<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
A Focus on Senior Loans.......................... 8
Portfolio Highlights............................. 9
Portfolio of Investments......................... 11
Statement of Assets and Liabilities.............. 17
Statement of Operations.......................... 18
Statement of Changes in Net Assets............... 19
Statement of Cash Flows.......................... 20
Financial Highlights............................. 21
Notes to Financial Statements.................... 22
</TABLE>
SFR SAR 3/99
<PAGE> 2
LETTER TO SHAREHOLDERS
February 19, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
Despite a difficult six months in many emerging markets, the U.S. economy
remained strong. The nation's gross domestic product (GDP), a measure of
economic health, grew 4.3 percent in 1998, surpassing 1997's growth rate. In the
fourth quarter alone, GDP rose 6.1 percent--surprising most economists, whose
estimates had been much more conservative. This impressive growth suggests that
the U.S. economy remains fundamentally sound, despite a crisis of confidence in
the third quarter as a result of the financial problems abroad. A continuation
of low inflation--only a 1.6 percent increase in the consumer price index in
1998--also helped maintain the health of the domestic economy and kept
inflation-adjusted interest rates attractive.
In the last few months of 1998, the Federal Reserve's interest rate
decreases contributed to the positive financial environment. In response to
declining corporate profits and mounting international concerns, the Fed lowered
interest rates three times, with 0.25 percent cuts in September, October, and
November. These rate cuts, coupled with a wave of corporate mergers and
cost-cutting measures, lent the support needed to foster continued growth
despite the global financial situation.
MARKET REVIEW
Although the economy moved along at a healthy pace, the stock and bond
markets experienced significant volatility in the third quarter of 1998, with
investor concerns about the financial problems in Asia and Latin America
reaching a peak in August. During this time, American and foreign investors
alike pursued a flight to quality--seeking the relative safety of large-company
stocks and government bonds. During this period, investor interest in the senior
loan market increased dramatically as companies issued greater amounts of
Continued on page 2
1
<PAGE> 3
senior loan debt to finance their business transactions in the third and fourth
quarters. In 1998, leveraged lending hit $272 billion, topping the record $194
billion we saw in 1997. The secondary market also experienced strong growth,
with a total volume of $67.3 billion, up from $62 billion the previous year.
OUTLOOK
Our outlook for the domestic economy remains positive, although we expect
that growth may slow somewhat in the coming months. Internationally, we
anticipate that low interest rates and declining inflation should lead to
improvements in troubled areas such as Asia and Latin America.
In the senior loan market, we believe that the banking industry should
remain strong as large-scale mergers and acquisitions continue to generate
short-term corporate capital needs. As a result, we believe there may be a
healthy supply of senior loans with attractive yields going forward.
Additional details about your fund, including a question-and-answer section
with your portfolio manager, are provided in this report. As always, we are
pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG]
Richard F. Powers III
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 JANUARY 31, 1999
VAN KAMPEN SENIOR FLOATING RATE FUND
<TABLE>
<CAPTION>
<S> <C>
TOTAL RETURNS
Six-month total return(1).................................. 3.58%
Life-of-Fund cumulative total return(1).................... 6.18%
Commencement date.......................................... 03/27/98
Distribution rate(2)....................................... 6.05%
SHARE VALUATIONS
Net asset value on 01/31/99................................ $10.08
Six-month high net asset value (01/31/99).................. $10.08
Six-month low net asset value (08/07/98)................... $10.03
</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 January 25, 1999 offering price of $10.08
and the current monthly dividend of $.0508 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
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
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.
CYCLICAL INDUSTRIES: Industries where earnings tend to rise quickly when the
economy strengthens and fall quickly when the economy weakens. Examples of
cyclical industries include housing, automobiles, and paper. Noncyclical
industries are typically less sensitive to changes in the economy. These
include utilities, grocery stores, and pharmaceuticals.
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.
FLIGHT TO QUALITY: The flow of funds toward relatively safer investments in
times of marketplace uncertainty or fear.
HEDGE FUND: A fund, usually used by wealthy individuals and institutions, that
is allowed to use aggressive strategies that are unavailable to most mutual
funds.
LONDON INTER-BANK OFFER RATE (LIBOR): The interest rate that the largest
international banks charge each other for loans.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from total assets and dividing this amount by the
number of common 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 holders 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.
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
during the past six months. 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
during the six months ended January 31, 1999.
Q HOW DID CONDITIONS IN THE SENIOR LOAN MARKET AFFECT THE FUND DURING THE
PAST SIX MONTHS?
A The financial turbulence in the second half of the year precipitated a
modest credit crunch. Between overseas turmoil and the collapse of Long
Term Capital Management, a large U.S. hedge fund, we saw a widening of
credit spreads as investors demanded greater yield compensation for higher-risk
investments. Yet market fundamentals didn't necessarily warrant such caution, as
the economy remained sound and inflation continued to be low. These conditions
created a favorable pricing environment and wider yield spreads for senior
loans. For example, loans that ordinarily might have come to market yielding 175
basis points above LIBOR were coming to market at LIBOR plus 350 basis points.
We were able to obtain some very attractive securities under these
circumstances.
Q WHAT AREAS OF THE MARKET PROVIDED THE BEST OPPORTUNITIES?
A We found ample opportunities from a broad range of industries.
Telecommunications--including cellular, satellite, wireless, and personal
communications systems--was the largest industry weighting in the
portfolio. This industry has seen a high level of consolidation recently, for
which senior loans have helped provide the financing. The portfolio is composed
of loans from a variety of industries, with greater concentration in restaurants
and food service; beverage, food, and tobacco; and chemicals, plastics, and
rubber. We favored a number of noncyclical industries, as the earnings of
companies from these areas traditionally haven't been closely tied to the health
of the overall economy.
Q CAN YOU TALK ABOUT SOME OF YOUR LARGEST HOLDINGS?
A Most of the borrowers represented in the portfolio provide basic goods and
services to the domestic economy. Currently, we hold nearly 75 issues from
more than 30 industry sectors. Some of our largest holdings include:
- - Agrilink Foods--This processing and marketing cooperative offers a variety of
food brands, including Birds Eye frozen vegetables.
5
<PAGE> 7
- - Iridium Operating--This company is seeking to establish a global wireless
communications system that will enable subscribers to send and receive
telephone calls anywhere in the world.
- - Domino's Pizza--A world leader in pizza delivery, Domino's Pizza operates in
more than 60 international markets.
- - SPX Corporation--This firm designs, manufactures and markets specialty service
tools and equipment for the motor vehicle industry.
- - King Pharmaceuticals--This firm recently acquired three branded prescription
pharmaceutical products from Hoechst Marion Roussel. The portfolio holds
senior loans that helped finance these acquisitions.
Our holdings represent companies that we believe can perform well in the
long run and make their loan payments on schedule. If you turn to the complete
listing of the Fund's investments on page 11, you'll probably see some familiar
companies whose products or services you use every day. Senior loans often
provide integral financing for the growth and development of these firms. 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 CAN THE FUND INVEST IN SENIOR LOANS THAT ARE USED TO FINANCE CONSTRUCTION
OR REAL ESTATE DEVELOPMENT PROJECTS?
A Yes. The Board of Trustees of the Fund recently authorized these
investments, provided they are consistent with the Fund's overall
investment objectives and policies, as described in the Fund's prospectus.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund's total return for the six-month period was 3.58 percent(1) at
net asset value (NAV). Based on the January 31, 1999, public offering
price of $10.08 per share, the Fund's current monthly dividend of $0.0508
represents a distribution rate of 6.05 percent(2). For more information on the
Fund's performance, please refer to the chart on page 3. Past performance does
not guarantee future results.
Q HOW DID CHANGING INTEREST RATES AFFECT THE FUND?
A Our senior loans have the ability to adjust their interest payments over
time in conjunction with changes in interest rates--generally, interest
rates on these loans reset every 30 to 90 days. As a result, the income
generated by the Fund usually reflects the prevailing trend in short-term
interest rates. During the reporting period, many of the Fund's holdings
adjusted their interest rates to reflect the downward trend in short-term rates
and the reductions by the Fed. We lowered the Fund's dividend accordingly.
Despite the falling interest rate environment, the Fund's NAV has remained
relatively consistent--between $10.03 and $10.08 per share during the reporting
period. (Editor's note: The
6
<PAGE> 8
Board of Trustees approved an increase in the Fund's monthly dividend, effective
March 5 reflecting the fact that the Fund's earnings have been slightly higher
in recent months.)
Q WHAT IS YOUR OUTLOOK FOR THE SENIOR LOAN MARKET AND FOR THE FUND?
A Most of our loans have tended to be repaid by their issuers in 18 to 24
months, so we are constantly seeking to replenish the portfolio. As such,
strong deal flows in the senior loan market should be a benefit to
shareholders, as we expect plenty of attractive securities to choose from. In
addition, we believe the U.S. banking industry currently may be the strongest in
the world, lending support to the senior loan market.
Going forward, we will seek to assemble an array of senior loan holdings
that have the potential to offer investors a degree of relative stability in a
variety of market conditions. It is inevitable that the senior loan market will
encounter rough spots from time to time. But we are confident that our loans
have certain 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, our portfolio management team has
successfully navigated senior loan portfolios 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
Please see footnotes on page 3
7
<PAGE> 9
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
trademarks, accounts receivable or inventory, buildings, real estate,
franchises, and common and preferred stock in subsidiaries and affiliates. 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.
SPECIAL CONSIDERATIONS
Under normal market conditions, the Fund may invest up to 20 percent of its
assets in senior loans that are not secured by any specific collateral. In
addition, up to 20 percent of its assets may be invested in senior loans made to
non-U.S. borrowers, although these loans must be U.S.-dollar denominated.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN SENIOR FLOATING RATE FUND
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF VARIABLE RATE SENIOR LOAN
INTERESTS
<TABLE>
<S> <C>
AS OF JANUARY 31, 1999
Chemicals, Plastics and Rubber ................. 8.3%
Telecommunications--Cellular ................... 6.7%
Telecommunications--Wireless Messaging ......... 6.4%
Restaurants and Food Service ................... 5.9%
Beverage, Food and Tobacco ..................... 5.2%
</TABLE>
NET ASSET VALUE STABILITY SINCE INCEPTION
MARCH 27, 1998 THROUGH JANUARY 31, 1999
[LINE GRAPH]
Past performance does not guarantee future results.
9
<PAGE> 11
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN SENIOR FLOATING RATE FUND
CURRENT DISTRIBUTION
MARCH 27, 1998 THROUGH JANUARY 25, 1999
[LINE GRAPH]
TOP FIVE HOLDINGS AS A PERCENTAGE OF VARIABLE RATE SENIOR LOAN INTERESTS
<TABLE>
<S> <C>
AS OF JANUARY 31, 1999
Agrilink Foods, Inc. ........................... 5.2%
BCP S.P., Ltd. ................................. 4.4%
Iridium Operating, LLC. ........................ 4.0%
The Pantry, Inc. ............................... 3.7%
Domino's Pizza ................................. 3.2%
</TABLE>
Past performance does not guarantee future results.
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Bank Loan
Amount Ratings*
(000) Borrower Moody's S&P Stated Maturity** Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
VARIABLE RATE*** SENIOR LOAN INTERESTS 89.9%
AEROSPACE/DEFENSE 1.7%
$ 4,971 Aerostructures Corp., Term
Loan......................... NR BB- 12/31/03 $ 4,973,693
8,978 Decrane Aircraft Holdings,
Inc., Term Loan.............. B1 B+ 09/30/05 8,977,556
572 Whittaker Corp., Term Loan... NR NR 05/31/03 571,751
234 Whittaker Corp., Revolving
Credit....................... NR NR 05/31/01 233,562
------------
14,756,562
------------
AUTOMOTIVE 1.4%
4,920 Breed Technologies Inc., Term
Loan......................... B1 BB 04/27/04 to 04/27/06 4,919,683
546 Breed Technologies Inc.,
Revolving Credit............. B1 BB 04/27/04 545,921
6,500 Metalforming Technologies,
Inc.,
Term Loan.................... NR NR 06/30/05 6,500,824
------------
11,966,428
------------
BEVERAGE, FOOD AND TOBACCO 4.6%
39,980 Agrilink Foods, Inc., Term
Loan......................... B1 BB- 09/30/04 to 09/30/05 39,991,053
------------
BROADCASTING 1.2%
10,000 Sinclair Broadcast Group,
Inc., Term Loan.............. Ba2 BB- 09/15/05 10,001,902
------------
BUILDINGS AND REAL ESTATE 0.6%
5,000 BSL Holdings, Inc., Term
Loan......................... NR BB- 12/30/05 5,000,042
------------
CHEMICALS, PLASTICS AND RUBBER 7.5%
6,484 High Performance Plastics,
Inc.,
Term Loan.................... NR NR 03/31/05 6,483,716
14,223 Lyondell Petrochemical Co.,
Term Loan.................... Ba2 BBB- 06/30/05 14,231,770
5,000 MetoKote Corp., Term Loan.... NR NR 11/02/05 5,001,620
8,200 Pioneer Americas Acquisition
Corp., Term Loan............. B2 B+ 12/31/06 8,203,440
6,634 Sterling Pulp Chemicals,
Inc., Term Loan.............. Ba3 NR 09/30/04 6,633,773
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Bank Loan
Amount Ratings*
(000) Borrower Moody's S&P Stated Maturity** Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
CHEMICALS, PLASTICS AND RUBBER (CONTINUED)
$18,269 Sybron Chemicals, Inc., Term
Loan......................... NR NR 07/31/04 $ 18,276,241
5,771 Western American Rubber Co.,
Term Loan.................... NR NR 06/30/05 5,771,037
------------
64,601,597
------------
COMMUNICATIONS -- TELEPHONE 2.2%
19,000 Davel Financing Co., LLC,
Term Loan.................... NR NR 06/23/05 19,007,814
------------
CONSTRUCTION MATERIALS 1.7%
5,217 Enclosures Holding Corp.,
Term Loan.................... NR NR 02/28/05 4,307,817
10,114 Hexcel Corp., Term Loan...... Ba2 BB 09/15/05 10,115,258
------------
14,423,075
------------
CONTAINERS, PACKAGING AND GLASS 1.5%
5,955 American Bottling Co., Term
Loan......................... NR NR 05/01/07 5,955,835
1,148 Huntsman Packaging Corp.,
Term Loan.................... B1 BB- 12/31/02 1,148,627
1,465 Huntsman Packaging Corp.,
Revolving Credit............. B1 BB- 12/31/02 1,465,359
4,084 Stone Container Corp., Term
Loan......................... Ba3 B+ 10/01/03 4,084,344
------------
12,654,165
------------
DIVERSIFIED MANUFACTURING 1.3%
10,827 Intesys Technologies, Inc.,
Term Loan.................... NR NR 06/30/04 to 06/30/06 10,829,459
443 Intesys Technologies, Inc.,
Revolving Credit............. NR NR 06/30/04 442,688
------------
11,272,147
------------
ECOLOGICAL 0.4%
3,220 Safety-Kleen Corp., Term
Loan......................... Ba3 BB 04/03/05 to 04/03/06 3,220,756
------------
ELECTRONICS 2.8%
7,500 Amphenol Corp., Term Loan.... Ba3 B+ 05/19/04 7,500,597
9,000 Details Capital Corp., Term
Loan......................... B1 B+ 04/22/05 9,000,007
8,000 WGL Acquisition Corp., Term
Loan......................... NR NR 07/30/04 8,000,478
------------
24,501,082
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Bank Loan
Amount Ratings*
(000) Borrower Moody's S&P Stated Maturity** Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
FARMING AND AGRICULTURE 2.5%
$16,423 Seminis, Inc., Term Loan..... NR NR 12/31/03 to 12/31/05 $ 16,428,847
4,912 Walco International, Inc.,
Term Loan.................... NR NR 03/31/04 4,943,714
------------
21,372,561
------------
FINANCE 3.1%
10,000 Bridge Information Systems,
Inc.,
Term Loan.................... NR NR 05/29/05 10,002,056
6,977 OSI Holdings Corp., Term
Loan......................... B2 NR 10/15/04 6,978,508
10,000 Paul G. Allen, Term Loan..... NR NR 06/10/03 10,000,122
------------
26,980,686
------------
GROCERY 3.4%
29,000 The Pantry, Inc., Term
Loan......................... B1 BB- 01/31/06 29,000,000
------------
HEALTHCARE 3.2%
9,375 Meditrust Corp., Term Loan... NR NR 07/15/99 9,375,317
18,572 Vencor, Inc., Term Loan...... B1 B- 01/15/05 18,572,029
------------
27,947,346
------------
HOME AND OFFICE FURNISHINGS 2.7%
6,500 Imperial Home Decor Group,
Inc., Term Loan.............. B1 B+ 03/13/05 to 03/13/06 6,559,394
17,103 Renters Choice, Inc., Term
Loan......................... Ba3 BB- 01/31/06 to 01/31/07 17,104,562
------------
23,663,956
------------
HOTELS, MOTELS, INNS, AND GAMING 1.2%
10,000 Aladdin Gaming, LLC, Term
Loan......................... B2 NR 08/25/06 to 08/26/06 10,002,502
------------
LEISURE AND ENTERTAINMENT 0.6%
4,988 True Temper Sports, Inc.,
Term Loan.................... B1 BB- 09/30/05 4,988,457
------------
MACHINERY 2.2%
4,365 Numatics, Inc., Term Loan.... Ba3 B+ 03/19/04 to 09/19/05 4,364,154
15,000 Ocean Rig (Norway), Term
Loan......................... NR NR 06/01/08 15,003,260
------------
19,367,414
------------
MINING, STEEL, IRON AND NON-PRECIOUS METALS 1.2%
9,950 Ispat Inland LP, Term Loan... Ba3 BB 07/16/05 to 07/16/06 9,950,000
------------
PAPER AND FOREST PRODUCTS 1.7%
14,925 Le Group Forex, Inc., Term
Loan......................... NR BB 06/30/05 15,000,644
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Bank Loan
Amount Ratings*
(000) Borrower Moody's S&P Stated Maturity** Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
PERSONAL AND MISCELLANEOUS SERVICES 2.2%
$ 5,193 Boyd's Collection, Ltd., Term
Loan......................... Ba3 B+ 04/21/06 $ 5,193,692
13,500 Dimac Corp., Term Loan....... B1 B+ 06/30/06 to 12/30/06 13,538,410
------------
18,732,102
------------
PHARMACEUTICALS 2.3%
20,000 King Pharmaceuticals, Inc.,
Term Loan.................... B2 BB- 12/18/06 20,000,009
------------
PRINTING AND PUBLISHING 3.3%
6,487 Advanstar Communications,
Inc., Term Loan.............. Ba3 B+ 04/30/05 6,487,000
5,000 Check Printers, Inc., Term
Loan......................... NR NR 06/30/05 5,003,933
7,500 Penton Media, Inc., Term
Loan......................... Ba3 BB- 05/31/06 7,500,000
5,000 Reiman Publications, Inc.,
Term Loan.................... NR NR 12/10/05 5,000,240
4,245 TransWestern Publishing, LP,
Term Loan.................... Ba3 B+ 10/01/04 4,245,176
------------
28,236,349
------------
RESTAURANTS AND FOOD SERVICE 5.3%
4,599 Americas Favorite Chicken,
Inc., Term Loan.............. NR NR 06/30/02 4,600,503
1,384 Carvel Corp., Term Loan...... NR NR 06/30/00 1,383,883
14,963 Duane Reade, Inc., Term
Loan......................... B1 B+ 02/15/06 14,966,735
25,000 Domino's Pizza, Term Loan.... B1 B+ 12/21/06 to 12/21/07 25,011,735
------------
45,962,856
------------
RETAIL -- OFFICE PRODUCTS 1.2%
9,995 U.S. Office Products Co.,
Term Loan.................... B2 B- 06/09/06 9,995,366
------------
RETAIL -- STORES 1.0%
9,066 Kirkland Holdings, LLC, Term
Loan......................... NR NR 06/30/02 9,066,086
------------
TELECOMMUNICATIONS -- CELLULAR 6.0%
34,300 BCP S.P., Ltd., Term Loan.... NR NR 03/31/00 34,090,220
3,000 Cellular, Inc. Financial
Corp. (CommNet), Term Loan... B1 B 09/30/05 2,997,443
15,000 Wireless One Network, LP,
Term Loan.................... NR NR 09/30/07 15,006,348
------------
52,094,011
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Bank Loan
Amount Ratings*
(000) Borrower Moody's S&P Stated Maturity** Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
TELECOMMUNICATIONS -- HYBRID 2.5%
$ 2,000 Nextel Finance Co., Term
Loan......................... Ba3 B- 09/30/06 $ 2,000,872
20,000 Pacific Crossing, Ltd., Term
Loan......................... NR NR 07/28/06 20,000,000
------------
22,000,872
------------
TELECOMMUNICATIONS -- PERSONAL COMMUNICATIONS SYSTEMS 3.4%
24,266 Omnipoint Communications,
Inc.,
Term Loan.................... B2 B 02/01/06 to 02/17/06 24,278,226
5,000 Telecorp PCS, Inc., Term
Loan......................... NR NR 12/05/07 5,002,094
------------
29,280,320
------------
TELECOMMUNICATIONS -- WIRELESS MESSAGING 5.7%
31,206 Iridium Operating, LLC, Term
Loan......................... NR B 12/29/00 31,211,140
6,349 Mobilemedia Communications,
Inc., Term Loan.............. Caa3 D 06/30/02 6,348,563
1,025 Mobilemedia Communications,
Inc.,
Revolving Credit............. Caa3 D 06/30/02 1,025,081
11,000 TSR Wireless, LLC, Term
Loan......................... NR NR 06/30/05 10,996,790
------------
49,581,574
------------
TEXTILES AND LEATHER 3.8%
8,238 American Marketing
Industries, Inc., Term
Loan......................... NR NR 11/30/04 to 11/30/05 8,239,519
5,400 Humphrey's, Inc., Term
Loan......................... Caa1 B+ 01/15/03 5,404,575
4,851 Joan Fabrics Corp., Term
Loan......................... NR NR 06/30/05 4,850,649
13,965 Norcross Safety Products,
LLC, Term Loan............... NR NR 10/02/05 13,963,584
------------
32,458,327
------------
TRANSPORTATION -- CARGO 1.6%
4,450 Gemini Air Cargo, Inc., Term
Loan......................... B1 NR 12/12/02 4,451,482
8,959 OmniTRAX Railroads, LLC, Term
Loan......................... NR NR 05/14/05 8,962,439
------------
13,413,921
------------
TRANSPORTATION -- MANUFACTURING COMPONENTS 2.9%
24,938 SPX Corp., Term Loan......... Ba3 BB 09/30/06 24,956,060
------------
TOTAL VARIABLE RATE*** SENIOR LOAN INTERESTS 89.9%
(Cost $773,445,168)........................................................... $775,448,042
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- -----------------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS 7.3%
COMMERCIAL PAPER 5.6%
CSX Corp. ($10,000,000 par, maturing 02/03/99, yielding 5.00%)................ $ 9,997,222
Case Credit Corp. ($5,000,000 par, maturing 03/10/99, yielding 4.96%)......... 4,974,511
Comdisco, Inc. ($8,000,000 par, maturing 02/18/99, yielding 4.99%)............ 7,981,149
Safeway, Inc. ($8,300,000 par, maturing 02/22/99, yielding 4.99%)............. 8,275,840
Sprint Capital Corp. ($10,000,000 par, maturing 02/24/99, yielding 5.00%)..... 9,968,056
Texas Utilities Co. ($7,500,000 par, maturing 02/10/99 to 02/24/99, yielding
4.93% to 4.98%)............................................................. 7,481,010
------------
48,677,788
------------
SHORT-TERM LOAN PARTICIPATIONS 1.7%
Centex Corp. ($6,750,000 par, maturing 02/24/99, yielding 4.97%).............. 6,750,000
Nabisco, Inc. ($8,000,000 par, maturing 02/01/99, yielding 4.90%)............. 8,000,000
------------
14,750,000
------------
TOTAL SHORT-TERM INVESTMENTS 7.3%
(Cost $63,427,788)............................................................ 63,427,788
------------
TOTAL INVESTMENTS 97.2%
(Cost $836,872,956)........................................................... 838,875,830
OTHER ASSETS IN EXCESS OF LIABILITIES 2.8%..................................... 24,389,050
------------
NET ASSETS 100.0%.............................................................. $863,264,880
============
</TABLE>
NR = Not Rated
* Bank loans rated below Baa by Moody's Investor Services, 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 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 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
16
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $836,872,956)....................... $838,875,830
Receivables:
Fund Shares Sold.......................................... 13,107,882
Interest.................................................. 11,417,970
Investments Sold.......................................... 2,276,092
Prepaid Expenses............................................ 186,382
Unamortized Organizational Costs............................ 116,140
Other....................................................... 85,030
------------
Total Assets.......................................... 866,065,326
------------
LIABILITIES:
Payables:
Income Distributions...................................... 827,520
Investment Advisory Fee................................... 726,948
Custodian Bank............................................ 507,553
Distributor and Affiliates................................ 258,402
Administrative Fee........................................ 213,015
Organizational Costs...................................... 95,380
Initial Offering and Registration Costs................... 41,558
Fund Shares Repurchased................................... 2,793
Accrued Expenses............................................ 112,115
Trustees' Deferred Compensation and Retirement Plans........ 15,162
------------
Total Liabilities..................................... 2,800,446
------------
NET ASSETS.................................................. $863,264,880
============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 85,643,767 shares issued and
outstanding).............................................. $ 856,438
Paid in Surplus............................................. 858,441,317
Net Unrealized Appreciation................................. 2,002,874
Accumulated Undistributed Net Investment Income............. 1,891,855
Accumulated Net Realized Gain............................... 72,396
------------
NET ASSETS.................................................. $863,264,880
============
NET ASSET VALUE PER COMMON SHARE
($863,264,880 divided by 85,643,767 shares outstanding)... $ 10.08
============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
STATEMENT OF OPERATIONS
For the Six Months Ended January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $26,426,494
Fees........................................................ 73,083
-----------
Total Income............................................ 26,499,577
-----------
EXPENSES:
Investment Advisory Fee..................................... 3,066,899
Administrative Fee.......................................... 807,079
Service Fee................................................. 484,247
Shareholder Services........................................ 290,090
Legal....................................................... 147,870
Custody..................................................... 48,074
Amortization of Organizational Costs........................ 14,116
Trustees' Fees and Expenses................................. 10,976
Other....................................................... 418,689
-----------
Total Expenses.......................................... 5,288,040
Less Investment Advisory Fees Waived.................... 95,436
-----------
Net Expenses............................................ 5,192,604
-----------
NET INVESTMENT INCOME....................................... $21,306,973
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 113,902
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 560,714
End of the Period......................................... 2,002,874
-----------
Net Unrealized Appreciation During the Period............... 1,442,160
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 1,556,062
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $22,863,035
===========
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended January 31, 1999 and the Period March 27, 1998
(Commencement of Investment Operations)
to July 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Period Ended
January 31, 1999 July 31, 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 21,306,973 $ 5,120,997
Net Realized Gain/Loss............................. 113,902 (2,430)
Net Unrealized Appreciation During the Period...... 1,442,160 560,714
------------ -------------
Change in Net Assets from Operations............... 22,863,035 5,679,281
------------ -------------
Distributions from Net Investment Income........... (19,725,063) (4,980,066)
Distributions from Net Realized Gain............... (39,076) -0-
------------ -------------
Total Distributions.............................. (19,764,139) (4,980,066)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... 3,098,896 699,215
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.......................... 459,606,856 408,647,472
Net Asset Value of Shares Issued Through Dividend
Reinvestment..................................... 13,954,887 3,263,134
Cost of Shares Repurchased......................... (24,831,063) (1,274,517)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS..................................... 448,730,680 410,636,089
------------ -------------
TOTAL INCREASE IN NET ASSETS....................... 451,829,576 411,335,304
NET ASSETS:
Beginning of the Period............................ 411,435,304 100,000
------------ -------------
End of the Period (Including undistributed net
investment income of $1,891,855 and $309,945,
respectively).................................... $863,264,880 $ 411,435,304
============ =============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
STATEMENT OF CASH FLOWS
For the Six Months Ended January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 22,863,035
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Used for Operating Activities:
Increase in Investments at Value.......................... (445,355,281)
Increase in Interest and Fees Receivables................. (8,885,545)
Increase in Investments Sold.............................. (2,276,092)
Decrease in Prepaid Expenses.............................. 293,104
Decrease in Unamortized Organizational Costs.............. 14,117
Increase in Other Assets.................................. (65,918)
Increase in Investment Advisory Fees...................... 418,489
Increase in Distributor & Affiliates Payable.............. 138,986
Increase in Administrative Fees........................... 115,041
Decrease in Organizational Costs Payable.................. (39,620)
Decrease in Offering & Registration Fees.................. (430,251)
Decrease in Accrued Expenses.............................. (5,280)
Increase in Deferred Compensation and Retirement Plans
Expenses................................................ 9,351
-------------
Total Adjustments....................................... (456,068,899)
-------------
NET CASH USED FOR OPERATING ACTIVITIES...................... (433,205,864)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Shares Sold................................... 462,961,631
Increase in Intra-day Credit Line........................... 507,553
Payments on Shares Repurchased.............................. (24,828,270)
Cash Dividends Paid......................................... (5,434,436)
Capital Gains Distributions Paid............................ (39,076)
-------------
Net Cash Provided by Financing Activities................. 433,167,402
-------------
NET DECREASE IN CASH........................................ (38,462)
Cash at Beginning of the Period............................. 38,462
-------------
CASH AT END OF THE PERIOD................................... $ -0-
=============
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 27, 1998
(Commencement
Six Months of Investment
Ended Operations) to
January 31, 1999 July 31, 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............. $10.037 $10.000
------- -------
Net Investment Income.............................. .328 .213
Net Realized and Unrealized Gain................... .029 .034
------- -------
Total from Investment Operations..................... .357 .247
------- -------
Less Distributions from Net Investment Income...... .313 .210
Less Distributions from Realized Gain.............. .001 -0-
------- -------
Total Distributions.................................. .314 .210
------- -------
Net Asset Value, End of the Period................... $10.080 $10.037
======= =======
Total Return*........................................ 3.58%** 2.52%**
Net Assets at End of the Period (In millions)........ $ 863.3 $ 411.4
Ratio of Expenses to Average Net Assets*............. 1.61% 1.70%
Ratio of Net Investment Income to Average Net
Assets*............................................ 6.60% 6.33%
Portfolio Turnover................................... 10%** 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.............. 1.64% 1.92%
Ratio of Net Investment Income to Average Net
Assets............................................. 6.57% 6.11%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 $775,448,042 (89.8% 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.
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
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 January 31, 1999, for federal income tax purposes cost of long- and
short-term investments is $836,875,407, the aggregate gross unrealized
appreciation is $3,030,637 and the aggregate gross unrealized depreciation is
$1,030,214 resulting in net unrealized appreciation of $2,000,423.
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.
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 six months ended January 31, 1999, the Fund recognized expenses of
approximately $122,700 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 six months ended January 31, 1999, the Fund recognized expenses of
approximately $25,200 representing Van Kampen's cost of providing 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 six months ended
January 31, 1999, the Fund recognized expenses for their services of
approximately $228,300. 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
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 January 31, 1999 and July 31, 1998, paid in surplus aggregated $858,441,317
and $410,157,150, respectively. Transactions in common shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Period Ended
January 31, 1999 July 31, 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares............................ 40,992,495 10,000
---------- ----------
Shares Sold................................. 45,734,814 40,784,384
Shares Issued Through Dividend
Reinvestment.............................. 1,387,989 325,311
Shares Repurchased.......................... (2,471,531) (127,200)
---------- ----------
Net Increase in Shares...................... 44,651,272 40,982,495
---------- ----------
Ending Shares............................... 85,643,767 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 $502,825,233 and $56,155,979,
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
six months ended January 31, 1999, 2,471,531 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 six months
ended January 31, 1999, Van Kampen received early withdrawal charges of
approximately $216,100 in connection with tendered shares of the Fund.
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
January 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 the
credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Fund and the Borrower.
At January 31, 1999, 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..................................... $ 8,238 $ 8,239
Canadian Imperial Bank of Commerce................ 12,502 12,502
------- -------
Total............................................. $20,740 $20,741
======= =======
</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 six months ended January 31, 1999, the Fund
paid service fees of $484,247 to Van Kampen.
26
<PAGE> 28
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
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
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 advisor 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.VANKAMPEN.COM--to view a prospectus, select Download
Prospectus
- - 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.VANKAMPEN.COM and selecting Contact Us
27
<PAGE> 29
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
A. THOMAS SMITH, III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
JEFFREY W. MAILLET*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT
ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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 LLP
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., 1999 All rights reserved.
(SM) denotes a service mark of
Van Kampen Funds Inc.
28
<PAGE> 30
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> SR FLOATING RATE
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 836,872,956
<INVESTMENTS-AT-VALUE> 838,875,830
<RECEIVABLES> 26,801,944
<ASSETS-OTHER> 302,522
<OTHER-ITEMS-ASSETS> 85,030
<TOTAL-ASSETS> 866,065,326
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,800,446
<TOTAL-LIABILITIES> 2,800,446
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 859,297,755
<SHARES-COMMON-STOCK> 85,643,767
<SHARES-COMMON-PRIOR> 40,992,495
<ACCUMULATED-NII-CURRENT> 1,891,855
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 72,396
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,002,874
<NET-ASSETS> 863,264,880
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,426,494
<OTHER-INCOME> 73,083
<EXPENSES-NET> (5,192,604)
<NET-INVESTMENT-INCOME> 21,306,973
<REALIZED-GAINS-CURRENT> 113,902
<APPREC-INCREASE-CURRENT> 1,442,160
<NET-CHANGE-FROM-OPS> 22,863,035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19,725,063)
<DISTRIBUTIONS-OF-GAINS> (39,076)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45,734,814
<NUMBER-OF-SHARES-REDEEMED> (2,471,531)
<SHARES-REINVESTED> 1,387,989
<NET-CHANGE-IN-ASSETS> 451,829,576
<ACCUMULATED-NII-PRIOR> 309,945
<ACCUMULATED-GAINS-PRIOR> (2,430)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,066,899
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,288,040
<AVERAGE-NET-ASSETS> 640,043,350
<PER-SHARE-NAV-BEGIN> 10.037
<PER-SHARE-NII> 0.328
<PER-SHARE-GAIN-APPREC> 0.029
<PER-SHARE-DIVIDEND> (0.313)
<PER-SHARE-DISTRIBUTIONS> (0.001)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.080
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
