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Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
TOP FIVE PORTFOLIO INDUSTRIES 5
TOP TEN HOLDINGS 5
CURRENT DISTRIBUTION 6
Q&A WITH YOUR PORTFOLIO MANAGERS 7
GLOSSARY OF TERMS 10
A FOCUS ON SENIOR LOANS 11
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 12
FINANCIAL STATEMENTS 30
NOTES TO FINANCIAL STATEMENTS 35
DIVIDEND REINVESTMENT PLAN 39
TRUST OFFICERS AND IMPORTANT ADDRESSES 40
Our generations of money-management experience may help you pursue life's true
wealth.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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OVERVIEW
LETTER TO SHAREHOLDERS
February 20, 2001
Dear Shareholder,
The year 2000 was an especially volatile one for the stock market. To manage
one's portfolio during such unpredictable times requires investment-management
experience, and the following pages should give you some insight into how we
have performed in this difficult environment.
In this report, the portfolio managers will explain how your investment
performed during the reporting period and describe the strategies they used to
manage your trust during that span. The report will also show you how your
investment has performed over time. Helpful charts summarize the trust's largest
investments, and you can examine the complete portfolio to see all of your
trust's holdings as of the end of your trust's reporting period.
At Van Kampen, we place a high priority on providing you and your financial
advisor with the information you need to help you monitor your investments
during all types of markets. With nearly four generations of
investment-management experience, we've been around long
enough to understand that by investing with Van Kampen you're
entrusting us with much more than your money. Your investments
may help make it possible to afford your next house, keep up with rising college
costs, or enjoy a comfortable retirement.
No matter what your reasons for investing, we're thankful that you've chosen to
place your investments with Van Kampen. We will continue to apply our
generations of money-management experience to helping you pursue life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investment Advisory Corp.
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ECONOMIC SNAPSHOT
ECONOMIC GROWTH
THE U.S. ECONOMY, WHICH GREW AT A RED-HOT PACE IN EARLY 2000, BROKE STRIDE LATER
IN THE YEAR AND LIMPED INTO 2001. GROSS DOMESTIC PRODUCT (GDP), THE PRIMARY
MEASURE OF ECONOMIC GROWTH, ROSE A DISAPPOINTING 1.1 PERCENT ON AN ANNUALIZED
BASIS FOR THE FOURTH QUARTER OF 2000--A SHARP CONTRAST FROM THE SECOND-QUARTER
HIGH OF 5.6 PERCENT. THE SUDDEN ECONOMIC SLOWDOWN SPARKED FEARS OF A RECESSION,
EFFECTIVELY COOLING BUSINESS AND CONSUMER DEMAND, SPENDING ON EXPORTS, AND
MANUFACTURING ACTIVITY.
CONSUMER SPENDING AND EMPLOYMENT
INFLATION CONCERNS WERE HELD AT BAY AS CORPORATE LAYOFFS, SOARING ENERGY COSTS,
A WEAKENING STOCK MARKET, AND A COOLING ECONOMY HAD A CHILLING EFFECT ON
CONSUMER SPENDING.
KEEPING IN STEP WITH THE FLAGGING ECONOMY, GROWTH IN OVERALL COMPENSATION COSTS
(SUCH AS WAGES AND BENEFITS) CONTINUED TO SLOW, FURTHER RELIEVING INFLATIONARY
PRESSURES. YET THE JOBLESS RATE CONTINUED TO HOLD AT HISTORICALLY LOW LEVELS,
EVEN AS IT REACHED A 16-MONTH HIGH OF 4.2 PERCENT IN JANUARY.
INTEREST RATES AND INFLATION
THE CONSUMER PRICE INDEX, A COMMON MEASURE OF THE INFLATION RATE, ROSE 3.7
PERCENT IN THE 12 MONTHS ENDED JANUARY 31. WITH INFLATION ON THE RISE AND
ECONOMIC GROWTH SLOWING RAPIDLY, ALL EYES WERE ON THE FEDERAL RESERVE AS IT MADE
A SURPRISE INTEREST-RATE CUT OF 0.50 PERCENT ON JANUARY 3, 2001, AND ANOTHER
HIGHLY ANTICIPATED CUT OF 0.50 PERCENT DURING ITS REGULARLY SCHEDULED MEETING ON
JANUARY 31, 2001.
THE FED, WHICH HAD HIKED INTEREST RATES THREE TIMES DURING THE FIRST HALF OF
2000, STATED ITS DRAMATIC POLICY REVERSAL AT THE START OF 2001 WAS IN RESPONSE
TO RISING ENERGY COSTS AND ERODING CONSUMER AND BUSINESS CONFIDENCE. WHILE
INDUSTRY ANALYSTS AND INVESTORS CAUTIOUSLY WELCOMED THE FED'S ACTIONS, MANY ARE
PREDICTING ADDITIONAL RATE CUTS WILL BE MADE IN THE FIRST HALF OF 2001 AS THE
FED TRIES TO WARD OFF A RECESSION AND RETURN GDP TO A HEALTHY AND SUSTAINABLE
RATE.
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U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(December 31, 1998--December 31, 2000)
[BAR GRAPH]
U.S. GROSS DOMESTIC PRODUCT
---------------------------
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.60
Sep 00 2.20
Dec 00 1.10
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(January 31, 1999--January 31, 2001)
[LINE GRAPH]
INTEREST RATES INFLATION RATES
-------------- ---------------
Jan 99 4.75 1.70
4.75 1.70
4.75 1.80
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.80
Apr 00 6.00 3.10
6.50 3.20
6.50 3.70
Jul 00 6.50 3.70
6.50 3.40
6.50 3.50
Oct 00 6.50 3.40
6.50 3.40
6.50 3.40
Jan 01 5.50 3.70
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 percentage
change of the Consumer Price Index for all urban consumers at the end of each
month.
Source: Bloomberg
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PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of January 31, 2001)
-----------------------------------------------------------------------
TOTAL RETURNS
-----------------------------------------------------------------------
Six-month total return based on market price(1) -1.02%
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Six-month total return based on NAV(2) -5.36%
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One-year total return based on market price(1) 7.81%
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One-year total return based on NAV(2) -3.02%
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Commencement date 06/24/98
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DISTRIBUTION RATE
-----------------------------------------------------------------------
Distribution rate as a % of closing common stock
price(3) 10.66%
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SHARE VALUATIONS
-----------------------------------------------------------------------
Net asset value $8.71
-----------------------------------------------------------------------
Closing common stock price $8.22
-----------------------------------------------------------------------
Six-month high common stock price (08/08/00) $9.00
-----------------------------------------------------------------------
Six-month low common stock price (01/03/01) $7.25
-----------------------------------------------------------------------
(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.
As a result of recent market activity current performance may vary from the
figures shown. Past performance is no guarantee of future results.
Distribution rate and net asset value will fluctuate with market conditions.
Investment return and principal value fluctuate and trust shares, when sold,
may be worth more or less than their original cost.
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PORTFOLIO AT A GLANCE
TOP FIVE PORTFOLIO INDUSTRIES*
(as a percentage of total assets--January 31, 2001)
Telecommunications--Wireless 7.6%
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Printing & Publishing 5.6%
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Entertainment & Leisure 5.3%
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Health Care 4.7%
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Chemicals, Plastics & Rubber 4.4%
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TOP TEN HOLDINGS*
(as a percentage of total assets--January 31, 2001)
Wyndham International 1.83%
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United Artists Theatre Co. 1.82%
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Agrilink Foods, Inc. 1.64%
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Telecorp PCS, Inc. 1.46%
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VoiceStream Wireless Corp. 1.38%
---------------------------------------------------------------------
Metro-Goldwyn-Mayer, Inc. 1.36%
---------------------------------------------------------------------
HMV Media Group 1.31%
---------------------------------------------------------------------
Ispat Inland 1.28%
---------------------------------------------------------------------
Vencor, Inc. 1.26%
---------------------------------------------------------------------
Ashtead Group, PLC 1.15%
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* Subject to change daily. All information is provided for informational
purposes only and should not be deemed as a recommendation to buy the
securities mentioned or the securities in the industries shown above. Morgan
Stanley Dean Witter & Co. and others affiliated with it may hold position in
or may seek to perform investment-banking services for the companies listed.
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CURRENT DISTRIBUTION
(August 31, 1998--January 31, 2001)
[LINE GRAPH]
VAN KAMPEN SENIOR INCOME TRUST 3-MONTH TREASURY BILL
------------------------------ ---------------------
8/98 8.490 4.825
8.000 4.361
7.850 4.317
7.960 4.482
8.170 4.452
1/99 7.910 4.452
7.760 4.670
8.170 4.475
8.230 4.535
8.170 4.627
8.210 4.779
7/99 8.160 4.745
8.490 4.966
8.810 4.851
8.750 5.088
8.870 5.301
9.900 5.328
1/00 9.530 5.692
8.750 5.781
10.340 5.870
9.400 5.829
9.880 5.619
9.960 5.854
7/00 9.600 6.219
9.460 6.306
10.010 6.210
10.460 6.389
11.300 6.202
11.580 5.895
1/01 10.660 4.994
Source: *Bloomberg
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[PHOTO]
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN SENIOR
INCOME TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
AND INFLUENCED THE TRUST'S RETURN OVER THE PAST SIX MONTHS. THE TEAM IS LED BY
HOWARD TIFFEN, SENIOR PORTFOLIO MANAGER, WHO HAS MANAGED THE TRUST SINCE
DECEMBER 1999 AND BRINGS MORE THAN 30 YEARS OF GLOBAL AND DOMESTIC INVESTMENT
EXPERIENCE TO VAN KAMPEN'S SENIOR LOAN MANAGEMENT TEAM. THE FOLLOWING DISCUSSION
REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED
JANUARY 31, 2001.
Q HOW WOULD YOU DESCRIBE THE
MARKET ENVIRONMENT IN WHICH THE TRUST OPERATED, AND HOW DID THE TRUST
PERFORM IN THAT ENVIRONMENT DURING THE LAST SIX MONTHS?
A The market changed quite
dramatically over the course of the last six months. At the start of the period,
the outlook for the markets was optimistic. Bolstered by a reasonably strong
bond market, deal flow for senior loans was good and transactions were
attractively structured.
By October 2000, however, corporate earnings had come under pressure and the
bond market was retreating. The markets were weighed down by an increasingly
high default rate--the highest in absolute terms since 1991--especially among
highly leveraged, high-yield companies.
As a result, the senior loan market lost its positive tone and deal flow
began to slow as it became more difficult to launch favorable bond deals in the
face of deteriorating credit conditions. The weak performance of the stock
market contributed to the stresses placed on the financial markets, which were
amplified by the slowdown in the U.S. economy.
Short-term interest rates rose during the first half of 2000, consistent
with the Federal Reserve Board's rate hikes designed to keep inflation in check,
and they remained at generally higher levels for most of the reporting period,
supporting the income earned by the trust's holdings. However, with the U.S.
economy showing signs of weakness, the Fed aggressively cut short-term interest
rates by 0.50 percent twice in January 2001, indicating their willingness to
continue easing rates until the slowdown shows signs of abating. These declines,
in turn, put pressure on the trust's dividend.
Overall, very light senior loan market activity and weak prices in all
markets persisted through the end of 2000 and into January 2001, and we continue
to face cautious markets.
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For the six months through January 31, 2001, the trust had a total return of
-1.02 percent based on market price. This includes a decrease in market price
from $8.7500 per share on July 31, 2000, to $8.2200 per share on January 31,
2001. A substantial portion of the trust's senior loan assets are priced
utilizing independent pricing services. As of January 31, 2001, over 80 percent
of the trust's senior loan assets had been priced using these services. Past
performance is no guarantee of future results. As a result of recent market
activity, current performance may vary from figures shown. The trust continued
to provide shareholders with a relatively attractive level of current income.
Its monthly dividend of $0.073 per share translates to a distribution rate of
10.66 percent based on the trust's closing market price on January 31, 2001.
Please refer to the chart and footnotes on page 4 for additional performance
results.
Q HOW DID YOU REACT TO THESE
MARKET CONDITIONS?
A Over the past 18 months, the trust
has been managed with three guiding principals: diversify to greatest extent
possible, use a sound and detail-oriented credit selection, and stress the yield
component of the portfolio.
Maintaining a diversified portfolio is important so that the performance of
any one senior loan issue has less of an impact on the portfolio as a whole. In
general, our goal is to limit the average investment size both in dollar terms
and as a percentage of portfolio assets. Overall, the trust's top 10 holdings
represent just 14.49 percent of the portfolio's total assets, down from 16.63
percent as of July 31, 2000.
As we anticipated, corporate earnings started to deteriorate during the
reporting period, and as a result we have continued to focus on credit quality.
We continue to apply intense credit analysis of the senior loans we consider for
the portfolio. We will also continue to add new analysts to our senior loan team
as necessary to ensure that we continue to provide the best possible credit
evaluation. The experience represented by these analysts is invaluable during
difficult phases of the credit cycle, as it helps the process of selective
investing during periods of exacerbated market volatility. Also, when an issue
does have problems, we have extensive knowledge of the workout and recovery
process to help produce the best possible recovery of assets in the case of a
loan default.
An experienced staff also helped us keep the portfolio as fully invested as
possible, keeping the level of idle cash at a lower level and putting more of
the trust's assets to work in competitive-yielding senior loan investments.
Q WHAT SPECIFIC STRATEGIES DID
YOU EMPLOY IN MANAGING THE PORTFOLIO?
A Obviously, in maintaining a high
level of diversification within the portfolio, we took a close look at a wide
variety of senior loan issues from a broad range of industries. The difficult
markets of recent months persuaded us to adopt a more conservative stance
altogether.
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As far as specific industries go, we reduced the trust's exposure to some of
the more cyclical sectors, such as automobiles and transportation, which were
plagued by surging energy and fuel costs. Also, the auto industry typically
faces a period of slackening demand as the economy slows, leaving it with high
inventories of unsold vehicles. Other industries hit by weakened consumer
confidence and sluggish spending included textiles, apparel, and retail.
The telecommunications sector was hit hard by declining technology spending
on the corporate side and by changing investor sentiment, as sales and earnings
growth began to fall behind expectations. Growing demand for increased
"bandwidth" has spurred these firms to make ever-larger capital investments in
new fiber optic cable, switching facilities, and wireless transmission capacity,
but it will be years before the revenues generated by these initiatives catch up
with current expenditures. Although these investments cut into current earnings,
we hope they will pay off over the long haul. When we did invest in the telecom
sector, we looked for firms generating positive cash flow and issues that had
strong collateral behind them.
Industry sectors that were attractive included food, drugs, and health care,
which have traditionally benefited from relatively stable demand even during
tough economic times. Within these market segments, we looked for
well-capitalized companies with low levels of leverage. There is no guarantee,
however, that these sectors will continue to perform well or will be held by the
trust in the future.
Q WHAT IS YOUR OUTLOOK FOR THE
MARKET AND THE TRUST IN THE MONTHS AHEAD?
A We expect the next six months to
present a challenging environment in which to manage an investment portfolio.
The recent economic slowdown may continue to take its toll on corporate profits,
and the anticipated decline in interest rates could put pressure on the trust's
dividend, though it should remain highly competitive in relation to other
fixed-income investment alternatives.
With default rates high, investors will likely demand higher credit-quality
parameters in new deals that come to market, such as lower leverage and better
collateral coverage, leading to loan structures that are more conservative in
nature.
The trust's high level of diversification may prove to be valuable if we
encounter tough markets ahead. We feel the portfolio is well positioned for the
remainder of the fiscal year, with a varied selection of investments.
It is important for all shareholders to remember that, as disclosed in the
prospectus, the trust's net asset value fluctuates, and is not stable. Given
this, shareholders should talk with their financial advisor about whether the
trust fits their overall investment objectives and risk tolerance. We are
hopeful that the trust's emphasis on diversification, credit quality, and a
competitive level of income will continue to provide an attractive choice for
fixed-income investors with an investment time frame in the range of three to
five years. It is our belief that the trust can be an integral part of a
well-rounded investment strategy.
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GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CYCLICAL INDUSTRIES: Industries where earnings tend to rise quickly when the
economy strengthens and fall quickly when the economy weakens. Examples of
cyclical industries include housing, automobiles, and paper. Noncyclical
industries are typically less sensitive to changes in the economy. These include
utilities, grocery stores, and pharmaceutical companies.
DEFAULT: The failure to make required debt payments on time.
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 at least eight times
a year to establish monetary policy and monitor the economic pulse of the United
States.
LEVERAGE: An investment strategy that involves using borrowed money to finance
an investment. Leveraging involves certain risks, including the potential for
increased volatility.
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.
SECONDARY MARKET: A market where securities are traded after they are initially
offered.
SENIOR LOANS: Loans or other debt securities that are given preference to junior
securities of the borrower. In the event of bankruptcy, payments to holders of
senior loan obligations are given priority over payments to holders of
subordinated debt, as well as shareholders of preferred and common stock. Senior
loans may share priority status with other senior securities of the borrower,
and such status is not a guarantee that monies to which the investor is entitled
will be paid.
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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.
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.
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BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.(1)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
VARIABLE RATE** SENIOR LOAN INTERESTS 121.7%
AEROSPACE/DEFENSE 2.3%
$ 7,784 Aerostructures Corp.,
Term Loan............... NR BB- 12/31/03 to 09/06/04 $ 7,695,558
3,453 Aircraft Braking Systems
Corp., Term Loan........ Ba3 B+ 10/15/05 3,453,039
2,481 DeCrane Finance Co.,
Term Loan............... B2 B+ 12/17/06 2,390,303
9,574 EG&G Technical Services,
Inc., Term Loan......... B1 NR 08/20/07 9,438,308
4,865 Fairchild Corp., Term
Loan.................... Ba3 BB- 04/30/06 4,572,824
7,000 Integrated Defense
Technologies, Inc., Term
Loan.................... NR NR 09/15/06 6,940,587
3,980 Vought Aircraft
Industries, Inc., Term
Loan.................... NR NR 07/30/07 to 06/30/08 3,961,758
--------------
38,452,377
--------------
AUTOMOTIVE 2.7%
5,955 AMCAN Technologies,
Inc., Term Loan......... NR NR 03/28/07 5,941,672
3,963 American Axle &
Manufacturing Holdings,
Inc., Term Loan......... Ba2 BB 04/30/06 3,943,134
3,165 Breed Technologies,
Inc., Term Loan......... NR NR 12/20/04 3,165,182
4,683 Exide Corp., Term Loan.. Ba3 B+ 03/18/05 4,278,586
10,500 Federal-Mogul Corp.,
Term Loan............... B2 B+ 02/24/04 10,447,500
4,980 J.L. French Automotive
Castings, Inc., Term
Loan.................... B1 B+ 10/21/06 4,701,465
See Notes to Financial Statements
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YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
AUTOMOTIVE (CONTINUED)
$ 7,501 Meridian Automotive
Systems, Inc., Term
Loan.................... B1 BB- 03/31/07 $ 7,505,424
2,733 Safelite Glass Corp.,
Term Loan (a)........... NR NR 09/30/07 2,732,516
--------------
42,715,479
--------------
BEVERAGE, FOOD & TOBACCO 4.5%
38,515 Agrilink Foods, Inc.,
Term Loan............... B1 B+ 09/30/04 to 09/30/05 35,313,380
16,837 Aurora Foods, Inc., Term
Loan.................... B2 B 09/30/06 15,490,384
7,004 B & G Foods, Inc., Term
Loan.................... B1 B+ 03/31/06 6,520,345
4,961 Doane Pet Care Co., Term
Loan.................... B1 B+ 12/31/05 4,906,432
4,922 Eagle Family Foods,
Inc., Term Loan......... B1 B 12/31/05 4,679,456
5,219 Imperial Sugar Corp.,
Term Loan (c)........... B3 B 12/31/05 4,331,925
--------------
71,241,922
--------------
BROADCASTING--CABLE 2.5%
7,000 CC VIII Operating, LLC,
Term Loan............... Ba3 BB+ 02/02/08 6,998,362
17,150 Falcon Communications,
L.P., Term Loan......... Ba3 BB- 12/31/07 17,014,223
4,948 Frontiervision Operating
Partners, L.P., Term
Loan.................... Ba3 BB 03/31/06 4,911,014
10,000 UPC Financing
Partnership, Term
Loan.................... Ba3 B+ 03/31/09 9,816,670
--------------
38,740,269
--------------
BROADCASTING--DIVERSIFIED 0.1%
1,000 Emmis Communications
Corp., Term Loan........ Ba2 B+ 08/31/09 1,002,656
--------------
See Notes to Financial Statements
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YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
BROADCASTING--TELEVISION 1.6%
$ 7,920 Quorum Broadcasting,
Inc., Term Loan......... NR NR 09/30/07 $ 7,926,605
17,718 Sinclair Broadcast
Group, Inc., Term
Loan.................... Ba2 BB- 09/15/05 17,346,359
--------------
25,272,964
--------------
BUILDINGS & REAL ESTATE 2.8%
17,323 Corrections Corp. of
America, Term Loan...... B3 B 12/31/02 13,512,616
1,937 Corrections Corp. of
America, Revolving
Credit Agreement........ B3 B 01/01/02 1,511,373
6,012 Crescent Real Estate
Equities Co., Term
Loan.................... NR NR 02/01/04 6,029,392
23,493 Ventas Realty Ltd.,
Inc., Term Loan......... NR NR 12/31/02 to 12/31/07 22,290,627
--------------
43,344,008
--------------
CHEMICALS, PLASTICS & RUBBER 6.1%
4,975 Applied Tech Management
Corp., Term Loan........ B1 NR 04/30/07 4,953,670
14,296 GenTek, Inc., Term
Loan.................... Ba3 BB 04/30/07 to 10/31/07 14,198,073
5,000 Hercules, Inc., Term
Loan.................... Ba1 BB 11/15/05 5,027,392
18,652 Huntsman Corp., Term
Loan.................... Ba2 NR 09/30/03 to 12/31/05 18,263,891
3,920 Huntsman ICI Chemicals,
LLC, Term Loan.......... Ba3 BB 06/30/07 to 06/30/08 3,931,270
13,882 Lyondell Chemical Co.,
Term Loan............... Ba3 NR 06/30/05 to 05/17/06 14,110,292
4,890 Nutrasweet Acquisition
Corp., Term Loan........ Ba3 NR 05/25/07 to 05/25/09 4,872,599
13,399 OM Group, Inc., Term
Loan.................... NR NR 03/31/07 13,457,370
16,934 Pioneer America
Acquisition Corp., Term
Loan.................... Caa1 D 12/31/06 5,585,049
5,000 Port Arthur Coker Co.,
Term Loan............... Ba3 NR 07/15/07 4,908,335
See Notes to Financial Statements
14
16
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
CHEMICALS, PLASTICS & RUBBER (CONTINUED)
$ 3,262 Sterling Pulp Chemicals,
Inc., Term Loan......... B3 BB- 06/30/05 $ 3,208,300
4,619 West American Rubber
Co., Term Loan.......... NR NR 06/30/05 to 12/30/05 2,771,699
--------------
95,287,940
--------------
CONSTRUCTION MATERIAL 1.5%
9,925 Brand Scaffold Services,
Inc., Term Loan......... B1 NR 09/30/03 9,726,411
1,000 Dayton Superior Corp.,
Term Loan............... Ba3 BB- 06/01/08 1,003,749
1,900 Magnatrax Corp., Term
Loan.................... NR NR 11/15/05 1,895,178
5,473 Washington Group
International, Inc.,
Term Loan............... NR BBB- 07/07/07 5,453,691
4,988 Wilmar Industries, Inc.,
Term Loan............... NR NR 09/29/07 4,955,670
--------------
23,034,699
--------------
CONTAINERS, PACKAGING & GLASS 4.2%
8,218 Dr. Pepper/Seven Up Co.,
Inc., Term Loan......... NR NR 10/07/07 8,211,057
10,167 Graham Packaging Co.,
Term Loan............... B1 B+ 01/31/06 to 01/31/07 9,983,446
25,608 Nexpak Corp., Term
Loan.................... NR NR 12/31/05 to 12/31/06 23,877,493
4,881 Packaging Dynamics, Term
Loan.................... NR BB+ 11/20/05 4,634,327
6,000 Pliant Corp., Term
Loan.................... B2 BB- 05/31/08 5,726,835
3,050 RIC Holdings, Inc.
(Riverwood), Revolving
Credit Agreement........ B1 B 02/28/03 2,968,220
4,975 Tekni-Plex, Inc., Term
Loan.................... Ba3 B+ 06/26/08 4,875,500
4,994 U.S. Can Corp., Term
Loan.................... B1 BB- 10/04/08 5,018,021
--------------
65,294,899
--------------
DIVERSIFIED MANUFACTURING 2.3%
6,418 Actuant Corp., Term
Loan.................... B1 BB- 07/30/08 6,438,355
12,485 Citation Corp., Term
Loan.................... NR B+ 12/01/07 12,258,826
See Notes to Financial Statements
15
17
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
DIVERSIFIED MANUFACTURING (CONTINUED)
$ 4,963 Mueller Group, Inc.,
Term Loan............... B1 B+ 08/16/07 $ 4,993,516
9,386 SPX Corp., Term Loan.... Ba2 BB+ 12/31/06 9,415,629
2,500 Yuasa, Inc., Term
Loan.................... NR NR 11/09/08 2,486,254
--------------
35,592,580
--------------
ECOLOGICAL 2.4%
21,481 Allied Waste Industries,
Inc., Term Loan......... Ba3 BB 07/21/05 to 07/23/07 21,102,940
4,987 GTS Corp., Term Loan.... NR NR 12/08/06 4,943,638
4,898 IT Group, Inc., Term
Loan.................... B1 BB 06/11/06 4,788,093
7,492 Stericycle, Inc., Term
Loan.................... B1 BB- 11/10/06 7,531,968
--------------
38,366,639
--------------
EDUCATION & CHILD CARE 0.2%
2,800 TEC Worldwide, Inc.,
Term Loan............... NR NR 02/28/05 2,690,932
--------------
ELECTRONICS 5.4%
21,741 Acterna, LLC, Term
Loan.................... NR B+ 09/30/07 21,637,906
17,061 Amphenol Corp., Term
Loan.................... Ba2 BB 10/03/04 to 10/03/06 16,922,372
4,496 Audio Visual Services
Corp., Term Loan........ NR NR 10/01/01 2,787,438
1,070 Audio Visual Services
Corp., Revolving Credit
Agreement............... NR NR 10/01/01 663,463
4,282 Automata, Inc., Term
Loan (a) (c)............ NR NR 02/28/03 to 02/28/04 147,281
5,000 Computer Associates
International, Inc.,
Term Loan............... Baa1 BBB+ 05/26/03 4,928,125
5,500 Kinetic Concepts, Inc.,
Term Loan............... Ba3 B- 02/28/06 5,501,280
5,000 ON Semiconductor Corp.,
Term Loan............... NR BB- 08/04/07 4,995,835
5,017 Rowe International,
Inc., Term Loan......... NR NR 12/31/03 2,709,254
See Notes to Financial Statements
16
18
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
ELECTRONICS (CONTINUED)
$ 96 Rowe International,
Inc., Revolving Credit
Agreement............... NR NR 12/31/03 $ 51,637
9,000 Seagate Technologies,
Inc., Term Loan......... NR BB+ 11/22/06 8,985,942
9,925 Superior Telecom, Inc.,
Term Loan............... B2 B+ 11/27/05 9,007,893
6,976 Viasystems, Inc., Term
Loan.................... B1 BB- 03/31/07 6,947,016
--------------
85,285,442
--------------
ENTERTAINMENT & LEISURE 7.4%
4,933 Bally Total Fitness
Holding Corp., Term
Loan.................... B1 B+ 11/10/04 4,913,294
5,351 Bell Sports, Inc., Term
Loan.................... Ba3 B+ 03/31/06 to 03/31/07 5,369,732
9,920 Fitness Holdings
Worldwide, Inc., Term
Loan.................... NR B 11/02/06 to 11/02/07 9,612,480
30,000 Metro-Goldwyn-Mayer,
Inc., Term Loan......... Baa3 BBB- 03/31/05 to 03/31/06 29,355,470
4,975 Playcore Wisconsin,
Inc., Term Loan......... NR NR 07/01/07 4,712,690
8,000 Six Flags Theme Parks,
Inc., Term Loan......... Ba2 BB- 09/30/05 8,055,496
46,728 United Artists Theatre,
Inc., Term Loan (c)..... Caa3 D 04/21/06 to 04/21/07 39,250,660
9,173 WFI Group, Inc., Term
Loan.................... Ba2 NR 07/14/04 9,171,751
4,975 Worldwide Sports &
Recreation, Inc., Term
Loan.................... NR NR 12/31/06 5,006,551
--------------
115,448,124
--------------
FARMING & AGRICULTURE 0.3%
4,001 The Scotts Co., Term
Loan.................... Ba3 BB 12/31/07 4,026,500
--------------
See Notes to Financial Statements
17
19
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
FINANCE 3.2%
$23,939 Bridge Information
Systems, Inc., Term Loan
(a) (d)................. NR NR 05/29/03 to 05/29/05 $ 3,830,233
11,184 Bridge Information
Systems, Inc., Revolving
Credit Agreement (a)
(d)..................... NR NR 05/29/03 1,789,432
11,716 Mafco Finance Corp.,
Term Loan............... NR NR 06/15/01 11,649,956
4,938 Outsourcing Solutions,
Term Loan............... B2 BB- 06/01/06 4,822,293
10,714 Paul G. Allen, Term
Loan.................... NR NR 06/10/03 10,664,068
6,065 Rent-A-Center, Inc.,
Term Loan............... Ba3 BB- 01/31/06 to 12/31/07 6,034,740
4,975 Risk Management
Assurance Co., Term
Loan.................... NR NR 12/21/06 4,959,697
7,000 Sovereign Bancorp, Inc.,
Term Loan............... Ba3 NR 11/14/03 7,022,603
--------------
50,773,022
--------------
GROCERY 0.6%
399 Fleming Cos., Inc., Term
Loan.................... Ba3 BB 07/25/04 384,543
1,141 Fleming Cos., Inc.,
Revolving Credit
Agreement............... Ba3 BB 07/25/03 1,098,198
7,986 Pathmark Stores, Inc.,
Term Loan............... NR NR 08/31/07 7,940,743
--------------
9,423,484
--------------
HEALTHCARE 6.4%
3,150 Charles River
Laboratories, Inc., Term
Loan.................... Ba3 BB- 09/29/07 3,162,420
13,739 Community Health
Systems, Inc., Term
Loan.................... NR NR 12/31/05 13,625,794
13,042 FHC Health Systems,
Inc., Term Loan......... NR NR 04/30/03 to 04/30/06 12,921,599
See Notes to Financial Statements
18
20
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
HEALTHCARE (CONTINUED)
$ 1,579 FHC Health Systems,
Inc., Revolving Credit
Agreement............... NR NR 05/18/03 $ 1,553,565
7,971 Genesis Health Ventures,
Inc., Term Loan (a)
(c)..................... NR NR 09/30/03 to 06/01/05 4,781,814
2,972 Genesis Health Ventures,
Inc., Revolving Credit
Agreement (a) (c)....... NR NR 05/30/06 1,783,037
44,213 Integrated Health
Services, Inc., Term
Loan (a) (c)............ NR NR 09/30/04 15,837,536
2,000 InteliStaf Group, Inc.,
Term Loan............... NR NR 10/31/07 1,982,561
6,540 Multicare Cos., Inc.,
Term Loan (a) (c)....... NR NR 09/30/03 to 06/01/05 3,923,942
1,407 Multicare Cos., Inc.,
Revolving Credit
Agreement (a) (c)....... NR NR 09/30/03 844,081
4,964 National Nephrology
Associates, Inc., Term
Loan.................... B1 B+ 12/31/05 4,933,038
2,904 Sun Healthcare Group,
Inc., Term Loan (a)
(c)..................... NR NR 11/12/03 871,158
12,555 Sun Healthcare Group,
Inc., Revolving Credit
Agreement (a) (c)....... NR NR 11/12/03 3,766,462
3,973 Tenet Healthcare Corp.,
Revolving Credit
Agreement............... Ba1 BB+ 01/31/02 3,928,516
28,284 Vencor, Inc., Term Loan
(a) (c)................. NR NR 03/31/03 to 01/15/05 27,152,754
--------------
101,068,277
--------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER
PRODUCTS 2.3%
7,335 Dal-Tile Group, Inc.,
Term Loan............... NR NR 12/31/03 7,163,530
5,460 Formica Corp., Term
Loan.................... B1 B+ 04/30/06 5,234,979
9,385 Holmes Products Corp.,
Term Loan............... B1 B+ 02/05/07 8,845,102
See Notes to Financial Statements
19
21
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER
PRODUCTS (CONTINUED)
$ 3,732 Imperial Home Decor
Group, Inc., Term Loan
(a) (c)................. NR NR 03/12/04 to 03/13/06 $ 309,794
1,246 Imperial Home Decor
Group, Inc., Revolving
Credit Agreement (a)
(c)..................... NR NR 03/12/04 103,402
6,126 Pillowtex Corp., Term
Loan (c)................ Caa2 CCC 12/31/04 3,798,277
1,583 Pillowtex Corp., Debtor
in Possession (c)....... Caa2 CCC 01/31/02 981,509
426 Sleepmaster, LLC, Term
Loan.................... B1 BB- 12/31/06 425,990
1,500 Targus Group
International, Inc.,
Term Loan............... NR NR 08/31/06 1,491,552
4,900 World Kitchen, Inc.,
Term Loan............... NR NR 10/09/06 3,724,000
4,783 World Kitchen, Inc.,
Revolving Credit
Agreement............... NR NR 04/09/05 3,634,182
--------------
35,712,317
--------------
HOTELS, MOTELS, INNS & GAMING 5.0%
25,419 Aladdin Gaming, LLC,
Term Loan............... B2 NR 03/31/07 to 09/30/08 20,589,294
12,469 Autotote Corp., Term
Loan.................... B1 B+ 09/30/07 12,521,654
5,000 Extended Stay America,
Inc., Term Loan......... Ba3 NR 06/30/07 5,023,215
992 Isle of Capri Casinos,
Inc., Term Loan......... Ba2 BB- 03/02/06 to 03/02/07 996,067
40,000 Wyndham International,
Inc., Term Loan......... NR NR 06/30/06 39,500,000
--------------
78,630,230
--------------
MACHINERY 5.7%
1,497 Alliance Laundry
Systems, LLC, Term
Loan.................... B1 B+ 06/30/05 1,460,714
25,000 Ashtead Group, PLC, Term
Loan.................... NR NR 06/01/07 24,734,375
10,923 Flowserve Corp., Term
Loan.................... B1 BB- 06/30/08 10,941,022
See Notes to Financial Statements
20
22
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
MACHINERY (CONTINUED)
$ 4,980 Goodman Manufacturing,
L.P., Term Loan......... NR NR 07/31/05 $ 4,839,480
15,870 NationsRent, Inc., Term
Loan.................... B2 BB- 07/20/06 14,323,699
15,000 Ocean Rig ASA-(Norway),
Term Loan............... NR NR 06/01/08 14,116,988
4,758 Thermadyne Manufacturing,
LLC, Term Loan.......... B3 B 05/22/05 to 05/22/06 3,948,895
11,875 United Rentals (North
America), Inc., Term
Loan.................... Ba3 BB+ 06/30/06 11,401,978
2,856 Weigh-Tronix, LLC, Term
Loan.................... NR NR 06/30/07 2,838,079
--------------
88,605,230
--------------
MEDICAL PRODUCTS & SUPPLIES 3.4%
25,000 Alliance Imaging, Inc.,
Term Loan............... B1 NR 11/02/07 to 11/02/08 24,645,825
18,356 Dade Behring, Inc., Term
Loan.................... NR B 06/30/05 to 06/30/07 13,216,203
15,972 Davita, Inc., Term
Loan.................... NR NR 03/31/06 15,943,565
--------------
53,805,593
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 3.0%
3,478 CII Carbon, LLC, Term
Loan.................... NR NR 06/25/08 3,384,157
9,749 Earle M. Jorgensen, Term
Loan.................... Ba3 B+ 03/31/04 9,619,385
38,332 Ispat Inland, Term
Loan.................... Ba3 BB- 07/16/05 to 07/16/06 27,598,934
6,930 UCAR International,
Inc., Term Loan......... Ba3 BB- 12/30/07 6,853,388
--------------
47,455,864
--------------
NATURAL RESOURCES 2.0%
25,000 Arch Western Resources,
LLC, Term Loan.......... Ba2 NR 05/31/03 24,331,346
7,230 P&L Coal Holdings Corp.,
Term Loan............... Ba2 NR 06/30/06 7,233,032
--------------
31,564,378
--------------
See Notes to Financial Statements
21
23
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
NON-DURABLE CONSUMER PRODUCTS 2.1%
$ 8,753 American Marketing
Industries, Inc., Term
Loan.................... NR NR 11/30/04 to 11/30/05 $ 8,152,199
992 American Safety Razor
Co., Term Loan.......... B1 B+ 04/30/07 988,734
6,302 Arena Brands, Inc., Term
Loan.................... NR NR 06/01/02 6,228,548
18,647 Boyds Collection, Ltd.,
Term Loan............... Ba3 B+ 04/21/05 17,550,549
--------------
32,920,030
--------------
PAPER & FOREST PRODUCTS 1.1%
2,616 Bear Island Paper Co.,
LLC, Term Loan.......... B1 B+ 12/31/05 2,562,927
7,429 Crown Paper Co., Term
Loan (c)................ NR NR 06/30/02 3,045,971
6,893 Crown Paper Co.,
Revolving Credit
Agreement (c)........... NR NR 08/22/02 2,826,119
8,700 Pacifica Papers, Inc.,
Term Loan............... Ba2 BB 03/12/06 8,728,023
--------------
17,163,040
--------------
PERSONAL & MISCELLANEOUS SERVICES 1.8%
4,347 Coinmach Laundry Corp.,
Term Loan............... NR BB- 06/30/05 4,339,554
12,903 Encompass Service Corp.,
Term Loan............... Ba3 BB 05/10/07 12,782,337
2,747 Iron Mountain, Inc.,
Term Loan............... NR BB 02/28/06 2,769,307
2,505 Professional Service
Industries, Inc., Term
Loan.................... NR NR 09/16/02 2,135,656
9,455 Telespectrum Worldwide,
Inc., Term Loan......... NR NR 12/31/01 to 12/31/03 6,618,034
--------------
28,644,888
--------------
PHARMACEUTICALS 1.9%
8,000 Advance Paradigm, Inc.,
Term Loan............... Ba3 BB 09/29/07 8,032,504
7,890 Bergen Brunswig Corp.,
Term Loan............... NR BB 03/31/06 7,903,278
See Notes to Financial Statements
22
24
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
PHARMACEUTICALS (CONTINUED)
$ 3,392 Caremark Rx, Inc., Term
Loan.................... B1 BB- 05/31/01 $ 3,382,727
3,085 Endo Pharmaceuticals,
Inc., Term Loan......... NR NR 12/31/02 3,000,673
7,000 Shire Pharmaceuticals,
Inc., Term Loan......... Ba1 NR 11/19/04 6,935,519
--------------
29,254,701
--------------
PRINTING & PUBLISHING 7.8%
4,750 21st Century Newspapers,
Term Loan............... NR NR 09/15/05 4,726,823
7,000 Advanstar
Communications, Inc.,
Term Loan............... Ba3 B+ 10/11/07 7,006,566
11,414 American Reprographics
Co., Term Loan.......... NR NR 03/31/08 11,468,287
8,000 CommerceConnect Media,
Inc., Term Loan......... NR NR 12/31/07 7,936,245
4,975 Liberty Group Operating,
Inc., Term Loan......... B1 B 03/31/07 4,984,328
6,288 Mail-Well, Inc., Term
Loan.................... Ba2 BB 02/22/07 6,256,656
4,887 Medical Arts Press,
Inc., Term Loan......... NR NR 05/16/06 4,910,828
8,529 Penton Media, Inc., Term
Loan.................... Ba3 BB- 06/30/07 8,313,950
8,128 R.H. Donnelley, Inc.,
Term Loan............... NR BB 12/05/05 to 12/05/06 8,067,200
9,239 Reiman Publications,
LLC, Term Loan.......... NR NR 12/10/05 9,294,445
5,000 Trader.com, Term Loan... NR NR 12/31/06 to 12/31/07 4,991,535
1,973 TWP, Inc., Term Loan.... Ba3 B+ 10/01/04 1,916,640
23,596 Vertis, Inc., Term
Loan.................... B1 BB- 12/06/05 23,174,236
13,798 Von Hoffman Press, Inc.,
Term Loan............... B1 B+ 07/01/04 to 07/01/05 13,621,432
1,995 Vutek, Inc., Term
Loan.................... NR NR 06/30/07 1,977,605
3,384 Ziff-Davis Media, Inc.,
Term Loan............... Ba3 B+ 03/31/07 3,380,670
--------------
122,027,446
--------------
See Notes to Financial Statements
23
25
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
RESTAURANTS & FOOD SERVICE 2.4%
$ 7,500 Captain D's, Inc., Term
Loan.................... B2 B+ 12/31/01 $ 6,862,528
1,384 Carvel Corp., Term
Loan.................... NR NR 06/30/01 1,365,625
10,169 Domino's Pizza, Inc.,
Term Loan............... B1 B+ 12/21/06 to 12/21/07 10,217,241
19,761 S.C. International
Services, Inc., Term
Loan.................... Ba3 NR 03/01/07 18,990,553
--------------
37,435,947
--------------
RETAIL--OFFICE PRODUCTS 0.3%
8,244 U.S. Office Products
Co., Term Loan.......... Caa1 CCC- 06/09/06 5,110,998
--------------
RETAIL--OIL & GAS 1.4%
7,396 Barjan Products, LLC,
Term Loan............... NR NR 05/31/06 7,427,997
4,975 Kwik Trip, Term Loan.... NR NR 07/27/07 4,931,622
9,392 The Pantry, Inc., Term
Loan.................... B1 BB- 01/31/06 to 07/31/06 9,424,697
--------------
21,784,316
--------------
RETAIL--SPECIALTY 0.8%
8,246 Josten's, Inc., Term
Loan.................... B1 BB- 05/31/06 to 05/31/08 8,248,638
4,960 Mitchell's Management
Corp., Term Loan........ NR NR 12/31/07 4,948,899
--------------
13,197,537
--------------
RETAIL--STORES 3.3%
4,950 CSK Auto, Inc., Term
Loan.................... Ba3 BB- 10/31/03 4,492,125
32,083 HMV Media Group, PLC,
Term Loan............... B2 BB- 03/28/06 to 09/28/06 28,107,197
18,725 Rite Aid Corp., Term
Loan.................... B1 BB- 08/01/02 to 08/15/02 18,449,820
--------------
51,049,142
--------------
TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 1.9%
5,004 Cincinnati Bell, Inc.,
Term Loan............... Ba1 BB+ 12/30/06 5,013,670
6,000 McLeodUSA, Inc., Term
Loan.................... Ba2 BB- 05/31/08 6,010,002
See Notes to Financial Statements
24
26
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS (CONTINUED)
$ 7,456 Orius Corp., Term
Loan.................... NR B+ 12/14/06 to 12/15/07 $ 7,232,456
12,500 Winstar Communications,
Inc., Term Loan......... B2 B+ 09/30/07 11,734,047
--------------
29,990,175
--------------
TELECOMMUNICATIONS--LONG DISTANCE 1.3%
6,000 Global Crossing
Holdings, Ltd., Term
Loan.................... Ba1 BBB- 06/30/06 6,010,416
15,000 Pacific Crossing, Ltd.,
Term Loan............... NR NR 07/28/06 14,231,250
--------------
20,241,666
--------------
TELECOMMUNICATIONS--PAGING 0.5%
12,690 Arch Wireless, Inc.,
Term Loan............... B2 B- 06/30/06 8,438,617
10,973 TSR Wireless, LLC, Term
Loan (a) (c)............ NR NR 06/30/05 0
--------------
8,438,617
--------------
TELECOMMUNICATIONS--WIRELESS 10.5%
5,000 American Cellular Corp.,
Term Loan............... Ba3 BB- 03/31/08 to 03/31/09 4,995,170
7,500 American Tower Corp.,
Term Loan............... Ba3 BB 01/06/08 7,537,500
25,001 BCP SP Ltd., Term Loan.. NR NR 03/31/02 to 03/31/05 24,504,447
11,712 Microcell Solutions,
Inc., Term Loan......... NR NR 03/01/06 11,686,770
13,000 Nextel Finance Co., Term
Loan.................... Ba2 BB- 06/30/08 to 12/31/08 13,038,753
5,531 Powertel PCS, Inc., Term
Loan.................... NR NR 12/31/05 5,431,567
5,000 Spectrasite
Communications, Inc.,
Term Loan............... B1 B+ 06/30/06 5,014,065
4,134 Sygnet Wireless, Inc.,
Term Loan............... NR NR 03/23/07 to 12/23/07 4,106,586
31,500 TeleCorp PCS, Inc., Term
Loan.................... B2 NR 12/05/07 31,401,562
12,700 Triton PCS, Inc., Term
Loan.................... B1 B 05/04/07 12,660,312
See Notes to Financial Statements
25
27
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
TELECOMMUNICATIONS--WIRELESS (CONTINUED)
$30,000 VoiceStream Wireless
Corp., Term Loan........ B1 B+ 02/25/08 to 06/30/09 $ 29,735,340
14,500 Western Wireless Corp.,
Term Loan............... Ba2 BB 09/30/08 14,546,820
--------------
164,658,892
--------------
TEXTILES & LEATHER 2.0%
8,772 Galey & Lord, Inc., Term
Loan.................... Caa2 BB- 04/02/05 to 04/01/06 7,959,824
5,930 Malden Mills Industries,
Inc., Term Loan......... B1 NR 10/28/06 5,887,622
17,176 Norcross Safety
Products, LLC, Term
Loan.................... NR NR 10/02/05 16,854,020
--------------
30,701,466
--------------
TRANSPORTATION--CARGO 3.2%
16,247 American Commercial
Lines, LLC, Term Loan... Ba2 BB- 06/26/06 to 06/26/07 16,261,821
6,067 Atlas Freighter Leasing,
Inc., Term Loan......... NR NR 04/20/05 to 04/20/06 5,861,256
8,986 Evergreen International
Aviation, Inc., Term
Loan.................... NR NR 05/31/02 to 05/02/04 8,952,073
6,500 Kansas City Southern
Railway Co., Term
Loan.................... Ba1 BB+ 12/30/05 6,512,188
12,870 North American Van
Lines, Inc., Term
Loan.................... B1 B+ 11/18/07 12,049,538
--------------
49,636,876
--------------
TRANSPORTATION--RAIL MANUFACTURING 0.7%
4,000 Helm, Inc., Term Loan... NR NR 10/18/06 4,003,752
7,940 RailWorks Corp., Term
Loan.................... B3 B 09/30/06 6,590,200
--------------
10,593,952
--------------
UTILITIES 0.8%
6,147 Global Energy, Inc.,
Term Loan............... NR NR 07/28/08 8,130,243
5,970 Western Resources, Inc.,
Term Loan............... NR NR 03/17/03 6,024,727
--------------
12,154,970
--------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 121.7%....................... 1,907,840,484
--------------
See Notes to Financial Statements
26
28
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BORROWER VALUE
FIXED INCOME SECURITIES 1.5%
Satelites Mexicanos ($26,081,000 par, 9.06% coupon, maturing
06/30/04), 144A Private Placement (b)..................... $ 23,342,495
--------------
EQUITIES 0.2%
Breed Technologies, Inc. (416,538 common shares) (e)........ 2,361,770
Rowe International, Inc. (87,636 common shares) (e)......... 0
Safelite Glass Corp. (122,963 common shares) (e) (f)........ 373,808
Safelite Realty (8,300 common shares) (e)................... 0
--------------
TOTAL EQUITIES.............................................. 2,735,578
--------------
TOTAL LONG-TERM INVESTMENTS 123.4%
(Cost $2,137,612,132)..................................... 1,933,918,557
--------------
SHORT TERM INVESTMENTS 12.6%
COMMERCIAL PAPER 7.0%
Chevron Phillips Chemical Co., LLC ($10,000,000 par,
maturing 02/09/01, yielding 6.65%)........................ 9,985,222
Comdisco, Inc. ($9,000,000 par, maturing 02/09/01, yielding
6.70%).................................................... 8,986,600
ConAgra, Inc. ($21,300,000 par, maturing 02/05/01, yielding
6.60%).................................................... 21,284,380
Temple Inland, Inc. ($22,000,000 par, maturing 02/06/01 to
02/13/01, yielding 6.50% to 6.85%)........................ 21,970,562
Texas Utilities Co. ($23,000,000 par, maturing 02/12/01 to
02/13/01, yielding 6.60% to 6.70%)........................ 22,949,858
TRW, Inc. ($25,000,000 par, maturing 02/06/01, yielding
6.85%).................................................... 24,976,216
--------------
TOTAL COMMERCIAL PAPER...................................... 110,152,838
--------------
SHORT-TERM LOAN PARTICIPATIONS 5.4%
Cox Communications, Inc. ($25,000,000 par, maturing
02/01/01, yielding 6.50%)................................. 25,000,000
Federated Department Stores ($7,800,000 par, maturing
02/01/01, yielding 6.50%)................................. 7,800,000
Nisource Finance Corp. ($12,000,000 par, maturing 02/05/01
to 02/09/01, yielding 6.62% to 6.60%)..................... 12,000,000
Tampa Electric Co. ($11,900,000 par, maturing 02/01/01,
yielding 5.95%)........................................... 11,900,000
Texas Utilities Co. ($2,000,000 par, maturing 02/01/01,
yielding 6.50%)........................................... 2,000,000
WorldCom, Inc. ($25,000,000 par, maturing 02/01/01, yielding
6.75%).................................................... 25,000,000
--------------
TOTAL SHORT-TERM LOAN PARTICIPATIONS........................ 83,700,000
--------------
See Notes to Financial Statements
27
29
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
BORROWER VALUE
TIME DEPOSIT 0.2%
State Street Bank & Trust Corp. ($3,900,000 par, 5.63%
coupon, dated 01/31/01, to be sold on 02/01/01 at
$3,900,609)............................................... $ 3,900,000
--------------
TOTAL SHORT-TERM INVESTMENTS 12.6%
(Cost $197,752,838)....................................... 197,752,838
--------------
TOTAL INVESTMENTS 136.0%
(Cost $2,335,364,970)..................................... 2,131,671,395
BORROWINGS (36.7%)......................................... (575,000,000)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%................. 11,177,305
--------------
NET ASSETS 100.0%.......................................... $1,567,848,700
==============
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) 144A Securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. 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, 2001, this borrower has filed for protection in
federal Bankruptcy court.
(e) Non-income producing security as this stock currently does not declare
dividends.
(f ) Restricted Security
* 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.
See Notes to Financial Statements
28
30
YOUR TRUST'S INVESTMENTS
January 31, 2001 (Unaudited)
** 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
29
31
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
January 31, 2001 (Unaudited)
ASSETS:
Total Investments (Cost $2,335,364,970)..................... $2,131,671,395
Receivables:
Interest.................................................. 22,141,537
Investments Sold.......................................... 10,340,807
Other....................................................... 224,103
--------------
Total Assets............................................ 2,164,377,842
--------------
LIABILITIES:
Payables:
Borrowings................................................ 575,000,000
Custodian Bank............................................ 15,309,516
Investment Advisory Fee................................... 1,616,441
Administrative Fee........................................ 394,411
Affiliates................................................ 27,857
Accrued Interest Expense.................................... 3,122,011
Accrued Expenses............................................ 929,463
Trustees' Deferred Compensation and Retirement Plans........ 129,443
--------------
Total Liabilities....................................... 596,529,142
--------------
NET ASSETS.................................................. $1,567,848,700
==============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 180,010,000 shares issued and
outstanding).............................................. $ 1,800,100
Paid in Surplus............................................. 1,795,855,431
Accumulated Undistributed Net Investment Income............. 17,173,863
Accumulated Net Realized Loss............................... (43,287,119)
Net Unrealized Depreciation................................. (203,693,575)
--------------
NET ASSETS.................................................. $1,567,848,700
==============
NET ASSET VALUE PER COMMON SHARE ($1,567,848,700 divided by
180,010,000 shares outstanding)........................... $ 8.71
==============
See Notes to Financial Statements
30
32
Statement of Operations
For the Six Months Ended January 31, 2001 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 116,746,558
Fees........................................................ 1,105,147
-------------
Total Income............................................ 117,851,705
-------------
EXPENSES:
Investment Advisory Fee..................................... 10,027,556
Administrative Fee.......................................... 2,359,425
Legal....................................................... 380,429
Custody..................................................... 374,951
Trustees' Fees and Related Expenses......................... 36,613
Other....................................................... 970,230
-------------
Total Operating Expenses................................ 14,149,204
Interest Expense........................................ 22,800,009
-------------
Total Expenses.......................................... 36,949,213
-------------
NET INVESTMENT INCOME....................................... $ 80,902,492
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (39,939,037)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (72,339,694)
End of the Period......................................... (203,693,575)
-------------
Net Unrealized Depreciation During the Period............... (131,353,881)
-------------
NET REALIZED AND UNREALIZED LOSS............................ $(171,292,918)
=============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (90,390,426)
=============
See Notes to Financial Statements
31
33
Statement of Changes in Net Assets
For the Six Months Ended January 31, 2001
and the Year Ended July 31, 2000 (Unaudited)
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 2001 JULY 31, 2000
---------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 80,902,492 $ 145,114,337
Net Realized Loss................................. (39,939,037) (3,054,917)
Net Unrealized Depreciation During the Period..... (131,353,881) (71,900,633)
-------------- --------------
Change in Net Assets from Operations.............. (90,390,426) 70,158,787
-------------- --------------
Distributions from Net Investment Income.......... (78,305,446) (147,076,580)
Distributions from Net Realized Gain.............. -0- (1,593,578)
-------------- --------------
Total Distributions............................... (78,305,446) (148,670,158)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (168,695,872) (78,511,371)
NET ASSETS:
Beginning of the Period........................... 1,736,544,572 1,815,055,943
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$17,173,863 and $14,576,817, respectively)...... $1,567,848,700 $1,736,544,572
============== ==============
See Notes to Financial Statements
32
34
Statement of Cash Flows
For the Six Months Ended January 31, 2001 (Unaudited)
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ (90,390,426)
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Used for Operating Activities:
Decrease in Investments at Value.......................... 293,195,059
Increase in Investments Sold.............................. (10,340,807)
Increase in Interest Receivable........................... (1,983,737)
Increase in Other Assets.................................. (53,848)
Decrease in Investment Advisory Fees Payable.............. (196,749)
Decrease in Administrative Fees Payable................... (46,294)
Decrease in Affiliates Payable............................ (174,317)
Increase in Accrued Expenses.............................. 288,338
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 14,296
-------------
Total Adjustments....................................... 280,701,941
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 190,311,515
=============
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in Bank Borrowings................................... (125,000,000)
Change in Intra-day Credit Line with Custodian Bank......... 13,924,189
Change in Accrued Interest Expense.......................... (930,258)
Cash Dividends Paid......................................... (78,305,446)
-------------
Net Cash Used for Financing Activities.................... 190,311,515
-------------
NET DECREASE IN CASH........................................ -0-
Cash at Beginning of the Period............................. -0-
-------------
CASH AT THE END OF THE PERIOD............................... $ -0-
=============
See Notes to Financial Statements
33
35
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE TRUST
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
JUNE 24, 1998
SIX MONTHS YEAR YEAR (COMMENCEMENT
ENDED ENDED ENDED OF INVESTMENT
JANUARY 31, JULY 31, JULY 31, OPERATIONS) TO
2001 2000 1999 JULY 31, 1998
--------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD
(a).................................... $ 9.65 $ 10.08 $ 10.07 $ 9.99
-------- -------- -------- --------
Net Investment Income.................. .45 .81 .77 .07
Net Realized and Unrealized
Gain/Loss............................ (.95) (.42) -0- .01
-------- -------- -------- --------
Total from Investment Operations......... (.50) .39 .77 .08
-------- -------- -------- --------
Less:
Distributions from Net Investment
Income............................... .44 .81 .76 -0-
Distributions from Net Realized
Gains................................ -0- .01 -0- -0-
-------- -------- -------- --------
Total Distributions...................... .44 .82 .76 -0-
-------- -------- -------- --------
NET ASSET VALUE, END OF THE PERIOD....... $ 8.71 $ 9.65 $ 10.08 $ 10.07
======== ======== ======== ========
Market Price Per Share at End of the
Period................................. $ 8.22 $ 8.7500 $ 9.5625 $10.0625
Total Investment Return at Market Price
(b).................................... -1.02%** .61% 2.98% 0.63%**
Total Return at Net Asset Value (c)...... -5.36%** 4.10% 7.91% 0.70%**
Net Assets at End of the Period (In
millions).............................. $1,567.8 $1,736.5 $1,815.1 $1,812.1
Ratio of Operating Expenses to Average
Net Assets*............................ 1.69% 1.75% 1.66% 1.18%
Ratio of Interest Expenses to Average Net
Assets................................. 2.73% 2.49% 2.37% 0.28%
Ratio of Net Investment Income to Average
Net Assets*............................ 9.68% 8.19% 7.72% 6.94%
Portfolio Turnover (d)................... 19%** 57% 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 N/A 1.21%
Ratio of Net Investment Income to Average
Net Assets............................. N/A N/A N/A 6.90%
** Non-Annualized
(a) Net asset value on 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
34
36
NOTES TO
FINANCIAL STATEMENTS
January 31, 2001 (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 geographical 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 accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION The Trust's Variable Rate Senior Loan interests and Other
Loan interests (collectively "Loan interests") are valued by the Trust following
valuation guidelines established and periodically reviewed by the Trust's Board
of Trustees. Under the valuation guidelines, Senior Loans and securities for
which reliable market quotes are readily available are valued at the mean of
such bid and ask quotes and all other Senior Loans securities and assets of the
Trust are valued at fair value in good faith following procedures established by
the 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 approved by the Board, certain Senior Loans
will be valued on the basis of such indicators. Other Senior Loans will be
valued by independent pricing sources approved by the Trust's Board of Trustees
based upon pricing models developed, maintained and operated by those pricing
sources or valued by Van Kampen Investment Advisory Corp. (the "Adviser") by
considering a number of factors including consideration of market indicators,
transactions in instruments which the Adviser believes may be comparable
(including comparable credit quality, interest rate, interest rate
redetermination period and maturity), the credit worthiness of the Borrower, the
current interest rate, the period until next interest rate redetermination and
the maturity of such Senior 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 Senior Loan interests in the Trust's portfolio. The fair value of
35
37
NOTES TO
FINANCIAL STATEMENTS
January 31, 2001 (Unaudited)
Senior Loans are reviewed and approved by the Trust's Valuation Committee
consistent with a methodology established by the Trust's Trustees. The Trust and
Trustees will continue to monitor developments in the Senior Loan market and
will make modifications to the current valuation methodology as deemed
appropriate.
Equity securities are valued on the basis of prices furnished by pricing
services or as determined in good faith by the Adviser under the direction of
the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. Short-term loan
participations are valued at cost in the absence of any indication of
impairment.
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 are amortized and
discounts are accreted 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. 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 post October losses and the deferral of losses
relating to wash sale transactions.
At January 31, 2001, for federal income tax purposes cost of long- and
short-term investments is $2,335,366,365, the aggregate gross unrealized
appreciation is $7,573,665 and the aggregate gross unrealized depreciation is
$211,268,635 resulting in net unrealized depreciation on long- and short-term
investments of $203,694,970.
E. 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 at least annually to common shareholders.
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 daily 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
36
38
NOTES TO
FINANCIAL STATEMENTS
January 31, 2001 (Unaudited)
monthly administrative fee to Van Kampen Investments Inc., the Trust's
Administrator, at an annual rate of .20% of the average daily 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, 2001, the Trust recognized expenses of
approximately $59,900 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.
Under a Legal Services agreement, the Adviser provides legal services to the
Trust. The Adviser allocates the cost of such services to each Trust. For the
six months ended January 31, 2001, the Trust recognized expenses of
approximately $21,100 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing legal services to the
Trust, which are reported as legal expenses in the statement of operations.
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.
During the period, the Trust owned shares of the following affiliated
companies. Affiliated companies are defined by the Investment Company Act of
1940 as those companies in which a fund holds 5% or more of the outstanding
voting securities.
REALIZED DIVIDEND MARKET VALUE
NAME SHARES* GAIN/(LOSS) INCOME 01/31/01
Rowe International Inc.............. 1,025,280 0 0 $0
* Shares were acquired through the restructuring of Senior loan interests.
3. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $407,149,328 and $634,152,588
respectively.
4. COMMITMENTS
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Trust had unfunded loan commitments of approximately $56,531,000 as of
37
39
NOTES TO
FINANCIAL STATEMENTS
January 31, 2001 (Unaudited)
January 31, 2001. The Trust generally will maintain with its custodian
short-term 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, 2001, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Trust on a participation
basis.
PRINCIPAL
AMOUNT VALUE
SELLING PARTICIPANT (000) (000)
Wachovia.................................................... $14,620 $14,475
Chase Securities............................................ 2,246 2,226
First Union................................................. 1,973 1,917
------- -------
$18,839 $18,618
======= =======
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 revolving credit agreement 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 revolving
credit agreement is secured by the assets of the Trust. For the period ended
January 31, 2001, the average daily balance of borrowings under the revolving
credit agreement was $673 million with a weighted average interest rate of
6.57%.
38
40
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
39
41
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN SENIOR INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
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
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, 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
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940,
as amended.
Van Kampen Funds Inc., (C) 2001. All rights reserved.
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