<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Glossary of Terms................................ 6
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 20
Report of Independent Accountants................ 25
Dividend Reinvestment Plan....................... 26
</TABLE>
VMT ANR 8/98
<PAGE> 2
LETTER TO SHAREHOLDERS
July 21, 1998
Dear Shareholder,
Recently, we decided to
consolidate all Van Kampen American
Capital mutual funds under the single
name of Van Kampen Funds. This move
accompanies the change in the legal
name of our firm to Van Kampen Funds [PHOTO]
Inc. Consequently, your Trust's name
will be changing to Van Kampen
Municipal Income Trust on August 28.
You can be assured that the change in DENNIS J. MCDONNELL AND DON G. POWELL
your Trust's name will not affect its
management or daily operations, and your Trust will continue to trade under its
current ticker symbol. If you have any questions regarding your Trust or our new
name, please contact your financial adviser.
ECONOMIC REVIEW
The economy staged an impressive performance during the past year. Growth
surged despite a sharp drop in exports to Asia, inflation was muted, and
consumer confidence jumped to a 29-year high. Even Alan Greenspan, chairman of
the Federal Reserve Board, has sung the economy's praises.
For the first three quarters of the reporting period, growth accelerated at
a 4 percent annual rate. At the same time, consumer prices rose 1.3 percent.
Inflation was tempered by a strong dollar, which slashed import prices and
limited price hikes among competing U.S. goods as it climbed to an eight-year
high against the Japanese yen. Lower oil prices, increased productivity, and a
pending budget surplus also contributed to the lack of price pressures.
Comforted by the lack of inflation at home and concerned about Asia's
financial future, the Fed refrained from raising interest rates during the
reporting period. The Asian crisis, otherwise, had a limited impact on the U.S.
economy. Heavy consumer spending and a large inventory buildup by manufacturers
overcame the drop in exports to the region.
MARKET OVERVIEW
U.S. bonds rallied during the reporting period against the backdrop of
benign inflation, steady Fed policy, and the economic crisis in Asia. The yield
of the 30-year Treasury bond, which moves in the opposite direction of its
price, fell from 6.78 percent on June 30, 1997, to 5.63 percent a year later.
Yields dropped to a record 5.57 percent in June amid heavy buying by investors
seeking a safe haven from the Asian tumult.
Earlier in the reporting period, however, foreign sales of Treasury
securities moved bond yields higher and bond prices lower. Fears of a Fed rate
hike alternating with
Continued on page two
1
<PAGE> 3
disappointment about the lack of a rate cut also created market volatility. The
30-year Treasury bond yield periodically jumped above the pivotal 6.00 percent
level, after initially dropping below it in December. By mid-May, bond yields
resumed their decline and the rally gained momentum.
Municipal bonds tracked the movement of Treasuries but did not gain nearly
as much in price because their supply far outpaced demand. Foreign investors
were not as interested in municipal bonds as they were in Treasuries, because
they had no need for the tax-exempt income. In addition, many domestic investors
preferred stocks as they rallied to unprecedented highs. By the end of the
reporting period, the average yield of a AAA-rated 30-year general obligation
municipal bond was 4.96 percent, down from 5.38 percent a year earlier.
During the intervening months, state and local governments took advantage of
lower interest rates and issued bonds to refinance older, higher-yielding
securities, as well as fund new projects. Among the new securities was a record
$3.4 billion offering from the new Long Island Power Authority. During the first
half of 1998, new issues of long-term municipal bonds soared to $146.4 billion,
up from $94.6 billion during the first half of 1997. Almost half of the new
issues were insured and rated AAA. The dominance of insured bonds reduced the
supply of lower-rated, higher-yielding securities and narrowed the spread
between yields of higher-quality and lower-quality bonds.
[CREDIT QUALITY GRAPH]
PORTFOLIO COMPOSITION BY CREDIT QUALITY*
AS OF JUNE 30, 1998
<TABLE>
<S> <C>
AAA................. 50.5%
AA.................. 5.4%
A................... 17.1%
BBB................. 23.4%
BB.................. 1.4%
Non-Rated........... 2.2%
</TABLE>
*As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued
by Standard & Poor's or Moody's.
TRUST STRATEGY
We used the following strategies to manage the Trust during the period:
Regarding credit quality, we continued to maintain heavy weightings of both
AAA-rated and BBB-rated bonds. This approach has helped to balance the Trust's
potential volatility in response to changing interest rates. AAA-rated bonds
have tended to outperform when interest rates are falling, which was the case
for most of the reporting period, while BBB-rated bonds have done best when
rates are rising. During the reporting period, the portion of BBB-rated bonds in
the Trust declined while the portion of A-rated bonds rose, due to an upgrade of
New York City securities by Moody's Investors Service.
We limited the number of purchases during the period because market yields
were lower than the average yields of bonds in the portfolio. Most of our
acquisitions were
Continued on page three
2
<PAGE> 4
designed to offset changes in the portfolio caused by market shifts. Due to the
decline in interest rates, for example, approximately $24 million worth of bonds
were prerefunded in anticipation of calls this year. Another $50 million were
priced to call dates in the following two years. In order to compensate for the
potential loss of these bonds from the portfolio, which account for about 16
percent of the Trust, we purchased noncallable long-term bonds and long-term
bonds with 10 years' worth of call protection.
Our purchases favored zero coupon bonds and other deep discount bonds
because these bonds have the potential to appreciate in value faster than par or
premium bonds during periods of falling interest rates. Discount bonds also have
a longer duration, which makes them more sensitive to changing rates. Our
purchases of discount bonds helped to offset the decline in the Trust's duration
due to prerefundings and repricings of bonds to their call dates. As of June 30,
the duration of the Trust was 7.75 years, compared with 7.65 years for the
Lehman Brothers Municipal Bond Index minus bonds with maturities of five years
or less. Looking ahead, we hope to maintain duration at this neutral level.
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR*
AS OF JUNE 30, 1998
<TABLE>
<S> <C>
Health Care.................................... 16.8%
Transportation................................. 11.1%
General Purpose................................ 9.5%
Wholesale Electric............................. 9.0%
Industrial Revenue............................. 8.1%
</TABLE>
*As a Percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the 12-month period ended June 30, 1998, the Trust generated a total
return of 6.85 percent(1). This reflects an unchanged market price per common
share of $10.875 on June 30, 1997, and June 30, 1998, plus reinvestment of
dividends. The Trust had a tax-exempt distribution rate of 6.18 percent(3),
based on the closing price of its common shares. Because income from the Trust
is exempt from federal income taxes, this distribution rate is equivalent to a
yield of 9.66 percent(4) on a taxable investment (for investors in the 36
percent federal income tax bracket).
As a result of a moderate decline in the Trust's earnings, the Board of
Trustees approved a decrease in its monthly dividend from $0.0600 to $0.0560 per
common share payable December 31, 1997. Please refer to the chart on page five
for additional performance numbers.
Continued on page four
3
<PAGE> 5
TWELVE-MONTH DIVIDEND HISTORY
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Distribution per Common Share
<S> <C>
Jul 1997..................... $.0600
Aug 1997..................... $.0600
Sep 1997..................... $.0600
Oct 1997..................... $.0600
Nov 1997..................... $.0600
Dec 1997..................... $.0560
Jan 1998..................... $.0560
Feb 1998..................... $.0560
Mar 1998..................... $.0560
Apr 1998..................... $.0560
May 1998..................... $.0560
Jun 1998..................... $.0560
</TABLE>
The dividend history represents past performance of the Trust and
does not predict the Trust's future distributions.
ECONOMIC OUTLOOK
We expect economic growth in the second half of 1998 will slacken from its
brisk first-quarter pace, due to the Asian economic crisis, General Motors
strike, and slowing inventory buildup by American industry. The bond market
itself is suggesting a slowdown: the yield spread between short-term and
long-term Treasury securities is almost flat, a configuration that typically
indicates economic moderation.
We believe there is little chance that the Fed will raise rates during the
coming months unless price pressures build and the economic slowdown is
short-lived. One indicator we will be watching closely is the consumer price
index, because its growth rate has begun to accelerate. If inflation rises
sharply and the Fed does decide to raise rates, long-term bond yields will
likely top 6.00 percent. Otherwise, yields are likely to remain within their
recent range, between 5.50 percent and 6.00 percent.
In the meantime, we will closely monitor market developments and their
effects on the performance of the Trust, adjusting the portfolio when
appropriate. We remain committed to maximizing the distribution of tax-free
dividends to our investors and enhancing the total returns of the Trust. Thank
you for your continued support and confidence in Van Kampen and the management
of your Trust.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1998
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VMT)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ 6.85%
One-year total return based on NAV(2)..................... 9.62%
DISTRIBUTION RATES
Distribution rate as a % of closing stock price(3)........ 6.18%
Taxable-equivalent distribution rate as a % of closing
stock price(4).......................................... 9.66%
SHARE VALUATIONS
Net asset value........................................... $ 10.26
Closing common stock price................................ $10.8750
One-year high common stock price (11/26/97)............... $11.2500
One-year low common stock price (4/28/98)................. $ 9.9375
Preferred share (Series A) rate(5)........................ 3.700%
Preferred share (Series B) rate(5)........................ 3.650%
Preferred share (series C) rate(5)........................ 3.610%
</TABLE>
(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.
5
<PAGE> 7
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific call dates before
maturity. Call dates and prices are set when the bond is issued. To compensate
the bondholder for loss of income and ownership, the initial 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.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality issues.
Normally, lower-quality issues provide higher yields to compensate investors for
the additional credit risk.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a fund's duration, the greater the effect of interest rate
movements on net asset value. Typically, funds with shorter durations have
performed better in rising rate environments, while funds with longer durations
have performed better when rates decline.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system 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 U.S.
GENERAL OBLIGATION BONDS: Bonds backed by the full faith and credit (taxing
authority) of the issuer for timely payment of interest and principal. These
bonds are issued to finance essential government projects, such as highways and
schools.
INFLATION: An economic state in which the money supply and business activity
dramatically increase, accompanied by sharply rising 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.
6
<PAGE> 8
INSURED BOND: A bond that is insured against default by the municipal bond
insurer. If the issuer defaults, the insurance company will step in and take
over payments of interest and principal. As a result of this protection against
credit risk, most insured bonds are AAA-rated. Recently, an A-rated insurer has
started to insure lower-quality municipal bonds, and those bonds are A-rated.
Insurance on the bonds does not relate to mutual fund shares, which will
fluctuate in price.
INVESTMENT GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.
MARKET PRICE: The price of a share of a closed-end fund trading on a stock
exchange. When the price is less than a fund's net asset value, the fund is
trading at a discount. When the price is more than the NAV, the fund is trading
at a premium.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
government entity to finance capital expenditures such as the construction of
highways, public works, or school buildings. Interest on municipal bonds is
exempt from federal taxation and, potentially, from state and local taxation.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding.
PREREFUNDING: A process whereby new bonds are issued to refinance an outstanding
bond issue. This typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
PREMIUM BOND: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond does.
YIELD SPREAD: The difference between the yields of different bonds, due to their
different credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities are
narrow, there is less incentive to own the bond with the longer maturity. In
both cases, the investor is not being compensated for the additional risk.
ZERO COUPON BONDS: A corporate or municipal debt security that is traded at a
deep discount to face value and pays no interest. It may be redeemed at maturity
for full face value.
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS
June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 102.1%
ALABAMA 0.1%
$ 500 Alabama St Indl Dev Auth Solid Waste Disp Rev
Pine City Fiber Co............................. 6.450% 12/01/23 $ 543,570
------------
ARKANSAS 0.2%
1,000 Conway, AR Hosp Rev Conway Regl Hosp Rfdg...... 8.375 07/01/11 1,082,680
------------
CALIFORNIA 7.2%
9,685 California Hsg Fin Agy Rev Homeowner Mtg Ser
D.............................................. * 08/01/20 1,777,973
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(MBIA Insd).................................... * 09/01/17 1,922,050
5,000 Imperial, CA Irrig Dist Elec Rev Rfdg (MBIA
Insd) (a)...................................... 5.000 11/01/18 4,927,500
3,300 Los Angeles, CA Wastewtr Sys Rev Ser 1993D
(FGIC Insd).................................... 4.700 11/01/17 3,130,545
5,000 Mount Diablo, CA Hosp Dist Rev Ser A (AMBAC
Insd).......................................... 5.125 12/01/23 4,954,150
6,075 Orange Cnty, CA Recovery Ctfs Ser A Rfdg (MBIA
Insd).......................................... 6.000 06/01/09 6,840,146
5,000 San Diego, CA Spl Tax Cmnty Fac Dist No 1 Rfdg
(MBIA Insd) (a)................................ 4.750 09/01/20 4,752,950
4,700 San Francisco, CA City & Cnty Arpts Comm Intl
Arpt Rev Second Ser (FSA Insd)................. 5.000 05/01/24 4,596,271
------------
32,901,585
------------
COLORADO 9.1%
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 1,186,670
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 1,784,175
19,405 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C (Prerefunded @ 08/31/05)...... * 08/31/26 2,949,172
1,825 Denver, CO City & Cnty Arpt Rev Ser A.......... 8.500 11/15/07 2,020,604
11,330 Denver, CO City & Cnty Arpt Rev Ser A (b)...... 8.250 11/15/12 12,454,163
5,115 Denver, CO City & Cnty Arpt Rev Ser A.......... 8.500 11/15/23 5,652,177
4,410 Denver, CO City & Cnty Arpt Rev Ser A.......... 8.750 11/15/23 5,046,142
1,070 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @11/15/00)........................ 8.250 11/15/12 1,192,750
1,590 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @11/15/01)........................ 8.750 11/15/23 1,850,903
2,000 Douglas Cnty, CO Sch Dist No 1 Rev Douglas &
Elbert Cntys Impt Ser A (Prerefunded @
12/15/04) (MBIA Insd) (b)...................... 6.400 12/15/11 2,262,480
3,000 Meridian Metro Dist CO Peninsular & Oriental
Steam Navig Co. Rfdg........................... 7.500 12/01/11 3,274,020
1,850 Montrose Cnty, CO Ctfs Partn................... 6.350 06/15/06 1,994,726
------------
41,667,982
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DISTRICT OF COLUMBIA 0.8%
$ 860 Dist of Columbia Ctfs Partn.................... 6.875% 01/01/03 $ 898,941
2,775 Dist of Columbia Hosp Rev Medlantic Hlthcare
Ser A Rfdg (MBIA Insd)......................... 5.250 08/15/12 2,834,968
------------
3,733,909
------------
FLORIDA 1.0%
4,660 Florida St Brd Edl Cap Outlay Pub Ed Ser A Rfdg
(Prerefunded @ 06/01/00)....................... * 06/01/15 1,509,188
3,000 Miami Dade Cnty, FL Pub Fac Rev Jackson Mem
Hosp (FSA Insd) (a)............................ 5.000 06/01/18 2,938,740
------------
4,447,928
------------
GEORGIA 4.4%
6,095 Fulton Cnty, GA Lease Rev...................... 7.250 06/15/10 7,125,967
5,000 Georgia Local Gov Ctfs Partn Grantor Trust Ser
A (MBIA Insd) (a).............................. 4.750 06/01/28 4,708,600
2,635 Georgia Muni Elec Auth Pwr Rev Ser A (MBIA
Insd).......................................... 6.500 01/01/20 3,154,095
5,000 Georgia Muni Elec Auth Pwr Rev Ser Z (MBIA
Insd).......................................... 5.500 01/01/20 5,313,450
------------
20,302,112
------------
IDAHO 1.0%
4,390 Boise, ID Urban Renewal Agy Pkg Rev Ser A...... 8.125 09/01/15 4,465,332
------------
ILLINOIS 11.3%
13,970 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Proj Ser 84A......................... 8.850 05/01/18 15,373,566
2,645 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Proj Ser 84B......................... 8.850 05/01/18 2,958,909
4,895 Chicago, IL Pub Bldg Comm Bldg Rev Ser A (MBIA
Insd).......................................... * 01/01/07 3,339,026
1,000 Chicago, IL Ser B Rfdg (AMBAC Insd)............ 5.125 01/01/15 1,026,400
2,000 Illinois Edl Fac Auth Rev Lewis Univ........... 6.125 10/01/26 2,097,560
1,515 Illinois Hlth Fac Auth Rev Glenoaks Med Cent
Ser D.......................................... 9.500 11/15/15 1,765,914
1,275 Illinois Hlth Fac Auth Rev Glenoaks Med Cent
Ser D (Prerefunded @ 11/15/00)................. 9.500 11/15/15 1,457,210
600 Illinois Hlth Fac Auth Rev Glenoaks Med Cent
Ser E.......................................... 9.500 11/15/19 700,500
1,310 Illinois Hlth Fac Auth Rev Glenoaks Med Cent
Ser E (Prerefunded @ 11/15/00)................. 9.500 11/15/19 1,483,510
1,000 Illinois Hlth Fac Auth Rev Lutheran Social Svcs
Proj Ser A (Prerefunded @ 08/01/00)............ 7.650 08/01/20 1,091,610
3,205 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys
Rfdg........................................... 6.000 11/15/23 3,373,198
2,000 Illinois Hlth Fac Auth Rev Servantcor Ser A
(Prerefunded @ 08/15/01)....................... 8.000 08/15/21 2,258,860
4,000 Illinois Hlth Fac Auth Rev Sherman Hlth Sys
(AMBAC Insd)................................... 5.250 08/01/22 3,986,240
45,775 Illinois Hsg Dev Auth Multi-Family Hsg Ser A... * 07/01/27 5,003,207
1,745 Illinois Hsg Dev Auth Multi-Family Hsg Ser C... 7.400 07/01/23 1,837,991
1,250 Sangamon Cnty, IL Ctfs Partn................... 10.000 12/01/06 1,739,613
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 6,500 Will Cnty, IL Cmnty Unit Sch Dist No 365 (FSA
Insd).......................................... * 11/01/17 $ 2,390,830
------------
51,884,144
------------
INDIANA 0.7%
1,370 Indiana Hlth Fac Fin Auth Hosp Rev Bartholomew
Cnty Hosp Proj (Prerefunded @ 08/15/00) (FSA
Insd).......................................... 7.750% 08/15/20 1,501,123
1,650 Indiana St Edl Fac Auth Rev Univ Evansville
Proj (Prerefunded @ 11/01/00).................. 8.125 11/01/10 1,834,321
------------
3,335,444
------------
KENTUCKY 0.5%
2,190 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (MBIA Insd)............ 6.250 03/01/09 2,469,159
------------
LOUISIANA 1.7%
1,196 Lafayette, LA Pub Fin Auth Single Family Mtg
Rev Ser A Rfdg................................. 8.500 11/15/12 1,256,871
4,951 Louisiana Pub Fac Auth Rev Multi-Family Hsg
Pontchatn Arpts Ser B (GNMA Collateralized).... 8.375 07/20/23 5,204,167
1,250 New Orleans, LA Hsg Dev Corp Multi-Family Rev
Hsg Southwood Patio Ser A (FNMA
Collateralized)................................ 7.700 02/01/22 1,363,213
------------
7,824,251
------------
MAINE 0.2%
840 Maine St Hsg Auth Ser C........................ 8.300 11/15/20 862,067
------------
MARYLAND 1.0%
4,650 Baltimore, MD Cap Apprec Cons Pub Impt Ser A
Rfdg (FGIC Insd)............................... * 10/15/09 2,610,928
2,000 Maryland St Hlth & Higher Edl Fac Auth Rev
Johns Hopkins Medicine (MBIA Insd)............. 5.000 07/01/19 1,970,600
------------
4,581,528
------------
MASSACHUSETTS 2.6%
2,570 Massachusetts St Hlth & Ed Fac Auth Rev
Farmingham Union Hosp Ser B (Prerefunded @
07/01/00)...................................... 8.500 07/01/10 2,840,313
3,000 Massachusetts St Hlth Edl Fac Boston Med Cntr
Ser A (MBIA Insd) (a).......................... 5.000 07/01/29 2,883,570
1,000 Massachusetts St Indl Fin Agy Rev Higher Edl
Hampshire College Proj......................... 5.625 10/01/12 1,024,210
5,250 Massachusetts St Wtr Res Auth Ser B (MBIA
Insd).......................................... 4.750 12/01/21 4,962,562
------------
11,710,655
------------
MICHIGAN 3.7%
1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale
Cmnty Hlth Ctr................................. 5.750 05/15/18 1,240,216
4,360 Michigan St Hosp Fin Auth Rev Hosp Battle Creek
Hosp Ser G Rfdg................................ 9.500 11/15/15 4,972,362
2,000 Michigan St Hosp Fin Auth Rev Hosp Bay Med Cent
Ser A Rfdg (Crossover Rfdg @ 07/01/00) (b)..... 8.250 07/01/12 2,190,840
1,000 Michigan St Hosp Fin Auth Rev Hosp Genesys Regl
Med Rfdg (ACA Insd)............................ 5.500 10/01/18 1,019,670
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MICHIGAN (CONTINUED)
$ 4,895 Michigan St Hosp Fin Auth Rev Hosp Genesys Regl
Med Rfdg (ACA Insd)............................ 5.500% 10/01/27 $ 4,962,257
2,300 Muskegon, MI Hosp Fin Auth Hosp Rev Hackley
Hosp Ser A Rfdg................................ 8.000 02/01/08 2,350,255
------------
16,735,600
------------
MINNESOTA 1.1%
5,000 Southern MN Muni Pwr Agy Pwr Supply Sys Rev Ser
A Rfdg (MBIA Insd)............................. 4.750 01/01/16 4,807,350
------------
MISSISSIPPI 0.4%
1,500 Mississippi Hosp Equip & Fac MS Baptist Med
Cent Rfdg (MBIA Insd).......................... 6.000 05/01/13 1,619,490
------------
MISSOURI 0.7%
3,000 Missouri St Hsg Dev Cmnty Mtg Rev Ser B Rfdg
(FHA Gtd)...................................... 7.000 09/01/10 3,176,760
------------
NEBRASKA 1.4%
5,635 Nebraska Invt Fin Single Family Mtg Rev Pgm B
(Inverse Fltg)................................. 11.116 03/15/22 6,226,675
------------
NEVADA 0.5%
2,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser
B Rfdg......................................... 5.900 10/01/30 2,045,360
------------
NEW JERSEY 0.5%
2,500 New Jersey Hlth Care Fac Hackensack Univ Med
Ctr Rfdg (MBIA Insd) (a)....................... 5.000 01/01/28 2,434,175
------------
NEW YORK 17.4%
11,455 Long Island Pwr Auth NY Elec Gen Ser A (FSA
Insd) (b)...................................... 5.125 12/01/22 11,328,651
3,150 Long Island Pwr Auth NY Elec Sys Rev Genl Ser
A.............................................. 5.250 12/01/26 3,124,579
5,000 Metro Tran Auth NY Commuter Fac Rev Ser B (FGIC
Insd) (a)...................................... 4.750 07/01/26 4,708,700
2,250 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev Ser C (Prerefunded @ 06/15/01)............. 7.750 06/15/20 2,516,310
7,000 New York City Ser A............................ 7.000 08/01/04 7,928,270
4,500 New York City Ser B (AMBAC Insd)............... 7.250 08/15/07 5,403,600
2,700 New York City Ser C............................ 7.000 08/15/08 2,913,327
1,100 New York City Ser C (Prerefunded @ 08/15/01)... 7.000 08/15/08 1,195,128
6,930 New York City Tran Auth Tran Fac Livingston
Plaza Proj Rfdg (FSA Insd)..................... 5.400 01/01/18 7,255,086
8,625 New York St Dorm Auth Rev City Univ Ser F...... 5.500 07/01/12 8,861,756
2,500 New York St Dorm Auth Rev City Univ Ser F...... 5.000 07/01/20 2,401,675
4,615 New York St Dorm Auth Rev St Univ Edl Fac Ser
B.............................................. 7.000 05/15/16 4,914,283
415 New York St Med Care Fac Fin Agy Rev Mental
Hlth Svcs Fac Ser A............................ 7.750 08/15/11 456,376
3,150 New York St Urban Dev Corp Rev Correctional Cap
Fac Rfdg....................................... 5.000 01/01/20 3,043,310
2,500 New York St Urban Dev Corp Rev Correctional Cap
Fac Ser A...................................... 5.250 01/01/21 2,475,575
2,635 New York St Urban Dev Corp Rev Youth Fac....... 5.875 04/01/08 2,818,554
4,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)............... 5.750 12/01/22 4,242,320
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 4,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)............... 5.750% 12/01/25 $ 4,196,960
------------
79,784,460
------------
NORTH CAROLINA 4.2%
2,500 North Carolina Med Care Comm Catholic Hlth East
Ser C (AMBAC Insd) (a)......................... 5.000 11/15/28 2,425,775
15,000 North Carolina Muni Pwr Agy No 1 Catawba Elec
Rev (MBIA Insd) (b)............................ 6.000 01/01/12 16,869,150
------------
19,294,925
------------
OHIO 1.1%
3,845 Mason, OH Hlthcare Fac MCV Hlthcare Fac (FHA
Gtd)........................................... 7.625 02/01/40 4,132,183
1,000 Ohio St Air Quality Dev Auth Rev JMG Funding
Ltd Partn Proj Rfdg (AMBAC Insd)............... 6.375 04/01/29 1,092,450
------------
5,224,633
------------
OREGON 0.6%
2,500 Oregon St Hsg & Cmnty Svcs Dept Mtg Rev Single
Family Mtg Proj Ser B.......................... 6.875 07/01/28 2,673,425
------------
PENNSYLVANIA 9.6%
6,460 Allegheny Cnty, PA Indl Dev Auth Rev
Environmental Impt USX Corp Proj Rfdg.......... 6.100 07/15/20 6,867,755
1,750 Emmaus, PA Genl Auth Rev Var Loc Govt Bond Pool
Pgm Ser B Var Rate Cpn (BIGI Insd)............. 8.000 05/15/18 1,767,570
4,535 Erie, PA Sch Dist Cap Apprec Rfdg (FSA Insd)... * 09/01/14 2,018,302
1,500 Erie, PA Sch Dist Cap Apprec Rfdg (FSA Insd)... * 09/01/15 629,685
10,000 Geisinger Auth PA Hlth Sys Ser A (b)........... 6.400 07/01/22 10,821,800
2,500 Harrisburg, PA Auth Wtr Rev (Inverse Fltg)
(FGIC Insd).................................... 7.570 06/18/15 2,831,250
1,700 Harrisburg, PA Cap Apprec Notes Ser F Rfdg
(AMBAC Insd)................................... * 09/15/14 761,107
1,375 Lower Bucks Cnty, PA Jt Muni Auth Swr & Wtr Rev
Rfdg (FSA Insd) (a)............................ 5.000 11/15/17 1,350,649
5,000 Pennsylvania St Higher Edl Assist Agy Student
Ln Rev Ser B (Inverse Fltg) (MBIA Insd)........ 10.889 03/01/20 5,656,250
1,770 Philadelphia, PA Auth Indl Dev Rev Edl Comm Fgn
Med Grads (MBIA Insd).......................... 5.000 06/01/18 1,731,697
1,000 Philadelphia, PA Auth Indl Dev Rev Edl Comm Fgn
Med Grads (MBIA Insd).......................... 5.000 06/01/21 975,320
1,750 Philadelphia, PA Sch Dist Cap Apprec Ser A Rfdg
(AMBAC Insd)................................... * 07/01/01 1,544,200
2,000 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser A
Rfdg 6.000 12/01/13 2,091,100
4,745 Sayre, PA Hlthcare Fac Auth Rev VHA Cap Asset
Fin Pgm Ser C (AMBAC Insd)..................... 7.700 12/01/15 4,955,725
------------
44,002,410
------------
RHODE ISLAND 0.2%
1,000 Providence, RI Pub Bldg Auth Genl Rev Ser B
(FSA Insd) 7.250 12/15/10 1,090,560
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SOUTH CAROLINA 0.4%
$ 1,610 South Carolina St Hsg Fin & Dev Auth Homeowner
Mtg Ser A...................................... 7.400% 07/01/23 $ 1,696,699
------------
TENNESSEE 2.1%
8,985 Tennessee Hsg Dev Agy Mtg Fin Ser A............ 7.125 07/01/26 9,634,975
------------
TEXAS 8.3%
15,000 Brazos River Auth TX Pollutn Cntrl Rev Adj
Utils Elec Co Rfdg............................. 5.550 06/01/30 15,004,950
7,065 Dallas Cnty, TX Util & Reclamation Dist Cap
Apprec (MBIA Insd)............................. * 02/15/20 1,536,284
2,800 Gulf Coast Wtr Auth TX Wtr Sys Contract Rev
(FGIC Insd).................................... 5.000 08/15/17 2,764,216
4,820 Harris Cnty, TX Toll Rd (Prerefunded @
08/15/09) (AMBAC Insd)......................... * 08/15/18 1,552,667
1,000 Harris Cnty, TX Toll Rd (Prerefunded @
08/15/09) (AMBAC Insd)......................... * 08/15/21 262,050
2,400 Port Arthur, TX Navig Dist Rfdg (AMBAC Insd)... 4.875 03/01/19 2,323,896
4,000 Rockwall, TX Ind Sch Dist Cap Apprec Rfdg (PSF
Gtd) (a)....................................... * 08/15/20 1,216,080
4,395 Rockwall, TX Ind Sch Dist Cap Apprec Rfdg (PSF
Gtd) (a)....................................... * 08/15/21 1,250,026
3,525 Texas Muni Pwr Agy Rev Cap Apprec Rfdg (AMBAC
Insd).......................................... * 09/01/07 2,323,010
8,220 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (FSA Insd) 5.500 09/01/13 8,486,986
1,250 West Side Calhoun Cnty, TX Navig Dist Solid
Waste Disp Union Carbide Chem & Plastics....... 8.200 03/15/21 1,382,462
------------
38,102,627
------------
UTAH 1.7%
5,210 Salt Lake City, UT Arpt Rev Delta Airls Inc
Proj........................................... 7.900 06/01/17 5,467,270
1,000 Salt Lake Cnty, UT College Rev Westminster
College Proj................................... 5.750 10/01/27 1,025,210
1,060 Utah St Hsg Fin Agy Single Family Mtg Ser B
Class 2........................................ 6.250 07/01/14 1,121,056
------------
7,613,536
------------
VIRGINIA 1.0%
1,200 Blue Ridge Regl Jail Auth VA Regl Jail Fac Rev
(MBIA Insd).................................... 5.200 12/01/17 1,206,216
1,750 Rappahannock, VA Rgl Jail Auth (MBIA
Insd) (a)...................................... 5.000 12/01/20 1,709,575
1,650 Winchester, VA Indl Dev Auth Edl Fac Rev First
Mtg Shenandoah Univ Proj (MBIA Insd)........... 5.000 10/01/18 1,615,927
------------
4,531,718
------------
WEST VIRGINIA 0.6%
2,480 South Charleston, WV Indl Dev Rev Union Carbide
Chem & Plastics Ser A.......................... 8.000 08/01/20 2,669,373
------------
WISCONSIN 0.9%
2,835 Southeast WI Professional Baseball Pk Dist
Lease Ctfs Partn (MBIA Insd)................... * 12/15/11 1,493,393
1,495 Southeast WI Professional Baseball Pk Dist
Lease Ctfs Partn (MBIA Insd)................... * 12/15/12 740,369
1,565 Southeast WI Professional Baseball Pk Dist
Lease Ctfs Partn (MBIA Insd)................... * 12/15/13 732,717
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WISCONSIN (CONTINUED)
$ 1,670 Southeast WI Professional Baseball Pk Dist
Lease Ctfs Partn (MBIA Insd)................... * 12/15/14 $ 738,457
1,000 Southeast WI Professional Baseball Pk Dist
Lease Ctfs Partn (MBIA Insd)................... * 12/15/16 393,300
------------
4,098,236
------------
PUERTO RICO 3.9%
18,500 Puerto Rico Comwlth Hwy & Tran Auth Tran Rev
Ser A.......................................... 4.750% 07/01/38 17,444,760
365 Puerto Rico Elec Pwr Auth Pwr Ser N............ 7.000 07/01/07 380,553
------------
17,825,313
------------
TOTAL LONG-TERM INVESTMENTS 102.1%
(Cost $433,717,281)....................................................... 467,100,646
LIABILITIES IN EXCESS OF OTHER ASSETS (2.1%)............................... (9,756,349)
------------
NET ASSETS 100.0%.......................................................... $457,344,297
============
</TABLE>
*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.
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $433,717,281)....................... $467,100,646
Cash........................................................ 7,120,938
Receivables:
Investments Sold.......................................... 17,154,361
Interest.................................................. 6,659,034
Other....................................................... 8,506
------------
Total Assets............................................ 498,043,485
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 40,043,729
Investment Advisory Fee................................... 225,480
Income Distributions -- Common and Preferred Shares....... 186,292
Affiliates................................................ 21,192
Accrued Expenses............................................ 130,406
Trustees' Deferred Compensation and Retirement Plans........ 92,089
------------
Total Liabilities....................................... 40,699,188
------------
NET ASSETS.................................................. $457,344,297
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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, 28,485,339 shares issued and
outstanding).............................................. 284,853
Paid in Surplus............................................. 263,776,167
Net Unrealized Appreciation................................. 33,383,365
Accumulated Undistributed Net Investment Income............. 1,217,067
Accumulated Net Realized Loss............................... (6,317,155)
------------
Net Assets Applicable to Common Shares.................. 292,344,297
------------
NET ASSETS.................................................. $457,344,297
============
NET ASSET VALUE PER COMMON SHARE ($292,344,297 divided by
28,485,339
shares outstanding)....................................... $ 10.26
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $28,870,508
-----------
EXPENSES:
Investment Advisory Fee..................................... 2,734,426
Preferred Share Maintenance................................. 444,348
Trustees' Fees and Expenses................................. 30,174
Custody..................................................... 27,918
Legal....................................................... 5,798
Other....................................................... 337,875
-----------
Total Expenses.......................................... 3,580,539
-----------
NET INVESTMENT INCOME....................................... $25,289,969
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 5,886,160
Options................................................... 1,452,919
Futures................................................... (2,073,137)
-----------
Net Realized Gain........................................... 5,265,942
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 31,305,431
End of the Period:
Investments............................................. 33,383,365
-----------
Net Unrealized Appreciation During the Period............... 2,077,934
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 7,343,876
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $32,633,845
===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $25,289,969 $25,824,086
Net Realized Gain...................................... 5,265,942 2,762,098
Net Unrealized Appreciation During the Period.......... 2,077,934 4,621,912
------------ ------------
Change in Net Assets from Operations................... 32,633,845 33,208,096
------------ ------------
Distributions from Net Investment Income:
Common Shares........................................ (19,639,177) (20,273,120)
Preferred Shares..................................... (5,972,446) (5,768,834)
------------ ------------
Total Distributions.................................... (25,611,623) (26,041,954)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 7,022,222 7,166,142
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment......................................... 2,074,652 2,382,543
------------ ------------
TOTAL INCREASE IN NET ASSETS........................... 9,096,874 9,548,685
NET ASSETS:
Beginning of the Period................................ 448,247,423 438,698,738
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $1,217,067 and $1,537,747,
respectively)........................................ $457,344,297 $448,247,423
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Net Asset Value, Beginning of
the Period (a)................ $10.014 $9.758 $9.760 $ 9.924 $11.133
------ ------ ----- ------ ------
Net Investment Income........... .890 .916 .940 .964 1.000
Net Realized and Unrealized
Gain/Loss..................... .261 .264 .048 (.065) (1.214)
------ ------ ----- ------ ------
Total from Investment
Operations.................... 1.151 1.180 .988 .899 (.214)
------ ------ ----- ------ ------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders.............. .692 .720 .770 .840 .840
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.... .210 .204 .220 .223 .155
Distributions from and in
Excess of Net Realized Gain
Paid to Common
Shareholders................ -0- -0- -0- -0- -0-
------ ------ ----- ------ ------
Total Distributions............. .902 .924 .990 1.063 .995
------ ------ ----- ------ ------
Net Asset Value, End of the
Period........................ $10.263 $10.014 $9.758 $ 9.760 $ 9.924
====== ====== ===== ====== ======
Market Price Per Share at End of
the Period.................... $10.8750 $10.875 $9.875 $11.125 $11.125
Total Investment Return at
Market Price (b).............. 6.85% 18.32% (4.27%) 8.59% (0.05%)
Total Return at Net Asset
Value (c)..................... 9.62% 10.24% 8.02% 7.24% (3.63%)
Net Assets at End of the Period
(In millions)................. $457.3 $448.2 $438.7 $436.1 $437.7
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**...................... 1.23% 1.28% 1.31% 1.33% 1.28%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common
Shares (d).................... 6.64% 7.18% 7.26% 7.56% 7.86%
Portfolio Turnover.............. 103% 53% 29% 38% 45%
* Non-Annualized
** Ratio of Expenses to Average
Net
Assets Including Preferred
Shares...................... .79% .80% .82% .83% .82%
</TABLE>
*** If certain expenses had not been assumed by the Adviser for the period ended
June 30, 1989, the Ratio of Expenses to Average Net Assets Applicable to
Common Shares would have been 1.07% and the Ratio of Net Investment Income
to Average Net Assets Applicable to Common Shares would have been 5.99%.
(a) Net Asset Value at August 26, 1988, is adjusted for common and preferred
share offering costs of $.120 per share.
(b) 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.
(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(d) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
N/A = Not Applicable
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 26, 1988
(Commencement
Year Ended June 30, of Investment
- ------------------------------------------ Operations) to
1993 1992 1991 1990 June 30, 1989
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
$10.688 $ 9.805 $ 9.534 $9.767 $9.180
------ ------ ------ ----- ------
1.078 1.095 1.093 1.070 .766
.520 .848 .295 (.229) .559
------ ------ ------ ----- ------
1.598 1.943 1.388 .841 1.325
------ ------ ------ ----- ------
.829 .791 .725 .685 .501
.162 .238 .337 .389 .237
.162 .031 .055 -0- -0-
------ ------ ------ ----- ------
1.153 1.060 1.117 1.074 .738
------ ------ ------ ----- ------
$11.133 $10.688 $ 9.805 $9.534 $9.767
====== ====== ====== ===== ======
$12.000 $11.375 $10.125 $9.250 $9.500
15.20% 21.65% 18.71% 4.65% .10%*
13.97% 18.08% 11.61% 4.76% 10.62%*
$467.9 $452.7 $426.7 $418.3 $424.4
1.25% 1.35% 1.46% 1.43% .92%***
8.41% 8.41% 7.88% 7.11% 6.15%***
45% 27% 69% 116% 90%*
.80% .84% .89% .87% N/A
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital 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--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics 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.
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.
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.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
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, 1998, the Trust had an accumulated capital loss carryforward
for tax purposes of $6,317,155 which will expire on June 30, 2004.
At June 30, 1998, for federal income tax purposes, cost of long- and
short-term investments is $433,717,281; the aggregate gross unrealized
appreciation is $33,463,372 and the aggregate gross unrealized depreciation is
$80,007, resulting in net unrealized appreciation on investments of $33,383,365.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually to common shareholders. Distributions from net
realized gains for book purposes may include short-term capital gains, which are
included as ordinary income for tax purposes. 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.
Permanent difference(s) related to expenses not deductible for tax purposes
totaling $974 have been reclassified from accumulated undistributed net
investment income to capital.
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 30,1998, the Trust recognized expenses of
approximately $2,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the year ended June 30, 1998, the Trust recognized expenses of
approximately $114,300 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Trust.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
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 under the plan is equal to the trustee's annual retainer fee,
which is currently $2,500.
3. CAPITAL TRANSACTIONS
At June 30, 1998 and 1997, common share paid in surplus aggregated $263,776,167
and $261,704,481 respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares........................... 28,286,058 28,047,767
Shares Issued Through Dividend
Reinvestment............................. 199,281 238,291
---------- ----------
Ending Shares.............................. 28,485,339 28,286,058
========== ==========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments
excluding short-term investments, were $504,925,870 and $472,564,690,
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 an option contract or taking
delivery of a security underlying a futures contract. In this instance, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
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, 1998, were as follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- ---------------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 30, 1997................... 1,500 $ 308,208
Options Written and Purchased (Net)............ 14,650 1,863,750
Options Terminated in Closing Transactions
(Net)........................................ (9,608) (1,227,064)
Options Expired (Net).......................... (6,542) (944,894)
------- -----------
Outstanding at June 30, 1998................... -0- $ -0-
======= ===========
</TABLE>
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, 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.
Transactions in futures contracts for the year ended June 30, 1998, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1997.............................. 600
Futures Opened............................................ 7,175
Futures Closed............................................ (7,775)
------
Outstanding at June 30, 1998.............................. 0
=======
</TABLE>
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.
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yield of the portfolio.
An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short term interest rates which it
pays on its preferred shares.
6. PREFERRED SHARES
The Trust has outstanding 330 shares of rate adjusted tax-exempt preferred
shares ("Rates") in three series of 110 shares each. Dividends are cumulative
and the rate on each series is currently reset every 28 days through an auction
process. The average rate in effect on June 30, 1998, was 3.653%. During the
year ended June 30, 1998, the rates ranged from 3.450% to 3.900%.
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.
24
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Municipal Income Trust (the "Trust"), including the
portfolio of investments, as of June 30, 1998, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of 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, 1998, 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 American Capital Municipal Income Trust as of June 30, 1998, 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 Peat Marwick LLP
Chicago, Illinois
August 3, 1998
25
<PAGE> 27
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
26
<PAGE> 28
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
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
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 and
Senior Loan Fund
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask your financial adviser 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.VAN-KAMPEN.COM -- to view
prospectuses, select Investors' Place,
then Download a 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.VAN-KAMPEN.COM and
selecting Investors' Place
27
<PAGE> 29
VAN KAMPEN AMERICAN CAPITAL 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
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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 PEAT MARWICK LLP
Peat Marwick Plaza
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., 1998 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
28
<PAGE> 30
RESULTS OF SHAREHOLDER VOTES
The Joint Annual Meeting of Shareholders of the Trust was held on June 26, 1998,
where shareholders voted on the election of Trustees and selection of KPMG Peat
Marwick LLP as independent accountants.
1) With regard to the election of the following Trustees:
<TABLE>
<CAPTION>
# OF SHARES
-----------------------
IN FAVOR ABSTAINED
---------- ---------
<S> <C> <C>
Don G. Powell................................ 22,295,666 233,027
Hugo F. Sonnenschein......................... 22,296,151 232,542
Theodore A. Myers............................ 314 0
</TABLE>
The other Trustees of the Trust whose terms did not expire in 1998 are David C.
Arch, Rod Dammeyer, Howard J Kerr, Dennis J. McDonnell, Steven Muller and Wayne
W. Whalen.
2) With regard to the ratification of KPMG Peat Marwick LLP as independent
accountants for the Trust, 22,242,919 shares voted in favor of the proposal,
96,406 shares voted against and 189,681 shares abstained.
29
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> MUNICIPAL INCOME CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 433,717,281<F1>
<INVESTMENTS-AT-VALUE> 467,100,646<F1>
<RECEIVABLES> 23,813,395<F1>
<ASSETS-OTHER> 8,506<F1>
<OTHER-ITEMS-ASSETS> 7,120,938<F1>
<TOTAL-ASSETS> 498,043,485<F1>
<PAYABLE-FOR-SECURITIES> 40,043,729<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 655,459<F1>
<TOTAL-LIABILITIES> 40,699,188<F1>
<SENIOR-EQUITY> 165,000,000
<PAID-IN-CAPITAL-COMMON> 264,061,020
<SHARES-COMMON-STOCK> 28,485,339
<SHARES-COMMON-PRIOR> 28,286,058
<ACCUMULATED-NII-CURRENT> 1,217,067<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (6,317,155)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 33,383,365<F1>
<NET-ASSETS> 457,344,297
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 28,870,508<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (3,580,539)<F1>
<NET-INVESTMENT-INCOME> 25,289,969<F1>
<REALIZED-GAINS-CURRENT> 5,265,942<F1>
<APPREC-INCREASE-CURRENT> 2,077,934<F1>
<NET-CHANGE-FROM-OPS> 32,633,845<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (25,611,623)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 199,281
<NET-CHANGE-IN-ASSETS> 9,096,874
<ACCUMULATED-NII-PRIOR> 1,537,747<F1>
<ACCUMULATED-GAINS-PRIOR> (11,583,097)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,734,426<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,580,539<F1>
<AVERAGE-NET-ASSETS> 455,793,047
<PER-SHARE-NAV-BEGIN> 10.014
<PER-SHARE-NII> 0.890
<PER-SHARE-GAIN-APPREC> 0.261
<PER-SHARE-DIVIDEND> (0.902)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.263
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
