-----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, Acj9KC/537gDwI4WM9YIsL6fmGmzBwOvBPoGSt1KFe5bSrs1M2KXIXNnd7jHRBpc pCIFSiv6N0Ln1r+2+tfVew== 0000950137-02-004669.txt : 20020827 0000950137-02-004669.hdr.sgml : 20020827 20020827171006 ACCESSION NUMBER: 0000950137-02-004669 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020827 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000818305 IRS NUMBER: 366866160 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05230 FILM NUMBER: 02749934 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 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 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST DATE OF NAME CHANGE: 19960102 N-30D 1 c70762nv30d.txt ANNUAL REPORT DATED JUNE 30, 2002 Table of Contents OVERVIEW LETTER TO SHAREHOLDERS 1 ECONOMIC SNAPSHOT 2 PERFORMANCE SUMMARY RETURN HIGHLIGHTS 4 PORTFOLIO AT A GLANCE CREDIT QUALITY 6 TWELVE-MONTH DIVIDEND HISTORY 6 TOP FIVE SECTORS 7 NET ASSET VALUE AND COMMON SHARE MARKET PRICE 7 Q&A WITH YOUR PORTFOLIO MANAGERS 8 GLOSSARY OF TERMS 11 BY THE NUMBERS YOUR TRUST'S INVESTMENTS 12 FINANCIAL STATEMENTS 23 NOTES TO FINANCIAL STATEMENTS 28 REPORT OF INDEPENDENT AUDITORS 32 DIVIDEND REINVESTMENT PLAN 33 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES 35 RESULTS OF SHAREHOLDER VOTES 36 TRUSTEE AND OFFICER INFORMATION 37
You have a time-tested partner in Van Kampen. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE OVERVIEW LETTER TO SHAREHOLDERS July 22, 2002 Dear Shareholder, Due to events in the markets and the well-publicized controversies surrounding certain companies, the recent months have been challenging for many investors. Against this backdrop, you may be re-evaluating your investments. In this regard, your financial advisor is a particularly valuable resource. Your advisor can help you review your current asset allocation and determine whether it remains appropriate for your goals, risk tolerance and time horizon. You also have a time-tested partner in Van Kampen. With roots extending to 1927, our legacy spans other market downturns and periods of uncertainty. While the causes of turbulence have changed, our generations of experience have taught us the enduring value of patience, discipline and long-term focus. Thank you for your continued trust in Van Kampen. We appreciate the opportunity to help you and your loved ones enjoy life's true wealth--family, friends and life's daily pleasures. Sincerely, [SIG] Richard F. Powers, III President and CEO Van Kampen Investment Advisory Corp. 1 ECONOMIC SNAPSHOT THE ECONOMY OVERALL ECONOMIC ACTIVITY INCREASED MODESTLY IN JUNE, CONTINUING THE TREND THAT HAS BEEN EVIDENT THROUGHOUT 2002. SIGNS OF GROWTH WERE EVIDENT IN MANY OF THE STATISTICAL MEASURES RELEASED THROUGHOUT THE MONTH. FOR EXAMPLE, MANUFACTURING ACTIVITY, WHICH SLOWLY GAINED MOMENTUM IN RECENT MONTHS, CLIMBED TO ITS HIGHEST LEVEL SINCE JUNE 1999. AND, DESPITE LESS-THAN-ANTICIPATED EMPLOYMENT GROWTH AND INCREASING UNCERTAINTY IN WORLD ECONOMICS AND POLITICS, U.S. CONSUMERS CONTINUED TO SUPPORT DOMESTIC GROWTH THROUGH THE PURCHASE OF HOUSES, CARS AND EVERYDAY MERCHANDISE AND SERVICES. FINALLY, AS IF ACKNOWLEDGING HOW FAR THE ECONOMY HAS COME--AND HOW FAR IT STILL HAS TO GO--THE FEDERAL RESERVE BOARD CHOSE TO LEAVE SHORT-TERM INTEREST RATES AT THE REMARKABLY LOW LEVELS THAT PREVAILED THROUGHOUT THE FIRST HALF OF 2002. 2 U.S. GROSS DOMESTIC PRODUCT SEASONALLY ADJUSTED ANNUALIZED RATES (March 31, 2000--March 31, 2002) [BAR GRAPH]
U.S. GROSS DOMESTIC PRODUCT --------------------------- Mar 00 4.80 Jun 00 5.70 Sep 00 1.30 Dec 00 1.90 Mar 01 1.30 Jun 01 0.30 Sep 01 -1.30 Dec 01 1.70 Mar 02 6.10
Source: Bureau of Economic Analysis INTEREST RATES AND INFLATION (June 30, 2000--June 30, 2002) [LINE GRAPH]
INTEREST RATES INFLATION -------------- --------- Jun 00 6.50 3.70 6.50 3.70 6.50 3.40 Sept 00 6.50 3.50 6.50 3.40 6.50 3.40 Dec 00 6.50 3.40 5.50 3.70 5.50 3.50 Mar 01 5.00 2.90 4.50 3.30 4.00 3.60 Jun 01 3.75 3.20 3.75 2.70 3.50 2.70 Sept 01 3.00 2.60 2.50 2.10 2.00 1.90 Dec 01 1.75 1.60 1.75 1.10 1.75 1.10 Mar 02 1.75 1.50 1.75 1.60 1.75 1.20 Jun 02 1.75 1.10
Interest rates are represented by the closing midline federal funds target rate on the last day of each month. Inflation is indicated by the annual percentage change of the Consumer Price Index for all urban consumers at the end of each month. Source: Bloomberg 3 PERFORMANCE SUMMARY RETURN HIGHLIGHTS (as of June 30, 2002) - ------------------------------ NYSE Ticker Symbol - VMT - ------------------------------
- ----------------------------------------------------------------------- One-year total return(1) 5.64% - ----------------------------------------------------------------------- Five-year average annual total return(1) 2.36% - ----------------------------------------------------------------------- Ten-year average annual total return(1) 4.75% - ----------------------------------------------------------------------- Life-of-Trust average annual total return(1) 6.55% - ----------------------------------------------------------------------- Commencement date 08/26/88 - ----------------------------------------------------------------------- Distribution rate as a % of closing common share market price(2) 5.97% - ----------------------------------------------------------------------- Taxable-equivalent distribution rate as a % of closing common share market price(3) 9.72% - ----------------------------------------------------------------------- Net asset value $9.99 - ----------------------------------------------------------------------- Closing common share market price $8.85 - ----------------------------------------------------------------------- One-year high common share market price (09/17/01) $9.25 - ----------------------------------------------------------------------- One-year low common share market price (12/20/01) $8.22 - ----------------------------------------------------------------------- Preferred share (Series A) rate(4) 1.273% - ----------------------------------------------------------------------- Preferred share (Series B) rate(4) 1.499% - ----------------------------------------------------------------------- Preferred share (Series C) rate(4) 1.310% - -----------------------------------------------------------------------
4 (1) Total return 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. (2) Distribution rate represents the monthly annualized distributions of the Trust at the end of the period and not the earnings of the Trust. (3) The taxable-equivalent distribution rate is calculated assuming a 38.6% federal income tax rate. (4) See "Notes to Financial Statements" footnote #4, 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 is no guarantee of future results. Investment return, common share market price and net asset value will fluctuate and Trust shares, when sold, may be worth more or less than their original cost. An investment in the Trust is subject to investment risks, and you could lose money on your investment in the Trust. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. 5 PORTFOLIO AT A GLANCE CREDIT QUALITY (as a percentage of long-term investments)
As of June 30, 2002 - - AAA/Aaa............ 72.8% [PIE CHART] - - AA/Aa.............. 12.2% - - A/A................ 5.3% - - BBB/Baa............ 6.8% - - Non-Rated.......... 2.9% As of June 30, 2001 - - AAA/Aaa............ 72.2% [PIE CHART] - - AA/Aa.............. 7.8% - - A/A................ 6.4% - - BBB/Baa............ 8.9% - - Non-Rated.......... 4.7%
Based upon the credit quality ratings as issued by Standard & Poor's Credit Market Services/Moody's Investor Services, respectively. Subject to change daily. TWELVE-MONTH DIVIDEND HISTORY (for the year ended June 30, 2002, for common shares) [BAR GRAPH]
DIVIDENDS --------- 7/01 0.044 8/01 0.044 9/01 0.044 10/01 0.044 11/01 0.044 12/01 0.044 1/02 0.044 2/02 0.044 3/02 0.044 4/02 0.044 5/02 0.044 6/02 0.044
The dividend history represents dividends that were paid on the trust and is no guarantee of the trust's future dividends. 6 TOP FIVE SECTORS (as a percentage of long-term investments) [BAR GRAPH]
JUNE 30, 2002 JUNE 30, 2001 ------------- ------------- General Purpose 27.20 24.70 Transportation 12.40 10.40 Wholesale Electric 8.70 6.60 Health Care 8.30 10.20 Public Education 7.90 7.40
Subject to change daily. NET ASSET VALUE AND COMMON SHARE MARKET PRICE (based upon quarter-end values--June 1992 through June 2002) [LINE GRAPH]
NET ASSET VALUE MARKET PRICE --------------- ------------ 6/92 10.6900 11.3750 10.9700 11.5000 10.6500 12.0000 11.0900 11.6250 6/93 11.1300 12.0000 11.3700 12.3750 11.1700 11.7500 9.9300 10.7500 6/94 9.9200 11.1250 9.8200 10.2500 9.3400 9.7500 9.9000 11.0000 6/95 9.7600 11.1250 9.8600 10.7500 10.2400 10.5000 9.8800 10.3750 6/96 9.7600 9.8750 9.9000 10.2500 10.0000 10.3750 9.8100 10.1250 6/97 10.0100 10.8750 10.1800 11.0000 10.3500 10.8120 10.3200 10.3120 6/98 10.2600 10.8750 10.5700 11.0000 10.3800 10.8125 10.1300 10.6875 6/99 9.5600 9.6250 9.1500 8.8750 8.8000 7.6250 9.0200 8.0625 6/00 9.0000 8.6875 9.1300 8.3750 9.6700 8.3750 9.7200 8.7000 6/01 9.6200 8.8900 9.9400 8.9000 9.6100 8.4800 9.5500 8.4100 6/02 9.9900 8.8500
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 common share 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. Common share market price is influenced by a range of factors, including supply and demand and market conditions. 7 Q&A WITH YOUR PORTFOLIO MANAGERS WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGEMENT TEAM OF THE VAN KAMPEN MUNICIPAL INCOME TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE 12-MONTH PERIOD ENDED JUNE 30, 2002. THE TRUST IS MANAGED BY THE ADVISER'S MUNICIPAL FIXED-INCOME TEAM. CURRENT MEMBERS(1) OF THE TEAM INCLUDE THOMAS BYRON, VICE PRESIDENT, ROBERT WIMMEL, VICE PRESIDENT, AND JACK REYNOLDSON, EXECUTIVE DIRECTOR. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE TRUST'S PERFORMANCE. (1) Team members may change at any time without notice. Q WHAT WAS THE MARKET ENVIRONMENT OF THE PAST 12 MONTHS? A The past 12 months have been generally favorable for municipal bonds. While there have been both up and down periods within that time, the general trend has been for strong performance and increasing investor appetite. Much of the performance of municipal bonds over the first half of the period was driven by falling interest rates. The vigilance of the Federal Reserve Board ("the Fed") resulted in a string of interest-rate cuts that lasted through the end of 2001. Falling rates are generally beneficial for bonds, whose prices move in the opposite direction of their yields. Rates did not fall evenly across the yield curve, however. Uncertainty about the future prospects for economic growth kept longer-term rates higher than short-term rates, and the differential between the two increased throughout the period. The yield curve steepened still further through the second half of the period when it became clear that a turnaround in the economy was unlikely to happen as quickly as had been anticipated. During that time, investors also seemed to develop a growing mistrust of the equity markets in the wake of an ongoing string of high-profile accounting scandals. These scandals combined with a generally unfavorable equity market to make bonds and bond funds an increasingly popular choice for individual investors. Issuance in this environment was very heavy, and by some measures seems on track in the first six months of 2002 to surpass 1993, the previous record issuance year. Much of this activity has been driven by municipalities seeking to lock in lower financing rates by either refinancing existing debt or issuing entirely new bonds. In some cases, declining tax receipts have led issuers to the capital markets to help finance their ongoing activities. The surge in supply was generally well balanced against investors' appetite for municipal bonds. 8 Q HOW DID THE TRUST PERFORM IN THIS ENVIRONMENT? A The portfolio continued to offer a competitive level of tax-exempt income. The trust's monthly dividend of $.044 per share translated to a distribution rate of 5.97 percent based on the trust's closing common share market price on June 30, 2002. Based on these figures, investors would have to earn a distribution rate of 9.72 percent on a taxable investment (for an investor in the 38.6 percent federal income tax bracket) to match the tax-exempt yield provided by the trust. For the 12 months ended June 30, 2002, the trust produced a total return of 5.64 percent based on common share market price. This reflects a decrease in common share market price from $8.89 per share on June 30, 2001, to $8.85 per share on June 30, 2002. Of course, past performance is no guarantee of future results. As a result of recent market activity, current performance may vary from the figures shown. Investment return, share price and net asset value will fluctuate and trust shares, when sold, may be worth more or less than their original cost. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. By comparison, the Lehman Brothers Municipal Bond Index posted a total return of 6.92 percent for the same period. The Lehman Brothers Municipal Bond Index is an unmanaged, broad-based statistical composite of municipal bonds. Index returns do not include any sales charges or fees that would be paid by an investor purchasing the securities it represents. Such costs would lower performance. It is not possible to invest directly in an index. For additional performance results, please refer to the chart and footnotes on page 4. Q WHAT WERE THE KEY DRIVERS OF THE TRUST'S RELATIVE PERFORMANCE? A One of the key factors in the trust's performance was its yield-curve positioning. Our analysis indicated that the intermediate part of the curve offered the best value, and we focused many of our purchases there. This proved to be a boon to performance, as the intermediate portion of the yield curve outperformed due to strong investor demand for this structure. The trust also benefited from our generally conservative stance. Given the turmoil in the economy and capital markets, we thought it prudent to avoid extreme interest-rate or credit positions. During the period, AAA-rated securities increased to 72.8 percent of long-term investments. This increase was offset by a corresponding decrease in A- and BBB-rated securities. Q WHAT STRATEGIES DID YOU USE TO MANAGE THE TRUST? A Much of the trading in this trust involved taking profits from positions that met their performance targets and redeploying those assets into securities that we felt were likely to produce strong performance going forward. For example, in recent years we purchased several discount coupon bonds that we anticipated would benefit from declining interest rates. Those bonds appreciated considerably as interest rates fell. We sold these positions when they had reached their price targets in order to lock those 9 gains into the portfolio. Similarly, we actively traded assets to attempt to capture value between various state markets as their bonds became more or less fully priced. In the process of trading, we also redeployed some of the portfolio's assets into bonds that we felt offered better characteristics for the next phase of the market. In some instances we looked for bonds with similar or slightly higher coupons and better structural characteristics. We also favored intermediate-maturity, premium-coupon bonds that are priced to their call date. We believe these securities offered the dual benefits of strong income as well as moderate vulnerability to changes in interest rates. The latter characteristic can be especially attractive during periods of rising interest rates. Falling interest rates have led many issuers to call their bonds in order to refinance them. The portfolio contained several such issues, and as a result had some of its holdings called away. This kind of activity is normal in times of low interest rates. We will continue to watch the portfolio closely for any additional issues that become eligible for refinancing. Q WHAT IS YOUR OUTLOOK FOR THE TRUST AND THE MARKETS IN THE COMING MONTHS? A The economic picture is very murky at this time. It's far from clear when the economy may turn the corner, and some market participants are even talking about the potential for a double-dip recession. On a more positive note, inflation seems to be well under control, and the Fed seems unlikely to raise interest rates in the very near future. Ongoing volatility in the equity market should also continue to prove beneficial to municipal bonds. 10 GLOSSARY OF TERMS A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT AND OTHER FINANCIAL PUBLICATIONS. BOND: A debt security issued by a government or corporation that pays a bondholder a stated rate of interest and repays the principal at the maturity date. CALL FEATURE: Allows a bond issuer to buy back a bond on specific dates at set prices before the bond's maturity date. 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 a bond issuer's credit history and capability of repaying debt obligations. Standard & Poor's Ratings Group and Moody's Investors Service are two companies that assign credit 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. The longer a bond's duration, the greater the effect of interest-rate movements on its price. Typically, trusts with shorter durations perform better in rising-rate environments, while trusts with longer durations perform better when rates decline. NET ASSET VALUE (NAV): The value of a trust share, calculated by deducting a trust's liabilities from the total assets applicable to common shareholders in its portfolio and dividing this amount by the number of common shares outstanding. YIELD CURVE: The pattern that results from viewing the yields of U.S. Treasury securities maturing in 1, 5, 10 and 30 years. When grouped together and graphed, a pattern of increasing yield is often reflected as the time-to-maturity extends. This pattern creates an upward sloping "curve." A "flat" yield curve represents little difference between short- and long-term interest rates, while a "negative" yield curve represents decreasing yields as the time-to-maturity extends. 11 BY THE NUMBERS YOUR TRUST'S INVESTMENTS June 30, 2002 THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF THE REPORTING PERIOD.
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MUNICIPAL BONDS 154.9% ALABAMA 1.1% $2,990 Jefferson Cnty, AL Wts Ser A (AMBAC Insd)... 5.000% 04/01/09 $ 3,221,306 ------------ ALASKA 1.9% 3,650 Alaska St Intl Arpt Rev Ser B (AMBAC Insd)....................................... 5.250 10/01/27 3,614,923 1,575 Matanuska-Susitna Boro, AK Ctf Part Pub Safety Bldg Lease (FSA Insd)................ 5.750 03/01/16 1,698,811 ------------ 5,313,734 ------------ ARIZONA 5.0% 4,000 Arizona St Trans Brd Excise Tax Maricopa Cnty Regl Area Rd Fd........................ 5.500 07/01/04 4,274,640 4,000 Arizona St Trans Brd Hwy Rev Sub Ser A Rfdg........................................ 4.750 07/01/11 4,115,320 1,000 Maricopa Cnty, AZ Sch Dist 28 Ser B (Prerefunded @ 07/01/04) (FGIC Insd)........ 6.000 07/01/14 1,078,870 4,375 Salt River Proj AZ Agric Impt Salt River Proj Ser A Rfdg............................. 5.250 01/01/06 4,730,031 ------------ 14,198,861 ------------ ARKANSAS 0.7% 2,000 Arkansas St Dev Fin Auth Hosp Rev Washington Regl Med Ctr................................ 7.375 02/01/29 2,119,220 ------------ CALIFORNIA 3.9% 1,000 California St Dept Wtr Res Ctr Wtr Sys Ser X (FGIC Insd)................................. 5.000 12/01/29 987,460 5,000 California St Univ Rev & Co Systemwide Ser A (AMBAC Insd)................................ 5.000 11/01/33 4,918,000 5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (Escrowed to Maturity) (MBIA Insd)...... * 09/01/17 2,260,700 2,000 North Orange Cnty, CA Cmnty Ser A (MBIA Insd)....................................... 5.000 02/01/27 1,978,700 1,000 Santa Clara Cnty, CA Brd Ed Rfdg (MBIA Insd) (a)......................................... 5.000 04/01/25 991,200 ------------ 11,136,060 ------------
See Notes to Financial Statements 12 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE COLORADO 3.1% $1,000 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev E-470 Proj Ser B (Prerefunded @ 08/31/05)... 6.950% 08/31/20 $ 1,161,740 1,500 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev E-470 Proj Ser B (Prerefunded @ 08/31/05)... 7.000 08/31/26 1,744,890 925 Colorado Ed & Cultural Fac Auth Rev Charter Sch Jefferson Academy....................... 6.500 06/01/15 872,904 1,535 Colorado Ed & Cultural Fac Auth Rev Charter Sch Jefferson Academy....................... 6.700 06/01/25 1,424,280 1,200 Colorado Hlth Fac Auth Rev Catholic Hlth Initiatives................................. 5.250 09/01/21 1,202,076 1,850 Montrose Cnty, CO Ctf Part.................. 6.350 06/15/06 1,948,087 500 Regional Trans Dist CO Ctf Trans Vehicles Proj Ser A (AMBAC Insd)..................... 5.000 06/01/10 539,825 ------------ 8,893,802 ------------ CONNECTICUT 1.4% 1,750 Connecticut St Spl Oblig Pkg Rev Bradley Intl Arpt Ser A (ACA Insd).................. 6.600 07/01/24 1,846,862 1,000 Hartford, CT Pkg Sys Rev Ser A.............. 6.500 07/01/25 1,035,270 1,000 New Haven, CT Ser B Rfdg (FGIC Insd)........ 5.000 11/01/18 1,031,850 ------------ 3,913,982 ------------ DISTRICT OF COLUMBIA 1.1% 200 District of Columbia Ctf Part............... 6.875 01/01/03 203,986 2,775 District of Columbia Hosp Rev Medlantic Hlthcare Ser A Rfdg (Escrowed to Maturity) (MBIA Insd)................................. 5.250 08/15/12 2,969,250 ------------ 3,173,236 ------------ FLORIDA 11.2% 1,250 Bay Cnty, FL Sales Tax Rev (AMBAC Insd)..... 5.125 09/01/32 1,242,875 2,000 Clearwater, FL Infrastructure (FSA Insd).... 4.000 12/01/03 2,064,420 1,000 Daytona Beach, FL Util Sys Rev Ser C Rfdg (FSA Insd).................................. 5.000 11/15/27 983,280 2,500 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd)....................................... 5.950 07/01/20 2,778,225 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd)................................. 5.750 07/01/11 1,128,750 2,000 Florida St Dept Env Protn Preservtn Rev Ser A (FGIC Insd)............................... 5.750 07/01/10 2,259,000 1,000 Greater Orlando Aviation Auth Ser B (FSA Insd)....................................... 5.125 10/01/21 999,920
See Notes to Financial Statements 13 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE FLORIDA (CONTINUED) $1,275 Gulf Breeze, FL Rev Miami Beach Loc Govt Ln E Tender (FGIC Insd)........................ 4.950% 12/01/20 $ 1,333,624 1,000 Highlands Cnty, FL Hlth Fac Auth Rev Hosp Adventist/Sunbelt Ser A..................... 6.000 11/15/31 1,020,260 1,745 Hillsborough Cnty, FL Port Dist Tampa Port Auth Proj Ser A (MBIA Insd)................. 5.375 06/01/27 1,748,734 1,000 Jea, FL Elec Sys Rev Ser 3 Ser A............ 5.500 10/01/41 1,007,300 1,500 Miami Beach, FL Stormwtr Rev (FGIC Insd).... 5.250 09/01/25 1,515,660 1,720 Miami Dade Cnty, FL Aviation Miami Intl Arpt (FGIC Insd)................................. 5.375 10/01/32 1,726,570 3,000 Orange Cnty, FL Sch Brd Ctf Part Ser A (AMBAC Insd)................................ 5.250 08/01/14 3,253,350 4,000 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC Insd)....................................... 5.625 10/01/14 4,346,640 2,000 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC Insd)....................................... 5.500 10/01/31 2,057,020 1,500 Palm Beach Cnty, FL Sch Brd Ser C (FSA Insd)....................................... 5.000 08/01/27 1,471,755 1,115 Tallahassee, FL Lease Rev FL St Univ Proj Ser A (MBIA Insd)........................... 5.500 08/01/19 1,179,904 ------------ 32,117,287 ------------ GEORGIA 14.8% 4,918 Fulton Cnty, GA Lease Rev (d)............... 7.250 06/15/10 5,504,264 23,000 Georgia Loc Govt Ctf Part Grantor Tr Ser A (MBIA Insd)................................. 4.750 06/01/28 21,703,260 2,635 Georgia Muni Elec Auth Pwr Rev Ser A (MBIA Insd)....................................... 6.500 01/01/20 3,156,229 3,000 Georgia Muni Elec Auth Pwr Rev Ser B Rfdg (FGIC Insd)................................. 6.250 01/01/17 3,521,550 2,500 Georgia St Ser D............................ 6.000 10/01/05 2,770,825 2,335 Georgia St Ser D............................ 6.000 10/01/06 2,631,872 800 Royston, GA Hosp Auth Hosp Rev Ctf Ty Cobb Hlthcare Sys Inc. .......................... 6.700 07/01/16 790,712 2,500 Royston, GA Hosp Auth Hosp Rev Ctf Ty Cobb Hlthcare Sys Inc. .......................... 6.500 07/01/27 2,373,075 ------------ 42,451,787 ------------ HAWAII 0.5% 1,390 University Hawaii Univ Sys Rev Ser B Rfdg (FSA Insd).................................. 5.250 10/01/14 1,486,049 ------------
See Notes to Financial Statements 14 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE ILLINOIS 19.3% $4,000 Chicago, IL Brd Ed Chicago Sch Reform Ser A (AMBAC Insd)................................ 5.250% 12/01/27 $ 3,986,480 1,400 Chicago, IL Brd Ed Ser A (MBIA Insd)........ 5.500 12/01/28 1,432,592 1,000 Chicago, IL O'Hare Intl Arpt Rev Second Lien Passenger Fac Ser B (AMBAC Insd)............ 5.500 01/01/16 1,070,670 3,000 Chicago, IL Pk Dist Ser D (FGIC Insd)....... 5.000 01/01/29 2,887,080 1,000 Chicago, IL Proj & Rfdg Ser C (FGIC Insd)... 5.750 01/01/14 1,100,540 1,000 Chicago, IL Proj & Rfdg Ser C (FGIC Insd)... 5.750 01/01/15 1,097,700 4,895 Chicago, IL Pub Bldg Comm Bldg Rev Ser A (Escrowed to Maturity) (MBIA Insd).......... * 01/01/07 4,199,176 1,000 Chicago, IL Ser B Rfdg (AMBAC Insd)......... 5.125 01/01/15 1,065,700 2,000 Chicago, IL Wastewtr Transmission Rev Second Lien (MBIA Insd)............................ 5.750 01/01/25 2,103,620 3,850 Chicago, IL Wastewtr Transmission Rev Second Lien Ser B (MBIA Insd)...................... 5.000 01/01/30 3,675,711 3,000 Chicago, IL Wtr Rev Sr Lien (AMBAC Insd).... 5.000 11/01/31 2,864,430 1,960 Cook Cnty, IL Cmnty Cons Sch Dist (FSA Insd)....................................... 5.500 12/01/13 2,182,676 1,000 Cook Cnty, IL Ser A (FGIC Insd)............. 5.500 11/15/31 1,021,410 3,230 Cook Cnty, IL Ser A Rfdg (MBIA Insd)........ 5.625 11/15/16 3,420,021 1,000 Du Page, IL Wtr Commn Rfdg.................. 5.250 03/01/10 1,091,170 2,000 Du Page, IL Wtr Commn Rfdg.................. 5.250 03/01/11 2,182,380 2,310 Illinois Dev Fin Auth Rev Adventist Hlth Ser A (MBIA Insd)............................... 5.500 11/15/13 2,502,077 2,500 Illinois Dev Fin Auth Rev Adventist Hlth Ser A (MBIA Insd)............................... 5.500 11/15/15 2,685,250 1,335 Illinois Dev Fin Auth Rev Bradley Univ Proj (AMBAC Insd)................................ 5.375 08/01/24 1,353,276 2,000 Illinois Ed Fac Auth Rev Lewis Univ......... 6.125 10/01/26 1,952,900 250 Illinois Hlth Fac Auth Rev Loyola Univ Hlth Sys Ser A................................... 6.125 07/01/31 253,538 3,205 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys Rfdg........................................ 6.000 11/15/23 3,236,377 1,500 Illinois St First Ser (FGIC Insd)........... 5.375 11/01/14 1,617,510 1,250 Sangamon Cnty, IL Ctf Part.................. 10.000 12/01/06 1,589,175 7,455 Will Cnty, IL Fst Presv Dist Ser B (FGIC Insd)....................................... * 12/01/12 4,635,519 ------------ 55,206,978 ------------ INDIANA 2.3% 2,420 Brownsburg, IN Sch Bldg Corp First Mtg Brownsburg Cmnty Sch (MBIA Insd)............ 5.550 02/01/24 2,499,473 1,000 Clark Pleasant, IN Cmnty Sch First Mtg (AMBAC Insd)................................ 5.500 07/15/18 1,057,400
See Notes to Financial Statements 15 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE INDIANA (CONTINUED) $2,000 Indiana Transn Fin Auth Toll Rfdg (AMBAC Insd)....................................... 5.375% 07/01/09 $ 2,158,660 1,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt.......................................... 6.375 11/01/29 986,520 ------------ 6,702,053 ------------ KANSAS 1.3% 1,250 Kansas St Dev Fin Auth Rev Kansas St Proj (AMBAC Insd)................................ 5.500 03/01/16 1,343,988 2,235 Sedgwick Cnty, KA Uni Sch Dist No. 259 Wichita (MBIA Insd)......................... 5.500 09/01/11 2,470,770 ------------ 3,814,758 ------------ KENTUCKY 3.5% 2,190 Kenton Cnty, KY Arpt Brd Rev Cincinnati/ Northn KY Intl Arpt Ser A Rfdg (MBIA Insd)....................................... 6.250 03/01/09 2,461,472 5,000 Kentucky St Ppty & Bldgs Commn Proj No. 74 Rfdg (FSA Insd)............................. 5.375 02/01/16 5,335,550 2,000 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (FSA Insd)........................ 5.500 07/01/07 2,214,720 ------------ 10,011,742 ------------ LOUISIANA 0.6% 1,500 Louisiana St Ser A (FGIC Insd).............. 5.500 11/15/08 1,672,515 ------------ MARYLAND 1.4% 2,180 Baltimore, MD Cap Apprec Ser A (FGIC Insd)....................................... * 10/15/09 1,545,053 1,470 Baltimore, MD Cap Apprec Ser A (Prerefunded @ 10/15/05) (FGIC Insd)..................... * 10/15/09 1,058,135 1,500 Maryland St Econ Dev Corp Student Hsg Rev Collegiate Hsg Salisbury Ser A.............. 6.000 06/01/30 1,532,085 ------------ 4,135,273 ------------ MASSACHUSETTS 3.6% 2,000 Massachusetts Muni Whsl Elec Co Proj 6 A (MBIA Insd)................................. 5.250 07/01/15 2,118,480 4,000 Massachusetts St Cons Ln Ser B (Prerefunded @ 03/01/12) (FSA Insd)...................... 5.500 03/01/17 4,482,320 1,500 Massachusetts St Fed Hwy Grant Antic Nt Ser A........................................... 5.750 06/15/15 1,652,355 1,000 Massachusetts St Hlth & Ed Fac Partn Hlthcare Sys Ser C.......................... 5.750 07/01/32 1,013,280 1,000 Massachusetts St Indl Fin Agy Rev Higher Ed Hampshire College Proj...................... 5.625 10/01/12 1,028,380 ------------ 10,294,815 ------------
See Notes to Financial Statements 16 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MICHIGAN 2.5% $1,000 Grand Rapids, MI Wtr Supply Sys Rfdg (FGIC Insd)....................................... 5.750% 01/01/13 $ 1,114,850 1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Ctr.................... 5.750 05/15/18 1,096,362 1,000 Michigan St Hosp Fin Auth Rev Hosp Sparrow Oblig Group Rfdg............................ 5.625 11/15/31 973,320 2,500 Michigan St Strategic Fd Detroit Ed Conv Rfdg (AMBAC Insd)........................... 4.850 09/01/30 2,601,275 1,500 Michigan St Strategic Fd Detroit Edison Pollutn Ctl Ser B Rfdg...................... 5.650 09/01/29 1,496,355 ------------ 7,282,162 ------------ MISSISSIPPI 0.6% 1,500 Mississippi Hosp Equip & Fac MS Baptist Med Ctr Rfdg (MBIA Insd)........................ 6.000 05/01/13 1,594,635 ------------ MISSOURI 1.3% 3,400 Missouri St Hwys & Trans Commst Rd Rev Ser A........................................... 5.500 02/01/08 3,759,584 ------------ NEBRASKA 0.5% 1,500 Omaha Convention Hotel Corp NE Rev Convention Ctr First Tier Ser A (AMBAC Insd)....................................... 5.125 04/01/32 1,484,280 ------------ NEVADA 1.5% 3,965 Clark Cnty, NV Bd Bk (FGIC Insd)............ 5.500 06/01/09 4,393,537 ------------ NEW JERSEY 2.2% 540 New Jersey Hlthcare Fac Fin Auth Rev Trinitas Hosp Oblig......................... 6.500 07/01/05 566,984 1,000 New Jersey St Trans Corp Cap Grant Antic Nt Ser B (AMBAC Insd).......................... 5.500 02/01/08 1,105,230 2,000 New Jersey St Trans Corp Fed Trans Admin Grants Ser A (AMBAC Insd)................... 5.500 09/15/13 2,229,540 2,095 New Jersey St Trans Tr Fd Auth Trans Sys Ser A........................................... 5.750 06/15/17 2,366,889 ------------ 6,268,643 ------------ NEW MEXICO 1.7% 4,500 Santa Fe, NM Gross Rcpt Tax Impt (AMBAC Insd)....................................... 5.250 06/01/13 4,866,840 ------------
See Notes to Financial Statements 17 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW YORK 16.4% $2,500 Metropolitan Trans Auth NY Ser A Rfdg (AMBAC Insd)....................................... 5.000% 07/01/30 $ 2,414,150 5,000 Metropolitan Trans Auth NY Ser A Rfdg (FSA Insd)....................................... 5.000 11/15/30 4,832,050 2,500 Nassau Cnty, NY Interim Fin Auth Sales Tax Secd Ser A.................................. 5.750 11/15/13 2,768,450 5,900 New York City Ser A (b)..................... 7.000 08/01/04 6,437,372 4,500 New York City Ser B (AMBAC Insd)............ 7.250 08/15/07 5,302,170 1,885 New York City Ser C......................... 7.000 08/15/08 1,893,162 1,000 New York City Ser H......................... 5.750 03/15/13 1,088,070 6,930 New York City Trans Auth Trans Fac Livingston Plaza Proj Rfdg (Escrowed to Maturity) (FSA Insd)........................ 5.400 01/01/18 7,568,114 3,000 New York City Trans Future Tax Secd Ser A Rfdg (a).................................... 5.500 11/01/26 3,290,100 5,190 New York St Dorm Auth Rev Insd NY Univ Ser A (AMBAC Insd)................................ 5.500 07/01/11 5,767,751 2,635 New York St Urban Dev Corp Rev Youth Fac.... 5.875 04/01/08 2,780,136 2,680 Port Auth NY & NJ Consolidated 119th Ser (FGIC Insd)................................. 5.500 09/15/17 2,787,629 ------------ 46,929,154 ------------ NORTH CAROLINA 5.1% 3,000 North Carolina Eastern Muni Pwr Agy Pwr Sys Rev Ser D................................... 6.750 01/01/26 3,175,830 10,000 North Carolina Muni Pwr Agy No. 1 Catawba Elec Rev Rfdg (MBIA Insd)................... 6.000 01/01/12 11,445,500 ------------ 14,621,330 ------------ OHIO 6.0% 5,000 Akron Bath Copley, OH St Twp Hosp Dist Rev Summa Hosp Ser A............................ 5.375 11/15/18 4,610,900 1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj........................................ 7.500 01/01/30 1,079,340 1,000 Ohio St Air Quality Dev Auth Rev JMG Fdg Ltd Partn Proj Rfdg (AMBAC Insd)................ 6.375 04/01/29 1,090,720 1,500 Ohio St Bldg Auth St Fac Admin Bldg Fd Proj A (FSA Insd)................................ 5.500 04/01/15 1,635,255 1,000 Ohio St Com Sch Cap Fac Ser B............... 5.500 09/15/08 1,114,790 1,000 Ohio St Higher Ed Cap Fac Ser II A.......... 5.250 12/01/06 1,097,700
See Notes to Financial Statements 18 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE OHIO (CONTINUED) $3,000 Ohio St Tpk Comm Tpk Rev Ser A Rfdg (FGIC Insd)....................................... 5.500% 02/15/24 $ 3,211,170 3,000 University Cincinnati OH Gen Ser A (FGIC Insd)....................................... 5.500 06/01/09 3,331,980 ------------ 17,171,855 ------------ OKLAHOMA 1.1% 3,000 Grand Riv Dam Auth OK Rev Ser A Rfdg (FSA Insd)....................................... 5.000 06/01/12 3,209,400 ------------ OREGON 2.2% 1,000 Clackamas Cnty, OR Sch Dist................. 5.500 06/01/10 1,115,720 3,560 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)................................. 5.250 11/01/17 3,725,504 1,250 Portland, OR Cmnty College Dist Ser B....... 5.250 06/01/12 1,363,825 ------------ 6,205,049 ------------ PENNSYLVANIA 9.8% 1,500 Allegheny Cnty, PA San Auth Swr (MBIA Insd)....................................... 5.500 12/01/30 1,544,925 1,000 Allegheny Cnty, PA Ser C-53 Rfdg (FGIC Insd)....................................... 5.500 11/01/14 1,089,350 1,000 Greensburg Salem, PA Sch Dist Rfdg (FGIC Insd)....................................... 5.375 09/15/15 1,079,030 2,500 Harrisburg, PA Auth Wtr Rev (Inverse Fltg) (FGIC Insd) (c)............................. 10.170 06/18/15 2,719,775 1,200 Harrisburg, PA Cap Apprec Nt Ser F Rfdg (AMBAC Insd)................................ * 09/15/14 674,736 1,000 Lycoming Cnty, PA Auth College Rev PA College of Technology (AMBAC Insd).......... 5.350 07/01/26 1,014,390 2,900 Philadelphia, PA (FSA Insd)................. 4.750 03/15/17 2,911,107 2,600 Philadelphia, PA Auth for Indl Ser B (FSA Insd)....................................... 5.500 10/01/16 2,806,024 7,385 Philadelphia, PA Sch Dist Ser A (MBIA Insd)....................................... 4.500 04/01/18 7,113,823 4,570 Pittsburgh, PA Ser A (AMBAC Insd)........... 5.500 09/01/16 4,949,219 2,000 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser A (Escrowed to Maturity)................ 6.000 12/01/13 2,261,420 ------------ 28,163,799 ------------ SOUTH CAROLINA 0.4% 1,000 Chesterfield Cnty, SC Sch Dist (FSA Insd)... 5.375 03/01/18 1,054,710 ------------ SOUTH DAKOTA 0.3% 875 Deadwood, SD Ctf Part (ACA Insd)............ 6.375 11/01/20 922,548 ------------
See Notes to Financial Statements 19 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE TENNESSEE 2.0% $2,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn St Hlth Ser A Rfdg (MBIA Insd)....................................... 7.500% 07/01/25 $ 2,447,140 2,500 Memphis, TN (Prerefunded @ 10/01/06)........ 5.250 10/01/14 2,761,050 435 Tennessee Hsg Dev Agy Mtg Fin Ser A......... 7.125 07/01/26 450,786 ------------ 5,658,976 ------------ TEXAS 15.2% 2,050 Austin, TX Wtr & Wastewtr Rfdg (MBIA Insd)....................................... 5.750 05/15/12 2,267,731 1,250 Brazos Riv Auth TX Pollutn Adj Elec Co Proj Ser C Rfdg.................................. 5.750 05/01/36 1,256,713 1,430 Cameron Cnty, TX Ctf Oblig (AMBAC Insd)..... 5.750 02/15/15 1,556,312 2,000 Dallas-Fort Worth, TX Intl Arpt Fac Impt Corp Rev American Airl Inc.................. 6.375 05/01/35 1,551,700 2,000 Fort Worth, TX Wtr & Swr Rev Rfdg & Impt.... 5.500 02/15/05 2,149,660 1,000 Harris Cnty, TX Hlth Fac Dev Mem Hermann Hlthcare Ser A.............................. 6.375 06/01/29 1,047,100 2,000 Harris Cnty, TX Perm Impt Rfdg.............. 5.000 10/01/11 2,087,600 4,820 Harris Cnty, TX Toll Rd (Prerefunded @ 08/15/09) (AMBAC Insd)...................... * 08/15/18 1,955,088 1,000 Harris Cnty, TX Toll Rd (Prerefunded @ 08/15/09) (AMBAC Insd)...................... * 08/15/21 329,970 2,105 Houston, TX Hotel Occupancy Tax & Spl Rev Convention & Entmt Ser B (AMBAC Insd)....... 5.750 09/01/15 2,313,311 1,000 Houston, TX Public Impt Rfdg (FSA Insd)..... 5.750 03/01/15 1,093,580 1,000 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser A Rfdg (FSA Insd)............................. 5.000 12/01/30 959,690 2,000 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser B Rfdg (FGIC Insd)............................ 6.250 12/01/05 2,236,300 1,500 Mesquite, TX Hlth Fac Dev Retirement Fac Christian A................................. 7.500 02/15/18 1,565,535 1,100 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj......................... 7.200 01/01/21 1,148,246 1,500 North Cent, TX Hlth Fac Dev Hosp Baylor Hlthcare Sys Proj Ser A..................... 5.125 05/15/29 1,416,405 2,000 North Cent, TX Hlth Fac Dev Hosp Childrens Med Ctr Dallas (AMBAC Insd)................. 5.250 08/15/32 1,979,840 137 Texas Muni Pwr Agy Rev (Escrowed to Maturity) (AMBAC Insd)...................... * 09/01/07 114,955 3,388 Texas Muni Pwr Agy Rev (AMBAC Insd)......... * 09/01/07 2,828,312 2,500 Texas St Pub Fin Auth Ser A Rfdg............ 5.250 10/01/07 2,748,000 8,220 Texas St Pub Ppty Fin Corp Rev Mental Hlth & Retardation Rfdg (FSA Insd)................. 5.500 09/01/13 8,492,986
See Notes to Financial Statements 20 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE TEXAS (CONTINUED) $1,000 Texas Tech Univ Rev Fin Sys Seventh Ser (MBIA Insd)................................. 5.000% 08/15/25 $ 972,550 1,500 Texas Wtr Dev Brd Rev St Revolving Fd Sr Lien Ser B.................................. 5.250 07/15/17 1,555,245 ------------ 43,626,829 ------------ UTAH 0.6% 1,000 Salt Lake Cnty, UT College Rev Westminster College Proj................................ 5.750 10/01/27 1,000,160 535 Utah St Hsg Fin Agy Single Family Mtg Ser B Class 2 (FHA/VA Gtd)........................ 6.250 07/01/14 572,049 ------------ 1,572,209 ------------ VIRGINIA 0.9% 2,275 Virginia Comwlth Trans Brd Northn VA Trans Dist Pgm Ser A.............................. 5.375 05/15/15 2,451,222 ------------ WASHINGTON 5.2% 3,410 Clark Cnty, WA Pub Util Dist Rfdg (FSA Insd)....................................... 5.500 01/01/08 3,737,360 2,595 Clark Cnty, WA Pub Util Dist Rfdg (FSA Insd)....................................... 5.500 01/01/09 2,851,178 1,300 Energy Northwest, WA Elec Rev Proj No. 3 Ser A Rfdg (FSA Insd)........................... 5.500 07/01/17 1,383,876 1,000 Grant Cnty, WA Pub Util Dist Ser H Rfdg (FSA Insd)....................................... 5.375 01/01/15 1,066,680 4,400 King Cnty, WA Ser B Rfdg (MBIA Insd)........ 5.250 01/01/34 4,349,840 1,500 Port Seattle, WA Rev Ser A (FGIC Insd)...... 5.000 04/01/31 1,434,900 ------------ 14,823,834 ------------ WISCONSIN 1.3% 2,345 Appleton, WI Wtrwks Rev Rfdg (FGIC Insd).... 5.375 01/01/19 2,429,748 1,375 Wisconsin St Hlth & Ed Fac Agnesian Hlthcare Inc......................................... 6.000 07/01/30 1,389,754 ------------ 3,819,502 ------------ GUAM 1.0% 2,800 Guam Pwr Auth Rev Ser A (AMBAC Insd)........ 5.250 10/01/34 2,817,108 ------------
See Notes to Financial Statements 21 YOUR TRUST'S INVESTMENTS June 30, 2002
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PUERTO RICO 0.4% $1,000 Puerto Rico Indl Tourist Ed Med & Environmental Ctl Fac Fin Auth Higher Ed Rev......................................... 5.375% 02/01/19 $ 1,004,040 ------------ TOTAL LONG-TERM INVESTMENTS 154.9% (Cost $421,054,988)................................................... 443,564,704 SHORT-TERM INVESTMENTS 0.9% (Cost $2,700,000)..................................................... 2,700,000 ------------ TOTAL INVESTMENTS 155.8% (Cost $423,754,988)................................................... 446,264,704 OTHER ASSETS IN EXCESS OF LIABILITIES 1.8%............................. 5,279,424 PREFERRED SHARES (57.6%)................................................ (165,099,582) ------------ NET ASSETS APPLICABLE TO COMMON SHARES 100.0%.......................... $286,444,546 ============
* 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. (c) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Trust to enhance the yield of the portfolio. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. (d) These securities are restricted and may be resold only in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FHA/VA--Federal Housing Administration/Department of Veterans Affairs FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. See Notes to Financial Statements 22 FINANCIAL STATEMENTS Statement of Assets and Liabilities June 30, 2002 ASSETS: Total Investments (Cost $423,754,988)....................... $446,264,704 Cash........................................................ 58,481 Receivables: Interest.................................................. 6,566,761 Investments Sold.......................................... 4,593,429 Other....................................................... 8,094 ------------ Total Assets............................................ 457,491,469 ------------ LIABILITIES: Payables: Investments Purchased..................................... 5,417,740 Investment Advisory Fee................................... 221,957 Affiliates................................................ 20,924 Trustees' Deferred Compensation and Retirement Plans........ 180,550 Accrued Expenses............................................ 106,170 ------------ Total Liabilities....................................... 5,947,341 Preferred Shares............................................ 165,099,582 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $286,444,546 ============ NET ASSET VALUE PER COMMON SHARE ($286,444,546 divided by 28,684,985 shares outstanding)............................ $ 9.99 ============ NET ASSETS CONSIST OF: 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 Net Unrealized Appreciation................................. 22,509,716 Accumulated Undistributed Net Investment Income............. 1,646,876 Accumulated Net Realized Loss............................... (3,828,411) ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $286,444,546 ============ PREFERRED SHARES ($.01 par value, authorized 1,000,000 shares, 330 issued with liquidation preference of $500,000 per share)................................................ $165,000,000 ============ NET ASSETS INCLUDING PREFERRED SHARES....................... $451,444,546 ============
See Notes to Financial Statements 23 Statement of Operations For the Year Ended June 30, 2002 INVESTMENT INCOME: Interest.................................................... $23,271,716 ----------- EXPENSES: Investment Advisory Fee..................................... 2,683,234 Preferred Share Maintenance................................. 434,823 Legal....................................................... 53,046 Trustees' Fees and Related Expenses......................... 44,944 Custody..................................................... 28,333 Other....................................................... 295,415 ----------- Total Expenses.......................................... 3,539,795 ----------- NET INVESTMENT INCOME....................................... $19,731,921 =========== REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Gain........................................... $ 4,307,437 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 17,957,332 End of the Period......................................... 22,509,716 ----------- Net Unrealized Appreciation During the Period............... 4,552,384 ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 8,859,821 =========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(3,015,335) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $25,576,407 ===========
See Notes to Financial Statements 24 Statements of Changes in Net Assets
YEAR ENDED YEAR ENDED JUNE 30, 2002 JUNE 30, 2001 ----------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................. $ 19,731,921 $ 21,492,062 Net Realized Gain...................................... 4,307,437 2,126,608 Net Unrealized Appreciation During the Period.......... 4,552,384 16,690,337 Distributions to Preferred Shareholders: Net Investment Income................................ (3,015,335) (6,592,402) ------------ ------------ Change in Net Assets from Operations................... 25,576,407 33,716,605 Distributions to Common Shareholders: Net Investment Income................................ (15,144,816) (15,704,326) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 10,431,591 18,012,279 NET ASSETS: Beginning of the Period................................ 276,012,955 258,000,676 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $1,646,876 and ($241,640), respectively)........................................ $286,444,546 $276,012,955 ============ ============
See Notes to Financial Statements 25 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
-------------------------------------- 2002 (D) 2001 2000 -------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD....... $ 9.62 $ 8.99 $ 9.56 ---------- ---------- ---------- Net Investment Income........................ .70 .75 .81 Net Realized and Unrealized Gain/Loss........ .31 .66 (.55) Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income...................... (.11) (.23) (.22) ---------- ---------- ---------- Total from Investment Operations............... .90 1.18 .04 Less Distributions Paid to Common Shareholders: Net Investment Income........................ .53 .55 .61 Net Realized Gain............................ -0- -0- -0- ---------- ---------- ---------- NET ASSET VALUE, END OF THE PERIOD............. $ 9.99 $ 9.62 $ 8.99 ========== ========== ========== Common Share Market Price at End of the Period....................................... $ 8.85 $ 8.89 $ 8.6875 Total Return (e)............................... 5.64% 8.88% -3.08% Net Assets at End of the Period (In millions).................................... $ 286.4 $ 276.0 $ 258.0 Ratio of Expenses to Average Net Assets Applicable to Common Shares (a).............. 1.25% 1.27% 1.32% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (a)....... 6.99% 7.94% 9.06% Portfolio Turnover............................. 41% 50% 54% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (a)............... .79% .79% .81% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (b)....... 5.92% 5.50% 6.59% SENIOR SECURITIES: Total Preferred Shares Outstanding............. 330 330 330 Asset Coverage Per Preferred Share (c)......... $1,368,316 $1,336,403 $1,281,820 Involuntary Liquidating Preference Per Preferred Share.............................. $ 500,000 $ 500,000 $ 500,000 Average Market Value Per Preferred Share....... $ 500,000 $ 500,000 $ 500,000
(a) Ratios do not reflect the effect of dividend payments to preferred shareholders. (b) Ratios reflect the effect of dividend payments to preferred shareholders. (c) 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. (d) As required, effective July 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended June 30, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses per share by $.01 and increase the ratio of net investment income to average net assets applicable to common shares by .04%. Per share, ratios and supplemental data for the periods prior to June 30, 2002 have not been restated to reflect this change in presentation. (e) Total return 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. 26
YEAR ENDED JUNE 30, - -------------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------- $ 10.26 $ 10.01 $ 9.76 $ 9.76 $ 9.92 $ 11.13 $ 10.69 ---------- ---------- ---------- ---------- ---------- ---------- ---------- .84 .89 .92 .94 .96 1.00 1.07 (.70) .26 .26 .05 (.06) (1.21) .52 (.19) (.21) (.21) (.22) (.22) (.16) (.16) ---------- ---------- ---------- ---------- ---------- ---------- ---------- (.05) .94 .97 .77 .68 (.37) 1.43 .65 .69 .72 .77 .84 .84 .83 -0- -0- -0- -0- -0- -0- .16 ---------- ---------- ---------- ---------- ---------- ---------- ---------- $ 9.56 $ 10.26 $ 10.01 $ 9.76 $ 9.76 $ 9.92 $ 11.13 ========== ========== ========== ========== ========== ========== ========== $ 9.625 $ 10.875 $ 10.875 $ 9.875 $ 11.125 $ 11.125 $ 12.00 -5.68% 6.85% 18.32% -4.27% 8.59% -0.05% 15.20% $ 274.1 $ 292.3 $ 283.2 $ 273.7 $ 271.1 $ 272.7 $ 302.9 1.24% 1.23% 1.28% 1.31% 1.33% 1.28% 1.25% 8.23% 8.69% 9.25% 9.47% 9.85% 9.30% 9.90% 98% 103% 53% 29% 38% 45% 45% .79% .79% .80% .82% .83% .82% .80% 6.35% 6.64% 7.18% 7.26% 7.56% 7.86% 8.41% 330 330 330 330 330 330 330 $1,330,642 $1,385,892 $1,358,326 $1,329,390 $1,321,483 $1,326,388 $1,417,940 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000
See Notes to Financial Statements 27 NOTES TO FINANCIAL STATEMENTS June 30, 2002 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 tax, consistent with preservation of capital. 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 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 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 or dealers 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, which approximates market value. 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. At June 30, the Trust has $4,281,300 of when-issued and delayed delivery purchase commitments. C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. As required, effective July 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. Prior to July 1, 2001, the Trust did not accrete market discount on fixed income securities. The cumulative 28 NOTES TO FINANCIAL STATEMENTS June 30, 2002 effect of this accounting change had no impact on total net assets of the Trust, but resulted in a $316,746 increase in cost of securities and a corresponding $316,746 decrease in net unrealized appreciation based on securities held by the Trust on July 1, 2001. The effect of this change for the year ended June 30, 2002 was to increase net investment income by $127,662; decrease net unrealized appreciation by $72,200, and decrease net realized gains by $55,462. The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation. 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 utilized 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, 2002, the Trust had an accumulated capital loss carryforward for tax purposes of $3,772,947 which will expire between June 30, 2008 and June 30, 2009. At June 30, 2002, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $423,366,042 ============ Gross tax unrealized appreciation........................... $ 24,046,722 Gross tax unrealized depreciation........................... (1,148,060) ------------ Net tax unrealized appreciation on investments.............. $ 22,898,662 ============
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly dividends from net investment income to common shareholders. 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. The tax character of distributions paid during 2002 and 2001 were as follows:
2002 2001 Distributions paid from: Ordinary income........................................... $85,634 $9,233 Long-term capital gain.................................... 0 0 ------- ------ $85,634 $9,233 ======= ======
29 NOTES TO FINANCIAL STATEMENTS June 30, 2002 As of June 30, 2002, the component of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $18,899 Undistributed long-term capital gain........................ 0
F. RECLASSIFICATIONS In accordance with the provisions of EITF D-98, "Classification and Measurement of Redeemable Securities", effective for the current period, the Trust has reclassified its Rate Adjusted Tax-Exempt Shares ("Rates") outside of permanent equity in the Net Assets section of the Statement of Assets and Liabilities. In addition, distributions to Rate shareholders are now classified as a component of the "Increase in net assets from operations" on the Statement of Operations and the Statements of Changes in Net Assets and as a component of the "Total from investment operations" on the Financial Highlights. Prior year amounts presented have been reclassified to conform to this year's presentation. This change has no impact on the net assets applicable to common shares of the Trust. 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 daily net assets of the Trust. For the year ended June 30, 2002, the Trust recognized expenses of approximately $30,400 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust is an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Trust. The Adviser allocates the cost of such services to each trust. For the year ended June 30, 2002, the Trust recognized expenses of approximately $53,100 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Trust, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Certain officers and trustees of the Trust are also officers and directors of Van Kampen. The Trust does not compensate its officers or trustees who are officers of Van Kampen. The Trust provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation 30 NOTES TO FINANCIAL STATEMENTS June 30, 2002 plan, trustees may elect to defer all or a portion of their compensation to a later date. Benefits under the retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Trust. The maximum annual benefit per trustee under the plan is $2,500. 3. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $179,259,432 and $179,016,012, respectively. 4. PREFERRED SHARES The Trust has outstanding 330 shares of Rate Adjusted Tax-Exempt Shares ("Rates") in three series of 110 shares each. Dividends are cumulative and the dividend rate is currently reset every 28 days through an auction process. The average rate in effect on June 30, 2002 was 1.361%. During the year ended June 30, 2002, the rates ranged from 1.273% to 2.980%. 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 in the Statement of Operations. 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 REPORT OF INDEPENDENT AUDITORS To the Board of Trustees and Shareholders of Van Kampen Municipal Income Trust We have audited the accompanying statement of assets and liabilities of Van Kampen Municipal Income Trust (the "Trust"), including the portfolio of investments, as of June 30, 2002, the related statement of operations 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 three 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. The Trust's financial highlights for the periods ended prior to June 30, 2000, were audited by other auditors whose report, dated August 5, 1999, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2002, by correspondence with the Trust's custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 Municipal Income Trust as of June 30, 2002, the results of its operations, 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 August 8, 2002 32 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 33 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 34 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN MUNICIPAL INCOME TRUST BOARD OF TRUSTEES DAVID C. ARCH ROD DAMMEYER HOWARD J KERR THEODORE A. MYERS RICHARD F. POWERS, III* - Chairman HUGO F. SONNENSCHEIN WAYNE W. WHALEN* INVESTMENT ADVISER VAN KAMPEN INVESTMENT ADVISORY CORP. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY c/o EquiServe P.O. Box 43011 Providence, Rhode Island 02940-3011 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Trust during its taxable year ended June 30, 2002. The Trust designated 99.5% of the income distributions as a tax-exempt income distribution. In January, the Trust provides tax information to shareholders for the preceding calendar year. * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. 35 RESULTS OF SHAREHOLDER VOTES The Annual Meeting of Shareholders of the Trust was held on June 12, 2002, where shareholders voted on the election of trustees. 1) With regards to the election of the following trustees by common shareholders of the Trust:
# OF SHARES ------------------------------ IN FAVOR WITHHELD - -------------------------------------------------------------------------------------- David C. Arch......................................... 24,848,030 559,950 Howard J Kerr......................................... 24,821,725 586,254
The other trustees of the Trust whose terms did not expire in 2002 are Hugo F. Sonnenschein, Rod Dammeyer, Theodore A. Myers, Richard F. Powers, III, and Wayne W. Whalen. 36 TRUSTEE AND OFFICER 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 officers of the Trust and their principal occupations for the last five years, other directorships held by the trustees and their affiliations, if any, with Van Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are referred to herein collectively as the "Advisers." For purposes hereof, the term "Fund Complex" includes each of the investment companies advised by the Advisers. Trustees 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 OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE David C. Arch (57) Trustee Trustee Mr. Arch is Chairman and Chief Executive 37 Blistex Inc. since 1988 Officer of Blistex Inc., a consumer health 1800 Swift Drive care products manufacturer, and former Oak Brook, IL 60523 Director of the World Presidents Organization-Chicago Chapter. Mr. Arch is also a Trustee or Managing General Partner of other investment companies advised by the Advisers. NAME, AGE AND ADDRESS OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE HELD BY TRUSTEE David C. Arch (57) Mr. Arch is a member of Blistex Inc. the Board of Directors of 1800 Swift Drive the Heartland Alliance, a Oak Brook, IL 60523 non-profit organization serving human needs based in Chicago.
37
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 OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE Rod Dammeyer (61) Trustee Trustee Mr. Dammeyer is President of CAC, llc., a 37 CAC, llc. since 1988 private company offering capital investment 676 North Michigan Avenue and management advisory services. Mr. Dammeyer Suite 2800 is also a Trustee or Managing General Partner Chicago, IL 60611 of other investment companies advised by the Advisers. Prior to February 2001, Mr. Dammeyer was Vice Chairman and Director of Anixter International, Inc. and IMC Global Inc. Prior to July 2000, Mr. Dammeyer was a Managing Partner of Equity Group Corporate Investment (EGI), a company that makes private investments in other companies. Prior to 1997, Mr. Dammeyer was President, Chief Executive Officer and a Director of Great American Management & Investment, Inc., a diversified manufacturing company. NAME, AGE AND ADDRESS OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE HELD BY TRUSTEE Rod Dammeyer (61) Mr. Dammeyer is a member CAC, llc. of the Board of Directors 676 North Michigan Avenue of TeleTech Holdings Suite 2800 Inc., Stericycle, Inc., Chicago, IL 60611 GATX Corporation, Therasense, Inc. and Peregrine Systems Inc. and a member of the Board of Trustees of the University of Chicago Hospitals and Health Systems. Prior to July 2000, Mr. Dammeyer was a member of the Board of Directors of Allied Riser Communications Corp., Matria Healthcare Inc., Transmedia Networks, Inc., CNA Surety, Corp. and Grupo Azcarero Mexico (GAM). Prior to April 1999, Mr. Dammeyer was a Director of Metal Management, Inc. Prior to 1998, Mr. Dammeyer was a Director of Lukens, Inc., Capsure Holdings Corp., Revco D.S., Inc., the Chase Manhattan Corporation National Advisory Board and Sealy, Inc. Prior to 1997, Mr. Dammeyer was a Director of Flacon Building Products, Inc.
38
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 OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE Howard J Kerr (66) Trustee Trustee Mr. Kerr is a Trustee or Managing General 37 736 North Western Avenue since 1992 Partner of other investment companies advised P.O. Box 317 by the Advisers. Prior to 1998, Mr. Kerr was Lake Forest, IL 60045 the President and Chief Executive Officer of Pocklington Corporation, Inc., an Investment holding company. Theodore A. Myers (72) Trustee Trustee Mr. Myers is a financial consultant. Mr. Myers 37 550 Washington Avenue since 1988 is also a Trustee or Managing General Partner Glencoe, IL 60022 of other investment companies advised by the Advisers. Prior to 1998, Mr. Myers was a Senior Financial Advisor (and, prior to 1997, an Executive Vice President, Chief Financial Officer and Director) of Qualitech Steel Corporation, a producer of high quality engineered steels for automotive, transportation and capital goods industries. Prior to 1997, Mr. Myers was a member of the Arthur Andersen Chief Financial Officers' Committee. NAME, AGE AND ADDRESS OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE HELD BY TRUSTEE Howard J Kerr (66) Mr. Kerr is a Director of 736 North Western Avenue Canbra Foods, Ltd., a P.O. Box 317 Canadian oilseed Lake Forest, IL 60045 crushing, refining, processing and packaging. operation, and the Marrow Foundation. Theodore A. Myers (72) Mr. Myers is a Director 550 Washington Avenue of Met Life Investors Glencoe, IL 60022 (formerly known as COVA Financial Life Insurance). Prior to 1997, Mr. Myers was a Director of McLouth Steel.
39
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 OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE Hugo F. Sonnenschein (61) Trustee Trustee Mr. Sonnenschein is President Emeritus and 37 1126 E. 59th Street since 1994 Honorary Trustee of the University of Chicago Chicago, IL 60637 and the Hutchinson Distinguished Service Professor in the Department of Economics at the University of Chicago. Prior to July 2000, Mr. Sonnenschein was President of the University of Chicago. Mr. Sonnenschein is a member of the Board of Trustees of the University of Rochester and a member of its investment committee. Mr. Sonnenschein is a member of the National Academy of Sciences, the American Philosophical Society, and a fellow of the American Academy of Arts and Sciences. Mr. Sonnenschein is also a Trustee or Managing General Partner of other investment companies advised by the Advisers. NAME, AGE AND ADDRESS OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE HELD BY TRUSTEE Hugo F. Sonnenschein (61) 1126 E. 59th Street Chicago, IL 60637
40 INTERESTED 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 OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE Richard F. Powers, III* Chairman Trustee Mr. Powers is Chairman, Director, President, 98 (56) since 1999 Chief Executive Officer and Managing Director 1 Parkview Plaza of Van Kampen; Chairman, Director, Chief Oakbrook Terrace, IL Executive Officer and Managing Director of the 60181 Advisers, Distributor, Van Kampen Advisors Inc. and Van Kampen Management Inc.; Director of other subsidiaries of Van Kampen; and Chief Sales and Marketing Officer of Morgan Stanley Asset Management Inc. Mr. Powers is also Chairman of the Board, Trustee/Director and President of funds in the Fund Complex. Prior to May 1998, Mr. Powers was Executive Vice President; and Director of Marketing of Morgan Stanley and Director of Dean Witter Discover & Co. and Dean Witter Realty. Prior to 1996, Mr. Powers was Director of Dean Witter Reynolds Inc. Wayne W. Whalen* (62) Trustee Trustee Mr. Whalen is a Partner in the law firm of 98 333 West Wacker Drive since 1988 Skadden, Arps, Slate, Meagher & Flom Chicago, IL 60606 (Illinois), legal counsel to certain funds advised by the Advisers. Mr. Whalen is a Trustee, Director or Managing General Partner of other funds advised by the Advisers. NAME, AGE AND ADDRESS OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (56) 1 Parkview Plaza Oakbrook Terrace, IL 60181 Wayne W. Whalen* (62) 333 West Wacker Drive Chicago, IL 60606
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act). Mr. Whalen is an interested person to certain of the funds in the Fund Complex by reason of his firm currently acting as legal counsel to such funds in the Fund Complex. Mr. Powers is an interested person of such funds in the Fund Complex and the Advisers by reason of their positions with Morgan Stanley or its affiliates. 41 OFFICERS:
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS Stephen L. Boyd (61) Vice President Officer Managing Director and Chief Investment Officer of Van Kampen 2800 Post Oak Blvd. since 1998 Investments, and Managing Director and President of the 45th Floor Advisers and Van Kampen Advisors Inc. Executive Vice Houston, TX 77056 President and Chief Investment Officer of funds in the Fund Complex. Prior to December 2000, Executive Vice President and Chief Investment Officer of Van Kampen Investments, and President and Chief Operating Officer of the Advisers. Prior to April 2000, Executive Vice President and Chief Investment Officer for Equity Investments of the Advisers. Prior to October 1998, Vice President and Senior Portfolio Manager with AIM Capital Management, Inc. Prior to February 1998, Senior Vice President and Portfolio Manager of Van Kampen American Capital Asset Management, Inc., Van Kampen American Capital Investment Advisory Corp. and Van Kampen American Capital Management, Inc. Joseph J. McAlinden (59) Chief Investment Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas Officer since 2002 Stanley Investment Advisors Inc. and Director of Morgan New York, NY 10020 Stanley Trust for 5 years.
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TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS A. Thomas Smith III (45) Vice President and Officer Managing Director and Director of Van Kampen Investments, 1221 Avenue of Americas Secretary since 1999 Director of the Advisers, Van Kampen Advisors Inc., the New York, NY 10020 Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Managing Director and General Counsel-Mutual Funds of Morgan Stanley Investment Advisors, Inc. Vice President or Principal Legal Officer and Secretary of funds in the Fund Complex. Prior to July 2001, Managing Director, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, the Distributor, Investor Services, and certain other subsidiaries of Van Kampen Investments. Prior to December 2000, Executive Vice President, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, Van Kampen Advisors Inc., the Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Prior to January 1999, Vice President and Associate General Counsel to New York Life Insurance Company ("New York Life"), and prior to March 1997, Associate General Counsel of New York Life. Prior to December 1993, Assistant General Counsel of The Dreyfus Corporation. Prior to August 1991, Senior Associate, Willkie Farr & Gallagher. Prior to January 1989, Staff Attorney at the Securities and Exchange Commission, Division of Investment Management, Office of Chief Counsel. John R. Reynoldson (49) Vice President Officer Executive Director of the Advisers and Van Kampen Advisors 1 Parkview Plaza since 2000 Inc. Vice President of funds in the Fund Complex. Prior to Oakbrook Terrace, IL 60181 July 2001, Principal and Co- head of the Fixed Income Department of the Advisers and Van Kampen Advisors Inc. Prior to December 2000, Senior Vice President of the Advisers and Van Kampen Advisors Inc. Prior to May 2000, he managed the investment grade taxable group for the Advisers since July 1999. From July 1988 to June 1999, he managed the government securities bond group for Asset Management. Mr. Reynoldson has been with Asset Management since April 1987. John L. Sullivan (46) Vice President, Officer Executive Director of Van Kampen Investments, the Advisers 1 Parkview Plaza Chief Financial since 1996 and Van Kampen Advisors Inc. Vice President, Chief Financial Oakbrook Terrace, IL 60181 Officer and Officer and Treasurer of funds in the Fund Complex. Head of Treasurer Fund Accounting for Morgan Stanley Investment Management.
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TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS John H. Zimmermann, III (44) Vice President Officer Managing Director and Director of Van Kampen Investments, Harborside Financial Center since 2000 and Managing Director, President and Director of the Plaza 2 - 7th Floor Distributor. Vice President of funds in the Fund Complex. Jersey City, NJ 07311 Prior to December 2000, President of Van Kampen Insurance Agency of Illinois Inc., and Senior Vice President and Director of Van Kampen Investments. From November 1992 to December 1997, Mr. Zimmermann was Senior Vice President of the Distributor.
44 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you make with us, our affiliates, or third parties. We may also collect information you provide when using our web site, and text files (a.k.a. "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com [VAN KAMPEN INVESTMENTS LOGO] Copyright (C)2002 Van Kampen Funds Inc. All rights reserved. 920, 919, 107 Member NASD/SIPC. VMT ANR 8/02 6949H02-AS-8/02 -----END PRIVACY-ENHANCED MESSAGE-----