-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A82zbJwi8X9YAlWPDjgsLOw7Qn2n5ypWnDSls2HMHuNhxQDewiKYd5KNOHxVyExW RCqOrSKMl9RwAj2qlFZNvA== 0000950137-00-000617.txt : 20000224 0000950137-00-000617.hdr.sgml : 20000224 ACCESSION NUMBER: 0000950137-00-000617 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000818305 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 366866160 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05230 FILM NUMBER: 551517 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC STREET 2: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST DATE OF NAME CHANGE: 19960102 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT MUNICIPAL INCOME TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT XEROX INSURED MUNIFUND DATE OF NAME CHANGE: 19880824 N-30D 1 SEMIANNUAL REPORT 1 TABLE OF CONTENTS Letter to Shareholders........................... 1 Economic Snapshot................................ 2 Performance Results.............................. 3 Portfolio Management Review...................... 4 Glossary of Terms................................ 7 Portfolio Highlights............................. 8 Portfolio of Investments......................... 10 Statement of Assets and Liabilities.............. 21 Statement of Operations.......................... 22 Statement of Changes in Net Assets............... 23 Financial Highlights............................. 24 Notes to Financial Statements.................... 26 Dividend Reinvestment Plan....................... 32
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. 2 LETTER TO SHAREHOLDERS January 20, 2000 Dear Shareholder: As we enter a new century--and millennium--it seems appropriate to take a look back at the progress that's been made over the last 100 years and how the world of investing has changed over the generations. Although rapid advances in technology and science have dramatically altered the world that we live in today, one of the greatest shifts we've seen is the increasing importance of investing for many Americans. Once considered primarily for the wealthy, investing in the stock market is now available to most people. In fact, almost 79 million individuals--who represent almost half of all U.S. households--own stocks either directly or through mutual funds. This is even more impressive when considering that just 16 years earlier, only 19 percent of households owned stocks. Another important shift has been the need for retirement planning beyond a pension plan or Social Security. The Investment Company Institute, the leading mutual fund industry association, reports that 77 percent of all mutual fund shareholders earmarked retirement as their primary financial goal in 1998. Through all the changes in the investment environment over the past century, the general principles that have made generations of investors successful remain the same. Some that have stood the test of time include: - INVESTING FOR THE LONG-TERM - BASING INVESTMENT DECISIONS ON SOUND RESEARCH - BUILDING A DIVERSIFIED PORTFOLIO - BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE While no one can predict the future, at Van Kampen we believe that these ideas will remain important tenets for investors well into this century. As we continue to focus on these principles, we hope that our decades of investment experience can help bring you closer to your financial goals as we welcome the new millennium. Sincerely, /s/ Richard F. Powers, III /s/ Dennis J. McDonnell Richard F. Powers, III Dennis J. McDonnell Chairman President Van Kampen Investment Advisory Van Kampen Investment Advisory Corp. Corp.
1 3 ECONOMIC SNAPSHOT ECONOMIC GROWTH The nation's brisk rate of economic growth continued throughout 1999, bringing the United States to the verge of its longest economic expansion on record. High levels of consumer spending, a host of new jobs, and increasing productivity kept the economy strong. Gross domestic product, the primary measure of economic growth, increased 4.2 percent for the year, including an impressive annualized rate of 5.7 percent for the third quarter and 5.8 percent in the fourth quarter. EMPLOYMENT The job market remained vibrant throughout the year, with more than 2.7 million U.S. jobs created in 1999. In addition, unemployment dropped to 4.1 percent in October--its lowest rate in three decades. With jobs plentiful and wages on the rise, most Americans were optimistic about the future. At the end of the year the consumer confidence index hit its highest level since 1968. Although wage pressures caused some concerns about the potential erosion of corporate profits, productivity gains helped keep those concerns muted through the end of the year. INFLATION AND INTEREST RATES Although the Consumer Price Index continued to reflect historically low inflation--rising only 2.7 percent during 1999--concerns about future increases in inflation were prevalent throughout the reporting period. The Federal Reserve Board remained active in guarding against inflation and trying to temper economic growth. The Fed reversed its three interest-rate cuts from the fall of 1998 by raising rates in June, August, and November 1999. U.S. GROSS DOMESTIC PRODUCT Seasonally Adjusted Annualized Rates Third Quarter 1997 through Fourth Quarter 1999 [GRAPH] 97Q3 4 97Q4 3.10 98Q1 6.70 98Q2 2.10 98Q3 3.80 98Q4 5.90 99Q1 3.70 99Q2 1.90 99Q3 5.70 99Q4 5.80
Source: Bureau of Economic Analysis 2 4 PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1999 VAN KAMPEN MUNICIPAL INCOME TRUST (NYSE TICKER SYMBOL--VMT) COMMON SHARE TOTAL RETURNS Six-month total return based on market price(1)........... (17.92)% Six-month total return based on NAV(2).................... (4.79)% DISTRIBUTION RATES Distribution rate as a % of closing stock price(3)........ 7.87% Taxable-equivalent distribution rate as a % of closing stock price(4)............................................ 12.30% SHARE VALUATIONS Net asset value........................................... $ 8.80 Closing common stock price................................ $ 7.625 Six-month high common stock price (07/02/99).............. $9.8125 Six-month low common stock price (12/14/99)............... $7.3750 Preferred share (Series A) rate(5)........................ 4.150% Preferred share (Series B) rate(5)........................ 4.200% Preferred share (Series C) rate(5)........................ 3.850%
(1) Total return based on market price assumes an investment at the market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Trust's dividend reinvestment plan, and sale of all shares at the closing common stock price at the end of the period indicated. (2) Total return based on net asset value (NAV) assumes an investment at the beginning of the period indicated, reinvestment of all distributions for the period, and sale of all shares at the end of the period, all at NAV. (3) Distribution rate represents the monthly annualized distributions of the Trust at the end of the period and not the earnings of the Trust. (4) The taxable-equivalent distribution rate is calculated assuming a 36% federal tax bracket. (5) See "Notes to Financial Statements" footnote #6, for more information concerning Preferred Share reset periods. A portion of the interest income may be taxable for those investors subject to the federal alternative minimum tax (AMT). Past performance does not guarantee future results. Investment return, stock price and net asset value will fluctuate with market conditions. Trust shares, when sold, may be worth more or less than their original cost. 3 5 PORTFOLIO MANAGEMENT REVIEW VAN KAMPEN MUNICIPAL INCOME TRUST We recently spoke with representatives of the adviser of the Van Kampen Municipal Income Trust about the key events and economic forces that shaped the markets during the past six months. David C. Johnson, portfolio manager, has managed the Trust since 1989 and worked in the investment industry since 1981. He is joined by Peter W. Hegel, chief investment officer for fixed-income investments. The following discussion reflects their views on the Trust's performance during the six months ended December 31, 1999. Q WHAT HAPPENED IN THE MUNICIPAL MARKET DURING THE REPORTING PERIOD? A The second half of 1999 proved to be very difficult for bonds, with prices declining dramatically as interest rates rose and inflation fears resurfaced. In addition to the negative effects of the Fed's interest-rate increases, the nation's strong economic growth continued to fuel concerns about inflation and future rate hikes. Together with low institutional demand for municipal bonds during the period, these conditions hurt municipals more than most taxable bonds (although municipals modestly outperformed long-term U.S. Treasury bonds). The bonds in the Trust's portfolio suffered price declines along with the rest of the municipal market. Conditions were particularly difficult for closed-end funds toward the end of the year, as many investors sold shares at a loss for tax purposes. In fact, the average closed-end municipal fund fell 20 percent in price during the year. Q HOW DID THIS ENVIRONMENT AFFECT MUNICIPAL BOND SUPPLY? A The interest-rate increases essentially suppressed municipal bond supply, bringing nationwide supply down more than 20 percent in 1999 compared with 1998. New issuance was down less than one percent for the year, but the amount of bonds issued through refinancing fell more than 50 percent in 1999. Many municipalities simply chose not to refinance outstanding bonds because of the higher interest rates they would have to pay in the current marketplace. Q WHAT TECHNIQUES DID YOU USE TO MANAGE THE TRUST IN THESE CONDITIONS? A Many of the Trust's more seasoned holdings were nearing their call dates, so we took advantage of higher interest rates in the municipal market to replace these bonds with new issues. These new bonds with longer maturity dates allowed us to extend the Trust's protection from bond calls and provided attractive coupon rates. Because bond prices had declined during the period, we were also able to enhance the Trust's tax management by selling these and other holdings at a capital loss. Using this strategy, we 4 6 offset some of the gains we earned early in 1999 to avoid the need to distribute taxable capital gains to shareholders this year. By purchasing longer-maturity bonds, we also increased the portfolio's duration, or sensitivity to interest-rate changes. We feel that the longer duration will benefit the Trust in a declining interest-rate environment by allowing it to participate more fully in a market rally. In the short term, however, the longer duration negatively affected the Trust's total return as interest rates climbed. Q WHAT AREAS OF THE MUNICIPAL MARKET WERE MOST ATTRACTIVE TO YOU? A We focused on increasing the Trust's income stream to help offset the loss of income from higher-yielding bonds that were called or sold from the portfolio. In our search for the most attractive-yielding issues that met our criteria, we found value in the lower-rated investment-grade credit quality range, as well as bonds in the long-term care and industrial revenue sectors. For additional portfolio highlights, please refer to page 8. Q HOW DID THE TRUST PERFORM DURING THE PERIOD? A Total return performance was disappointing because of the general downturn in bond prices and the negative effects of the Trust's longer duration. In addition, the Trust's leverage component hurt its performance during the period. Although leverage helps the Trust provide higher income levels to common shareholders, it made the portfolio more sensitive to the interest-rate increases we experienced during the reporting period. For the six-month period ended December 31, 1999, the Trust returned -17.92 percent(1) based on market price. This reflects a decrease in market price from $9.625 per share on June 30, 1999, to $7.625 per share on December 31, 1999. The Trust continued to provide shareholders with an attractive dividend, although the dividend rate was decreased in November. The adjustment resulted from the call of older, higher-yielding bonds that had been purchased when interest rates were much higher than they are now. Although interest rates have increased in recent months, they have not increased enough for the income from the new bonds to compensate for the loss of income from the older bonds. The monthly dividend of $0.05 per share translates to a distribution rate of 7.87 percent(3) based on the Trust's closing market price on December 31, 1999. Because the Trust is exempt from federal income taxes, this distribution rate is equivalent to a yield of 12.3 percent(4) for an investor in the 36 percent federal income tax bracket. Please refer to the chart and footnotes on page 3 for additional performance results. Past performance does not guarantee future results. 5 7 Q WHAT DO YOU SEE AHEAD FOR THE ECONOMY AND THE MUNICIPAL MARKET? A We believe that the economy should eventually slow from this record-breaking pace, although the Federal Reserve may have to take significant action in the next several months to slow the rate of economic growth. However, we think that the municipal market is poised for a recovery later in 2000 if interest rates reverse their course, and that municipals--especially closed-end municipal funds--currently represent an excellent value in the marketplace. With year 2000 computer concerns and the wave of tax-loss selling behind us, market activity should pick up early in the new year. In the meantime, we will continue to focus on finding attractive-yielding bonds and protecting the Trust from bond calls as much as possible. We will also use our extensive research capabilities to look for opportunities throughout the coming months. 6 8 GLOSSARY OF TERMS CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set prices before maturity. These dates and prices are set when the bond is issued. To compensate the bondholder for the potential loss of income and ownership, a bond's call price is usually higher than the face value of the bond. Bonds are usually called when interest rates drop so significantly that the issuer can save money by issuing new bonds at lower rates. CREDIT RATING: An evaluation of an issuer's credit history and capability of repaying obligations. Standard & Poor's and Moody's Investors Service are two companies that assign bond ratings. Standard & Poor's ratings range from a high of AAA to a low of D, while Moody's ratings range from a high of Aaa to a low of C. DURATION: A measure of the sensitivity of a bond's price to changes in interest rates, expressed in years. Each year of duration represents an expected 1 percent change in the price of a bond for every 1 percent change in interest rates (i.e. a 5-year duration means the bond will fall about 5 percent in value if interest rates rise by 1 percent). The longer a bond's duration, the greater the effect of interest rate movements on its price. Typically, funds with shorter durations perform better in rising rate environments, while funds with longer durations perform better when rates decline. INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or Baa and above by Moody's Investors Service. Bonds rated below BBB or Baa are noninvestment grade. LEVERAGE: A process employed by the Trust that involves borrowing money at short-term interest rates by issuing preferred shares. The proceeds are then invested in longer-term bonds, which typically pay higher rates. The difference between the long-term rates earned by the Trust and the short-term rates paid on the preferred shares is passed along to shareholders in the Trust's dividend. Common shareholders typically benefit from leverage when short-term interest rates decline. However, a rise in short-term rates would have a negative effect by raising the Trust's borrowing costs and possibly affecting the dividend and price of common shares. MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999 and maturing in 2009 is a 10-year bond. PREREFUNDING: The process of issuing new bonds to refinance an outstanding municipal bond issue prior to its maturity or call date. The proceeds from the new bonds are generally invested in U.S. government securities. Prerefunding typically occurs when interest rates decline and an issuer replaces its higher-yielding bonds with current lower-yielding issues. 7 9 PORTFOLIO HIGHLIGHTS VAN KAMPEN MUNICIPAL INCOME TRUST TOP FIVE PORTFOLIO INDUSTRIES* [GRAPH]
DECEMBER 31, 1999 JUNE 30, 1999 ----------------- ------------- General Purpose 18 20.2 Health Care 12.5 12.3 Transportation 7.9 7.5 Public Education 7.6 9 Airport 6.2 8.8
* As a percentage of long-term investments NET ASSET VALUE AND MARKET PRICE (BASED UPON MONTH-END VALUES) DECEMBER 1989 THROUGH DECEMBER 1999 [GRAPH]
MARKET PRICE NET ASSET VALUE ------------ --------------- Dec 1989 9.1250 9.7200 9.3750 9.5800 9.3750 9.6100 9.2500 9.5600 9.3750 9.3300 9.2500 9.4300 9.2500 9.5300 9.5000 9.6600 9.2500 9.4000 9.0000 9.3100 8.8750 9.3600 9.2500 9.5600 Dec 1990 9.6250 9.6200 9.6250 9.6100 10.0000 9.7000 10.0000 9.6400 10.0000 9.7400 10.1250 9.8300 10.1250 9.8100 10.3750 9.9200 10.3750 9.9700 10.6250 10.1100 10.5000 10.1300 10.5000 10.1300 Dec 1991 10.7500 10.2400 11.1250 10.2000 10.7500 10.2200 10.8750 10.1800 11.1250 10.2500 11.1250 10.4500 11.3750 10.6900 11.8750 11.3700 11.7500 10.9900 11.5000 10.9700 10.7500 10.6800 11.3750 10.7100 Dec 1992 12.0000 10.6500 12.0000 10.6900 12.3750 11.0900 11.6250 11.0900 11.7500 11.0900 11.8750 11.0900 12.0000 11.1300 12.2500 11.0900 12.6250 11.2100 12.3750 11.3700 12.2500 11.3100 11.7500 11.0400 Dec 1993 11.7500 11.1700 12.2500 11.2700 11.7500 10.8000 10.7500 9.9300 11.1250 9.9100 11.0000 9.9700 11.1250 9.9200 11.2500 10.0000 11.0000 10.0200 10.2500 9.8200 10.0000 9.5000 10.1250 9.1000 Dec 1994 9.7500 9.3400 10.6250 9.6100 11.2500 9.9000 11.0000 9.9000 11.0000 9.7700 11.0000 9.9400 11.1250 9.7600 11.2500 9.7600 11.1250 9.8500 10.7500 9.8600 10.5000 9.9800 10.5000 10.1600 Dec 1995 10.5000 10.2400 11.0000 10.2600 11.0000 10.1600 10.3750 9.8800 10.1250 9.7600 10.0000 9.7200 9.8750 9.7600 10.1250 9.8400 10.3750 9.7700 10.2500 9.9000 10.2500 9.9700 10.3750 10.1200 Dec 1996 10.3750 10.0000 10.3750 9.9600 10.3750 10.0400 10.1250 9.8100 10.6250 9.8900 10.6250 9.9900 10.8750 10.0100 11.0625 10.3800 11.0000 10.0900 11.0000 10.1800 10.9370 10.2300 11.8700 10.2000 Dec 1997 10.8120 10.3500 11.1250 10.4200 11.0620 10.3700 10.3120 10.3200 10.2500 10.1400 10.4370 10.2800 10.8750 10.2600 10.8125 10.2300 10.7500 10.4400 11.0000 10.5700 11.1250 10.4300 11.3750 10.4100 Dec 1998 10.8125 10.3800 10.6250 10.4300 10.8750 10.2000 10.6875 10.1300 10.5000 10.1100 10.3750 9.9200 9.6250 9.5600 9.5000 9.5200 9.0620 9.2400 8.8750 9.1500 8.2500 8.9000 7.9375 8.9800 Dec 1999 7.6250 8.8000
The solid line above represents the Trust's net asset value (NAV), which indicates overall changes in value among the Trust's underlying securities. The Trust's market price is represented by the dashed line, which indicates the price the market is willing to pay for shares of the Trust at a given time. Market price is influenced by a range of factors, including supply and demand and market conditions. 8 10 PORTFOLIO HIGHLIGHTS (CONTINUED) VAN KAMPEN MUNICIPAL INCOME TRUST CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF DECEMBER 31, 1999 [PIE CHART]
AAA/AAA AA/AA A/A BBB/BAA NON-RATED ------- ----- --- ------- --------- As of December 31, 1999 58.40 4.20 12.60 22.40 2.40
AS OF JUNE 30, 1999 [PIE CHART]
AAA/AAA AA/AA A/A BBB/BAA NON-RATED ------- ----- --- ------- --------- As of June 30, 1999 63.80 3.80 10.40 20.00 2.00
Based upon the highest credit quality ratings as issued by Standard & Poor's or Moody's, respectively. DIVIDEND HISTORY FOR THE PERIOD ENDED DECEMBER 31, 1999 [BAR GRAPH]
MONTHLY DIVIDEND ---------------- Jul 1999 0.052 Aug 1999 0.052 Sep 1999 0.052 Oct 1999 0.052 Nov 1999 0.050 Dec 1999 0.050
The dividend history represents past performance of the Trust and does not predict the Trust's future distributions. 9 11 PORTFOLIO OF INVESTMENTS December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- MUNICIPAL BONDS 102.3% ALABAMA 0.4% $ 500 Alabama St Indl Dev Auth Solid Waste Disp Rev Pine City Fiber Co (b)...... 6.450% 12/01/23 $ 471,840 1,500 Lauderdale Cnty & Florence, AL Hlthcare Auth Rev (MBIA Insd)........ 5.250 07/01/19 1,337,700 ------------ 1,809,540 ------------ ARKANSAS 0.3% 1,000 Conway, AR Hosp Rev Conway Regl Hosp Rfdg............................ 8.375 07/01/11 1,040,190 ------------ CALIFORNIA 5.9% 1,755 California Hsg Fin Agy Rev Homeowner Mtg Ser D................................ * 08/01/20 356,528 5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (MBIA Insd)............. * 09/01/17 1,754,950 2,000 Duarte, CA Ctfs Partn Ser A.......... 5.250 04/01/19 1,666,920 1,500 Duarte, CA Ctfs Partn Ser A.......... 5.250 04/01/24 1,210,365 30,535 Foothill/Eastern Corridor Agy CA Toll Rd Rev Rfdg............................. * 01/15/34 3,266,940 10,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Rfdg............................. * 01/15/38 819,800 15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg............... * 01/15/30 2,105,250 3,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Conv Cap Apprec Rfdg.......... * 01/15/27 1,514,940 6,075 Orange Cnty, CA Recovery Ctfs Ser A Rfdg (MBIA Insd) (b)................. 6.000 06/01/09 6,494,054 11,120 San Diego, CA Unified Sch Dist Cap Apprec Ser A (FGIC Insd)............. * 07/01/23 2,645,114 3,000 San Joaquin Hills, CA Tran Corridor Agy Toll Rd Rev Cap Apprec Ser A (MBIA Insd).......................... * 01/15/34 363,810 22,445 San Joaquin Hills, CA Tran Corridor Agy Toll Rd Rev Cap Apprec Ser A (MBIA Insd).......................... * 01/15/35 2,555,812 ------------ 24,754,483 ------------
See Notes to Financial Statements 10 12 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- COLORADO 7.6% $ 1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470 Proj Ser B (Prerefunded @ 08/31/05).......................... 6.950% 08/31/20 $ 1,124,090 1,500 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470 Proj Ser B (Prerefunded @ 08/31/05).......................... 7.000 08/31/26 1,689,495 1,015 Colorado Edl And Cultural Fac Auth Rev Charter Sch Jefferson Academy.... 6.500 06/01/15 994,355 1,535 Colorado Edl And Cultural Fac Auth Rev Charter Sch Jefferson Academy.... 6.700 06/01/25 1,495,996 1,825 Denver, CO City & Cnty Arpt Rev Ser A.................................... 8.500 11/15/07 1,914,097 11,330 Denver, CO City & Cnty Arpt Rev Ser A (b).................................. 8.250 11/15/12 11,831,806 4,410 Denver, CO City & Cnty Arpt Rev Ser A (b).................................. 8.750 11/15/23 4,750,805 1,070 Denver, CO City & Cnty Arpt Rev Ser A (Prerefunded @ 11/15/00) (b)......... 8.250 11/15/12 1,128,379 1,590 Denver, CO City & Cnty Arpt Rev Ser A (Prerefunded @ 11/15/01)............. 8.750 11/15/23 1,736,678 3,000 Meridian Metro Dist CO Peninsular & Oriental Steam Navig Co Rfdg......... 7.500 12/01/11 3,146,280 1,850 Montrose Cnty, CO Ctfs Partn......... 6.350 06/15/06 1,929,735 ------------ 31,741,714 ------------ CONNECTICUT 0.7% 3,100 Stamford, CT Hsg Auth Multi-Family Rev Fairfield Apts Proj Rfdg......... 4.750 12/01/28 2,867,562 ------------ DISTRICT OF COLUMBIA 1.0% 550 Dist of Columbia Ctfs Partn.......... 6.875 01/01/03 559,691 2,775 Dist of Columbia Hosp Rev Medlantic Hlthcare Ser A Rfdg (MBIA Insd) (b).................................. 5.250 08/15/12 2,728,352 1,000 Dist of Columbia Rev Gonzaga College High Sch (FSA Insd).................. 5.375 07/01/29 882,180 ------------ 4,170,223 ------------ FLORIDA 2.9% 1,000 Bartow, FL Wtr & Swr Sys Rev (FGIC Insd)................................ 5.125 10/01/29 869,890 4,660 Florida St Brd Edl Cap Outlay Pub Ed Ser A Rfdg (Prerefunded @ 06/01/00)............................ * 06/01/15 1,600,570
See Notes to Financial Statements 11 13 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $ 3,500 Gulf Breeze, FL Rev Cap Fdg Ser B (MBIA Insd).......................... 4.500% 10/01/27 $ 2,710,610 4,000 Sarasota Cnty, FL Pub Hosp Brd Miles Sarasota Mem Hosp Proj Ser A (Embedded Cap) (MBIA Insd).......................... * 10/01/21 3,744,360 3,500 Tampa, FL Hosp Rev Cap Impt H Lee Moffitt Ser A................................ 5.750 07/01/29 3,125,955 ------------ 12,051,385 ------------ GEORGIA 9.0% 5,866 Fulton Cnty, GA Lease Rev (b)........ 7.250 06/15/10 6,476,078 25,000 Georgia Local Gov Ctfs Partn Grantor Trust Ser A (MBIA Insd) (b).......... 4.750 06/01/28 20,262,750 2,635 Georgia Muni Elec Auth Pwr Rev Ser A (MBIA Insd) (b)...................... 6.500 01/01/20 2,814,391 3,000 Georgia Muni Elec Auth Pwr Rev Ser B (FGIC Insd) (b)............................ 6.250 01/01/17 3,146,370 2,000 Georgia Muni Elec Auth Pwr Rev Ser Z Rfdg (MBIA Insd) (b)................. 5.500 01/01/20 1,910,180 800 Royston, GA Hosp Auth Hosp Rev Ty Cobb Hlthcare Sys, Inc............... 6.700 07/01/16 766,568 2,500 Royston, GA Hosp Auth Hosp Rev Ty Cobb Hlthcare Sys, Inc............... 6.500 07/01/27 2,321,175 ------------ 37,697,512 ------------ HAWAII 0.3% 2,480 Honolulu, HI City & Cnty Wastewtr Sys Rev (FGIC Insd).......................... * 07/01/13 1,119,398 ------------ ILLINOIS 15.7% 49,000 Chicago, IL Brd Edl Cap Apprec Sch Reform B-1 (FGIC Insd)............... * 12/01/27 8,285,410 9,000 Chicago, IL Brd Edl Chicago Sch Reform Ser A (AMBAC Insd)............ 5.250 12/01/27 7,833,780 13,645 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airls Inc Proj Ser 84A (b).................................. 8.850 05/01/18 14,396,021 2,585 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airls Inc Proj Ser 84B (b).................................. 8.850 05/01/18 2,727,278
See Notes to Financial Statements 12 14 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 4,895 Chicago, IL Pub Bldg Comm Bldg Rev Ser A (MBIA Insd).................... * 01/01/07 $ 3,387,193 1,000 Chicago, IL Ser B Rfdg (AMBAC Insd) (b).................................. 5.125% 01/01/15 933,940 1,335 Illinois Dev Fin Auth Rev Bradley Univ Proj (AMBAC Insd)............... 5.375 08/01/24 1,197,655 2,000 Illinois Edl Fac Auth Rev Lewis Univ................................. 6.125 10/01/26 1,860,360 1,380 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser D........................... 9.500 11/15/15 1,471,108 1,275 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser D (Prerefunded @ 11/15/00)............................ 9.500 11/15/15 1,358,283 540 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser E................................ 9.500 11/15/19 575,651 1,310 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser E (Prerefunded @ 11/15/00)............................ 9.500 11/15/19 1,389,714 1,000 Illinois Hlth Fac Auth Rev Lutheran Social Svcs Proj Ser A (Prerefunded @ 08/01/00) (LOC: Bank of Japan) (b)... 7.650 08/01/20 1,039,870 3,205 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys Rfdg (b)............................. 6.000 11/15/23 2,973,375 45,775 Illinois Hsg Dev Auth Multi-Family Hsg Ser A............................ * 07/01/27 5,737,896 1,250 Sangamon Cnty, IL Ctfs Partn......... 10.000 12/01/06 1,591,988 3,750 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill (FGIC Insd).............. * 01/01/15 1,527,075 4,295 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill (FGIC Insd).............. * 01/01/17 1,523,651 6,500 Will Cnty, IL Cmnty Sch Dist No 365 (FSA Insd)........................... * 11/01/17 2,191,670 7,455 Will Cnty, IL Fst Presv Dist Ser B (FGIC Insd).......................... * 12/01/12 3,571,169 ------------ 65,573,085 ------------
See Notes to Financial Statements 13 15 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- INDIANA 3.1% $ 1,370 Indiana Hlth Fac Fin Auth Hosp Rev Bartholomew Cnty Hosp Proj (Prerefunded @ 08/15/00) (FSA Insd) (b).................................. 7.750% 08/15/20 $ 1,427,581 1,565 Indiana St Edl Fac Auth Rev Univ Evansville Proj (Prerefunded @ 11/01/00) (b)........................ 8.125 11/01/10 1,647,100 12,705 St Joseph Cnty, IN Hosp Auth Hlth Sys Rev Ser A (MBIA Insd)................ 4.625 08/15/28 9,662,661 ------------ 12,737,342 ------------ KENTUCKY 0.6% 2,190 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn KY Intl Arpt Ser A Rfdg (MBIA Insd) (b)................. 6.250 03/01/09 2,331,627 ------------ LOUISIANA 2.3% 851 Lafayette, LA Pub Fin Auth Single Family Mtg Rev Ser A Rfdg............ 8.500 11/15/12 861,912 1,250 New Orleans, LA Hsg Dev Corp Multi-Family Rev Hsg Southwood Patio Ser A (FNMA Collateralized).......... 7.700 02/01/22 1,319,000 7,500 St Charles Parish, LA Pollutn Ctl Rev Energy LA Inc Proj Ser C Rfdg........ 5.350 10/01/29 7,474,725 ------------ 9,655,637 ------------ MARYLAND 1.4% 2,180 Baltimore, MD Cap Apprec Ser A (FGIC Insd)................................ * 10/15/09 1,263,114 2,470 Baltimore, MD Cap Apprec Ser A (Prerefunded @ 10/15/05) (FGIC Insd)................................ * 10/15/09 1,452,311 2,500 Maryland St Econ Dev Corp Student Hsg Rev.................................. 6.000 06/01/30 2,235,425 1,000 Maryland St Econ Dev Corp Student Hsg Rev Collegiate Hsg Towson Ser A...... 5.750 06/01/29 879,700 ------------ 5,830,549 ------------
See Notes to Financial Statements 14 16 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- MASSACHUSETTS 2.0% $ 2,440 Massachusetts St Hlth & Edl Fac Auth Rev Farmingham Union Hosp Ser B (Prerefunded @ 07/01/00)............. 8.500% 07/01/10 $ 2,528,840 1,000 Massachusetts St Indl Fin Agy Rev Higher Edl Hampshire College Proj.... 5.625 10/01/12 943,840 5,000 Massachusetts St Wtr Pollutn Abatement Trust Wtr Pollutn Abatement Rev.................................. 5.750 08/01/29 4,771,150 ------------ 8,243,830 ------------ MICHIGAN 2.2% 1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Ctr............. 5.750 05/15/18 1,013,467 4,150 Michigan St Hosp Fin Auth Rev Hosp Battle Creek Hosp Ser G Rfdg......... 9.500 11/15/15 4,418,464 1,915 Michigan St Hosp Fin Auth Rev Hosp Bay Med Cent Ser A Rfdg (Crossover Rfdg @ 07/01/00) (b)........................ 8.250 07/01/12 1,989,666 2,000 Michigan St Hosp Fin Auth Rev Hosp Hackley Hosp Ser A Rfdg.............. 5.000 05/01/18 1,612,320 ------------ 9,033,916 ------------ MINNESOTA 0.2% 1,000 Southern MN Muni Pwr Agy Pwr Supply Sys Rev Ser A Rfdg (MBIA Insd)....... 4.750 01/01/16 853,720 ------------ MISSISSIPPI 0.4% 1,500 Mississippi Hosp Equip & Fac MS Baptist Med Cent Rfdg (MBIA Insd) (b).................................. 6.000 05/01/13 1,525,185 ------------ MISSOURI 0.7% 2,735 Missouri St Hsg Dev Cmnty Mtg Rev Ser B Rfdg (FHA Gtd) (b)................. 7.000 09/01/10 2,793,803 ------------ NEBRASKA 0.8% 3,235 Nebraska Invt Fin Single Family Mtg Rev Pgm B (Inverse Fltg) (GNMA Insd) (b).................................. 9.868 01/27/00 3,380,575 ------------ NEW HAMPSHIRE 0.5% 2,340 New Hampshire St Bus Fin Auth Pollutn Ctl Rev.............................. 5.875 10/01/33 2,064,465 ------------
See Notes to Financial Statements 15 17 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- NEW JERSEY 0.9% $ 880 New Jersey Hlthcare Fac Fin Auth Rev (a).................................. 6.500% 07/01/04 $ 879,930 940 New Jersey Hlthcare Fac Fin Auth Rev (a).................................. 6.500 07/01/05 937,349 2,095 New Jersey St Tran Trust Fund Auth Tran Sys Ser A................................ 5.750 06/15/17 2,093,785 ------------ 3,911,064 ------------ NEW YORK 9.2% 7,000 New York City Ser A (b).............. 7.000 08/01/04 7,546,840 4,500 New York City Ser B (AMBAC Insd) (b).................................. 7.250 08/15/07 5,099,805 1,885 New York City Ser C (b).............. 7.000 08/15/08 1,948,845 1,915 New York City Ser C (Prerefunded @ 08/15/01).......................... 7.000 08/15/08 1,989,723 6,930 New York City Tran Auth Tran Fac Livingston Plaza Proj Rfdg (FSA Insd) (b).................................. 5.400 01/01/18 6,554,048 1,250 New York St Dorm Auth Lease Rev St Univ Dorm Facs Ser C (MBIA Insd)..... 5.500 07/01/29 1,143,963 5,190 New York St Dorm Auth Rev Insd NY Univ Ser A (AMBAC Insd) (a).......... 5.500 07/01/11 5,141,889 415 New York St Med Care Fac Fin Agy Rev Mental Hlth Svcs Fac Ser A........... 7.750 08/15/11 436,265 1,000 New York St Urban Dev Corp Sub Lien Corp Purp............................ 5.500 07/01/22 902,800 2,500 New York St Urban Dev Corp Rev Correctional Cap Fac Ser A........... 5.250 01/01/21 2,184,775 2,635 New York St Urban Dev Corp Rev Youth Fac.................................. 5.875 04/01/08 2,699,004 2,680 Port Auth NY & NJ Consolidated 119Th Ser.................................. 5.500 09/15/17 2,555,862 ------------ 38,203,818 ------------ NORTH CAROLINA 4.5% 3,000 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev Ser D........................ 6.750 01/01/26 2,974,590 15,000 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev (MBIA Insd) (b)..... 6.000 01/01/12 15,712,950 ------------ 18,687,540 ------------
See Notes to Financial Statements 16 18 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- OHIO 2.9% $ 5,000 Akron Bath Copley, OH St Twp Hosp Dist Rev Summa Hosp Ser A............ 5.375% 11/15/18 $ 4,199,350 3,755 Mason, OH Hlthcare Fac MCV Hlthcare Fac (FHA Gtd) (Prerefunded @ 02/01/01)............................ 7.625 02/01/40 3,994,607 1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd Partn Proj Rfdg (AMBAC Insd) (b)............................ 6.375 04/01/29 1,006,950 3,000 Ohio St Tpk Comm Tpk Rev Ser A Rfdg (FGIC Insd).......................... 5.500 02/15/24 2,833,530 ------------ 12,034,437 ------------ OKLAHOMA 1.4% 3,300 McAlester, OK Public Wks Auth Utility Sys Rev (FSA Insd)................... 5.750 02/01/20 3,183,741 3,000 Oklahoma Dev Fin Auth Rev St John Hlth Sys Rfdg........................ 5.750 02/15/25 2,856,420 ------------ 6,040,161 ------------ PENNSYLVANIA 6.4% 1,000 Allegheny Cnty, PA Ctfs Partn (AMBAC Insd)................................ 5.000 12/01/28 829,650 2,500 Harrisburg, PA Auth Wtr Rev (Inverse Fltg) (FGIC Insd) (b)................ 7.480 01/12/00 2,459,375 1,200 Harrisburg, PA Cap Apprec Notes Ser F Rfdg (AMBAC Insd).................... * 09/15/14 506,664 5,000 Pennsylvania St Higher Edl Assist Agy Student Ln Rev Ser B (Inverse Fltg) (MBIA Insd) (b)...................... 10.331 01/08/00 5,793,750 1,770 Philadelphia, PA Auth Indl Dev Rev Edl Comm Foreign Med Grads (MBIA Insd)................................ 5.000 06/01/18 1,553,600 1,000 Philadelphia, PA Auth Indl Dev Rev Edl Comm Foreign Med Grads (MBIA Insd)................................ 5.000 06/01/21 855,050 7,385 Philadelphia, PA Sch Dist Ser A (MBIA Insd)................................ 4.500 04/01/18 5,964,938 1,750 Philadelphia, PA Sch Dist Cap Apprec Ser A Rfdg (AMBAC Insd).............. * 07/01/01 1,633,398 2,000 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser A Rfdg (b).................. 6.000 12/01/13 2,087,940 4,745 Sayre, PA Hlthcare Fac Auth Rev VHA Cap Asset Fin Pgm Ser C (AMBAC Insd) (b).................................. 7.700 12/01/15 4,898,121 ------------ 26,582,486 ------------
See Notes to Financial Statements 17 19 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- RHODE ISLAND 0.2% $ 1,000 Providence, RI Pub Bldg Auth Genl Rev Ser B (FSA Insd) (b)................. 7.250% 12/15/10 $ 1,046,340 ------------ SOUTH CAROLINA 0.4% 1,610 South Carolina St Hsg Fin & Dev Auth Homeowner Mtg Ser A (b).............. 7.400 07/01/23 1,647,159 ------------ SOUTH DAKOTA 0.3% 1,375 Deadwood, SD Ctfs Partn (ACA Insd) (a).................................. 6.375 11/01/20 1,347,706 ------------ TENNESSEE 1.1% 4,605 Tennessee Hsg Dev Agy Mtg Fin Ser A (b).................................. 7.125 07/01/26 4,728,414 ------------ TEXAS 9.0% 7,000 Austin, TX Rev Sub Lien Ser A Rfdg (MBIA Insd).......................... 4.250 05/15/28 5,081,090 7,065 Dallas Cnty, TX Util & Reclamation Dist Cap Apprec (MBIA Insd).......... * 02/15/20 1,644,237 2,790 Dallas Fort Worth, TX Intl Arpt Fac Imp Corp Rev......................... 6.000 11/01/14 2,651,839 1,800 Gulf Coast Wtr Auth TX Wtr Sys Contract Rev (FGIC Insd)............. 5.000 08/15/17 1,603,026 4,820 Harris Cnty, TX Toll Rd (Prerefunded @ 08/15/09) (AMBAC Insd)............. * 08/15/18 1,543,846 1,000 Harris Cnty, TX Toll Rd (Prerefunded @ 08/15/09) (AMBAC Insd)............. * 08/15/21 260,560 10,000 Matagorda Cnty, TX Nav Dist No 1 Houton Ltg Rfdg (AMBAC Insd)......... 5.125 11/01/28 8,487,900 1,900 Port Arthur, TX Navig Dist Rfdg (AMBAC Insd)......................... 4.875 03/01/19 1,598,166 4,000 Rockwall, TX Ind Sch Dist Cap Apprec Rfdg (PSF Gtd)....................... * 08/15/20 1,084,520 4,395 Rockwall, TX Ind Sch Dist Cap Apprec Rfdg (PSF Gtd)....................... * 08/15/21 1,113,869 3,525 Texas Muni Pwr Agy Rev Cap Apprec Rfdg (AMBAC Insd).................... * 09/01/07 2,349,871 8,220 Texas St Pub Ppty Fin Corp Rev Mental Hlth & Retardation Rfdg (FSA Insd) (b).................................. 5.500 09/01/13 8,137,636
See Notes to Financial Statements 18 20 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 1,475 Waxahachie, TX Cmnty Dev Corp Sales Tax Rev (MBIA Insd).................. * 08/01/21 $ 374,753 1,270 Waxahachie, TX Cmnty Dev Corp Sales Tax Rev (MBIA Insd).................. * 08/01/22 301,498 1,250 West Side Calhoun Cnty, TX Navig Dist Solid Waste Disp Union Carbide Chem & Plastics (b)......................... 8.200% 03/15/21 1,305,450 ------------ 37,538,261 ------------ UTAH 1.7% 5,210 Salt Lake City, UT Arpt Rev Delta Airls Inc Proj (b)................... 7.900 06/01/17 5,322,223 1,000 Salt Lake Cnty, UT College Rev Westminster College Proj............. 5.750 10/01/27 901,100 870 Utah St Hsg Fin Agy Single Family Mtg Ser B Class 2 (b).................... 6.250 07/01/14 888,592 ------------ 7,111,915 ------------ VIRGINIA 3.7% 1,970 Richmond, VA (FSA Insd) (a).......... 5.250 01/15/09 1,942,873 4,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/12 3,932,680 4,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/13 3,895,320 3,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/16 2,852,370 3,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/17 2,832,840 ------------ 15,456,083 ------------ WEST VIRGINIA 0.6% 2,480 South Charleston, WV Indl Dev Rev Union Carbide Chem & Plastics Ser A (b).................................. 8.000 08/01/20 2,558,046 ------------ WISCONSIN 1.2% 2,835 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/11 1,458,012 1,495 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/12 719,977 1,565 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/13 702,763 1,670 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/14 697,893
See Notes to Financial Statements 19 21 PORTFOLIO OF INVESTMENTS (CONTINUED) December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- WISCONSIN (CONTINUED) $ 1,000 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/16 $ 361,610 1,000 Southeast WI Professional Baseball Pk Dist Sales Tax Rev Ser A Rfdg (MBIA Insd)................................ 5.500% 12/15/26 938,000 ------------ 4,878,255 ------------ PUERTO RICO 0.9% 1,000 Puerto Rico Indl Tourist Edl Med & Environmental Control Fac Financing Auth Higher Edl Rev.................. 5.375 02/01/19 889,430 3,000 Puerto Rico Pub Bldgs Auth Gtd Pub Ed & Hlth Fac........................... 5.700 07/01/16 2,954,340 ------------ 3,843,770 ------------ TOTAL LONG-TERM INVESTMENTS 102.3% (Cost $435,653,868)................................................ 426,891,196 SHORT-TERM INVESTMENTS 0.4% (Cost $1,500,000).................................................. 1,500,000 ------------ TOTAL INVESTMENTS 102.7% (Cost $437,153,868)................................................ 428,391,196 LIABILITIES IN EXCESS OF OTHER ASSETS (2.7%)........................ (11,049,271) ------------ NET ASSETS 100.0%................................................... $417,341,925 ============
* Zero coupon bond (a) Securities purchased on a when issued or delayed delivery basis. (b) Assets segregated as collateral for when issued or delayed delivery purchase commitments and open futures transactions. ACA--American Capital Access AMBAC--AMBAC Indemnity Corporation FGIC--Financial Guaranty Insurance Company FHA--Federal Housing Administration FNMA--Federal National Mortgage Association FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance Corp. PSF--Permanent School Fund Guaranty See Notes to Financial Statements 20 22 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- ASSETS: Total Investments (Cost $437,153,868)....................... $428,391,196 Cash........................................................ 90,665 Receivables: Investments Sold.......................................... 8,705,229 Interest.................................................. 5,563,427 Variation Margin on Futures............................... 5,469 Other....................................................... 21,112 ------------ Total Assets.......................................... 442,777,098 ------------ LIABILITIES: Payables: Investments Purchased..................................... 24,576,495 Income Distributions -- Common and Preferred Shares....... 352,774 Investment Advisory Fee................................... 213,681 Affiliates................................................ 19,815 Accrued Expenses............................................ 155,376 Trustees' Deferred Compensation and Retirement Plans........ 117,032 ------------ Total Liabilities..................................... 25,435,173 ------------ NET ASSETS.................................................. $417,341,925 ============ NET ASSETS CONSIST OF: Preferred Shares ($.01 par value, authorized 1,000,000 shares, 330 issued with liquidation preference of $500,000 per share)................................................ $165,000,000 ------------ Common Shares ($.01 par value with an unlimited number of shares authorized, 28,684,985 shares issued and outstanding).............................................. 286,850 Paid in Surplus............................................. 265,829,515 Accumulated Undistributed Net Investment Income............. 941,736 Accumulated Net Realized Loss............................... (6,123,183) Net Unrealized Depreciation................................. (8,592,993) ------------ Net Assets Applicable to Common Shares................ 252,341,925 ------------ NET ASSETS.................................................. $417,341,925 ============ NET ASSET VALUE PER COMMON SHARE ($252,341,925 divided by 28,684,985 shares outstanding)............................ $ 8.80 ============
See Notes to Financial Statements 21 23 STATEMENT OF OPERATIONS For the Six Months Ended December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest.................................................... $ 13,411,077 ------------ EXPENSES: Investment Advisory Fee..................................... 1,291,398 Preferred Share Maintenance................................. 217,528 Custody..................................................... 16,330 Trustees' Fees and Related Expenses......................... 10,727 Legal....................................................... 9,200 Other....................................................... 153,745 ------------ Total Expenses.......................................... 1,698,928 ------------ NET INVESTMENT INCOME....................................... $ 11,712,149 ============ REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ (7,094,601) Options................................................... 231,709 Futures................................................... 3,252,241 ------------ Net Realized Loss........................................... (3,610,651) ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 9,463,175 ------------ End of the Period: Investments............................................. (8,762,672) Futures................................................. 169,679 ------------ (8,592,993) ------------ Net Unrealized Depreciation During the Period............... (18,056,168) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(21,666,819) ============ NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (9,954,670) ============
See Notes to Financial Statements 22 24 STATEMENT OF CHANGES IN NET ASSETS For the Six Months Ended December 31, 1999 and the Year Ended June 30, 1998 (Unaudited) - --------------------------------------------------------------------------------
Six Months Ended Year Ended December 31, 1999 June 30, 1999 - ----------------------------------------------------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income............................ $ 11,712,149 $ 24,072,047 Net Realized Gain/Loss........................... (3,610,651) 3,804,623 Net Unrealized Depreciation During the Period.... (18,056,168) (23,920,190) ------------ ------------ Change in Net Assets from Operations............. (9,954,670) 3,956,480 ------------ ------------ Distributions from Net Investment Income: Common Shares.................................. (8,834,911) (18,745,835) Preferred Shares............................... (2,980,455) (5,498,326) ------------ ------------ Total Distributions.............................. (11,815,366) (24,244,161) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..................................... (21,770,036) (20,287,681) FROM CAPITAL TRANSACTIONS: Value of Common Shares Issued Through Dividend Reinvestment.......................... -0- 2,055,345 ------------ ------------ TOTAL DECREASE IN NET ASSETS..................... (21,770,036) (18,232,336) NET ASSETS: Beginning of the Period.......................... 439,111,961 457,344,297 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $941,736 and $1,044,953, respectively)...................... $417,341,925 $439,111,961 ============ ============
See Notes to Financial Statements 23 25 FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for one common share of the Trust outstanding throughout the periods indicated. (Unaudited) - --------------------------------------------------------------------------------
Six Months Ended --------------------------------------------- December 31, 1999 1999 1998 1997 1996 - --------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of the Period (a)............. $ 9.556 $10.263 $10.014 $ 9.758 $9.760 ----------------- ------- ------- ------- ------ Net Investment Income........ .409 .841 .890 .916 .940 Net Realized and Unrealized Gain/Loss.................. (.756) (.700) .261 .264 .048 ----------------- ------- ------- ------- ------ Total from Investment Operations................. (.347) .141 1.151 1.180 .988 ----------------- ------- ------- ------- ------ Less: Distributions from Net Investment Income: Paid to Common Shareholders........... .308 .656 .692 .720 .770 Common Share Equivalent of Distributions Paid to Preferred Shareholders........... .104 .192 .210 .204 .220 Distributions from and in Excess of Net Realized Gain Paid to Common Shareholders............. -0- -0- -0- -0- -0- ----------------- ------- ------- ------- ------ Total Distributions.......... .412 .848 .902 .924 .990 ----------------- ------- ------- ------- ------ Net Asset Value, End of the Period..................... $ 8.797 $ 9.556 $10.263 $10.014 $9.758 ================= ======= ======= ======= ====== Market Price Per Share at End of the Period.............. $ 7.625 $ 9.625 $10.875 $10.875 $9.875 Total Investment Return at Market Price (a)........... (17.92%)** (5.68%) 6.85% 18.32% (4.27%) Total Return at Net Asset Value (b).................. (4.79%)** (.67%) 9.62% 10.24% 8.02% Net Assets at End of the Period (In millions)....... $ 417.3 $ 439.1 $ 457.3 $ 448.2 $438.7 Ratio of Expenses to Average Net Assets Applicable to Common Shares*............. 1.28% 1.24% 1.23% 1.28% 1.31% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c)................. 6.60% 6.35% 6.64% 7.18% 7.26% Portfolio Turnover........... 34%** 98% 103% 53% 29% * Ratio of Expenses to Average Net Assets Including Preferred Shares.................... .79% .79% .79% .80% .82%
(a) Total Investment Return at Market Price reflects the change in market value of the common shares for the period indicated with reinvestment of dividends in accordance with the Trust's dividend reinvestment plan. (b) Total Return at Net Asset Value (NAV) reflects the change in value of the Trust's assets with reinvestment of dividends based upon NAV. (c) Net Investment Income is adjusted for common share equivalent of distributions paid to preferred shareholders. ** Non-Annualized 24 26 - --------------------------------------------------------------------------------
Year Ended June 30, - ------------------------------------------- 1995 1994 1993 1992 1991 - ----------------------------------------------------- $ 9.924 $11.133 $10.688 $ 9.805 $ 9.534 ------- ------- ------- ------- ------- .964 1.000 1.078 1.095 1.093 (.065) (1.214) .520 .848 .295 ------- ------- ------- ------- ------- .899 (.214) 1.598 1.943 1.388 ------- ------- ------- ------- ------- .840 .840 .829 .791 .725 .223 .155 .162 .238 .337 -0- -0- .162 .031 .055 ------- ------- ------- ------- ------- 1.063 .995 1.153 1.060 1.117 ------- ------- ------- ------- ------- $ 9.760 $ 9.924 $11.133 $10.688 $ 9.805 ======= ======= ======= ======= ======= $11.125 $11.125 $12.000 $11.375 $10.125 8.59% (0.05%) 15.20% 21.65% 18.71% 7.24% (3.63%) 13.97% 18.08% 11.61% $ 436.1 $ 437.7 $ 467.9 $ 452.7 $ 426.7 1.33% 1.28% 1.25% 1.35% 1.46% 7.56% 7.86% 8.41% 8.41% 7.88% 38% 45% 45% 27% 69% .83% .82% .80% .84% .89%
25 27 NOTES TO FINANCIAL STATEMENTS December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Municipal Income Trust (the "Trust") is registered as a diversified closed-end management investment company under the Investment Company Act of 1940, as amended. The Trust's investment objective is to provide a high level of current income exempt from federal income taxes with safety of principal through investment in a diversified portfolio of investment grade tax-exempt municipal securities. The Trust commenced investment operations on August 26, 1988. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. A. SECURITY VALUATION--Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services are valued at fair value using procedures established in good faith by the Board of Trustees. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost. B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. 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 maintain, in a segregated account with its custodian, assets having an aggregate value at least equal to the amount of the when issued or delayed delivery purchase commitments until payment is made. C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond premium and original issue discount are amortized over the expected life of each applicable security. 26 28 NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. The Trust intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At June 30, 1999, the Trust had an accumulated capital loss carryforward for tax purposes of $2,492,182 which will expire on June 30, 2004. At December 31, 1999, for federal income tax purposes, cost of long- and short-term investments is $437,153,868; the aggregate gross unrealized appreciation is $11,505,180 and the aggregate gross unrealized depreciation is $20,267,852, resulting in net unrealized depreciation on long- and short-term investments of $8,762,672. E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from net investment income to common shareholders monthly. Net realized gains, if any, are distributed 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. Due to inherent differences in the recognition of certain expenses under generally accepted accounting principles and for federal income tax purposes, the amount of net investment income/loss may differ between book and federal income tax purposes for a particular period. These differences are temporary in nature, but may result in book basis net investment losses. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Trust's Investment Advisory Agreement, Van Kampen Investment Advisory Corp. (the "Adviser") will provide investment advice and facilities to the Trust for an annual fee payable monthly of .60% of the average net assets of the Trust. For the six months ended December 31, 1999, the Trust recognized expenses of approximately $4,700 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust is an affiliated person. For the six months ended December 31, 1999, the Trust recognized expenses of approximately $52,500 representing Van Kampen Funds Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Trust. 27 29 NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Certain officers and trustees of the Trust are also officers and directors of Van Kampen. The Trust does not compensate its officers or trustees who are officers of Van Kampen. The Trust provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation to a later date. Benefits under the retirement plan are payable for a ten-year period and are based upon each trustee's years of service to the Trust. The maximum annual benefit per trustee under the plan is $2,500. 3. CAPITAL TRANSACTIONS At December 31, 1999 and June 30, 1999, respectively, common shares paid in surplus aggregated $265,829,515 and $265,829,515, respectively. Transactions in common shares were as follows:
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 1999 JUNE 30, 1999 - --------------------------------------------------------------------------- Beginning Shares........................ 28,684,985 28,485,339 Shares Issued Through Dividend Reinvestment.......................... -0- 199,646 ---------- ---------- Ending Shares........................... 28,684,985 28,684,985 ========== ==========
4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $150,657,593 and $165,748,264, respectively. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Trust has a variety of reasons to use derivative instruments, such as to attempt to protect the Trust against possible changes in the market value of its portfolio and to manage the portfolio's effective yield, maturity and duration. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when exercising a call option contract or taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the option or futures contract. 28 30 NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Summarized below are the specific types of derivative financial instruments used by the Trust. A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the obligation to buy (call) or sell (put) an underlying item at a fixed exercise price during a specified period. These contracts are generally used by the Trust to manage the portfolio's effective maturity and duration. Transactions in options, each with a par value of $100,000, for the six months ended December 31, 1999, were as follows:
CONTRACTS PREMIUM - ----------------------------------------------------------------------- Outstanding at June 30, 1999.................... -0- $ -0- Options Written and Purchased (Net)............. 1,175 372,926 Options Terminated in Closing Transactions (Net)......................................... (750) (330,712) Options Expired (Net)........................... (425) (42,214) ----- --------- Outstanding at December 31, 1999................ -0- $ -0- ===== =========
B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond Index and typically closes the contract prior to the delivery date. These contracts are generally used to manage the portfolio's effective maturity and duration. Upon entering into futures contracts, the Trust maintains, in a segregated account with its custodian, cash or liquid securities with a value equal to its obligation under the futures contracts. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. 29 31 NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Transactions in futures contracts for the six months ended December 31, 1999, were as follows:
CONTRACTS - --------------------------------------------------------------------- Outstanding at June 30, 1999.............................. 420 Futures Opened............................................ 1,296 Futures Closed............................................ (1,541) ------ Outstanding at December 31, 1999.......................... 175 ======
The futures contracts outstanding as of December 31, 1999, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION - ------------------------------------------------------------------------- Short Contracts Municipal Bond Future, Mar 2000-- (Current Notional Value of $93,438 per contract)................................. 175 $ 169,679 === =========
C. INDEXED SECURITIES--These instruments are identified in the portfolio of investments. The price of these securities may be more volatile than the price of a comparable fixed rate security. An Inverse Floating security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specified factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. These instruments are typically used by the Trust to enhance the yield of the portfolio. An Embedded Cap security includes a cap strike level such that the coupon payment may be supplemented by cap payments if the floating rate index upon which the cap is based rises above the strike level. The Trust invests in these instruments as a hedge against a rise in the short-term interest rates which it pays on its preferred shares. 6. PREFERRED SHARES The Trust has outstanding 330 shares of rate adjusted tax-exempt preferred shares ("Rates") in three series of 110 shares each. Dividends are cumulative and the rate on each series is currently reset every 28 days through an auction process. The average rate in effect on December 31, 1999, was 4.067%. During the six months ended December 31, 1999, the rates ranged from 3.247% to 4.200%. 30 32 NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- 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 Preferred Share Maintenance expense. The Rates are redeemable at the option of the Trust in whole or in part at a price of $500,000 per share plus accumulated and unpaid dividends. The Trust is subject to certain asset coverage tests, and the Rates are subject to mandatory redemption if the tests are not met. 31 33 DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re- registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's Common Shares, resulting in the acquisition of fewer Common Shares than if the dividend or distribution had been paid in Common Shares issued by the Trust. All reinvestments are in full and fractional Common shares and are 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 distribution paid subsequent to written notice of the change sent to all Common Shareholders of the Trust at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days written notice to all Common Shareholders of the Trust. COSTS OF THE PLAN The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. No other charges will be made to participants for reinvesting dividends or capital gains distributions, except for certain brokerage commissions, as described above. TAX IMPLICATIONS You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. RIGHT TO WITHDRAW Plan participants may withdraw at any time by calling 1-800-341-2929 or by writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266- 8200. 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 Funds Inc. Attn: Closed-End Funds 2800 Post Oak Blvd. Houston, TX 77056 32 34 VAN KAMPEN FUNDS GROWTH Aggressive Growth* American Value* Emerging Growth Enterprise Equity Growth Focus Equity Growth Mid Cap Growth Pace Small Cap Value Technology GROWTH AND INCOME Comstock Equity Income Growth and Income Harbor Real Estate Securities Utility Value GLOBAL/INTERNATIONAL Asian Growth Emerging Markets European Equity Global Equity Global Equity Allocation Global Fixed Income* Global Franchise Global Government Securities* Global Managed Assets* International Magnum Latin American Strategic Income Worldwide High Income INCOME Corporate Bond Government Securities High Income Corporate Bond High Yield High Yield & Total Return Limited Maturity Government U.S. Government U.S. Government Trust for Income CAPITAL PRESERVATION Reserve Tax Free Money SENIOR LOAN Prime Rate Income Trust Senior Floating Rate TAX FREE California Insured Tax Free Florida Insured Tax Free Income High Yield Municipal** Insured Tax Free Income Intermediate Term Municipal Income Municipal Income New York Tax Free Income Pennsylvania Tax Free Income Tax Free High Income To find out more about any of these funds, ask your financial advisor for a prospectus, which contains more complete information, including sales charges, risks, and ongoing expenses. Please read it carefully before you invest or send money. To view a current Van Kampen fund prospectus or to receive additional fund information, choose from one of the following: - - visit our Web site at WWW.VANKAMPEN.COM--to view a prospectus, select Download Prospectus - - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time. Telecommunications Device for the Deaf users, call 1-800-421-2833. - - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us * Closed to new investors ** Open to new investors for a limited time 33 35 VAN KAMPEN MUNICIPAL INCOME TRUST BOARD OF TRUSTEES DAVID C. ARCH ROD DAMMEYER HOWARD J KERR DENNIS J. MCDONNELL* THEODORE A. MYERS RICHARD F. POWERS, III* - Chairman HUGO F. SONNENSCHEIN WAYNE W. WHALEN* OFFICERS RICHARD F. POWERS, III* President DENNIS J. MCDONNELL* Executive Vice President and Chief Investment Officer A. THOMAS SMITH III* Vice President and Secretary JOHN L. SULLIVAN* Vice President, Treasurer, and Chief Financial Officer PETER W. HEGEL* MICHAEL H. SANTO* EDWARD C. WOOD, III* Vice Presidents INVESTMENT ADVISER VAN KAMPEN INVESTMENT ADVISORY CORP. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02105 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT ACCOUNTANTS KPMG LLP 303 East Wacker Drive Chicago, Illinois 60601 * "Interested" persons of the Trust, as defined in the Investment Company Act of 1940. (C) Van Kampen Funds Inc., 2000 All rights reserved. (SM) denotes a service mark of Van Kampen Funds Inc. 34 36 YEAR 2000 UPDATE As we enter the new century, it's "business as usual" for Van Kampen. Thank you for the confidence you showed in us during the changeover on January 1, 2000, and for entrusting us with your investment portfolio. We look forward to continuing to serve your investment needs. 35 37 VAN KAMPEN FUNDS YOUR NOTES: 36 -----END PRIVACY-ENHANCED MESSAGE-----