<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 TEN HOLDINGS 4
CURRENT DISTRIBUTION 4
Q&A WITH YOUR PORTFOLIO MANAGERS 5
GLOSSARY OF TERMS 10
A FOCUS ON SENIOR LOANS 11
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 12
FINANCIAL STATEMENTS 25
NOTES TO FINANCIAL STATEMENTS 30
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 34
DIVIDEND REINVESTMENT PLAN 35
TRUST 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>
TOTAL RETURNS
- -----------------------------------------------------------------------
<S> <C>
Six month total return based on Market Price(1) (7.64%)
- -----------------------------------------------------------------------
Six month total return based on NAV(2) 1.60%
- -----------------------------------------------------------------------
One-year total return based on Market Price(1) (0.59%)
- -----------------------------------------------------------------------
One-year total return based on NAV(2) 5.38%
- -----------------------------------------------------------------------
Commencement date 06/24/98
- -----------------------------------------------------------------------
DISTRIBUTION RATE
- -----------------------------------------------------------------------
Distribution rate as of % of closing common stock
price(3) 9.53%
- -----------------------------------------------------------------------
SHARE VALUATIONS
- -----------------------------------------------------------------------
Net asset value $ 9.83
- -----------------------------------------------------------------------
Closing common stock price $8.4375
- -----------------------------------------------------------------------
High common stock price (08/02/99) $9.5625
- -----------------------------------------------------------------------
Low common stock price (12/30/99) $7.9375
- -----------------------------------------------------------------------
</TABLE>
(1) Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common stock price at the end of the period
indicated.
(2)Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
Past performance does not guarantee future results. Distribution rate and net
asset value may fluctuate with market conditions. Investment return, stock price
and net asset value will fluctuate with market conditions. Trust shares, when
sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS
(as a percentage of total assets - January 31, 2000)
<TABLE>
<S> <C>
American Cellular Wireless, Inc. 3.07%
- ---------------------------------------------------------------------
Ispat Inland 2.84%
- ---------------------------------------------------------------------
Wyndham International 2.84%
- ---------------------------------------------------------------------
BCP SP Ltd. 2.78%
- ---------------------------------------------------------------------
Omnipoint Communications Corp. 2.42%
- ---------------------------------------------------------------------
Bridge Information Systems, Inc. 2.02%
- ---------------------------------------------------------------------
Telecorp PCS, Inc. 1.93%
- ---------------------------------------------------------------------
Voicestream PCS Holdings 1.74%
- ---------------------------------------------------------------------
Lyondell Petrochemicals 1.74%
- ---------------------------------------------------------------------
United Artists Theatre Co. 1.67%
- ---------------------------------------------------------------------
</TABLE>
CURRENT DISTRIBUTION
(August 31, 1998 - January 31, 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
VAN KAMPEN SENIOR INCOME TRUST 3-MONTH TREASURY BILL
------------------------------ ---------------------
<S> <C> <C>
8/98 8.49 4.83
8.00 4.36
7.85 4.32
7.96 4.48
8.17 4.45
1/99 7.91 4.45
7.76 4.67
8.17 4.48
8.23 4.54
8.17 4.63
8.21 4.78
7/99 8.16 4.75
8.49 4.97
8.81 4.85
8.75 5.09
8.87 5.30
9.90 5.33
1/00 9.82 5.69
</TABLE>
4
<PAGE> 6
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE ADVISER OF THE VAN KAMPEN SENIOR
INCOME TRUST 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 TRUST. 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 TRUST'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 TRUST, AND WHAT OTHER FACTORS HAD A SIGNIFICANT IMPACT ON THE TRUST'S
PERFORMANCE?
A The rise in defaults hurt the entire
senior loan industry during the six-month period. Much of the Trust's loss,
approximately 2.3 percent of NAV, was due to its modest holding in Iridium
Operating LLC, a telecommunications firm in bankruptcy, and the Trust's
concentration 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. Demand for the relatively
large and expensive phones fell short of expectations, and revenues failed to
cover debt expenses. The value of these loans declined 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
5
<PAGE> 7
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 the health-care sector and, to a lesser extent, Iridium Operating
LLC, that had the largest adverse impact on the NAV. The Trust's NAV fell from
$10.08 on July 31, 1999, to $9.83 as of January 31, 2000.
The market price on the New York Stock Exchange also fell, from $9.5625 per
share on July 31, 1999 to $8.4375 on January 31, 2000, with the Trust's discount
widening from 5.13 percent to 14.17 percent, and the yield rising from 8.16
percent to 9.53 percent.
With respect to the market price, we cannot speculate on the precise factors
that had a negative impact because the shares trade in the secondary market on
the New York Stock Exchange. The market price typically trades differently from
the NAV of the portfolio. The market price reflects the last trade on a public
exchange, whereas the NAV reflects the aggregate value of the loans in the
portfolio, less expenses.
Q WHY DID DEFAULTS AFFECT THE
TRUST? 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 Trust's loans are required to be "collateralized"--backed by the
borrowers' assets. As a result, the Trust 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
6
<PAGE> 8
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 Trust's NAV.
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
Trust--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 Trust, 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 Trust, 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
TRUST?
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
September, the Trust raised its dividend from $0.065 to $0.067 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.
7
<PAGE> 9
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 TRUST'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 Trust. The Trust'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 Trust, as set forth in the Trust's
disclosure documents. As of January 31, 2000, approximately 41 percent of the
Trust's senior loan assets were priced based on market indicators provided by
LPC.
As stated in the Trust's disclosure documents, the NAV of the Trust will
fluctuate as a function of interest rate and credit factors. Moreover, the
Trust's greater use of independent market indicators in valuing certain senior
loans has no affect on the yield of the Trust. Yield is determined based upon
the income earned on assets held in the Trust.
The Trust 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
TRUST PERFORM DURING THE REPORTING PERIOD?
A The Trust's total return for the six-
month period was -7.64 percent at market price. Based on the January 31, 2000,
public offering price of $8.4375 per share, the Trust's current monthly dividend
of $.067 represents a distribution rate of 9.53 percent. For more information on
the Trust'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 TRUST?
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 Trust 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.
8
<PAGE> 10
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 Trust, 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 Trust's NAV and dividends.
9
<PAGE> 11
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 trust share, calculated by deducting a
trust's liabilities from the total assets applicable to common shareholders in
its portfolio and dividing this amount by the number of common shares
outstanding.
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.
10
<PAGE> 12
A FOCUS ON SENIOR LOANS
The Senior Income Trust 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 Trust's management team, are
important to the integrity of the Trust'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 Trust is entitled will be paid. If
they are not fully paid, it potentially could have a negative effect on the
Trust'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 nonpayment 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 Trust's security interest in the
loan's collateral to be invalidated. This could potentially have a negative
effect on the Trust'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 Trust'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 Trust 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 Trust holds an interest, or a
substantial deterioration in the borrower's creditworthiness. From time to time,
the Trust's net asset value may be more or less than at the time of the
investment.
SPECIAL CONSIDERATIONS
Under normal market conditions, the Trust may invest up to 20 percent of its
assets in senior loans that are not secured by any specific collateral. In
addition, the Trust may invest in senior loans made to non-U.S. borrowers,
although these loans must be U.S.-dollar denominated.
11
<PAGE> 13
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR TRUST AT THE END OF THE
REPORTING PERIOD.(1)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
VARIABLE RATE ** SENIOR LOAN INTERESTS
AEROSPACE/DEFENSE 1.2%
$4,871 Aerostructures Corp.,
Term Loan................ NR BB- 09/06/04 $ 4,872,030
6,547 Aircraft Braking Systems,
Inc., Term Loan.......... NR NR 10/15/05 6,547,006
7,564 High Performance
Plastics, Inc., Term
Loan..................... NR NR 09/30/03 to 03/31/05 7,564,923
1,966 High Performance
Plastics, Inc., Revolving
Credit Agreement......... NR NR 09/30/03 1,965,681
--------------
20,949,640
--------------
AUTOMOTIVE 3.7%
24,000 American Axle and
Manufacturing Co., Term
Loan..................... Ba3 BB- 04/30/06 23,931,000
19,048 Breed Technologies, Inc.,
Term Loan (a)(c)......... NR CCC 04/27/06 15,238,404
631 Breed Technologies, Inc.,
Debtor in
Possession (c)........... NR NR 09/30/00 630,598
5,000 Exide Corp., Term Loan... Ba3 NR 03/18/05 5,012,360
7,147 Insilco Corp., Term
Loan..................... Ba3 B+ 11/24/05 7,146,466
5,000 Meridian Automotive, Term
Loan..................... NR NR 05/25/06 5,003,100
8,000 Tenneco, Inc., Term
Loan..................... Ba3 BB 11/04/07 to 07/04/08 8,057,224
--------------
65,019,152
--------------
BEVERAGE, FOOD & TOBACCO 4.3%
39,284 Agrilink Foods, Inc.,
Term Loan................ B1 B+ 09/30/04 to 09/30/05 39,038,556
11,970 Aurora Foods, Inc., Term
Loan..................... Ba2 BB 09/30/06 11,968,228
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$5,000 B & G Foods, Inc., Term
Loan..................... B1 B+ 03/31/06 $ 5,012,687
13,965 Dr Pepper Holdings, Inc.,
Term Loan................ NR NR 10/07/07 13,998,460
5,588 Imperial Sugar Corp, Term
Loan..................... Ba3 B+ 12/31/05 5,584,559
--------------
75,602,490
--------------
BROADCASTING -- CABLE 1.6%
6,493 Fairchild Corp., Term
Loan..................... Ba3 BB- 04/30/06 6,493,995
17,325 Falcon Communications,
Inc., Term Loan.......... Ba3 BB 12/31/07 17,311,469
4,990 Frontiervision Operating
Partners, L.P., Term
Loan..................... Ba2 BB 03/31/06 4,988,847
--------------
28,794,311
--------------
BROADCASTING -- TELEVISION 2.0%
8,000 Quoram Broadcasting,
Inc., Term Loan.......... NR NR 09/30/07 7,995,360
28,000 Sinclair Broadcasting,
Term Loan................ Ba2 BB- 09/15/05 27,995,464
--------------
35,990,824
--------------
CHEMICALS, PLASTICS & RUBBER 4.8%
8,395 Gentek, Inc., Term
Loan..................... Ba3 BB 04/30/07 8,394,908
6,675 Huntsman Group Holdings,
Term Loan................ Ba2 NR 09/30/03 6,674,810
44,279 Lyondell Petrochemical
Corp., Term Loan......... Ba3 NR 06/30/05 to 05/17/06 44,916,956
17,085 Pioneer Americas
Acquisition Corp., Term
Loan..................... B3 B+ 12/31/06 17,067,877
3,767 Sterling Pulp Chemicals,
Inc., Term Loan.......... B3 BB- 06/30/05 3,766,620
4,531 West American Rubber,
Term Loan................ NR NR 06/30/05 4,530,101
--------------
85,351,272
--------------
CONSTRUCTION MATERIALS 1.4%
24,470 BSI Holdings, Inc., Term
Loan..................... NR NR 09/30/05 24,469,091
--------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
CONTAINERS, PACKAGING & GLASS 2.0%
$25,869 Mediapak Corp., Term
Loan..................... NR NR 12/31/05 to 12/31/06 $ 25,865,203
4,941 Packaging Dynamics, Term
Loan..................... NR NR 11/20/05 4,938,880
4,525 RIC Holdings,
Inc., Revolving Credit
Agreement................ NR NR 02/28/03 4,524,760
--------------
35,328,843
--------------
DIVERSIFIED MANUFACTURING 0.5%
8,829 International Wire Group,
Inc., Term Loan.......... B1 NR 09/30/03 8,828,374
--------------
ECOLOGICAL 2.1%
30,000 Allied Waste North
America, Inc., Term
Loan..................... Ba3 BB 07/23/06 to 07/23/07 29,079,090
8,000 Stericycle, Inc., Term
Loan..................... B1 BB- 11/10/06 8,038,336
--------------
37,117,426
--------------
EDUCATION & CHILDCARE 0.2%
3,150 TEC Worldwide, Inc., Term
Loan..................... NR NR 02/28/05 3,149,218
--------------
ELECTRONICS 5.2%
20,368 Amphenol Corp., Term
Loan..................... Ba3 BB 05/19/04 to 05/19/06 20,207,379
6,370 Automata, Inc., Term
Loan..................... NR NR 02/28/03 to 02/28/04 3,707,547
4,455 Caribiner International,
Term Loan................ NR NR 09/30/03 4,453,019
25,085 Chatham Technologies
Acquisition, Inc., Term
Loan..................... NR NR 08/18/03 to 09/12/05 24,333,322
5,000 Computer Associates, Term
Loan..................... Baa1 BBB+ 05/26/04 4,994,433
4,957 EG&G Technical Services
Inc., Term Loan.......... B1 NR 08/20/07 4,956,886
29,690 Viasystems, Inc., Term
Loan..................... B1 B+ 03/31/04 to 06/30/05 29,688,806
--------------
92,341,392
--------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
ENTERTAINMENT & LEISURE 7.5%
$5,000 Bally Total Fitness, Term
Loan..................... B1 B+ 11/10/04 $ 4,996,751
10,000 Fitness Holdings, Term
Loan..................... NR B+ 11/02/06 to 11/02/07 9,988,750
3,897 Hedstrom Corp., Term
Loan..................... Caa1 B 06/30/03 3,894,592
30,000 Metro-Goldwyn-Mayer,
Inc., Term Loan.......... Baa3 BBB- 03/31/05 to 03/31/06 29,494,020
2,528 Regal Cinemas, Inc., Term
Loan..................... B1 B+ 05/27/05 2,527,290
5,511 Regal Cinemas, Revolving
Credit Agreement......... B1 B+ 05/27/05 5,509,731
14,900 SFX Entertainment, Inc.,
Term Loan................ B1 B+ 06/30/06 14,881,375
8,000 Six Flags Theme Park,
Inc., Term Loan.......... Ba2 B+ 09/30/05 8,050,712
46,727 United Artists Theatre
Co., Term Loan........... B3 CCC 04/21/06 to 04/21/07 43,254,620
10,240 WFI Group, Inc., Term
Loan..................... Baa3 NR 07/14/04 10,238,272
--------------
132,836,113
--------------
FINANCE 6.9%
40,934 Bridge Information
Systems, Inc., Term
Loan..................... NR NR 06/30/03 to 05/29/05 40,892,420
11,244 Bridge Information
Systems, Inc., Revolving
Credit Agreement......... NR NR 05/29/03 11,230,695
4,988 Outsourcing Solutions,
Term Loan................ B2 BB- 06/01/06 4,987,272
25,000 Paul G. Allen, Term
Loan..................... NR NR 06/10/03 24,990,158
12,500 Prison Realty Trust Inc.,
Term Loan................ Ba3 BB 12/31/02 12,502,029
28,718 Ventas Realty Ltd., Inc.,
Term Loan................ NR NR 04/30/03 27,856,681
--------------
122,459,255
--------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
GROCERY 0.8%
$4,950 Eagle Family Foods, Term
Loan..................... B1 B 12/31/05 $ 4,947,657
1,624 Fred Meyer, Inc., Term
Loan..................... Baa3 NR 02/28/03 1,610,237
6,995 The Pantry, Inc., Term
Loan..................... B1 BB- 01/31/06 to 07/31/06 7,015,838
--------------
13,573,732
--------------
HEALTHCARE 8.0%
5,000 Alliance Imaging, Inc.,
Term Loan................ B1 NR 11/02/07 to 11/02/08 4,993,761
9,444 Caremark Rx, Inc., Term
Loan..................... B1 BB- 05/31/01 9,445,481
1,919 Extendicare Health
Services, Inc., Term
Loan..................... B1 B 12/31/03 1,919,074
14,088 FHC Health Systems, Inc.,
Term Loan................ NR NR 04/30/03 to 04/30/06 14,079,703
8,912 Genesis Healthcare
Ventures, Inc., Term
Loan..................... B2 B 09/30/04 to 05/30/06 8,919,533
3,243 Genesis Healthcare
Ventures, Inc., Revolving
Credit Agreement......... B2 B 05/30/06 3,243,910
44,213 Integrated Health
Services, Inc., Term Loan
(a)(d)................... Caa2 NR 09/30/04 31,383,193
6,933 Multicare Companies,
Inc., Term Loan.......... B3 B 09/30/03 to 06/01/05 6,940,406
1,614 Multicare Companies,
Inc., Revolving Credit
Agreement................ B3 B 10/09/03 1,613,920
11,500 Oxford Health Plans,
Inc., Term Loan.......... B3 NR 05/13/03 11,484,066
2,904 Sun Healthcare Group,
Inc., Term Loan (a)(c)... Caa2 NR 11/12/04 2,206,934
12,375 Sun Healthcare Group,
Inc., Revolving Credit
Agreement (a)(c)......... Caa2 NR 11/12/05 9,405,091
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
HEALTHCARE (CONTINUED)
$15,870 Total Renal Care
Holdings, Inc., Term
Loan..................... Ba2 NR 03/31/08 $ 15,870,000
23,284 Vencor, Inc., Term
Loan (a)(c).............. Caa2 NR 03/31/03 to 01/15/05 20,257,201
--------------
141,762,273
--------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER PRODUCTS 1.3%
4,950 Corning Consumer
Products, Co., Term
Loan..................... B1 NR 10/09/06 4,948,207
3,073 Corning Consumer
Products, Inc., Revolving
Credit Agreement......... B1 NR 04/09/05 3,070,144
7,395 Dal-Tile Group, Inc.,
Term Loan................ NR NR 12/31/03 7,267,695
4,978 Imperial Home Decor
Group, Inc., Term
Loan (c)................. Caa3 D 03/13/05 2,837,609
3,871 Rent A Center, Inc., Term
Loan..................... Ba3 BB- 01/31/06 to 01/31/07 3,844,364
--------------
21,968,019
--------------
HOTELS, MOTELS, INNS & GAMING 9.6%
25,550 Alladin Gaming, LLC, Term
Loan..................... B2 NR 02/26/06 to 02/26/08 25,549,544
28,800 Allegro Resorts Corp.,
Term Loan................ NR NR 02/11/03 28,804,877
16,303 Meditrust, Revolving
Credit Agreement......... NR NR 07/17/01 16,298,019
25,000 Starwood Hotels and
Resorts, Inc.,Term
Loan..................... Ba1 NR 02/23/03 24,998,217
75,000 Wyndham International,
Inc., Term Loan.......... NR NR 06/30/06 73,354,350
--------------
169,005,007
--------------
MACHINERY 1.5%
15,000 Ocean Rig (Norway), Term
Loan..................... NR NR 06/01/08 14,997,821
4,925 Thermadyne, LLC, Term
Loan..................... B1 B 05/28/05 to 05/28/06 4,922,122
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
MACHINERY (CONTINUED)
$7,350 Universal Compression,
Inc., Term Loan.......... Ba3 B+ 02/13/04 $ 7,349,099
--------------
27,269,042
--------------
MANUFACTURING 0.7%
12,500 Citation Corp.,
Term Loan................ NR B+ 12/01/07 12,500,525
--------------
MINING, STEEL, IRON, & NON-PRECIOUS METALS 4.7%
9,850 Earle M Jorgenson, Term
Loan..................... B1 B+ 03/31/04 9,825,000
73,725 Ispat Inland, Term
Loan..................... Ba3 BB 07/16/05 to 07/16/06 73,356,375
--------------
83,181,375
--------------
NATURAL RESOURCES --
COAL 1.9%
25,000 Arch Western Resources,
LLC, Term Loan........... Ba2 NR 05/31/03 24,987,358
9,231 P&L Coal Holdings Corp.,
Term Loan................ Ba2 NR 06/30/06 9,225,000
--------------
34,212,358
--------------
PAPER & FOREST PRODUCTS 0.9%
2,690 Bear Island Paper Co.,
Term Loan................ Ba3 B+ 12/31/05 2,688,210
4,929 Crown Paper Co., Term
Loan..................... B2 B+ 06/30/03 4,931,254
8,789 Pacifica Papers, Inc.,
Term Loan................ Ba2 BB 03/12/06 8,788,893
--------------
16,408,357
--------------
PERSONAL & MISCELLANEOUS SERVICES 1.9%
6,889 Arena Brands, Inc., Term
Loan..................... NR NR 06/01/02 6,879,222
18,647 Boyds Collection, Ltd.,
Term Loan................ Ba3 B+ 04/21/05 18,602,490
4,913 Coinmach Corp., Term
Loan..................... NR BB- 06/30/05 4,912,309
3,936 Professional Service
Industries, Inc., Term
Loan..................... NR NR 09/16/02 3,935,341
--------------
34,329,362
--------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
PHARMACEUTICALS 0.9%
$4,147 Endo Pharmaceuticals,
Inc., Term Loan.......... NR NR 12/31/02 $ 4,146,388
4,975 King Pharmaceuticals,
Inc., Term Loan.......... B1 BB- 12/18/06 4,988,346
7,000 Shire Pharmaceuticals,
Term Loan................ Ba1 NR 11/19/04 7,001,048
--------------
16,135,782
--------------
PRINTING & PUBLISHING 3.7%
8,571 Penton Media, Inc., Term
Loan..................... Ba3 BB- 06/30/07 8,570,921
9,969 Reiman Publications, Term
Loan..................... NR NR 12/10/05 10,006,010
11,820 R.H. Donnelley, Inc.,
Term Loan................ NR NR 09/30/05 to 09/30/06 11,790,450
2,027 TWP Capital Corp., Term
Loan..................... NR NR 10/01/04 2,026,288
13,945 Von Hoffman Press, Inc.,
Term Loan................ B1 B+ 07/01/04 to 07/01/05 13,947,177
19,392 Ziff-Davis Publishing,
Inc., Term Loan.......... Ba2 BB- 03/31/05 to 03/31/06 19,383,240
--------------
65,724,086
--------------
RESTAURANTS & FOOD SERVICE 3.6%
1,384 Carvel Corp., Term Loan.. NR NR 06/30/00 1,383,020
24,805 Domino's Pizza, Term
Loan..................... B1 B+ 12/21/06 to 12/21/07 24,895,255
7,858 IDF Acquisition, Term
Loan..................... NR NR 01/15/04 to 01/15/06 7,858,637
30,041 S.C International
Services, Inc., Term
Loan..................... Ba3 NR 03/01/07 30,025,452
--------------
64,162,364
--------------
RETAIL -- OFFICE PRODUCTS 3.0%
13,000 Buhrmann US, Inc., Term
Loan..................... Ba3 BB- 10/26/07 13,069,069
39,646 U.S. Office Products Co.,
Term Loan................ B3 B 06/09/06 39,642,256
--------------
52,711,325
--------------
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
RETAIL -- SPECIALTY 0.3%
$4,963 Petco Animal Supply, Term
Loan..................... NR NR 04/29/06 $ 4,970,410
--------------
RETAIL -- STORES 1.8%
32,409 HMV Media Group, Inc.,
Term Loan................ B1 BB- 03/28/05 to 03/28/06 32,373,990
--------------
TELECOMMUNICATIONS -- CELLULAR 4.8%
79,400 American Cellular
Wireless, Inc., Term
Loan..................... NR NR 06/30/07 79,371,648
4,912 Sygnet Wireless, Inc.,
Term Loan................ B3 NR 03/31/07 to 12/23/07 4,928,943
--------------
84,300,591
--------------
TELECOMMUNICATIONS -- HYBRID 3.1%
7,500 American Tower Corp.,
Term Loan................ B1 BB- 01/06/08 7,497,324
5,000 Cincinnati Bell, Inc.,
Term Loan................ Ba1 BB+ 12/30/06 4,999,745
9,748 Dynatech Corp., Term
Loan..................... NR B+ 05/31/05 to 05/31/07 9,770,115
18,000 Nextel Finance Co., Term
Loan..................... Ba2 BB- 06/30/08 to 12/31/08 18,243,756
10,000 Pacific Crossing Ltd.,
Term Loan................ NR NR 07/28/06 9,998,376
5,000 Spectrasite
Communications, Term
Loan..................... NR NR 06/30/06 5,019,530
--------------
55,528,846
--------------
TELECOMMUNICATIONS -- PERSONAL COMMUNICATION SYSTEMS 15.8%
71,840 BCP SP Ltd., Term Loan... NR NR 03/16/00 71,853,470
11,712 Microcell
Telecommunications, Inc.,
Term Loan................ NR NR 03/01/06 11,720,022
62,208 Omnipoint Communications,
Inc., Term Loan.......... B2 NR 02/01/06 to 02/17/06 62,552,237
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
TELECOMMUNICATIONS -- PERSONAL COMMUNICATION SYSTEMS (CONTINUED)
$6,000 Powertel PCS, Inc., Term
Loan..................... NR NR 12/31/06 $ 5,999,854
50,000 Telecorp PCS, Inc., Term
Loan..................... B2 NR 12/05/07 49,895,850
9,694 Telespectrum Worldwide,
Inc., Term Loan.......... NR NR 12/31/01 to 12/31/03 9,692,088
22,700 Triton PCS, Inc., Term
Loan..................... B1 B 05/04/07 22,449,347
45,000 Voicestream PCS Holdings,
Term Loan................ B1 NR 12/31/06 44,981,235
--------------
279,144,103
--------------
TELECOMMUNICATIONS -- WIRELESS MESSAGING 1.8%
20,000 Iridium Operating LLC,
Term Loan (a)(c)......... NR D 12/29/00 7,399,676
14,900 Paging Network, Revolving
Credit Agreement......... B2 CCC 12/31/04 13,395,557
11,000 TSR Wireless LLC, Term
Loan..................... NR NR 06/30/05 11,000,608
--------------
31,795,841
--------------
TEXTILES & LEATHER 2.2%
8,842 American Marketing
Industries, Inc., Term
Loan..................... NR NR 11/30/04 to 11/30/05 8,844,049
8,522 Galey & Lord, Inc., Term
Loan..................... B3 BB- 04/02/05 to 04/01/06 8,521,496
13,825 Norcross Safety Products,
Term Loan................ NR NR 10/02/05 13,823,503
7,794 Pillowtex Corp., Term
Loan..................... B3 CCC 12/31/04 7,811,473
--------------
39,000,521
--------------
TRANSPORTATION -- CARGO 2.3%
17,564 American Commercial
Lines, Term Loan......... Ba2 BB 06/26/06 to 06/26/07 17,388,469
10,000 Kansas City Southern
Railway Co., Term Loan... Ba1 BBB 12/30/05 9,999,799
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
BANK LOAN
PAR RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P MATURITY* VALUE
<C> <S> <C> <C> <C> <C>
TRANSPORTATION -- CARGO (CONTINUED)
$13,000 North American Van Lines,
Inc., Term Loan.......... B1 B+ 11/18/07 $ 12,998,592
--------------
40,386,860
--------------
TRANSPORTATION -- MANUFACTURING 0.1%
995 Transportation
Technologies, Inc., Term
Loan..................... Ba2 BB- 04/29/05 994,983
--------------
UTILITIES 0.6%
10,000 AES Texas Funding, Term
Loan..................... Ba1 NR 04/24/01 10,000,000
--------------
TOTAL VARIABLE RATE **
SENIOR LOAN INTERESTS 118.7%................................... 2,099,677,153
--------------
FIXED INCOME SECURITIES 1.5%
Satelites Mexicanos ($26,121,000 par, 9.06% coupon, maturing
06/30/04) 144A Private Placement (b)............................ 26,236,310
--------------
TOTAL LONG-TERM INVESTMENTS 120.2%
(Cost $2,173,115,093)........................................... 2,125,913,463
--------------
</TABLE>
<TABLE>
<S> <C>
SHORT-TERM INVESTMENTS 24.2%
COMMERCIAL PAPER 21.6%
Armstrong World Industry ($5,000,000 par, maturing 02/10/00
yielding 5.72%)...........................................
4,992,850
Ashland, Inc. ($20,000,000 par, maturing 02/10/00 to
02/18/00 yielding 5.75% to 5.83%).........................
19,951,517
Autoliv ASP, Inc. ($8,000,000 par, maturing 02/29/00
yielding 5.90%)...........................................
7,963,289
Baxter Intl. Inc. ($15,000,000 par, maturing 02/02/00
yielding 5.50%)...........................................
14,997,708
Bell Atlantic Network ($20,000,000 par, maturing 02/08/00 to
02/09/00 yielding 5.58% to 5.60%).........................
19,976,706
CSX Corp. ($12,500,000 par, maturing 02/02/00 to 02/16/00
yielding 5.75% to 5.85%)..................................
$ 12,475,226
Cargill, Inc. ($16,000,000 par, maturing 02/17/00 yielding
5.58%)....................................................
15,960,320
Case Corp. ($5,000,000 par, maturing 02/02/00 yielding
5.70%)....................................................
4,999,208
Conagra, Inc. ($9,653,000 par, maturing 02/14/00 yielding
5.80%)....................................................
9,632,782
Cox Communications, Inc. ($21,000,000 par, maturing 02/10/00
to 02/11/00 yielding 5.80% to 5.82%)......................
20,966,947
Dominion Resources, Inc. ($20,000,000 par, maturing 02/08/00
to 02/09/00 yielding 5.78%)...............................
19,975,917
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
DESCRIPTION VALUE
<S> <C>
COMMERCIAL PAPER (CONTINUED)
Emerson Electric Co. ($15,200,000 par, maturing 02/14/00
yielding 5.58%)...........................................
$ 15,169,372
FDX Corp. ($10,000,000 par, maturing 02/07/00 to 02/22/00
yielding 5.73% to 5.78%)..................................
9,978,471
Fluor Corp. ($21,500,000 par, maturing 02/08/00 to 02/09/00
yielding 5.57% to 5.60%)..................................
21,475,100
Ford Motor Credit Corp. ($15,000,000 par, maturing 02/16/00
yielding 5.57%)...........................................
14,965,187
Hertz Corp. ($20,000,000 par, maturing 02/10/00 to 02/11/00
yielding 5.55% to 5.60%)..................................
19,970,569
Illinois Power Co. ($10,000,000 par, maturing 02/02/00
yielding 5.80%)...........................................
9,998,389
Maytag Corp. ($10,000,000 par, maturing 02/29/00 yielding
5.75%)....................................................
9,955,278
MCI Worldcom, Inc. ($8,000,000 par, maturing 02/25/00
yielding 5.84%)...........................................
7,968,853
Nabisco Inc. ($20,000,000 par, maturing 02/15/00 yielding
5.70%)....................................................
19,955,667
RPM, Inc. ($17,689,000 par, maturing 02/03/00 yielding 5.75%
to 5.80%).................................................
17,683,322
Safeway, Inc. ($20,000,000 par, maturing 02/04/00 to
02/07/00 yielding 5.72% to 5.75%).........................
19,985,650
Sprint Capital Corp. ($20,000,000 par, maturing 02/03/00 to
02/22/00 yielding 5.80% to 5.83%).........................
19,962,769
TRW, Inc. ($15,000,000 par, maturing 02/28/00 yielding
5.82%)....................................................
14,934,525
Texas Utilities Co. ($15,000,000 par, maturing 02/07/00 to
02/23/00 yielding 5.72% to 5.95%).........................
14,958,872
Xtra, Inc. ($13,880,000 par, maturing 02/04/00 to 02/24/00
yielding 5.72% to 5.77%)..................................
13,844,673
--------------
TOTAL COMMERCIAL PAPER......................................
382,699,167
==============
SHORT-TERM LOAN PARTICIPATIONS 2.3%
Comdisco Inc. ($5,000,000 par, maturing 02/01/00, yielding
6.00%)....................................................
5,000,000
Dial Corp. ($10,000,000 par, maturing 02/01/00, yielding
5.95%)....................................................
10,000,000
Grainger, Inc. ($10,000,000 par, maturing 02/01/00, yielding
5.55%)....................................................
10,000,000
Indiana Gas, Inc. ($15,000,000 par, maturing 02/01/00,
yielding 5.55%)...........................................
15,000,000
--------------
TOTAL SHORT-TERM LOAN PARTICIPATIONS........................
40,000,000
--------------
TIME DEPOSIT 0.3%
State Street Bank & Trust Corp. ($5,000,000 par, 5.00%
coupon, dated 01/31/00, to be sold on 02/01/00 at
$5,000,694)...............................................
5,000,000
--------------
TOTAL SHORT-TERM INVESTMENTS 24.2%
(Cost $427,699,167).....................................
427,699,167
--------------
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
YOUR TRUST'S INVESTMENTS
January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
DESCRIPTION VALUE
<S> <C>
TOTAL INVESTMENTS 144.4%
(Cost $2,600,814,260)...................................
$2,553,612,630
BORROWINGS (45.2%).........................................
(800,000,000)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.8%.................
15,006,057
--------------
NET ASSETS 100.0%..........................................
$1,768,618,687
==============
</TABLE>
NR=Not Rated
+ Bank Loans rated below Baa by Moody's Investor Services, Inc. or BBB by
Standard & Poors Group are considered to be below investment grade.
(1) Industry percentages are calculated as a percentage of net assets.
(a) This Senior Loan is non-income producing.
(b) 144A Securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(c) This borrower has filed for protection in federal bankruptcy court.
(d) Subsequent to January 31, 2000, this borrower has filed for protection in
federal bankruptcy court.
* Senior Loans in the Trust'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 Trust's portfolio may occur. As a
result, the actual remaining maturity of Senior Loans held in the Trust's
portfolio may be substantially less than the stated maturities shown.
Although the Trust is unable to accurately estimate the actual remaining
maturity of individual Senior Loans, the Trust 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 Trust 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 Trust 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
24
<PAGE> 26
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
January 31, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $2,600,814,260)..................... $2,553,612,630
Cash........................................................ 5,354,367
Receivables:
Interest.................................................. 19,897,024
Investments Sold.......................................... 5,486,535
Prepaid Debt Issuance Cost.................................. 413,321
Other....................................................... 501,652
--------------
Total Assets............................................ 2,585,265,529
--------------
LIABILITIES:
Payables:
Borrowings................................................ 800,000,000
Investments Purchased..................................... 10,000,000
Investment Advisory Fee................................... 1,852,993
Administrative Fee........................................ 450,070
Affiliates................................................ 60,724
Organizational Costs...................................... 40,000
Accrued Interest Expense.................................... 3,998,724
Accrued Expenses............................................ 141,982
Trustees' Deferred Compensation and Retirement Plans........ 102,349
--------------
Total Liabilities....................................... 816,646,842
--------------
NET ASSETS.................................................. $1,768,618,687
==============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 180,010,000 shares issued and
outstanding).............................................. $ 1,800,100
Paid in Surplus............................................. 1,795,981,867
Accumulated Undistributed Net Investment Income............. 17,366,563
Accumulated Net Realized Gain............................... 671,787
Net Unrealized Depreciation................................. (47,201,630)
--------------
NET ASSETS.................................................. $1,768,618,687
==============
NET ASSET VALUE PER COMMON SHARE ($1,768,618,687 divided by
180,010,000 shares outstanding)........................... $ 9.83
==============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
Statement of Operations
For the Six Months Ended January 31, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $110,314,933
Fees........................................................ 1,414,835
------------
Total Income............................................ 111,729,768
------------
EXPENSES:
Investment Advisory Fee..................................... 11,090,253
Administrative Fee.......................................... 2,609,471
Custody..................................................... 285,974
Legal....................................................... 225,200
Trustees' Fees and Related Expenses......................... 73,151
Amortization of Organizational Costs........................ 31,210
Shareholder Services........................................ 12,639
Other....................................................... 723,459
------------
Total Operating Expenses................................ 15,051,357
Interest Expense........................................ 23,720,482
------------
Total Expenses.......................................... 38,771,839
------------
NET INVESTMENT INCOME....................................... $ 72,957,929
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 973,463
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (439,061)
End of the Period......................................... (47,201,630)
------------
Net Unrealized Depreciation During the Period............... (46,762,569)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(45,789,106)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 27,168,823
============
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
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............................ $ 72,957,929 $ 140,011,697
Net Realized Gain................................ 973,463 1,521,075
Net Unrealized Depreciation During the Period.... (46,762,569) (1,812,501)
-------------- --------------
Change in Net Assets from Operations............. 27,168,823 139,720,271
-------------- --------------
Distributions from Net Investment Income......... (72,003,990) (136,447,562)
Distributions from Net Realized Gain............. (1,602,089) (360,020)
-------------- --------------
Total Distributions.......................... (73,606,079) (136,807,582)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (46,437,256) 2,912,689
NET ASSETS:
Beginning of the Period.......................... 1,815,055,943 1,812,143,254
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$17,366,563 and $16,412,624, respectively)..... $1,768,618,687 $1,815,055,943
============== ==============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
Statement of Cash Flows
For the Six Months Ended January 31, 2000 (Unaudited)
<TABLE>
<S> <C>
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 27,168,823
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Used for Operating Activities:
Decrease in Investments at Value.......................... 52,025,647
Increase in Interest Receivable........................... (2,819,505)
Increase in Receivable for Investments Sold............... (4,856,240)
Decrease in Unamortized Organizational Costs.............. 31,210
Increase in Other Assets.................................. (315,521)
Decrease in Investment Advisory Fees Payable.............. (35,057)
Increase in Administrative Fees Payable................... 5,823
Increase in Payable for Investments Purchased............. 10,000,000
Decrease in Affiliates Payable............................ (28,426)
Decrease in Accrued Expenses.............................. (349,024)
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 29,524
-------------
Total Adjustments....................................... 53,688,431
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 80,857,254
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in Bank Borrowings................................... -0-
Change in Intra-day Credit Line with Custodian Bank......... (2,721,613)
Change in Debt Issuance Cost................................ 566,606
Change in Accrued Interest Expense.......................... 415,049
Cash Dividends Paid......................................... (72,160,840)
Capital Gain Dividends Paid................................. (1,602,089)
-------------
Net Cash Used for Financing Activities.................... (75,502,887)
-------------
NET INCREASE IN CASH........................................ 5,354,367
Cash at Beginning of the Period............................. -0-
-------------
CASH AT THE END OF THE PERIOD............................... $ 5,354,367
=============
</TABLE>
See Notes to Financial Statements
28
<PAGE> 30
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE TRUST
OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 24, 1998
SIX MONTHS (COMMENCEMENT
ENDED YEAR OF INVESTMENT
JANUARY 31, ENDED OPERATIONS) TO
2000 JULY 31, 1999 JULY 31, 1998
--------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD (a).. $ 10.083 $ 10.067 $ 9.987
-------- -------- --------
Net Investment Income....................... .405 .778 .071
Net Realized and Unrealized Gain/Loss....... (.254) (.002) .009
-------- -------- --------
Total from Investment Operations.............. .151 .776 .080
-------- -------- --------
Less:
Distributions from Net Investment Income.... .400 .758 -0-
Distributions from Net Realized Gains....... .009 .002 -0-
-------- -------- --------
Total Distributions........................... .409 .760 -0-
-------- -------- --------
NET ASSET VALUE, END OF THE PERIOD............ $ 9.825 $ 10.083 $ 10.067
======== ======== ========
Market Price Per Share at End of the Period... $ 8.4375 $ 9.5625 $10.0625
Total Investment Return at Market Price (b)... (7.64%)** 2.98% 0.63%**
Total Return at Net Asset Value (c)........... 1.60%** 7.91% 0.70%**
Net Assets at End of the Period (In
millions)................................... $1,768.6 $1,815.1 $1,812.1
Ratio of Operating Expenses to Average Net
Assets*..................................... 1.66% 1.66% 1.18%
Ratio of Interest Expenses to Average Net
Assets...................................... 2.62% 2.37% 0.28%
Ratio of Net Investment Income to Average Net
Assets*..................................... 8.06% 7.72% 6.94%
Portfolio Turnover (d)........................ 16%** 28% 3%**
* If certain expenses had not been assumed by Van Kampen,
Total Return would have been lower and the ratios would
have been as follows:
Ratio of Operating Expenses to Average Net
Assets.................................. N/A N/A 1.21%
Ratio of Net Investment Income to Average
Net Assets.............................. N/A N/A 6.90%
</TABLE>
** Non-Annualized
(a) Net Asset Value at June 24, 1998 of $10.00 is adjusted for common share
offering costs of $.013.
(b) Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions
for the period in accordance with the Trust's dividend reinvestment plan,
and sale of all shares at the closing common stock price at the end of the
period indicated.
(c) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(d) Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interest.
N/A=Not Applicable
See Notes to Financial Statements
29
<PAGE> 31
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Senior Income Trust (the "Trust"), is registered as a non-diversified
closed-end management investment company under the Investment Company Act of
1940, as amended. The Trust's investment objective is to provide a high level of
current income, consistent with preservation of capital. The Trust 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 graphical regions. The
Trust borrows money for investment purposes which will create the opportunity
for enhanced return, but also should be considered a speculative technique and
may increase the Trust's volatility. The Trust commenced investment operations
on June 24, 1998.
The following is a summary of significant accounting policies consistently
followed by the Trust 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 Trust's Variable Rate Senior Loan interests and Other
Loan interests (collectively "Loan interests") are valued by the Trust following
guidelines established and periodically reviewed by the Trust's Board of
Trustees. Subject to criteria established by the Trust'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
Trust'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 Trust's portfolio. The fair value of
Loan interests are reviewed and approved by the Trust's Valuation Committee and
by the Trust'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.
30
<PAGE> 32
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (Unaudited)
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.
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 EXPENSES The Trust has agreed to reimburse Van Kampen Funds
Inc. or its affiliates (collectively "Van Kampen") for costs incurred in
connection with the Trust's organization and initial registration in the amount
of $40,000. These costs normally are amortized over a 60 month period beginning
on the date of the Trust'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 Trust's
statement of assets and liabilities be written off. Therefore, the Trust wrote
off the remaining unamortized organizational costs in August 1999.
E. FEDERAL INCOME TAXES It is the Trust'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 and tax reporting
purposes primarily as a result of wash sales.
At January 31, 2000, for federal income tax purposes cost of long- and
short-term investments is $2,600,814,260, the aggregate gross unrealized
appreciation is $5,204,071 and the aggregate gross unrealized depreciation is
$52,406,530 resulting in net unrealized depreciation on long- and short-term
investments of $47,202,459.
F. DISTRIBUTION OF INCOME AND GAINS The Trust intends to declare and pay monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are to be distributed annually to common shareholders.
31
<PAGE> 33
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (Unaudited)
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee of .85%
of the average managed assets. Managed assets are defined as the gross asset
value of the Trust minus the sum of accrued liabilities, other than the
aggregate amount of borrowings undertaken by the Trust. In addition, the Trust
will pay a monthly administrative fee to Van Kampen Investments Inc., the
Trust's Administrator, at an annual rate of .20% of the average managed assets
of the Trust. 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 Trust's portfolio and
providing certain services to the holders of the Trust's securities.
For the six months ended January 31, 2000, the Trust recognized expenses of
approximately $57,300 representing legal services provided by Skadden, Arps,
Slate, Meagher, & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the six months ended January 31, 2000, the Trust recognized expenses of
approximately $20,600 representing Van Kampen's cost of providing legal services
to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust 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 Trust. The maximum
annual benefit per trustee under the plan is $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $369,623,701 and $677,502,829
respectively.
4. COMMITMENTS
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Trust had unfunded loan commitments of approximately $46,782,112 as of
January 31, 2000. The Trust generally will maintain with its custodian
short-term
32
<PAGE> 34
NOTES TO
FINANCIAL STATEMENTS
January 31, 2000 (Unaudited)
investments and/or cash having an aggregate value at least equal to the amount
of unfunded loan commitments.
5. SENIOR LOAN PARTICIPATION COMMITMENTS
The Trust 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 and foreign corporations, partnerships, and other entities. When
the Trust purchases a participation of a Senior Loan interest, the Trust
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 Trust assumes the credit risk of the Borrower, Selling Participant or other
persons interpositioned between the Trust and the Borrower.
At January 31, 2000, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Trust on a participation
basis.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SELLING PARTICIPANT (000) (000)
<S> <C> <C>
Wachovia.................................................... $14,088 $14,080
Lehman Commercial Paper..................................... 12,500 12,502
Goldman Sachs Credit........................................ 9,222 9,212
Toronto Dominion............................................ 9 9
------- -------
$35,819 $35,803
======= =======
</TABLE>
6. BORROWINGS
In accordance with its investment policies, the Trust may borrow money for
investment purposes in an amount up to approximately 33 1/3% of the Trust's
total assets.
The Trust has entered into an $800 million commercial paper program with VVR
Funding LLC, a Delaware limited liability company whose sole purpose is the
issuance of commercial paper. VVR has the authority to issue a maximum of $800
million of commercial paper, at a discount, with maturities of up to 180 days,
the proceeds of which are used to make advances to the Trust. This line of
credit is secured by the assets of the Trust. For the period ended January 31,
2000, the daily balance of borrowings under the revolving credit agreement was
$800 million with an weighted average interest rate of 5.75%.
33
<PAGE> 35
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
34
<PAGE> 36
DIVIDEND REINVESTMENT PLAN
The Trust offers a Dividend Reinvestment Plan (the "Plan") pursuant to which
Common Shareholders who are participants in the Plan may have all distributions
of dividends and capital gains automatically reinvested in Common Shares of the
Trust. Common Shareholders who elect not to participate in the Plan will receive
all distributions of dividends and capital gains in cash paid by check mailed
directly to the Common Shareholder by the Trust's dividend disbursing agent.
HOW THE PLAN WORKS
State Street Bank and Trust Company, as your Plan Agent, serves as agent for
the Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or capital gains distribution paid subsequent to written
notice of the change sent to all Common Shareholders of the Trust at least 90
days before the record date for the dividend or distribution. The Plan also may
be amended or terminated by the Plan Agent, with the written consent of the
Trust, by providing at least 90 days written notice to all Participants in the
Plan.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
You may withdraw from the Plan at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company. If you withdraw, you will receive,
without charge, a share certificate issued in your name for all full Common
Shares credited to your account under the Plan, and a cash payment will be made
for any fractional Common Share credited to your account under the Plan. You may
again elect to participate in the Plan at any time by calling 1-800-341-2929 or
writing to the Trust at:
2800 Post Oak Blvd.
Attn: Closed-End Funds
Houston, TX 77056
35
<PAGE> 37
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN SENIOR INCOME TRUST
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 ADVISER
VAN KAMPEN INVESTMENT
ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
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 Trust, 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.
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.
