UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08743
Van Kampen Senior Income Trust
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 7/31
Date of reporting period: 1/31/04
Item 1. Reports to Shareholders.
The Trust's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Senior Income Trust performed during the semi-annual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the trust's financial statements and a list of trust investments
as of January 31, 2004.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the trust will achieve its investment
objective. The trust is subject to market risk, which is the possibility
that the market values of securities owned by the trust will decline and,
therefore, the value of the trust shares may be less than what you paid
for them. Accordingly, you can lose money investing in this trust.
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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Performance Summary
SENIOR INCOME TRUST
SYMBOL: VVR
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AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (6/24/98) 5.08% 5.40%
5-year 4.70 6.89
1-year 16.70 29.30
6-month 8.11 13.65
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Past performance is no guarantee of future results. Investment return, net asset
value (NAV) and common share market price will fluctuate and trust shares, when
sold, may be worth more or less than their original cost.
As a result of recent market activity, current performance may vary from the
figures shown. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor. The NAV per share is determined by dividing
the value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding. The common share
market price is the price the market is willing to pay for shares of the trust
at a given time. Common share market price is influenced by a range of factors,
including supply and demand and market conditions. Total return assumes an
investment at the beginning of the period, reinvestment of all distributions for
the period in accordance with the trust's dividend reinvestment plan, and sale
of all shares at the end of the period.
1
Trust Report
FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 2004
Van Kampen Senior Income Trust is managed by the adviser's Senior Loans team,
led by Howard Tiffen, Managing Director.(1)
MARKET OVERVIEW
The six months ended January 31, 2004 were highly favorable for the senior-loan
market. Corporations continued to exhibit strong financial performance, with
marked improvement in balance sheets across most industries. In spite of limited
top-line revenue growth, companies were generally able to reap the benefits of
rising productivity, lower operating costs and low interest rates to boost
profitability. Market leaders were typically those companies that had
proactively restructured their businesses to thrive in an era of lower prices
and greater global competition.
These positive financial results formed the backdrop for a period of strong
performance in both the senior-loan market and its sibling, the high-yield
market. Yield spreads contracted over much of the period, which enabled many
companies to access the senior-loan market at the best terms since 1999. The
market was further boosted by an increase in demand, much of which came from
institutional investors drawn to the attractive yields and improving credit
quality. This was especially evident in the last two months of the period, when
investors began accepting issuance from companies with slightly higher debt
ratios than had previously been the case. The surge of interest in the asset
class led to the easy absorption of the healthy supply of new issuance during
the period.
PERFORMANCE ANALYSIS
A closed-end fund's return can be calculated based upon either the market price
or the net asset value (NAV) of its shares. NAV per share is determined by
dividing the value of the trust's portfolio securities, cash and other assets,
less all liabilities, by the total number of common shares outstanding, while
market price reflects the supply and demand for the shares. As a result, the two
returns
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 2004
-------------------------------
BASED ON BASED ON MARKET
NAV PRICE
8.11% 13.65%
-------------------------------
Past performance is no guarantee of future results. Investment return, net asset
value and common share market price will fluctuate and trust shares, when sold,
may be worth more or less than their original cost. See Performance Summary for
additional performance information.
(1) Team members may change without notice at any time.
2
can differ significantly. On a market-price basis, the trust returned 13.65
percent. On an NAV basis, the trust returned 8.11 percent.
We remained focused on maintaining a high level of diversification in the
trust's portfolio during the period in order to minimize the risk of
over-concentration in any one sector or security. While we follow a bottom-up
security-selection process and generally do not practice sector rotation, we did
move to limit the portfolio's exposure to certain industries facing ongoing
challenges. For example, we found the textile industry particularly unappealing
given the growing occurrence of import substitution, and we limited the trust's
holdings in this sector. We avoided the auto industry because we believe that
with the industry's continuing re-structuring, weaknesses may become evident
throughout the supply chain. We followed a similar path in telecommunications,
where ongoing problems with overcapacity have yet to be resolved.
Through thorough fundamental research, we identified issuers in several sectors
that offered what we believed to be compelling value relative to our assessment
of their financial prospects. Within the cable industry, for example, prices
remained depressed throughout much of the period in the wake of the Adelphia
reorganization. Our analysis indicated that the market was not properly pricing
the underlying strength of the cable business model. By investing in the
companies' senior secured debt, we were able to capitalize on these pricing
opportunities from a somewhat protected standpoint, relative to investors in
traditional high-yield bonds.
The trust also benefited during the period from our use of leverage. We use
leverage on an ongoing basis in an effort to enhance the trust's overall
returns.
TOP TEN INDUSTRIES AS OF 1/31/04
Printing & Publishing 7.9%
Broadcasting--Cable 7.6
Beverage, Food & Tobacco 7.0
Medical Products & Services 7.0
Healthcare 5.8
Hotels, Motels, Inns & Gaming 5.6
Chemicals, Plastics & Rubber 4.7
Telecommunications--Wireless 4.3
Entertainment & Leisure 3.7
Containers, Packaging & Glass 3.5
Subject to change daily. All percentages are as a percentage of total assets.
Provided for informational purposes only and should not be deemed as a
recommendation to buy securities in the industries shown above. Van Kampen is a
wholly owned subsidiary of a global securities firm which is engaged in a wide
range of financial services including, for example, securities trading and
brokerage activities, investment banking, research and analysis, financing and
financial advisory services.
3
To implement this approach, the trust borrows and invests at interest rates that
roughly track current market rates. As a result, this approach minimizes the
risks inherent in traditional leveraged strategies (which exploit the difference
between short- and long-term interest rates), especially in periods of rising
interest rates, and can help boost returns.
The number of issuers in the portfolio that are in default (defined here as
those not paying principal and/or interest as contractually obligated) has
declined by approximately 20 percent since the beginning of the period. The
process of working out previous defaults had left the portfolio with equity
holdings in several companies. We took advantage of rising prices over the
course of the period to sell several of these holdings and reinvested the
proceeds into interest-bearing notes.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
4
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S 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 138.1%
AEROSPACE/DEFENSE 2.8%
$ 3,000 Anteon International Corp.,
Term Loan.................. Ba3 BB 12/31/10 $ 3,022,500
1,122 DeCrane Aircraft Holdings,
Inc., Term Loan............ B3 B- 12/17/06 1,040,750
7,007 DRS Technologies, Inc.,
Term Loan.................. Ba3 BB- 11/04/10 7,081,892
2,590 ILC Industries, Inc., Term
Loan....................... NR NR 04/11/10 2,602,571
12,790 The Titan Corp., Term
Loan....................... Ba3 BB- 06/30/09 12,820,152
1,496 Transdigm, Inc., Term
Loan....................... B1 B+ 07/22/10 1,515,187
9,674 United Defense Industries,
Inc., Term Loan (i)........ Ba2 BB 08/13/07 to 08/13/09 9,709,803
5,865 Vought Aircraft Industries,
Inc., Term Loan............ Ba3 B+ 12/31/06 to 06/30/08 5,880,366
--------------
43,673,221
--------------
AUTOMOTIVE 4.8%
3,396 AMCAN Consolidate
Technologies, Inc., Term
Loan....................... NR NR 03/28/07 2,903,349
7,064 Citation Corp., Term Loan
(k)........................ NR B- 12/01/05 to 12/01/07 6,303,655
995 Eagle Pitcher Industries,
Term Loan.................. B2 B+ 08/07/09 1,006,194
20,950 Federal-Mogul Corp., Term
Loan (c)................... NR NR 02/05/05 to 02/06/05 21,028,422
9,792 Federal-Mogul Corp.,
Revolving Credit Agreement
(c)........................ NR NR 02/06/05 9,743,015
5,500 Goodyear Tire & Rubber Co.,
Term Loan.................. Ba3 BB+ 03/31/06 5,548,125
6,744 MetoKote Corp., Term Loan.. B1 B+ 11/02/05 to 11/14/05 6,691,051
12,687 Safelite Glass Corp., Term
Loan....................... NR NR 09/30/07 12,521,387
See Notes to Financial Statements 5
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
AUTOMOTIVE (CONTINUED)
$ 3,500 Tenneco Automotive, Inc.,
Term Loan.................. B1 B 12/12/10 $ 3,558,335
2,783 TRW Automotive, Inc., Term
Loan....................... Ba2 BB 02/28/11 2,831,304
2,475 United Components, Inc.,
Term Loan.................. B1 BB- 06/30/10 2,505,938
--------------
74,640,775
--------------
BEVERAGE, FOOD & TOBACCO 10.4%
4,000 Atkins Nutritionals, Inc.,
Term Loan.................. NR NR 10/29/09 4,025,000
24,827 Aurora Foods, Inc., Term
Loan (c)................... NR CC 06/30/05 to 09/30/06 25,383,323
9,788 B & G Foods, Inc., Term
Loan....................... B1 B+ 08/31/09 9,898,083
12,207 Birds Eye Foods, Inc., Term
Loan....................... Ba3 B+ 06/30/08 12,340,715
4,963 Burns Philp, Inc., Term
Loan....................... B1 B+ 02/26/09 5,024,531
6,567 Commonwealth Brands, Inc.,
Term Loan.................. NR NR 08/28/07 to 04/15/08 6,618,243
3,125 Constellation Brands, Inc.,
Term Loan.................. Ba1 BB 11/30/08 3,164,712
7,160 Dean Foods Co., Term Loan.. Ba1 BB+ 07/15/08 7,249,759
4,366 Del Monte Corp., Term
Loan....................... Ba3 BB- 12/20/10 4,423,666
7,058 Doane Pet Care Co., Term
Loan....................... B1 B- 03/31/05 to 12/29/06 7,087,019
488 Doane Pet Care Co.,
Revolving Credit
Agreement.................. B1 B- 03/31/05 477,396
8,013 Dole Food Co., Inc., Term
Loan....................... Ba3 BB+ 09/28/08 8,140,742
4,000 DS Waters Enterprises, LP,
Term Loan.................. B1 B+ 11/07/09 4,062,500
8,441 Hartz Mountain Corp., Term
Loan....................... B1 NR 12/31/07 8,470,702
16,587 Land O'Lakes, Inc., Term
Loan....................... B1 B+ 10/10/06 to 10/10/08 16,638,709
1,922 Mafco Worldwide Corp., Term
Loan....................... NR NR 03/31/06 1,903,122
2,100 Merisant Co., Term Loan.... B1 BB- 01/11/10 2,122,313
6 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 6,000 Michael Foods, Inc., Term
Loan....................... B1 B+ 11/21/10 $ 6,088,752
5,732 New World Pasta Co., Term
Loan....................... NR NR 01/28/06 5,129,707
948 New World Pasta Co.,
Revolving Credit
Agreement.................. NR NR 01/28/05 843,720
4,712 Otis Spunkmeyer, Inc., Term
Loan....................... B1 B+ 02/20/09 4,747,212
6,055 Pinnacle Foods, Inc., Term
Loan....................... B1 BB- 11/25/10 6,070,204
5,993 Southern Wine & Spirits of
America, Inc., Term Loan... NR NR 07/02/08 6,062,604
3,921 Swift & Co., Term Loan..... Ba2 BB 09/19/08 3,950,363
--------------
159,923,097
--------------
BROADCASTING--CABLE 11.4%
15,541 CC VIII Operating, LLC,
Term Loan.................. B2 B- 06/30/07 to 02/02/08 15,288,858
51,533 Charter Communications
Operating, LLC, Term Loan.. B2 B 09/18/07 to 09/18/08 50,769,347
21,867 Falcon Cable
Communications, LP, Term
Loan....................... B2 NR 12/31/07 21,384,019
11,136 Frontiervision Operating
Partners, LP, Term Loan
(c)........................ NR NR 03/31/06 11,070,690
4,364 Frontiervision Operating
Partners, LP, Revolving
Credit Agreement (c)....... NR NR 10/31/05 4,343,638
2,634 Hilton Head Communications,
LP, Term Loan (c).......... NR NR 03/31/08 2,609,883
13,500 Insight Midwest Holdings
LLC, Term Loan (i)......... Ba3 BB+ 06/30/09 to 12/31/09 13,559,767
4,250 MCC Iowa, LLC, Term Loan... Ba3 BB+ 09/30/10 4,297,519
1,481 Mediacom Illinois, LLC,
Term Loan.................. Ba3 BB+ 12/31/08 1,488,964
4,078 Mediacom Illinois, LLC,
Revolving Credit
Agreement.................. Ba3 BB+ 06/30/08 3,823,739
See Notes to Financial Statements 7
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
BROADCASTING--CABLE (CONTINUED)
$ 2,705 Mediacom Southeast, LLC,
Term Loan.................. Ba3 BB+ 09/30/08 $ 2,711,754
3,626 Mediacom Southeast, LLC,
Revolving Credit
Agreement.................. Ba3 BB+ 03/31/08 3,653,514
24,240 Olympus Cable Holdings,
LLC, Term Loan (c)......... NR NR 06/30/10 to 09/30/10 23,930,136
8,511 Parnassos, Term Loan (c)... NR NR 06/30/07 8,403,518
2,112 Parnassos, Revolving Credit
Agreement (c).............. NR NR 06/30/07 2,085,955
5,486 Rainbow Media Holdings,
Inc., Term Loan............ Ba2 BB+ 03/31/09 5,538,244
--------------
174,959,545
--------------
BROADCASTING--DIVERSIFIED 0.8%
10,000 DirecTV Holdings, LLC, Term
Loan....................... Ba2 BB 03/06/10 10,121,880
1,500 Nexstar Broadcasting, Term
Loan....................... Ba3 B+ 12/31/10 1,515,000
--------------
11,636,880
--------------
BROADCASTING--RADIO 0.5%
7,750 Spanish Broadcasting
System, Inc., Term Loan.... B1 B+ 10/30/09 7,846,875
--------------
BROADCASTING--TELEVISION 0.5%
7,040 Gray Communications
Systems, Inc., Term Loan... NR B+ 12/31/10 7,111,280
--------------
BUILDINGS & REAL ESTATE 4.0%
8,000 AIMCO Properties, LP, Term
Loan....................... NR NR 05/30/08 8,085,000
10,410 CB Richard Ellis Services,
Inc., Term Loan............ B1 B+ 12/31/08 10,507,579
5,186 Central Parking Corp., Term
Loan....................... Ba3 BB- 03/31/10 5,256,811
4,699 Corrections Corp. of
America, Term Loan......... Ba3 BB- 03/31/08 4,758,121
5,000 General Growth, Term Loan.. NR NR 04/16/06 5,031,250
2,438 GEO Group, Inc., Term
Loan....................... Ba3 BB- 07/09/09 2,464,922
4,000 Landsource Communities
Development, LLC, Term
Loan....................... NR NR 03/31/10 4,057,500
8 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
BUILDINGS & REAL ESTATE (CONTINUED)
$ 4,750 The Macerich Co., Term
Loan....................... NR NR 07/26/05 $ 4,774,011
10,875 Ventas, Inc., Term Loan.... NR NR 04/17/07 10,929,172
5,000 WFP Tower Co., LP, Term
Loan....................... NR NR 03/31/06 5,003,125
--------------
60,867,491
--------------
CHEMICALS, PLASTICS & RUBBER 6.4%
8,704 CP Kelco ApS, Term Loan
(i)........................ B3 B 09/30/06 to 09/30/08 8,768,914
9,647 GenTek, Inc., Term Loan.... NR NR 11/10/08 9,698,445
26,138 Huntsman Corp., Term Loan.. B2 B 03/31/07 25,800,417
17,377 Huntsman ICI Chemicals,
LLC, Term Loan............. B1 B 06/30/07 to 06/30/08 17,577,404
982 ISP Chemco, Term Loan...... NR B- 06/27/08 989,613
5,000 Kraton Polymers, LLC, Term
Loan....................... B1 BB- 12/23/10 5,081,250
3,423 Messer Griesheim, Term
Loan....................... Ba2 BB 04/27/09 to 04/27/10 3,451,468
23,500 Nalco Co., Term Loan....... B1 BB- 11/04/09 to 11/04/10 23,776,741
1,496 Nutrasweet Acquisition
Corp., Term Loan........... Ba3 NR 06/30/06 to 05/25/09 1,492,511
1,493 Unifrax Corp., Term Loan... B1 B+ 09/04/09 1,508,358
--------------
98,145,121
--------------
CONSTRUCTION MATERIAL 1.7%
6,784 Builders FirstSource, Inc.,
Term Loan.................. NR BB- 12/30/05 6,792,673
1,990 Building Materials Holding
Corp., Term Loan........... Ba2 BB- 08/21/10 1,997,462
4,875 Interline Brands, Inc.,
Term Loan.................. B2 B+ 11/30/09 4,900,901
1,959 National Waterworks, Inc.,
Term Loan.................. B1 BB- 11/22/09 1,981,224
1,500 Sensus Metering Systems,
Inc., Term Loan............ B2 B+ 12/17/10 1,515,000
2,000 St. Mary's Cement, Inc.,
Term Loan.................. B1 BB- 12/05/09 2,022,500
7,427 Werner Holding Co., Inc.,
Term Loan.................. B1 B 06/11/09 7,198,084
--------------
26,407,844
--------------
See Notes to Financial Statements 9
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
CONTAINERS, PACKAGING & GLASS 5.2%
$ 8,669 Crown Cork & Seal Co.,
Inc., Term Loan............ Ba3 BB 09/15/08 $ 8,787,945
18,500 Dr. Pepper/Seven Up
Bottling Group, Inc., Term
Loan....................... B1 NR 12/19/10 18,762,089
12,438 Graphic Packaging
International Corp., Term
Loan....................... B1 B+ 08/09/10 12,631,836
981 Impress Metal Packaging
Holding B.V., Term Loan.... NR B 12/31/06 982,486
2,865 Jefferson Smurfit Corp.,
Revolving Credit
Agreement.................. NR NR 03/31/05 2,831,468
14,333 Owens-Illinois, Inc., Term
Loan (i)................... B1 BB 04/01/07 to 04/01/08 14,461,559
5,452 Packaging Dynamics, Term
Loan....................... NR NR 09/29/08 to 09/29/09 5,463,297
5,467 Pliant Corp., Term Loan.... B3 BB- 05/31/08 5,478,556
4,141 Smurfit-Stone Container
Corp., Term Loan........... NR NR 06/30/09 4,178,766
2,559 Smurfit-Stone Container
Corp., Revolving Credit
Agreement.................. NR NR 12/31/05 2,489,701
1,851 Tekni-Plex, Inc., Term
Loan....................... B1 B+ 06/21/08 1,861,830
1,610 U.S. Can Corp., Term Loan.. B2 B 01/04/06 1,614,289
--------------
79,543,822
--------------
DIVERSIFIED MANUFACTURING 1.7%
995 Amsted Industries, Inc.,
Term Loan.................. B1 BB- 10/15/10 1,001,374
3,658 Chart Industries, Inc.,
Term Loan.................. NR NR 09/15/09 3,626,323
2,425 EnerSys, Term Loan......... NR NR 11/09/08 2,434,211
14,534 Mueller Group, Inc., Term
Loan....................... B1 B+ 05/31/08 14,620,950
22 Mueller Group, Inc.,
Revolving Credit
Agreement.................. B1 B+ 08/16/05 21,653
4,414 SPX Corp., Term Loan....... Ba2 BBB- 09/30/09 4,448,857
--------------
26,153,368
--------------
10 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
ECOLOGICAL 4.6%
$51,829 Allied Waste North America,
Inc., Term Loan (i)........ Ba3 BB 01/15/10 $ 52,685,764
8,750 Duratek, Inc., Term Loan... B1 BB- 12/16/09 8,766,406
1,886 Environmental Systems
Products Holdings, Inc.,
Term Loan.................. B2 BB- 12/12/08 1,897,560
3,000 Great Lakes Dredge & Dock
Corp., Term Loan........... Ba3 B+ 12/22/10 3,030,000
2,992 IESI Corp., Term Loan...... B1 B+ 09/30/10 3,029,906
1,750 Waste Connections, Inc.,
Term Loan.................. Ba2 BB+ 10/22/10 1,772,423
--------------
71,182,059
--------------
EDUCATION & CHILD CARE 0.1%
863 TEC Worldwide, Inc., Term
Loan....................... NR NR 02/28/05 859,165
--------------
ELECTRONICS 3.4%
1,995 AMI Semiconductor, Inc.,
Term Loan.................. B1 BB 09/26/08 2,016,197
6,690 Audio Visual Services
Corp., Term Loan........... NR NR 03/04/06 6,690,075
4,178 Automata, Inc., Term Loan
(a) (c) (j)................ NR NR 02/28/03 to 02/28/04 0
4,803 Knowles Electronics, Inc.,
Term Loan.................. B3 CCC 06/29/07 4,802,111
12,262 Rayovac Corp., Term Loan... B1 B+ 09/30/09 12,359,304
11,820 Seagate Technologies, Inc.,
Term Loan.................. Ba1 BB+ 05/13/07 11,925,541
8,658 Semiconductor Components
Industries, LLC, Term
Loan....................... B3 B 08/04/07 8,696,252
5,033 Viasystems, Inc., Term
Loan....................... NR NR 09/30/08 5,091,622
--------------
51,581,102
--------------
ENTERTAINMENT & LEISURE 5.6%
2,500 24 Hour Fitness, Inc., Term
Loan....................... B1 B 07/01/09 2,531,250
4,384 Bell Sports, Inc., Term
Loan....................... Ba3 NR 03/31/06 to 03/30/07 4,004,490
6,468 Carmike Cinemas, Inc., Term
Loan....................... B1 NR 01/31/07 6,510,055
1,000 Detroit Red Wings, Inc.,
Term Loan.................. NR NR 08/30/06 1,000,625
See Notes to Financial Statements 11
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
ENTERTAINMENT & LEISURE (CONTINUED)
$ 5,008 Festival Fun Parks, LLC,
Term Loan.................. NR NR 06/30/07 to 12/31/07 $ 4,987,319
3,432 GT Brands, LLC, Term Loan.. NR NR 09/30/07 3,333,153
5,940 Kerasotes Theatres, Inc.,
Term Loan.................. NR NR 12/31/08 6,014,250
7,864 Loews Cineplex
Entertainment Corp., Term
Loan....................... NR NR 02/29/08 7,890,205
8,333 Mets II, LLC, Term Loan.... NR NR 08/23/05 8,333,333
4,000 New Jersey Basketball, LLC,
Term Loan.................. NR NR 07/16/04 4,015,000
4,617 Playcore Wisconsin, Inc.,
Term Loan.................. NR NR 07/01/07 4,529,160
4,875 Pure Fishing, Term Loan.... NR NR 12/31/09 4,896,328
4,680 Regal Cinemas, Inc., Term
Loan....................... Ba2 BB- 06/30/09 4,739,253
2,453 Riddell Sports Group, Inc.,
Term Loan.................. NR NR 06/30/08 2,459,258
5,304 Six Flags Theme Parks,
Inc., Term Loan............ Ba2 B+ 06/30/09 5,328,435
10,667 Vivendi Universal
Entertainment, Term Loan... Ba2 BB+ 06/30/08 10,763,339
4,226 Worldwide Sports &
Recreation, Inc., Term
Loan....................... NR NR 12/31/06 4,160,197
--------------
85,495,650
--------------
FARMING & AGRICULTURE 0.5%
2,239 Central Garden & Pet Co.,
Term Loan.................. Ba2 BB+ 05/14/09 2,254,141
5,000 The Scotts Co., Term Loan.. Ba1 BB 09/30/10 5,068,305
48 United Industries Corp.,
Revolving Credit
Agreement.................. B1 B+ 01/20/05 47,092
--------------
7,369,538
--------------
FINANCE 1.3%
3,367 Outsourcing Solutions, Term
Loan....................... NR NR 12/09/08 3,198,266
179 Outsourcing Solutions,
Revolving Credit
Agreement.................. NR NR 12/09/08 169,961
12 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
FINANCE (CONTINUED)
$ 8,458 Rent-A-Center, Inc., Term
Loan....................... Ba2 BB 05/28/09 $ 8,569,562
8,200 Risk Management Assurance
Co., Term Loan............. NR NR 12/21/06 8,245,218
--------------
20,183,007
--------------
GROCERY 0.5%
5,240 Fleming Cos., Inc., Term
Loan (c)................... NR NR 06/18/08 5,203,190
2,960 Fleming Cos., Inc.,
Revolving Credit Agreement
(c)........................ NR NR 06/18/07 2,942,541
--------------
8,145,731
--------------
HEALTHCARE 6.2%
7,584 Ameripath, Inc., Term
Loan....................... B1 B+ 03/27/10 7,603,406
6,375 AMN Healthcare Services,
Inc., Term Loan............ Ba2 BB- 10/02/08 6,454,688
1,995 Beverly Enterprises, Inc.,
Term Loan.................. Ba3 BB 10/22/08 2,017,444
35,788 Community Health Systems,
Inc., Term Loan (i)........ NR BB- 07/16/10 to 01/16/11 36,318,037
1,493 Concentra Operating Corp.,
Term Loan.................. B1 B+ 06/30/09 1,511,623
1,857 FHC Health Systems, Inc.,
Term Loan.................. B2 B 10/31/06 1,882,679
1,200 Gensis Healthcare Corp.,
Term Loan.................. Ba3 BB- 12/01/10 1,212,000
7,363 InteliStaf Group, Inc.,
Term Loan.................. NR NR 10/31/05 to 10/31/07 7,307,925
22,336 Kindred Healthcare, Inc.,
Term Loan.................. NR NR 04/13/08 22,322,325
3,758 Team Health, Inc., Term
Loan....................... Ba3 B+ 10/31/08 3,758,475
4,980 Triad Hospitals, Inc., Term
Loan....................... Ba3 BB 09/30/08 5,036,467
--------------
95,425,069
--------------
HEALTHCARE & BEAUTY 0.9%
3,563 Jafra Cosmetics
International, Inc., Term
Loan....................... B1 B+ 05/20/08 3,482,344
1,324 Mary Kay, Inc., Term
Loan....................... Ba2 BB 10/03/07 1,333,297
See Notes to Financial Statements 13
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
HEALTHCARE & BEAUTY (CONTINUED)
$ 2,617 Prestige Brands Holdings,
Inc., Term Loan............ NR NR 12/30/08 $ 2,628,330
5,852 Revlon Consumer Products
Corp., Term Loan........... B3 B- 05/30/05 5,837,107
--------------
13,281,078
--------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE CONSUMER
PRODUCTS 1.4%
1,958 Formica Corp., Term Loan
(c)........................ NR NR 04/30/06 1,902,034
8,085 General Binding Corp., Term
Loan....................... B2 B+ 01/15/08 8,085,000
2,948 Hunter Fan Co., Term Loan.. NR NR 04/30/10 2,976,975
1,422 Imperial Home Decor Group,
Inc., Term Loan (a)(d)..... NR NR 04/04/06 35,557
3,069 National Bedding Co., Term
Loan....................... B1 B+ 08/31/08 3,098,364
3,567 Sealy Mattress Co., Term
Loan....................... B1 B+ 12/15/04 to 12/15/06 3,580,111
1,344 Targus Group International,
Inc., Term Loan............ NR NR 08/31/06 1,330,606
--------------
21,008,647
--------------
HOTELS, MOTELS, INNS & GAMING 8.3%
37,993 Aladdin Gaming, LLC, Term
Loan (a) (c)............... NR NR 02/25/05 to 02/26/08 34,383,756
9,600 Alliance Gaming Corp., Term
Loan....................... B1 BB- 09/04/09 9,700,003
2,891 Ameristar Casinos, Inc.,
Term Loan.................. Ba3 BB- 12/20/06 2,908,707
3,980 Extended Stay America,
Inc., Term Loan............ Ba3 BB- 01/15/08 4,043,849
5,383 Greektown Casino, LLC, Term
Loan....................... NR NR 12/31/05 5,432,118
2,000 Green Valley Ranch Gaming,
LLC, Term Loan............. B1 NR 12/22/10 2,025,000
2,947 Isle of Capri Casinos,
Inc., Term Loan............ Ba2 BB- 04/26/08 2,973,750
10,500 Mandalay Resort Group, Term
Loan....................... NR NR 06/30/08 10,513,125
6,788 Marina District Finance
Co., Term Loan............. B2 B+ 12/13/07 6,841,959
3,803 Penn National Gaming, Inc.,
Term Loan.................. B1 BB- 09/01/07 3,844,745
14 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
$17,026 Scientific Games Corp.,
Term Loan.................. Ba3 BB- 12/31/09 $ 17,292,285
4,772 United Auburn Indian
Community, Term Loan....... Ba3 BB- 01/24/09 4,796,062
23,436 Wyndham International,
Inc., Term Loan............ NR NR 04/01/06 to 06/30/06 22,905,531
--------------
127,660,890
--------------
INSURANCE 2.0%
10,000 Alea Group Holdings, Term
Loan....................... NR BBB- 03/31/07 10,025,000
12,250 Conseco, Inc., Term Loan... Caa1 B- 09/10/09 to 09/10/10 12,348,077
3,037 Hilb, Rogal & Hamilton Co.,
Term Loan.................. Ba3 BB- 06/30/07 3,071,251
3,185 Infinity Property &
Casualty, Term Loan........ Baa3 BBB 06/30/10 3,213,438
1,990 USI Holdings Corp., Term
Loan....................... B1 BB- 08/11/08 2,009,900
--------------
30,667,666
--------------
MACHINERY 1.0%
4,067 Alliance Laundry Holdings,
LLC, Term Loan............. B1 B 08/02/07 4,085,998
7,108 Ashtead Group, PLC, Term
Loan....................... NR NR 06/01/07 6,782,254
1,436 Flowserve Corp., Term
Loan....................... Ba3 BB- 06/30/09 1,448,518
1,275 Goodman Global Holdings,
Inc., Term Loan............ NR NR 11/21/09 1,290,937
2,109 Weigh-Tronix, LLC, Term
Loan....................... NR NR 09/30/05 1,966,282
--------------
15,573,989
--------------
MEDICAL PRODUCTS & SERVICES 8.9%
3,369 Alaris Medical Systems,
Inc., Term Loan............ B1 BB 06/30/09 3,409,536
6,685 Alliance Imaging, Inc.,
Term Loan.................. B1 B+ 06/10/08 6,660,622
3,000 Colgate Medical Ltd., Term
Loan....................... Ba2 BB- 12/30/08 3,009,375
10,724 CONMED Corp., Term Loan.... Ba3 BB- 12/15/09 10,851,658
9,793 Dade Behring, Inc., Term
Loan....................... B1 BB 11/03/08 to 10/03/10 9,939,702
38,005 DaVita, Inc., Term Loan
(i)........................ Ba3 BB- 03/31/07 to 03/31/09 38,400,555
2,500 EMPI, Inc., Term Loan...... B1 B+ 11/24/09 2,531,250
See Notes to Financial Statements 15
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
MEDICAL PRODUCTS & SERVICES (CONTINUED)
$14,340 Fisher Scientific
International, Inc., Term
Loan....................... Ba3 BB+ 03/31/10 $ 14,443,478
23,724 Fresenius Medical Care
Holding, Inc., Term Loan... Ba1 BB+ 02/21/10 24,057,660
1,621 Hanger Orthopedic, Term
Loan....................... B1 B+ 09/30/09 1,637,654
7,416 InSight Health, Term
Loan....................... B1 B+ 10/17/08 7,453,262
7,463 Kinetics Concepts, Inc.,
Term Loan.................. Ba3 BB- 08/11/10 7,574,437
907 Rotech Healthcare, Inc.,
Term Loan.................. Ba2 BB 03/31/08 913,513
5,865 Symmetry Medical, Inc.,
Term Loan.................. NR NR 06/30/08 to 06/30/09 5,866,901
--------------
136,749,603
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 2.5%
3,371 CII Carbon, LLC, Term
Loan....................... NR NR 06/25/08 3,235,795
3,038 Fairmount Minerals, Ltd.,
Term Loan.................. NR NR 03/13/09 3,046,058
31,388 Ispat Inland, Term Loan.... Caa1 B- 07/16/05 to 07/16/06 30,472,462
2,500 Techs Industries, Inc.,
Term Loan.................. NR NR 01/14/10 2,506,250
--------------
39,260,565
--------------
NATURAL RESOURCES 3.0%
7,500 El Paso Coastal, Term
Loan....................... B3 NR 12/31/05 7,485,937
500 El Paso Coastal, Revolving
Credit Agreement........... B3 NR 06/30/05 486,875
2,800 LA Grange Acquisition, LP,
Term Loan.................. NR NR 01/18/08 2,828,000
10,500 LYONDELL-CITGO Refining,
LP, Term Loan.............. NR NR 06/10/04 10,552,500
15,000 Ocean Rig ASA--(Norway),
Term Loan.................. B3 CCC 06/01/08 13,706,250
4,500 Pacific Energy Group, LLC,
Term Loan.................. Ba2 BBB- 07/26/09 4,529,534
4,764 Peabody Energy Corp., Term
Loan....................... Ba1 BB+ 03/21/10 4,826,032
1,211 U.S. Synthetic Corp., Term
Loan....................... NR NR 05/31/05 1,156,929
--------------
45,572,057
--------------
16 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
NON-DURABLE CONSUMER PRODUCTS 1.0%
$ 2,148 Aero Products
International, Inc., Term
Loan....................... NR NR 12/19/08 $ 2,110,467
2,970 Amscan Holdings, Inc., Term
Loan....................... B1 BB- 06/15/07 2,994,749
5,581 Boyds Collection, Ltd.,
Term Loan.................. Ba3 B+ 04/21/05 5,469,299
2,042 Church & Dwight Co., Inc.,
Term Loan.................. Ba2 BB 09/30/07 2,069,018
2,627 JohnsonDiversey, Inc., Term
Loan....................... Ba3 BB- 11/03/09 2,655,670
--------------
15,299,203
--------------
PAPER & FOREST PRODUCTS 0.1%
2,402 Port Townsend Paper Corp.,
Term Loan.................. NR NR 03/16/05 to 03/16/07 2,330,027
--------------
PERSONAL & MISCELLANEOUS SERVICES 2.2%
2,644 Alderwoods Group, Inc.,
Term Loan.................. B1 BB- 09/29/08 to 01/02/09 2,682,504
8,840 Coinmach Laundry Corp.,
Term Loan.................. B1 BB- 07/25/09 8,933,925
3,334 Encompass Service Corp.,
Term Loan (a) (c).......... Caa1 NR 05/10/07 433,426
1,990 Global Imaging Systems,
Inc., Term Loan............ Ba3 BB- 06/25/09 2,002,438
1,775 InfoUSA, Inc., Term Loan... Ba3 BB 04/30/07 1,773,337
1,282 Iron Mountain, Inc., Term
Loan....................... B1 BB 02/15/08 1,294,073
4,925 Katun Corp., Term Loan..... NR B+ 06/30/09 4,921,922
1,183 Stewart Enterprises, Inc.,
Term Loan.................. Ba3 BB 01/31/06 1,193,131
8,675 The Relizon Co., Term
Loan....................... NR NR 09/30/06 to 12/31/07 8,600,386
1,504 Weight Watchers
International, Inc., Term
Loan....................... Ba1 BB 03/31/10 1,515,820
--------------
33,350,962
--------------
PHARMACEUTICALS 3.0%
3,388 aaiPharma, Inc., Term
Loan....................... B2 BB- 12/01/09 3,428,431
9,663 Caremark Rx, Inc., Term
Loan....................... Ba2 BBB- 03/31/06 9,722,153
See Notes to Financial Statements 17
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
PHARMACEUTICALS (CONTINUED)
$21,446 Medco Health Solutions,
Term Loan.................. Ba1 BBB 06/30/10 $ 21,781,455
11,856 MedPointe, Inc., Term
Loan....................... B1 B 09/30/07 to 09/30/08 11,877,527
--------------
46,809,566
--------------
PRINTING & PUBLISHING 11.7%
4,936 21st Century Newspapers,
Term Loan.................. NR NR 08/27/08 4,935,897
1,138 Adams Outdoor Advertising
LP, Term Loan.............. B1 B+ 02/08/08 1,144,104
431 Advanstar Communications,
Inc., Term Loan............ B2 B 10/11/07 431,748
7,583 American Media Operations,
Inc., Term Loan (i)........ Ba3 B+ 04/01/07 7,675,199
7,500 American Reprographics Co.,
Term Loan.................. B1 BB- 06/18/09 7,612,500
1,492 CanWest Media, Inc., Term
Loan....................... NR B+ 05/15/09 1,508,319
17,175 CommerceConnect Media,
Inc., Term Loan............ NR NR 12/31/07 17,089,551
1,879 Daily News, LP, Term Loan.. NR NR 03/19/08 1,815,386
5,119 Day International Group,
Inc., Term Loan............ B1 B 09/16/09 5,148,916
1,854 Dex Media East, LLC, Term
Loan....................... B1 BB- 11/08/08 1,872,299
28,947 Dex Media West LLC, Term
Loan (i)................... B1 BB- 11/08/08 to 03/09/10 29,357,619
10,232 F&W Publications, Inc.,
Term Loan.................. NR NR 12/31/09 10,302,175
4,988 Haights Cross
Communications, LLC, Term
Loan....................... B3 B- 08/20/08 5,062,312
7,200 Lamar Media Corp., Term
Loan....................... Ba2 BB- 06/30/10 7,275,002
3,552 Liberty Group Operating,
Inc., Term Loan............ B1 B 03/31/07 3,582,656
2,500 MediaNews Group, Inc., Term
Loan....................... NR NR 12/30/10 2,528,125
10,448 Merrill Communications,
LLC, Term Loan............. B3 B 11/23/05 to 11/23/07 10,447,586
3,485 Moore Corp., Term Loan..... Ba2 BB+ 03/15/10 3,498,787
18 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
PRINTING & PUBLISHING (CONTINUED)
$10,500 Morris Publishing Group
LLC, Term Loan............. Ba1 BB 03/31/11 $ 10,611,563
3,417 Network Communications,
Inc., Term Loan............ NR NR 12/27/08 3,425,989
8,561 Primedia, Inc., Term
Loan....................... B3 B 06/30/08 to 06/30/09 8,414,322
6,461 R.H. Donnelley, Inc., Term
Loan....................... Ba3 BB 12/31/08 to 06/30/10 6,541,965
6,600 The Reader's Digest
Association, Inc., Term
Loan....................... Ba1 BB 05/21/07 6,633,191
1,850 Vutek, Inc., Term Loan..... NR NR 07/31/07 1,794,181
8,500 Xerox Corp., Term Loan..... NR BB- 09/30/08 8,599,612
10,999 Xerox Turkey--(Turkey),
Term Loan.................. NR BB 12/31/05 10,944,256
2,516 Ziff-Davis Media, Inc.,
Term Loan.................. B3 CCC 03/31/07 2,490,654
--------------
180,743,914
--------------
RESTAURANTS & FOOD SERVICE 0.2%
3,544 Domino's, Inc., Term
Loan....................... B1 B+ 06/25/10 3,602,711
--------------
RETAIL--OFFICE PRODUCTS 0.2%
2,500 Buhrmann US, Inc., Term
Loan....................... NR BB- 12/31/10 2,530,730
--------------
RETAIL--OIL & GAS 0.9%
5,000 Barjan Products, LLC, Term
Loan....................... NR NR 05/31/06 2,500,000
10,879 The Pantry, Inc., Term
Loan....................... B1 B+ 03/31/07 11,027,684
--------------
13,527,684
--------------
RETAIL--SPECIALTY 0.8%
3,193 DRL Acquisition, Inc., Term
Loan....................... NR NR 04/30/09 3,185,142
1,592 Home Interiors & Gifts,
Inc., Term Loan............ B2 B+ 12/31/06 1,596,324
6,161 Jostens, Inc., Term Loan... Ba3 BB- 07/29/10 6,224,458
1,750 Nebraska Book Co., Inc.,
Term Loan.................. Ba3 B+ 06/30/07 1,765,313
--------------
12,771,237
--------------
See Notes to Financial Statements 19
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
RETAIL--STORES 4.0%
$ 3,696 Advance Stores Co., Inc.,
Term Loan.................. Ba3 BB 11/30/06 to 11/30/07 $ 3,741,344
2,500 Alimentation Couche-Tard,
Inc., Term Loan............ Ba2 BB 12/17/10 2,515,625
6,250 CSK Auto, Inc., Term
Loan....................... Ba3 B+ 06/19/09 6,308,594
3,125 General Nutrition Centers,
Inc., Term Loan............ B1 B+ 12/05/09 3,149,416
2,479 Murray's Discount Auto
Stores, Inc., Term Loan.... NR NR 08/08/09 2,500,253
42,750 Rite Aid Corp., Term
Loan....................... Ba3 BB 04/30/08 43,690,500
--------------
61,905,732
--------------
TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 1.4%
7,980 Cincinnati Bell, Inc., Term
Loan....................... B1 B+ 06/30/08 8,084,737
3,000 Fairpoint Communications,
Inc., Term Loan............ B1 BB- 03/31/07 3,011,250
1,772 Orius Corp., Term Loan..... NR NR 01/23/09 to 01/23/10 394,491
1,127 Orius Corp., Revolving
Credit Agreement........... NR NR 01/23/05 647,798
6,131 Qwest Corp., Term Loan..... Ba3 B- 06/30/07 6,445,164
3,000 Qwest Services Corp.,
Revolving Credit
Agreement.................. NR B- 05/03/05 2,997,750
7,500 WCI Capital Corp., Term
Loan (a) (c)............... NR NR 09/30/07 18,750
1,747 WCI Capital Corp.,
Revolving Credit Agreement
(a) (c).................... NR NR 12/31/04 146,767
--------------
21,746,707
--------------
TELECOMMUNICATIONS--LONG DISTANCE 0.1%
20,965 Pacific Crossing, Ltd.,
Term Loan (a) (c).......... NR NR 07/28/06 1,467,578
--------------
TELECOMMUNICATIONS--WIRELESS 5.9%
2,808 Centennial Cellular, Inc.,
Term Loan.................. B2 B 11/30/06 2,800,024
7,422 Centennial Puerto Rico
Operations Corp., Term
Loan....................... B2 B 05/31/07 to 11/30/07 7,450,817
3,250 Cricket Communications,
Inc., Term Loan (a) (c).... NR NR 06/30/07 2,640,625
3,990 Crown Castle International
Corp., Term Loan........... B1 B- 09/30/10 4,074,787
20 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
TELECOMMUNICATIONS--WIRELESS (CONTINUED)
$ 7,481 Dobson Cellular Systems,
Inc., Term Loan............ Ba3 B- 03/31/10 $ 7,591,718
8,468 Microcell Solutions, Inc.,
Term Loan.................. NR CCC 12/31/08 8,438,570
23,281 Nextel Finance Co., Term
Loan (i)................... Ba2 BB 12/31/07 to 12/15/10 23,528,530
5,000 Nextel Partners, Inc., Term
Loan....................... B1 B 11/30/10 5,061,250
4,698 Pinnacle Towers, Inc., Term
Loan....................... NR NR 10/31/05 4,711,015
9,000 Rural Cellular Corp., Term
Loan (i)................... B2 B- 04/03/08 to 04/03/09 9,024,939
3,698 Spectrasite Communications,
Inc., Term Loan............ B1 B+ 12/31/07 3,732,166
998 TSI Telecommunication
Services, Inc., Term
Loan....................... Ba3 B+ 12/31/06 999,429
10,443 Western Wireless Corp.,
Term Loan.................. B2 B- 03/31/08 to 09/30/08 10,446,595
--------------
90,500,465
--------------
TEXTILES & LEATHER 0.1%
2,104 Malden Mills Industries,
Inc., Term Loan............ NR NR 10/01/08 1,601,083
--------------
TRANSPORTATION--CARGO 1.2%
9,764 American Commercial Lines,
LLC, Term Loan (c)......... NR NR 06/30/06 to 06/30/07 8,604,283
32 Comcar Industries, Inc.,
Term Loan.................. NR NR 09/30/04 32,266
6,294 Pacer International, Inc.,
Term Loan.................. B1 BB- 06/10/10 6,354,435
1,496 Quality Distribution, Inc.,
Term Loan.................. B2 B+ 11/13/09 1,513,083
2,702 United States Shipping,
LLC, Term Loan............. Ba2 BB 09/12/08 2,721,545
--------------
19,225,612
--------------
TRANSPORTATION--PERSONAL 2.1%
16,956 Laidlaw Investments Ltd.,
Term Loan.................. Ba3 BB+ 06/19/09 17,178,253
900 Neoplan USA Corp.,
Revolving Credit Agreement
(d)........................ NR NR 06/30/06 900,000
7,780 Transcore Holdings, Inc.,
Term Loan.................. NR NR 01/05/08 7,857,735
See Notes to Financial Statements 21
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT --------------
(000) BORROWER MOODY'S S&P STATED MATURITY* VALUE
TRANSPORTATION--PERSONAL (CONTINUED)
$ 819 United Airlines, Inc.,
Revolving Credit
Agreement.................. NR NR 07/01/04 $ 822,738
6,000 Yellow Roadway Corp., Term
Loan (i)................... Baa3 BBB 06/11/08 6,052,500
--------------
32,811,226
--------------
TRANSPORTATION--RAIL MANUFACTURING 0.2%
3,213 Helm, Inc., Term Loan...... NR NR 10/18/06 3,172,848
1,630 RailWorks Corp., Term Loan
(a)........................ NR NR 11/13/04 611,432
--------------
3,784,280
--------------
UTILITIES 2.6%
14,500 AES Corp., Term Loan....... B2 B+ 04/30/08 14,702,768
1,845 Allegheny Energy, Inc.,
Term Loan.................. B1 B- 09/30/04 1,851,354
5,000 Aquila, Inc., Term Loan.... B2 NR 07/30/04 5,006,250
4,447 Edison Mission Energy,
Revolving Credit Agreement
(g)........................ Ba3 CCC 12/11/03 to 12/11/04 4,402,050
6,500 Midwest Funding, LLC, Term
Loan....................... Ba3 B 12/15/04 6,435,000
5,000 Mission Energy Holdings
Co., Term Loan............. Caa2 CCC 12/11/06 5,055,210
1,612 Pike Electric, Inc., Term
Loan....................... NR NR 04/18/10 1,626,372
1,512 Westar Energy, Inc., Term
Loan....................... Ba1 BBB- 06/06/05 1,519,296
10 Westar Energy, Inc.,
Revolving Credit
Agreement.................. Ba1 BBB- 06/05/05 9,800
--------------
40,608,100
--------------
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 138.1%.......................... 2,125,541,952
--------------
22 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BORROWER VALUE
NOTES 2.0%
Alderwoods Group, Inc. ($2,120,200 par, 12.25% coupon, maturing 01/02/09).... $ 2,385,225
American Home Patient, Inc. ($5,562,289 par, 6.79% to 8.57% coupon, maturing
07/01/09).................................................................. 4,395,518
Commonwealth Brands, Inc. ($1,500,000 par, 5.19% coupon, maturing 08/28/07)
(h)........................................................................ 1,582,500
Dade Behring, Inc. ($5,355,169 par, 11.91% coupon, maturing 10/03/10)........ 5,971,013
Pioneer Cos., Inc. ($1,624,077 par, 4.66% coupon, maturing 12/31/06) (h)..... 1,599,716
Premcor Refining Group, Inc. ($7,500,000 par, 4.34% coupon, maturing
02/11/06) (h).............................................................. 7,582,035
Satelites Mexicanos ($8,763,000 par, 5.63% coupon, maturing 06/30/04), 144A
Private Placement (b) (h).................................................. 7,229,475
--------------
TOTAL NOTES.................................................................. 30,745,482
--------------
EQUITIES 4.4%
Audio Visual Services Corp. (70,205 common shares) (e) (f)................... 737,153
Comdisco Holdings Co. (521 common shares) (e)................................ 26,050
Dade Behring Holdings, Inc. (191,967 common shares) (e)...................... 7,438,721
Genesis Healthcare Corp. (447,507 common shares) (e)......................... 9,576,650
Gentek, Inc. (183,978 common shares) (e) (f)................................. 7,184,341
Gentek, Inc. (Warrants for 615 common shares) (e) (f)........................ 0
Holmes Group, Inc. (Warrants for 6,073 common shares) (e).................... 29,150
IDT Corp. (22,898 common shares) (e) (f)..................................... 497,345
Imperial Home Decor Group, Inc. (512,023 common shares) (d) (e) (f).......... 0
Imperial Home Decor Realty, Inc. (512,023 common shares) (d) (e) (f)......... 0
Malden Mills Industries (277,808 common shares) (e) (f)...................... 0
Malden Mills Industries (907,870 preferred shares) (e) (f)................... 0
NeighborCare, Inc. (1,025,981 common shares)................................. 23,300,028
Neoplan (2,262 preferred shares) (d) (e)..................................... 1,072,776
Neoplan (8,517 common shares) (d) (e)........................................ 85
Orius Corp. (315,080 common shares) (e) (f).................................. 0
Outsourcing Solutions (73,858 common shares) (e) (f)......................... 2,400,385
Pioneer Cos., Inc. (86,740 common shares) (e)................................ 628,865
RailWorks Corp. (186 preferred shares) (e) (f)............................... 0
RailWorks Corp. (Warrants for 3,282 common shares) (e) (f)................... 0
Rotech Healthcare, Inc. (478,573 common shares) (e).......................... 10,050,033
Rotech Medical Corp. (48,485 common shares) (e) (f).......................... 0
Safelite Glass Corp. (421,447 common shares) (e) (f)......................... 4,724,421
Safelite Realty (28,448 common shares) (f)................................... 0
Targus Group International (Warrants for 28,689 common shares) (e) (f)....... 1,148
Tembec, Inc. (67,713 common shares) (e)...................................... 441,489
West American Rubber Co., LLC (5.04% Ownership Interest) (e) (f)............. 0
--------------
TOTAL EQUITIES............................................................... 68,108,640
--------------
See Notes to Financial Statements 23
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
BORROWER VALUE
TOTAL LONG-TERM INVESTMENTS 144.5%
(Cost $2,235,457,222)...................................................... $2,224,396,074
--------------
REPURCHASE AGREEMENT 3.8%
State Street Bank & Trust Corp. ($58,000,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 01/30/04, to be sold
on 02/02/04 at $58,005,993) (i)
(Cost $58,000,000)......................................................... 58,000,000
--------------
TOTAL INVESTMENTS 148.3%
(Cost $2,293,457,222)...................................................... 2,282,396,074
BORROWINGS (43.2)%.......................................................... (665,000,000)
LIABILITIES IN EXCESS OF OTHER ASSETS (5.1)%................................ (78,505,748)
--------------
NET ASSETS 100.0%........................................................... $1,538,890,326
==============
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) Affiliated company. See Notes to Financial Statements.
(e) Non-income producing security as this stock currently does not declare
dividends.
(f) Restricted Security.
(g) The borrower is in the process of restructuring or amending the terms of
this loan.
(h) Variable rate security. Interest rate shown is that in effect at January 31,
2004.
(i) A portion of this security is segregated in connection with unfunded
commitments.
(j) This borrower is currently in liquidation.
(k) Payment-in-kind 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
24 See Notes to Financial Statements
YOUR PORTFOLIO'S INVESTMENTS
January 31, 2004 (Unaudited)
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 25
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
January 31, 2004 (Unaudited)
ASSETS:
Total Investments (Cost $2,293,457,222)..................... $2,282,396,074
Cash........................................................ 443,855
Receivables:
Interest and Fees......................................... 8,825,568
Investments Sold.......................................... 1,586,893
Other....................................................... 175,927
--------------
Total Assets............................................ 2,293,428,317
--------------
LIABILITIES:
Payables:
Borrowings................................................ 665,000,000
Investments Purchased..................................... 86,178,602
Investment Advisory Fee................................... 1,548,897
Administrative Fee........................................ 364,446
Distributor and Other Affiliates.......................... 112,644
Income Distributions...................................... 66,144
Accrued Interest Expense.................................... 552,092
Accrued Expenses............................................ 391,870
Trustees' Deferred Compensation and Retirement Plans........ 323,296
--------------
Total Liabilities....................................... 754,537,991
--------------
NET ASSETS.................................................. $1,538,890,326
==============
NET ASSET VALUE PER COMMON SHARE ($1,538,890,326 divided by
180,010,000 shares outstanding)........................... $ 8.55
==============
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............................................. 1,795,669,290
Accumulated Undistributed Net Investment Income............. 3,320,076
Net Unrealized Depreciation................................. (11,061,148)
Accumulated Net Realized Loss............................... (250,837,992)
--------------
NET ASSETS.................................................. $1,538,890,326
==============
26 See Notes to Financial Statements
Statement of Operations
For the Six Months Ended January 31, 2004 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 50,843,363
Fees........................................................ 297,538
Dividends................................................... 83,494
Other....................................................... 2,558,918
------------
Total Income............................................ 53,783,313
------------
EXPENSES:
Investment Advisory Fee..................................... 8,712,931
Administrative Fee.......................................... 2,050,101
Credit Line................................................. 1,023,499
Legal....................................................... 381,589
Custody..................................................... 271,730
Trustees' Fees and Related Expenses......................... 56,854
Other....................................................... 337,355
------------
Total Operating Expenses................................ 12,834,059
------------
Interest Expense........................................ 3,068,541
------------
NET INVESTMENT INCOME....................................... $ 37,880,713
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,271,990
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (87,962,378)
End of the Period......................................... (11,061,148)
------------
Net Unrealized Appreciation During the Period............... 76,901,230
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 78,173,220
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $116,053,933
============
See Notes to Financial Statements 27
Statements of Changes in Net Assets
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2004 JULY 31, 2003
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 37,880,713 $ 83,693,834
Net Realized Gain/Loss................................. 1,271,990 (33,874,642)
Net Unrealized Appreciation During the Period.......... 76,901,230 58,694,953
-------------- --------------
Change in Net Assets from Operations................... 116,053,933 108,514,145
Distributions from Net Investment Income............... (35,749,930) (79,888,289)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 80,304,003 28,625,856
NET ASSETS:
Beginning of the Period................................ 1,458,586,323 1,429,960,467
-------------- --------------
End of the Period (Including accumulated undistributed
net investment income of $3,320,076 and $1,189,293
respectively)........................................ $1,538,890,326 $1,458,586,323
============== ==============
28 See Notes to Financial Statements
Statement of Cash Flows
For the Six Months Ended January 31, 2004 (Unaudited)
CHANGE IN NET ASSETS FROM OPERATIONS........................ $ 116,053,933
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Used for Operating Activities:
Increase in Investments at Value.......................... (363,679,944)
Increase in Interest and Fees Receivables................. (1,596,320)
Decrease in Receivable for Investments Sold............... 21,826,880
Decrease in Other Assets.................................. 3,121
Decrease in Payable for Investments Purchased............. (754,470)
Increase in Investment Advisory Fee Payable............... 205,518
Increase in Administrative Fee Payable.................... 48,357
Increase in Distributor and Affiliates Payable............ 38,248
Decrease in Accrued Expenses.............................. (152,526)
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 7,876
-------------
Total Adjustments....................................... (344,053,260)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... (227,999,327)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in Bank Borrowings................................... 264,000,000
Change in Intra-day Credit Line with Custodian Bank......... (68,362)
Change in Accrued Interest Expense.......................... 195,330
Cash Dividends Paid......................................... (35,683,786)
-------------
Net Cash Used for Financing Activities.................. 228,443,182
-------------
NET INCREASE IN CASH........................................ 443,855
Cash at Beginning of the Period............................. -0-
-------------
CASH AT THE END OF THE PERIOD............................... $ 443,855
=============
See Notes to Financial Statements 29
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE TRUST
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED
JANUARY 31, --------
2004 2003
----------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD (a)................ $ 8.10 $ 7.94
-------- --------
Net Investment Income..................................... .21 .46
Net Realized and Unrealized Gain/Loss..................... .44 .14
-------- --------
Total from Investment Operations............................ .65 .60
-------- --------
Less:
Distributions from Net Investment Income.................. .20 .44
Distributions from Net Realized Gain...................... -0- -0-
-------- --------
Total Distributions......................................... .20 .44
-------- --------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 8.55 $ 8.10
======== ========
Common Share Market Price at End of the Period.............. $ 8.70 $ 7.84
Total Return (b)............................................ 13.65%** 25.06%
Net Assets at End of the Period (In millions)............... $1,538.9 $1,458.6
Ratios to Average Net Assets excluding Borrowings:
Operating Expense*........................................ 1.71% 1.59%
Interest Expense.......................................... .41% .62%
Gross Expense *........................................... 2.12% 2.21%
Net Investment Income *................................... 5.04% 5.98%
Portfolio Turnover (c)...................................... 39%** 78%
SUPPLEMENTAL RATIOS:
Ratios to Average Net Assets including Borrowings:
Operating Expense*........................................ 1.25% 1.19%
Interest Expense.......................................... .30% .46%
Gross Expense*............................................ 1.55% 1.65%
Net Investment Income*.................................... 3.70% 4.47%
SENIOR INDEBTEDNESS:
Total Borrowing Outstanding (In thousands).................. $665,000 $401,000
Asset Coverage Per $1,000 Unit of Senior Indebtedness (d)... 3,314 4,637
* If certain expenses had not been voluntarily assumed by Van Kampen, total
return would have been lower and the Ratio of Operating Expenses to Average
Net Assets and the Ratio of Net Investment Income to Average Net Assets would
have been 1.21% and 6.90% for the period ended July 31, 1998.
** 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 common share market price assumes an investment at the
common share 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 share market price at the end of the period indicated.
(c)Calculation includes the proceeds from principal repayments and sales of
variable rate senior loan interest.
(d)Calculated by subtracting the Trust's total liabilities (not including the
Borrowings) from the Trust's total assets and dividing by the total number of
senior indebtedness units, where one unit equals $1,000 of senior
indebtedness.
(e)As required, effective August 1, 2001, the Trust has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities. The effect of this change for
the year ended July 31, 2002 was to decrease the ratio of net investment
income to average net asset applicable to common shares by .01%. Net
investment income per share and net realized and unrealized gains and losses
per share were unaffected by the adjustments. Per share, ratios and
supplemental data for the periods prior to July 31, 2002 have not been
restated to reflect this change in presentation.
N/A--Not Applicable.
30
JUNE 24, 1998
(COMMENCEMENT OF
YEAR ENDED JULY 31, INVESTMENT
---------------------------------------------- OPERATIONS) TO
2002 (e) 2001 2000 1999 JULY 31, 1998
-----------------------------------------------------------------
$ 8.51 $ 9.65 $ 10.08 $ 10.07 $ 9.99
-------- -------- -------- -------- --------
.49 .79 .81 .77 .07
(.55) (1.10) (.42) -0- .01
-------- -------- -------- -------- --------
(.06) (.31) .39 .77 .08
-------- -------- -------- -------- --------
.51 .83 .81 .76 -0-
-0- -0- .01 -0- -0-
-------- -------- -------- -------- --------
.51 .83 .82 .76 -0-
-------- -------- -------- -------- --------
$ 7.94 $ 8.51 $ 9.65 $ 10.08 $ 10.07
======== ======== ======== ======== ========
$ 6.67 $ 7.79 $ 8.75 $ 9.5625 $10.0625
-8.05% -1.42% .61% 2.98% .63%**
$1,430.0 $1,532.7 $1,736.5 $1,815.1 $1,812.1
1.48% 1.63% 1.75% 1.66% 1.18%
.53% 2.15% 2.49% 2.37% .28%
2.01% 3.78% 4.24% 4.03% 1.46%
6.02% 8.90% 8.19% 7.72% 6.94%
65% 55% 57% 28% 3%**
1.22% 1.20% 1.24% 1.18% N/A
.44% 1.58% 1.77% 1.67% N/A
1.66% 2.78% 3.01% 2.85% N/A
4.95% 6.55% 5.83% 5.46% N/A
$370,159 $375,000 $700,000 $800,000 $400,000
4,863 5,087 3,481 3,269 5,530
See Notes to Financial Statements 31
NOTES TO
FINANCIAL STATEMENTS
January 31, 2004 (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. Effective November 30, 2003, the Trust's investment adviser,
Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset
Management.
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 Senior Loans 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 for which reliable
market quotes are readily available are valued at the mean of such bid and ask
quotes. Where reliable market quotes are not readily available, Senior Loans are
valued, where possible, using independent market indicators provided by
independent pricing sources approved by the Board of Trustees. Other Senior
Loans are valued by independent pricing sources approved by the Board of
Trustees based upon pricing models developed, maintained and operated by those
pricing sources or valued by Van Kampen Asset Management (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. 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
Loans in the Trust's portfolio. The fair value of Senior Loans are reviewed and
approved by the Trust's Valuation Committee and the Board of Trustees.
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.
32
NOTES TO
FINANCIAL STATEMENTS
January 31, 2004 (Unaudited)
The Trust may invest in repurchase agreements, which are short-term
investments in which the Trust acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
Repurchase agreements are fully collateralized by the underlying debt security.
The Trust will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Trust.
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 senior loan,
note, or other fixed income security. Other income is comprised primarily of
amendment fees which are recorded when received. 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.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At July 31, 2003, the Trust had an accumulated capital loss carryforward
for tax purposes of $179,582,840, which will expire between July 31, 2009 and
2011.
At January 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $2,293,531,790
==============
Gross tax unrealized appreciation........................... $ 49,329,669
Gross tax unrealized depreciation........................... (60,465,385)
--------------
Net tax unrealized depreciation on investments.............. $ (11,135,716)
==============
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.
Distributions from net realized gains for book purposes may include short term
capital gains, which are included as ordinary income for tax purposes.
33
NOTES TO
FINANCIAL STATEMENTS
January 31, 2004 (Unaudited)
The tax character of distributions paid for the year ended July 31, 2003 was
as follows:
2003
Distributions paid from:
Ordinary income........................................... $79,888,289
Long-term capital gain.................................... -0-
-----------
$79,888,289
===========
As of July 31, 2003, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income............................... $2,873,430
Net realized gains and losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses resulting from wash
sale transactions.
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 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 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, 2004, the Trust recognized expenses of
approximately $67,000 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, 2004, the Trust recognized expenses of
approximately $23,300 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 deter all or a portion of their compensation to a
later date. Benefits under the retirement
34
NOTES TO
FINANCIAL STATEMENTS
January 31, 2004 (Unaudited)
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.
INTEREST/
PAR/ REALIZED DIVIDEND MARKET VALUE
NAME SHARES * GAIN/(LOSS) INCOME 1/31/04 COST
Imperial Home Decor Group,
Inc., Term Loan............. 1,422,288 -0- -0- $ 35,557 $1,367,833
Imperial Home Decor Group,
Inc., Common Stock.......... 512,023 -0- -0- -0- 522,263
Imperial Home Decor Realty,
Inc., Common Stock.......... 512,023 -0- -0- -0- -0-
Neoplan USA Corp., Revolving
Credit Agreement............ 900,000 -0- 9,650 900,000 900,000
Neoplan USA Corp., Common
Stock....................... 8,517 -0- -0- 85 85
Neoplan USA Corp., Preferred
Stock C..................... 532 -0- -0- 532 532
Neoplan USA Corp., Preferred
Stock D..................... 1,730 -0- -0- 1,072,244 1,072,244
* Shares were acquired through the restructuring of Senior loan interests.
At January 31, 2004, Van Kampen owned 10,000 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $1,047,387,614 and $795,783,363,
respectively.
4. COMMITMENTS
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Trust had unfunded loan commitments of approximately $109,972,500 as of
January 31, 2004. The Trust intends to reserve against such contingent
obligations by segregating cash, liquid securities and liquid Senior Loans as a
reserve.
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
35
NOTES TO
FINANCIAL STATEMENTS
January 31, 2004 (Unaudited)
Trust assumes the credit risk of the borrower, selling participant or other
persons interpositioned between the Trust and the borrower.
At January 31, 2004, 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)
Bank of America............................................. $ 4,772 $ 4,796
Bank of Nova Scotia......................................... 1,164 1,677
JP Morgan Chase............................................. 10,999 10,944
------- -------
Total....................................................... $16,935 $17,417
======= =======
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 a $700 million revolving credit and security
agreement. This revolving credit agreement is secured by the assets of the
Trust. For the six months ended January 31, 2004, the average daily balance of
borrowings under the revolving credit agreement was $543,744,565 with a weighted
average interest rate of 1.11%.
7. SUBSEQUENT EVENT--PREFERRED SHARES ISSUANCE
As of February 20, 2004, the Trust issued 5,600 shares each of Series M, Series
T, Series W, Series TH and Series F Auction Preferred Shares ("APS"), $.01 par
value, $25,000 liquidation preference, for a total issuance of $700 million.
Dividends are cumulative and the dividend rates are generally reset every seven
days through an auction process. The Trust used the net proceeds of the offering
to pay down existing borrowings.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees will be included as a component of the "Preferred Share
Maintenance" expense in the Statement of Operations.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
36
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN SENIOR INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, NY 10020
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.
37
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc.,
Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many
Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC.
VVR SAR 3/04 13910C04-AS-3/04
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Senior Income Trust
-------------------------------------
By: /s/ Ronald E. Robison
-----------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: March 19, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
-----------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: March 19, 2004
By: /s/ John L. Sullivan
-----------------------------------------------
Name: John L. Sullivan
Title: Principal Financial Officer
Date: March 19, 2004