.80%)..................................... $11,800,000
National Rural Utilities Cooperative Finance Corp. ($5,000,000 par, maturing 08/20/98, yielding 5.57%)....... 5,000,000
Ralston Purina Co. ($11,000,000 par, maturing 08/03/98, yielding 5.80%)...................................... 11,000,000
------------
35,300,000
TOTAL SHORT-TERM INVESTMENTS 16.1%
(Cost $66,478,216)........................................................................................... 66,478,216
------------
TOTAL INVESTMENTS 95.6%
(Cost $392,959,835).......................................................................................... 393,520,549
OTHER ASSETS IN EXCESS OF LIABILITIES 4.4%.................................................................... 17,914,755
------------
NET ASSETS 100.0%............................................................................................. $411,435,304
----------
</TABLE>
NR = Not rated
+ Bank loans rated below Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
* Senior Loans in the Fund's portfolio generally are subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment conditions
and because there may be significant economic incentives for a Borrower to
prepay, prepayments of Senior Loans in the Fund's portfolio may occur. As a
result, the actual remaining maturity of Senior Loans held in the Fund's
portfolio may be substantially less than the stated maturities shown.
Although the Fund is unable to accurately estimate the actual remaining
maturity of individual Senior Loans, the Fund estimates that the actual
average maturity of the Senior Loans held in its portfolio will be
approximately 18-24 months.
** Senior Loans in which the Fund invests generally pay interest at rates which
are periodically redetermined by reference to a base lending rate plus a
premium. These base lending rates are generally (i) the prime rate offered by
one or more major United States banks, (ii) the lending rate offered by one
or more major European banks, such as the London Inter-Bank Offered Rate
("LIBOR") and (iii) the certificate of deposit rate. Senior loans are
generally considered to be restricted in that the Fund ordinarily is
contractually obligated to receive approval from the Agent Bank and/or
borrower prior to the disposition of a Senior Loan.
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $392,959,835)....................... $393,520,549
Cash........................................................ 38,462
Receivables:
Fund Shares Sold.......................................... 16,462,657
Interest.................................................. 2,532,425
Prepaid Expenses............................................ 479,486
Unamortized Organizational Costs............................ 130,257
Other....................................................... 19,112
------------
Total Assets.......................................... 413,182,948
------------
LIABILITIES:
Payables:
Income Distributions...................................... 491,780
Initial Offering and Registration Costs................... 471,809
Investment Advisory Fee................................... 308,459
Organizational Costs...................................... 135,000
Administrative Fee........................................ 97,974
Distributor and Affiliates................................ 73,633
Service Fee............................................... 45,783
Accrued Expenses............................................ 117,395
Trustees' Deferred Compensation and Retirement Plans........ 5,811
------------
Total Liabilities..................................... 1,747,644
------------
NET ASSETS.................................................. $411,435,304
============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 40,992,495 shares issued and
outstanding).............................................. $ 409,925
Paid in Surplus............................................. 410,157,150
Net Unrealized Appreciation................................. 560,714
Accumulated Undistributed Net Investment Income............. 309,945
Accumulated Net Realized Loss............................... (2,430)
------------
NET ASSETS.................................................. $411,435,304
============
NET ASSET VALUE PER COMMON SHARE
($411,435,304 divided by 40,992,495 shares outstanding)... $ 10.04
============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF OPERATIONS
For the Period March 27, 1998
(Commencement of Investment Operations)
to July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $6,476,183
Fees........................................................ 19,415
----------
Total Income............................................ 6,495,598
----------
EXPENSES:
Investment Advisory Fee..................................... 756,106
Administrative Fee.......................................... 198,975
Service Fee................................................. 119,385
Printing Costs.............................................. 91,588
Shareholder Services........................................ 88,345
Custody..................................................... 35,816
Amortization of Organizational Costs........................ 9,743
Trustees' Fees and Expenses................................. 6,075
Other....................................................... 248,540
----------
Total Expenses.......................................... 1,554,573
Less Investment Advisory Fees Waived.................... 179,972
----------
Net Expenses............................................ 1,374,601
----------
NET INVESTMENT INCOME....................................... $5,120,997
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (2,430)
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... -0-
End of the Period......................................... 560,714
----------
Net Unrealized Appreciation During the Period............... 560,714
----------
NET REALIZED AND UNREALIZED GAIN............................ $ 558,284
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $5,679,281
==========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF CHANGES IN NET ASSETS
For the Period March 27, 1998
(Commencement of Investment Operations)
to July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
July 31, 1998
- ---------------------------------------------------------------------------
<S> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $5,120,997
Net Realized Loss........................................... (2,430)
Net Unrealized Appreciation During the Period............... 560,714
------------
Change in Net Assets from Operations........................ 5,679,281
Distributions from Net Investment Income.................... (4,980,066)
------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... 699,215
------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 408,647,472
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 3,263,134
Cost of Shares Repurchased.................................. (1,274,517)
------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 410,636,089
------------
TOTAL INCREASE IN NET ASSETS................................ 411,335,304
NET ASSETS:
Beginning of the Period..................................... 100,000
------------
End of the Period (Including undistributed net investment
income of $309,945)....................................... $411,435,304
============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CASH FLOWS
For the Period March 27, 1998 (Commencement of Investment Operations) to July
31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 5,679,281
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Used for Operating Activities:
Increase in Investments at Value.......................... (393,520,549)
Increase in Interest and Fees Receivables................. (2,532,425)
Increase in Prepaid Expenses.............................. (479,486)
Increase in Unamortized Organizational Costs.............. (130,257)
Increase in Other Assets.................................. (19,112)
Increase in Offering & Registration Fees.................. 471,809
Increase in Investment Advisory Fees...................... 308,459
Increase in Organizational Costs Payable.................. 135,000
Increase in Accrued Expenses.............................. 117,395
Increase in Administrative Fees........................... 97,974
Increase in Distributor & Affiliates Payable.............. 73,633
Increase in Service Fees.................................. 45,783
Increase in Deferred Compensation and Retirement Plans
Expenses................................................ 5,811
-------------
Total Adjustments....................................... (395,425,965)
-------------
NET CASH USED FOR OPERATING ACTIVITIES...................... (389,746,684)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Shares Sold................................... 392,184,815
Payments on Shares Repurchased.............................. (1,274,517)
Cash Dividends Paid......................................... (1,225,152)
-------------
Net Cash Provided by Financing Activities................. 389,685,146
-------------
NET DECREASE IN CASH........................................ (61,538)
Cash at Beginning of the Period............................. 100,000
-------------
CASH AT END OF THE PERIOD................................... $ 38,462
-----------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the period indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 27, 1998
(Commencement
of Investment
Operations) to
July 31, 1998
- ---------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of the Period.................... $10.000
-------
Net Investment Income..................................... .213
Net Realized and Unrealized Gain.......................... .034
-------
Total from Investment Operations............................ 0.247
-------
Less Distributions from Net Investment Income............... 0.210
-------
Net Asset Value, End of the Period.......................... $10.037
=======
Total Return*............................................... 2.52%**
Net Assets at End of the Period (In millions)............... $ 411.4
Ratio of Expenses to Average Net Assets*.................... 1.70%
Ratio of Net Investment Income to Average Net Assets*....... 6.33%
Portfolio Turnover.......................................... 4%**
* If certain expenses had not been waived by Van Kampen,
Total Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets..................... 1.92%
Ratio of Net Investment Income to Average Net Assets........ 6.11%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
July 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Senior Floating Rate Fund, formerly known as Van Kampen American
Capital Senior Floating Rate Fund (the "Fund"), is registered as a
non-diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to provide a
high level of current income, consistent with preservation of capital. The Fund
seeks to achieve its objective by investing primarily in a portfolio of
interests in floating or variable rate senior loans to corporations,
partnerships and other entities which operate in a variety of industries and
geographical regions. The Fund commenced investment operations on March 27,
1998.
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 generally
accepted accounting principles 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 value of the Fund's Variable Rate Senior Loan
interests, totaling $327,042,333 (79.5% of net assets) is determined in the
absence of actual market values by Van Kampen Investment Advisory Corp. (the
"Adviser") following guidelines and procedures established, and periodically
reviewed, by the Board of Trustees. The value of a Variable Rate Senior Loan
interest in the Fund's portfolio is determined with reference to changes in
market interest rates and to the creditworthiness of the underlying obligor. In
valuing Variable Rate Senior Loan interests, the Adviser considers market
quotations and transactions in instruments that the Adviser believes may be
comparable to such Variable Rate Senior Loan interests. In determining the
relationship between such instruments and the Variable Rate Senior Loan
interest, the Adviser considers such factors as the creditworthiness of the
underlying obligor, the current interest rate, the interest rate redetermination
period and the maturity date. To the extent that reliable market transactions in
Variable Rate Senior Loan interest have occurred, the Adviser also considers
pricing information derived from such secondary market transactions in valuing
Variable Rate Senior Loan interests. Because of uncertainty inherent in the
valuation process, the estimated value of a Variable Rate Senior Loan interest
may differ significantly from the value that would have been used had there been
market activity for that Variable Rate Senior Loan interest. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Investment transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Facility
fees received are treated as market discounts. Market premiums and discounts are
amortized over the stated life of each applicable security.
D. ORGANIZATIONAL COSTS--The Fund will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $140,000. These costs are being amortized
on a straight line basis over the 60 month period ending March 26, 2003. The
Adviser has agreed that in the event any of the initial shares of the Fund
originally purchased by Van Kampen are redeemed by the Fund during the
amortization period, the Fund will be reimbursed any unamortized organizational
costs in the same proportion as the number of shares redeemed bears to the
number of initial shares held at the time of redemption.
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 1998
- --------------------------------------------------------------------------------
E. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At July 31, 1998, for federal income tax purposes cost of long- and
short-term investments is $392,957,384, the aggregate gross unrealized
appreciation is $719,299 and the aggregate gross unrealized depreciation is
$156,134 resulting in net unrealized appreciation of $563,165. Net realized
gains or losses may differ for financial reporting and tax purposes primarily as
a result of the deferral of losses for tax purposes resulting from wash sales.
F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between financial and tax basis
reporting for the 1998 fiscal year have been identified and appropriately
reclassified. Permanent differences of $169,014 relating to certain offering
costs which are not deductible for tax purposes have been reclassified from
accumulated undistributed net investment income to capital.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- -------------------------------------------------------------------------
<S> <C>
First $4.0 billion.......................................... .950 of 1%
Next $3.5 billion........................................... .900 of 1%
Next $2.5 billion........................................... .875 of 1%
Over $10.0 billion.......................................... .850 of 1%
</TABLE>
In addition, the Fund will pay a monthly administrative fee to Van Kampen
Funds Inc., the Fund's Administrator, at an annual rate of .25% of the average
net assets of the Fund. The administrative services to be provided by the
Administrator include monitoring the provisions of the loan agreements and any
agreements with respect to participations and assignments, record keeping
responsibilities with respect to interests in Variable Rate Senior Loans in the
Fund's portfolio and providing certain services to the holders of the Fund's
securities.
For the period ended July 31, 1998, the Fund recognized expenses of
approximately $16,200 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the period ended July 31, 1998, the Fund recognized expenses of
approximately $9,700 representing the Administrator's or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Fund.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the period ended July
31, 1998, the Fund recognized expenses for their services
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 1998
- --------------------------------------------------------------------------------
of approximately $68,400. The transfer agency fees are determined through
negotiations with the Fund's Board of Trustees and are based on competitive
market benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable 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.
3. CAPITAL TRANSACTIONS
At July 31, 1998, paid in surplus aggregated $410,157,150. Transactions in
common shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1998
- ---------------------------------------------------------------------------
<S> <C>
Beginning Shares............................................ 10,000
----------
Shares Sold................................................. 40,784,384
Shares Issued Through Dividend Reinvestment................. 325,311
Shares Repurchased.......................................... (127,200)
----------
Net Increases in Shares..................................... 40,982,495
----------
Outstanding Ending Shares................................... 40,992,495
==========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $334,319,527 and $7,911,217,
respectively.
5. TENDER OF SHARES
The Board of Trustees currently intends, each quarter, to consider authorizing
the Fund to make tender offers for all or a portion of its then outstanding
common shares at the net asset value of the common shares at that time. For the
period ended July 31, 1998, 127,200 shares were tendered and repurchased by the
Fund.
6. EARLY WITHDRAWAL CHARGE
An early withdrawal charge to recover offering expenses will be imposed in
connection with most common shares held for less than one year which are
accepted by the Fund for repurchase pursuant to tender offers. The early
withdrawal charge of 1.00% will be payable to Van Kampen. For the period ended
July 31, 1998, Van Kampen received early withdrawal charges of approximately
$11,320 in connection with tendered shares of the Fund.
7. SENIOR LOAN PARTICIPATION COMMITMENTS
The Fund invests primarily in participations, assignments, or acts as a party to
the primary lending syndicate of a Variable Rate Senior Loan interest to United
States corporations, partnerships, and other entities. When the Fund purchases a
participation of a Senior Loan interest, the Fund typically enters into a
contractual agreement with the lender or other third party selling the
participation, but not with the borrower directly. As such, the Fund assumes
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 1998
- --------------------------------------------------------------------------------
the credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Fund and the Borrower.
At July 31, 1998, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Fund on a participation
basis.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SELLING PARTICIPANT (000) (000)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Bankers Trust............................................... $ 8,279 $ 8,279
Canadian Imperial Bank of Commerce.......................... 19,459 19,461
------- -------
Total....................................................... $27,738 $27,740
======= =======
</TABLE>
8. SERVICE PLAN
The Fund has adopted a Service Plan (the "Plan") designed to meet the service
fee requirements of the sales charge rule of the National Association of
Securities Dealers, Inc. The Plan governs payments for personal services and/or
the maintenance of shareholder accounts.
Annual fees under the Plan of .15% (.25% maximum) of net assets are
accrued daily and paid quarterly. For the period ended July 31, 1998, the Fund
paid service fees of $73,602 to Van Kampen.
9. YEAR 2000 COMPLIANCE (UNAUDITED)
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the internal systems and external vendor connections. The goal of
this project is to position our business to continue unaffected as a result of
the century change. At this time, there can be no assurance that the steps taken
will be sufficient to avoid any adverse impact to the Fund, but we do not
anticipate that the move to Year 2000 will have a material impact on our ability
to continue to provide the Fund with service at current levels. In addition, it
is possible that the securities markets in which the Fund invests may be
detrimentally affected by computer failures throughout the financial services
industry beginning January 1, 2000. Improperly functioning trading systems may
result in settlement problems and liquidity issues.
20
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Senior Floating Rate Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Senior Floating Rate Fund (the "Fund"), including the portfolio of
investments, as of July 31, 1998, and the related statements of operations, cash
flows and changes in net assets and financial highlights for the period from
March 27, 1998 (commencement of investment operations) to July 31, 1998. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1998, by correspondence with the custodian and selling or agent banks; where
replies were not received we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Van Kampen Senior Floating Rate Fund as of July 31, 1998, the
results of its operations, cash flows, the changes in its net assets and
financial highlights for the period from March 27, 1998 (commencement of
investment operations) to July 31, 1998, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
September 4, 1998
21
<PAGE> 23
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales
charges, risks, and expenses. Please read it carefully before you invest or
send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our web site at
WWW.VAN-KAMPEN.COM -- to view prospectuses, click on Investors' Place, and
select Prospectuses and Reports
- call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- e-mail us by visiting
WWW.VAN-KAMPEN.COM and selecting Investors' Place
22
<PAGE> 24
VAN KAMPEN SENIOR FLOATING RATE FUND
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
JEFFREY W. MAILLET*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT
ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
23
<PAGE> 25
VAN KAMPEN SENIOR FLOATING RATE FUND
THIS PAGE INTENTIONALLY LEFT BLANK
24
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> SR FLOATING RATE
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> MAR-27-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 392,959,835
<INVESTMENTS-AT-VALUE> 393,520,549
<RECEIVABLES> 18,995,082
<ASSETS-OTHER> 609,743
<OTHER-ITEMS-ASSETS> 57,574
<TOTAL-ASSETS> 413,182,948
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,747,644
<TOTAL-LIABILITIES> 1,747,644
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 410,567,075
<SHARES-COMMON-STOCK> 40,992,495
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 309,945
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,430)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 560,714
<NET-ASSETS> 411,435,304
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,476,183
<OTHER-INCOME> 19,415
<EXPENSES-NET> (1,374,601)
<NET-INVESTMENT-INCOME> 5,120,997
<REALIZED-GAINS-CURRENT> (2,430)
<APPREC-INCREASE-CURRENT> 560,714
<NET-CHANGE-FROM-OPS> 5,679,281
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,980,066)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,784,384
<NUMBER-OF-SHARES-REDEEMED> (127,200)
<SHARES-REINVESTED> 325,311
<NET-CHANGE-IN-ASSETS> 411,335,304
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 756,106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,554,573
<AVERAGE-NET-ASSETS> 232,389,733
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.213
<PER-SHARE-GAIN-APPREC> 0.034
<PER-SHARE-DIVIDEND> (0.210)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.037
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
