-----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, Q5e+GlfejPT7yPB5tQw4AJbG/6uCuMXf38QbUR1Ht72x1eJW+QWI01c280BNLayv fwhUaMUsrs54NZFBYEHKWw== 0000950137-99-003128.txt : 19990819 0000950137-99-003128.hdr.sgml : 19990819 ACCESSION NUMBER: 0000950137-99-003128 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990818 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: 99695429 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 ANNUAL 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............................. 9 Portfolio of Investments......................... 11 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 Report of Independent Accountants................ 32 Dividend Reinvestment Plan....................... 33
VMT ANR 8/99 NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. 2 LETTER TO SHAREHOLDERS July 20, 1999 Dear Shareholder, With the volatility that we've experienced recently in many financial markets, some investors have sold securities because of uncertainty about where the markets were going, only to be left rethinking whether they made the right decision. We've witnessed this kind of market activity numerous times over the past several years, sparked by concerns such as the impact of the Asian economic crisis, high stock valuations, or, most recently, the stability of many high-flying technology companies. While these fears eventually subsided, investors who may have sold during this period were unable to reap the benefits of the subsequent rally. That's partly because most of the recent big gains happened in relatively short periods of time. This kind of volatility--and the danger of making short-term decisions--highlights the importance of investing for the long term, in accordance with your individual financial objectives. Although the worst of the Asian crisis appears to be behind us, new concerns are always emerging. In the coming months, we'll likely hear more about how the year 2000 computer problem may affect the markets or that we're overdue for a correction. While the markets could undoubtedly suffer as a result of these or any number of other events, we encourage you to focus on your long-term investment goals. Although nothing is certain, history has shown us that over time, the markets tend to recover--and most investors want to be positioned to take advantage of any recovery. If you have concerns about market volatility or questions about how your portfolio is structured to respond to these events, we encourage you to contact your financial advisor. Your advisor can talk with you about sustaining a long-term investment plan through a variety of market conditions. We hope that Van Kampen Funds will play an important role as you and your advisor build a portfolio designed to help you weather what the markets have in store. Sincerely, [SIG] Richard F. Powers, III Chairman Van Kampen Investment Advisory Corp. [SIG] Dennis J. McDonnell President Van Kampen Investment Advisory Corp. 1 3 ECONOMIC SNAPSHOT The strength of the domestic economy continued to defy expectations in the first half of 1999, although it finally began to show signs of slowing down. Strong growth, healthy employment, and low inflation all contributed to the favorable economic environment. STRONG ECONOMIC GROWTH The nation's gross domestic product rose at an impressive rate of 4.3 percent during the first quarter of 1999, but fell to 2.3 percent in the second quarter. The first-quarter expansion was fueled by an increase in consumer spending, which dropped to more moderate levels later in the reporting period. POSITIVE EMPLOYMENT ENVIRONMENT In May, the unemployment rate dropped to 4.2 percent--its lowest level in more than 30 years. Throughout the reporting period, unemployment remained low, the number of jobs grew, and wages rose. The labor market remained especially tight in the service industry and most urban areas. LOW INFLATION Inflation remained low throughout most of the reporting period, although a sharp increase in oil prices contributed to a spike in April's consumer price index report (CPI). Following this up-tick, the Federal Reserve raised interest rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a series of rate increases, May's tame CPI report prompted it to drop this bias when announcing the June rate increase. ECONOMIC OUTLOOK Our outlook for the economy suggests that the moderate slowdown may continue, bringing the economy back to historically normal growth levels. Healthy job growth, which has been supporting the consumer confidence and spending levels, showed signs of faltering toward the end of the reporting period. However, a renewed optimism for corporate earnings, low unemployment, and a vibrant housing market should provide some balance against a slower job growth rate. INTEREST RATES AND INFLATION June 30, 1997, through June 30, 1999
INTEREST RATES INFLATION -------------- --------- Jun 1997 6.5000 2.3000 6.0000 2.2000 5.5000 2.2000 Sep 1997 6.2500 2.2000 5.7500 2.1000 5.6875 1.8000 Dec 1997 6.5000 1.7000 5.5625 1.6000 5.6250 1.4000 Mar 1998 6.1250 1.4000 5.6250 1.4000 5.6875 1.7000 Jun 1998 6.0000 1.7000 5.5625 1.7000 5.9375 1.6000 Sep 1998 5.7500 1.5000 5.2500 1.5000 4.8750 1.5000 Dec 1998 4.0000 1.6000 4.8125 1.7000 4.8750 1.6000 Mar 1999 5.1250 1.7000 4.9375 2.3000 4.5000 2.1000 Jun 1999 4.0000 2.0000
Interest rates are represented by the closing midline federal funds rate on the last day of each month. Inflation is indicated by the annual percent change of the Consumer Price Index for all urban consumers at the end of each month. 2 4 PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999 VAN KAMPEN MUNICIPAL INCOME TRUST (NYSE TICKER SYMBOL--VMT) COMMON SHARE TOTAL RETURNS One-year total return based on market price(1)............ (5.68)% One-year total return based on NAV(2)..................... (.67)% DISTRIBUTION RATES Distribution rate as a % of closing stock price(3)........ 6.48% Taxable-equivalent distribution rate as a % of closing stock price(4).......................................... 10.13% SHARE VALUATIONS Net asset value........................................... $ 9.56 Closing common stock price................................ $ 9.6250 One-year high common stock price (11/23/98)............... $11.5000 One-year low common stock price (06/30/99)................ $ 9.5000 Preferred share (Series A) rate(5)........................ 3.498% Preferred share (Series B) rate(5)........................ 3.650% Preferred share (series C) rate(5)........................ 3.250%
(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 the management team of the Van Kampen Municipal Income Trust about the key events and economic forces that shaped the markets during the past year. The team includes David C. Johnson, portfolio manager, who has managed the Trust since April 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 comments reflect their views on the Trust's performance during the 12 months ended June 30, 1999. Q HOW DID THE ECONOMY AFFECT THE MUNICIPAL MARKET DURING THE REPORTING PERIOD? A During the majority of the reporting period, the municipal market remained relatively stable, even though the stock and high-yield bond markets experienced significant volatility. Much of this stability was attributed to the municipal market's isolation from turbulence abroad. However, the market started to experience more volatility in yields and prices during the last three months of the reporting period. Concerns about rising inflation--particularly the spike in the consumer price index (CPI) in April--led to higher interest rates (and subsequently lower bond prices) during this period. Although inflationary concerns were fueled by strong economic growth and the Federal Reserve's bias toward raising rates, they were moderated by a zero growth rate for the CPI in May. In addition, the Fed's rate hike on June 30 was coupled with the announcement that it no longer had a bias toward future rate increases, which helped calm the markets. Q DID THIS ECONOMIC ACTIVITY AFFECT THE SUPPLY OF MUNICIPAL BONDS? A Yes. Throughout the reporting period, the supply of municipal bonds declined, particularly as rates increased. As of June 30, the supply of new and refinanced bonds was down 23 percent compared with the previous year, partly because it was no longer economically favorable to refinance many bonds once rates increased. Also, since municipalities had benefited from the strong economy, many no longer needed to issue bonds for general operating needs. Although overall supply fell, the proportion of higher-yielding municipal bonds increased during the period as the number of insured bonds declined. Because bond insurers tightened their underwriting criteria, more securities came to market without insurance and offered higher yields to compensate bondholders for the increased credit risk. This situation benefited the Trust's yield because it allowed our experienced research staff to seek out those higher-yielding bonds that we felt had strong underlying quality. 4 6 Q GIVEN THESE CONDITIONS, HOW DID YOU MANAGE THE TRUST? A We continued to focus on protecting the Trust's income stream as much as possible. Many of the bonds in the Trust offer significantly higher yields than are available in the current marketplace, and therefore are vulnerable to being called by the issuer and refinanced at today's lower rates. In fact, more than 20 percent of the portfolio is subject to call by the end of 2000. To cushion the impact of the potential loss of these higher-yielding bonds, we made a number of purchases when interest rates rose at the end of the reporting period. Although the new bonds yield less than the bonds they replaced, they offered the most attractive rates available during the reporting period. While these purchases did not offset the need for a dividend decrease, we anticipate that they will help us moderate future dividend reductions. To further support the Trust, we bought noncallable bonds, which provide slightly lower yields but cannot be removed from the portfolio until their maturity date unless we choose to sell them. We also avoided sectors such as housing, because the low interest-rate environment meant that these bonds might be repaid early as more homeowners refinance their mortgages. While the housing sector usually offers higher yields because of its susceptibility to calls, we did not feel that these bonds offered enough yield to compensate for the added call risk. Q WHERE DID YOU FIND VALUE IN THE MUNICIPAL MARKET? A We focused on areas of the market that we felt offered the most value and avoided sectors that appeared to be under pressure. For example, we reduced the Trust's holdings in the health-care sector because of increasing financial pressures on the industry. Although many health-care bonds remain attractive, the challenges imposed by managed care and changing Medicare reimbursement policies have led us to look to other sectors in recent months. As a result, we sold lower-rated health-care issues and replaced them with longer-maturity AAA bonds, which offered favorable yields given their solid credit standing. The higher-quality bonds temporarily hurt the Trust's total return because they were more sensitive to price declines as interest rates increased. We believe, however, that they will benefit the Trust in the future if credit spreads widen and higher-rated bonds increase in value. For additional Trust highlights, please refer to page 9. Q HOW DID THE TRUST PERFORM DURING THE PERIOD? A The volatile market and rise in interest rates, especially during the last few weeks of the reporting period, hurt the Trust's price performance. For the 12 months ended June 30, 1999, the Trust generated a total return of - -5.68 percent(1) based on market price. This reflects a decrease in market price from $10.875 on June 30, 1998, to $9.625 on June 30, 1999. Although the total return suffered, the Trust provided a very competitive distribution rate of 6.48 percent(3) based on its closing common stock price on June 30, 1999. 5 7 Because the Trust is exempt from federal income taxes, this distribution rate is equivalent to a yield of 10.13 percent(4) on a taxable investment for shareholders in the 36 percent federal income tax bracket. As we discussed earlier, the low interest-rate environment led to a reduction in the Trust's income stream over the past year. As a result, the Board of Trustees approved decreases in the Trust's dividend in December 1998 and June 1999. Despite the dividend decreases, we believe that the Trust offers a competitive yield, especially when considering its exemption from federal income taxes. Please refer to the chart and footnotes on page 3 for additional Trust performance results. Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS? A Strong economic performance should continue to bolster the credit conditions of municipal issuers, which would support the Trust's already-strong credit quality. In addition, we expect that this economic strength will prompt municipalities to issue debt for special projects rather than for general operating financing, keeping supply at moderate levels. We also see the potential for changes in traditional economic activity toward the end of the year because of investor concerns about the year 2000 computer problem. These temporary concerns, however, may result in attractive investment opportunities that our research staff can explore to uncover potential value. [SIG] David C. Johnson Portfolio Manager [SIG] Peter W. Hegel Chief Investment Officer Fixed Income Investments 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. FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve System, which is the central bank of the United States. Its policy-making committee, called the Federal Open Market Committee, meets eight times a year to establish monetary policy and monitor the economic pulse of the United States. INFLATION: A persistent and measurable rise in the general level of prices. Inflation is widely measured by the Consumer Price Index, an economic indicator that measures the change in the cost of purchased goods and services. INSURED BOND: A bond that is insured against default by the bond insurer. If the issuer defaults, the insurance company will step in and take over payments of interest and principal when due. Once a bond is insured, it typically carries the rating of the insurer. Most insurers are rated AAA. 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 GLOSSARY OF TERMS (CONTINUED) VOLATILITY: A measure of the fluctuation in the market price of a security. A security that is volatile has frequent and large swings in price. YIELD: The annual rate of return on an investment, expressed as a percentage. YIELD SPREAD: The additional yield investors can earn by either investing in bonds with longer maturities or by investing in bonds with lower ratings. The spread is the difference in yield between bonds with short versus long maturities or the difference in yield between high-quality bonds and lower-quality bonds. 8 10 PORTFOLIO HIGHLIGHTS VAN KAMPEN MUNICIPAL INCOME TRUST TOP FIVE PORTFOLIO INDUSTRIES* [BAR GRAPH]
JUNE 30, 1999 JUNE 30, 1998 ------------- ------------- General Purpose 20.20 9.50 Health Care 12.30 16.80 Public Education 9.00 2.70 Airport 8.80 7.50 Transportation 7.50 11.10
* As a percentage of long-term investments NET ASSET VALUE AND MARKET PRICE (BASED UPON MONTH-END VALUES) JUNE 1989 THROUGH JUNE 1999 [GRAPH]
MARKET PRICE NET ASSET VALUE ------------ --------------- Jun 1989 9.5000 9.7700 9.6250 9.8000 9.5000 9.6100 9.2500 9.5000 9.2500 9.5400 9.5000 9.6700 9.1250 9.7200 9.3750 9.5800 9.3750 9.6100 9.2500 9.5600 9.3750 9.3300 9.2500 9.4300 Jun 1990 9.2500 9.5300 9.5000 9.6600 9.2500 9.4000 9.0000 9.3100 8.8750 9.3600 9.2500 9.5600 9.6250 9.6200 9.6250 9.6100 10.0000 9.7000 10.0000 9.6400 10.0000 9.7400 10.1250 9.8300 Jun 1991 10.1250 9.8100 10.3750 9.9200 10.3750 9.9700 10.6250 10.1100 10.5000 10.1300 10.5000 10.1300 10.7500 10.2400 11.1250 10.2000 10.7500 10.2200 10.8750 10.1800 11.1250 10.2500 11.1250 10.4500 Jun 1992 11.3750 10.6900 11.8750 11.3700 11.7500 10.9900 11.5000 10.9700 10.7500 10.6800 11.3750 10.7100 12.0000 10.6500 12.0000 10.6900 12.3750 11.0900 11.6250 11.0900 11.7500 11.0900 11.8750 11.0900 Jun 1993 12.0000 11.1300 12.2500 11.0900 12.6250 11.2100 12.3750 11.3700 12.2500 11.3100 11.7500 11.0400 11.7500 11.1700 12.2500 11.2700 11.7500 10.8000 10.7500 9.9300 11.1250 9.9100 11.0000 9.9700 Jun 1994 11.1250 9.9200 11.2500 10.0000 11.0000 10.0200 10.2500 9.8200 10.0000 9.5000 10.1250 9.1000 9.7500 9.3400 10.6250 9.6100 11.2500 9.9000 11.0000 9.9000 11.0000 9.7700 11.0000 9.9400 Jun 1995 11.1250 9.7600 11.2500 9.7600 11.1250 9.8500 10.7500 9.8600 10.5000 9.9800 10.5000 10.1600 10.5000 10.2400 11.0000 10.2600 11.0000 10.1600 10.3750 9.8800 10.1250 9.7600 10.0000 9.7200 Jun 1996 9.8750 9.7600 10.1250 9.8400 10.3750 9.7700 10.2500 9.9000 10.2500 9.9700 10.3750 10.1200 10.3750 10.0000 10.3750 9.9600 10.3750 10.0400 10.1250 9.8100 10.6250 9.8900 10.6250 9.9900 Jun 1997 10.8750 10.0100 11.0625 10.3800 11.0000 10.0900 11.0000 10.1800 10.9370 10.2300 11.1870 10.2000 10.8120 10.3500 11.1250 10.4200 11.0620 10.3700 10.3120 10.3200 10.2500 10.1400 10.4370 10.2800 Jun 1998 10.8750 10.2600 10.8125 10.2300 10.7500 10.4400 11.0000 10.5700 11.1250 10.4300 11.3750 10.4100 10.8125 10.3800 10.6250 10.4300 10.8750 10.2000 10.6875 10.1300 10.5000 10.1100 10.3750 9.9200 Jun 1999 9.6250 9.5600
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. 9 11 PORTFOLIO HIGHLIGHTS (CONTINUED) VAN KAMPEN MUNICIPAL INCOME TRUST CREDIT QUALITY [PIE CHART]
As of June 30, 1999 AAA/Aaa ............ 63.80 AA/Aa .............. 3.80 A/A ................ 10.40 BBB/Baa ............ 20.00 NON-RATED .......... 2.00
[PIE CHART]
As of December 31, 1998 AAA/Aaa ............ 50.5 AA/Aa .............. 5.4 A/A ................ 17.1 BBB/Baa ............ 23.4 BB/Ba .............. 1.4 NON-RATED .......... 2.2
Based upon the highest credit quality ratings as issued by Standard & Poor's or Moody's, respectively. DIVIDEND HISTORY FOR THE PERIOD ENDED JUNE 30, 1999 [BAR GRAPH]
MONTHLY DIVIDEND ---------------- Jul 1998 0.0560 Aug 1998 0.0560 Sep 1998 0.0560 Oct 1998 0.0560 Nov 1998 0.0560 Dec 1998 0.0540 Jan 1999 0.0540 Feb 1999 0.0540 Mar 1999 0.0540 Apr 1999 0.0540 May 1999 0.0540 Jun 1999 0.0520
The dividend history represents past performance of the Trust and does not predict the Trust's future distributions. 10 12 PORTFOLIO OF INVESTMENTS June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- MUNICIPAL BONDS 106.2% ALABAMA 0.1% $ 500 Alabama St Indl Dev Auth Solid Waste Disp Rev Pine City Fiber Co (b)...... 6.450% 12/01/23 $ 515,570 ------------ ARKANSAS 0.2% 1,000 Conway, AR Hosp Rev Conway Regl Hosp Rfdg................................. 8.375 07/01/11 1,048,830 ------------ CALIFORNIA 6.1% 24,940 Alameda Corridor Tran Auth CA Rev Ser 1999 A (MBIA Insd)................... * 10/01/36 3,135,207 7,280 California Hsg Fin Agy Rev Homeowner Mtg Ser D............................ * 08/01/20 1,446,973 4,250 California St (MBIA Insd)............ 5.000 08/01/24 4,020,458 5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (MBIA Insd)............. * 09/01/17 1,855,800 2,000 Duarte CA Ctfs Partn Ser A........... 5.250 04/01/19 1,871,460 1,500 Duarte CA Ctfs Partn Ser A........... 5.250 04/01/24 1,388,460 6,075 Orange Cnty, CA Recovery Ctfs Ser A Rfdg (MBIA Insd) (b)................. 6.000 06/01/09 6,647,204 11,120 San Diego, CA Unified Sch Dist Cap Apprec Ser A (FGIC Insd)............. * 07/01/23 2,964,036 15,000 San Joaquin Hills, CA Tran Toll Cap Apprec Ser A Rfdg (MBIA Insd)........ * 01/15/26 3,423,000 ------------ 26,752,598 ------------ COLORADO 8.0% 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 1,151,320 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 1,730,970 1,825 Denver, CO City & Cnty Arpt Rev Ser A.................................... 8.500 11/15/07 1,955,323 11,330 Denver, CO City & Cnty Arpt Rev Ser A (b).................................. 8.250 11/15/12 12,045,263 5,115 Denver, CO City & Cnty Arpt Rev Ser A (b).................................. 8.500 11/15/23 5,457,551 4,410 Denver, CO City & Cnty Arpt Rev Ser A (b).................................. 8.750 11/15/23 4,862,951 1,070 Denver, CO City & Cnty Arpt Rev Ser A (Prerefunded @ 11/15/00) (b)......... 8.250 11/15/12 1,153,899
See Notes to Financial Statements 11 13 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- COLORADO (CONTINUED) $ 1,590 Denver, CO City & Cnty Arpt Rev Ser A (Prerefunded @ 11/15/01)............. 8.750% 11/15/23 $ 1,783,169 3,000 Meridian Metro Dist CO Peninsular & Oriental Steam Navig Co Rfdg (LOC: Meridian Assoc East)................. 7.500 12/01/11 3,208,110 1,850 Montrose Cnty, CO Ctfs Partn......... 6.350 06/15/06 1,977,021 ------------ 35,325,577 ------------ CONNECTICUT 0.7% 3,100 Stamford, CT Hsg Auth Multi-Family Rev Fairfield Apts Proj Rfdg......... 4.750 12/01/28 2,992,554 ------------ DISTRICT OF COLUMBIA 0.8% 710 Dist of Columbia Ctfs Partn.......... 6.875 01/01/03 732,138 2,775 Dist of Columbia Hosp Rev Medlantic Hlthcare Ser A Rfdg (MBIA Insd) (b).................................. 5.250 08/15/12 2,801,778 ------------ 3,533,916 ------------ FLORIDA 2.1% 1,000 Bartow, FL Wtr & Swr Systems Rev (FGIC Insd).......................... 5.125 10/01/29 958,430 4,660 Florida St Brd Edl Cap Outlay Pub Ed Ser A Rfdg (Prerefunded @ 06/01/00)............................ * 06/01/15 1,576,758 3,500 Florida St Brd Edl Cap Outlay Pub Ed Ser B................................ 4.500 06/01/27 2,968,280 4,000 Sarasota Cnty, FL Pub Hosp Brd Miles Sarasota Mem Hosp Proj Ser A (Embedded Cap) (MBIA Insd)........... * 10/01/21 3,760,360 ------------ 9,263,828 ------------ GEORGIA 9.5% 1,000 Burke Cnty, GA Dev Auth Pollution Control Rev GA Pwr Co Plant Vogtle Second Ser (AMBAC Insd).............. 5.250 05/01/34 957,010 5,866 Fulton Cnty, GA Lease Rev (b)........ 7.250 06/15/10 6,601,727 25,000 Georgia Local Gov Ctfs Partn Grantor Trust Ser A (MBIA Insd) (b).......... 4.750 06/01/28 22,550,000 2,635 Georgia Muni Elec Auth Pwr Rev Ser A (MBIA Insd) (b)...................... 6.500 01/01/20 3,014,888
See Notes to Financial Statements 12 14 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- GEORGIA (CONTINUED) $ 3,000 Georgia Muni Elec Auth Pwr Rev Ser B (FGIC Insd) (b)...................... 6.250% 01/01/17 $ 3,331,590 5,000 Georgia Muni Elec Auth Pwr Rev Ser Z Rfdg (MBIA Insd) (b)................. 5.500 01/01/20 5,105,850 ------------ 41,561,065 ------------ IDAHO 0.5% 2,080 Boise, ID Urban Renewal Agy Pkg Rev Ser A (b)............................ 8.125 09/01/15 2,115,277 ------------ ILLINOIS 18.3% 49,000 Chicago, IL Brd Edl Cap Apprec Sch Reform B-1 (FGIC Insd)............... * 12/01/27 9,716,700 78,500 Chicago, IL Brd Edl Cap Apprec Sch Reform B-1 (FGIC Insd)............... * 12/01/31 12,357,470 13,645 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airls Inc Proj Ser 84A (b).................................. 8.850 05/01/18 14,792,544 2,585 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airls Inc Proj Ser 84B (b).................................. 8.850 05/01/18 2,802,399 4,895 Chicago, IL Pub Bldg Comm Bldg Rev Ser A (MBIA Insd).................... * 01/01/07 3,394,242 1,000 Chicago, IL Ser B Rfdg (AMBAC Insd) (b).................................. 5.125 01/01/15 985,290 5,000 Hoffman Estates, IL Park Dist........ 5.375 12/01/29 4,804,600 2,000 Illinois Edl Fac Auth Rev Lewis Univ................................. 6.125 12/01/26 2,012,400 1,450 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser D....................... 9.500 11/15/15 1,597,378 1,275 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser D (Prerefunded @ 11/15/00)............................ 9.500 11/15/15 1,395,908 570 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser E....................... 9.500 11/15/19 628,140 1,310 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser E (Prerefunded @ 11/15/00)............................ 9.500 11/15/19 1,433,612 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 1,061,980 3,205 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys Rfdg (b)................ 6.000 11/15/23 3,252,979
See Notes to Financial Statements 13 15 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $ 2,000 Illinois Hlth Fac Auth Rev Servantcor Ser A (Prerefunded @ 08/15/01)....... 8.000% 08/15/21 $ 2,187,500 45,775 Illinois Hsg Dev Auth Multi-Family Hsg Ser A............................ * 07/01/27 5,594,620 1,250 Sangamon Cnty, IL Ctfs Partn......... 10.000 12/01/06 1,656,713 3,750 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill (FGIC Insd) (a).......... * 01/01/15 1,607,325 4,295 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill (FGIC Insd) (a).......... * 01/01/17 1,636,352 6,500 Will Cnty, IL Cmnty Sch Dist No 365 (FSA Insd) (a)....................... * 11/01/17 2,365,220 10,435 Will Cnty, IL Fst Presv Dist Ser B (FGIC Insd).......................... * 12/01/12 5,104,489 ------------ 80,387,861 ------------ INDIANA 0.7% 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 1,458,201 1,650 Indiana St Edl Fac Auth Rev Univ Evansville Proj (Prerefunded @ 11/01/00) (b)........................ 8.125 11/01/10 1,775,499 ------------ 3,233,700 ------------ KENTUCKY 0.5% 2,190 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn KY Intl Arpt Ser A Rfdg (MBIA Insd) (b)................. 6.250 03/01/09 2,372,361 ------------ LOUISIANA 1.7% 1,022 Lafayette, LA Pub Fin Auth Single Family Mtg Rev Ser A Rfdg............ 8.500 11/15/12 1,050,851 4,895 Louisiana Pub Fac Auth Rev Multi-Family Hsg Pontchatn Arpts Ser B (GNMA Collateralized) (b).......... 8.375 07/20/23 5,103,856 1,250 New Orleans, LA Hsg Dev Corp Multi-Family Rev Hsg Southwood Patio Ser A (FNMA Collateralized).......... 7.700 02/01/22 1,351,000 ------------ 7,505,707 ------------ MARYLAND 2.5% 2,180 Baltimore, MD Cap Apprec Ser A (FGIC Insd)................................ * 10/15/09 1,264,247 2,470 Baltimore, MD Cap Apprec Ser A (Prerefunded @ 10/15/05) (FGIC Insd)................................ * 10/15/09 1,451,051
See Notes to Financial Statements 14 16 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- MARYLAND (CONTINUED) $ 1,000 Maryland St Econ Dev Corp Student Housing Rev (a)...................... 5.750% 06/01/29 $ 960,690 2,500 Maryland St Econ Dev Corp Student Housing Rev (a)...................... 6.000 06/01/30 2,492,875 5,000 Maryland St Hlth & Higher Edl Fac Auth Rev Medlantic/Helix Issue Ser B (AMBAC Insd)......................... 5.250 08/15/38 4,834,650 ------------ 11,003,513 ------------ MASSACHUSETTS 0.8% 2,440 Massachusetts St Hlth & Edl Fac Auth Rev Farmingham Union Hosp Ser B (Prerefunded @ 07/01/00)............. 8.500 07/01/10 2,591,622 1,000 Massachusetts St Indl Fin Agy Rev Higher Edl Hampshire College Proj.... 5.625 10/01/12 985,230 ------------ 3,576,852 ------------ MICHIGAN 4.6% 1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Ctr............. 5.750 05/15/18 1,153,355 4,260 Michigan St Hosp Fin Auth Rev Hosp Battle Creek Hosp Ser G Rfdg......... 9.500 11/15/15 4,656,095 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 2,031,528 1,000 Michigan St Hosp Fin Auth Rev Hosp Genesys Regl Med Ser A Rfdg (ACA Insd)................................ 5.500 10/01/18 967,070 2,000 Michigan St Hosp Fin Auth Rev Hosp Hackley Hosp Ser A Rfdg.............. 5.000 05/01/18 1,793,640 4,000 Michigan St Strat Fd Ltd Oblig Rev Detroit Edison Co Ser A Rfdg (MBIA Insd) (a)............................ 5.550 09/01/29 3,934,840 5,000 Wayne Charter Cnty, MI Airport Rev Detroit Metro Wayne Cnty (MBIA Insd)................................ 5.000 12/01/28 4,579,650 1,000 Wayne Charter Cnty, MI Airport Rev Subordinated Lien Detroit Metro Ser B (MBIA Insd).......................... 5.250 12/01/13 980,640 ------------ 20,096,818 ------------
See Notes to Financial Statements 15 17 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- MINNESOTA 0.6% $ 3,000 Southern MN Muni Pwr Agy Pwr Supply Sys Rev Ser A Rfdg (MBIA Insd)....... 4.750% 01/01/16 $ 2,799,630 ------------ MISSISSIPPI 0.4% 1,500 Mississippi Hosp Equip & Fac MS Baptist Med Cent Rfdg (MBIA Insd) (b).................................. 6.000 05/01/13 1,568,940 ------------ MISSOURI 0.7% 2,735 Missouri St Hsg Dev Cmnty Mtg Rev Ser B Rfdg (FHA Gtd) (b)................. 7.000 09/01/10 2,859,853 ------------ NEBRASKA 1.0% 3,935 Nebraska Invt Fin Single Family Mtg Rev Pgm B (Inverse Fltg) (GNMA Insd) (b).................................. 11.623 03/15/22 4,190,775 ------------ NEW HAMPSHIRE 0.5% 2,340 New Hampshire St Bus Fin Auth Pollutn Ctl Rev.............................. 5.875 10/01/33 2,344,610 ------------ NEW YORK 15.1% 2,250 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Ser C (Prerefunded @ 06/15/01) (b)........................ 7.750 06/15/20 2,438,460 7,000 New York City Ser A (b).............. 7.000 08/01/04 7,718,830 4,500 New York City Ser B (AMBAC Insd) (b).................................. 7.250 08/15/07 5,192,325 2,700 New York City Ser C (b).............. 7.000 08/15/08 2,844,666 1,100 New York City Ser C (Prerefunded @ 08/15/01)............................ 7.000 08/15/08 1,166,869 6,930 New York City Tran Auth Tran Fac Livingston Plaza Proj Rfdg (FSA Insd) (b).................................. 5.400 01/01/18 7,000,478 9,450 New York St Dorm Auth Rev Mental Hlth Svcs Fac Impt F (AMBAC Insd)......... 4.500 08/15/28 8,030,610 8,625 New York St Dorm Auth Rev City Univ Ser F (b)............................ 5.500 07/01/12 8,679,683 5,190 New York St Dorm Auth Rev Insd NY Univ Ser A (AMBAC Insd) (a).......... 5.500 07/01/11 5,229,963 415 New York St Med Care Fac Fin Agy Rev Mental Hlth Svcs Fac Ser A........... 7.750 08/15/11 443,834 2,500 New York St Urban Dev Corp Rev Correctional Cap Fac Ser A........... 5.250 01/01/21 2,389,900
See Notes to Financial Statements 16 18 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $ 2,635 New York St Urban Dev Corp Rev Youth Fac.................................. 5.875% 04/01/08 $ 2,746,382 5,305 New York, NY City Trans Auth Ser A... 5.625 01/01/12 5,523,990 3,000 New York, NY City Trans Auth Metro Ser A................................ 5.250 01/01/29 2,906,010 4,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl Arpt Terminal 6 (MBIA Insd) (b)............................ 5.750 12/01/22 4,105,440 ------------ 66,417,440 ------------ NORTH CAROLINA 3.7% 15,000 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev (MBIA Insd) (b)..... 6.000 01/01/12 16,186,200 ------------ OHIO 1.2% 3,805 Mason, OH Hlthcare Fac (FHA Gtd) (Prerefunded @ 02/01/01)............. 7.625 02/01/40 4,118,380 1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd Partn Proj Rfdg (AMBAC Insd) (b)............................ 6.375 04/01/29 1,077,930 ------------ 5,196,310 ------------ OKLAHOMA 0.8% 3,300 Mc Alester, OK Public Wks Auth Utility Sys Rev (FSA Insd)........... 5.750 02/01/20 3,394,050 ------------ PENNSYLVANIA 7.7% 1,000 Allegheny Cnty, PA Ctfs Partn (AMBAC Insd)................................ 5.000 12/01/28 928,150 2,500 Harrisburg, PA Auth Wtr Rev (Inverse Fltg) (FGIC Insd) (b)................ 8.030 06/18/15 2,675,000 1,700 Harrisburg, PA Cap Apprec Notes Ser F Rfdg (AMBAC Insd).................... * 09/15/14 748,187 5,000 Pennsylvania St Higher Edl Assist Agy Student Ln Rev Ser B (Inverse Fltg) (MBIA Insd) (b)...................... 11.244 03/01/20 6,187,500 1,770 Philadelphia, PA Auth Indl Dev Rev Edl Comm Fgn Med Grads (MBIA Insd)... 5.000 06/01/18 1,671,623 1,000 Philadelphia, PA Auth Indl Dev Rev Edl Comm Fgn Med Grads (MBIA Insd)... 5.000 06/01/21 944,620 7,385 Philadelphia, PA Sch Dist Ser A (MBIA Insd)................................ 4.500 04/01/18 6,476,054 1,750 Philadelphia, PA Sch Dist Cap Apprec Ser A Rfdg (AMBAC Insd).............. * 07/01/01 1,608,320 6,500 Philadelphia, PA Sch Dist Ser A (MBIA Insd) (a)............................ 4.500 04/01/23 5,577,975
See Notes to Financial Statements 17 19 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - ------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) $ 2,000 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser A Rfdg (b).................. 6.000% 12/01/13 $ 2,153,440 4,745 Sayre, PA Hlthcare Fac Auth Rev VHA Cap Asset Fin Pgm Ser C (AMBAC Insd) (b).................................. 7.700 12/01/15 4,912,309 ------------ 33,883,178 ------------ RHODE ISLAND 0.2% 1,000 Providence, RI Pub Bldg Auth Genl Rev Ser B (FSA Insd) (b)................. 7.250 12/15/10 1,063,590 ------------ SOUTH CAROLINA 0.4% 1,610 South Carolina St Hsg Fin & Dev Auth Homeowner Mtg Ser A (b).............. 7.400 07/01/23 1,677,137 ------------ TENNESSEE 1.3% 5,385 Tennessee Hsg Dev Agy Mtg Fin Ser A (b).................................. 7.125 07/01/26 5,713,377 ------------ TEXAS 7.1% 7,000 Austin, TX Rev Rfdg Sub Lien Ser A (MBIA Insd).......................... 4.250 05/15/28 5,616,450 7,065 Dallas Cnty, TX Util & Reclamation Dist Cap Apprec (MBIA Insd).......... * 02/15/20 1,609,902 2,790 Dallas Fort Worth, TX Intl Arpt Fac Imp Corp Rev......................... 6.000 11/01/14 2,852,105 1,800 Gulf Coast Wtr Auth TX Wtr Sys Contract Rev (FGIC Insd)............. 5.000 08/15/17 1,722,330 4,820 Harris Cnty, TX Toll Rd (Prerefunded @ 08/15/09) (AMBAC Insd)............. * 08/15/18 1,558,354 1,000 Harris Cnty, TX Toll Rd (Prerefunded @ 08/15/09) (AMBAC Insd)............. * 08/15/21 263,010 2,400 Port Arthur, TX Navig Dist Rfdg (AMBAC Insd)......................... 4.875 03/01/19 2,230,440 4,000 Rockwall, TX Ind Sch Dist Cap Apprec Rfdg (PSF Gtd)....................... * 08/15/20 1,210,200 4,395 Rockwall, TX Ind Sch Dist Cap Apprec Rfdg (PSF Gtd)....................... * 08/15/21 1,231,435 3,525 Texas Muni Pwr Agy Rev Cap Apprec Rfdg (AMBAC Insd).................... * 09/01/07 2,356,603 8,220 Texas St Pub Ppty Fin Corp Rev Mental Hlth & Retardation Rfdg (FSA Insd) (b).................................. 5.500 09/01/13 8,276,965
See Notes to Financial Statements 18 20 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
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 $ 414,106 1,270 Waxahachie, TX Cmnty Dev Corp Sales Tax Rev (MBIA Insd).................. * 08/01/22 336,626 1,250 West Side Calhoun Cnty, TX Navig Dist Solid Waste Disp Union Carbide Chem & Plastics (b)......................... 8.200% 03/15/21 1,338,513 ------------ 31,017,039 ------------ UTAH 1.7% 5,210 Salt Lake City, UT Arpt Rev Delta Airls Inc Proj (b)................... 7.900 06/01/17 5,326,600 1,000 Salt Lake Cnty, UT College Rev Westminster College Proj............. 5.750 10/01/27 1,001,320 965 Utah St Hsg Fin Agy Single Family Mtg Ser B Class 2 (b).................... 6.250 07/01/14 1,010,741 ------------ 7,338,661 ------------ VIRGINIA 3.6% 1,970 Richmond, VA (FSA Insd) (a).......... 5.250 01/15/09 1,948,625 4,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/12 3,980,440 4,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/13 3,971,920 3,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/16 2,936,190 3,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/17 2,919,810 ------------ 15,756,985 ------------ WEST VIRGINIA 0.6% 2,480 South Charleston, WV Indl Dev Rev Union Carbide Chem & Plastics Ser A (b).................................. 8.000 08/01/20 2,605,637 ------------ WISCONSIN 1.6% 2,835 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/11 1,479,275 1,495 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/12 734,598 1,565 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/13 724,329 1,670 Southeast WI Professional Baseball Pk Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/14 727,318
See Notes to Financial Statements 19 21 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 - --------------------------------------------------------------------------------
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 $ 387,150 2,750 Southeast WI Professional Baseball Pk Dist Sales Tax Rev Ser A Rfdg (MBIA Insd)................................ 5.500% 12/15/26 2,794,990 ------------ 6,847,660 ------------ PUERTO RICO 0.9% 1,000 Puerto Rico Indl Tourist Edl Med & Environmental Control Fac Financing Auth Higher Edl Rev (a).............. 5.375 02/01/19 978,620 3,000 Puerto Rico Pub Bldgs Auth Gtd Pub Ed & Hlth Fac........................... 5.700 07/01/16 3,099,120 ------------ 4,077,740 ------------ TOTAL INVESTMENTS 106.2% (Cost $456,782,012)................................................ 466,224,839 LIABILITIES IN EXCESS OF OTHER ASSETS (6.2%)........................ (27,112,878) ------------ NET ASSETS 100.0%................................................... $439,111,961 ============
* 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 June 30, 1999 - -------------------------------------------------------------------------------- ASSETS: Total Investments (Cost $456,782,012)....................... $466,224,839 Receivables: Investments Sold.......................................... 11,672,438 Interest.................................................. 5,925,500 Other....................................................... 24,391 ------------ Total Assets.......................................... 483,847,168 ------------ LIABILITIES: Payables: Investments Purchased..................................... 43,670,342 Variation Margin on Futures............................... 230,000 Investment Advisory Fee................................... 218,266 Income Distributions -- Preferred Shares.................. 186,744 Custodian Bank............................................ 98,516 Affiliates................................................ 15,442 Accrued Expenses............................................ 201,864 Trustees' Deferred Compensation and Retirement Plans........ 114,033 ------------ Total Liabilities..................................... 44,735,207 ------------ NET ASSETS.................................................. $439,111,961 ============ NET ASSETS CONSIST OF: Preferred Shares ($.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 Net Unrealized Appreciation................................. 9,463,175 Accumulated Undistributed Net Investment Income............. 1,044,953 Accumulated Net Realized Loss............................... (2,512,532) ------------ Net Assets Applicable to Common Shares................ 274,111,961 ------------ NET ASSETS.................................................. $439,111,961 ============ NET ASSET VALUE PER COMMON SHARE ($274,111,961 divided by 28,684,985 shares outstanding)............................ $ 9.56 ============
See Notes to Financial Statements 21 23 STATEMENT OF OPERATIONS For the Year Ended June 30, 1999 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest.................................................... $ 27,706,872 ------------ EXPENSES: Investment Advisory Fee..................................... 2,745,741 Preferred Share Maintenance................................. 430,793 Trustees' Fees and Related Expenses......................... 37,120 Custody..................................................... 32,765 Legal....................................................... 18,678 Other....................................................... 369,728 ------------ Total Expenses.......................................... 3,634,825 ------------ NET INVESTMENT INCOME....................................... $ 24,072,047 ============ REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 5,514,664 Options................................................... 283,658 Futures................................................... (1,993,699) ------------ Net Realized Gain........................................... 3,804,623 ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 33,383,365 ------------ End of the Period: Investments............................................. 9,442,827 Futures................................................. 20,348 ------------ 9,463,175 ------------ Net Unrealized Depreciation During the Period............... (23,920,190) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(20,115,567) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,956,480 ============
See Notes to Financial Statements 22 24 STATEMENT OF CHANGES IN NET ASSETS For the Years Ended June 30, 1999 and 1998 - --------------------------------------------------------------------------------
Year Ended Year Ended June 30, 1999 June 30, 1998 - -------------------------------------------------------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income............................ $ 24,072,047 $ 25,289,969 Net Realized Gain................................ 3,804,623 5,265,942 Net Unrealized Appreciation/Depreciation During the Period..................................... (23,920,190) 2,077,934 ------------ ------------ Change in Net Assets from Operations............. 3,956,480 32,633,845 ------------ ------------ Distributions from Net Investment Income: Common Shares.................................. (18,745,835) (19,639,177) Preferred Shares............................... (5,498,326) (5,972,446) ------------ ------------ Total Distributions.............................. (24,244,161) (25,611,623) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..................................... (20,287,681) 7,022,222 FROM CAPITAL TRANSACTIONS: Value of Common Shares Issued Through Dividend Reinvestment................................... 2,055,345 2,074,652 ------------ ------------ TOTAL INCREASE/DECREASE IN NET ASSETS............ (18,232,336) 9,096,874 NET ASSETS: Beginning of the Period.......................... 457,344,297 448,247,423 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $1,044,953 and $1,217,067, respectively)....... $439,111,961 $457,344,297 ============ ============
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. - --------------------------------------------------------------------------------
-------------------------------------------------- 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------- Net Asset Value, Beginning of the Period (a)............. $10.263 $10.014 $ 9.758 $9.760 $ 9.924 ------- ------- ------- ------ ------- Net Investment Income........ .841 .890 .916 .940 .964 Net Realized and Unrealized Gain/Loss.................. (.700) .261 .264 .048 (.065) ------- ------- ------- ------ ------- Total from Investment Operations................. .141 1.151 1.180 .988 .899 ------- ------- ------- ------ ------- Less: Distributions from Net Investment Income: Paid to Common Shareholders........... .656 .692 .720 .770 .840 Common Share Equivalent of Distributions Paid to Preferred Shareholders........... .192 .210 .204 .220 .223 Distributions from and in Excess of Net Realized Gain Paid to Common Shareholders............. -0- -0- -0- -0- -0- ------- ------- ------- ------ ------- Total Distributions.......... .848 .902 .924 .990 1.063 ------- ------- ------- ------ ------- Net Asset Value, End of the Period..................... $ 9.556 $10.263 $10.014 $9.758 $ 9.760 ======= ======= ======= ====== ======= Market Price Per Share at End of the Period.............. $9.6250 $10.875 $10.875 $9.875 $11.125 Total Investment Return at Market Price (a)........... (5.68%) 6.85% 18.32% (4.27%) 8.59% Total Return at Net Asset Value (b).................. (.67%) 9.62% 10.24% 8.02% 7.24% Net Assets at End of the Period (In millions)....... $ 439.1 $ 457.3 $ 448.2 $438.7 $ 436.1 Ratio of Expenses to Average Net Assets Applicable to Common Shares*............. 1.24% 1.23% 1.28% 1.31% 1.33% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c)................. 6.35% 6.64% 7.18% 7.26% 7.56% Portfolio Turnover........... 98% 103% 53% 29% 38% * Ratio of Expenses to Average Net Assets Including Preferred Shares..................... .79% .79% .80% .82% .83%
(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. 24 26 - --------------------------------------------------------------------------------
Year Ended June 30, - ----------------------------------------------------- 1994 1993 1992 1991 1990 - ----------------------------------------------------- $11.133 $10.688 $ 9.805 $ 9.534 $ 9.767 ------- ------- ------- ------- ------- 1.000 1.078 1.095 1.093 1.070 (1.214) .520 .848 .295 (.229) ------- ------- ------- ------- ------- (.214) 1.598 1.943 1.388 .841 ------- ------- ------- ------- ------- .840 .829 .791 .725 .685 .155 .162 .238 .337 .389 -0- .162 .031 .055 -0- ------- ------- ------- ------- ------- .995 1.153 1.060 1.117 1.074 ------- ------- ------- ------- ------- $ 9.924 $11.133 $10.688 $ 9.805 $ 9.534 ======= ======= ======= ======= ======= $11.125 $12.000 $11.375 $10.125 $ 9.250 (0.05%) 15.20% 21.65% 18.71% 4.65% (3.63%) 13.97% 18.08% 11.61% 4.76% $ 437.7 $ 467.9 $ 452.7 $ 426.7 $ 418.3 1.28% 1.25% 1.35% 1.46% 1.43% 7.86% 8.41% 8.41% 7.88% 7.11% 45% 45% 27% 69% 116% .82% .80% .84% .89% .87%
25 See Notes to Financial Statements 27 NOTES TO FINANCIAL STATEMENTS June 30, 1999 - -------------------------------------------------------------------------------- 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) June 30, 1999 - -------------------------------------------------------------------------------- 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 June 30, 1999, for federal income tax purposes, cost of long-term investments is $456,782,012; the aggregate gross unrealized appreciation is $19,684,310 and the aggregate gross unrealized depreciation is $10,241,483, resulting in net unrealized appreciation on long-term investments of $9,442,827. Net realized gains or losses differ for financial reporting and tax purposes as a result of gains or losses recognized for tax purposes on open futures positions at June 30, 1999. 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 year ended June 30, 1999, the Trust recognized expenses of approximately $7,800 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. 27 29 NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 1999 - -------------------------------------------------------------------------------- For the year ended June 30, 1999, the Trust recognized expenses of approximately $139,100 representing Van Kampen Funds Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Trust. 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 June 30, 1999 and 1998, respectively, common shares paid in surplus aggregated $265,829,515 and $263,776,167 respectively. Transactions in common shares were as follows:
YEAR ENDED YEAR ENDED JUNE 30, 1999 JUNE 30, 1998 - --------------------------------------------------------------------------- Beginning Shares............................ 28,485,339 28,286,058 Shares Issued Through Dividend Reinvestment.............................. 199,646 199,281 ---------- ---------- Ending Shares............................... 28,684,985 28,485,339 ========== ==========
4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments excluding short-term investments, were $468,665,360 and $453,734,850, 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 the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when exercising a call option contract or 28 30 NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 1999 - -------------------------------------------------------------------------------- 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. 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 year ended June 30, 1999, were as follows:
CONTRACTS PREMIUM - ----------------------------------------------------------------------- Outstanding at June 30, 1998.................... -0- $ -0- Options Written and Purchased (Net)............. 2,090 465,102 Options Terminated in Closing Transactions (Net)......................................... (1,490) (740,275) Options Expired (Net)........................... (600) 275,173 ------ --------- Outstanding at June 30, 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) June 30, 1999 - -------------------------------------------------------------------------------- Transactions in futures contracts for the year ended June 30, 1999, were as follows:
CONTRACTS - --------------------------------------------------------------------- Outstanding at June 30, 1998.............................. -0- Futures Opened............................................ 5,230 Futures Closed............................................ (4,810) ------ Outstanding at June 30, 1999.............................. 420 ======
The futures contracts outstanding as of June 30, 1999, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION - ------------------------------------------------------------------------- Long Contracts U.S. Treasury Bond Future, Sep 1999-- (Current Notional Value of $115,906 per contract)................................. 100 $ 36,690 Short Contracts Municipal Bond Future, Sep 1999-- (Current Notional Value of $118,781 per contract)................................. 320 (16,342) --- -------- 420 $ 20,348 === ========
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 30 32 NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 1999 - -------------------------------------------------------------------------------- in effect on June 30, 1999, was 3.466%. During the year ended June 30, 1999, the rates ranged from 3.000% to 3.700%. 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 REPORT OF INDEPENDENT ACCOUNTANTS 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, 1999, and the related statement of operations for the year then ended, the statement of changes in net assets for the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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, 1999, by correspondence with the 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, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. KPMG LLP Chicago, Illinois August 5, 1999 32 34 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 33 35 VAN KAMPEN FUNDS EQUITY FUNDS Domestic Aggressive Equity Aggressive Growth American Value Comstock Emerging Growth Enterprise Equity Growth Equity Income Growth Growth and Income Harbor Pace Real Estate Securities Small Cap Value Technology Utility Value Global/International Asian Growth Emerging Markets European Equity Global Equity Global Equity Allocation Global Franchise Global Managed Assets International Magnum Latin American FIXED-INCOME FUNDS Income Corporate Bond Global Fixed Income Global Government Securities Government Securities High Income Corporate Bond High Yield High Yield & Total Return Limited Maturity Government Short-Term Global Income Strategic Income U.S. Government U.S. Government Trust for Income Worldwide High Income Tax Exempt Income 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 Capital Preservation Reserve Tax Free Money Senior Loan Funds Prime Rate Income Trust Senior Floating Rate 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 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 34 36 VAN KAMPEN MUNICIPAL INCOME TRUST BOARD OF TRUSTEES DAVID C. ARCH ROD DAMMEYER HOWARD J KERR DENNIS J. MCDONNELL* - Chairman STEVEN MULLER THEODORE A. MYERS DON G. POWELL* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* OFFICERS DENNIS J. MCDONNELL* President A. THOMAS SMITH III* Vice President and Secretary JOHN L. SULLIVAN* Vice President, Treasurer, and Chief Financial Officer CURTIS W. MORELL* Vice President and Chief Accounting Officer TANYA M. LODEN* Controller PETER W. HEGEL* 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., 1999 All rights reserved. (SM) denotes a service mark of Van Kampen Funds Inc. 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, 1999. The Trust designated 99.7% of the income distributions as a tax-exempt income distribution. In January, 2000, the Trust will provide tax information to shareholders for the 1999 calendar year. 35 37 RESULTS OF SHAREHOLDER VOTES The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where shareholders voted on the election of trustees and the selection of independent public accountants. 1) With regard to the election of the following trustees by the common shareholders of the Trust:
# OF SHARES ---------------------- IN FAVOR ABSTAINED - ------------------------------------------------------------------------ David C. Arch 25,108,402 251,400 Howard J Kerr 25,105,339 254,503 Dennis J. McDonnell 25,106,337 253,506
The other trustees of the Trust whose terms did not expire in 1999 are Rod Dammeyer, Steven Muller, Theodore A. Myers, Don G. Powell, Hugo F. Sonnenschein and Wayne W. Whalen. 2) With regard to the ratification of KPMG LLP as independent public accountants for the Trust, 25,012,919 shares voted in favor of the proposal, 97,116 shares voted against and 249,807 shares abstained. 36 38 YEAR 2000 READINESS DISCLOSURE Like other mutual funds, financial and business organizations and individuals around the world, the Trust could be adversely affected if the computer systems used by the Trust's investment adviser and other service providers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's investment adviser is taking steps that it believes are reasonably designed to address the Year 2000 Problem with respect to computer systems that it uses and to obtain reasonable assurances that comparable steps are being taken by the Trust's other major service providers. At this time, there can be no assurances that these steps will be sufficient to avoid any adverse impact to the Trust. In addition, the Year 2000 Problem may adversely affect the markets and the issuers of securities in which the Trust may invest that, in turn, may adversely affect the net asset value of the Trust. Improperly functioning trading systems may result in settlement problems and liquidity issues. In addition, corporate and governmental data processing errors may result in production problems for individual companies or issuers and overall economic uncertainty. Earnings of individual issuers will be affected by remediation costs, which may be substantial and may be reported inconsistently in U.S. and foreign financial statements. Accordingly, the Trust's investments may be adversely affected. The statements above are subject to the Year 2000 Information and Readiness Disclosure Act, which may limit the legal rights regarding the use of such statements in the case of dispute. EX-27 2 FDS
6 11 MUNICIPAL INCOME TRUST 1 12-MOS JUN-30-1999 JUL-01-1998 JUN-30-1999 456,782,012 466,224,839 17,597,938 0 24,391 483,847,168 43,670,342 0 1,064,865 44,735,207 165,000,000 266,116,365 28,684,985 28,485,339 1,044,953 0 (2,512,532) 0 9,463,175 439,111,961 0 27,706,872 0 (3,634,825) 24,072,047 3,804,623 (23,920,190) 3,956,480 0 (24,244,161) 0 0 0 0 199,646 (18,232,336) 1,217,067 (6,317,155) 0 0 2,745,741 0 3,634,825 457,532,475 10.263 0.841 (0.700) (0.656) (0.192) 0.000 9.556 1.24 This item relates to the Fund on a composite basis and not on a class basis.
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