<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 9
Portfolio of Investments......................... 11
Statement of Assets and Liabilities.............. 21
Statement of Operations.......................... 22
Statement of Changes in Net Assets............... 23
Financial Highlights............................. 24
Notes to Financial Statements.................... 26
Report of Independent Accountants................ 32
Dividend Reinvestment Plan....................... 33
</TABLE>
VMT ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VMT)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ (5.68)%
One-year total return based on NAV(2)..................... (.67)%
DISTRIBUTION RATES
Distribution rate as a % of closing stock price(3)........ 6.48%
Taxable-equivalent distribution rate as a % of closing
stock price(4).......................................... 10.13%
SHARE VALUATIONS
Net asset value........................................... $ 9.56
Closing common stock price................................ $ 9.6250
One-year high common stock price (11/23/98)............... $11.5000
One-year low common stock price (06/30/99)................ $ 9.5000
Preferred share (Series A) rate(5)........................ 3.498%
Preferred share (Series B) rate(5)........................ 3.650%
Preferred share (series C) rate(5)........................ 3.250%
</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.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN MUNICIPAL INCOME TRUST
We recently spoke with the management team of the Van Kampen Municipal Income
Trust about the key events and economic forces that shaped the markets during
the past year. The team includes David C. Johnson, portfolio manager, who has
managed the Trust since April 1989 and worked in the investment industry since
1981. He is joined by Peter W. Hegel, chief investment officer for fixed-income
investments. The following comments reflect their views on the Trust's
performance during the 12 months ended June 30, 1999.
Q HOW DID THE ECONOMY AFFECT THE MUNICIPAL MARKET DURING THE REPORTING
PERIOD?
A During the majority of the reporting period, the municipal market remained
relatively stable, even though the stock and high-yield bond markets
experienced significant volatility. Much of this stability was attributed
to the municipal market's isolation from turbulence abroad. However, the market
started to experience more volatility in yields and prices during the last three
months of the reporting period. Concerns about rising inflation--particularly
the spike in the consumer price index (CPI) in April--led to higher interest
rates (and subsequently lower bond prices) during this period.
Although inflationary concerns were fueled by strong economic growth and the
Federal Reserve's bias toward raising rates, they were moderated by a zero
growth rate for the CPI in May. In addition, the Fed's rate hike on June 30 was
coupled with the announcement that it no longer had a bias toward future rate
increases, which helped calm the markets.
Q DID THIS ECONOMIC ACTIVITY AFFECT THE SUPPLY OF MUNICIPAL BONDS?
A Yes. Throughout the reporting period, the supply of municipal bonds
declined, particularly as rates increased. As of June 30, the supply of
new and refinanced bonds was down 23 percent compared with the previous
year, partly because it was no longer economically favorable to refinance many
bonds once rates increased. Also, since municipalities had benefited from the
strong economy, many no longer needed to issue bonds for general operating
needs.
Although overall supply fell, the proportion of higher-yielding municipal
bonds increased during the period as the number of insured bonds declined.
Because bond insurers tightened their underwriting criteria, more securities
came to market without insurance and offered higher yields to compensate
bondholders for the increased credit risk. This situation benefited the Trust's
yield because it allowed our experienced research staff to seek out those
higher-yielding bonds that we felt had strong underlying quality.
4
<PAGE> 6
Q GIVEN THESE CONDITIONS, HOW DID YOU MANAGE THE TRUST?
A We continued to focus on protecting the Trust's income stream as much as
possible. Many of the bonds in the Trust offer significantly higher yields
than are available in the current marketplace, and therefore are
vulnerable to being called by the issuer and refinanced at today's lower rates.
In fact, more than 20 percent of the portfolio is subject to call by the end of
2000. To cushion the impact of the potential loss of these higher-yielding
bonds, we made a number of purchases when interest rates rose at the end of the
reporting period. Although the new bonds yield less than the bonds they
replaced, they offered the most attractive rates available during the reporting
period. While these purchases did not offset the need for a dividend decrease,
we anticipate that they will help us moderate future dividend reductions.
To further support the Trust, we bought noncallable bonds, which provide
slightly lower yields but cannot be removed from the portfolio until their
maturity date unless we choose to sell them. We also avoided sectors such as
housing, because the low interest-rate environment meant that these bonds might
be repaid early as more homeowners refinance their mortgages. While the housing
sector usually offers higher yields because of its susceptibility to calls, we
did not feel that these bonds offered enough yield to compensate for the added
call risk.
Q WHERE DID YOU FIND VALUE IN THE MUNICIPAL MARKET?
A We focused on areas of the market that we felt offered the most value and
avoided sectors that appeared to be under pressure. For example, we
reduced the Trust's holdings in the health-care sector because of
increasing financial pressures on the industry. Although many health-care bonds
remain attractive, the challenges imposed by managed care and changing Medicare
reimbursement policies have led us to look to other sectors in recent months. As
a result, we sold lower-rated health-care issues and replaced them with
longer-maturity AAA bonds, which offered favorable yields given their solid
credit standing. The higher-quality bonds temporarily hurt the Trust's total
return because they were more sensitive to price declines as interest rates
increased. We believe, however, that they will benefit the Trust in the future
if credit spreads widen and higher-rated bonds increase in value. For additional
Trust highlights, please refer to page 9.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A The volatile market and rise in interest rates, especially during the last
few weeks of the reporting period, hurt the Trust's price performance. For
the 12 months ended June 30, 1999, the Trust generated a total return of
- -5.68 percent(1) based on market price. This reflects a decrease in market price
from $10.875 on June 30, 1998, to $9.625 on June 30, 1999.
Although the total return suffered, the Trust provided a very competitive
distribution rate of 6.48 percent(3) based on its closing common stock price on
June 30, 1999.
5
<PAGE> 7
Because the Trust is exempt from federal income taxes, this distribution rate is
equivalent to a yield of 10.13 percent(4) on a taxable investment for
shareholders in the 36 percent federal income tax bracket.
As we discussed earlier, the low interest-rate environment led to a
reduction in the Trust's income stream over the past year. As a result, the
Board of Trustees approved decreases in the Trust's dividend in December 1998
and June 1999. Despite the dividend decreases, we believe that the Trust offers
a competitive yield, especially when considering its exemption from federal
income taxes. Please refer to the chart and footnotes on page 3 for additional
Trust performance results.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A Strong economic performance should continue to bolster the credit
conditions of municipal issuers, which would support the Trust's
already-strong credit quality. In addition, we expect that this economic
strength will prompt municipalities to issue debt for special projects rather
than for general operating financing, keeping supply at moderate levels. We also
see the potential for changes in traditional economic activity toward the end of
the year because of investor concerns about the year 2000 computer problem.
These temporary concerns, however, may result in attractive investment
opportunities that our research staff can explore to uncover potential value.
[SIG]
David C. Johnson
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
INSURED BOND: A bond that is insured against default by the bond insurer. If the
issuer defaults, the insurance company will step in and take over payments
of interest and principal when due. Once a bond is insured, it typically
carries the rating of the insurer. Most insurers are rated AAA.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from
the new bonds are generally invested in U.S. government securities.
Prerefunding typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
7
<PAGE> 9
GLOSSARY OF TERMS (CONTINUED)
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
YIELD: The annual rate of return on an investment, expressed as a percentage.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN MUNICIPAL INCOME TRUST
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
General Purpose 20.20 9.50
Health Care 12.30 16.80
Public Education 9.00 2.70
Airport 8.80 7.50
Transportation 7.50 11.10
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE (BASED UPON MONTH-END VALUES) JUNE 1989
THROUGH JUNE 1999
[GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Jun 1989 9.5000 9.7700
9.6250 9.8000
9.5000 9.6100
9.2500 9.5000
9.2500 9.5400
9.5000 9.6700
9.1250 9.7200
9.3750 9.5800
9.3750 9.6100
9.2500 9.5600
9.3750 9.3300
9.2500 9.4300
Jun 1990 9.2500 9.5300
9.5000 9.6600
9.2500 9.4000
9.0000 9.3100
8.8750 9.3600
9.2500 9.5600
9.6250 9.6200
9.6250 9.6100
10.0000 9.7000
10.0000 9.6400
10.0000 9.7400
10.1250 9.8300
Jun 1991 10.1250 9.8100
10.3750 9.9200
10.3750 9.9700
10.6250 10.1100
10.5000 10.1300
10.5000 10.1300
10.7500 10.2400
11.1250 10.2000
10.7500 10.2200
10.8750 10.1800
11.1250 10.2500
11.1250 10.4500
Jun 1992 11.3750 10.6900
11.8750 11.3700
11.7500 10.9900
11.5000 10.9700
10.7500 10.6800
11.3750 10.7100
12.0000 10.6500
12.0000 10.6900
12.3750 11.0900
11.6250 11.0900
11.7500 11.0900
11.8750 11.0900
Jun 1993 12.0000 11.1300
12.2500 11.0900
12.6250 11.2100
12.3750 11.3700
12.2500 11.3100
11.7500 11.0400
11.7500 11.1700
12.2500 11.2700
11.7500 10.8000
10.7500 9.9300
11.1250 9.9100
11.0000 9.9700
Jun 1994 11.1250 9.9200
11.2500 10.0000
11.0000 10.0200
10.2500 9.8200
10.0000 9.5000
10.1250 9.1000
9.7500 9.3400
10.6250 9.6100
11.2500 9.9000
11.0000 9.9000
11.0000 9.7700
11.0000 9.9400
Jun 1995 11.1250 9.7600
11.2500 9.7600
11.1250 9.8500
10.7500 9.8600
10.5000 9.9800
10.5000 10.1600
10.5000 10.2400
11.0000 10.2600
11.0000 10.1600
10.3750 9.8800
10.1250 9.7600
10.0000 9.7200
Jun 1996 9.8750 9.7600
10.1250 9.8400
10.3750 9.7700
10.2500 9.9000
10.2500 9.9700
10.3750 10.1200
10.3750 10.0000
10.3750 9.9600
10.3750 10.0400
10.1250 9.8100
10.6250 9.8900
10.6250 9.9900
Jun 1997 10.8750 10.0100
11.0625 10.3800
11.0000 10.0900
11.0000 10.1800
10.9370 10.2300
11.1870 10.2000
10.8120 10.3500
11.1250 10.4200
11.0620 10.3700
10.3120 10.3200
10.2500 10.1400
10.4370 10.2800
Jun 1998 10.8750 10.2600
10.8125 10.2300
10.7500 10.4400
11.0000 10.5700
11.1250 10.4300
11.3750 10.4100
10.8125 10.3800
10.6250 10.4300
10.8750 10.2000
10.6875 10.1300
10.5000 10.1100
10.3750 9.9200
Jun 1999 9.6250 9.5600
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
9
<PAGE> 11
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN MUNICIPAL INCOME TRUST
CREDIT QUALITY
[PIE CHART]
<TABLE>
<CAPTION>
As of June 30, 1999
<S> <C>
AAA/Aaa ............ 63.80
AA/Aa .............. 3.80
A/A ................ 10.40
BBB/Baa ............ 20.00
NON-RATED .......... 2.00
</TABLE>
[PIE CHART]
<TABLE>
<CAPTION>
As of December 31, 1998
<S> <C>
AAA/Aaa ............ 50.5
AA/Aa .............. 5.4
A/A ................ 17.1
BBB/Baa ............ 23.4
BB/Ba .............. 1.4
NON-RATED .......... 2.2
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED JUNE 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
MONTHLY DIVIDEND
----------------
<S> <C>
Jul 1998 0.0560
Aug 1998 0.0560
Sep 1998 0.0560
Oct 1998 0.0560
Nov 1998 0.0560
Dec 1998 0.0540
Jan 1999 0.0540
Feb 1999 0.0540
Mar 1999 0.0540
Apr 1999 0.0540
May 1999 0.0540
Jun 1999 0.0520
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 106.2%
ALABAMA 0.1%
$ 500 Alabama St Indl Dev Auth Solid Waste
Disp Rev Pine City Fiber Co (b)...... 6.450% 12/01/23 $ 515,570
------------
ARKANSAS 0.2%
1,000 Conway, AR Hosp Rev Conway Regl Hosp
Rfdg................................. 8.375 07/01/11 1,048,830
------------
CALIFORNIA 6.1%
24,940 Alameda Corridor Tran Auth CA Rev Ser
1999 A (MBIA Insd)................... * 10/01/36 3,135,207
7,280 California Hsg Fin Agy Rev Homeowner
Mtg Ser D............................ * 08/01/20 1,446,973
4,250 California St (MBIA Insd)............ 5.000 08/01/24 4,020,458
5,000 Contra Costa, CA Home Mtg Fin Auth
Home Mtg Rev (MBIA Insd)............. * 09/01/17 1,855,800
2,000 Duarte CA Ctfs Partn Ser A........... 5.250 04/01/19 1,871,460
1,500 Duarte CA Ctfs Partn Ser A........... 5.250 04/01/24 1,388,460
6,075 Orange Cnty, CA Recovery Ctfs Ser A
Rfdg (MBIA Insd) (b)................. 6.000 06/01/09 6,647,204
11,120 San Diego, CA Unified Sch Dist Cap
Apprec Ser A (FGIC Insd)............. * 07/01/23 2,964,036
15,000 San Joaquin Hills, CA Tran Toll Cap
Apprec Ser A Rfdg (MBIA Insd)........ * 01/15/26 3,423,000
------------
26,752,598
------------
COLORADO 8.0%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser B (Prerefunded
@ 08/31/05).......................... 6.950 08/31/20 1,151,320
1,500 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser B (Prerefunded
@ 08/31/05).......................... 7.000 08/31/26 1,730,970
1,825 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.500 11/15/07 1,955,323
11,330 Denver, CO City & Cnty Arpt Rev Ser A
(b).................................. 8.250 11/15/12 12,045,263
5,115 Denver, CO City & Cnty Arpt Rev Ser A
(b).................................. 8.500 11/15/23 5,457,551
4,410 Denver, CO City & Cnty Arpt Rev Ser A
(b).................................. 8.750 11/15/23 4,862,951
1,070 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/00) (b)......... 8.250 11/15/12 1,153,899
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO (CONTINUED)
$ 1,590 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/01)............. 8.750% 11/15/23 $ 1,783,169
3,000 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)................. 7.500 12/01/11 3,208,110
1,850 Montrose Cnty, CO Ctfs Partn......... 6.350 06/15/06 1,977,021
------------
35,325,577
------------
CONNECTICUT 0.7%
3,100 Stamford, CT Hsg Auth Multi-Family
Rev Fairfield Apts Proj Rfdg......... 4.750 12/01/28 2,992,554
------------
DISTRICT OF COLUMBIA 0.8%
710 Dist of Columbia Ctfs Partn.......... 6.875 01/01/03 732,138
2,775 Dist of Columbia Hosp Rev Medlantic
Hlthcare Ser A Rfdg (MBIA Insd)
(b).................................. 5.250 08/15/12 2,801,778
------------
3,533,916
------------
FLORIDA 2.1%
1,000 Bartow, FL Wtr & Swr Systems Rev
(FGIC Insd).......................... 5.125 10/01/29 958,430
4,660 Florida St Brd Edl Cap Outlay Pub Ed
Ser A Rfdg (Prerefunded @
06/01/00)............................ * 06/01/15 1,576,758
3,500 Florida St Brd Edl Cap Outlay Pub Ed
Ser B................................ 4.500 06/01/27 2,968,280
4,000 Sarasota Cnty, FL Pub Hosp Brd Miles
Sarasota Mem Hosp Proj Ser A
(Embedded Cap) (MBIA Insd)........... * 10/01/21 3,760,360
------------
9,263,828
------------
GEORGIA 9.5%
1,000 Burke Cnty, GA Dev Auth Pollution
Control Rev GA Pwr Co Plant Vogtle
Second Ser (AMBAC Insd).............. 5.250 05/01/34 957,010
5,866 Fulton Cnty, GA Lease Rev (b)........ 7.250 06/15/10 6,601,727
25,000 Georgia Local Gov Ctfs Partn Grantor
Trust Ser A (MBIA Insd) (b).......... 4.750 06/01/28 22,550,000
2,635 Georgia Muni Elec Auth Pwr Rev Ser A
(MBIA Insd) (b)...................... 6.500 01/01/20 3,014,888
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GEORGIA (CONTINUED)
$ 3,000 Georgia Muni Elec Auth Pwr Rev Ser B
(FGIC Insd) (b)...................... 6.250% 01/01/17 $ 3,331,590
5,000 Georgia Muni Elec Auth Pwr Rev Ser Z
Rfdg (MBIA Insd) (b)................. 5.500 01/01/20 5,105,850
------------
41,561,065
------------
IDAHO 0.5%
2,080 Boise, ID Urban Renewal Agy Pkg Rev
Ser A (b)............................ 8.125 09/01/15 2,115,277
------------
ILLINOIS 18.3%
49,000 Chicago, IL Brd Edl Cap Apprec Sch
Reform B-1 (FGIC Insd)............... * 12/01/27 9,716,700
78,500 Chicago, IL Brd Edl Cap Apprec Sch
Reform B-1 (FGIC Insd)............... * 12/01/31 12,357,470
13,645 Chicago, IL O'Hare Intl Arpt Spl Fac
Rev United Airls Inc Proj Ser 84A
(b).................................. 8.850 05/01/18 14,792,544
2,585 Chicago, IL O'Hare Intl Arpt Spl Fac
Rev United Airls Inc Proj Ser 84B
(b).................................. 8.850 05/01/18 2,802,399
4,895 Chicago, IL Pub Bldg Comm Bldg Rev
Ser A (MBIA Insd).................... * 01/01/07 3,394,242
1,000 Chicago, IL Ser B Rfdg (AMBAC Insd)
(b).................................. 5.125 01/01/15 985,290
5,000 Hoffman Estates, IL Park Dist........ 5.375 12/01/29 4,804,600
2,000 Illinois Edl Fac Auth Rev Lewis
Univ................................. 6.125 12/01/26 2,012,400
1,450 Illinois Hlth Fac Auth Rev Glenoaks
Med Cent Ser D....................... 9.500 11/15/15 1,597,378
1,275 Illinois Hlth Fac Auth Rev Glenoaks
Med Cent Ser D (Prerefunded @
11/15/00)............................ 9.500 11/15/15 1,395,908
570 Illinois Hlth Fac Auth Rev Glenoaks
Med Cent Ser E....................... 9.500 11/15/19 628,140
1,310 Illinois Hlth Fac Auth Rev Glenoaks
Med Cent Ser E (Prerefunded @
11/15/00)............................ 9.500 11/15/19 1,433,612
1,000 Illinois Hlth Fac Auth Rev Lutheran
Social Svcs Proj Ser A (Prerefunded @
08/01/00) (LOC: Bank of Japan) (b)... 7.650 08/01/20 1,061,980
3,205 Illinois Hlth Fac Auth Rev OSF
Hlthcare Sys Rfdg (b)................ 6.000 11/15/23 3,252,979
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,000 Illinois Hlth Fac Auth Rev Servantcor
Ser A (Prerefunded @ 08/15/01)....... 8.000% 08/15/21 $ 2,187,500
45,775 Illinois Hsg Dev Auth Multi-Family
Hsg Ser A............................ * 07/01/27 5,594,620
1,250 Sangamon Cnty, IL Ctfs Partn......... 10.000 12/01/06 1,656,713
3,750 Will Cnty, IL Cmnty Sch Dist No 161
Summit Hill (FGIC Insd) (a).......... * 01/01/15 1,607,325
4,295 Will Cnty, IL Cmnty Sch Dist No 161
Summit Hill (FGIC Insd) (a).......... * 01/01/17 1,636,352
6,500 Will Cnty, IL Cmnty Sch Dist No 365
(FSA Insd) (a)....................... * 11/01/17 2,365,220
10,435 Will Cnty, IL Fst Presv Dist Ser B
(FGIC Insd).......................... * 12/01/12 5,104,489
------------
80,387,861
------------
INDIANA 0.7%
1,370 Indiana Hlth Fac Fin Auth Hosp Rev
Bartholomew Cnty Hosp Proj
(Prerefunded @ 08/15/00) (FSA Insd)
(b).................................. 7.750 08/15/20 1,458,201
1,650 Indiana St Edl Fac Auth Rev Univ
Evansville Proj (Prerefunded @
11/01/00) (b)........................ 8.125 11/01/10 1,775,499
------------
3,233,700
------------
KENTUCKY 0.5%
2,190 Kenton Cnty, KY Arpt Brd Rev
Cincinnati/Northn KY Intl Arpt Ser A
Rfdg (MBIA Insd) (b)................. 6.250 03/01/09 2,372,361
------------
LOUISIANA 1.7%
1,022 Lafayette, LA Pub Fin Auth Single
Family Mtg Rev Ser A Rfdg............ 8.500 11/15/12 1,050,851
4,895 Louisiana Pub Fac Auth Rev
Multi-Family Hsg Pontchatn Arpts Ser
B (GNMA Collateralized) (b).......... 8.375 07/20/23 5,103,856
1,250 New Orleans, LA Hsg Dev Corp
Multi-Family Rev Hsg Southwood Patio
Ser A (FNMA Collateralized).......... 7.700 02/01/22 1,351,000
------------
7,505,707
------------
MARYLAND 2.5%
2,180 Baltimore, MD Cap Apprec Ser A (FGIC
Insd)................................ * 10/15/09 1,264,247
2,470 Baltimore, MD Cap Apprec Ser A
(Prerefunded @ 10/15/05) (FGIC
Insd)................................ * 10/15/09 1,451,051
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MARYLAND (CONTINUED)
$ 1,000 Maryland St Econ Dev Corp Student
Housing Rev (a)...................... 5.750% 06/01/29 $ 960,690
2,500 Maryland St Econ Dev Corp Student
Housing Rev (a)...................... 6.000 06/01/30 2,492,875
5,000 Maryland St Hlth & Higher Edl Fac
Auth Rev Medlantic/Helix Issue Ser B
(AMBAC Insd)......................... 5.250 08/15/38 4,834,650
------------
11,003,513
------------
MASSACHUSETTS 0.8%
2,440 Massachusetts St Hlth & Edl Fac Auth
Rev Farmingham Union Hosp Ser B
(Prerefunded @ 07/01/00)............. 8.500 07/01/10 2,591,622
1,000 Massachusetts St Indl Fin Agy Rev
Higher Edl Hampshire College Proj.... 5.625 10/01/12 985,230
------------
3,576,852
------------
MICHIGAN 4.6%
1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev
Hillsdale Cmnty Hlth Ctr............. 5.750 05/15/18 1,153,355
4,260 Michigan St Hosp Fin Auth Rev Hosp
Battle Creek Hosp Ser G Rfdg......... 9.500 11/15/15 4,656,095
1,915 Michigan St Hosp Fin Auth Rev Hosp
Bay Med Cent Ser A Rfdg (Crossover
Rfdg @ 07/01/00) (b)................. 8.250 07/01/12 2,031,528
1,000 Michigan St Hosp Fin Auth Rev Hosp
Genesys Regl Med Ser A Rfdg (ACA
Insd)................................ 5.500 10/01/18 967,070
2,000 Michigan St Hosp Fin Auth Rev Hosp
Hackley Hosp Ser A Rfdg.............. 5.000 05/01/18 1,793,640
4,000 Michigan St Strat Fd Ltd Oblig Rev
Detroit Edison Co Ser A Rfdg (MBIA
Insd) (a)............................ 5.550 09/01/29 3,934,840
5,000 Wayne Charter Cnty, MI Airport Rev
Detroit Metro Wayne Cnty (MBIA
Insd)................................ 5.000 12/01/28 4,579,650
1,000 Wayne Charter Cnty, MI Airport Rev
Subordinated Lien Detroit Metro Ser B
(MBIA Insd).......................... 5.250 12/01/13 980,640
------------
20,096,818
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MINNESOTA 0.6%
$ 3,000 Southern MN Muni Pwr Agy Pwr Supply
Sys Rev Ser A Rfdg (MBIA Insd)....... 4.750% 01/01/16 $ 2,799,630
------------
MISSISSIPPI 0.4%
1,500 Mississippi Hosp Equip & Fac MS
Baptist Med Cent Rfdg (MBIA Insd)
(b).................................. 6.000 05/01/13 1,568,940
------------
MISSOURI 0.7%
2,735 Missouri St Hsg Dev Cmnty Mtg Rev Ser
B Rfdg (FHA Gtd) (b)................. 7.000 09/01/10 2,859,853
------------
NEBRASKA 1.0%
3,935 Nebraska Invt Fin Single Family Mtg
Rev Pgm B (Inverse Fltg) (GNMA Insd)
(b).................................. 11.623 03/15/22 4,190,775
------------
NEW HAMPSHIRE 0.5%
2,340 New Hampshire St Bus Fin Auth Pollutn
Ctl Rev.............................. 5.875 10/01/33 2,344,610
------------
NEW YORK 15.1%
2,250 New York City Muni Wtr Fin Auth Wtr &
Swr Sys Rev Ser C (Prerefunded @
06/15/01) (b)........................ 7.750 06/15/20 2,438,460
7,000 New York City Ser A (b).............. 7.000 08/01/04 7,718,830
4,500 New York City Ser B (AMBAC Insd)
(b).................................. 7.250 08/15/07 5,192,325
2,700 New York City Ser C (b).............. 7.000 08/15/08 2,844,666
1,100 New York City Ser C (Prerefunded @
08/15/01)............................ 7.000 08/15/08 1,166,869
6,930 New York City Tran Auth Tran Fac
Livingston Plaza Proj Rfdg (FSA Insd)
(b).................................. 5.400 01/01/18 7,000,478
9,450 New York St Dorm Auth Rev Mental Hlth
Svcs Fac Impt F (AMBAC Insd)......... 4.500 08/15/28 8,030,610
8,625 New York St Dorm Auth Rev City Univ
Ser F (b)............................ 5.500 07/01/12 8,679,683
5,190 New York St Dorm Auth Rev Insd NY
Univ Ser A (AMBAC Insd) (a).......... 5.500 07/01/11 5,229,963
415 New York St Med Care Fac Fin Agy Rev
Mental Hlth Svcs Fac Ser A........... 7.750 08/15/11 443,834
2,500 New York St Urban Dev Corp Rev
Correctional Cap Fac Ser A........... 5.250 01/01/21 2,389,900
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,635 New York St Urban Dev Corp Rev Youth
Fac.................................. 5.875% 04/01/08 $ 2,746,382
5,305 New York, NY City Trans Auth Ser A... 5.625 01/01/12 5,523,990
3,000 New York, NY City Trans Auth Metro
Ser A................................ 5.250 01/01/29 2,906,010
4,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6 (MBIA
Insd) (b)............................ 5.750 12/01/22 4,105,440
------------
66,417,440
------------
NORTH CAROLINA 3.7%
15,000 North Carolina Muni Pwr Agy No 1
Catawba Elec Rev (MBIA Insd) (b)..... 6.000 01/01/12 16,186,200
------------
OHIO 1.2%
3,805 Mason, OH Hlthcare Fac (FHA Gtd)
(Prerefunded @ 02/01/01)............. 7.625 02/01/40 4,118,380
1,000 Ohio St Air Quality Dev Auth Rev JMG
Funding Ltd Partn Proj Rfdg (AMBAC
Insd) (b)............................ 6.375 04/01/29 1,077,930
------------
5,196,310
------------
OKLAHOMA 0.8%
3,300 Mc Alester, OK Public Wks Auth
Utility Sys Rev (FSA Insd)........... 5.750 02/01/20 3,394,050
------------
PENNSYLVANIA 7.7%
1,000 Allegheny Cnty, PA Ctfs Partn (AMBAC
Insd)................................ 5.000 12/01/28 928,150
2,500 Harrisburg, PA Auth Wtr Rev (Inverse
Fltg) (FGIC Insd) (b)................ 8.030 06/18/15 2,675,000
1,700 Harrisburg, PA Cap Apprec Notes Ser F
Rfdg (AMBAC Insd).................... * 09/15/14 748,187
5,000 Pennsylvania St Higher Edl Assist Agy
Student Ln Rev Ser B (Inverse Fltg)
(MBIA Insd) (b)...................... 11.244 03/01/20 6,187,500
1,770 Philadelphia, PA Auth Indl Dev Rev
Edl Comm Fgn Med Grads (MBIA Insd)... 5.000 06/01/18 1,671,623
1,000 Philadelphia, PA Auth Indl Dev Rev
Edl Comm Fgn Med Grads (MBIA Insd)... 5.000 06/01/21 944,620
7,385 Philadelphia, PA Sch Dist Ser A (MBIA
Insd)................................ 4.500 04/01/18 6,476,054
1,750 Philadelphia, PA Sch Dist Cap Apprec
Ser A Rfdg (AMBAC Insd).............. * 07/01/01 1,608,320
6,500 Philadelphia, PA Sch Dist Ser A (MBIA
Insd) (a)............................ 4.500 04/01/23 5,577,975
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 2,000 Ridley Park, PA Hosp Auth Rev Taylor
Hosp Ser A Rfdg (b).................. 6.000% 12/01/13 $ 2,153,440
4,745 Sayre, PA Hlthcare Fac Auth Rev VHA
Cap Asset Fin Pgm Ser C (AMBAC Insd)
(b).................................. 7.700 12/01/15 4,912,309
------------
33,883,178
------------
RHODE ISLAND 0.2%
1,000 Providence, RI Pub Bldg Auth Genl Rev
Ser B (FSA Insd) (b)................. 7.250 12/15/10 1,063,590
------------
SOUTH CAROLINA 0.4%
1,610 South Carolina St Hsg Fin & Dev Auth
Homeowner Mtg Ser A (b).............. 7.400 07/01/23 1,677,137
------------
TENNESSEE 1.3%
5,385 Tennessee Hsg Dev Agy Mtg Fin Ser A
(b).................................. 7.125 07/01/26 5,713,377
------------
TEXAS 7.1%
7,000 Austin, TX Rev Rfdg Sub Lien Ser A
(MBIA Insd).......................... 4.250 05/15/28 5,616,450
7,065 Dallas Cnty, TX Util & Reclamation
Dist Cap Apprec (MBIA Insd).......... * 02/15/20 1,609,902
2,790 Dallas Fort Worth, TX Intl Arpt Fac
Imp Corp Rev......................... 6.000 11/01/14 2,852,105
1,800 Gulf Coast Wtr Auth TX Wtr Sys
Contract Rev (FGIC Insd)............. 5.000 08/15/17 1,722,330
4,820 Harris Cnty, TX Toll Rd (Prerefunded
@ 08/15/09) (AMBAC Insd)............. * 08/15/18 1,558,354
1,000 Harris Cnty, TX Toll Rd (Prerefunded
@ 08/15/09) (AMBAC Insd)............. * 08/15/21 263,010
2,400 Port Arthur, TX Navig Dist Rfdg
(AMBAC Insd)......................... 4.875 03/01/19 2,230,440
4,000 Rockwall, TX Ind Sch Dist Cap Apprec
Rfdg (PSF Gtd)....................... * 08/15/20 1,210,200
4,395 Rockwall, TX Ind Sch Dist Cap Apprec
Rfdg (PSF Gtd)....................... * 08/15/21 1,231,435
3,525 Texas Muni Pwr Agy Rev Cap Apprec
Rfdg (AMBAC Insd).................... * 09/01/07 2,356,603
8,220 Texas St Pub Ppty Fin Corp Rev Mental
Hlth & Retardation Rfdg (FSA Insd)
(b).................................. 5.500 09/01/13 8,276,965
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$ 1,475 Waxahachie, TX Cmnty Dev Corp Sales
Tax Rev (MBIA Insd).................. * 08/01/21 $ 414,106
1,270 Waxahachie, TX Cmnty Dev Corp Sales
Tax Rev (MBIA Insd).................. * 08/01/22 336,626
1,250 West Side Calhoun Cnty, TX Navig Dist
Solid Waste Disp Union Carbide Chem &
Plastics (b)......................... 8.200% 03/15/21 1,338,513
------------
31,017,039
------------
UTAH 1.7%
5,210 Salt Lake City, UT Arpt Rev Delta
Airls Inc Proj (b)................... 7.900 06/01/17 5,326,600
1,000 Salt Lake Cnty, UT College Rev
Westminster College Proj............. 5.750 10/01/27 1,001,320
965 Utah St Hsg Fin Agy Single Family Mtg
Ser B Class 2 (b).................... 6.250 07/01/14 1,010,741
------------
7,338,661
------------
VIRGINIA 3.6%
1,970 Richmond, VA (FSA Insd) (a).......... 5.250 01/15/09 1,948,625
4,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/12 3,980,440
4,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/13 3,971,920
3,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/16 2,936,190
3,000 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/17 2,919,810
------------
15,756,985
------------
WEST VIRGINIA 0.6%
2,480 South Charleston, WV Indl Dev Rev
Union Carbide Chem & Plastics Ser A
(b).................................. 8.000 08/01/20 2,605,637
------------
WISCONSIN 1.6%
2,835 Southeast WI Professional Baseball Pk
Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/11 1,479,275
1,495 Southeast WI Professional Baseball Pk
Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/12 734,598
1,565 Southeast WI Professional Baseball Pk
Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/13 724,329
1,670 Southeast WI Professional Baseball Pk
Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/14 727,318
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WISCONSIN (CONTINUED)
$ 1,000 Southeast WI Professional Baseball Pk
Dist Lease Ctfs Partn (MBIA Insd).... * 12/15/16 $ 387,150
2,750 Southeast WI Professional Baseball Pk
Dist Sales Tax Rev Ser A Rfdg (MBIA
Insd)................................ 5.500% 12/15/26 2,794,990
------------
6,847,660
------------
PUERTO RICO 0.9%
1,000 Puerto Rico Indl Tourist Edl Med &
Environmental Control Fac Financing
Auth Higher Edl Rev (a).............. 5.375 02/01/19 978,620
3,000 Puerto Rico Pub Bldgs Auth Gtd Pub Ed
& Hlth Fac........................... 5.700 07/01/16 3,099,120
------------
4,077,740
------------
TOTAL INVESTMENTS 106.2%
(Cost $456,782,012)................................................ 466,224,839
LIABILITIES IN EXCESS OF OTHER ASSETS (6.2%)........................ (27,112,878)
------------
NET ASSETS 100.0%................................................... $439,111,961
============
</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 and open futures transactions.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corporation
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
PSF--Permanent School Fund Guaranty
See Notes to Financial Statements
20
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $456,782,012)....................... $466,224,839
Receivables:
Investments Sold.......................................... 11,672,438
Interest.................................................. 5,925,500
Other....................................................... 24,391
------------
Total Assets.......................................... 483,847,168
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 43,670,342
Variation Margin on Futures............................... 230,000
Investment Advisory Fee................................... 218,266
Income Distributions -- Preferred Shares.................. 186,744
Custodian Bank............................................ 98,516
Affiliates................................................ 15,442
Accrued Expenses............................................ 201,864
Trustees' Deferred Compensation and Retirement Plans........ 114,033
------------
Total Liabilities..................................... 44,735,207
------------
NET ASSETS.................................................. $439,111,961
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 1,000,000
shares, 330 issued with liquidation preference of $500,000
per share)................................................ $165,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 28,684,985 shares issued and
outstanding).............................................. 286,850
Paid in Surplus............................................. 265,829,515
Net Unrealized Appreciation................................. 9,463,175
Accumulated Undistributed Net Investment Income............. 1,044,953
Accumulated Net Realized Loss............................... (2,512,532)
------------
Net Assets Applicable to Common Shares................ 274,111,961
------------
NET ASSETS.................................................. $439,111,961
============
NET ASSET VALUE PER COMMON SHARE ($274,111,961 divided by
28,684,985 shares outstanding)............................ $ 9.56
============
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 27,706,872
------------
EXPENSES:
Investment Advisory Fee..................................... 2,745,741
Preferred Share Maintenance................................. 430,793
Trustees' Fees and Related Expenses......................... 37,120
Custody..................................................... 32,765
Legal....................................................... 18,678
Other....................................................... 369,728
------------
Total Expenses.......................................... 3,634,825
------------
NET INVESTMENT INCOME....................................... $ 24,072,047
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 5,514,664
Options................................................... 283,658
Futures................................................... (1,993,699)
------------
Net Realized Gain........................................... 3,804,623
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 33,383,365
------------
End of the Period:
Investments............................................. 9,442,827
Futures................................................. 20,348
------------
9,463,175
------------
Net Unrealized Depreciation During the Period............... (23,920,190)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(20,115,567)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,956,480
============
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 24,072,047 $ 25,289,969
Net Realized Gain................................ 3,804,623 5,265,942
Net Unrealized Appreciation/Depreciation During
the Period..................................... (23,920,190) 2,077,934
------------ ------------
Change in Net Assets from Operations............. 3,956,480 32,633,845
------------ ------------
Distributions from Net Investment Income:
Common Shares.................................. (18,745,835) (19,639,177)
Preferred Shares............................... (5,498,326) (5,972,446)
------------ ------------
Total Distributions.............................. (24,244,161) (25,611,623)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (20,287,681) 7,022,222
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment................................... 2,055,345 2,074,652
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS............ (18,232,336) 9,096,874
NET ASSETS:
Beginning of the Period.......................... 457,344,297 448,247,423
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$1,044,953 and $1,217,067, respectively)....... $439,111,961 $457,344,297
============ ============
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period (a)............. $10.263 $10.014 $ 9.758 $9.760 $ 9.924
------- ------- ------- ------ -------
Net Investment Income........ .841 .890 .916 .940 .964
Net Realized and Unrealized
Gain/Loss.................. (.700) .261 .264 .048 (.065)
------- ------- ------- ------ -------
Total from Investment
Operations................. .141 1.151 1.180 .988 .899
------- ------- ------- ------ -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders........... .656 .692 .720 .770 .840
Common Share Equivalent
of Distributions Paid
to Preferred
Shareholders........... .192 .210 .204 .220 .223
Distributions from and in
Excess of Net Realized
Gain Paid to Common
Shareholders............. -0- -0- -0- -0- -0-
------- ------- ------- ------ -------
Total Distributions.......... .848 .902 .924 .990 1.063
------- ------- ------- ------ -------
Net Asset Value, End of the
Period..................... $ 9.556 $10.263 $10.014 $9.758 $ 9.760
======= ======= ======= ====== =======
Market Price Per Share at End
of the Period.............. $9.6250 $10.875 $10.875 $9.875 $11.125
Total Investment Return at
Market Price (a)........... (5.68%) 6.85% 18.32% (4.27%) 8.59%
Total Return at Net Asset
Value (b).................. (.67%) 9.62% 10.24% 8.02% 7.24%
Net Assets at End of the
Period (In millions)....... $ 439.1 $ 457.3 $ 448.2 $438.7 $ 436.1
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares*............. 1.24% 1.23% 1.28% 1.31% 1.33%
Ratio of Net Investment
Income to Average Net
Assets Applicable to Common
Shares (c)................. 6.35% 6.64% 7.18% 7.26% 7.56%
Portfolio Turnover........... 98% 103% 53% 29% 38%
* Ratio of Expenses to
Average Net
Assets Including Preferred
Shares..................... .79% .79% .80% .82% .83%
</TABLE>
(a) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(b) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(c) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
24
<PAGE> 26
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
- -----------------------------------------------------
1994 1993 1992 1991 1990
- -----------------------------------------------------
<S> <C> <C> <C> <C>
$11.133 $10.688 $ 9.805 $ 9.534 $ 9.767
------- ------- ------- ------- -------
1.000 1.078 1.095 1.093 1.070
(1.214) .520 .848 .295 (.229)
------- ------- ------- ------- -------
(.214) 1.598 1.943 1.388 .841
------- ------- ------- ------- -------
.840 .829 .791 .725 .685
.155 .162 .238 .337 .389
-0- .162 .031 .055 -0-
------- ------- ------- ------- -------
.995 1.153 1.060 1.117 1.074
------- ------- ------- ------- -------
$ 9.924 $11.133 $10.688 $ 9.805 $ 9.534
======= ======= ======= ======= =======
$11.125 $12.000 $11.375 $10.125 $ 9.250
(0.05%) 15.20% 21.65% 18.71% 4.65%
(3.63%) 13.97% 18.08% 11.61% 4.76%
$ 437.7 $ 467.9 $ 452.7 $ 426.7 $ 418.3
1.28% 1.25% 1.35% 1.46% 1.43%
7.86% 8.41% 8.41% 7.88% 7.11%
45% 45% 27% 69% 116%
.82% .80% .84% .89% .87%
</TABLE>
25
See Notes to Financial Statements
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Municipal Income Trust (the "Trust") is registered as a diversified
closed-end management investment company under the Investment Company Act of
1940, as amended. The Trust's investment objective is to provide a high level of
current income exempt from federal income taxes with safety of principal through
investment in a diversified portfolio of investment grade tax-exempt municipal
securities. The Trust commenced investment operations on August 26, 1988.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
A. SECURITY VALUATION--Municipal bonds are valued by independent pricing
services or dealers using the mean of the bid and asked prices or, in the
absence of market quotations, at fair value based upon yield data relating to
municipal bonds with similar characteristics and general market conditions.
Securities which are not valued by independent pricing services are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1999, the Trust had an accumulated capital loss carryforward
for tax purposes of $2,492,182 which will expire on June 30, 2004.
At June 30, 1999, for federal income tax purposes, cost of long-term
investments is $456,782,012; the aggregate gross unrealized appreciation is
$19,684,310 and the aggregate gross unrealized depreciation is $10,241,483,
resulting in net unrealized appreciation on long-term investments of $9,442,827.
Net realized gains or losses differ for financial reporting and tax purposes
as a result of gains or losses recognized for tax purposes on open futures
positions at June 30, 1999.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually to common shareholders. Distributions from net
realized gains for book purposes may include short-term capital gains, which are
included as ordinary income for tax purposes. Due to inherent differences in the
recognition of certain expenses under generally accepted accounting principles
and for federal income tax purposes, the amount of net investment income/loss
may differ between book and federal income tax purposes for a particular period.
These differences are temporary in nature, but may result in book basis net
investment losses.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. (the "Adviser") will provide investment advice and
facilities to the Trust for an annual fee payable monthly of .60% of the average
net assets of the Trust.
For the year ended June 30, 1999, the Trust recognized expenses of
approximately $7,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
For the year ended June 30, 1999, the Trust recognized expenses of
approximately $139,100 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Trust. The maximum
annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At June 30, 1999 and 1998, respectively, common shares paid in surplus
aggregated $265,829,515 and $263,776,167 respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares............................ 28,485,339 28,286,058
Shares Issued Through Dividend
Reinvestment.............................. 199,646 199,281
---------- ----------
Ending Shares............................... 28,684,985 28,485,339
========== ==========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments
excluding short-term investments, were $468,665,360 and $453,734,850,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising a call option contract or
28
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
Transactions in options, each with a par value of $100,000, for the year
ended June 30, 1999, were as follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -----------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 30, 1998.................... -0- $ -0-
Options Written and Purchased (Net)............. 2,090 465,102
Options Terminated in Closing Transactions
(Net)......................................... (1,490) (740,275)
Options Expired (Net)........................... (600) 275,173
------ ---------
Outstanding at June 30, 1999.................... -0- $ -0-
====== =========
</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, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
Transactions in futures contracts for the year ended June 30, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1998.............................. -0-
Futures Opened............................................ 5,230
Futures Closed............................................ (4,810)
------
Outstanding at June 30, 1999.............................. 420
======
</TABLE>
The futures contracts outstanding as of June 30, 1999, and the descriptions
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- -------------------------------------------------------------------------
<S> <C> <C>
Long Contracts
U.S. Treasury Bond Future, Sep 1999--
(Current Notional Value of $115,906 per
contract)................................. 100 $ 36,690
Short Contracts
Municipal Bond Future, Sep 1999--
(Current Notional Value of $118,781 per
contract)................................. 320 (16,342)
--- --------
420 $ 20,348
=== ========
</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.
An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yield of the portfolio.
An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short term interest rates which it
pays on its preferred shares.
6. PREFERRED SHARES
The Trust has outstanding 330 shares of rate adjusted tax-exempt preferred
shares ("Rates") in three series of 110 shares each. Dividends are cumulative
and the rate on each series is currently reset every 28 days through an auction
process. The average rate
30
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
in effect on June 30, 1999, was 3.466%. During the year ended June 30, 1999, the
rates ranged from 3.000% to 3.700%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The Rates are redeemable at the option of the Trust in whole or in part at a
price of $500,000 per share plus accumulated and unpaid dividends. The Trust is
subject to certain asset coverage tests, and the Rates are subject to mandatory
redemption if the tests are not met.
31
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Municipal Income Trust (the "Trust"), including the portfolio of
investments, as of June 30, 1999, and the related statement of operations for
the year then ended, the statement of changes in net assets for the two years in
the period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Municipal Income Trust as of June 30, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
August 5, 1999
32
<PAGE> 34
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be re-
registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-
8200. If you withdraw, you will receive, without charge, a share certificate
issued in your name for all full Common Shares credited to your account under
the Plan and a cash payment will be made for any fractional Common Share
credited to your account under the Plan. You may again elect to participate in
the Plan at any time by calling 1-800-341-2929 or writing to the Trust at:
Van Kampen Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
33
<PAGE> 35
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan Funds
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM--to view a prospectus, select Download
Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
34
<PAGE> 36
VAN KAMPEN MUNICIPAL INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL* - Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer, and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of
Van Kampen Funds Inc.
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Trust during its taxable year ended
June 30, 1999. The Trust designated 99.7% of the income distributions as a
tax-exempt income distribution. In January, 2000, the Trust will provide tax
information to shareholders for the 1999 calendar year.
35
<PAGE> 37
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where
shareholders voted on the election of trustees and the selection of independent
public accountants.
1) With regard to the election of the following trustees by the common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
----------------------
IN FAVOR ABSTAINED
- ------------------------------------------------------------------------
<S> <C> <C>
David C. Arch 25,108,402 251,400
Howard J Kerr 25,105,339 254,503
Dennis J. McDonnell 25,106,337 253,506
</TABLE>
The other trustees of the Trust whose terms did not expire in 1999 are Rod
Dammeyer, Steven Muller, Theodore A. Myers, Don G. Powell, Hugo F. Sonnenschein
and Wayne W. Whalen.
2) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 25,012,919 shares voted in favor of the proposal,
97,116 shares voted against and 249,807 shares abstained.
36
<PAGE> 38
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> MUNICIPAL INCOME TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 456,782,012<F1>
<INVESTMENTS-AT-VALUE> 466,224,839<F1>
<RECEIVABLES> 17,597,938<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 24,391<F1>
<TOTAL-ASSETS> 483,847,168<F1>
<PAYABLE-FOR-SECURITIES> 43,670,342<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,064,865<F1>
<TOTAL-LIABILITIES> 44,735,207<F1>
<SENIOR-EQUITY> 165,000,000
<PAID-IN-CAPITAL-COMMON> 266,116,365
<SHARES-COMMON-STOCK> 28,684,985
<SHARES-COMMON-PRIOR> 28,485,339
<ACCUMULATED-NII-CURRENT> 1,044,953<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (2,512,532)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 9,463,175<F1>
<NET-ASSETS> 439,111,961
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 27,706,872<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (3,634,825)<F1>
<NET-INVESTMENT-INCOME> 24,072,047<F1>
<REALIZED-GAINS-CURRENT> 3,804,623<F1>
<APPREC-INCREASE-CURRENT> (23,920,190)<F1>
<NET-CHANGE-FROM-OPS> 3,956,480<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (24,244,161)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 199,646
<NET-CHANGE-IN-ASSETS> (18,232,336)
<ACCUMULATED-NII-PRIOR> 1,217,067<F1>
<ACCUMULATED-GAINS-PRIOR> (6,317,155)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,745,741<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,634,825<F1>
<AVERAGE-NET-ASSETS> 457,532,475
<PER-SHARE-NAV-BEGIN> 10.263
<PER-SHARE-NII> 0.841
<PER-SHARE-GAIN-APPREC> (0.700)
<PER-SHARE-DIVIDEND> (0.656)
<PER-SHARE-DISTRIBUTIONS> (0.192)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.556
<EXPENSE-RATIO> 1.24
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
