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
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas New York, New York 10020
(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: 7/31/06
Item 1. Reports to Shareholders.
The Trust's 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 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 July 31, 2006.
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
THAT THE VALUE OF THE TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU
PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST.
PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT
RISKS.
AN INVESTMENT IN SENIOR LOANS IS SUBJECT TO CERTAIN RISKS SUCH AS LOAN
DEFAULTS AND ILLIQUIDITY DUE TO INSUFFICIENT COLLATERAL BACKING.
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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Performance Summary as of 7/31/06
SENIOR INCOME TRUST
SYMBOL: VVR
------------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (6/24/98) 5.51% 5.22%
5-year 6.59 8.00
1-year 6.54 10.41
------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND TRUST SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
The NAV per share is determined by dividing the value of the trust's portfolio
securities, cash and other assets, less all liabilities and preferred shares, 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 12-MONTH PERIOD ENDED JULY 31, 2006
MARKET CONDITIONS
The 12-month period ended July 31, 2006 was quite favorable for the senior loan
asset class. Economic growth was solid, inflation remained in check, and the
credit market showed overall strength with many corporations posting good
profits, increasing revenues and improving credit quality. In addition, interest
rates continued to climb as the Federal Open Market Committee (the "Fed") raised
the target federal funds rate by 25 basis points at each of its meetings during
the reporting period, bringing the target rate to 5.25 percent at the end of
June 2006. The rising-rate environment was particularly beneficial to the senior
loan market as the yields on the loans adjust in tandem to short-term interest
rates.
Yield spreads in the senior loan market were relatively steady during the first
half of the reporting year, then began to widen in March. These widening spreads
in the latter half of the period added to the attractiveness of senior loans,
spurring demand from both institutional and individual investors.
PERFORMANCE ANALYSIS
The trust'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 and preferred shares, 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 can differ, as they did during the reporting
period. For the 12 months ended July 31, 2006, the trust returned 10.41 percent
on a market price basis and 6.54 percent on an NAV basis.
TOTAL RETURNS FOR THE 12-MONTH PERIOD ENDED JULY 31, 2006
------------------------------------------------
BASED ON NAV BASED ON MARKET PRICE
6.54% 10.41%
------------------------------------------------
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. 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.
We continued to follow our research-intensive investment approach, seeking to
balance yield with a stable net asset value. Our investment process remained
focused on identifying companies with strong management, solid and predictable
cash flows, and sufficient collateral in the event of default.
2
Throughout the reporting period, we continued to employ a bottom-up security
selection process driven by analysis of individual company fundamentals. We do,
however, analyze overall sector and industry trends as well, which led us to
position the trust somewhat defensively during the period. For example, we
favored investments in less cyclical sectors such as food and drug, cable,
leisure and entertainment, and the defense industry. These sectors have
historically experienced steady demand for goods and services. In addition, we
generally avoided investing in companies that we believed to be vulnerable to
cyclical economic downturns or rising fuel prices, particularly the auto and
airline industries. We also remained cautious about the health care sector,
which has been struggling due to reductions in Medicaid reimbursements.
The trust benefited during the period from our use of leverage. Leverage
involves borrowing at a short-term lending rate and reinvesting the proceeds at
a higher rate. We used this strategy on an ongoing basis in an effort to enhance
the trust's dividend. Unlike other fixed-income classes, using leverage in
conjunction with senior loans does not involve the same degree of risk from
rising short-term interest rates, since the income from senior loans adjusts to
changes in interest rates, as do the rates which determine the trust's borrowing
costs. (Similarly, should short-term rates fall, borrowing costs would also
decline.) We might reduce leverage in periods of weaker credit quality
conditions to prevent magnifying erosion of the trust's net asset value.
The trust's procedure for reinvesting all dividends and distributions in common
shares is through purchases in the open market. This method helps support the
market value of the trust's shares. In addition, we would like to remind you
that the Trustees have approved a procedure whereby the trust may, when
appropriate, purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the trust in
the future.
3
CHANGES IN INVESTMENT POLICIES
At a meeting held on March 1, 2006, the Board of Trustees approved changes to
certain of the Trust's investment policies in order to expand the investment
options available to the Trust as the Trust seeks to achieve its investment
objective of high level of current income, consistent with preservation of
capital. The Trust's investment policy of investing at least 80% of its total
assets in Senior Loans remains unchanged. The changes to the Trust's investment
policies are as follows:
(1) The Trust may, subject to the limits specified below, invest in
credit-linked deposits. Credit-linked deposits are deposits by lenders, such as
the Trust, to support the issuance of letters of credit to the Senior Loan
borrower. The Trust receives from the bank issuing such letters of credit an
agreed upon rate of return in exchange for its deposit. There are risks
associated with credit-linked deposits, including the credit risk of the bank
which maintains the deposit account as well as the credit risk of the borrower.
The Trust bears the risk of possible loss of its principal investment, in
addition to the periodic interest payments that are expected to be received for
the duration of the Trust's investment in the credit-linked deposit. Thus,
restating the Trust's investment policies to include this new investment: The
Trust may invest up to 20% of its total assets in any combination of (1)
warrants and equity securities, in each case the Trust must own or acquire a
Senior Loan of the same issuer, (2) junior debt securities or securities with a
lien on collateral lower than a senior claim on collateral, (3) high quality
short-term debt securities, (4) credit-linked deposits and (5) Treasury
Inflation Protected Securities ("U.S. TIPS") and other inflation-indexed bonds
issued by the U.S. government, its agencies or instrumentalities.
(2) The Trust's ability to invest in structured products has been increased to
10% of its total assets and expanded to include credit default swaps ("CDS") to
enhance the yield on its portfolio or to increase income available for
distributions or for other non-hedging purposes. A CDS is an agreement between
two parties to exchange the credit risk of a particular issuer or reference
entity. In a CDS transaction, a buyer pays periodic fees in return for a payment
by the seller which is contingent upon an adverse credit event occurring in the
underlying issuer or reference entity. The seller collects periodic fees from
the buyer and profits if the credit of the underlying issuer or reference entity
remains stable or improves while the swap is outstanding, but the seller in a
CDS contract would be required to pay an agreed upon amount to the buyer in the
event of an adverse credit event in the reference entity. A buyer of a CDS is
said to buy protection whereas a seller of a CDS is said to sell protection.
When the Trust buys a CDS, it is utilizing the swap for hedging purposes similar
to other hedging strategies described herein. When the Trust sells a CDS, it is
utilizing the swap to enhance the yield on its portfolio to increase income
available for distribution or for other non-hedging purposes, and the Trust is
subject to the 10% limitation described herein on structured products.
4
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 7/31/2006
Chemicals, Plastics & Rubber 7.5%
Broadcasting--Cable 7.3
Printing & Publishing 5.8
Beverage, Food & Tobacco 5.6
Hotels, Motels, Inns & Gaming 5.1
Entertainment & Leisure 5.0
Healthcare 4.7
Buildings & Real Estate 4.5
Automotive 4.0
Electronics 4.0
Personal & Miscellaneous Services 3.1
Aerospace/Defense 2.8
Finance 2.6
Ecological 2.6
Paper & Forest Products 2.4
Construction Material 2.3
Containers, Packaging & Glass 2.0
Restaurants & Food Service 2.0
Insurance 1.8
Medical Products & Services 1.7
Utilities 1.6
Health & Beauty 1.6
Natural Resources 1.5
Telecommunications--Local Exchange Carriers 1.3
Broadcasting--Radio 1.2
Diversified Manufacturing 1.1
Non-Durable Consumer Products 1.1
Home & Office Furnishings, Housewares & Durable Consumer
Products 1.1
Telecommunications--Wireless 1.1
Pharmaceuticals 1.1
Grocery 1.0
Retail--Specialty 1.0
Business Equipment & Services 0.8
Retail--Stores 0.7
Machinery 0.7
Retail--Oil & Gas 0.6
Textiles & Leather 0.5
Mining, Steel, Iron & Non-Precious Metals 0.5
Transportation--Rail Manufacturing 0.4
Transportation--Personal 0.4
Farming & Agriculture 0.4
Transportation--Cargo 0.4
Education & Child Care 0.4
Broadcasting--Diversified 0.3
Telecommunications--Equipment & Services 0.2
Broadcasting--Television 0.2
(continued on next page)
5
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 7/31/2006
(continued from previous page)
Telecommunications--Long Distance 0.1
Retail--Office Products 0.1
-----
Total Long-Term Investments 98.2%
Short-Term Investments 1.8
-----
Total Investments 100.0%
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. Summary of investments by industry
classification percentages are as a percentage of total investments. Securities
are classified by sectors that represent broad groupings of related industries.
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.
6
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen trust provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
trust's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to trust shareholders,
and makes these reports available on its public Web site,
www.vankampen.com. In addition to the semiannual and annual reports that
Van Kampen delivers to shareholders and makes available through the Van
Kampen public Web site, each trust files a complete schedule of portfolio
holdings with the SEC for the trust's first and third fiscal quarters on
Form N-Q. Van Kampen does not deliver the reports for the first and third
fiscal quarters to shareholders, nor are the reports posted to the Van
Kampen public Web site. You may, however, obtain the Form N-Q filings (as
well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web
site, http://www.sec.gov. You may also review and copy them at the SEC's
Public Reference Room in Washington, DC. Information on the operation of
the SEC's Public Reference Room may be obtained by calling the SEC at
(800) SEC-0330. You can also request copies of these materials, upon
payment of a duplicating fee, by electronic request at the SEC's e-mail
address (publicinfo@sec.gov) or by writing the Public Reference section
of the SEC, Washington, DC 20549-0102.
You may obtain copies of a trust's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
7
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the trust's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the trust voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
8
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
breakpoints in the Fund's investment advisory fee schedule. The Board of
Trustees considered comparative advisory fees of the Fund and other investment
companies and/or other products at different asset levels, and considered the
trends in the industry. The Board of Trustees evaluated other benefits the
investment adviser and its affiliates derive from their relationship with the
Fund. The Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
together, has determined, in the exercise of its business judgment, that
approval
9
of the investment advisory agreement is in the best interests of the Fund and
its shareholders. The following summary provides more detail on certain matters
considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund. The trustees also
discuss certain other services which are provided on a cost-reimbursement basis
by the investment adviser or its affiliates to the Van Kampen funds including
certain accounting, administrative and legal services. The Board has determined
that the nature, extent and quality of the services provided by the investment
adviser support its decision to approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report and in
the Fund's prospectus. The trustees discuss with the investment adviser the
level of advisory fees for this Fund relative to comparable funds and other
products advised by the adviser and others in the marketplace. The trustees
review not only the advisory fees but other fees and expenses (whether paid to
the adviser, its affiliates or others) and the Fund's overall expense ratio. The
Board has determined that the performance, fees and expenses of the Fund support
its decision to approve the investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees discuss with the investment adviser its revenues and expenses,
including among other things, revenues for advisory services, portfolio
management-related expenses, revenue sharing arrangement costs and allocated
expenses both on an aggregate basis and per fund. The Board has determined that
the analysis of the
10
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
of the Fund and how that relates to the Fund's expense ratio and particularly
the Fund's advisory fee rate. In conjunction with its review of the investment
adviser's profitability, the trustees discuss with the investment adviser how
more (or less) assets can affect the efficiency or effectiveness of managing the
Fund's portfolio and whether the advisory fee level is appropriate relative to
current asset levels and/or whether the advisory fee structure reflects
economies of scale as asset levels change. The Board has determined that its
review of the actual and potential economies of scale of the Fund support its
decision to approve the investment advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
11
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
VARIABLE RATE** SENIOR LOAN INTERESTS 178.7%
AEROSPACE/DEFENSE 5.2%
$14,594 Alion Science and Technology
Corp., Term Loan............. B1 B+ 8.00 to 12/31/07 to $ 14,642,319
11.00% 08/02/09
155 Alion Science and Technology
Corp., Revolving Credit
Agreement.................... B1 B+ 10.00 08/02/09 151,125
3,825 AM General, LLC, Term Loan
(b).......................... NR NR 9.83 to 11/01/11 3,870,422
11.75
1,497 Apptis, Inc., Term Loan...... B2 B+ 8.65 01/05/10 1,508,353
7,527 ARINC, Inc., Term Loan....... Ba3 BB 7.11 03/10/11 7,550,271
4,989 DynCorp International, LLC,
Term Loan.................... Ba3 BB- 7.81 to 02/11/11 5,011,932
8.31
7,460 IAP Worldwide Services, Inc.,
Term Loan.................... B2 B- 8.50 to 12/30/12 to 7,551,990
13.50 06/30/13
3,540 ILC Industries, Inc., Term
Loan......................... NR NR 7.99 to 02/24/12 3,553,777
8.00
9,720 K&F Industries, Inc., Term
Loan......................... B2 B+ 7.40 11/18/12 9,736,239
1,406 Primus International, Inc.,
Revolving Credit Agreement... NR NR 7.84 06/07/12 1,411,523
4,497 SI International, Inc., Term
Loan......................... B1 NR 6.97 02/09/11 4,502,926
11,370 Spirit AeroSystems, Inc.,
Term Loan.................... B1 BB- 7.75 12/31/11 11,431,050
8,478 Wyle Laboratories, Inc., Term
Loan......................... NR B+ 7.88 to 01/28/11 to 8,575,667
11.63 07/28/11
--------------
79,497,594
--------------
AUTOMOTIVE 7.4%
8,392 Accuride Corp., Term Loan
(b).......................... B1 B+ 7.31 01/31/12 8,414,896
3,000 Dana Corp., Term Loan........ B3 BB- 7.45 04/13/08 3,005,937
14,021 Federal-Mogul Corp., Term
Loan (c)..................... NR NR 9.15 12/09/06 14,126,066
15,384 Federal-Mogul Corp.,
Revolving Credit Agreement
(c).......................... NR NR 9.15 12/09/06 15,431,585
3,497 Heartland Automotive
Holdings, Inc., Term Loan.... NR NR 8.93 to 02/27/12 3,523,067
9.26
3,600 Lear Corp., Term Loan........ B2 B+ 7.93 04/25/12 3,580,124
12 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
AUTOMOTIVE (CONTINUED)
$10,369 MetoKote Corp., Term Loan.... B2 B+ 8.68 to 11/27/11 $ 10,401,152
8.74%
1,566 Navistar International Corp.,
Term Loan.................... NR BB- 10.49 02/22/09 1,581,300
6,120 Polypore, Inc., Term Loan.... B2 B 8.40 11/12/11 6,180,750
9,842 Safelite Glass Corp., Term
Loan......................... NR NR 8.92 to 09/30/07 9,718,839
9.42
6,000 Sensata Technologies, Term
Loan......................... B1 BB- 7.14 to 04/27/13 5,974,824
7.24
3,818 Tenneco Automotive, Inc.,
Term Loan.................... Ba3 BB- 7.19 12/12/10 3,846,709
26,561 TRW Automotive, Inc., Term
Loan......................... Ba2 BB+ 6.75 to 01/10/10 to 26,534,260
7.19 06/30/12
2,591 United Components, Inc., Term
Loan......................... B2 BB- 7.41 to 06/30/12 2,603,780
7.66
--------------
114,923,289
--------------
BEVERAGE, FOOD & TOBACCO 10.3%
7,182 Advantage Sales & Marketing,
LLC, Term Loan (b)........... NR NR 7.22 03/29/13 7,119,157
573 Atkins Nutritionals, Inc.,
Term Loan.................... NR NR 17.50 12/31/10 479,801
12,979 Birds Eye Foods, Inc., Term
Loan (b)..................... B1 B+ 8.15 to 06/30/08 13,043,905
8.18
1,509 Buffets Holdings, Inc., Term
Loan (b)..................... B1 B- 8.90 to 06/28/09 1,514,561
9.00
12,372 Commonwealth Brands, Inc.,
Term Loan.................... NR NR 7.75 12/22/12 12,449,023
4,722 Constellation Brands, Inc.,
Term Loan.................... Ba2 BB 6.75 to 06/05/13 4,742,514
7.00
4,575 Culligan International Co.,
Term Loan.................... B1 B+ 7.37 09/30/11 4,576,176
17,959 Dole Food, Co., Inc., Term
Loan......................... Ba3 B+ 5.37 to 04/12/13 17,614,351
9.00
9,487 DS Waters Enterprises, LP,
Term Loan.................... Caa3 CCC 9.81 to 11/07/09 9,507,405
11.50
3,267 Eight O'clock Coffee Co.,
Term Loan.................... NR NR 10.25 11/14/11 3,283,310
See Notes to Financial Statements 13
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 5,080 Farley's & Sathers Candy Co.,
Inc., Term Loan.............. NR NR 8.24 to 06/15/10 to $ 5,096,201
11.62% 03/24/11
2,400 Fresh Start Bakeries, Inc.,
Term Loan.................... NR NR 7.75 to 06/27/13 2,403,000
7.88
3,982 Le-Nature's, Inc., Term
Loan......................... B1 B 7.88 to 06/23/10 4,024,808
10.25
6,726 Luigino's, Inc., Term Loan... B1 B+ 8.25 to 04/02/11 6,782,273
8.44
1,546 Mafco Worldwide Corp., Term
Loan......................... B1 B+ 7.35 to 12/08/11 1,548,781
7.45
8,874 Michael Foods, Inc., Term
Loan......................... B1 B+ 7.03 to 11/21/10 8,901,555
7.55
6,295 National Dairy Holdings, LP,
Term Loan.................... NR NR 7.40 03/15/12 6,318,237
2,640 National Distributing Co.,
Inc., Term Loan.............. NR NR 11.90 06/22/10 2,646,600
2,493 OSI Foods GMBH & Co. KG, Term
Loan......................... NR NR 7.25 09/02/11 2,489,843
5,609 OSI Group, LLC, Term Loan.... NR NR 7.25 09/02/11 5,602,148
3,116 OSI-Holland Finance B.V.,
Term Loan.................... NR NR 7.25 09/02/11 3,112,304
4,635 PBM Products, LLC, Term
Loan......................... NR NR 8.40 07/26/11 4,666,724
6,848 Pierre Foods, Inc., Term
Loan......................... B1 B+ 6.93 06/30/10 6,860,840
5,757 Pinnacle Foods, Inc., Term
Loan......................... B1 B+ 7.45 to 11/25/10 5,761,967
7.48
750 Reddy Ice Group, Inc., Term
Loan......................... B1 B+ 7.25 08/09/12 749,531
6,000 Reynolds American, Inc., Term
Loan......................... Ba1 BBB- 7.19 to 05/31/12 6,036,096
7.31
5,000 Sturm Foods, Inc., Term
Loan......................... NR NR 7.75 to 05/26/11 5,018,750
10.00
14 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO (CONTINUED)
$ 3,206 Sunny Delight Beverage Co.,
Term Loan.................... Caa1 CCC 11.19 to 08/20/10 $ 3,176,385
11.52%
3,950 Volume Services America,
Inc., Term Loan.............. B2 NR 8.74 to 10/01/10 3,974,688
9.50
--------------
159,500,934
--------------
BROADCASTING--CABLE 13.5%
3,300 Century Cable Holdings, LLC,
Term Loan (c)................ NR NR 10.25 06/30/09 3,173,894
15,000 Cequel Communications, LLC,
Term Loan.................... B1 B+ 7.74 11/05/13 14,920,980
60,927 Charter Communications
Operating, LLC, Term Loan.... B2 B 8.13 04/28/13 61,090,337
14,963 CSC Holdings, Inc., Term
Loan......................... Ba3 BB 6.88 to 03/29/13 14,890,919
7.26
9,593 Frontiervision Operating
Partners, LP, Term Loan (c)
(j).......................... NR NR 9.65 to 09/30/05 to 9,463,588
9.78 03/31/06
2,354 Frontiervision Operating
Partners, LP, Revolving
Credit Agreement (c) (j)..... NR NR 9.65 06/30/06 2,318,260
13,373 Hilton Head Communications,
LP, Term Loan (c)............ NR NR 9.50 03/31/08 12,754,739
12,760 Hilton Head Communications,
LP, Revolving Credit
Agreement (c)................ NR NR 8.25 09/30/07 12,079,471
9,151 Insight Midwest Holdings,
LLC, Term Loan............... Ba3 BB- 7.44 12/31/09 9,171,447
823 Insight Midwest Holdings,
LLC, Revolving Credit
Agreement.................... Ba3 BB- 6.63 to 06/30/09 808,067
6.69
4,962 MCC Iowa, LLC, Term Loan..... Ba3 BB- 6.90 to 01/31/15 4,941,456
7.37
4,800 Mediacom Broadbrand, LLC,
Term Loan.................... Ba3 BB- 7.38 01/31/15 4,785,000
2,400 Mediacom Illinois, LLC, Term
Loan......................... Ba3 BB- 6.90 to 01/31/15 2,392,930
7.37
57,095 Olympus Cable Holdings, LLC,
Term Loan (c)................ NR NR 9.50 to 06/30/10 to 54,752,964
10.25
--------------
207,544,052
--------------
See Notes to Financial Statements 15
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
BROADCASTING--DIVERSIFIED 0.6%
$ 6,000 Cumulus Media, Inc., Term
Loan......................... Ba3 B 7.33 to 06/07/13 $ 6,013,128
7.63%
3,709 Entravision Communications
Corp., Term Loan............. Ba3 B+ 7.01 03/29/13 3,711,950
--------------
9,725,078
--------------
BROADCASTING--RADIO 2.2%
6,000 CMP KC, LLC, Term Loan....... Caa1 CCC 9.25 to 05/03/11 6,007,500
9.31
14,786 CMP Susquehanna Corp., Term
Loan......................... Ba3 B 7.25 to 05/05/13 14,792,649
7.38
1,795 LBI Media, Inc., Term Loan... B1 B 6.76 03/31/12 1,784,278
5,673 NextMedia Operating, Inc.,
Term Loan.................... B1 B 7.33 to 11/15/12 to 5,696,609
10.01 11/15/13
5,431 Spanish Broadcasting Systems,
Inc., Term Loan.............. B1 B+ 7.25 06/11/12 5,426,726
--------------
33,707,762
--------------
BROADCASTING--TELEVISION 0.3%
4,158 HIT Entertainment, Inc., Term
Loan......................... B1 B 7.70 03/20/12 4,178,790
--------------
BUILDINGS & REAL ESTATE 8.2%
6,667 BioMed Realty, LP, Term Loan
(b).......................... NR NR 7.60 05/30/10 6,683,333
15,629 Capital Automotive, LP, Term
Loan (b)..................... Ba1 BB+ 7.10 12/16/10 15,645,987
316 Central Parking Corp., Term
Loan......................... Ba3 BB- 7.50 03/31/10 318,136
6,300 Edge-Star Partners, Term
Loan......................... NR NR 8.44 to 11/18/07 6,327,750
14.69
21,000 Ginn LA CS Borrower, LLC Term
Loan......................... B1 BB 8.29 to 06/08/11 to 20,745,000
12.35 06/08/12
6,000 Landsource Communities
Development, LLC, Term Loan.. NR NR 7.88 03/31/10 6,011,250
4,800 LNR Property Corp., Term
Loan......................... B2 B+ 8.11 07/12/11 4,829,002
2,394 London Arena & Waterfront
Finance, LLC, Term Loan...... NR NR 8.78 03/08/12 2,414,948
5,000 Macerich Partnership, LP,
Term Loan.................... NR NR 6.88 04/25/10 4,991,665
16 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
BUILDINGS & REAL ESTATE (CONTINUED)
$ 394 NCI Building Systems, Inc.,
Term Loan.................... Ba2 BB 6.71% 06/18/10 $ 394,505
2,767 NewKirk Master, LP, Term
Loan......................... Ba2 BB+ 7.10 to 08/11/08 2,776,061
8.75
5,693 North Las Vegas, Term Loan... B2 B+ 8.25 to 05/09/11 to 5,737,483
12.50 05/30/12
3,600 Shea Capital I, LLC, Term
Loan......................... NR NR 7.49 10/27/11 3,586,500
2,494 Shea Mountain House, LLC,
Term Loan.................... NR NR 7.17 05/11/11 2,475,047
4,500 South Edge, LLC, Term Loan... NR NR 7.19 to 10/31/07 to 4,511,041
7.44 10/31/09
3,600 Standard Pacific Corp., Term
Loan......................... NR NR 6.56 05/05/13 3,532,500
5,991 Tamarack Resorts, LLC, Term
Loan......................... NR NR 8.33 to 05/19/11 6,017,211
8.75
9,000 Trizec Properties, Inc., Term
Loan......................... NR BB+ 6.78 05/02/07 8,995,779
12,000 WCI Communities, Inc., Term
Loan......................... NR NR 7.44 12/23/10 11,940,000
9,134 Yellowstone Development, LLC,
Term Loan.................... NR NR 7.78 09/30/10 9,103,881
--------------
127,037,079
--------------
BUSINESS EQUIPMENT & SERVICES 1.6%
1,788 Affiliated Computer,
Services, Inc., Term Loan
(b).......................... Ba2 BB 7.40 to 03/20/13 1,791,680
8.23
3,000 Contec, LLC, Term Loan....... NR NR 8.63 to 06/15/12 3,007,500
8.75
2,090 InfoUSA, Inc., Term Loan..... Ba3 BB 7.25 02/14/12 2,092,112
4,800 Institutional Shareholders
Services, Inc., Term Loan.... NR NR 7.85 09/30/11 4,812,000
4,113 Katun Corp., Term Loan....... NR BB- 6.21 to 06/30/09 4,113,436
9.75
2,758 Pro-Quest, Revolving Credit
Agreement.................... NR NR 7.89 to 01/31/10 2,700,570
8.89
5,435 Verifone, Inc., Term Loan.... B1 BB- 7.24 06/30/11 5,441,793
--------------
23,959,091
--------------
See Notes to Financial Statements 17
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
CHEMICALS, PLASTICS & RUBBER 13.9%
$ 1,241 American Pacific Corp., Term
Loan......................... B2 B 9.50% 11/30/10 $ 1,242,176
3,900 Basell North America
(Netherlands), Term Loan
(b).......................... Ba3 B+ 7.73 to 09/07/13 to 3,948,748
8.23 09/07/14
1,781 Becker-Underwood, Inc., Term
Loan......................... NR NR 9.75 to 09/30/11 to 1,768,689
12.50 03/31/12
11,400 Brenntag Holdings GmbH & Co.
KG, Term Loan (b)............ B2 B+ 8.08 to 01/20/14 to 11,522,406
12.08 07/17/15
17,315 Celanese, AG (Germany), Term
Loan (b)..................... B1 BB- 7.50 04/06/11 17,367,175
7,500 Ferro Corp., Revolving Credit
Agreement.................... NR B+ 8.53 to 06/06/12 7,497,660
8.74
3,600 Fibervisions Delaware Corp.,
Term Loan.................... B2 B 9.00 03/31/13 3,609,000
24,000 Hexion Specialty Chemicals,
Inc., Term Loan.............. B2 B+ 7.50 to 05/05/13 23,797,488
7.56
55,489 Huntsman International, LLC,
Term Loan.................... Ba3 BB- 7.15 08/16/12 55,297,961
9,000 Ineos Holdings Ltd., Term
Loan......................... Ba3 B+ 7.34 to 12/16/13 to 9,065,628
7.84 12/23/14
9,686 INVISTA (Netherlands), Term
Loan......................... Ba3 BB 7.00 04/30/10 to 9,703,336
04/29/11
10,175 ISP Chemco, Inc., Term Loan.. Ba3 BB- 6.94 to 02/16/13 10,185,397
7.38
14,962 Kraton Polymers, LLC, Term
Loan......................... B1 B+ 7.44 05/12/13 14,962,500
10,754 Nalco Co., Term Loan......... B1 BB- 7.10 to 11/04/10 10,757,005
7.30
10,171 PQ Corp., Term Loan.......... B1 B+ 7.50 02/10/12 10,192,437
17,867 Rockwood Specialties Group,
Inc., Term Loan.............. B1 NR 7.49 12/13/13 17,926,751
4,800 Wellman, Inc., Term Loan..... B2 B- 11.90 02/10/10 4,855,200
--------------
213,699,557
--------------
18 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
CONSTRUCTION MATERIAL 3.4%
$11,940 AXIA, Inc., Term Loan........ B2 B 8.75% 12/21/12 $ 11,969,850
2,524 Brand Services, Inc., Term
Loan (b)..................... B2 B 7.48 to 01/15/12 2,527,666
8.23
1,147 Builders FirstSource, Inc.,
Term Loan (b)................ B1 BB- 8.01 08/11/11 1,149,533
9,958 Contech Construction
Products, Inc., Term Loan.... B1 B+ 7.22 to 01/31/13 9,976,722
9.25
1,500 Custom Building Products,
Inc., Term Loan.............. NR NR 10.62 04/29/12 1,508,438
3,261 Gibraltar Industries, Inc.,
Term Loan.................... Ba1 BB 7.19 to 12/08/12 3,260,870
7.25
6,000 Interline Brands, Inc., Term
Loan......................... B1 BB 7.21 to 06/23/13 6,022,500
7.26
1,197 Nortek, Inc., Term Loan...... B2 B 7.40 to 08/27/11 1,195,271
9.25
3,511 Panolam Industries
International, Inc. (Canada),
Term Loan.................... B2 B+ 8.25 09/30/12 3,537,624
5,700 Professional Paint, Inc.,
Term Loan.................... NR NR 7.69 to 05/31/12 to 5,731,500
11.38 05/31/13
894 Sensus Metering Systems,
Inc., Term Loan.............. B2 B+ 6.94 to 12/17/10 896,401
7.58
2,394 Universal Building Products,
Inc., Term Loan.............. NR NR 8.58 to 04/28/12 2,417,940
9.01
1,508 Werner Holding Co., Inc.,
Term Loan (a) (c)............ NR D 11.25 to 12/11/09 1,500,008
17.25
969 Werner Holding Co., Inc.,
Term Loan (c) (g)............ NR D 11.25 to 06/11/09 881,892
17.25
--------------
52,576,215
--------------
CONTAINERS, PACKAGING & GLASS 3.8%
3,000 Anchor Glass Container Corp.,
Term Loan.................... NR NR 7.52 to 05/03/13 3,007,500
7.75
4,438 Berry Plastics Corp., Term
Loan (b)..................... B1 B+ 7.15 12/02/11 4,439,200
1,847 Bluegrass Container Holdings,
LLC, Term Loan (b)........... Ba3 BB- 7.65 06/30/13 1,857,084
See Notes to Financial Statements 19
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING & GLASS (CONTINUED)
$ 1,764 Consolidated Container Co.,
LLC, Term Loan............... B2 B- 8.38% 12/15/08 $ 1,773,556
4,800 Covalence Specialty Materials
Corp., Term Loan............. Ba3 B+ 7.44 to 05/18/13 to 4,817,438
8.63 08/16/13
1,800 Crown Americas, Inc., Term
Loan......................... Ba2 BB- 6.95 11/15/12 1,802,250
6,020 Graham Packaging Co., Term
Loan......................... B2 B 7.56 to 10/07/11 to 6,045,792
9.75 04/07/12
13,817 Graphic Packaging
International Corp., Term
Loan......................... B1 B+ 7.62 to 08/08/10 13,944,153
8.14
554 Graphic Packaging
International Corp.,
Revolving Credit Agreement... B1 B+ 8.40 to 08/08/09 537,923
10.25
5,000 Packaging Dynamics, Term
Loan......................... NR BB- 7.51 06/09/13 5,006,250
4,026 Ranpak Corp., Term Loan...... NR NR 7.83 12/14/11 4,035,853
7,294 Smurfit-Stone Container
Corp., Term Loan............. Ba3 B+ 7.50 to 11/01/11 7,336,298
9.50
501 Smurfit-Stone Container
Corp., Revolving Credit
Agreement.................... Ba3 B+ 9.75 11/01/09 487,988
1,993 Solo Cup, Inc., Term Loan.... B3 B- 7.61 to 02/27/11 to 2,007,540
9.66 03/31/12
998 Unifrax Corp., Term Loan..... B2 B 7.69 05/02/13 999,059
--------------
58,097,884
--------------
DIVERSIFIED MANUFACTURING 2.1%
2,424 Arnold Magnetic Technologies
Corp., Term Loan............. NR NR 10.50 to 03/06/11 to 2,423,845
11.50 03/06/12
5,108 Chart Industries, Inc, Term
Loan......................... B1 B+ 7.56 10/17/12 5,116,318
4,500 Euramax International, Inc.,
Term Loan.................... Caa1 B- 12.49 06/29/13 4,524,380
14,096 Mueller Group, Inc., Term
Loan......................... B1 BB- 7.36 to 10/03/12 14,184,165
7.87
6,000 X-Rite, Term Loan............ B1 6,067,500
B+ 7.60 to 06/30/12 to --------------
10.35 06/30/13
32,316,208
--------------
20 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
ECOLOGICAL 4.7%
$20,984 Allied Waste North America,
Inc., Term Loan (b).......... B1 BB 6.72 to 01/15/12 $ 20,910,061
7.27%
5,072 Duratek, Inc., Term Loan..... NR BB 7.65 to 06/07/13 5,116,075
7.77
11,728 Energy Solutions, LLC, Term
Loan......................... B2 BB 7.62 to 06/07/11 to 11,830,925
7.77 06/07/13
7,776 Environmental Systems
Products Holdings,
Term Loan.................... B3 NR 8.73 to 12/12/08 to 7,876,480
15.50 12/12/10
4,115 Great Lakes Dredge & Dock
Corp., Term Loan............. B2 CCC 7.99 to 12/22/10 4,130,215
8.62
3,881 LVI Services, Inc., Term
Loan......................... NR NR 8.25 to 11/16/11 3,865,948
8.37
1,481 Safety-Kleen Corp., Term
Loan......................... NR NR 12.17 to 09/15/08 1,526,921
14.25
6,400 Synagro Technologies, Inc.,
Term Loan.................... NR BB- 7.76 to 06/21/12 6,416,000
7.77
8,180 Waste Services, Inc., Term
Loan......................... B2 B- 8.59 to 03/31/11 8,230,732
10.50
373 Waste Services, Inc.,
Revolving Credit Agreement... B2 B- 9.37 04/29/09 367,733
3,000 WasteQuip, Inc., Term Loan... B3 NR 11.00 07/15/12 3,015,000
--------------
73,286,090
--------------
EDUCATION & CHILD CARE 0.7%
10,800 Education Management Corp.,
Term Loan.................... B2 B 8.06 06/01/13 10,869,185
--------------
ELECTRONICS 7.4%
8,400 AMI Semiconductor, Inc., Term
Loan (b)..................... Ba3 BB- 6.90 04/01/12 8,421,011
5,318 Amkor Technology, Inc., Term
Loan (b)..................... B2 B- 9.69 10/27/10 5,507,642
4,191 Audio Visual Services Corp.,
Term Loan.................... B1 NR 8.00 05/18/11 4,212,332
4,178 Automata, Inc., Term Loan (a)
(c) (i)...................... NR NR 7.25 to 02/28/03 to 0
10.75 02/28/04
See Notes to Financial Statements 21
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
ELECTRONICS (CONTINUED)
$ 1,194 Blackboard, Inc., Term
Loan......................... Ba3 B+ 7.65 to 02/28/12 $ 1,205,940
9.00%
2,929 DoubleClick, Inc., Term
Loan......................... B2 B 9.13 to 07/13/12 2,969,047
9.17
1,193 Eastman Kodak Co., Term
Loan......................... Ba3 B+ 7.44 to 10/18/12 1,193,336
7.76
2,992 Epicor Software Corp., Term
Loan......................... B1 B+ 7.71 to 03/30/12 3,016,814
9.15
2,000 GXS Worldwide, Inc., Term
Loan......................... B2 B+ 10.26 to 07/29/11 1,985,000
10.49
17,104 ON Semiconductor Corp., Term
Loan......................... B3 B+ 7.75 12/15/11 17,106,790
1,467 Open Solutions, Inc., Term
Loan......................... B1 B+ 7.78 to 09/03/11 to 1,481,335
11.78 11/30/11
15,712 Spectrum Brands, Inc., Term
Loan......................... B2 B- 7.67 to 02/06/12 15,731,323
8.51
600 Stratus Technologies, Inc.,
Term Loan.................... B1 B- 8.50 03/29/11 602,063
40,031 Sungard Data Systems, Inc.,
Term Loan.................... B1 B+ 7.66 02/11/13 40,256,060
16 Sungard Data Systems, Inc.,
Revolving Credit Agreement... B1 B+ 9.75 08/11/11 15,809
9,037 UGS Corp., Term Loan......... B1 B+ 7.40 to 03/31/12 9,046,050
7.49
1,158 Viasystems, Inc., Revolving
Credit Agreement............. B2 NR 11.75 01/31/08 1,141,001
--------------
113,891,553
--------------
ENTERTAINMENT & LEISURE 9.2%
2,962 Alliance Atlantis
Communications, Inc., Term
Loan (b)..................... Ba2 BB 7.00 12/20/11 2,960,648
2,985 AMC Entertainment, Inc., Term
Loan (b)..................... Ba3 B+ 7.53 01/26/13 2,997,889
6,000 Bombardier Capital, Inc.,
Term Loan (b)................ B1 B+ 8.24 06/28/13 5,996,250
2,400 Century Theatres, Inc., Term
Loan......................... Ba3 B+ 7.11 03/01/13 2,405,100
22 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (CONTINUED)
$11,000 Fender Musical Instruments
Corp., Term Loan............. Caa1 B- 7.87 to 03/30/12 to $ 11,075,011
11.12% 09/30/12
43,744 Metro-Goldwyn-Mayer Studios,
Inc., Term Loan.............. NR NR 7.75 04/08/12 43,869,273
4,986 Mets, LP, Term Loan.......... NR NR 7.56 07/25/10 5,041,804
481 Movie Gallery, Inc., Term
Loan......................... Caa1 CCC 10.50 04/27/10 469,135
4,489 Panavision, Inc., Term
Loan......................... B1 B 8.23 to 03/30/11 4,530,832
8.49
7,446 Pure Fishing, Inc., Term
Loan......................... B1 B+ 8.50 to 09/30/10 to 7,469,574
11.31 03/31/11
20,946 Regal Cinemas, Inc., Term
Loan......................... Ba2 BB- 7.07 to 11/10/10 20,859,285
7.25
6,566 Six Flags Theme Parks, Inc.,
Term Loan.................... B1 B- 7.41 to 06/30/09 6,628,612
7.73
1,170 Six Flags Theme Parks, Inc.,
Revolving Credit Agreement... B1 B- 8.10 to 06/30/08 1,155,741
8.15
6,000 Southwest Sports Group, LLC,
Term Loan.................... NR NR 7.80 to 12/22/10 6,003,750
8.00
4,140 Tigers Ballpark, LLC, Term
Loan......................... NR NR 7.13 08/15/10 4,150,350
10,658 True Temper Sports, Inc.,
Term Loan.................... B2 B 3.00 to 03/15/11 10,737,803
10.25
5,880 Universal City Development
Partners, LP, Term Loan...... Ba3 BB- 7.19 to 06/09/11 5,889,190
7.51
--------------
142,240,247
--------------
FARMING & AGRICULTURE 0.8%
998 Nutro Products, Inc., Term
Loan......................... B1 B 7.27 04/26/13 998,747
10,462 Wm. Bolthouse Farms, Inc.,
Term Loan (b)................ B2 B+ 7.81 to 12/16/12 to 10,580,634
11.00 12/16/13
--------------
11,579,381
--------------
See Notes to Financial Statements 23
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
FINANCE 4.8%
$11,970 Ameritrade Holding Corp.,
Term Loan (b)................ Ba1 BB 6.90% 12/31/12 $ 11,955,038
3,121 DCS Business Services, Inc.,
Term Loan.................... NR NR 9.40 to 02/04/11 to 3,113,211
10.89 08/04/11
18,029 Fidelity National Information
Solutions, Inc., Term Loan... Ba1 BB+ 7.10 03/09/13 18,052,494
3,591 iPayment, Inc., Term Loan.... B2 B 7.61 to 05/10/13 3,591,000
7.75
5,970 LPL Holdings, Inc., Term
Loan......................... B2 B 8.13 to 06/28/13 6,040,894
8.75
8,575 Outsourcing Solutions, Inc.,
Term Loan.................... NR NR 9.90 09/30/10 8,596,930
11,526 Refco Finance Holdings, LLC,
Term Loan (a) (c)............ B1 BB- 9.00 to 08/05/11 12,140,716
9.50
10,579 Transfirst Holdings, Inc.,
Term Loan.................... NR NR 8.50 to 03/31/10 to 10,716,358
13.00 03/31/11
--------------
74,206,641
--------------
GROCERY 1.8%
11,947 Roundy's Supermarkets, Inc.,
Term Loan.................... B2 B+ 8.17 to 11/03/11 12,071,938
8.29
14,963 Supervalu, Inc., Term Loan... NR NR 7.06 06/02/12 14,929,253
--------------
27,001,191
--------------
HEALTH & BEAUTY 2.5%
15,168 Bare Escentuals Beauty, Inc.,
Term Loan (b)................ B3 CCC 8.19 to 02/18/12 to 15,281,897
12.43 02/18/13
3,635 CEI Holdings, Inc., Term
Loan......................... NR NR 8.88 to 12/03/10 to 3,644,362
13.31 12/03/11
4,613 Marietta Intermediate Holding
Corp., Term Loan............. NR NR 8.69 to 12/17/10 to 4,510,661
13.50 12/17/11
15,629 Prestige Brands Holdings,
Inc., Term Loan.............. B1 B+ 7.23 to 04/06/11 15,680,898
9.50
--------------
39,117,818
--------------
HEALTHCARE 8.7%
1,197 Ameripath, Inc., Term Loan
(b).......................... B1 BB- 7.39 10/31/12 1,196,850
4,874 AMN Healthcare Services,
Inc., Term Loan.............. Ba2 BB- 7.50 11/02/11 4,895,495
24 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
$ 2,736 Angiotech Pharmaceuticals,
Inc., Term Loan.............. Ba3 BB- 6.93 to 03/23/13 $ 2,703,381
7.00%
10,776 Capella Healthcare, Inc.,
Term Loan.................... B3 CCC 8.24 to 11/30/12 to 10,838,835
11.24 11/30/13
3,630 Center For Diagnostic Imaging
(CDI), Term Loan............. B2 B 9.00 12/31/10 3,357,501
31,028 Community Health Systems,
Inc., Term Loan.............. Ba3 BB- 6.97 08/19/11 31,071,769
7,273 Concentra Operating Corp.,
Term Loan.................... B1 B+ 7.50 09/30/11 7,293,306
1,197 CRC Health Corp., Term Loan.. B1 B 7.75 02/06/13 1,195,504
987 Diagnostic Imaging Group,
LLC, Term Loan............... B2 B+ 8.38 to 05/04/12 950,469
10.75
6,219 FHC Health Systems, Inc.,
Term Loan.................... B2 B 11.23 to 12/18/09 6,436,960
13.23
1,085 Genoa Healthcare Group, Term
Loan......................... B2 B 8.61 to 08/10/12 1,096,831
10.50
598 Golden Gate National Senior
Care Holdings, LLC, Term
Loan......................... B1 B+ 7.96 to 03/14/11 602,241
8.25
2,906 Harlan Sprague Dawley, Inc.,
Term Loan.................... B2 B+ 8.00 to 12/19/11 2,924,414
9.75
43,118 LifePoint Hospitals, Inc.,
Term Loan.................... Ba3 BB 7.13 04/15/12 42,995,096
583 Matria Healthcare, Inc., Term
Loan......................... B1 BB- 7.44 to 01/19/07 to 579,982
7.75 01/19/12
7,305 Multiplan, Inc., Term Loan... B2 B+ 7.50 04/12/13 7,277,386
4,200 National Renal Institutes,
Inc., Term Loan.............. NR NR 7.42 to 03/31/13 4,200,000
7.53
3,541 Sterigenics International,
Inc., Term Loan.............. B2 B+ 8.33 to 06/14/11 3,549,433
10.25
600 US Oncology, Inc., Term
Loan......................... Ba3 B+ 7.94 08/20/11 602,813
--------------
133,768,266
--------------
See Notes to Financial Statements 25
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
HOME & OFFICE FURNISHINGS, HOUSEWARES & DURABLE
CONSUMER PRODUCTS 2.0%
$ 2,992 Formica Corp., Term Loan..... B2 B 8.17 to 03/15/13 $ 3,001,852
8.50%
3,683 Hunter Fan Co., Term Loan.... B1 B 7.76 03/24/12 3,678,729
11,100 National Bedding Co., Term
Loan......................... B3 B+ 10.49 08/31/12 11,301,188
5,393 Quality Home Brands Holdings,
LLC, Term Loan............... B2 B 7.96 to 12/20/12 to 5,439,626
11.94 06/20/13
6,866 Sealy Mattress Co., Term
Loan......................... Ba3 BB- 6.98 to 04/06/12 6,877,740
8.75
--------------
30,299,135
--------------
HOTELS, MOTELS, INNS & GAMING 9.4%
1,417 Alliance Gaming Corp., Term
Loan (b)..................... NR B 9.33 09/04/09 1,422,247
9,400 Greektown Casino, LLC, Term
Loan......................... B1 B 8.00 12/03/12 9,447,000
4,888 Green Valley Ranch Gaming,
LLC, Term Loan............... NR NR 7.25 12/17/11 4,894,173
4,147 Herbst Gaming, Inc., Term
Loan......................... B1 B+ 7.11 to 01/31/11 4,155,277
7.50
4,823 Interstate Operating Co., LP,
Term Loan.................... B2 B 9.94 01/14/08 4,871,074
7,729 Kuilima Resort Co., Term
Loan......................... NR NR 11.90 09/30/11 7,284,862
15,021 MGM Mirage, Revolving Credit
Agreement.................... NR NR 6.28 to 04/25/10 14,611,116
8.75
7,339 MGM Mirage, Term Loan........ NR NR 6.28 to 04/25/10 7,325,525
8.75
600 Pinnacle Entertainment, Term
Loan......................... B1 BB- 7.40 12/14/11 601,969
118 Planet Hollywood
International, Inc., Term
Loan (g)..................... B3 B- 8.51 to 08/31/10 114,512
8.99
44,287 Planet Hollywood
International, Inc., Term
Loan......................... B3 B- 8.51 to 08/31/10 42,880,604
8.99
5,494 Resorts International Hotel &
Casino, Inc., Term Loan...... Caa1 CCC- 16.50 04/26/13 5,721,846
26 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
$ 175 Resorts International Hotel &
Casino, Inc., Revolving
Credit Agreement............. Caa1 CCC- 8.25 to 04/26/10 $ 172,787
8.37%
1,746 Scientific Games Corp., Term
Loan......................... Ba2 BB 6.65 12/23/09 1,747,262
753 Scientific Games Corp.,
Revolving Credit Agreement... Ba2 BB 7.15 to 12/23/09 749,235
9.00
13,200 Venetian Casino Resorts, LLC,
Term Loan.................... Ba3 BB- 7.25 06/15/11 13,201,030
2,890 Venetian Casino Resorts, LLC,
Revolving Credit Agreement... Ba3 BB- 7.09 to 02/22/10 2,832,513
7.25
2,000 Wembley, Inc., Term Loan..... B1 B+ 6.99 08/23/11 to 2,000,625
07/18/12
17,338 Wynn Las Vegas, LLC, Term
Loan......................... B2 B+ 7.55 12/14/11 17,370,008
3,079 Yonkers Racing Corp., Term
Loan......................... NR NR 8.89 08/12/11 3,105,763
--------------
144,509,428
--------------
INSURANCE 3.3%
4,182 American Wholesale Insurance
Group, Inc., Term Loan....... NR B 8.40 to 10/27/11 to 4,192,455
12.75 04/27/12
8,976 ARG Holdings, LLC, Term
Loan......................... B2 NR 8.50 to 11/30/11 to 9,053,925
12.75 11/30/12
3,000 Audatex North America, Inc.,
Term Loan (b)................ B1 B+ 7.75 04/13/13 3,015,000
3,840 CCC Information Services
Group, Inc., Term Loan....... NR NR 8.00 02/10/13 3,859,999
7,102 Conseco, Inc., Term Loan..... Ba3 BB- 7.12 06/22/10 7,117,910
3,591 Hilb, Rogal & Hobbs Co., Term
Loan......................... Ba2 BB 7.00 04/26/13 3,593,991
1,708 Mitchell International, Inc.,
Term Loan.................... B1 B+ 7.50 08/15/11 1,715,251
11,314 USI Holdings Corp., Term
Loan......................... B1 NR 7.75 03/24/11 11,399,346
6,933 Vertafore, Inc., Term Loan... NR NR 7.73 to 01/31/12 to 7,021,664
11.23 01/31/13
--------------
50,969,541
--------------
See Notes to Financial Statements 27
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
MACHINERY 1.2%
$ 7,166 Alliance Laundry Holdings,
LLC, Term Loan (b)........... B1 B 7.60 to 01/27/12 $ 7,195,278
9.50%
3,117 Douglas Dynamics, LLC, Term
Loan......................... B1 BB- 7.25 12/16/10 3,125,290
6,016 Goodman Global Holdings,
Inc., Term Loan.............. B1 B+ 6.94 12/23/11 6,008,990
2,444 United Rentals (North
America), Inc., Term Loan.... B2 BB- 7.40 02/14/11 2,450,732
--------------
18,780,290
--------------
MEDICAL PRODUCTS & SERVICES 3.2%
2,388 Accellent, Inc., Term Loan
(b).......................... B2 BB- 7.23 11/22/12 2,385,512
3,890 AGA Medical Corp., Term
Loan......................... B2 B+ 7.38 04/28/13 3,896,330
5,486 Conmed Corp., Term Loan...... Ba2 BB- 7.14 to 04/12/13 5,506,823
9.00
21,205 DaVita, Inc., Term Loan...... B1 BB- 7.11 to 10/05/12 21,273,040
7.69
2,793 DJ Orthopedics, LLC, Term
Loan......................... Ba3 BB- 6.94 to 04/07/13 2,782,526
7.06
8,977 Fresenius Medical Care
Holding, Inc., Term Loan..... NR BB+ 6.78 to 03/31/13 8,909,549
6.87
1,259 Kinetics Concepts, Inc., Term
Loan......................... Ba3 BB 7.25 08/11/10 1,267,063
2,940 VWR International, Inc., Term
Loan......................... B2 B+ 7.34 04/07/11 2,950,703
--------------
48,971,546
--------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 0.9%
4,966 New Enterprise Stone & Lime
Co., Inc., Term Loan......... NR NR 7.72 to 07/30/10 4,990,964
9.50
7,418 Novelis, Inc., Term Loan..... Ba2 BB- 6.88 to 01/07/12 7,468,527
7.38
2,078 Techs Industries, Inc., Term
Loan......................... NR NR 9.50 01/14/10 2,080,827
--------------
14,540,318
--------------
NATURAL RESOURCES 2.7%
4,200 CDX Funding, LLC, Term Loan.. NR NR 10.75 03/31/13 4,263,000
595 Cheniere LNG Holdings, LLC,
Term Loan.................... NR BB 8.25 08/30/12 600,897
28 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
NATURAL RESOURCES (CONTINUED)
$ 2,388 Key Energy Services Group,
Inc., Term Loan.............. NR NR 8.40 to 06/30/12 $ 2,399,443
8.90%
7,977 LYONDELL-CITGO Refining, LP,
Term Loan.................... NR NR 7.50 05/21/07 7,997,143
2,542 SemCrude, LP, Term Loan...... Ba3 NR 7.58 to 03/16/11 2,553,272
9.00
24,373 Targa Resources, Inc., Term
Loan......................... Ba3 B+ 7.23 to 10/31/07 to 24,411,333
7.75 10/31/12
--------------
42,225,088
--------------
NON-DURABLE CONSUMER PRODUCTS 2.0%
13,188 Aearo Technologies, Inc.,
Term Loan (b)................ B2 CCC 7.96 to 03/22/13 to 13,384,474
11.96 09/24/13
3,894 Amscan Holdings, Inc., Term
Loan (b)..................... B1 B+ 8.19 to 12/23/12 3,906,979
8.30
4,489 Easton-Bell Sports, Inc.,
Term Loan.................... B1 B+ 6.81 to 03/16/12 4,496,233
6.94
2,640 JohnsonDiversey, Inc., Term
Loan......................... B1 B 7.63 12/16/11 2,660,352
1,782 Mega Bloks, Inc. (Canada),
Term Loan.................... Ba3 BB- 6.94 to 07/26/12 1,781,444
7.25
2,200 Targus Group International,
Inc., Term Loan.............. B3 CCC 12.80 05/22/13 2,131,250
2,993 UCG Paper Crafts, Inc., Term
Loan......................... NR NR 8.65 02/17/13 2,999,981
--------------
31,360,713
--------------
PAPER & FOREST PRODUCTS 4.2%
51,514 Georgia-Pacific Corp., Term
Loan......................... Ba2 BB- 7.30 to 12/20/12 to 51,645,383
8.30 12/20/13
774 New Page Corp., Term Loan.... B1 B 8.50 05/02/11 779,921
5,702 White Birch Paper Co.
(Canada), Term Loan.......... B2 B+ 8.75 04/06/12 5,781,899
5,854 Xerium Technologies, Inc.,
Term Loan.................... B1 B+ 7.75 05/18/12 5,836,033
--------------
64,043,236
--------------
See Notes to Financial Statements 29
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
PERSONAL & MISCELLANEOUS SERVICES 5.7%
$12,559 Affinion Group, Inc., Term
Loan (b)..................... B1 B+ 7.92 to 10/17/12 $ 12,633,457
8.12%
1,782 Alderwoods Group, Inc., Term
Loan (b)..................... Ba3 BB 7.37 to 09/29/09 1,784,568
7.40
288 Alderwoods Group, Inc.,
Revolving Credit Agreement... Ba3 BB 10.00 09/29/08 284,040
10,179 Coinmach Laundry Corp., Term
Loan......................... B2 B 7.69 to 12/19/12 10,264,246
7.88
4,047 Educate Operating Co., LLC,
Term Loan.................... B1 NR 8.50 03/31/12 4,067,652
32,183 Hertz Corp., Term Loan....... Ba2 BB 7.41 to 12/21/12 32,379,257
7.69
11,028 Iron Mountain, Inc., Term
Loan......................... Ba3 BB- 7.00 to 04/02/11 11,058,465
7.13
1,809 Omniflight Helicopters, Inc.,
Term Loan.................... NR NR 12.25 to 09/30/11 to 1,813,147
12.75 09/30/12
5,031 Sedgewick Claims Management
Services, Inc., Term Loan.... B1 B+ 7.43 to 01/31/13 5,023,590
7.50
3,884 Stewart Enterprises, Inc.,
Term Loan.................... Ba3 BB 6.66 to 11/19/11 3,893,238
7.33
4,647 Weightwatchers.com, Term
Loan......................... B1 B+ 7.62 to 12/16/10 to 4,678,378
10.36 06/16/11
--------------
87,880,038
--------------
PHARMACEUTICALS 1.9%
3,330 Bradley Pharmaceuticals,
Inc., Term Loan.............. NR NR 9.18 to 11/14/10 3,367,462
11.25
26,519 Warner Chilcott Holding Co.,
Term Loan.................... B2 B 7.61 to 01/18/12 26,581,359
8.00
--------------
29,948,821
--------------
PRINTING & PUBLISHING 10.7%
5,657 Adams Outdoor Advertising,
LP, Term Loan (b)............ B1 B+ 6.96 to 10/18/12 5,669,771
7.27
4,027 ALM Media Holdings, Inc.,
Term Loan.................... B3 B- 8.00 03/05/10 4,025,358
30 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (CONTINUED)
$ 4,950 American Media Operations,
Inc., Term Loan (b).......... B1 B 8.12% 01/31/13 $ 4,995,169
7,607 American Reprographics Co.,
Term Loan (b)................ Ba3 BB- 7.14 to 06/18/09 7,616,779
9.00
1,755 Ascend Media Holdings, LLC,
Term Loan.................... NR NR 8.62 to 01/31/12 1,704,544
9.00
6,672 Canon Communications, LLC,
Term Loan.................... B3 B 8.50 to 05/31/11 6,688,458
8.62
598 Caribe Information
Investment, Inc., Term
Loan......................... B1 B 7.42 to 03/31/13 599,248
7.46
9,825 Cygnus Business Media, Inc.,
Term Loan.................... B3 CCC 10.01 07/13/09 9,775,875
14,135 Day International Group,
Inc., Term Loan.............. B1 B 8.12 to 12/05/12 to 14,323,798
12.87 12/05/13
2,740 Dex Media East, LLC, Term
Loan......................... Ba2 BB 6.66 to 05/08/09 2,728,332
7.00
18,923 Dex Media West, LLC, Term
Loan......................... Ba2 BB 6.67 to 03/09/10 18,839,594
7.00
2,312 FSC Acquisition, LLC, Term
Loan......................... B2 B 7.42 to 08/01/12 2,314,317
7.60
5,400 Gatehouse Media, Inc., Term
Loan......................... B1 BB- 7.39 12/06/13 5,394,940
10,187 Haights Cross Communications,
LLC, Term Loan............... B3 B- 8.67 to 08/20/08 10,284,577
9.67
3,664 MC Communications, LLC, Term
Loan......................... NR NR 7.44 12/31/10 3,684,334
2,086 MediaNews Group, Inc., Term
Loan......................... Ba3 BB- 6.65 to 12/30/10 2,083,111
8.50
9,707 Merrill Communications, LLC,
Term Loan.................... B1 B+ 7.65 to 05/15/11 9,757,270
7.75
2,836 Network Communications, Inc.,
Term Loan.................... Ba3 B+ 7.28 to 11/30/12 2,849,929
8.12
See Notes to Financial Statements 31
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (CONTINUED)
$12,707 New Publications, Inc., Term
Loan......................... NR B 8.16 to 02/05/13 $ 12,763,920
12.76%
10,098 Primedia, Inc., Term Loan.... NR NR 7.88 09/30/13 9,970,513
814 Primedia, Inc., Revolving
Credit Agreement............. NR NR 7.88 06/30/08 781,986
21,537 R.H. Donnelley, Inc., Term
Loan......................... Ba3 BB 6.46 to 12/31/09 to 21,399,478
7.01 06/30/11
2,806 Source Media, Inc., Term
Loan......................... B1 NR 7.68 11/08/11 2,810,934
2,209 SGS International, Inc., Term
Loan......................... B1 B+ 7.64 to 12/30/11 2,217,183
8.12
1,500 Thomas Nelson Publishers,
Inc., Term Loan.............. B1 B 7.61 to 06/12/12 1,508,438
7.75
--------------
164,787,856
--------------
RESTAURANTS & FOOD SERVICE 3.7%
5,505 Arby's, LLC, Term Loan (b)... B1 B+ 7.74 to 07/25/12 5,507,956
7.75
12,504 Burger King Corp., Term Loan
(b).......................... Ba2 B+ 7.00 06/30/12 12,473,792
6,355 Carrols Corp., Term Loan
(b).......................... B1 B+ 8.00 12/31/10 6,399,892
10,506 CBRL Group, Inc., Term
Loan......................... Ba2 BB 6.63 04/27/13 10,457,519
4,164 Denny's Corp., Term Loan..... B2 B 8.19 to 09/30/09 to 4,201,115
10.75 09/30/10
2,873 Landry's Restaurants, Inc.,
Term Loan.................... Ba2 BB- 6.86 12/28/10 2,876,929
3,750 NPC International, Term
Loan......................... B1 B+ 6.88 to 05/03/13 3,727,736
9.00
9,000 Quiznos, LLC, Term Loan...... Caa1 B 7.75 to 05/05/13 to 9,018,376
11.25 11/05/13
2,496 Sagittarius Restaurants, LLC,
Term Loan.................... B1 B 7.75 03/29/13 2,493,130
--------------
57,156,445
--------------
RETAIL--OFFICE PRODUCTS 0.2%
3,553 Buhrmann US, Inc., Term Loan
(b).......................... Ba3 BB- 6.88 to 12/23/10 3,562,130
7.15
--------------
32 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
RETAIL--OIL & GAS 1.0%
$ 5,672 The Pantry, Inc., Term
Loan......................... Ba3 BB 7.15% 01/02/12 $ 5,683,909
10,448 Travelcenters of America,
Inc., Term Loan.............. B1 BB 6.86 to 12/01/11 10,456,642
7.25
--------------
16,140,551
--------------
RETAIL--SPECIALTY 1.7%
15,616 Nebraska Book Co., Inc., Term
Loan......................... B2 B- 7.74 03/04/11 15,693,875
11,102 Visant Holding Corp., Term
Loan......................... B1 B+ 7.07 10/04/11 11,168,854
--------------
26,862,729
--------------
RETAIL--STORES 1.3%
18,513 Neiman Marcus Group, Inc.,
Term Loan.................... B1 B+ 7.77 04/06/13 18,684,678
1,197 Pep Boys--Manny, Moe & Jack,
Term Loan.................... Ba2 B+ 8.21 01/27/11 1,206,726
--------------
19,891,404
--------------
TELECOMMUNICATIONS--EQUIPMENT & SERVICES 0.4%
6,000 Level 3 Communications, Inc.,
Term Loan.................... B3 B- 8.41 12/01/11 6,010,002
--------------
TELECOMMUNICATIONS--LOCAL EXCHANGE CARRIERS 2.2%
600 Alaska Communications Systems
Group, Inc., Term Loan (b)... B1 B+ 7.25 02/01/12 600,000
4,165 Cincinnati Bell, Inc., Term
Loan......................... Ba3 B+ 6.66 to 08/31/12 4,155,101
6.93
9,800 Fairpoint Communications,
Inc., Term Loan.............. B1 BB- 7.25 02/08/12 9,757,125
4,092 Hawaiian Telcom, Inc., Term
Loan......................... B1 B 7.75 04/30/12 to 4,111,802
10/31/12
1,712 Orius Corp., LLC, Term Loan
(c) (i)...................... NR NR 12.00 01/23/09 to 358,032
01/23/10
618 Orius Corp., LLC, Revolving
Credit Agreement (c) (i)..... NR NR 4.00 to 01/31/06 531,357
10.75
13,425 Qwest Corp., Term Loan....... Ba3 BB 12.00 06/30/07 13,665,214
1,150 Sorenson Communications,
Inc., Term Loan.............. NR NR 8.11 11/15/12 1,154,659
--------------
34,333,290
--------------
See Notes to Financial Statements 33
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--LONG DISTANCE 0.2%
$ 3,582 Time Warner Telecom, Inc.,
Term Loan.................... B1 B 7.82 to 11/30/12 $ 3,608,865
8.00%
--------------
3,540 Cellular South, Inc., Term 3,548,728
Loan......................... NR NR 7.24 to 05/04/11
8.75
11,917 Centennial Cellular, Inc., 11,973,056
Term Loan.................... B1 B 7.23 to 02/09/11
7.75
1,800 Cricket Communications, Inc., 1,815,413
Term Loan.................... B2 B 8.25 06/16/13
3,636 Nextel Partners, Inc., Term 3,640,153
Loan......................... Ba1 A 6.85 05/31/12
--------------
20,977,350
--------------
TEXTILES & LEATHER 1.0%
1,995 Malden Mills Industries,
Inc., Term Loan (a).......... NR NR 10.00 10/01/08 0
8,064 Propex Fabrics, Inc., Term
Loan......................... B1 BB- 7.76 07/31/12 8,074,537
6,933 The William Carter Co., Term
Loan......................... B1 BB 6.76 to 07/14/12 6,923,861
6.99
--------------
14,998,398
--------------
TRANSPORTATION--CARGO 0.7%
4,160 Jacobson Acquisition Co.,
Term Loan.................... NR NR 10.00 to 04/07/09 to 4,169,911
10.75 04/07/11
1,194 Kenan Advantage Group, Inc.,
Term Loan.................... NR NR 8.50 12/16/11 1,201,462
2,452 Pacer International, Inc.,
Term Loan.................... Ba3 BB 6.81 to 06/10/10 2,445,636
8.75
2,912 Quality Distribution, Inc.,
Term Loan.................... B2 B- 8.39 to 11/13/09 2,926,160
8.40
510 Quality Distribution, Inc.,
Revolving Credit Agreement... B2 B- 8.85 to 11/13/08 507,450
10.75
--------------
11,250,619
--------------
34 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
BANK LOAN
PRINCIPAL RATINGS+
AMOUNT -------------- STATED
(000) BORROWER MOODY'S S&P COUPON MATURITY* VALUE
------------------------------------------------------------------------------------------------
TRANSPORTATION--PERSONAL 0.8%
$ 934 Neoplan USA Corp., Revolving
Credit Agreement (d) (j)
(m).......................... NR NR 8.54% 06/30/06 $ 873,056
6,000 United Airlines, Inc., Term
Loan......................... B1 B+ 8.63 to 02/01/12 6,075,624
9.19
4,800 US Airways Group, Inc., Term
Loan......................... B2 B 9.00 03/31/11 4,831,800
--------------
11,780,480
--------------
TRANSPORTATION--RAIL MANUFACTURING 0.8%
12,108 Helm Holding Corp., Term
Loan......................... NR NR 7.66 to 07/08/11 to 12,207,231
11.66 07/08/12
--------------
UTILITIES 3.0%
4,498 Astoria Generating Co., LP,
Term Loan (b)................ B1 BB- 7.38 to 02/23/13 to 4,523,478
9.20 08/23/13
1,928 Midwest Generation, LLC, Term
Loan......................... Ba3 BB- 7.24 to 04/27/11 1,932,418
7.31
5,970 Mirant North America, LLC,
Term Loan.................... B1 BB- 7.15 01/03/13 5,940,150
17,973 NRG Energy, Inc., Term Loan.. Ba2 BB- 7.23 02/01/13 18,045,091
6,300 Primary Energy Operating,
LLC, Term Loan............... NR NR 7.98 08/24/09 6,320,998
2,602 Reliant Energy Resources
Corp., Term Loan............. B2 B 7.78 04/30/10 2,604,920
1,606 Reliant Energy Resources
Corp., Revolving Credit
Agreement.................... B2 B 8.28 to 12/22/09 1,583,400
10.13
5,615 Thermal North America, Inc.,
Term Loan.................... Ba3 BB- 7.25 10/12/13 5,607,658
--------------
46,558,113
--------------
2,756,377,522
TOTAL VARIABLE RATE** SENIOR LOAN INTERESTS 178.7%.............................
--------------
DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
NOTES 2.3%
Boise Cascade LLC, ($3,700,000 par, 8.38% coupon, maturing 10/15/12) (h)..... $ 3,718,500
Builders FirstSource, Inc. ($8,700,000 par, 9.42% coupon, maturing 02/15/12)
(h)........................................................................ 8,874,000
See Notes to Financial Statements 35
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
Compression Polymers Corp. ($2,700,000 par, 12.39% coupon, maturing 07/01/12)
(h)........................................................................ $ 2,767,500
Del Laboratories, Inc. ($5,400,000 par, 10.15% coupon, maturing 11/01/11)
(h)........................................................................ 5,616,000
Qwest Corp. ($3,500,000 par, 8.58% coupon, maturing 06/15/13) (h)............ 3,762,500
Rogers Wireless Communications, Inc. ($9,000,000 par, 8.45% coupon, maturing
12/15/10) (Canada) (h)..................................................... 9,270,000
Verso Paper Holding LLC ($1,500,000 par, 9.24% coupon, maturing 08/01/14) (h)
(k) (l).................................................................... 1,500,000
--------------
TOTAL NOTES 2.3%............................................................ 35,508,500
--------------
EQUITIES 0.0%
Aladdin Gaming Holdings, LLC (7.84% Ownership Interest, Acquired 09/30/04,
Cost $304,135) (e) (f)..................................................... 27,104
Comdisco Holding Co., Inc. (134 common shares) (e)........................... 2,047
Comdisco Holding Co., Inc. (63 common shares, Acquired 03/02/05, Cost $32)
(e) (f).................................................................... 963
Environmental Systems Products Holdings, Inc. (3,275 common shares, Acquired
06/22/04, Cost $0) (e) (f)................................................. 83,971
IDT Corp. (22,898 common shares) (e)......................................... 306,375
London Clubs International (Warrants for 141,982 common shares, Acquired
10/15/04, Cost $260,912) (e) (f)........................................... 255,940
Malden Mills Industries (263,436 common shares, Acquired 10/29/03, Cost $0)
(e) (f).................................................................... 0
Malden Mills Industries (860,902 preferred shares, Acquired 10/29/03, Cost
$0) (e) (f)................................................................ 0
Neoplan USA Corp. (2,262 preferred shares, Acquired 09/04/03, Cost
$1,074,521) (d) (e) (f) (m)................................................ 0
Neoplan USA Corp. (8,517 common shares, Acquired 09/04/03, Cost $85) (d) (e)
(f) (m).................................................................... 0
Orius Corp. (315,080 common shares, Acquired 02/03/03, Cost $0) (c) (e)
(f)........................................................................ 0
Planet Hollywood International, Inc. (Warrants for 89,674 common shares,
Acquired 09/03/04 & 07/22/05, Cost $0) (e) (f)............................. 0
Railworks Corp. (Warrants for 865 common shares, Acquired 02/10/03, Cost $0)
(e) (f).................................................................... 0
Rotech Medical Corp. (48,485 common shares, Acquired 06/12/02, Cost $193,940)
(e) (f).................................................................... 0
Safelite Glass Corp. (421,447 common shares, Acquired 10/20/00, Cost
$1,714,995) (e) (f)........................................................ 0
Safelite Realty (28,448 common shares, Acquired 10/26/00, Cost $0) (e) (f)... 0
--------------
TOTAL EQUITIES............................................................... 676,400
--------------
TOTAL LONG-TERM INVESTMENTS 181.0%
(Cost $2,805,185,567)...................................................... 2,792,562,422
--------------
36 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 3.2%
REPURCHASE AGREEMENT 1.2%
State Street Bank & Trust Corp. ($19,000,000 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.12%,
dated 07/31/06, to be sold on 08/01/06 at $19,002,702) (b)................. $ 19,000,000
TIME DEPOSIT 2.0%
State Street Bank & Trust Corp. ($31,108,536 par, 4.05% coupon, dated
07/31/06, to be sold on 08/01/06 at $31,112,036) (b)....................... 31,108,536
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $50,108,536)......................................................... 50,108,536
--------------
TOTAL INVESTMENTS 184.2%
(Cost $2,855,294,103)...................................................... 2,842,670,958
BORROWINGS (36.1%).......................................................... (557,000,000)
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (45.4%).................. (700,452,586)
LIABILITIES IN EXCESS OF OTHER ASSETS (2.7%)................................ (42,337,292)
--------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%............................... $1,542,881,080
==============
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. Bank
loan ratings are unaudited.
Industry percentages are calculated as a percentage of net assets
applicable to common shares.
(a) This Senior Loan interest is non-income producing.
(b) A portion of this security is designated in connection with unfunded
commitments.
(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 or warrant currently does not
declare dividends.
(f) Restricted Security. Securities were acquired through the restructuring of
senior loans. These securities are restricted as they are not allowed to be
deposited via the Depository Trust Company. If at a later point in time,
the company wishes to register, the issuer will bear the costs associated
with registration. The aggregate value of restricted securities represents
0.02% of the net assets applicable to common shares of the Trust.
(g) Payment-in-kind security.
(h) Variable rate security. Interest rate shown is that in effect at July 31,
2006.
(i) This borrower is currently in liquidation.
See Notes to Financial Statements 37
VAN KAMPEN SENIOR INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JULY 31, 2006 continued
(j) The borrower is in the process of restructuring or amending the terms of
this loan.
(k) 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 those
transactions with qualified institutional buyers.
(l) Security purchased on a when-issued or delayed delivery basis.
(m) Subsequent to July 31, 2006, this borrower has filed for protection in
federal bankruptcy court.
* Senior Loans in the Trust's portfolio generally are subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment
conditions and because there may be significant economic incentives for a
Borrower to prepay, prepayments of Senior Loans in the Trust's portfolio
may occur. As a result, the actual remaining maturity of Senior Loans held
in the Trust's portfolio may be substantially less than the stated
maturities shown. Although the Trust is unable to accurately estimate the
actual remaining maturity of individual Senior Loans, the Trust estimates
that the actual average maturity of the Senior Loans held in its portfolio
will be approximately 18-24 months.
** Senior Loans in which the Trust invests generally pay interest at rates
which are periodically redetermined by reference to a base lending rate
plus a premium. These base lending rates are generally (i) the lending rate
offered by one or more major European banks, such as the London Inter-Bank
Offered Rate ("LIBOR"), (ii) the prime rate offered by one or more major
United States banks and (iii) the certificate of deposit rate. Senior Loans
are generally considered to be restricted in that the Trust ordinarily is
contractually obligated to receive approval from the Agent Bank and/or
Borrower prior to the disposition of a Senior Loan.
38 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
July 31, 2006
ASSETS:
Investments in Unaffiliated Securities (Cost
$2,853,285,747)........................................... $2,841,797,902
Investments in Affiliated Securities (Cost $2,008,356)...... 873,056
--------------
Total Investments (Cost $2,855,294,103)................... 2,842,670,958
Receivables:
Interest and Fees......................................... 20,324,811
Investments Sold.......................................... 5,408,250
Other....................................................... 289,583
--------------
Total Assets............................................ 2,868,693,602
--------------
LIABILITIES:
Payables:
Borrowings................................................ 557,000,000
Investments Purchased..................................... 59,302,056
Investment Advisory Fee................................... 2,022,750
Administrative Fee........................................ 475,941
Distributor and Other Affiliates.......................... 156,530
Income Distributions--Common Shares....................... 150,869
Accrued Interest Expense.................................... 2,557,220
Unfunded Commitments........................................ 2,329,699
Accrued Expenses............................................ 842,265
Trustees' Deferred Compensation and Retirement Plans........ 522,606
--------------
Total Liabilities....................................... 625,359,936
Preferred Shares (including accrued distributions).......... 700,452,586
--------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $1,542,881,080
==============
NET ASSET VALUE PER COMMON SHARE ($1,542,881,080 divided by
180,010,000 shares outstanding)........................... $ 8.57
==============
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............................................. 1,788,748,292
Accumulated Undistributed Net Investment Income............. 4,835,073
Net Unrealized Depreciation................................. (14,952,844)
Accumulated Net Realized Loss............................... (237,549,541)
--------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $1,542,881,080
==============
PREFERRED SHARES ($.01 par value, authorized 28,000 shares,
28,000 issued with liquidation preference of $25,000 per
share).................................................... $ 700,000,000
==============
NET ASSETS INCLUDING PREFERRED SHARES....................... $2,242,881,080
==============
See Notes to Financial Statements 39
VAN KAMPEN SENIOR INCOME TRUST
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended July 31, 2006
INVESTMENT INCOME:
Interest from Unaffiliated Securities....................... $200,185,110
Interest from Affiliated Securities......................... 82,020
Dividends................................................... 11,134
Other....................................................... 3,862,404
------------
Total Income.......................................... 204,140,668
------------
EXPENSES:
Investment Advisory Fee..................................... 23,983,804
Administrative Fee.......................................... 5,643,248
Credit Line................................................. 2,176,496
Preferred Share Maintenance................................. 1,821,794
Custody..................................................... 666,705
Legal....................................................... 636,862
Trustees' Fees and Related Expenses......................... 116,543
Other....................................................... 967,579
------------
Total Operating Expense............................... 36,013,031
------------
Interest Expense...................................... 25,343,917
Total Expense......................................... 61,356,948
------------
NET INVESTMENT INCOME....................................... $142,783,720
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Loss on Affiliated Securities...................... $ (1,779,547)
Realized Loss on Unaffiliated Securities.................... (7,718,194)
------------
(9,497,741)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (5,150,495)
------------
End of the Period:
Investments............................................. (12,623,145)
Unfunded Commitments.................................... (2,329,699)
------------
(14,952,844)
------------
Net Unrealized Depreciation During the Period............... (9,802,349)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(19,300,090)
============
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(30,129,890)
============
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 93,353,740
============
40 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JULY 31, 2006 JULY 31, 2005
--------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 142,783,720 $ 107,008,212
Net Realized Loss....................................... (9,497,741) (228,737)
Net Unrealized Appreciation/Depreciation During the
Period................................................ (9,802,349) 2,818,009
Distributions to Preferred Shareholders:
Net Investment Income................................. (30,129,890) (17,534,408)
-------------- --------------
Change in Net Assets Applicable to Common Shares from
Operations............................................ 93,353,740 92,063,076
Distributions to Common Shareholders:
Net Investment Income................................. (111,174,162) (85,468,577)
-------------- --------------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM INVESTMENT ACTIVITIES............................ (17,820,422) 6,594,499
FROM CAPITAL TRANSACTIONS:
Offering Costs on Preferred Shares...................... -0- (1,764)
-------------- --------------
TOTAL INCREASE/DECREASE IN NET ASSETS APPLICABLE TO
COMMON SHARES......................................... (17,820,422) 6,592,735
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period................................. 1,560,701,502 1,554,108,767
-------------- --------------
End of the Period (Including accumulated undistributed
net investment income of $4,835,073 and $4,136,318,
respectively)......................................... $1,542,881,080 $1,560,701,502
============== ==============
See Notes to Financial Statements 41
VAN KAMPEN SENIOR INCOME TRUST
FINANCIAL STATEMENTS continued
Statement of Cash Flows
For the Year Ended July 31, 2006
CHANGE IN NET ASSETS FROM OPERATIONS (INCLUDING PREFERRED
SHARE DISTRIBUTIONS)...................................... $ 93,353,740
-------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Provided by Operating Activities:
Increase in Investments at Value.......................... (4,514,521)
Increase in Interest and Fees Receivables................. (6,719,453)
Decrease in Receivable for Investments Sold............... 9,238,040
Increase in Other Assets.................................. (117,294)
Increase in Investment Advisory Fee Payable............... 37,137
Increase in Administrative Fee Payable.................... 8,738
Increase in Distributor and Affiliates Payable............ 1,822
Decrease in Payable for Investments Purchased............. (14,685,651)
Change in Unfunded Commitments............................ 29,997
Change in Accrued Interest Expense........................ 1,156,599
Increase in Accrued Expenses.............................. 123,872
Increase in Trustees' Deferred Compensation and Retirement
Plans................................................... 78,844
-------------
Total Adjustments....................................... (15,361,870)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 77,991,870
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in Bank Borrowings................................... 33,000,000
Cash Distributions Paid..................................... (110,991,879)
-------------
Net Cash Used for Financing Activities.................. (77,991,879)
-------------
NET INCREASE IN CASH........................................ (9)
Cash at Beginning of the Period............................. 9
-------------
CASH AT THE END OF THE PERIOD............................... $ -0-
=============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Year for Interest...................... $ 24,187,318
=============
42 See Notes to Financial Statements
VAN KAMPEN SENIOR INCOME TRUST
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
--------
2006
--------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 8.67
--------
Net Investment Income..................................... .79(g)
Net Realized and Unrealized Gain/Loss..................... (.10)
Common Share Equivalent of Distributions Paid to Preferred
Shareholders:
Net Investment Income................................... (.17)
--------
Total from Investment Operations............................ .52
--------
Distributions Paid to Common Shareholders:
Net Investment Income..................................... (.62)
Dilutive impact from the offering of Money Market Cumulative
Preferred Shares.......................................... -0-
--------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 8.57
========
Common Share Market Price at End of the Period.............. $ 8.38
Total Return (a)............................................ 10.41%
Net Assets Applicable to Common Shares at End of the Period
(In millions)............................................. $1,542.9
Ratios to Average Net Assets applicable to Common Shares
excluding Borrowings:
Operating Expense (d)..................................... 2.31%
Interest Expense (d)...................................... 1.63%
Gross Expense (d)......................................... 3.94%
Net Investment Income (d)................................. 9.17%
Net Investment Income (e)................................. 7.23%
Portfolio Turnover (b)...................................... 75%
SUPPLEMENTAL RATIOS:
Ratios to Average Net Assets including Preferred Shares and
Borrowings:
Operating Expense (d)..................................... 1.28%
Interest Expense (d)...................................... .90%
Gross Expense (d)......................................... 2.18%
Net Investment Income (d)................................. 5.06%
Net Investment Income (e)................................. 3.99%
SENIOR INDEBTEDNESS:
Total Preferred Shares Outstanding........................ 28,000
Asset Coverage Per Preferred Share (f).................... $ 80,119
Involuntary Liquidating Preference Per Preferred Share.... $ 25,000
Average Market Value Per Preferred Share.................. $ 25,000
Total Borrowing Outstanding (In thousands)................ $557,000
Asset Coverage Per $1,000 Unit of Senior Indebtedness
(c)..................................................... 5,028
(a) 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.
(b)Calculation includes the proceeds from principal repayments and sales of
senior loan interests.
(c)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.
(d)Ratios do not reflect the effect of distributions to preferred shareholders.
(e)Ratios reflect the effect of distributions to preferred shareholders.
(f)Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets and dividing this by the
number of preferred shares outstanding.
(g)Based on average shares outstanding.
N/A=Not Applicable
See Notes to Financial Statements 43
YEAR ENDED JULY 31,
----------------------------------------------
2005 2004 2003 2002
----------------------------------------------
$ 8.63 $ 8.10 $ 7.94 $ 8.51
-------- -------- -------- --------
.60 .42 .46 .49
.01 .57 .14 (.55)
(.10) (.02) -0- -0-
-------- -------- -------- --------
.51 .97 .60 (.06)
-------- -------- -------- --------
(.47) (.40) (.44) (.51)
-0- (.04) -0- -0-
-------- -------- -------- --------
$ 8.67 $ 8.63 $ 8.10 $ 7.94
======== ======== ======== ========
$ 8.19 $ 8.84 $ 7.84 $ 6.67
-2.03% 18.13% 25.06% -8.05%
$1,560.7 $1,554.1 $1,458.6 $1,430.0
2.26% 1.91% 1.59% 1.48%
.82% .31% .62% .53%
3.08% 2.22% 2.21% 2.01%
6.87% 5.06% 5.98% 6.02%
5.75% 4.80% N/A N/A
94% 84% 78% 65%
1.27% 1.30% 1.19% 1.22%
.46% .21% .46% .44%
1.73% 1.51% 1.65% 1.66%
3.86% 3.44% 4.47% 4.95%
3.23% 3.26% N/A N/A
28,000 28,000 N/A N/A
$ 80,750 $ 80,509 N/A N/A
$ 25,000 $ 25,000 N/A N/A
$ 25,000 $ 25,000 N/A N/A
$524,000 $450,000 $401,000 $370,159
5,315 6,009 4,637 4,863
44
VAN KAMPEN SENIOR INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006
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 (the "1940 Act"), as amended. The Trust's investment objective is to seek
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 Senior Loans and notes 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
notes 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 and notes are valued, where possible, using independent
market indicators provided by independent pricing sources approved by the Board
of Trustees. Other Senior Loans and notes 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.
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
45
VAN KAMPEN SENIOR INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
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.
Legal expenditures that are expected to result in the restructuring of or a plan
of reorganization for an investment are recorded as realized losses. The Trust
may purchase and sell securities on a "when-issued" or "delayed delivery" basis,
with settlement to occur at a later date. The value of the security so purchased
is subject to market fluctuations during this period. The Trust will segregate
assets with the custodian having an aggregate value at least equal to the amount
of the when-issued or delayed delivery purchase commitments until payment is
made. At July 31, 2006, the Trust had $1,500,000 of when-issued or delayed
delivery purchase commitments.
C. INVESTMENT INCOME Dividend income is recorded on the ex-dividend date and
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 Subchapter M 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, 2006, the Trust had an accumulated capital loss carryforward
for tax purposes of $218,138,489, which will expire according to the following
schedule.
AMOUNT EXPIRATION
$ 4,851,995................................................ July 31, 2009
122,716,095................................................ July 31, 2010
52,014,750................................................ July 31, 2011
29,634,358................................................ July 31, 2012
2,190,907................................................ July 31, 2013
6,730,384................................................ July 31, 2014
At July 31, 2006, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $2,864,231,881
==============
Gross tax unrealized appreciation........................... $ 31,001,717
Gross tax unrealized depreciation........................... (52,562,640)
--------------
Net tax unrealized depreciation on investments.............. $ (21,560,923)
==============
46
VAN KAMPEN SENIOR INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
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.
The tax character of distributions paid for the years ended July 31, 2006
and 2005 were as follows:
2006 2005
Distributions paid from:
Ordinary income........................................... $141,121,769 $102,806,311
Long-term capital gain.................................... -0- -0-
------------ ------------
$141,121,769 $102,806,311
============ ============
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. Permanent differences
related to book to tax amortization differences and currency gain reclasses
totaling $781,384 and $471, respectively, have been reclassified from
accumulated undistributed net investment income to accumulated net realized
loss.
As of July 31, 2006, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income............................... $6,082,285
Net realized gains and losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses resulting from wash
sale transactions and post October losses which are not realized for tax
purposes until the first day of the following fiscal year.
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.
47
VAN KAMPEN SENIOR INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
For the year ended July 31, 2006, the Trust recognized expenses of
approximately $121,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Trust is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Trust.
Under separate Legal Services, and Chief Compliance Officer (CCO) Employment
agreements, the Adviser provides legal services and the CCO provides compliance
services to the Trust. The costs of these services are allocated to each trust.
For the year ended July 31, 2006, the Trust recognized expenses of approximately
$142,600 representing Van Kampen Investments Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing legal services to the Trust, as
well as, the salary, benefits and related costs of the CCO and related support
staff paid by Van Kampen. Services provided pursuant to the Legal Services
agreement are reported as part of "Legal" expenses on the Statement of
Operations. Services provided pursuant to the CCO Employment agreement are
reported as part of "Other" expenses on 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 1940 Act, as amended, as
those companies in which a fund holds 5% or more of the outstanding voting
securities.
DIVIDEND/
PAR/ INTEREST MARKET VALUE
NAME SHARES* INCOME 7/31/06 COST
Neoplan USA Corp., Revolving Credit
Agreement............................... $933,750 $82,020 $873,056 $ 933,750
Neoplan USA Corp., Common Stock........... 8,517 -0- -0- 85
Neoplan USA Corp., Preferred Stock C...... 532 -0- -0- 532
Neoplan USA Corp., Preferred Stock D...... 1,730 -0- -0- 1,073,989
------- -------- ----------
$82,020 $873,056 $2,008,356
======= ======== ==========
* Shares were acquired through the restructuring of Senior Loan interests.
Affiliate transactions during the year ended July 31, 2006 were as follows:
PAR/SHARES PAR/SHARES REALIZED
AS OF GROSS GROSS AS OF GAIN/
NAME 7/31/05 ADDITIONS REDUCTIONS 7/31/06 (LOSS)
Imperial Home Decor Group,
Inc., Term Loan........... $1,379,619 $-0- $1,379,619 $-0- $(1,259,610)
Imperial Home Decor Group,
Inc., Common Stock........ 512,023 -0- 512,023 -0- (519,937)
-----------
$(1,779,547)
===========
48
VAN KAMPEN SENIOR INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
3. INVESTMENT TRANSACTIONS
During the period, the costs of purchases and proceeds from investments sold and
repaid, excluding short-term investments, were $2,124,854,332 and
$2,101,931,457, respectively.
4. COMMITMENTS
Pursuant to the terms of certain Senior Loan agreements, the Trust had unfunded
loan commitments of approximately $138,669,100 as of July 31, 2006. The Trust
intends to reserve against such contingent obligations by designating cash,
liquid securities and liquid Senior Loans as a reserve. The unrealized
depreciation on these commitments of $2,329,699 as of July 31, 2006 is reported
as "Unfunded Commitments" on the Statement of Assets and Liabilities.
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 July 31, 2006, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Trust on a participation
basis.
SELLING PARTICIPANT
PRINCIPAL
AMOUNT VALUE
(000) (000)
General Electrical Capital Corp............................. $5,000 $4,978
6. BORROWINGS
The Trust may utilize financial leverage to the maximum extent allowable under
the 1940 Act, as amended. Under the 1940 Act, as amended, a fund generally may
not (i) borrow money greater than 33 1/3% of the fund's total assets or (ii)
issue preferred shares greater than 50% of the fund's total assets. In using a
combination of borrowing money and issuing preferred shares, the maximum
allowable leverage is somewhere between 33 1/3% and 50% (but in no event more
that 50%) of the fund's total assets based on the relative amounts borrowed or
preferred shares issued.
The Trust has entered into a $700 million revolving credit and security
agreement. Annual commitment fees of .13% are charged on the unused portion of
the credit line. This revolving credit agreement is secured by the assets of the
Trust. For the year ended July 31, 2006, the average daily balance of borrowings
under the revolving credit agreement was $564,380,165 with a weighted average
interest rate of 4.30%.
49
VAN KAMPEN SENIOR INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JULY 31, 2006 continued
7. 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 average rate in effect on July 31, 2006 was
5.066%. During the year ended July 31, 2006, the rates ranged from 3.200% to
5.270%.
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 are included as a component of the "Preferred Share
Maintenance" expense on 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.
8. INDEMNIFICATIONS
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
9. NEW ACCOUNTING PRONOUNCEMENT
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainly in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The impact to the
Trust's financial statements, if and, is currently being assessed.
50
VAN KAMPEN SENIOR INCOME TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Van Kampen Senior Income Trust
We have audited the accompanying statement of assets and liabilities of Van
Kampen Senior Income Trust (the "Trust"), including the portfolio of
investments, as of July 31, 2006, the related statements of operations and cash
flows for the year then ended, the statements of changes in net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Trust is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of July 31, 2006, by correspondence with the custodian,
brokers and selling or agent banks; where replies were not received, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Senior Income Trust as of July 31, 2006, the results of its operations,
its cash flows, the changes in its net assets and the financial highlights for
the respective stated periods, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
September 14, 2006
51
VAN KAMPEN SENIOR INCOME TRUST
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
Computershare Trust Company, N.A., 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 30
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 30 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.
52
VAN KAMPEN SENIOR INCOME TRUST
DIVIDEND REINVESTMENT PLAN continued
RIGHT TO WITHDRAW
You may withdraw from the Plan at any time by calling 1-800-341-2929 or by
writing Computershare Trust Company, N.A. 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:
Van Kampen Closed End Funds
c/o Computershare Trust Company, N.A.
P.O. Box 43011
Providence RI 02940-3011
To obtain a complete copy of the Dividend Reinvestment Plan, please call our
Client Relations department at 1-800-341-2929.
53
VAN KAMPEN SENIOR INCOME TRUST
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
PHILLIP G. GOFF
Chief Financial Officer and Treasurer
HOWARD TIFFEN
Vice President
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
TRANSFER AGENT
COMPUTERSHARE TRUST COMPANY, N.A.
c/o Computershare Investor Services
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
54
VAN KAMPEN SENIOR INCOME TRUST
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 23, 2006, where
shareholders voted on the election of trustees.
With regards to the election of the following trustees by the common
shareholders of the Trust:
# OF SHARES
--------------------------------
IN FAVOR WITHHELD
------------------------------------------------------------------------------------------
Jerry D. Choate......................................... 165,024,689 2,113,802
Suzanne H. Woolsey...................................... 165,145,666 1,992,825
Linda Hutton Heagy...................................... 165,206,742 1,931,749
Wayne W. Whalen......................................... 165,146,290 1,992,201
Jack E. Nelson.......................................... 165,098,335 2,040,156
R. Craig Kennedy........................................ 165,170,642 1,967,849
With regards to the election of the following trustees by the preferred
shareholders of the Trust:
# OF SHARES
------------------------------
IN FAVOR WITHHELD
------------------------------------------------------------------------------------------
Rod Dammeyer.............................................. 23,674 196
The other trustees of the Trust whose terms did not expire in 2006 are David C.
Arch, Howard J Kerr and Hugo F. Sonnenschein.
55
VAN KAMPEN SENIOR INCOME TRUST
TRUSTEES AND OFFICERS INFORMATION
The business and affairs of the Trust are managed under the direction of the
Trust's Board of Trustees and the Trust's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Trust
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees of the Trust generally serve three year terms or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 68 Trustee/Director/Managing
Blistex Inc. since 1998 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (67) Trustee Trustee Prior to January 1999, 68 Trustee/Director/Managing
33971 Selva Road since 2006 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
56
VAN KAMPEN SENIOR INCOME TRUST
TRUSTEES AND OFFICERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (65) Trustee Trustee President of CAC, L.L.C., 68 Trustee/Director/Managing
CAC, L.L.C. since 1998 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
57
VAN KAMPEN SENIOR INCOME TRUST
TRUSTEES AND OFFICERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 68 Trustee/Director/Managing
Heidrick & Struggles since 2006 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 68 Trustee/Director/Managing
1744 R Street, NW since 2006 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (70) Trustee Trustee Prior to 1998, President 68 Trustee/Director/Managing
14 Huron Trace since 1998 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
58
VAN KAMPEN SENIOR INCOME TRUST
TRUSTEES AND OFFICERS INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 68 Trustee/Director/Managing
423 Country Club Drive since 2006 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (65) Trustee Trustee President Emeritus and 68 Trustee/Director/Managing
1126 E. 59th Street since 1998 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, Ph.D. Trustee Trustee Chief Communications 68 Trustee/Director/Managing
(64) since 2006 Officer of the National General Partner of funds
815 Cumberstone Road Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
59
VAN KAMPEN SENIOR INCOME TRUST
TRUSTEES AND OFFICERS INFORMATION continued
INTERESTED TRUSTEE:*
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 68 Trustee/Director/Managing
333 West Wacker Drive since 1998 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
60
VAN KAMPEN SENIOR INCOME TRUST
TRUSTEES AND OFFICERS INFORMATION continued
OFFICERS:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
Ronald E. Robison (67) President and Officer President of funds in the Fund Complex since September 2005
1221 Avenue of the Americas Principal Executive since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Officer since May 2003. Managing Director of Van Kampen Advisors
Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan
Stanley & Co. Incorporated. Managing Director and Director
of Morgan Stanley Investment Management Inc. Chief
Administrative Officer, Managing Director and Director of
Morgan Stanley Investment Advisors Inc. and Morgan Stanley
Services Company Inc. Managing Director and Director of
Morgan Stanley Distributors Inc. and Morgan Stanley
Distribution Inc. Chief Executive Officer and Director of
Morgan Stanley Trust. Executive Vice President and Principal
Executive Officer of the Institutional and Retail Morgan
Stanley Funds. Director of Morgan Stanley SICAV. Previously,
Chief Global Operations Officer of Morgan Stanley Investment
Management Inc. and Executive Vice President of funds in the
Fund Complex from May 2003 to September 2005.
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisers Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (39) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
61
VAN KAMPEN SENIOR INCOME TRUST
TRUSTEES AND OFFICERS INFORMATION continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
John L. Sullivan (51) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1998 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
Phillip G. Goff (42) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management
1 Parkview Plaza and Treasurer since 2005 Inc. since June 2005. Chief Financial Officer and Treasurer
Oakbrook Terrace, IL 60181 of funds in the Fund Complex since August 2005. Prior to
June 2005, Vice President and Chief Financial Officer of
Enterprise Capital Management, Inc., an investment holding
company.
Howard Tiffen (58) Vice President Officer Managing Director of the Advisers and Van Kampen Advisors
1 Parkview Plaza since 2000 Inc. Vice President of the senior loan funds advised by the
P.O. Box 5555 Adviser. Prior to 1999, senior portfolio manager for Pilgrim
Oakbrook Terrace, IL 60181 Investments. Associate of the Chartered Institute of Bankers
and a member of the Economic Club of Chicago.
In accordance with Section 303A.12(a) of the New York Stock Exchange Listed
Company Manual, the Trust's Chief Executive Officer has certified to the New
York Stock Exchange that, as of July 18, 2005, he was not aware of any violation
by the Trust of NYSE corporate governance listing standards.
The certifications by the Trust's principal executive officer and principal
financial officer required by Rule 30a-2 under the 1940 Act were filed with the
Trust's report to the SEC on Form N-CSR and are available on the Securities and
Exchange Commission's web site at http://www.sec.gov.
62
Van Kampen Senior Income Trust
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
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Van Kampen Senior Income Trust
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen Senior Income Trust
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
VVR ANR 9/06
(VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-02417P-Y07/06
Item 2. Code of Ethics.
(a) The Trust has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Trust or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Trust has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1.
Due to personnel changes at the Adviser, the list of Covered Officers set forth
in Exhibit B was amended in September 2005. Both editions of Exhibit B are
attached.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Trust's Code of Ethics is attached hereto as Exhibit 12A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Trust's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, "independent" Trustees Rod
Dammeyer, Jerry D. Choate and R. Craig Kennedy. Under applicable securities
laws, a person who is determined to be an audit committee financial expert will
not be deemed an "expert" for any purpose, including without limitation for the
purposes of Section 11 of the Securities Act of 1933, as a result of being
designated or identified as an audit committee financial expert. The designation
or identification of a person as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities that are greater
than the duties, obligations, and liabilities imposed on such person as a member
of the audit committee and Board of Trustees in the absence of such designation
or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2006 REGISTRANT COVERED ENTITIES(1)
---- ---------- -------------------
AUDIT FEES .............. $75,800 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ... $16,500(2) $244,200(3)
TAX FEES ............. $ 2,400(4) $ 0
ALL OTHER FEES ....... $ 0 $ 0
TOTAL NON-AUDIT FEES .... $18,900 $244,200
TOTAL ................... $94,700 $244,200
2005 REGISTRANT COVERED ENTITIES(1)
---- ---------- -------------------
AUDIT FEES .............. $73,550 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ... $10,000(2) $321,000(3)
TAX FEES ............. $ 2,400(4) $ 0
ALL OTHER FEES ....... $ 0 $ 0
TOTAL NON-AUDIT FEES .... $12,400 $321,000
TOTAL ................... $85,950 $321,000
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any
entity controlling, controlled by or under common control with the Adviser
that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent agreed upon procedures related to the
maintenance of Preferred Shares by the Registrant.
(3) Audit-Related Fees represent assurance and related services provided that
are reasonably related to the performance of the audit of the financial
statements of the Covered Entities' and funds advised by the Adviser or its
affiliates, specifically attestation services provided in connection with a
SAS 70 Report.
(4) Tax Fees represent tax advice and compliance services provided in
connection with the review of the Registrant's tax.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider whether
such services are consistent with the SEC's rules on auditor independence. The
Audit Committee will also consider whether the Independent Auditors are best
positioned to provide the most effective and efficient services, for reasons
such as its familiarity with the Fund's business, people, culture, accounting
systems, risk profile and other factors, and whether the service might enhance
the Fund's ability to manage or control risk or improve audit quality. All such
factors will be considered as a whole, and no one factor should necessarily be
determinative.
The Audit Committee is also mindful of the relationship between fees for
audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax and
All Other services that have the general pre-approval of the Audit Committee.
The term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval
----------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval Policy
and Procedures (the "Policy"), amended as of the date above, supercedes and
replaces all prior versions that may have been amended from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have the
meanings as defined in the Joint Audit Committee Charter.
from the Audit Committee. The Audit Committee will add to or subtract from the
list of general pre-approved services from time to time, based on subsequent
determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1.
All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix
B.2. All other Audit-related services not listed in Appendix B.2 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services. Hence, the Audit Committee believes it may grant
general pre-approval to those Tax services that have historically been provided
by the Independent Auditors, that the Audit Committee has reviewed and believes
would not impair the independence of the Independent Auditors, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the Independent Auditors in connection with a
transaction initially recommended by the Independent Auditors, the sole business
purpose of which may be tax avoidance and the tax treatment of which may not be
supported in the Internal Revenue Code and related regulations. The Audit
Committee will consult with Director of Tax or outside counsel to determine that
the tax planning and reporting positions are consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the Tax Services in Appendix B.3. All Tax services involving large and complex
transactions not listed in Appendix B.3 must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix B.5. The SEC's rules and relevant guidance should be
consulted to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be rendered. The Fund's Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the Independent Auditors. Requests or applications to provide services that
require specific approval by the Audit Committee will be submitted to the Audit
Committee by both the Independent Auditors and the Fund's Chief Financial
Officer, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. A sample report is included as Appendix
B.7. Both the Fund's Chief Financial Officer and management will immediately
report to the chairman of the Audit Committee any breach of this Policy that
comes to the attention of the Fund's Chief Financial Officer or any member of
management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
- Van Kampen Investments Inc.
- Van Kampen Asset Management
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Investor Services Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Trust Company
- Morgan Stanley Investment Management Ltd.
- Morgan Stanley Investment Management Company
- Morgan Stanley Asset & Investment Trust Management Company Ltd.
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services
are determined to have a direct impact on the operations or financial reporting
of the Registrant. 100% of such services were pre-approved by the audit
committee pursuant to the Audit Committee's pre-approval policies and procedures
(included herein).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Trust has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are:
David C. Arch, Rod Dammeyer, Howard J Kerr, Hugo F. Sonnenschein.
(b) Not applicable.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Trust's and its investment advisor's Proxy Voting Policies and Procedures
are as follows:
MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND PROCEDURES
I. POLICY STATEMENT
Introduction - Morgan Stanley Investment Management's ("MSIM") policy and
procedures for voting proxies ("Policy") with respect to securities held in the
accounts of clients applies to those MSIM entities that provide discretionary
investment management services and for which a MSIM entity has authority to vote
proxies. The Policy will be reviewed and, updated, as necessary, to address new
or revised proxy voting issues. The MSIM entities covered by the Policy
currently include the following: Morgan Stanley Investment Advisors Inc., Morgan
Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley
Investment Management Limited, Morgan Stanley Investment Management Company,
Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley
Investment Management Private Limited, Morgan Stanley Hedge Fund Partners GP LP,
Morgan Stanley Hedge Fund Partners LP, Van Kampen Asset Management, and Van
Kampen Advisors Inc. (each an "MSIM Affiliate" and collectively referred to as
the "MSIM Affiliates").
Each MSIM Affiliate will use its best efforts to vote proxies as part of its
authority to manage, acquire and dispose of account assets. With respect to the
MSIM registered management investment companies (Van Kampen, Institutional and
Advisor Funds)(collectively referred to herein as the "MSIM Funds"), each MSIM
Affiliate will vote proxies under this Policy (except for the Morgan Stanley KLD
Social Index Fund, which votes proxies pursuant to the Institutional Shareholder
Services' Social Investment Research Proxy Voting Guidelines) pursuant to
authority granted under its applicable investment advisory agreement or, in the
absence of such authority, as authorized by the Board of
Directors or Trustees of the MSIM Funds. A MSIM Affiliate will not vote proxies
if the "named fiduciary" for an ERISA account has reserved the authority for
itself, or in the case of an account not governed by ERISA, the investment
management or investment advisory agreement does not authorize the MSIM
Affiliate to vote proxies. MSIM Affiliates will, in a prudent and diligent
manner, vote proxies in the best interests of clients, including beneficiaries
of and participants in a client's benefit plan(s) for which the MSIM Affiliates
manage assets, consistent with the objective of maximizing long-term investment
returns ("Client Proxy Standard"). In certain situations, a client or its
fiduciary may provide a MSIM Affiliate with a proxy voting policy. In these
situations, the MSIM Affiliate will comply with the client's policy.
Proxy Research Services - Institutional Shareholder Services ("ISS") and Glass
Lewis (together with other proxy research providers as MSIM Affiliates may
retain from time to time, the "Research Providers") are independent advisers
that specialize in providing a variety of fiduciary-level proxy-related services
to institutional investment managers, plan sponsors, custodians, consultants,
and other institutional investors. The services provided include in-depth
research, global issuer analysis, and voting recommendations. While the MSIM
Affiliates may review and utilize the recommendations of the Research Providers
in making proxy voting decisions, they are in no way obligated to follow such
recommendations. In addition to research, ISS provides vote execution,
reporting, and recordkeeping. MSIM's Proxy Review Committee (see Section IV.A.
below) will carefully monitor and supervise the services provided by the
Research Providers.
Voting Proxies for Certain Non-U.S. Companies - While the proxy voting process
is well established in the United States and other developed markets with a
number of tools and services available to assist an investment manager, voting
proxies of non-U.S. companies located in certain jurisdictions, particularly
emerging markets, may involve a number of problems that may restrict or prevent
a MSIM Affiliate's ability to vote such proxies. These problems include, but are
not limited to: (i) proxy statements and ballots being written in a language
other than English; (ii) untimely and/or inadequate notice of shareholder
meetings; (iii) restrictions on the ability of holders outside the issuer's
jurisdiction of organization to exercise votes; (iv) requirements to vote
proxies in person, (v) the imposition of restrictions on the sale of the
securities for a period of time in proximity to the shareholder meeting; and
(vi) requirements to provide local agents with power of attorney to facilitate
the MSIM Affiliate's voting instructions. As a result, clients' non-U.S. proxies
will be voted on a best efforts basis only, after weighing the costs and
benefits to MSIM's clients of voting such proxies, consistent with the Client
Proxy Standard. ISS has been retained to provide assistance to the MSIM
Affiliates in connection with voting their clients' non-U.S. proxies.
II. GENERAL PROXY VOTING GUIDELINES
To ensure consistency in voting proxies on behalf of its clients, MSIM
Affiliates will follow (subject to any exception set forth herein) this Policy,
including the guidelines set forth below. These guidelines address a broad range
of issues, including board size and composition, executive compensation,
anti-takeover proposals, capital structure proposals and social responsibility
issues and are meant to be general voting parameters on issues that arise most
frequently. The MSIM Affiliates, however, may, pursuant to the procedures set
forth in Section IV. below, vote in a manner that is not in accordance with the
following general guidelines, provided the vote is approved by the Proxy Review
Committee and is consistent with the Client Proxy Standard. Morgan Stanley AIP
GP LP will follow the procedures as described in Appendix A. A MSIM Affiliate
will not generally vote a proxy if it has sold the affected security between the
record date and the meeting date.
III. GUIDELINES
A. CORPORATE GOVERNANCE MATTERS. The following proposals will generally be voted
as indicated below, unless otherwise determined by the Proxy Review Committee.
i. General.
1. Generally, routine management proposals will be supported. The
following are examples of routine management proposals:
- Approval of financial statements, director and auditor reports.
- General updating/corrective amendments to the charter.
- Proposals related to the conduct of the annual meeting, except
those proposals that relate to the "transaction of such other
business which may come before the meeting."
2. Proposals to eliminate cumulative voting generally will be supported;
proposals to establish cumulative voting in the election of directors
will not be supported.
3. Proposals requiring confidential voting and independent tabulation of
voting results will be supported.
4. Proposals requiring a U.S. company to have a separate Chairman and CEO
will not be supported. Proposals requiring non-U.S. companies to have
a separate Chairman and CEO will be supported.
5. Proposals by management of non-U.S. companies regarding items that are
clearly related to the regular course of business will be supported.
6. Proposals to require the company to expense stock options will be
supported.
7. Open-ended requests for adjournment generally will not be supported.
However, where management specifically states the reason for
requesting an adjournment and the requested adjournment is necessary
to permit a proposal that would otherwise be supported under this
Policy to be carried out (i.e. an uncontested corporate transaction),
the adjournment request will be supported.
8. Proposals to declassify the Board of Directors (if management supports
a classified board) generally will not be supported.
9. Proposal requiring that the company prepare reports that are costly to
provide or that would require duplicative efforts or expenditures that
are of a non-business nature or would provide no pertinent information
from the perspective of institutional shareholders generally will not
be supported.
ii. Election of Directors. In situations where no conflict exists and where
no specific governance deficiency has been noted, unless otherwise
determined by the
Proxy Review Committee, proxies will be voted in support of nominees of
management.
1. The following proposals generally will be supported:
- Proposals requiring that a certain percentage (up to 66 2/3%) of
the company's board members be independent directors.
- Proposals requiring that members of the company's compensation,
nominating and audit committees be comprised of independent or
unaffiliated directors.
2. Unless otherwise determined by the Proxy Review Committee, a withhold
vote will be made in the following circumstances:
(a) If a company's board is not comprised of a majority of
disinsterested directors, a withhold vote will be made for
interested directors. A director nominee may be deemed to be
interested if the nominee has, or any time during the previous
five years had, a relationship with the issuer (e.g., investment
banker, counsel or other professional service provider, or
familial relationship with a senior officer of the issuer) that
may impair his or her independence;
(b) If a nominee who is interested is standing for election as a
member of the company's compensation, nominating or audit
committees;
(c) A direct conflict exists between the interests of the nominee and
the public shareholders;
(d) Where the nominees standing for election have not taken action to
implement generally accepted governance practices for which there
is a "bright line" test. These would include elimination of dead
hand or slow hand poison pills, requiring audit, compensation or
nominating committees to be composed of independent directors and
requiring a majority independent board;
(e) A nominee has failed to attend at least 75% of board meetings
within a given year without a reasonable excuse; or
(f) A nominee serves on the board of directors for more than six
companies (excluding investment companies).
iii. Auditors
1. Generally, management proposals for selection or ratification of
auditors will be supported. However, such proposals may not be
supported if the fees paid to auditors are excessive. Generally, to
determine if such fees are excessive, a 50% test will be applied:
i.e., non-audit fees should be less than 50% of the total fees paid to
the auditor.
2. Proposals requiring auditors to attend the annual meeting of
shareholders will be supported.
3. Proposals to indemnify auditors will not be supported.
iv. Anti-Takeover Matters
1. Proposals to modify or rescind existing supermajority vote
requirements to amend the charter or bylaws will be supported;
proposals to amend by-laws to require a supermajority shareholder vote
to pass or repeal certain provisions will not be supported.
2. Proposals relating to the adoption of anti-greenmail provisions will
be supported, provided that the proposal: (i) defines greenmail; (ii)
prohibits buyback offers to large block holders (holders of at least
1% of the outstanding shares and in certain cases, a greater amount,
as determined by the Proxy Review Committee) not made to all
shareholders or not approved by disinterested shareholders; and (iii)
contains no anti-takeover measures or other provisions restricting the
rights of shareholders.
3. Proposals requiring shareholder approval or ratification of a
shareholder rights plan or poison pill will be supported.
B. CAPITALIZATION CHANGES. The following proposals generally will be voted as
indicated below, unless otherwise determined by the Proxy Review Committee.
1. The following proposals generally will be supported:
- Proposals relating to capitalization changes that eliminate other
classes of stock and/or eliminate unequal voting rights.
- Proposals to increase the authorization of existing classes of
common stock (or securities convertible into common stock) if:
(i) a clear and legitimate business purpose is stated; (ii) the
number of shares requested is reasonable in relation to the
purpose for which authorization is requested; and (iii) the
authorization does not exceed 100% of shares currently authorized
and at least 30% of the new authorization will be outstanding.
- Proposals to create a new class of preferred stock or for
issuances of preferred stock up to 50% of issued capital.
- Proposals for share repurchase plans.
- Proposals to reduce the number of authorized shares of common or
preferred stock, or to eliminate classes of preferred stock.
- Proposals to effect stock splits.
- Proposals to effect reverse stock splits if management
proportionately reduces the authorized share amount set forth in
the corporate charter. Reverse stock splits that do not adjust
proportionately to the authorized share amount generally will be
approved if the resulting increase in
authorized shares coincides with the proxy guidelines set forth
above for common stock increases.
2. The following proposals generally will not be supported
(notwithstanding management support).
- Proposals relating to capitalization changes that add classes of
stock which substantially dilute the voting interests of existing
shareholders.
- Proposals to increase the authorized number of shares of existing
classes of stock that carry preemptive rights or supervoting
rights.
- Proposals to create "blank check" preferred stock.
- Proposals relating to changes in capitalization by 100% or more.
C. COMPENSATION. The following proposals generally will be voted as indicated
below, unless otherwise determined by the Proxy Review Committee.
1. The following proposals generally will be supported:
- Proposals relating to director fees, provided the amounts are not
excessive relative to other companies in the country or industry.
- Proposals for employee stock purchase plans that permit discounts
up to 15%, but only for grants that are part of a broad-based
employee plan, including all non-executive employees.
- Proposals for the establishment of employee stock option plans
and other employee ownership plans, provided that our research
does not indicate that approval of the plan would be against
shareholder interest.
- Proposals for the establishment of employee retirement and
severance plans, provided that our research does not indicate
that approval of the plan would be against shareholder interest.
2. Blanket proposals requiring shareholder approval of all severance
agreements will not be supported, however, proposals that require
shareholder approval for agreements in excess of three times the
annual compensation (salary and bonus) generally will be supported.
3. Blanket proposals requiring shareholder approval of executive
compensation generally will not be supported.
4. Proposals that request or require disclosure of executive compensation
in addition to the disclosure required by the Securities and Exchange
Commission ("SEC") regulations generally will not be supported.
D. OTHER RECURRING ITEMS. The following proposals generally will be voted as
indicated below, unless otherwise determined by the Proxy Review Committee.
1. Proposals to add restrictions related to social, political,
environmental or special interest issues that do not relate directly
to the business of the company and which do not appear to be directed
specifically to the business or financial interest of the company
generally will not be supported.
2. Proposals requiring adherence to workplace standards that are not
required or customary in market(s) to which the proposals relate will
not be supported.
E. ITEMS TO BE REVIEWED BY THE PROXY REVIEW COMMITTEE
The following types of non-routine proposals, which potentially may have a
substantive financial or best interest impact on an issuer, will be voted as
determined by the Proxy Review Committee.
i. Corporate Transactions
- Proposals relating to mergers, acquisitions and other special
corporate transactions (i.e., takeovers, spin-offs, sales of
assets, reorganizations, restructurings and recapitalizations)
will be examined on a case-by-case basis. In all cases, Research
Providers' research and analysis will be used along with MSIM
Affiliates' research and analysis, including, among other things,
MSIM internal company-specific knowledge. Proposals for mergers
or other significant transactions that are friendly and approved
by the Research Providers generally will be supported where there
is no portfolio manager objection and where there is no material
conflict of interest and in those instances will not need to be
reviewed by the Proxy Review Committee.
ii. Compensation
- Proposals relating to change-in-control provisions in non-salary
compensation plans, employment contracts, and severance
agreements that benefit management and would be costly to
shareholders if triggered. With respect to proposals related to
severance and change of control situations, MSIM Affiliates will
support a maximum of three times salary and bonus.
- Proposals relating to Executive/Director stock option plans.
Generally, stock option plans should be incentive based. The
Proxy Review Committee will evaluate the the quantitative
criteria used by a Research Provider when considering such
Research Provider's recommendation. If the Proxy Review Committee
determines that the criteria used by the Research Provider is
reasonable, the proposal will be supported if it falls within a
5% band above the Research Provider's threshold.
- Compensation proposals that allow for discounted stock options
that have not been offered to employees in general.
iii. Other
- Proposals for higher dividend payouts.
- Proposals recommending set retirement ages or requiring specific
levels of stock ownership by directors.
- Proposals for election of directors, where a director nominee is
related to MSIM (i.e. on an MSIM Fund's Board of
Directors/Trustees or part of MSIM senior management) must be
considered by the Proxy Review Committee. If the proposal relates
to a director nominee who is on a Van Kampen Fund's Board of
Directors/Trustees, to the extent that the shares of the relevant
company are held by a Van Kampen Fund, the Van Kampen Board shall
vote the proxies with respect to those shares, to the extent
practicable. In the event that the Committee cannot contact the
Van Kampen Board in advance of the shareholder meeting, the
Committee will vote such shares pursuant to the Proxy Voting
Policy.
- Proposals requiring diversity of board membership relating to
broad based social, religious or ethnic groups.
- Proposals to limit directors' liability and/or broaden
indemnification of directors. Generally, the Proxy Review
Committee will support such proposals provided that the officers
and directors are eligible for indemnification and liability
protection if they have acted in good faith on company business
and were found innocent of any civil or criminal charges for
duties performed on behalf of the company.
F. FUND OF FUNDS. Certain Funds advised by an MSIM Affiliate invest only in
other MSIM funds. If an underlying fund has a shareholder meeting, in order to
avoid any potential conflict of interest, such proposals will be voted in the
same proportion as the votes of the other shareholders of the underlying fund,
unless otherwise determined by the Proxy Review Committee.
IV. ADMINISTRATION OF POLICY
A. PROXY REVIEW COMMITTEE
1. The MSIM Proxy Review Committee ("Committee") is responsible for
creating and implementing the Policy and, in this regard, has
expressly adopted it.
(a) The Committee, which is appointed by MSIM's Chief Investment
Officer ("CIO"), consists of senior investment professionals who
represent the different investment disciplines and geographic
locations of the firm. The Committee is responsible for
establishing MSIM's Policy and determining how MSIM will vote
proxies on an ongoing basis.
(b) The Committee will periodically review and have the authority to
amend, as necessary, the Policy and establish and direct voting
positions consistent with the Client Proxy Standard.
(c) The Committee will meet at least monthly to (among other
matters): (1) address any outstanding issues relating to the
Policy and (2) review proposals at upcoming shareholder meetings
of MSIM portfolio
companies in accordance with this Policy including, as
appropriate, the voting results of prior shareholder meetings of
the same issuer where a similar proposal was presented to
shareholders. The Committee, or its designee, will timely
communicate to ISS MSIM's Policy (and any amendments to them
and/or any additional guidelines or procedures it may adopt).
(d) The Committee will meet on an ad hoc basis to (among other
matters): (1) authorize "split voting" (i.e., allowing certain
shares of the same issuer that are the subject of the same proxy
solicitation and held by one or more MSIM portfolios to be voted
differently than other shares) and/or "override voting" (i.e.,
voting all MSIM portfolio shares in a manner contrary to the
Policy); (2) review and approve upcoming votes, as appropriate,
for matters for which specific direction has been provided in
this Policy; and (3) determine how to vote matters for which
specific direction has not been provided in this Policy. Split
votes generally will not be approved within a single Global
Investor Group investment team. The Committee may take into
account Research Providers' recommendations and research as well
as any other relevant information they may request or receive,
including portfolio manager and/or analyst research, as
applicable. Generally, proxies related to securities held in
accounts that are managed pursuant to quantitative, index or
index-like strategies ("Index Strategies") will be voted in the
same manner as those held in actively managed accounts. Because
accounts managed using Index Strategies are passively managed
accounts, research from portfolio managers and/or analysts
related to securities held in these accounts may not be
available. If the affected securities are held only in accounts
that are managed pursuant to Index Strategies, and the proxy
relates to a matter that is not described in this Policy, the
Committee will consider all available information from the
Research Providers, and to the extent that the holdings are
significant, from the portfolio managers and/or analysts.
(e) In addition to the procedures discussed above, if the Committee
determines that an issue raises a potential material conflict of
interest, or gives rise to the appearance of a potential material
conflict of interest, the Committee will request a special
committee to review, and recommend a course of action with
respect to, the conflict(s) in question ("Special Committee").
The Special Committee shall be comprised of the Chairperson of
the Proxy Review Committee, the Compliance Director for the area
of the firm involved or his/her designee, a senior portfolio
manager (if practicable, one who is a member of the Proxy Review
Committee) designated by the Proxy Review Committee, and MSIM's
Chief Investment Officer or his/her designee. The Special
Committee may request the assistance of MSIM's General Counsel or
his/her designee and will have sole discretion to cast a vote. In
addition to the research provided by Research Providers, the
Special Committee may request analysis from MSIM Affiliate
investment professionals and outside sources to the extent it
deems appropriate.
(f) The Committee and the Special Committee, or their designee(s),
will document in writing all of their decisions and actions,
which documentation will be maintained by the Committee and the
Special Committee, or their designee(s), for a period of at least
6 years. To the extent these decisions relate to a security held
by a MSIM U.S. registered investment company, the Committee and
Special Committee, or their designee(s), will report their
decisions to each applicable Board of Trustees/Directors of those
investment companies at each Board's next regularly scheduled
Board meeting. The report will contain information concerning
decisions made by the Committee and Special Committee during the
most recently ended calendar quarter immediately preceding the
Board meeting.
(g) The Committee and Special Committee, or their designee(s), will
timely communicate to applicable portfolio managers, the
Compliance Departments and, as necessary, to ISS, decisions of
the Committee and Special Committee so that, among other things,
ISS will vote proxies consistent with their decisions.
B. IDENTIFICATION OF MATERIAL CONFLICTS OF INTEREST
1. If there is a possibility that a vote may involve a material conflict
of interest, the vote must be decided by the Special Committee in
consultation with MSIM's General Counsel or his/her designee.
2. A material conflict of interest could exist in the following
situations, among others:
(a) The issuer soliciting the vote is a client of MSIM or an affiliate of
MSIM and the vote is on a material matter affecting the issuer;
(b) The proxy relates to Morgan Stanley common stock or any other security
issued by Morgan Stanley or its affiliates; or
(c) Morgan Stanley has a material pecuniary interest in the matter
submitted for a vote (e.g., acting as a financial advisor to a party
to a merger or acquisition for which Morgan Stanley will be paid a
success fee if completed).
C. PROXY VOTING REPORTS
(a) MSIM will promptly provide a copy of this Policy to any client
requesting them. MSIM will also, upon client request, promptly provide
a report indicating how each proxy was voted with respect to
securities held in that client's account.
(b) MSIM's legal department is responsible for filing an annual Form N-PX
on behalf of each registered management investment company for which
such filing is required, indicating how all proxies were voted with
respect to such investment company's holdings.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
VAN KAMPEN SENIOR INCOME TRUST
FUND MANAGEMENT
PORTFOLIO MANAGEMENT. As of the date of this report, the Fund is managed by
members of the Taxable Fixed Income team. The team consists of portfolio
managers and analysts. Current members of the team jointly and primarily
responsible for the day-to-day management of the Fund's portfolio and the
overall execution of the strategy of the Fund are Howard T. Tiffen, a Managing
Director of the Adviser and Christina Jamieson, an Executive Director of the
Adviser.
Mr. Tiffen has been associated with the Adviser in an investment management
capacity since December 1999 and began managing the Fund in December 1999. Ms.
Jamieson has been associated with the Adviser in an investment management
capacity since March 2000 and began managing the Fund in June 2005.
The composition of the team may change from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
The following information is as of July 31, 2006.
As of July 31, 2006, Mr. Tiffen managed 6 mutual funds with a total of
approximately $5.7 billion in assets; no pooled investment vehicles other than
mutual funds; and 2 other accounts with a total of approximately $585.2 million
in assets.
As of June 30, 2006, Ms. Jamieson managed two mutual funds with a total of
approximately $4.0 billion in assets; no pooled investment vehicles other than
mutual funds; and no other accounts.
Because the portfolio managers manage assets for other investment companies,
pooled investment vehicles, and/or other accounts (including institutional
clients, pension plans and certain high net worth individuals), there may be an
incentive to favor one client over another resulting in conflicts of interest.
For instance, the Adviser may receive fees from certain accounts that are higher
than the fee it receives from the Fund, or it may receive a performance-based
fee on certain accounts. In those instances, the portfolio manager may have an
incentive to favor the higher and/or performance-based fee accounts over the
Fund. The Adviser has adopted trade allocation and other policies and procedures
that it believes are reasonably designed to address these and other conflicts of
interest.
PORTFOLIO MANAGER COMPENSATION STRUCTURE
Portfolio managers receive a combination of base compensation and discretionary
compensation, comprised of a cash bonus and several deferred compensation
programs described below. The methodology used to determine portfolio manager
compensation is applied across all funds/accounts managed by the portfolio
manager.
Base salary compensation. Generally, portfolio managers receive base salary
compensation based on the level of their position with the Adviser.
Discretionary compensation. In addition to base compensation, portfolio managers
may receive discretionary compensation.
Discretionary compensation can include:
- Cash Bonus.
- Morgan Stanley's Equity Incentive Compensation Program (EICP) awards -- a
mandatory program that defers a portion of discretionary year-end
compensation into restricted stock units or other awards based on Morgan
Stanley common stock that are subject to vesting and other conditions.
- Investment Management Deferred Compensation Plan (IMDCP) awards -- a
mandatory program that defers a portion of discretionary year-end
compensation and notionally invests it in designated Funds advised by the
Adviser or its affiliates. The award is subject to vesting and other
conditions. Portfolio managers must notionally invest a minimum of 25% to a
maximum of 75% of the IMDCP deferral into a combination of the designated
open-end mutual funds they manage that are included in the IMDCP Fund menu,
which may or may not include the Fund.
- Voluntary Deferred Compensation Plans -- voluntary programs that permit
certain employees to elect to defer a portion of their discretionary
year-end compensation and directly or notionally invest the deferred
amount: (1) across a range of designated investment Funds, including Funds
advised by the Adviser or its affiliates; and/or (2) in Morgan Stanley
stock units.
Several factors determine discretionary compensation, which can vary by
portfolio management team and circumstances. In order of relative importance,
these factors include:
- Investment performance. A portfolio manager's compensation is linked to the
pre-tax investment performance of the funds/accounts managed by the
portfolio manager. Investment performance is calculated for one-, three-
and five-year periods measured against a fund's/account's primary
benchmark, indices and/or peer groups where applicable. Generally, the
greatest weight is placed on the three- and five-year periods.
- Revenues generated by the investment companies, pooled investment vehicles
and other accounts managed by the portfolio manager.
- Contribution to the business objectives of the Adviser.
- The dollar amount of assets managed by the portfolio manager.
- Market compensation survey research by independent third parties.
- Other qualitative factors, such as contributions to client objectives.
- Performance of Morgan Stanley and Morgan Stanley Investment Management, and
the overall performance of the investment team(s) of which the portfolio
manager is a member.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of July 31, 2006, the portfolio managers did not own any shares of the Fund.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11. 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 second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) 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: September 21, 2006
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: September 21, 2006
By: /s/ James W. Garrett
------------------------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: September 21, 2006