N-CSRS 1 c86781nvcsrs.txt FORM N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05273 Van Kampen Income Trust -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas, New York, New York 10020 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: 12/31 Date of reporting period: 6/30/04 Item 1. Reports to Shareholders. The Trust's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Income Trust performed during the semiannual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the trust's financial statements and a list of trust investments as of June 30, 2004. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the trust will achieve its investment objective. The trust is subject to market risk, which is the possibility that the market values of securities owned by the trust will decline and that the value of the trust shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this trust.
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 6/30/04
INCOME TRUST SYMBOL: VIN ------------------------------------------------------------ AVERAGE ANNUAL BASED ON BASED ON TOTAL RETURNS NAV MARKET PRICE Since Inception (04/22/88) 7.03% 5.92% 10-year 6.58 5.83 5-year 4.66 2.98 1-year 5.46 -3.90 6-month 1.33 -4.88 ------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET ASSET VALUE AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. The common share market price is the price the market is willing to pay for shares of the trust at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions. Total return assumes an investment at the beginning of the period, reinvestment of all distributions for the period in accordance with the trust's dividend reinvestment plan, and sale of all shares at the end of the period. 1 Trust Report FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2004 Van Kampen Income Trust is managed by the Adviser's Taxable Fixed-Income team.(1) Current team members include Sheila Finnerty, Managing Director of the Adviser; Gordon Loery and Jaidip Singh, Executive Directors of the Adviser; and Menglin Luo, Vice President of the Adviser. MARKET CONDITIONS After a year in which deflation concerns dominated the bond markets, the first six months of 2004 were overshadowed by entirely different concerns, foremost among them rising interest rates. When the year began, the market was anticipating that the Federal Reserve Bank's Federal Open Market Committee (the Fed) would soon raise the target federal funds rate from its 46-year low of 1.0 percent. Continued low inflation and sluggish job growth, however, led the Fed to maintain its accommodative stance. The lack of expected Fed activity led investors to believe that an increase in interest rates was likely to be further away than anticipated and, as a result, bond prices rose and yields fell. In April, though, the market reversed course. Unexpectedly high payroll data released early that month and again in early May indicated a sharp pick-up in job growth, which caused investors to once again anticipate an increase in interest rates. These expectations, coupled with climbing oil prices and growing tensions in Iraq, hit the credit markets hard, driving bond prices down. In June, market volatility subsided as investors awaited the results of the month-end Fed meeting. At that meeting, the Fed finally announced it was raising the federal funds rate by 25 basis points to 1.25 percent--the first rate increase since 2000. Bond yields remained relatively unchanged, however, as the market had already priced in higher rates. Government-security yields were somewhat volatile during the reporting period, due to their greater sensitivity to interest rates, but yields on lower-rated, high-yield bonds remained relatively stable. Overall, the lowest-credit tiers of the market, such as CCC-rated high-yield bonds, continued to outperform higher credit-quality paper. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS Closed-end fund returns can be calculated based upon either the market price or the net asset value (NAV) of its shares. NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, minus all liabilities, by the total number of common shares outstanding, whereas market price reflects the supply and demand for trust shares. As a result, the two returns may differ significantly, as they did during the reporting period when the trust realized a 1.33 percent gain on an NAV basis, but a 4.88 percent decline on a market-price basis. (See table below.) The trust continued to maintain a balanced credit-quality profile. Approximately 46 percent of holdings were in very high-quality Treasury, agency and mortgage-backed securities, offset by approximately 43 percent in high-yield corporate securities. The mortgage-backed securities portion of the trust-- roughly 22 percent of holdings--performed well during the reporting period. We had positioned the trust in preparation for rising interest rates by emphasizing higher-coupon paper within this sector--securities with yields between 5.5 and 6.5 percent. This strategy was particularly helpful in maintaining performance when the difference in yields on mortgage-backed securities versus Treasuries narrowed late in the reporting period. The trust's reduced holdings in telecommunications also contributed to performance. We trimmed the trust's holdings here last year, a strategy that proved beneficial during the period when the sector became more expensive. The portfolio's positioning in economically-sensitive industries also helped boost returns. On the industrial side, holdings in chemical companies performed well, as did consumer-product and food-and-beverage companies on the consumer side. On a less positive note, the trust's focus on higher-rated securities did keep the portfolio from more fully participating in the stronger performance of lower-rated debt during the period. Security selection in the cable and energy sectors also detracted from performance. TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2004
--------------------------------------- BASED ON BASED ON NAV MARKET PRICE 1.33% -4.88% ---------------------------------------
Past performance is no guarantee of future results. Investment return, net asset value and common share market price will fluctuate and trust shares, when sold, may be worth more or less than their original cost. See Performance Summary for additional performance information. 3 Looking forward, finding solid value within the high-yield bond market may prove more challenging in the coming months. However, we believe that given the trust's moderate weighting in this segment of the market, along with its diversified mix of government securities and high-coupon bias within its mortgage-backed holdings, the portfolio should be well positioned to weather the months ahead. TOP 5 SECTORS AS OF 06/30/04 RATINGS ALLOCATIONS AS OF 06/30/04 Media-Noncable 4.8% AAA/Aaa 47.8% Media-Cable 3.7 BBB/Baa 2.3 Chemicals 3.6 BB/Ba 14.2 Healthcare 2.9 B/B 28.4 Paper 2.8 CCC/Caa 6.0 CC/Ca 1.0 Non-Rated 0.3
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Sectors percentages are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Ratings allocation percentages are as a percentage of long-term debt investments. Ratings allocations based upon ratings as issued by Standard & Poor's and Moody's. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen trust provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the trust's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to trust shareholders, and makes these reports available on its public web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public web site, each trust files a complete schedule of portfolio holdings with the SEC for the trust's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. In addition to filing a complete schedule of portfolio holdings with the SEC each fiscal quarter, each Van Kampen trust makes portfolio holdings information available by periodically providing the information on its public web site, www.vankampen.com. Each Van Kampen trust provides a complete schedule of portfolio holdings on the public web site on a calendar-quarter basis approximately 30 days after the close of the calendar quarter. Furthermore, each Van Kampen trust provides partial lists of its portfolio holdings (such as top 10 or top 15 trust holdings) to the public web site each with a delay of approximately 15 days. You may obtain copies of a trust's fiscal quarter filings, or its monthly or calendar-quarter web site postings, by contacting Van Kampen Client Relations at 1-800-847-2424. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities and information on how the trust voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by calling 1-800-847-2424 or by visiting our web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's web site at http://www.sec.gov. 5 VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED)
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- DOMESTIC CORPORATE BONDS 40.8% AUTOMOTIVE 0.3% $ 250 Autonation, Inc. .................... 9.000% 08/01/08 $ 283,750 ------------ BUILDING MATERIALS 1.4% 125 Brand Services, Inc. ................ 12.000 10/15/12 143,125 290 NMHG Holdings Co. ................... 10.000 05/15/09 320,450 530 Nortek Holdings, Inc., 144A--Private Placement (a) (b).................... 0/10.000 05/15/11 426,650 140 Schuler Homes, Inc. ................. 9.375 07/15/09 154,350 280 Trimas Corp. ........................ 9.875 06/15/12 298,200 ------------ 1,342,775 ------------ CHEMICALS 2.9% 100 Equistar Chemicals LP................ 10.625 05/01/11 111,500 120 FMC Corp. ........................... 10.250 11/01/09 138,600 110 Huntsman Advanced Materials, LLC, 144A--Private Placement (a).......... 11.000 07/15/10 124,575 395 Huntsman ICI Chemicals, LLC.......... 10.125 07/01/09 404,875 250 Hydrochem Industrial Services, Inc., Ser B................................ 10.375 08/01/07 253,125 140 ISP Chemco, Inc. .................... 10.250 07/01/11 156,450 300 ISP Holdings, Inc. .................. 10.625 12/15/09 331,500 230 Johnsondiversey, Inc. ............... 9.625 05/15/12 251,850 225 Millennium America, Inc. ............ 7.000 11/15/06 232,312 305 Nalco Co., 144A--Private Placement (a).................................. 7.750 11/15/11 321,012 160 Nalco Co., 144A--Private Placement (a).................................. 8.875 11/15/13 168,400 185 Rockwood Specialties Group, Inc. .... 10.625 05/15/11 197,950 120 Westlake Chemical Corp. ............. 8.750 07/15/11 130,800 ------------ 2,822,949 ------------ CONSTRUCTION MACHINERY 1.0% 85 Flowserve Corp. ..................... 12.250 08/15/10 96,687 25 Manitowoc Co., Inc. (EUR)............ 10.375 05/15/11 33,906 330 Manitowoc, Inc. ..................... 10.500 08/01/12 379,500 230 United Rentals North America, Inc. ................................ 6.500 02/15/12 218,500 290 United Rentals North America, Inc. ................................ 7.750 11/15/13 275,500 ------------ 1,004,093 ------------ CONSUMER PRODUCTS 2.1% 160 Amscan Holdings, Inc., 144A--Private Placement (a)........................ 8.750 05/01/14 158,000 255 Iron Mountain, Inc. ................. 8.625 04/01/13 271,575 170 Iron Mountain, Inc. ................. 7.750 01/15/15 169,575 155 Leiner Health Products, Inc., 144A--Private Placement (a).......... 11.000 06/01/12 160,812 145 Muzak, LLC........................... 10.000 02/15/09 128,325 245 Muzak, LLC........................... 9.875 03/15/09 189,875
6 See Notes to Financial Statements VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- CONSUMER PRODUCTS (CONTINUED) $ 220 Prestige Brands, Inc., 144A--Private Placement (a)........................ 9.250% 04/15/12 $ 212,300 180 Rayovac Corp. ....................... 8.500 10/01/13 189,900 89 Tempur Pedic, Inc. .................. 10.250 08/15/10 100,792 465 Xerox Corp. ......................... 7.125 06/15/10 476,625 ------------ 2,057,779 ------------ DIVERSIFIED MANUFACTURING 0.1% 80 Koppers, Inc. ....................... 9.875 10/15/13 88,000 ------------ ELECTRIC 1.9% 41 AES Corp. ........................... 9.375 09/15/10 43,921 26 AES Corp. ........................... 8.875 02/15/11 27,105 160 AES Corp. ........................... 7.750 03/01/14 154,600 260 AES Corp., 144A--Private Placement (a).................................. 9.000 05/15/15 279,825 135 Allegheny Energy, Inc. .............. 7.750 08/01/05 140,400 445 Calpine Corp., 144A--Private Placement (a)........................ 8.500 07/15/10 370,462 35 CMS Energy Corp. .................... 7.500 01/15/09 35,000 220 CMS Energy Corp. .................... 8.500 04/15/11 225,500 75 IPALCO Enterprises, Inc. ............ 7.625 11/14/11 81,750 260 Monongahela Power Co. ............... 5.000 10/01/06 266,765 20 PSEG Energy Holdings, Inc. .......... 7.750 04/16/07 21,050 205 PSEG Energy Holdings, Inc. .......... 8.625 02/15/08 221,400 ------------ 1,867,778 ------------ ENTERTAINMENT 0.2% 350 Cinemark, Inc., 144A--Private Placement (a) (b).................... 0/9.750 03/15/14 230,125 ------------ ENVIRONMENTAL SERVICES 0.3% 185 Allied Waste North America, Inc. .... 9.250 09/01/12 208,125 110 Allied Waste North America, Inc., 144A--Private Placement (a).......... 6.500 11/15/10 109,450 ------------ 317,575 ------------ FOOD/BEVERAGE 1.3% 195 Michael Foods, Inc. ................. 8.000 11/15/13 202,312 435 Pilgrim's Pride Corp. ............... 9.625 09/15/11 482,850 125 Pilgrim's Pride Corp. ............... 9.250 11/15/13 133,750 430 Smithfield Foods, Inc. .............. 8.000 10/15/09 465,475 ------------ 1,284,387 ------------ GAMING 1.9% 210 Harrahs Operating Co., Inc. ......... 7.875 12/15/05 222,337 215 Horseshoe Gaming, LLC................ 8.625 05/15/09 225,212 420 MGM Mirage, Inc. .................... 6.000 10/01/09 413,700 180 Park Place Entertainment Corp. ...... 7.875 12/15/05 189,675
See Notes to Financial Statements 7 VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- GAMING (CONTINUED) $ 250 Park Place Entertainment Corp. ...... 8.875% 09/15/08 $ 271,875 100 Station Casinos, Inc. ............... 6.000 04/01/12 97,250 260 Station Casinos, Inc. ............... 6.500 02/01/14 251,550 170 Venetian Casino Resort, LLC.......... 11.000 06/15/10 197,200 ------------ 1,868,799 ------------ HEALTHCARE 2.7% 390 AmerisourceBergen Corp. ............. 8.125 09/01/08 422,175 226 Fisher Scientific International, Inc. ................................ 8.125 05/01/12 242,950 165 Fresenius Medical Care Capital Trust II................................... 7.875 02/01/08 174,487 240 Fresenius Medical Care Capital Trust IV................................... 7.875 06/15/11 255,600 335 HCA, Inc. ........................... 8.750 09/01/10 382,987 115 HCA, Inc. ........................... 6.300 10/01/12 115,242 145 Medcath Hldgs Corp., 144A--Private Placement (a) (c).................... 9.875 07/15/12 147,175 50 National Nephrology Associates, Inc., 144A--Private Placement (a).......... 9.000 11/01/11 57,500 220 Team Health, Inc., 144A--Private Placement (a)........................ 9.000 04/01/12 212,300 50 Tenet Healthcare Corp. .............. 6.500 06/01/12 43,750 215 Tenet Healthcare Corp. .............. 7.375 02/01/13 195,650 135 Tenet Healthcare Corp., 144A--Private Placement (a)........................ 9.875 07/01/14 138,037 110 VWR International, Inc., 144A--Private Placement (a).......... 6.875 04/15/12 110,962 140 VWR International, Inc., 144A--Private Placement (a).......... 8.000 04/15/14 144,200 ------------ 2,643,015 ------------ HOME CONSTRUCTION 1.7% 590 Associated Materials, Inc., 144A--Private Placement (a) (b)...... 0/11.250 03/01/14 398,250 65 Interface, Inc. ..................... 7.300 04/01/08 64,756 75 Interface, Inc. ..................... 10.375 02/01/10 84,000 255 Interface, Inc., 144A--Private Placement (a)........................ 9.500 02/01/14 255,000 245 LNR Property Corp. .................. 7.625 07/15/13 245,000 95 Technical Olympic USA, Inc. ......... 9.000 07/01/10 97,850 180 Technical Olympic USA, Inc. ......... 9.000 07/01/10 185,400 180 Technical Olympic USA, Inc. ......... 10.375 07/01/12 188,550 110 WII Components, Inc., 144A--Private Placement (a)........................ 10.000 02/15/12 108,350 ------------ 1,627,156 ------------ INDEPENDENT ENERGY 0.3% 240 Equistar Chemicals LP................ 10.125 09/01/08 264,000 ------------
8 See Notes to Financial Statements VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- INTEGRATED ENERGY 2.3% $ 345 BRL Universal Equipment.............. 8.875% 02/15/08 $ 371,306 345 Chesapeake Energy Corp. ............. 7.500 09/15/13 360,525 525 El Paso Production Holding Co. ...... 7.750 06/01/13 484,312 60 Hanover Compressor Co. .............. 8.625 12/15/10 62,400 225 Hanover Compressor Co. .............. 9.000 06/01/14 234,562 205 Hanover Equipment Trust.............. 8.500 09/01/08 217,812 95 Hanover Equipment Trust.............. 8.750 09/01/11 102,125 50 MSW Energy Holdings, LLC............. 8.500 09/01/10 53,125 230 MSW Energy Holdings, LLC, 144A--Private Placement (a).......... 7.375 09/01/10 230,000 95 Transcontinental Gas Pipe Line Corp. ............................... 8.875 07/15/12 107,825 ------------ 2,223,992 ------------ LODGING 1.0% 250 Hilton Hotels Corp. ................. 7.950 04/15/07 271,250 130 Hilton Hotels Corp. ................. 7.625 12/01/12 140,400 155 HMH Properties, Inc. ................ 7.875 08/01/08 159,650 65 Starwood Hotels & Resorts Worldwide, Inc. ................................ 7.375 05/01/07 68,737 275 Starwood Hotels & Resorts Worldwide, Inc. ................................ 7.875 05/01/12 295,625 ------------ 935,662 ------------ MEDIA-CABLE 1.9% 63 Avalon Cable, LLC.................... 11.875 12/01/08 67,117 565 Charter Communications Holdings, LLC.................................. 9.625 11/15/09 460,475 160 CSC Holdings, Inc. .................. 8.125 07/15/09 167,200 65 CSC Holdings, Inc. .................. 10.500 05/15/16 73,287 290 DirecTV Holdings, LLC................ 8.375 03/15/13 322,263 81 Echostar DBS Corp. .................. 9.125 01/15/09 89,201 320 Echostar DBS Corp. .................. 6.375 10/01/11 316,800 120 General Cable Corp. ................. 9.500 11/15/10 129,600 1,000 Park N View, Inc., Ser B (d) (e) (f).................................. 13.000 05/15/08 0 140 Pegasus Communications Corp., Ser B (d) (e).............................. 9.750 12/01/06 68,600 15 Pegasus Communications Corp., Ser B (d) (e).............................. 12.500 08/01/07 7,350 135 Renaissance Media Group.............. 10.000 04/15/08 139,725 ------------ 1,841,618 ------------ MEDIA-NONCABLE 3.0% 45 Advanstar Communications, Inc. ...... 10.750 08/15/10 50,006 397 Advanstar Communications, Inc. (Variable Rate Coupon)............... 8.750 08/15/08 417,843 195 Dex Media East Finance Corp., LLC.... 12.125 11/15/12 228,638 175 Dex Media West Finance Corp. ........ 9.875 08/15/13 192,938 370 Dex Media, Inc., 144A--Private Placement (a) (b).................... 0/9.000 11/15/13 240,500
See Notes to Financial Statements 9 VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MEDIA-NONCABLE (CONTINUED) $ 100 Granite Broadcasting Corp., 144A--Private Placement (a).......... 9.750% 12/01/10 $ 93,500 350 Hollinger Participation Trust, 144A--Private Placement (a) (g)...... 12.125 11/15/10 409,434 225 Interep National Radio Sales, Inc., Ser B................................ 10.000 07/01/08 187,875 235 Nebraska Book, Co, Inc. ............. 8.625 03/15/12 231,475 385 Nevada Power Co. .................... 9.000 08/15/13 420,613 83 PEI Holdings, Inc. .................. 11.000 03/15/10 96,695 325 Primedia, Inc. ...................... 8.875 05/15/11 323,375 ------------ 2,892,892 ------------ METALS 0.8% 342 Doe Run Resources Corp., 144A--Private Placement (a) (g)...... 7.025 11/01/08 264,667 750 GS Technologies Operating, Inc. (d) (e) (f).............................. 12.000 09/01/04 75 245 UCAR Finance, Inc. .................. 10.250 02/15/12 273,788 189 United States Steel Corp. ........... 9.750 05/15/10 210,263 ------------ 748,793 ------------ NATURAL GAS PIPELINES 1.7% 340 Dynegy Holdings, Inc. ............... 6.875 04/01/11 294,525 200 Dynegy Holdings, Inc., 144A--Private Placement (a)........................ 9.875 07/15/10 216,000 54 Gulfterra Energy Partners LP......... 8.500 06/01/10 58,995 211 Gulfterra Energy Partners LP......... 10.625 12/01/12 252,145 55 Northwest Pipeline Corp. ............ 8.125 03/01/10 59,538 215 Pacific Energy Partners, 144A--Private Placement (a).......... 7.125 06/15/14 219,300 105 Southern Natural Gas Co. ............ 8.875 03/15/10 115,238 470 Williams Cos., Inc. ................. 7.875 09/01/21 454,725 ------------ 1,670,466 ------------ OIL FIELD SERVICES 0.7% 320 Hilcorp Energy Finance Corp., 144A--Private Placement (a).......... 10.500 09/01/10 348,000 160 Magnum Hunter Resources, Inc. ....... 9.600 03/15/12 176,800 115 Plains Exploration & Production Co., 144A--Private Placement (a).......... 7.125 06/15/14 117,588 ------------ 642,388 ------------ OTHER DIVERSIFIED FINANCIAL SERVICES 0.2% 145 Global Cash Access, LLC, 144A--Private Placement (a).......... 8.750 03/15/12 151,525 ------------ PACKAGING 1.0% 65 Owens-Illinois, Inc. ................ 7.350 05/15/08 65,163 575 Owens-Illinois, Inc. ................ 7.500 05/15/10 566,375
10 See Notes to Financial Statements VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- PACKAGING (CONTINUED) $ 90 Tekni-Plex, Inc., 144A--Private Placement (a)........................ 8.750% 11/15/13 $ 86,400 250 Tekni-Plex, Inc., Ser B.............. 12.750 06/15/10 241,250 ------------ 959,188 ------------ PAPER 1.3% 435 Georgia-Pacific Corp. ............... 8.875 02/01/10 494,813 340 Graphic Packaging International Corp. ............................... 9.500 08/15/13 370,600 25 Owens-Brockway Glass Containers, Inc. ................................ 7.750 05/15/11 26,125 80 Owens-Brockway Glass Containers, Inc. ................................ 8.750 11/15/12 87,200 150 Pliant Corp. ........................ 13.000 06/01/10 135,000 185 Pliant Corp. ........................ 13.000 06/01/10 166,500 ------------ 1,280,238 ------------ RAILROADS 0.3% 235 Amsted Industries, Inc., 144A--Private Placement (a).......... 10.250 10/15/11 256,150 ------------ REAL ESTATE INVESTMENT TRUSTS 0.2% 158 Istar Financial, Inc. ............... 8.750 08/15/08 175,542 ------------ REFINING 1.1% 120 Citgo Petroleum Corp. ............... 11.375 02/01/11 139,800 250 Frontier Oil Corp. .................. 11.750 11/15/09 274,375 145 Tesoro Petroleum Corp. .............. 9.000 07/01/08 150,075 135 Tesoro Petroleum Corp. .............. 9.625 04/01/12 152,213 390 Vintage Petroleum, Inc. ............. 7.875 05/15/11 401,700 ------------ 1,118,163 ------------ RETAIL 1.3% 135 Big 5 Corp., Ser B................... 10.875 11/15/07 141,075 165 General Nutrition Center, Inc., 144A--Private Placement (a).......... 8.500 12/01/10 172,013 120 Oxford Industrials, Inc., 144A--Private Placement (a).......... 8.875 06/01/11 127,200 135 Penney JC Co., Inc. ................. 9.000 08/01/12 159,975 245 Petro Stopping Center Financial, 144A--Private Placement (a).......... 9.000 02/15/12 243,775 175 Rite Aid Corp. ...................... 7.125 01/15/07 179,813 65 Rite Aid Corp. ...................... 8.125 05/01/10 68,738 1,000 Sleepmaster, LLC, Ser B (d) (e) (f).................................. 11.000 05/15/09 220,000 ------------ 1,312,589 ------------
See Notes to Financial Statements 11 VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- SERVICES 0.7% $ 300 Buhrmann US, Inc., 144A--Private Placement (a)........................ 8.250% 07/01/14 $ 300,750 55 CB Richard Ellis Service, Inc. ...... 9.750 05/15/10 60,775 315 CB Richard Ellis Service, Inc. ...... 11.250 06/15/11 360,675 ------------ 722,200 ------------ SUPERMARKETS 0.6% 325 Delhaize America, Inc. .............. 8.125 04/15/11 356,373 246 Kroger Co., 144A--Private Placement (a).................................. 8.500 07/15/17 273,159 ------------ 629,532 ------------ TRANSPORTATION SERVICES 1.3% 335 Laidlaw International, Inc. ......... 10.750 06/15/11 367,244 245 Sonic Automotive, Inc. .............. 8.625 08/15/13 256,638 225 Tenneco Automotive, Inc. ............ 11.625 10/15/09 243,000 391 TRW Automotive, Inc. ................ 9.375 02/15/13 442,808 ------------ 1,309,690 ------------ WIRELESS COMMUNICATIONS 2.1% 270 American Tower Corp. ................ 9.375 02/01/09 289,575 175 American Tower Corp., 144A--Private Placement (a)........................ 7.500 05/01/12 170,188 345 Centennial Communications, 144A--Private Placement (a).......... 8.125 02/01/14 321,713 275 Metro PCS, Inc. ..................... 10.750 10/01/11 299,750 145 Rural Cellular Corp., 144A--Private Placement (Variable Rate Coupon) (a).................................. 6.020 03/15/10 150,075 495 SBA Communications Corp. ............ 10.250 02/01/09 509,850 90 Ubiquitel Operating Co. (b).......... 0/14.000 04/15/10 89,550 235 US Unwired, Inc., 144A--Private Placement (a)........................ 10.000 06/15/12 238,525 ------------ 2,069,226 ------------ WIRELINE COMMUNICATIONS 1.2% 250 Exodus Communications, Inc. (d) (e) (f).................................. 11.250 07/01/08 0 400 Exodus Communications, Inc. (d) (e) (f).................................. 11.625 07/15/10 0 535 Primus Telecom Group................. 8.000 01/15/14 473,475 250 Qwest Communications International, Inc., 144A--Private Placement (Variable Rate Coupon) (a)........... 4.750 02/15/09 235,000
12 See Notes to Financial Statements VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- WIRELINE COMMUNICATIONS (CONTINUED) $ 110 Qwest Corp. ......................... 6.625% 09/15/05 $ 112,750 310 Qwest Services Corp., 144A--Private Placement (a)........................ 13.500 12/15/07 354,950 ------------ 1,176,175 ------------ TOTAL DOMESTIC CORPORATE BONDS 40.8%.......................................... 39,818,210 ------------ FOREIGN BONDS AND DEBT SECURITIES (US$) 7.5% BELGIUM 0.4% 170 Telenet Communications, 144A--Private Placement (EUR) (a).................. 9.000 12/15/13 207,813 215 Telenet Group Holding NV, 144A--Private Placement (a) (b)...... 0/11.500 06/15/14 137,600 ------------ 345,413 ------------ BRAZIL 0.4% 500 Multicanal Participacoes, Ser B (d).................................. 12.625 06/18/04 377,500 ------------ CANADA 2.1% 80 Abitibi Consolidated, Inc., 144A--Private Placement (a).......... 7.750 06/15/11 80,280 205 Abitibi-Consolidated, Inc. .......... 8.550 08/01/10 217,184 80 Abitibi-Consolidated, Inc. .......... 6.000 06/20/13 71,206 355 Alliance Atlantis Communications, Inc. ................ 13.000 12/15/09 392,275 300 CHC Helicopter Corp., 144A--Private Placement (a)........................ 7.375 05/01/14 296,250 285 Husky Oil Ltd. (Variable Rate Coupon).............................. 8.900 08/15/28 322,993 125 Norampac, Inc. ...................... 6.750 06/01/13 123,125 250 Nortel Networks Ltd. ................ 6.125 02/15/06 252,500 350 Tembec Industries, Inc. ............. 7.750 03/15/12 339,500 ------------ 2,095,313 ------------ FRANCE 0.6% 220 Rhodia SA, 144A--Private Placement (a).................................. 8.875 06/01/11 187,000 85 Vivendi Universal SA ................ 6.250 07/15/08 90,553 235 Vivendi Universal SA ................ 9.250 04/15/10 277,758 ------------ 555,311 ------------ GERMANY 0.7% 260 Cognis Deutschland, 144A--Private Placement (Variable Rate Coupon) (EUR) (a)............................ 6.897 11/15/13 313,088 325 Kabel Deutschland, 144A--Private Placement (a) (c).................... 10.625 07/01/14 335,563 ------------ 648,651 ------------
See Notes to Financial Statements 13 VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- GUERNSEY 0.2% $ 145 ABB International Finance Ltd. (EUR)................................ 11.000% 01/15/08 $ 205,272 ------------ LUXEMBOURG 1.4% 380 Cablecom Luxembourg, 144A--Private Placement (EUR) (a).................. 9.375 04/15/14 454,124 110 Johnsondiversey, Inc. (EUR).......... 9.625 05/15/12 145,171 200 Lighthouse Intl., 144A--Private Placement (EUR) (a).................. 8.000 04/30/14 235,972 305 Safilo Capital International SA, 144A--Private Placement (EUR) (a).... 9.625 05/15/13 350,582 140 SGL Carbon Luxembourg SA, 144A--Private Placement (EUR) (a).... 8.500 02/01/12 166,032 ------------ 1,351,881 ------------ MEXICO 1.0% 350 Axtel SA, 144A--Private Placement (a).................................. 11.000 12/15/13 333,375 475 Satelites Mexicanos SA (d)........... 10.125 11/01/04 201,875 460 TV Azteca SA......................... 10.500 02/15/07 471,500 ------------ 1,006,750 ------------ UNITED KINGDOM 0.7% 145 Avecia Group Plc..................... 11.000 07/01/09 110,925 140 Dunlop Stand Aero Holdings, 144A--Private Placement (a).......... 11.875 05/15/09 149,450 325 JSG Funding Plc (EUR)................ 10.125 10/01/12 430,892 ------------ 691,267 ------------ TOTAL FOREIGN BONDS AND DEBT SECURITIES 7.5%.................................. 7,277,358 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS 0.7% 998 Federal Home Loan Mortgage Corp. (Interest Only)...................... 5.000 09/15/14 to 12/15/16 114,702 362 Federal Home Loan Mortgage Corp. (Interest Only)...................... 6.000 05/15/30 42,057 200 Federal Home Loan Mortgage Corp. (Interest Only) (h).................. 6.760 03/15/32 18,075 1,100 Federal National Mortgage Association (Interest Only)...................... 5.500 06/25/26 to 05/25/27 104,996 442 Federal National Mortgage Association (Interest Only) REMIC................ 6.000 08/25/32 to 11/25/32 78,235 693 Federal National Mortgage Association (Interest Only)...................... 6.500 07/01/31 to 05/25/33 158,561 357 Federal National Mortgage Association (Interest Only) REMIC................ 7.000 03/01/32 to 04/25/33 79,260
14 See Notes to Financial Statements VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) $ 82 Federal National Mortgage Association (Interest Only)...................... 8.000% 05/01/30 $ 17,706 299 Government National Mortgage Association (Interest Only) REMIC (h).................................. 6.148 05/16/32 19,188 297 Government National Mortgage Association (Interest Only) REMIC (h).................................. 6.748 05/16/32 19,591 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 0.7%................................ 652,371 ------------ MORTGAGE BACKED SECURITIES 22.2% 1,878 Federal Home Loan Mortgage Corp. .... 6.500 09/01/31 to 09/01/32 1,959,474 430 Federal Home Loan Mortgage Corp. .... 7.500 11/01/29 to 10/01/31 463,214 1,450 Federal Home Loan Mortgage Corp., July................................. 5.000 TBA 1,450,906 400 Federal Home Loan Mortgage Corp., July................................. 7.500 TBA 430,000 200 Federal National Mortgage Association, July.................... 4.885 TBA 199,000 523 Federal National Mortgage Association.......................... 6.000 04/01/28 to 12/01/28 537,129 587 Federal National Mortgage Association.......................... 6.500 06/01/15 to 08/01/32 613,005 3,143 Federal National Mortgage Association.......................... 7.000 03/01/15 to 12/01/32 3,328,068 792 Federal National Mortgage Association.......................... 7.500 03/01/15 to 03/01/32 848,453 2,600 Federal National Mortgage Association, August.................. 5.500 TBA 2,649,561 1,575 Federal National Mortgage Association, August.................. 6.500 TBA 1,634,554 1,000 Federal National Mortgage Association, July.................... 4.500 TBA 977,188 1,800 Federal National Mortgage Association, July.................... 5.500 TBA 1,791,562 1,475 Federal National Mortgage Association, July.................... 6.500 TBA 1,535,844 400 Federal National Mortgage Association, July.................... 6.000 TBA 408,375 230 Government National Mortgage Association.......................... 7.000 07/15/29 to 01/15/30 244,934 551 Government National Mortgage Association.......................... 7.500 07/15/23 to 09/15/29 596,476 329 Government National Mortgage Association.......................... 8.000 03/15/17 to 10/15/22 364,288 144 Government National Mortgage Association.......................... 8.500 07/15/24 to 12/15/24 160,079 393 Government National Mortgage Association.......................... 9.000 08/15/16 to 12/15/24 443,213
See Notes to Financial Statements 15 VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE ---------------------------------------------------------------------------------------------- MORTGAGE BACKED SECURITIES (CONTINUED) $ 86 Government National Mortgage Association.......................... 9.500% 11/15/09 to 01/15/17 $ 97,086 1,000 Government National Mortgage Association, July.................... 5.500 TBA 998,438 ------------ TOTAL MORTGAGE BACKED SECURITIES 22.2%........................................ 21,730,847 ------------ U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 10.3% 4,850 Federal Home Loan Mortgage Corp. .... 2.750 08/15/06 4,819,013 150 Federal Home Loan Mortgage Corp. (c).................................. 3.642 07/01/34 148,359 1,100 Federal Home Loan Mortgage Corp. .... 6.625 09/15/09 1,216,887 1,100 Federal Home Loan Mortgage Corp. .... 7.000 03/15/10 1,240,728 1,250 Federal National Mortgage Association.......................... 7.125 06/15/10 1,420,813 1,100 Federal National Mortgage Association.......................... 7.250 01/15/10 1,253,694 ------------ TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS........................ 10,099,494 ------------ UNITED STATES TREASURY OBLIGATIONS 11.1% 1,600 United States Treasury Bonds......... 5.250 02/15/29 1,569,251 3,375 United States Treasury Bonds......... 6.125 08/15/29 3,713,556 2,230 United States Treasury Bonds......... 7.625 02/15/25 2,862,328 1,900 United States Treasury Bonds (STRIPS)............................. 0.000 02/15/25 597,400 1,560 United States Treasury Notes......... 3.875 02/15/13 1,491,812 2,000 United States Treasury Notes (STRIPS)............................. 0.000 05/15/25 616,320 ------------ TOTAL UNITED STATES TREASURY OBLIGATIONS....................................... 10,850,667 ------------ FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATION 0.2% 180 United Mexican States (Mexico)....... 8.375 01/14/11 203,850 ------------
16 See Notes to Financial Statements VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
DESCRIPTION VALUE -------------------------------------------------------------------------------------------------- EQUITIES 0.8% Doe Run Resources Corp. (1 Common Stock Warrant) (f) (j)........................... $ 0 HF Holdings, Inc. (5,260 Common Stock Warrants) (f) (j)............................ 0 Optel, Inc. (500 Common Shares) (f) (j)............................................ 0 Park N View, Inc., 144A--Private Placement (1,000 Common Stock Warrants) (a) (e) (f) (j)............................................................................ 0 Paxon Communications Corp. (4,100 Preferred Shares) (g)............................ 360,287 Republic Technologies International, Inc., 144A--Private Placement (250 Common Stock Warrants) (a) (f) (j) ..................................................... 0 Startec Global Communications, 144A--Private Placement (1,000 Common Stock Warrants) (a) (f) (j)............................................................ 0 TNP Enterprises, Inc. (4,030 Preferred Shares) (g)................................. 452,368 ------------ TOTAL EQUITIES..................................................................... 812,655 ------------ TOTAL LONG-TERM INVESTMENTS 93.6% (Cost $92,991,932)............................................................... 91,445,452 ------------ SHORT-TERM INVESTMENTS 18.4% REPURCHASE AGREEMENT 10.7% UBS Securities ($10,451,000 par collateralized by U.S. Government obligations in a pooled cash account, interest rate of 1.25%, dated 06/30/04, to be sold on 07/01/04 at $10,451,363)......................................................... 10,451,000 U.S. GOVERNMENT AGENCY OBLIGATIONS 7.7% Federal National Mortgage Association Discount Note ($7,500,000 par, yielding 1.11%, 07/15/04 maturity)........................................................ 7,496,762 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $17,947,762)............................................................... 17,947,762 ------------ TOTAL INVESTMENTS 112.0% (Cost $110,939,694).............................................................. 109,393,214 LIABILITIES IN EXCESS OF OTHER ASSETS (12.0%)..................................... (11,686,259) ------------ NET ASSETS 100.0%................................................................. $ 97,706,955 ============
Percentages are calculated as a percentage of net assets. (a) 144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. (b) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (c) Security purchased on a when-issued or delayed delivery basis. (d) Non-income producing as security is in default. See Notes to Financial Statements 17 VAN KAMPEN INCOME TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued (e) This borrower has filed for protection in federal bankruptcy court. (f) Market value is determined in accordance with procedures established in good faith by the Board of Trustees. (g) Payment-in-kind security. (h) 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. (j) Non-income producing security. EUR--Eurodollar REMIC--Real Estate Mortgage Investment Conduits STRIPS--Separate Trading of Registered Interest and Principal of Securities TBA--To be announced, maturity date has not yet been established. The maturity date will be determined upon settlement and delivery of the mortgage pools. 18 See Notes to Financial Statements VAN KAMPEN INCOME TRUST FINANCIAL STATEMENTS Statement of Assets and Liabilities June 30, 2004 (Unaudited) ASSETS: Total Investments (Cost $110,939,694), including repurchase agreement of 10,451,000................................... $109,393,214 Cash........................................................ 372 Receivables: Investments Sold.......................................... 4,788,179 Interest.................................................. 1,351,381 Other....................................................... 26,844 ------------ Total Assets............................................ 115,559,990 ------------ LIABILITIES: Payables: Investments Purchased..................................... 17,527,287 Investment Advisory Fee................................... 51,739 Income Distributions...................................... 20,301 Other Affiliates.......................................... 3,625 Trustees' Deferred Compensation and Retirement Plans........ 127,233 Accrued Expenses............................................ 62,933 Forward Foreign Currency Contracts.......................... 59,917 ------------ Total Liabilities....................................... 17,853,035 ------------ NET ASSETS.................................................. $ 97,706,955 ============ NET ASSET VALUE PER COMMON SHARE ($97,706,955 divided by 15,371,738 shares outstanding).... $ 6.36 ============ NET ASSETS CONSIST OF: Common Shares (no par value with unlimited shares authorized, 15,371,738 shares issued and outstanding)..... $120,152,592 Accumulated Undistributed Net Investment Income............. (411,918) Net Unrealized Depreciation................................. (1,606,169) Accumulated Net Realized Loss............................... (20,427,550) ------------ NET ASSETS.................................................. $ 97,706,955 ============
See Notes to Financial Statements 19 VAN KAMPEN INCOME TRUST FINANCIAL STATEMENTS continued Statement of Operations For the Six Months Ended June 30, 2004 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 2,931,630 Dividends................................................... 70,008 Other....................................................... 12,984 ----------- Total Income............................................ 3,014,622 ----------- EXPENSES: Investment Advisory Fee..................................... 319,200 Accounting.................................................. 27,159 Shareholder Reports......................................... 25,973 Trustees' Fees and Related Expenses......................... 20,985 Custody..................................................... 17,083 Legal....................................................... 2,729 Other....................................................... 40,183 ----------- Total Expenses.......................................... 453,312 Less Credits Earned on Cash Balances.................... 298 ----------- Net Expenses............................................ 453,014 ----------- NET INVESTMENT INCOME....................................... $ 2,561,608 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ (132,395) Forward Foreign Currency Contracts........................ 23,396 Foreign Currency Transactions............................. 2,016 ----------- Net Realized Loss........................................... (106,983) ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... (42,524) ----------- End of the Period: Investments............................................. (1,546,480) Forward Foreign Currency Contracts...................... (59,917) Foreign Currency Translation............................ 228 ----------- (1,606,169) ----------- Net Unrealized Depreciation During the Period............... (1,563,645) ----------- NET REALIZED AND UNREALIZED LOSS............................ $(1,670,628) =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 890,980 ===========
20 See Notes to Financial Statements VAN KAMPEN INCOME TRUST FINANCIAL STATEMENTS continued Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................. $ 2,561,608 $ 4,979,071 Net Realized Loss..................................... (106,983) (4,732,962) Net Unrealized Appreciation/Depreciation During the Period.............................................. (1,563,645) 11,053,582 ----------- ----------- Change in Net Assets from Operations.................. 890,980 11,299,691 ----------- ----------- Distributions from Net Investment Income.............. (2,536,338) (5,291,984) Return of Capital Distribution........................ -0- (464,494) ----------- ----------- Total Distributions................................... (2,536,338) (5,756,478) ----------- ----------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (1,645,358) 5,543,213 NET ASSETS: Beginning of the Period............................... 99,352,313 93,809,100 ----------- ----------- End of the Period (Including accumulated undistributed net investment income of ($411,918) and ($437,188), respectively)....................................... $97,706,955 $99,352,313 =========== ===========
See Notes to Financial Statements 21 VAN KAMPEN INCOME TRUST FINANCIAL HIGHLIGHTS (UNAUDITED) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED JUNE 30, --------------------------- 2004 2003 2002 2001 (a) ----------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD............ $6.46 $6.10 $ 6.51 $ 6.85 ----- ----- ------ ------ Net Investment Income............................. .17 .32 .39 .53 Net Realized and Unrealized Gain/Loss............. (.11) .41 (.33) (.29) ----- ----- ------ ------ Total from Investment Operations.................... .06 .73 .06 .24 Less: Distributions from Net Investment Income.......... .16 .34 .47 .58 Return of Capital Distributions................... -0- .03 -0- -0- ----- ----- ------ ------ Total Distributions................................. .16 .37 .47 .58 ----- ----- ------ ------ NET ASSET VALUE, END OF THE PERIOD.................. $6.36 $6.46 $ 6.10 $ 6.51 ===== ===== ====== ====== Common Share Market Price at End of the Period...... $5.37 $5.81 $ 5.71 $ 6.33 Total Return (b).................................... 1.33%* 8.42% -2.59% 5.05% Net Assets at End of the Period (In millions)....... $97.7 $99.4 $ 93.8 $100.0 Ratio of Expenses to Average Net Assets............. .92% .92% .89% .93% Ratio of Net Investment Income to Average Net Assets............................................ 5.22% 5.14% 6.29% 7.88% Portfolio Turnover.................................. 109%* 299%(c) 101% 46%
* Non-Annualized (a) As required, effective January 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on fixed income securities and presenting paydown gains and losses on mortgage- and asset-backed securities as interest income. The effect of these changes for the year ended December 31, 2001 was an increase in the ratio of net investment income to average net assets from 7.83% to 7.88%. Net investment income per share and net realized and unrealized gains and losses per share were unaffected by the adjustments. Per share, ratios and supplemental data for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (b) 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 price at the end of the period indicated. (c) The Trust's portfolio turnover rate is calculated by dividing the lesser of purchases or sales of portfolio securities for a fiscal year by the average monthly value of the Trust's portfolio securities during such fiscal year. The turnover rate may vary greatly from year to year as well as within a year. The accounting treatment used by the Trust for mortgage pool forward commitments now reflects them as purchases and sales, which had not been the case in the past. This caused the reported portfolio turnover rate to be higher during the current fiscal year than in previous fiscal years. 22
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 1994 ------------------------------------------------------------------- $ 7.25 $ 7.84 $ 8.05 $ 7.93 $ 7.94 $ 7.28 $ 8.15 ------- ------- ------ ------ ------ ------ ------ .60 .64 .66 .66 .66 .65 .65 (.40) (.63) (.22) .18 (.01) .66 (.86) ------- ------- ------ ------ ------ ------ ------ .20 .01 .44 .84 .65 1.31 (.21) .60 .60 .65 .72 .66 .65 .66 -0- -0- -0- -0- -0- -0- -0- ------- ------- ------ ------ ------ ------ ------ .60 .60 .65 .72 .66 .65 .66 ------- ------- ------ ------ ------ ------ ------ $ 6.85 $ 7.25 $ 7.84 $ 8.05 $ 7.93 $ 7.94 $ 7.28 ======= ======= ====== ====== ====== ====== ====== $6.5625 $5.6875 $ 7.75 $ 8.00 $ 7.50 $ 7.25 $ 6.50 26.59% -19.81% 5.05% 16.97% 12.95% 21.83% -8.06% $ 104.8 $ 110.9 $120.0 $123.1 $121.2 $121.4 $111.4 .96% .95% .96% .91% 1.00% .94% .96% 8.51% 8.46% 8.17% 8.32% 8.40% 8.50% 7.94% 60% 28% 47% 55% 36% 34% 45%
See Notes to Financial Statements 23 VAN KAMPEN INCOME TRUST NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen 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 current income through investing in a portfolio of U.S. Government securities and in corporate fixed income securities, including high-yielding, lower rated or nonrated securities believed not to involve undue risk to income or principal. The Trust commenced investment operations on April 22, 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 Fixed income investments are stated at value using market quotations or indications of value obtained from an independent pricing service. Investments in securities listed on a securities exchange are valued at their sales price as of the close of such securities exchange. Listed and unlisted securities for which the last sales price is not available are valued at the mean of the bid and asked prices. For those securities where quotations or prices are not available, valuations are determined in accordance with 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. Forward foreign currency contracts are valued using quoted foreign exchange rates. 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", "delayed delivery" or "forward commitment" basis, with settlement to occur at a later date. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security so purchased is subject to market fluctuations during this period. Purchasing securities on this basis involves a risk that the market value at the time of delivery may be lower than the agreed upon purchase price resulting in an unrealized loss. 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, 2004, the Trust had $12,530,672 of when-issued, delayed delivery and forward purchase commitments. The Trust may invest in repurchase agreements, which are short-term investments whereby the Trust acquires ownership of a debt security and the seller agrees to repurchase the security at a future time and specified price. The Trust may invest independently in repurchase agreements, or transfer uninvested cash balances into a pooled cash account along with other investment companies advised by Van Kampen Asset Management (the "Adviser") or its affiliates, the daily aggregate of which is invested in repurchase agreements. Repurchase agreements are fully collateralized by the underlying debt security. The Trust will make payment for such securities only upon physical delivery or evidence of book entry transfer to 24 VAN KAMPEN INCOME TRUST NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) continued the account of the custodian bank. The seller is required to maintain the value of the underlying security at not less than the repurchase proceeds due the Trust. C. INVESTMENT INCOME Interest income is recorded on an accrual basis and dividend income is recorded on the ex-dividend date. Discounts are accreted and premiums are amortized over the expected life of each applicable security. 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 these losses against any future realized capital gains. At December 31, 2003, the Trust had an accumulated capital loss carryforward for tax purposes of $19,032,344, which will expire between December 31, 2007 and December 31, 2011. At June 30, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $111,115,622 ============ Gross tax unrealized appreciation........................... $ 3,187,352 Gross tax unrealized depreciation........................... (4,909,760) ------------ Net tax unrealized depreciation on investments.............. $ (1,722,408) ============
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays dividends monthly from net investment income to shareholders. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains, which are included in ordinary income for tax purposes. The tax character of distributions paid during the year ended December 31, 2003 was as follows: Distribution paid from: Ordinary Income........................................... $5,265,713 Long-term capital gain.................................... -0- Return of Capital......................................... 464,494 ---------- $5,730,207 ==========
Net realized gains or losses may differ for financial reporting and tax purposes primarily as a result of the deferral of losses relating to wash sale transactions. F. FOREIGN CURRENCY TRANSLATION Asset and liabilities denominated in foreign currencies and commitments under forward foreign currency contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated at the rate of exchange prevailing when such securities were acquired or sold. Realized gain and loss on foreign currency transactions on 25 VAN KAMPEN INCOME TRUST NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) continued the Statement of Operations includes the net realized amount from the sale of foreign currency and the amount realized between trade date and settlement date on securities transactions. Income and expenses are translated at rates prevailing when accrued. G. EXPENSE REDUCTION During the six months ended June 30, 2004, the Trust's custody fee was reduced by $298 as a result of credits earned on cash balances. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Trust's Investment Advisory Agreement, the Adviser will provide investment advice and facilities to the Trust for an annual fee payable monthly of .65% of the average daily net assets of the Trust. For the six months ended June 30, 2004, the Trust recognized expenses of approximately $2,700 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust is an affiliated person. Under an Accounting Services agreement, the Adviser provides accounting services to the Trust. The Adviser allocates the cost of such services to each trust. For the six months ended June 30, 2004, the Trust recognized expenses of approximately $5,100 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting services to the Trust, which is reported as part of "Accounting" expenses in the Statement of Operations. Certain officers and trustees of the Trust are also officers and directors of Van Kampen. The Trust does not compensate its officers or trustees who are officers of Van Kampen. The Trust provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to 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, including principal paydowns and excluding short-term investments, were $102,029,529 and $101,337,517, respectively. 4. 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, foreign currency exposure, or generate potential gain. All of the Trust's holdings, including derivative instruments, are marked to market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a forward commitment. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the forward commitment. 26 VAN KAMPEN INCOME TRUST NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) continued Purchasing securities on a forward commitment involves a risk that the market value at the time of delivery may be lower than the agreed upon purchase price resulting in an unrealized loss. Selling securities on a forward commitment involves different risks and can result in losses more significant than those arising from the purchase of such securities. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Upon the settlement of the contract, a realized gain or loss is recognized and is included as a component of realized gain/loss on forwards. The following forward foreign currency contracts were outstanding as of June 30, 2004.
UNREALIZED CURRENT APPRECIATION/ VALUE DEPRECIATION LONG CONTRACTS: Euro Currency 55,000 expiring 7/26/04................................... $ 66,960 $ 1,620 SHORT CONTRACTS: Euro Currency 1,310,000 expiring 7/26/04................................ 1,594,869 (43,829) 290,000 expiring 7/26/04.................................. 353,062 (9,732) 70,000 expiring 7/26/04................................... 85,222 (2,272) 100,000 expiring 7/26/04.................................. 121,746 (2,556) 290,000 expiring 7/26/04.................................. 353,063 (3,148) ---------- -------- 2,507,962 (61,537) ---------- -------- $2,574,922 $(59,917) ========== ========
5. INDEMNIFICATIONS The Trust enters into contracts that contain a variety of indemnifications. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 27 VAN KAMPEN INCOME TRUST BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUSAN H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, NY 10020 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY c/o EquiServe P.O. Box 43011 Providence, Rhode Island 02940-3011 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. 28 VAN KAMPEN INCOME TRUST RESULTS OF SHAREHOLDER VOTES The Annual Meeting of Shareholders of the Trust was held on June 23, 2004, where shareholders voted on the election of trustees. With regards to the election of the following trustees by common shareholders of the Trust:
# OF SHARES ------------------------------ IN FAVOR WITHHELD ------------------------------------------------------------------------------------------ David C. Arch............................................. 13,889,782 568,790 Jerry D. Choate........................................... 13,872,767 585,805 Howard J. Kerr............................................ 13,866,618 591,954 Suzanne H. Woolsey........................................ 13,888,099 570,473
Trustees not voted on include: J. Miles Branagan, Rod Dammeyer, Linda Hutton Heagy, R. Craig Kennedy, Mitchell M. Merin, Jack E. Nelson, Richard F. Powers III, Hugo F. Sonnenschein, and Wayne W. Whalen. 29 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 920, 957, 107 VIN SAR 8/04 RN04-01591P-Y06/04 Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semi-annual reports. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable. Item 10. Controls and Procedures (a) The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits. (a) Code of Ethics -- Not applicable for semi-annual reports. (b)(1) A certification for the Principal Executive Officer of the registrant is attached hereto as part of EX-99.CERT. (b)(2) A certification for the Principal Financial Officer of the registrant is attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Van Kampen Income Trust By: /s/ Ronald E. Robison ------------------------ Name: Ronald E. Robison Title: Principal Executive Officer Date: August 19, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison ----------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: August 19, 2004 By: /s/ James M. Dykas -------------------- Name: James M. Dykas Title: Principal Financial Officer Date: August 19, 2004