<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 3
PORTFOLIO AT A GLANCE
TOP FIVE INDUSTRIES 4
TOP TEN HOLDINGS 4
CURRENT DISTRIBUTION 5
NET ASSET VALUE SINCE INCEPTION 5
Q&A WITH YOUR PORTFOLIO MANAGERS 6
GLOSSARY OF TERMS 11
A FOCUS ON SENIOR LOANS 12
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 13
FINANCIAL STATEMENTS 24
NOTES TO FINANCIAL STATEMENTS 29
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 35
FUND OFFICERS AND IMPORTANT ADDRESSES 36
</TABLE>
One of the greatest shifts we've seen is the increasing importance of investing
for many Americans.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
February 20, 2000
Dear Shareholder,
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all
mutual fund shareholders earmarked retirement as their primary
financial goal in 1998.
Through all the changes in the investment environment over the
past century, the general principles that have made
generations of investors successful remain the same. Some that have stood the
test of time include:
- - Investing for the long-term
- - Basing investment decisions on sound research
- - Building a diversified portfolio
- - Believing in the value of professional investment advice
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Van Kampen
Investment Advisory Corp. Investment Advisory Corp.
</TABLE>
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH REMAINED VIBRANT IN THE SECOND HALF OF 1999, DUE TO STRONG
CONSUMER SPENDING, INVENTORY BUILD-UP, AND EXPORTS. GROSS DOMESTIC PRODUCT
(GDP), THE PRIMARY MEASURE OF ECONOMIC GROWTH, INCREASED AT HISTORICALLY HIGH
ANNUALIZED RATES OF 5.7 PERCENT AND 6.9 PERCENT, RESPECTIVELY, IN THE LAST TWO
QUARTERS OF THE YEAR. WITH GDP MEASURING 4.1 PERCENT FOR 1999, THIS WAS THE
THIRD SUCCESSIVE YEAR IN WHICH GDP EXCEEDED 4 PERCENT. THE CLOSE OF THE
REPORTING PERIOD ALSO MARKED 107 CONSECUTIVE MONTHS OF ECONOMIC EXPANSION--THE
LONGEST STREAK IN U.S. HISTORY.
STRONG GDP DATA, AMONG OTHER FACTORS, PROMPTED THE FEDERAL RESERVE BOARD TO TAKE
AN ACTIVE STANCE IN TEMPERING ECONOMIC GROWTH AND WARDING OFF INFLATION.
ALTHOUGH THE CONSUMER PRICE INDEX (CPI) ROSE A MODEST 2.7 PERCENT DURING 1999,
THE FED INCREASED THE FEDERAL FUNDS RATE BY 0.25 PERCENT IN AUGUST AND NOVEMBER
1999 AND IN FEBRUARY 2000. FED POLICYMAKERS SUGGESTED THAT ADDITIONAL INCREASES
ARE LIKELY IN THE COMING MONTHS.
ALTHOUGH THE CPI REMAINED QUIET, HINTS OF INFLATION WERE PRESENT IN OTHER
ECONOMIC MEASURES SUCH AS THE EMPLOYMENT COST INDEX (ECI) AND CONSUMER SPENDING
RATES. THE JOB MARKET CONTINUED TO THRIVE AS UNEMPLOYMENT DROPPED TO ITS LOWEST
LEVEL IN 30 YEARS. CONSEQUENTLY, AT YEAR-END THE ECI RECORDED ITS SHARPEST
QUARTER-TO-QUARTER INCREASE SINCE 1991, AS EMPLOYERS WERE FORCED TO INCREASE
BENEFITS SUCH AS HEALTH INSURANCE AND PAID LEAVE TO ATTRACT WORKERS.
THE PROSPECT OF RISING INTEREST RATES APPEARED TO HAVE LITTLE IMPACT ON CONSUMER
SPENDING AND OPTIMISM. CONSUMERS SPENT FREELY IN THE LAST MONTHS OF 1999, WHICH
CULMINATED IN THE STRONGEST HOLIDAY SALES SINCE 1992. AND, THANKS TO PLENTIFUL
JOBS, LOW INFLATION, AND THE REJUVENATED STOCK MARKET, CONSUMER CONFIDENCE
REACHED AN ALL-TIME HIGH IN JANUARY.
INTEREST RATES AND INFLATION
(January 31, 1998 - January 31, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jan 1998 5.5 1.6
5.5 1.4
5.5 1.4
Apr 1998 5.5 1.4
5.5 1.7
5.5 1.7
Jul 1998 5.5 1.7
5.5 1.6
5.25 1.5
Oct 1998 5 1.5
4.75 1.5
4.75 1.6
Jan 1999 4.75 1.7
4.75 1.6
4.75 1.7
Apr 1999 4.75 2.3
4.75 2.1
5 2
Jul 1999 5 2.1
5.25 2.3
5.25 2.6
Oct 1999 5.25 2.6
5.5 2.6
5.5 2.7
Jan 2000 5.5 2.7
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last
day of each month. Inflation is indicated by the annual percent change of the
Consumer Price Index for all urban consumers at the end of each month.
2
<PAGE> 4
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of January 31, 2000)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
<S> <C>
TOTAL RETURNS AND DISTRIBUTION RATE
- -----------------------------------------------------------------------
Six-month total return(1) 1.02%
- -----------------------------------------------------------------------
One-year total return(1) 4.44%
- -----------------------------------------------------------------------
Life-of-Fund average annual total return(1) 5.75%
- -----------------------------------------------------------------------
Commencement date 03/27/98
- -----------------------------------------------------------------------
Distribution rate(2) 7.39%
- -----------------------------------------------------------------------
SHARE VALUATIONS
- -----------------------------------------------------------------------
Net asset value on 01/31/00 $9.83
- -----------------------------------------------------------------------
Six-month high net asset value (08/02/99) $10.09
- -----------------------------------------------------------------------
Six-month low net asset value (01/31/00) $9.83
- -----------------------------------------------------------------------
</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 1% imposed on most shares
accepted by the Fund for repurchase which have been held for less than one year.
If the early withdrawal charge was included, total return would be lower.
(2) Distribution rate is based upon the offering price of $9.90 and the current
monthly dividend of $0.0610 per share as of January 25, 2000.
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
risk considerations, charges and expenses, investment objectives and operating
policies. Prospective investors should read the prospectus carefully before
investing or sending money.
3
<PAGE> 5
PORTFOLIO AT A GLANCE
TOP FIVE PORTFOLIO INDUSTRIES
(as a percentage of total assets - January 31, 2000)
<TABLE>
<S> <C>
Telecommunications--Personal Communication Systems 7.1%
- ---------------------------------------------------------------------
Chemicals, Plastics, and Rubber 4.7%
- ---------------------------------------------------------------------
Entertainment and Leisure 4.0%
- ---------------------------------------------------------------------
Transportation--Personal 3.7%
- ---------------------------------------------------------------------
Printing and Publishing 3.6%
- ---------------------------------------------------------------------
</TABLE>
TOP TEN HOLDINGS
(as a percentage of total assets - January 31, 2000)
<TABLE>
<S> <C>
Allied Waste North America, Inc. 2.8%
- ---------------------------------------------------------------------
Avis Rent A Car, Inc. 2.3%
- ---------------------------------------------------------------------
Agrilink Foods, Inc. 2.3%
- ---------------------------------------------------------------------
BCP SP Ltd. 2.2%
- ---------------------------------------------------------------------
Omnipoint Communications, Inc. 1.7%
- ---------------------------------------------------------------------
The Pantry, Inc. 1.6%
- ---------------------------------------------------------------------
Domino's, Inc. 1.4%
- ---------------------------------------------------------------------
Lyondell Chemical Co. 1.4%
- ---------------------------------------------------------------------
Pacific Crossing Ltd. 1.4%
- ---------------------------------------------------------------------
Motor Coach Industries International, Inc. 1.3%
- ---------------------------------------------------------------------
</TABLE>
4
<PAGE> 6
CURRENT DISTRIBUTION
(April 24, 1998 - January 25, 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
VAN KAMPEN SENIOR FLOATING RATE
FUND 3-MONTH TREASURY BILL
------------------------------- ---------------------
<S> <C> <C>
4/98 6.59 4.97
6.58 5.01
6.57 5.08
7/98 6.57 5.07
6.57 4.83
6.32 4.36
6.07 4.32
6.07 4.48
6.06 4.45
1/99 6.05 4.45
6.03 4.67
6.40 4.48
6.52 4.54
6.53 4.63
6.52 4.78
7/99 6.52 4.75
6.89 4.97
6.89 4.85
6.91 5.09
6.91 5.30
6.91 5.33
1/00 7.39 5.69
</TABLE>
NET ASSET VALUE SINCE INCEPTION
(March 27, 1998 - January 31, 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
VAN KAMPEN SENIOR FLOATING RATE FUND
------------------------------------
<S> <C>
3/98 10.00
10.01
10.03
10.04
7/98 10.04
10.04
10.05
10.05
10.05
10.06
1/99 10.08
10.11
10.12
10.11
10.11
10.12
7/99 10.09
10.02
10.01
9.98
9.98
9.93
1/00 9.83
</TABLE>
Past performance does not guarantee future results.
5
<PAGE> 7
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE ADVISER OF THE VAN KAMPEN SENIOR
FLOATING RATE FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE
MARKETS DURING THE PAST SIX MONTHS. ONE OF THE KEY EVENTS DURING THE PERIOD WAS
A CHANGE IN PORTFOLIO MANAGERS. ON DECEMBER 8, 1999, HOWARD TIFFEN ASSUMED
DAY-TO-DAY MANAGEMENT RESPONSIBILITIES FOR THE FUND. HE BRINGS MORE THAN 30
YEARS OF GLOBAL AND DOMESTIC INVESTMENT EXPERIENCE TO VAN KAMPEN'S SENIOR LOAN
TEAM.
THE FOLLOWING DISCUSSION REFLECTS HIS VIEWS ON THE FUND'S PERFORMANCE DURING
THE SIX MONTHS ENDED JANUARY 31, 2000.
Q CAN YOU TALK ABOUT MARKET
CONDITIONS DURING THE LAST SIX MONTHS?
A The last six months could be
described as a game of two halves in the senior loan market. In the summer and
fall of 1999, the supply of loans in the senior loan market was extremely
favorable to investors, providing many new loans with relatively favorable yield
and credit terms. The winter months of 1999 and early 2000 were the reverse,
with sparse offerings and lower relative yields, making it a more difficult
environment for investors.
Credit deterioration, however, had a much larger impact on investors than
did the supply of senior loans. Defaults reached levels not seen since 1992, and
that was unusual and unexpected by us given the strength of the economy.
Q HOW DID THESE CONDITIONS AFFECT
THE FUND, AND WHAT OTHER FACTORS HAD A SIGNIFICANT IMPACT ON THE FUND'S
PERFORMANCE?
A The rise in defaults hurt the
entire senior loan industry during the six-month period. Much of the Fund's
loss, approximately 2.6 percent of NAV, was due to its concentration in Iridium
Operating LLC, a telecommunications firm in bankruptcy, and the Fund's modest
holdings in the health-care industry.
Iridium Operating LLC filed for Chapter 11 bankruptcy protection during the
period, shortly after defaulting on $1.55 billion in bank loans. The company's
primary business relied on building a global satellite network to provide
cellular phone access almost anywhere in the world.
6
<PAGE> 8
Demand for the relatively large and expensive phones fell short of expectations,
and revenues failed to cover debt expenses. The value of these loans were marked
down considerably during the period as new information became available.
With respect to health care, or to be more precise, nursing homes, we first
mentioned this situation in your last report dated July 31, 1999. At that time,
it was clear that the Balanced Budget Act of 1997 was having more of a negative
effect on nursing homes than initially expected. One component of the act
changed how nursing homes are reimbursed by Medicare. The new policy was
originally projected to save Medicare $8 billion in nursing-home costs over a
five-year period. In 1999, it was discovered that the savings had been
underestimated by nearly half, and that Medicare's new policy would realize
savings of approximately $17 billion over the same period--a difference of $9
billion--siphoned out of nursing-home revenues.
For many nursing homes, most of which rely on Medicare for about 60 percent
of their revenues, this result put a significant strain on their businesses. As
of January 31, 2000, three of the seven largest providers of long-term care
facilities were operating under bankruptcy protection. [Editor's note: As of
February 20, 2000, four of the seven largest providers were operating under
bankruptcy protection.]
During 1999, Congress amended the Act to provide some relief from these
negative effects on nursing-home providers. The Balanced Budget Refinement Act
of 1999 revised again the Medicare reimbursement policy to reduce the burden on
the nursing-home sector by approximately $3 billion over the next 5 years, and
this should relieve some of the stress that has been placed on these businesses.
It was Iridium Operating LLC and, to a lesser extent, the health-care sector
that had the largest adverse impact on the NAV. The Fund's NAV fell from $10.09
on July 31, 1999, to $9.83 as of January 31, 2000.
Q WHY DID DEFAULTS AFFECT THE
FUND? AREN'T THE LOANS BACKED BY COLLATERAL?
A Defaults affect all holders of
interests in senior loans, even those that are collateralized. At least 80
percent of the Fund's loans are required to be "collateralized"--backed by the
borrowers' assets. As a result, the Fund is likely to recover more of its
investment in a defaulted senior loan than it would if it were invested in other
types of securities. Recovery on defaulted senior loans, however, takes time.
When a senior loan defaults (i.e., the borrower is unable to make a scheduled
payment of interest or principal), lenders typically engage in negotiations with
the borrower and, in many cases, other participants in the borrower's capital
structure, to seek to recover the value of the loans. This usually takes the
form of an out-of-court restructuring or bankruptcy proceeding, either of which
can last for several years. During this period, the value of the defaulted
senior loan may decrease, which may result in a decline in the Fund's NAV.
7
<PAGE> 9
If the borrower is unable to get back on its feet during that period, its
assets would typically be sold, if possible, and the creditors--including the
Fund--are then paid out of the proceeds. However, even in the case of
collateralized senior loans, there is no certainty that the sale of the
collateral will be sufficient to repay all or part of the loan or that the
collateral can or will be sold.
A July 1999 report by rating agency Moody's Investor Services Inc.
summarized the advantages of senior loans in bankruptcy situations. The report
found that, in the event of a bankruptcy, the median recovery for senior secured
and senior unsecured obligations, such as those held by the Fund, was
significantly higher than it was for other investments such as senior
subordinated debt, subordinated debt (such as bonds), and preferred and common
stock.
Although this Moody's report may not be indicative of future recoveries for
defaulted senior loans in general or those held in the Fund, it lends support to
our view that long-term investors in senior loans have historically recovered
more of their investments following bankruptcies than have investors in other
securities because of the loan's senior position in a borrower's capital
structure--demonstrating one of the principal benefits of this asset class.
Q THE FEDERAL RESERVE RAISED
INTEREST RATES SEVERAL TIMES DURING THE PERIOD. HOW DID THIS AFFECT THE
FUND?
A Senior loans are one of the few
fixed-income asset classes with the potential to benefit from rising interest
rates, demonstrating another advantage of this asset class. Interest rates on
senior loans are reset periodically to reflect trends in prevailing short-term
interest rates, such as the Prime Rate and London InterBank Offered Rate. In
January, the Fund raised its dividend from $0.0575 to $0.061 per share. Of
course, while the loans have the ability to pay investors higher yields when
interest rates rise, they also can pay lower rates when interest rates fall.
Shareholders often ask, "If borrowers are required to pay higher yields to
investors when interest rates rise, doesn't the risk of default increase with
their higher debt costs?" The answer is typically no, at least not directly.
Borrowers are often required to purchase interest-rate insurance from a
third-party bank or insurer. The insurance does not guarantee the solvency of
the borrower, but, subject to the insurer's financial condition, it protects
borrowers from the rising interest cost of their senior loan in rising
interest-rate environments by paying the excess interest cost over a contractual
interest cost cap.
8
<PAGE> 10
Q VAN KAMPEN RECENTLY ANNOUNCED
THAT IT BEGAN MAKING GREATER USE OF INDEPENDENT MARKET INDICATORS PROVIDED
BY LOAN PRICING CORPORATION (LPC), AN INDEPENDENT PRICING SERVICE, IN
VALUING CERTAIN OF THE SENIOR LOANS IN THE FUND'S PORTFOLIO. WHAT IMPACT
MIGHT THIS HAVE ON THE PERFORMANCE?
A Making greater use of market
indicators, which was implemented on January 26, 2000, has had an insignificant
impact on the NAV of the Fund. The Fund's use of market indicators in valuing
senior loans is not new; we've used these indicators as a factor in valuing
senior loans throughout the life of the Fund, as set forth in the Fund's
disclosure documents. As of January 31, 2000, approximately 37 percent of the
Fund's senior loan assets were priced based on market indicators provided by
LPC.
As stated in the Fund's disclosure documents, the NAV of the Fund will
fluctuate as a function of interest rate and credit factors. Moreover, the
Fund's greater use of independent market indicators in valuing certain senior
loans has no affect on the yield of the Fund. Yield is determined based upon the
income earned on assets held in the Fund.
The Fund will continue to value senior loans for which reliable market
indicators are not available in a manner consistent with the Board of Trustees'
long-standing fair value methodology and with pricing policies governed by
procedures adopted by the Board.
Q TO SUMMARIZE, HOW DID THE
FUND PERFORM DURING THE REPORTING PERIOD?
A The Fund's total return for the six-
month period was 1.02 percent at NAV. Based on the January 25, 2000, public
offering price of $9.90 per share, the Fund's current monthly dividend of $0.061
represents a distribution rate of 7.39 percent. For more information on the
Fund's performance, please refer to the chart and footnotes on page 3. Also,
please remember that past performance does not guarantee future results.
Q WHAT IS YOUR OUTLOOK FOR THE
SENIOR LOAN MARKET AND FOR THE FUND?
A We believe the outlook for the
senior loan market is very good, particularly when compared to our outlook six
months ago. In the primary or "new loans" market, we've seen a large number of
mergers and acquisitions (M&A) in recent months. M&A activity often leads to an
increase in new senior loans coming to market, as many companies use senior
loans to help finance these activities. We believe this may lead to an abundance
of offerings with strong credit protection and higher relative yields. In the
developing secondary market, we believe there may be growing opportunities for
the Fund to acquire senior loans from other investors at prices lower than and
at yields higher than we could expect to receive in the primary or new loans
markets.
9
<PAGE> 11
In terms of credit quality, we believe the rate of defaults during 2000 may
be lower than in 1999. We anticipate that defaults during 2000 may fall to
approximately 2 to 3 percent from 7.5 percent during 1999. The principal reason
for our optimism is that we believe the negative effects of the Balanced Budget
Act of 1997 on the health-care sector were reflected primarily during 1999 and
that most of the defaults by nursing-home providers have already occurred. Of
course, there can be no assurance that our forecast will be accurate, but we are
hopeful the industry-wide problem that occurred in the health-care sector is
behind us.
As the Fed raises interest rates, we may also see a rise in investors'
demand for senior loan funds, as investors seek to take advantage of one of the
few asset classes with the potential to benefit from rising interest rates and
inflation.
With regard to the Fund, our goal is to further diversify the loans we hold.
With a department staff of 23 professionals, including 11 analysts with an
average of nearly 15 years of experience, we believe that we have the resources
to manage a significantly larger number of loans than we currently hold. In the
long run, we believe that improved diversification will add strength and
stability to the Fund's NAV and dividends.
10
<PAGE> 12
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATION.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank 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.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing this
amount by the number of shares outstanding. The NAV does not include any initial
or contingent deferred sales charge; if these charges were included, the NAV
would decrease.
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 Trust is entitled
will be paid.
11
<PAGE> 13
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. If
they are not fully paid, it potentially could have a negative effect on the
Fund's net asset value. 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 undersecured, 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. This could potentially have a negative
effect on the Fund's net asset value.
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,
for example, 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.
12
<PAGE> 14
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR FUND AT THE END OF THE
REPORTING PERIOD(1).
<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 80.1%
AEROSPACE/DEFENSE 1.9%
$ 4,933 Aerostructures Corp.,
Term Loan............... NR BB- 12/31/03 $ 4,933,479
13,850 Decrane Finance Co.,
Term Loan............... B2 B+ 09/30/05 to 04/23/06 13,849,379
6,419 High Performance
Plastics, Inc., Term
Loan.................... NR NR 03/31/05 6,417,676
7,449 Stellex Technologies,
Inc., Term Loan......... B2 B+ 09/30/06 7,448,209
--------------
32,648,743
--------------
AUTOMOTIVE 3.4%
4,868 Breed Technologies,
Inc., Term
Loan (a)(b)............. NR NR 04/27/04 to 04/27/06 3,894,256
949 Breed Technologies,
Inc., Revolving Credit
Agreement (a)(b)........ NR NR 04/27/04 758,983
193 Breed Technologies,
Inc., Debtor In
Possession (b).......... NR NR 09/30/00 193,425
5,000 Exide Corp., Term
Loan.................... Ba3 NR 03/18/05 5,012,360
12,632 J.L. French Automotive
Castings, Inc., Term
Loan.................... B1 B+ 10/21/06 12,632,091
9,967 Metalforming
Technologies, Inc., Term
Loan.................... NR NR 06/30/06 9,965,795
4,000 Polypore, Inc., Term
Loan.................... Ba3 B+ 12/31/06 3,999,807
4,947 Safelite Glass Corp.,
Term Loan............... B1 B+ 12/23/03 3,907,641
2,000 Safelite Glass Corp.,
Revolving Credit
Agreement............... B1 B+ 12/23/03 1,579,480
15,000 Tenneco Automotive,
Inc., Term Loan......... Ba3 BB 11/04/07 to 07/04/08 15,107,295
--------------
57,051,133
--------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
BEVERAGE, FOOD & TOBACCO 2.8%
$ 39,284 Agrilink Foods, Inc.,
Term Loan............... B1 B+ 09/30/04 to 09/30/05 $ 39,038,558
9,250 B & G Foods, Inc., Term
Loan.................... B1 B+ 03/31/06 9,246,161
--------------
48,284,719
--------------
BROADCASTING--CABLE 0.6%
9,310 Fairchild Corp., Term
Loan.................... Ba3 BB- 04/30/06 9,310,954
--------------
BROADCASTING--DIVERSIFIED 0.9%
10,000 Comcord Broadcasting,
Term Loan............... NR NR 06/30/07 9,999,773
4,550 White Knight, Term
Loan.................... NR NR 06/30/07 4,550,894
--------------
14,550,667
--------------
BROADCASTING--RADIO 0.4%
7,000 Cumulus Media, Inc.,
Term Loan............... B1 B+ 09/30/07 to 02/28/08 6,999,931
--------------
BROADCASTING--TELEVISION 1.0%
8,000 Quoram Broadcasting,
Inc., Term Loan......... NR NR 09/30/07 7,999,300
9,333 Sinclair Broadcast
Group, Inc., Term
Loan.................... Ba2 BB- 09/15/05 9,331,821
--------------
17,331,121
--------------
BUILDINGS & REAL ESTATE 1.0%
4,954 Builders FirstSource,
Inc., Term Loan......... NR BB- 12/30/05 4,955,136
12,500 Prison Realty Trust,
Inc., Term Loan......... Ba3 BB 12/31/02 12,502,029
--------------
17,457,165
--------------
CHEMICAL, PLASTICS & RUBBER 4.7%
10,000 Georgia Gulf Corp., Term
Loan.................... Ba1 BBB- 11/12/06 10,058,330
1,148 Huntsman Corp., Term
Loan.................... Ba2 BB 12/31/02 1,147,892
2,659 Huntsman Corp.,
Revolving Credit
Agreement............... Ba2 BB 12/31/02 2,658,382
24,063 Lyondell Chemical Co.,
Term Loan............... Ba3 NR 06/30/05 to 05/17/06 24,461,323
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
CHEMICAL, PLASTICS & RUBBER (CONTINUED)
$ 5,000 MetoKote Corp., Term
Loan.................... NR NR 11/02/05 $ 4,999,669
8,075 Pioneer Americas, Inc.,
Term Loan............... B3 B+ 12/31/06 8,066,504
6,278 Sterling Pulp Chemicals,
Inc., Term Loan......... B3 BB- 09/30/04 6,278,381
17,113 Sybron Chemicals, Inc.,
Term Loan............... NR NR 07/31/04 17,083,973
5,713 West American Rubber,
Term Loan............... NR NR 06/30/05 5,713,000
--------------
80,467,454
--------------
CONSTRUCTION MATERIALS 2.7%
20,875 American Building Co.,
Term Loan............... NR NR 11/15/05 20,861,807
5,216 Flextek Components,
Inc., Term Loan (a)..... NR NR 02/28/05 2,625,755
12,103 Hexcel Corp., Term
Loan.................... Ba3 BB- 09/14/05 to 09/15/05 12,100,439
9,950 Mueller Group, Inc.,
Term Loan............... NR B+ 08/16/06 to 08/16/07 10,008,038
--------------
45,596,039
--------------
CONTAINERS, PACKAGING & GLASS 2.3%
10,960 Dr. Pepper Holdings,
Inc., Term Loan......... NR NR 10/07/07 10,986,260
10,000 LLS Corp., Term Loan.... B1 B+ 07/31/06 9,998,518
14,925 Mediapak Corp., Term
Loan.................... NR NR 12/31/05 to 12/31/06 14,927,269
3,894 Stone Container Corp.,
Term Loan............... Ba3 B+ 10/01/03 3,906,946
--------------
39,818,993
--------------
DIVERSIFIED MANUFACTURING 1.3%
9,975 Blount, Inc., Term
Loan.................... B1 B+ 09/30/06 9,971,692
12,500 Citation Corp., Term
Loan.................... NR B+ 12/01/07 12,500,525
--------------
22,472,217
--------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
ECOLOGICAL 3.0%
$ 50,000 Allied Waste North
America, Inc., Term
Loan.................... Ba3 BB 07/23/06 to 07/23/07 $ 48,465,150
3,188 Safety-Kleen Corp., Term
Loan.................... Ba3 BB 04/03/05 to 04/03/06 3,182,412
--------------
51,647,562
--------------
ELECTRONICS 2.3%
7,500 Amphenol Corp., Term
Loan.................... Ba3 BB 05/19/04 7,414,845
7,500 Computer Associates
International, Inc.,
Term Loan............... Baa1 BBB+ 05/26/04 7,492,181
8,946 Dynamic Details, Inc.,
Term Loan............... B1 NR 04/22/05 8,946,000
4,957 EG&G Technical Services,
Inc., Term Loan......... B1 NR 08/20/07 4,956,777
4,953 Stratus Computers, Inc.,
Term Loan............... NR NR 12/31/04 4,978,126
5,000 Stream International,
Term Loan............... NR NR 12/31/06 5,000,100
--------------
38,788,029
--------------
ENTERTAINMENT & LEISURE 4.1%
10,000 Aspen Marketing, Inc.,
Term Loan............... NR NR 06/30/06 10,002,286
12,500 Bally Total Fitness
Holding Corp., Term
Loan.................... B1 B+ 11/10/04 12,491,717
10,000 Fitness Holdings
Worldwide, Inc., Term
Loan.................... NR B+ 11/02/06 to 11/02/07 9,988,750
15,000 SFX Entertainment, Inc.,
Term Loan............... B1 B+ 06/30/06 14,981,250
17,000 Six Flags Theme Parks,
Inc., Term Loan......... Ba2 B+ 09/30/05 17,107,763
4,610 True Temper Sports,
Inc., Term Loan......... B1 BB- 09/30/05 4,609,858
--------------
69,181,624
--------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
FINANCE 3.1%
$ 9,950 Bridge Information
Systems, Inc., Term
Loan.................... NR NR 05/29/05 $ 9,952,422
16,958 Outsourcing Solutions,
Term Loan............... B2 NR 06/01/06 16,957,100
10,000 Paul G. Allen, Term
Loan.................... NR NR 06/10/03 9,996,063
16,000 Sovereign Bancorp, Inc.,
Term Loan............... Ba3 NR 11/14/03 16,053,328
--------------
52,958,913
--------------
GROCERY 1.6%
27,615 The Pantry, Inc., Term
Loan.................... B1 BB- 01/31/06 27,678,769
--------------
HEALTHCARE 3.1%
15,000 Alliance Imaging, Inc.,
Term Loan............... B1 NR 11/02/07 to 11/02/08 14,997,339
9,975 Charles River
Laboratories, Inc., Term
Loan.................... B1 B+ 09/29/07 9,968,571
4,988 Unilab Corp., Term
Loan.................... B1 B+ 11/23/06 4,987,690
18,119 Vencor, Inc., Term Loan
(a)(b).................. Caa2 NR 01/15/05 15,763,784
7,900 Wilson Greatbatch, Ltd.,
Term Loan............... NR NR 07/30/04 7,899,944
--------------
53,617,328
--------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER
PRODUCTS 1.7%
21,398 Imperial Home Decor
Group, Inc., Term Loan
(b)..................... Caa3 D 03/13/06 12,223,212
16,519 Rent-A-Center, Inc.,
Term Loan............... Ba3 BB- 01/31/06 to 01/31/07 16,405,000
--------------
28,628,212
--------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
HOTELS, MOTELS, INNS & GAMING 1.9%
$ 10,000 Aladdin Gaming, LLC,
Term Loan............... B2 NR 08/25/06 to 08/26/06 $ 10,000,695
6,987 Meditrust Corp.,
Revolving Credit
Agreement............... NR NR 07/17/01 6,986,042
16,000 Starwood Hotel and
Resorts Worldwide, Inc.,
Term Loan............... Ba1 NR 02/23/03 15,999,487
--------------
32,986,224
--------------
INSURANCE 0.3%
5,000 Brera Gab Robins, Inc.,
Term Loan............... NR NR 12/01/05 4,999,963
--------------
MACHINERY 2.4%
4,078 Numantics, Inc., Term
Loan.................... Ba3 B 03/19/04 to 09/19/05 4,078,763
15,000 Ocean Rig (Norway), Term
Loan.................... NR NR 06/01/08 14,997,821
10,000 Terex Corp., Term
Loan.................... Ba3 BB- 03/06/06 10,029,690
12,500 United Rentals, Inc.,
Term Loan............... Ba2 BB+ 06/30/06 12,476,563
--------------
41,582,837
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 0.6%
9,850 Ispat Inland, Term
Loan.................... Ba3 BB 07/16/05 to 07/16/06 9,800,750
--------------
PERSONAL & MISCELLANEOUS SERVICES 0.9%
1,842 Boyds Collection, Ltd.,
Term Loan............... Ba3 B+ 04/21/06 1,831,020
13,500 Dimac Corp., Term
Loan.................... NR NR 06/30/06 to 12/30/06 13,521,808
--------------
15,352,828
--------------
PHARMACEUTICALS 1.0%
17,471 King Pharmaceuticals,
Inc., Term Loan......... B1 BB- 12/18/06 17,517,899
--------------
PRINTING & PUBLISHING 3.6%
6,380 Advanstar
Communications, Inc.,
Term Loan............... Ba3 B+ 04/30/05 6,361,063
16,000 Big Flower Press
Holdings, Inc., Term
Loan.................... B1 NR 12/06/08 15,999,550
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
PRINTING & PUBLISHING (CONTINUED)
$ 4,923 Check Printers, Inc.,
Term Loan............... NR NR 06/30/05 $ 4,923,026
10,000 Haights Cross
Communications, Inc.,
Term Loan............... B2 B+ 12/10/06 10,000,000
8,789 Pacifica Papers, Inc.,
Term Loan............... Ba2 BB 03/12/06 8,790,383
6,429 Penton Media, Inc., Term
Loan.................... Ba3 BB- 06/30/07 6,427,143
4,984 Reiman Publications,
Inc., Term Loan......... NR NR 12/10/05 5,003,005
4,135 TWP Capital Corp., Term
Loan.................... NR NR 10/01/04 4,135,399
--------------
61,639,569
--------------
RESTAURANTS & FOOD SERVICE 1.8%
3,640 AFC Enterprises, Inc.,
Term Loan............... Ba3 BB- 06/30/02 3,640,014
1,384 Carvel Corp., Term
Loan.................... NR NR 06/30/00 1,383,750
24,805 Domino's, Inc., Term
Loan.................... B1 B+ 12/21/06 to 12/21/07 24,895,255
--------------
29,919,019
--------------
RETAIL--OFFICE PRODUCTS 0.9%
7,000 Buhrmann US, Inc., Term
Loan.................... Ba3 BB- 10/26/07 7,037,191
8,810 U.S. Office Products
Co., Term Loan.......... B3 B 06/09/06 8,809,858
--------------
15,847,049
--------------
RETAIL--OIL & GAS 0.6%
9,334 Superior Energy
Services, Inc., Term
Loan.................... Ba3 BB- 06/30/06 9,332,915
--------------
RETAIL--STORES 1.3%
14,813 Duane Reade, Inc., Term
Loan.................... B1 B+ 02/15/06 14,814,163
7,123 Kirkland's Holdings,
Term Loan............... NR NR 06/30/02 7,123,145
--------------
21,937,308
--------------
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
TELECOMMUNICATIONS--CELLULAR 0.9%
$ 15,000 Wireless One Network,
L.P., Term Loan......... NR NR 09/30/07 $ 15,000,375
--------------
TELECOMMUNICATIONS--HYBRID 3.4%
5,000 Cincinnati Bell, Inc.,
Term Loan............... Ba1 BB+ 12/30/06 4,999,745
13,500 Nextel Finance Co., Term
Loan.................... Ba2 BB- 06/30/08 to 12/31/08 13,682,817
15,000 Orius Corp., Term
Loan.................... NR B+ 12/14/06 14,999,157
24,000 Pacific Crossing Ltd.,
Term Loan............... NR NR 07/28/06 24,000,000
--------------
57,681,719
--------------
TELECOMMUNICATIONS--PERSONAL COMMUNICATION SYSTEMS 7.1%
38,300 BCP SP Ltd., Term
Loan.................... NR NR 03/31/00 37,917,000
18,810 Davel Financing Co...... NR NR 06/23/05 18,813,496
15,000 Nextel Partners
Operating Corp., Term
Loan.................... B2 B- 07/29/08 14,993,745
29,034 Omnipoint
Communications, Inc.,
Term Loan............... B2 NR 02/01/06 to 02/17/06 29,194,367
6,000 Omnipoint Midwest
Holdings, Term Loan..... NR NR 12/31/06 5,997,815
5,000 TeleCorp PCS, Inc., Term
Loan.................... B2 NR 12/05/07 4,989,585
9,694 Telespectrum Worldwide,
Inc., Term Loan......... NR NR 12/31/01 to 12/31/03 9,692,133
--------------
121,598,141
--------------
TELECOMMUNICATIONS--WIRELESS MESSAGING 1.8%
55,000 Iridium Operating LLC,
Term Loan (a)(b)........ NR D 12/29/00 20,350,127
11,000 TSR Wireless LLC, Term
Loan.................... NR NR 06/30/05 11,025,226
--------------
31,375,353
--------------
TEXTILES & LEATHER 3.2%
8,155 American Marketing
Industries, Inc., Term
Loan.................... NR NR 11/30/04 to 11/30/05 8,156,178
19,242 Glenoit Corp., Term
Loan.................... B1 B 12/31/03 to 06/30/04 19,242,102
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL BANK LOAN
AMOUNT RATINGS+
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
TEXTILES & LEATHER (CONTINUED)
$ 5,400 Humphrey's, Inc., Term
Loan.................... B2 NR 01/15/03 $ 5,401,608
3,385 Joan Fabrics Corp., Term
Loan.................... NR NR 06/30/05 3,376,887
4,994 Norcorp, Inc., Term
Loan.................... NR NR 05/30/06 to 11/30/06 4,993,185
13,825 Norcross Safety
Products, Term Loan..... NR NR 10/02/05 13,825,000
--------------
54,994,960
--------------
TRANSPORTATION--CARGO 1.8%
4,821 Gemini Leasing, Inc.,
Term Loan............... B1 NR 08/12/05 4,813,937
17,000 North American Van
Lines, Inc., Term
Loan.................... B1 B+ 11/18/07 16,998,159
8,059 OmniTrax Railroads, LLC,
Term Loan............... NR NR 05/14/05 8,060,365
--------------
29,872,461
--------------
TRANSPORTATION--MANUFACTURING COMPONENTS 1.0%
17,188 SPX Corp., Term Loan.... Ba2 BB+ 09/30/06 17,273,438
--------------
TRANSPORTATION--PERSONAL 3.7%
40,000 Avis Rent A Car, Inc.,
Term Loan............... Ba3 BB+ 06/30/06 to 06/30/07 40,261,140
23,084 Motor Coach Industries
International, Inc.,
Term Loan............... Ba3 BB- 06/15/06 23,066,570
--------------
63,327,710
--------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 80.1%
(Cost $1,412,077,633)..................................................... $1,366,530,091
--------------
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
<S> <C>
SHORT-TERM INVESTMENTS 18.3%
COMMERCIAL PAPER 16.1%
Armstrong World Industries ($5,000,000 par, maturing 02/23/00,
yielding 5.74%)................................................. $ 4,982,461
Ashland, Inc. ($20,000,000 par, maturing 02/10/00 to 02/18/00,
yielding 5.75% to 5.83%)........................................ 19,958,095
Autoliv ASP, Inc. ($8,774,000 par, maturing 02/29/00, yielding
5.90%).......................................................... 8,733,737
Baxter International, Inc. ($25,000,000 par, maturing 02/02/00,
yielding 5.50%)................................................. 24,996,181
Bell Atlantic Network ($20,984,000 par, maturing 02/08/00 to
02/15/00, yielding 5.58% to 5.60%).............................. 20,954,693
CSX Corp. ($10,000,000 par, maturing 02/16/00, yielding 5.85%).. 9,975,625
Conagra, Inc. ($10,000,000 par, maturing 02/02/00, yielding
5.70%).......................................................... 9,998,417
Cox Communications, Inc. ($20,000,000 par, maturing 02/11/00 to
02/17/00, yielding 5.80% to 5.95%).............................. 19,963,644
Dial Corp. ($6,800,000 par, maturing 02/03/00, yielding
5.75%).......................................................... 6,797,828
Dominion Resources, Inc. ($25,000,000 par, maturing 02/08/00 to
02/24/00, yielding 5.75% to 5.86%).............................. 24,932,661
FDX Corp. ($20,000,000 par, maturing 02/03/00 to 02/18/00,
yielding 5.73% to 5.75%)........................................ 19,969,664
Fluor Corp. ($7,200,000 par, maturing 02/16/00, yielding
5.64%).......................................................... 7,183,080
Grainger W.W., Inc. ($10,000,000 par, maturing 02/15/00,
yielding 5.60%)................................................. 9,978,222
Hertz Corp. ($10,000,000 par, maturing 02/10/00, yielding
5.55%).......................................................... 9,986,125
Illinois Power Co. ($5,000,000 par, maturing 02/04/00, yielding
5.70%).......................................................... 4,997,625
Nabisco, Inc. ($10,620,000 par, maturing 02/15/00, yielding
5.70%).......................................................... 10,596,459
RPM, Inc. ($22,000,000 par, maturing 02/04/00 to 02/09/00,
yielding 5.80% to 5.85%)........................................ 21,981,200
Safeway, Inc. ($10,000,000 par, maturing 02/07/00, yielding
5.75%).......................................................... 9,990,417
Texas Utilities Co. ($15,000,000 par, maturing 02/07/00 to
02/25/00, yielding 5.72% to 5.95%).............................. 14,970,633
Wal Mart Stores, Inc. ($10,000,000 par, maturing 02/14/00,
yielding 5.59%)................................................. 9,979,814
Xtra, Inc. ($4,000,000 par, maturing 02/04/00, yielding
5.72%).......................................................... 3,998,093
--------------
TOTAL COMMERCIAL PAPER.......................................... 274,924,674
--------------
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
YOUR FUND'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
VALUE
<S> <C>
SHORT-TERM LOAN PARTICIPATIONS 2.1%
Comdisco Inc. ($6,000,000 par, maturing 02/01/00, yielding
6.00%).......................................................... $ 6,000,000
Cox Communications, Inc. ($5,000,000 par, maturing 02/01/00,
yielding 6.00%)................................................. 5,000,000
Praxair, Inc. ($25,000,000 par, maturing 02/01/00, yielding
6.40%).......................................................... 25,000,000
--------------
TOTAL SHORT-TERM LOAN PARTICIPATIONS............................ 36,000,000
--------------
TIME DEPOSIT 0.1%
State Street Bank & Trust Corp. ($2,000,000 par, 5.00% coupon,
dated 01/31/00, to be sold on 02/01/00 at $2,000,278)........... 2,000,000
--------------
TOTAL SHORT-TERM INVESTMENTS 18.3%
(Cost $312,924,674)....................................................... 312,924,674
--------------
TOTAL INVESTMENTS 98.4%
(Cost $1,725,002,307)..................................................... 1,679,454,765
OTHER ASSETS IN EXCESS OF LIABILITIES 1.6%................................. 27,860,543
--------------
NET ASSETS 100.0%.......................................................... $1,707,315,308
==============
</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.
1 Industry percentages are calculated as a percentage of net assets.
(a) This Senior Loan interest is non-income producing.
(b) This Borrower has filed for protection in federal bankruptcy court.
* 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
23
<PAGE> 25
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
January 31, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,725,002,307)..................... $1,679,454,765
Cash........................................................ 17,688,765
Receivables:
Interest.................................................. 13,202,529
Fund Shares Sold.......................................... 7,159,471
Investments Sold.......................................... 2,613,998
Prepaid Expenses............................................ 738,865
Other....................................................... 309,128
--------------
Total Assets.......................................... 1,721,167,521
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 9,560,981
Income Distributions...................................... 2,039,823
Investment Advisory Fee................................... 1,426,091
Administrative Fee........................................ 394,957
Distributor and Affiliates................................ 282,171
Initial Offering and Registration Costs................... 41,558
Trustees' Deferred Compensation and Retirement Plans........ 53,856
Accrued Expenses............................................ 52,776
--------------
Total Liabilities..................................... 13,852,213
--------------
NET ASSETS.................................................. $1,707,315,308
==============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 173,671,374 shares issued and
outstanding).............................................. $ 1,736,714
Paid in Surplus............................................. 1,744,154,325
Accumulated Undistributed Net Investment Income............. 6,088,149
Accumulated Net Realized Gain............................... 883,662
Net Unrealized Depreciation................................. (45,547,542)
--------------
NET ASSETS.................................................. $1,707,315,308
==============
NET ASSET VALUE PER COMMON SHARE ($1,707,315,308 divided by
173,671,374 shares outstanding)........................... $ 9.83
==============
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
Statement of Operations
For the Six Months Ended January 31, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 70,674,892
Fees........................................................ 16,239
Other....................................................... 706,003
------------
Total Income............................................ 71,397,134
------------
EXPENSES:
Investment Advisory Fee..................................... 7,733,324
Administrative Fee.......................................... 2,035,085
Service Fee................................................. 1,221,051
Shareholder Services........................................ 545,403
Custody..................................................... 272,132
Legal....................................................... 154,400
Amortization of Organizational Costs........................ 102,254
Trustees' Fees and Related Expenses......................... 45,988
Other....................................................... 455,473
------------
Total Expenses.......................................... 12,565,110
------------
NET INVESTMENT INCOME....................................... $ 58,832,024
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,110,577
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (911,892)
End of the Period......................................... (45,547,542)
------------
Net Unrealized Depreciation During the Period............... (44,635,650)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(43,525,073)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 15,306,951
============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
Statement of Changes in Net Assets
For the Six Months Ended January 31, 2000 and the Year Ended July 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31, 1999
----------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 58,832,024 $ 58,912,884
Net Realized Gain................................ 1,110,577 891,210
Net Unrealized Depreciation During the Period.... (44,635,650) (1,472,606)
-------------- --------------
Change in Net Assets from Operations............. 15,306,951 58,331,488
-------------- --------------
Distributions from Net Investment Income......... (56,047,850) (56,436,224)
Distributions from Net Realized Gain............. (1,076,619) (39,076)
-------------- --------------
Total Distributions.......................... (57,124,469) (56,475,300)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (41,817,518) 1,856,188
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 415,319,512 1,133,265,976
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................... 40,301,672 39,411,306
Cost of Shares Repurchased....................... (178,440,995) (114,016,137)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... 277,180,189 1,058,661,145
-------------- --------------
TOTAL INCREASE IN NET ASSETS..................... 235,362,671 1,060,517,333
NET ASSETS:
Beginning of the Period.......................... 1,471,952,637 411,435,304
-------------- --------------
End of the Period (Including undistributed net
investment income of $6,088,149 and $3,303,975,
respectively).................................. $1,707,315,308 $1,471,952,637
============== ==============
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
Statement of Cash Flows
For the Six Months Ended January 31, 2000 (Unaudited)
<TABLE>
<S> <C>
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 15,306,951
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Used for Operating Activities:
Increase in Investments at Value.......................... (228,705,381)
Increase in Interest Receivable........................... (5,716,487)
Increase in Receivable for Investments sold............... (2,363,998)
Increase in Prepaid Expenses.............................. (490,230)
Decrease in Unamortized Organizational Costs.............. 102,254
Increase in Other Assets.................................. (296,386)
Increase in Payable for Investments Purchased............. 9,560,981
Increase in Investment Advisory Fees Payable.............. 231,234
Increase in Administrative Fees Payable................... 60,851
Decrease in Distributor & Affiliates Payable.............. (39,042)
Decrease in Accrued Expenses.............................. (210,196)
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 19,414
-------------
Total Adjustments....................................... (227,846,986)
-------------
NET CASH USED FOR OPERATING ACTIVITIES...................... (212,540,035)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Shares Sold................................... 427,452,185
Change in Intra-day Credit Line with Custodian Bank......... (2,093,112)
Payments on Shares Repurchased.............................. (178,440,995)
Cash Dividends Paid......................................... (15,612,659)
Capital Gain Distributions Paid............................. (1,076,619)
-------------
Net Cash Provided by Financing Activities................. 230,228,800
-------------
NET INCREASE IN CASH........................................ 17,688,765
Cash at Beginning of the Period............................. -0-
-------------
CASH AT END OF THE PERIOD................................... $ 17,688,765
=============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
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
SIX MONTHS (COMMENCEMENT
ENDED OF INVESTMENT
JANUARY 31, YEAR ENDED OPERATIONS) TO
2000 JULY 31, 1999 JULY 31, 1998
----------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD.... $ 10.085 $ 10.037 $10.000
-------- -------- -------
Net Investment Income..................... .360 .652 .213
Net Realized and Unrealized Gain/Loss..... (.261) .037 .034
-------- -------- -------
Total from Investment Operations............ .099 .689 .247
-------- -------- -------
Less:
Distributions from Net Investment
Income.................................. .347 .640 .210
Distributions from Realized Gain.......... .006 .001 -0-
-------- -------- -------
Total Distributions......................... .353 .641 .210
-------- -------- -------
NET ASSET VALUE, END OF THE PERIOD.......... $ 9.831 $ 10.085 $10.037
======== ======== =======
Total Return* (a)........................... 1.02%** 7.09% 2.52%**
Net Assets at End of the Period (In
millions)................................. $1,707.3 $1,472.0 $ 411.4
Ratio of Expenses to Average Net Assets*.... 1.54% 1.60% 1.70%
Ratio of Net Investment Income to Average
Net Assets*............................... 7.21% 6.66% 6.33%
Portfolio Turnover (b)...................... 19%** 23% 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................................ N/A 1.61% 1.92%
Ratio of Net Investment Income to
Average Net Assets.................... N/A 6.65% 6.11%
</TABLE>
** Non-Annualized
N/A = Not Applicable.
(a) 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 1% imposed on most
shares accepted by the Fund for repurchase which have been held for less
than one year. If the early withdrawal charge was included, total return
would be lower.
(b) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interests.
See Notes to Financial Statements
28
<PAGE> 30
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (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 Fund's Variable Rate Senior Loan interests ("Loan
interests") are valued by the Fund following guidelines established and
periodically reviewed by the Fund's Board of Trustees. Subject to criteria
established by the Fund's Board of Trustees about the availability and
reliability of market indicators obtained from independent pricing sources,
certain Loan interests are valued at the mean of bid and ask market indicators
supplied by independent pricing sources approved by the Fund's Board of
Trustees. All other Loan interests are valued by considering a number of factors
including consideration of market indicators, transactions in instruments which
Van Kampen Investment Advisory Corp. (the "Adviser") believes may be comparable
(including comparable credit quality, interest rate, interest rate
redetermination period and maturity), the credit worthiness of the Borrower, the
current interest rate, the period until next interest rate redetermination and
the maturity of such Loan interests. Consideration of comparable instruments may
include commercial paper, negotiable certificates of deposit and short-term
variable rate securities which have adjustment periods comparable to the Loan
interests in the Fund's portfolio. The fair value of Loan interests are reviewed
and approved by the Fund's Valuation Committee and by the Fund's Board of
Trustees. The fair value of a Loan interest may differ significantly from the
market value that would have been used had there been a ready and reliable
market for that Loan interest.
Short-term securities with remaining maturities of 60 days or less are
valued at amortized cost. Short-term loan participations are valued at cost in
the absence of any indication of impairment.
29
<PAGE> 31
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (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. Other income is
comprised primarily of amendment fees. Amendment fees are earned as compensation
for agreeing to changes in loan agreements.
D. ORGANIZATIONAL COSTS The Fund has agreed to 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 normally are
amortized over a 60 month period beginning on the date of the Fund's initial
public offering of its shares. However, AICPA Statement of Position 98-5, which
is effective for fiscal years beginning after December 15, 1998, requires that
unamortized organizational costs on the Fund's statement of assets and
liabilities be written off. Therefore, the Fund wrote off the remaining
unamortized organizational costs in August 1999.
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.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
At January 31, 2000, for federal income tax purposes the cost of long- and
short-term investments is $1,725,004,944, the aggregate gross unrealized
appreciation is $7,278,392 and the aggregate gross unrealized depreciation is
$52,828,571 resulting in net unrealized depreciation on long- and short-term
investments of $45,550,179.
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.
30
<PAGE> 32
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (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, 2000, the Fund recognized expenses of
approximately $115,200 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 six months ended January 31, 2000, the Fund recognized expenses of
approximately $9,100 representing Van Kampen's cost of providing legal services
to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent of the Fund. For the six months ended January
31, 2000, the Fund recognized expenses for their services of approximately
$447,700. 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.
31
<PAGE> 33
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (Unaudited)
3. CAPITAL TRANSACTIONS
At January 31, 2000 and July 31, 1999, paid in surplus aggregated $1,744,154,325
and $1,467,251,336 respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31, 1999
<S> <C> <C>
Beginning Shares.................................... 145,951,374 40,992,495
----------- -----------
Shares Sold....................................... 41,528,218 112,343,843
Shares Issued Through Dividend Reinvestment....... 4,038,542 3,904,175
Shares Repurchased................................ (17,846,760) (11,289,139)
----------- -----------
Net Increase in Shares............................ 27,720,000 104,958,879
----------- -----------
Ending Shares....................................... 173,671,374 145,951,374
=========== ===========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $489,727,594 and $238,544,595,
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, 2000, 17,846,760 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, 2000, Van Kampen received early withdrawal charges of
approximately $470,300 in connection with tendered shares of the Fund.
7. COMMITMENTS/BORROWINGS
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Fund had unfunded loan commitments of approximately $7,113,261 as of January
31, 2000. The Fund generally will maintain with its custodian short-term
32
<PAGE> 34
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (Unaudited)
investments having an aggregate value at least equal to the amount of unfunded
loan commitments.
The Fund, along with the Van Kampen Prime Rate Income Trust, has entered
into a revolving credit agreement with a syndicate led by Bank of America for an
aggregate of $500,000,000, which will terminate on June 13, 2000. The proceeds
of any borrowing by the Fund under the revolving credit agreement may only be
used, directly or indirectly, for liquidity purposes in connection with the
consummation of a tender offer by the Fund for its shares. Annual commitment
fees of .09% are charged on the unused portion of the credit line. Borrowings
under this facility will bear interest at either the LIBOR rate or the Federal
Funds rate plus .45%. There have been no borrowings under this agreement to
date.
8. 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
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, 2000, 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>
Lehman Brothers............................................. $12,500 $12,502
Bankers Trust............................................... 8,155 8,156
Canadian Imperial Bank of Commerce.......................... 7,700 7,700
Citibank.................................................... 7,500 7,492
Credit Suisse............................................... 6,998 7,011
------- -------
Total....................................................... $42,853 $42,861
======= =======
</TABLE>
9. 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.
33
<PAGE> 35
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (Unaudited)
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, 2000, the Fund
paid service fees of $1,221,100 to Van Kampen.
34
<PAGE> 36
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth*
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Small Cap Value
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income*
Global Franchise
Global Government Securities*
Global Managed Assets*
International Magnum
Latin American
Strategic Income
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
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
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 ongoing 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 [COMPUTER ICON]
- - 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.
[PHONE ICON]
- - e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
35
<PAGE> 37
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares and other pertinent
data. After June 30, 2000 the report must, if used with prospective investors,
be accompanied by a monthly performance update.
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN SENIOR FLOATING RATE FUND
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISOR
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 218256
Kansas City, Missouri 64121-8256
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
36
<PAGE> 38
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen.
Thank you for the confidence you showed in us during the changeover on
January 1, 2000, and for entrusting us with your investment portfolio. We
look forward to continuing to serve your investment needs.
