<PAGE> 1
TABLE OF CONTENTS
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 23
Statement of Operations.......................... 24
Statement of Changes in Net Assets............... 25
Financial Highlights............................. 26
Notes to Financial Statements.................... 28
Report of Independent Accountants................ 32
Dividend Reinvestment Plan....................... 33
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
November 19, 1999
Dear Shareholder:
As we approach the end of the century--and the millennium--it seems
appropriate to take a look back at the progress we've made over the last 100
years and how the world of investing has changed over the generations. Although
rapid advances in technology and science have dramatically altered the world
that we live in today, one of the greatest shifts we've seen this century is the
increasing importance of investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is
now available to most people. In fact, almost 79 million individuals--who
represent almost half of all U.S. households--own stocks either directly or
through mutual funds. This is even more impressive when considering that just 16
years earlier, only 19 percent of households owned stocks. Another important
shift has been the need for retirement planning beyond a pension plan or Social
Security. The Investment Company Institute, the leading mutual fund industry
association, reports that 77 percent of all mutual fund shareholders earmarked
retirement as their primary financial goal in 1998.
Through all the changes in the investment environment over the past century,
the general principles that have made generations of investors successful remain
the same. Those that have stood the test of time include:
- Investing for the long-term
- Basing investment decisions on sound research
- Building a diversified portfolio
- Believing in the value of professional investment advice
While no one can predict the future, at Van Kampen, we believe that these
ideas will remain important tenets for investors well into the next century. As
we continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we enter the new
millennium.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Source: Investment Company Institute
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree over the past year, keeping the
economy growing at a healthy pace. High levels of consumer confidence fueled
this heavy retail activity, which pushed the personal savings rate to a record
low as spending rates outpaced income growth. Although the U.S. economy
experienced a slowdown during the second quarter of 1999, growth rebounded
toward the end of the reporting period.
EMPLOYMENT SITUATION
The strong job market helped support the strength of the economy. During the
reporting period, the unemployment rate reached its lowest level in almost 30
years, and wages continued to climb. The wage pressures were balanced somewhat
by productivity gains. However, these pressures ultimately pushed the cost of
labor higher in the second quarter, as the employment cost index recorded its
biggest gain in eight years before returning to a more moderate level in the
third quarter.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report. The Federal Reserve Board remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
its three interest rate cuts from the fall of 1998, raising rates in June,
August, and November 1999 to keep the economy from overheating.
U.S. GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
Third Quarter 1997 through Third Quarter 1999
[GRAPH]
<TABLE>
<S> <C>
97Q3 4.0
97Q4 3.1
98Q1 6.7
98Q2 2.1
98Q3 3.8
98Q4 5.9
99Q1 3.7
99Q2 1.9
99Q3 5.5
</TABLE>
Source: Bureau of Economic Analysis
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1999
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VKA)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ (13.16%)
One-year total return based on NAV(2)..................... (7.16%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 6.96%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 10.88%
SHARE VALUATIONS
Net asset value........................................... $ 14.87
Closing common stock price................................ $12.9375
One-year high common stock price (12/02/98)............... $16.6875
One-year low common stock price (10/26/99)................ $12.6250
Preferred share (Series A) rate(5)........................ 3.440%
Preferred share (Series B) rate(5)........................ 3.440%
Preferred share (Series C) rate(5)........................ 3.405%
Preferred share (Series D) rate(5)........................ 3.750%
</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 income tax bracket.
(5) See "Notes to Financial Statements" footnote #5, 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 ADVANTAGE MUNICIPAL INCOME TRUST
We recently spoke with representatives of the adviser of the Van Kampen
Advantage Municipal Income Trust about the key events and economic forces that
shaped the markets during the past year. Dennis S. Pietrzak, portfolio manager,
has managed the Trust since August 1995 and worked in the investment industry
since 1968. He is joined by Peter W. Hegel, chief investment officer for
fixed-income investments. The following discussion reflects their views on the
Trust's performance during the 12 months ended October 31, 1999.
Q WHAT HAPPENED IN THE MUNICIPAL MARKET DURING THE REPORTING PERIOD?
A Bonds of all types experienced price declines during the past 12 months as
interest rates rose, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two
interest-rate increases during the summer, the bond market declined as the
nation's strong economic growth continued to spark inflation fears, leading to
concern about future rate hikes. Because of low institutional demand for
municipal bonds during the period, these conditions affected municipals more
than their taxable counterparts--corporate and Treasury bonds. The yields of
newly issued 30-year AAA municipal bonds rose more than a full percentage point
during the 12-month period, so the prices of existing bonds dropped
concurrently. The bonds in the Trust's portfolio were not spared by this market
movement and suffered price declines along with the rest of the municipal
market.
The interest-rate increases also suppressed municipal bond supply, bringing
nationwide issuance down more than 20 percent in the first ten months of the
year compared with 1998. Supply was down in almost every sector, with
electric-utility and health-care bonds experiencing the most significant drops.
Although new issuance kept pace with last year's active market, the amount of
bonds issued through refinancing was down more than 50 percent for the year
through October. Many municipalities simply chose not to refinance outstanding
bonds because of the higher interest rates they would have to pay in the current
marketplace.
Q DID MUNICIPAL BONDS BENEFIT FROM THE STRONG ECONOMY?
A Yes. The effects of the healthy economy were reflected in the good credit
conditions in the municipal market, even though prices suffered. With the
exception of the health-care sector, overall credit quality remained high,
and we witnessed a number of credit upgrades as tax revenues kept municipal
finances strong.
4
<PAGE> 6
Q WHAT TECHNIQUES DID YOU USE TO MANAGE THE TRUST IN THESE CONDITIONS?
A Some of the Trust's more seasoned holdings were nearing their call dates,
so we took advantage of higher interest rates in the municipal market to
replace these bonds with new issues. This allowed us to support the
Trust's income stream and extend its protection from bond calls with securities
that were paying higher yields. Because bond prices had declined during the
period, we were also able to enhance the Trust's tax management by selling these
and other holdings at a capital loss. Using this strategy, we offset some of the
gains we had earned early in 1999, enabling the Trust to avoid the need to
distribute taxable capital gains to shareholders this year. However, this
strategy also increased the Trust's duration--or sensitivity to interest-rate
changes--because the new purchases were longer-duration securities. We feel that
the longer duration will benefit the Trust in a declining interest-rate
environment by allowing it to participate more fully in a market rally. In the
short term, however, the longer duration negatively affected the Trust's total
return as interest rates climbed.
In addition, we focused on securities that, going forward, we felt would be
in greatest demand by retail investors. That often involved selling the holdings
that provided the most in-demand coupon rate by individual investors (which
varied as interest rates increased) and replacing them with other issues that
appeared to be undervalued and had the potential for increased demand in the
future. Throughout the year, this activity contributed to the Trust's total
return. For additional portfolio highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A Total return performance was disappointing because of the general downturn
in bond prices and the Trust's increased duration. In addition, the
Trust's leverage component hurt its performance during the period.
Although leverage helps the Trust provide higher income levels to common
shareholders, it made the portfolio more sensitive to the interest-rate
increases we experienced during the reporting period. For the one-year period
ended October 31, 1999, the Trust returned -13.16 percent(1) based on market
price. This reflects a decrease in market price from $15.8125 per share on
October 31, 1998, to $12.9375 per share on October 31, 1999.
On the positive side, the dividend remained unchanged during the past 12
months. The monthly tax-exempt dividend of $0.075 per share translates to a
distribution rate of 6.96 percent(3) based on the Trust's closing market price
on October 31, 1999. Because the Trust is exempt from federal income taxes, this
distribution rate is equivalent to a yield of 10.88 percent(4) for an investor
in the 36 percent federal income tax bracket. Please refer to the chart and
footnotes on page 3 for additional performance results. Past performance does
not guarantee future performance.
5
<PAGE> 7
Q WHAT DO YOU SEE AHEAD FOR THE ECONOMY AND THE
MUNICIPAL MARKET?
A In the coming months, we will probably see a slowing economy, which may be
partly the result of year 2000 concerns. Wage increases will likely keep
inflation fears at the forefront, although increasing productivity should
be able to offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided, but we believe that market activity should
pick up early in 2000. In the meantime, we will continue to focus on finding
attractive-yielding bonds and protecting the Trust from bond calls as much as
possible. We will also use our extensive research capabilities to look for
attractive opportunities throughout the coming months.
[SIG]
Dennis S. Pietrzak
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.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues 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 (i.e. a 5-year duration means the bond will fall about 5 percent in
value if interest rates rise by 1 percent). The longer a bond's duration,
the greater the effect of interest rate movements on its price. Typically,
funds with shorter durations perform better in rising rate environments,
while funds with longer durations perform better when rates decline.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody Investors Service. Bonds rated below BBB or Baa are
noninvestment grade.
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.
ZERO COUPON BONDS: A corporate or municipal bond that is traded at a deep
discount to face value and pays no interest. It is redeemed at maturity for
full face value.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
Transportation 17.40 15.30
Industrial Revenue 15.10 13.90
Health Care 11.40 12.50
Single-Family Housing 9.50 12.60
General Purpose 9.20 6.60
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
SEPTEMBER 1992 THROUGH OCTOBER 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Sep 1992 14.96 14.96
Oct 1992 13.88 14.59
14.25 15.26
14.25 15.40
14.75 15.57
15.50 16.57
15.25 16.21
15.25 16.33
15.13 16.34
15.25 16.63
15.50 16.62
15.88 16.96
16.13 17.25
Oct 1993 16.00 17.18
15.38 16.73
15.75 17.08
16.00 17.26
14.88 16.51
14.00 15.16
14.00 14.99
14.50 15.10
14.25 14.94
14.13 15.20
14.00 15.13
13.06 14.65
Oct 1994 12.75 13.99
12.63 13.26
12.75 13.88
13.88 14.46
14.50 15.09
14.50 15.24
14.25 15.10
14.50 15.52
14.50 15.18
14.50 15.25
14.13 15.33
13.88 15.35
Oct 1995 14.38 15.61
14.75 16.01
14.63 16.20
15.13 16.19
15.13 15.96
14.88 15.43
14.38 15.19
14.25 15.11
14.63 15.23
14.38 15.41
15.00 15.30
14.75 15.56
Oct 1996 14.75 15.68
14.75 16.00
13.88 15.76
14.38 15.67
14.50 15.79
14.00 15.41
14.25 15.47
14.38 15.71
14.88 15.89
15.50 16.50
14.94 16.12
15.06 16.33
Oct 1997 15.06 16.35
15.13 16.39
15.31 16.66
15.81 16.80
15.44 16.71
15.25 16.64
14.88 16.36
15.00 16.66
15.31 16.65
15.25 16.60
15.44 16.88
16.13 17.11
Oct 1998 15.81 16.93
16.56 16.92
16.50 16.87
15.44 17.04
16.13 16.80
15.56 16.68
15.31 16.65
14.94 16.37
14.75 15.85
14.38 15.81
14.19 15.44
13.50 15.28
Oct 1999 12.94 14.87
</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.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS
AS OF OCTOBER 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa BB/Ba
------- ----- --- ------- -----
<S> <C> <C> <C> <C> <C>
As of October 31, 1999 61.10 12.00 9.40 17.30 0.20
</TABLE>
AS OF OCTOBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa B/B
------- ----- --- ------- ---
<S> <C> <C> <C> <C> <C>
As of October 31, 1998 58.90 14.20 11.30 15.40 0.20
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED OCTOBER 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DISTRIBUTION PER COMMON SHARE
-----------------------------
<S> <C>
Nov 1998 $.0750
Dec 1998 $.0750
Jan 1999 $.0750
Feb 1999 $.0750
Mar 1999 $.0750
Apr 1999 $.0750
May 1999 $.0750
Jun 1999 $.0750
Jul 1999 $.0750
Aug 1999 $.0750
Sep 1999 $.0750
Oct 1999 $.0750
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 102.3%
ALABAMA 2.1%
$ 1,000 Alabama Bldg Renovation Fin Auth Rev
Rfdg (AMBAC Insd)................... 5.625% 09/01/24 $ 948,720
2,000 Alabama Incentives Fin Auth Ser A
(AMBAC Insd) (a).................... 6.000 10/01/29 1,973,880
6,050 Alabama Wtr Pollutn Ctl Auth
Revolving Fund Ln Ser A (AMBAC
Insd)............................... 5.000 08/15/15 5,457,523
1,555 Birmingham, AL Arpt Auth Arpt Rev
Rfdg (AMBAC Insd) (a)............... 5.500 07/01/14 1,495,086
------------
9,875,209
------------
ALASKA 1.8%
10,000 Alaska St Hsg Fin Corp Ser A Rfdg
(b)................................. 5.000 12/01/18 8,679,400
------------
ARIZONA 0.9%
3,930 Pima Cnty, AZ Indl Dev Auth Indl Rev
Lease Oblig Irvington Proj Tucson
Ser A Rfdg (FSA Insd)............... 7.250 07/15/10 4,228,130
------------
CALIFORNIA 5.4%
4,215 California Hlth Fac Fin Auth Rev
Kaiser Permanente Med Cent.......... 5.450 10/01/13 4,090,447
5,000 California St Pub Wks Brd Lease Rev
Var CA St Univ Projs Ser A.......... 5.250 12/01/13 4,856,800
2,000 Foothill/Eastern Trans Corridor Agy
CA Toll Rd Rev Conv Rfdg............ * 01/15/20 1,063,220
10,000 Foothill/Eastern Trans Corridor Agy
CA Toll Rd Rev Rfdg................. * 01/15/21 2,572,200
5,000 Foothill/Eastern Trans Corridor Agy
CA Toll Rd Rev Rfdg................. * 01/15/25 988,300
2,500 Los Angeles Cnty, CA Pub Wks Fin
Auth Rev Cap Constr Rfdg (AMBAC
Insd)............................... 5.000 03/01/11 2,443,800
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 7,500 Los Angeles Cnty, CA Trans Comm
Sales Tax Rev Prop C Ser A
(Prerefunded @ 07/01/02)............ 6.500% 07/01/20 $ 8,084,250
1,500 Orange Cnty, CA Recovery Ctfs Ser A
(MBIA Insd)......................... 6.000 07/01/07 1,616,760
------------
25,715,777
------------
COLORADO 2.5%
8,500 Arapahoe Cnty, CO Cap Impt Trust
Fund Hwy Rev E-470 Proj Ser C
(Prerefunded @ 08/31/05)............ * 08/31/26 1,327,785
1,230 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser B1....................... 7.900 12/01/25 1,312,828
555 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser D1 Rfdg.................. 8.000 12/01/24 583,516
1,791 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser E........................ 8.125 12/01/24 1,907,661
3,215 Denver, CO City & Cnty Arpt Rev Ser
C................................... 6.350 11/15/01 3,302,609
2,500 Denver, CO City & Cnty Sch Dist No 1
Rfdg (FGIC Insd).................... 5.000 12/01/23 2,167,800
1,000 Meridian Metro Dist, CO Peninsular &
Oriental Steam Navig Co Rfdg........ 7.500 12/01/11 1,057,350
------------
11,659,549
------------
CONNECTICUT 0.2%
1,000 Connecticut St Dev Auth Wtr Fac Rev
Brdgeport Hydraulic................. 6.150 04/01/35 990,680
------------
FLORIDA 0.5%
3,000 Broward Cnty, FL Arpt Sys Rev
Passenger Fac Conv Lien Ser H-2
(AMBAC Insd)........................ 4.750 10/01/23 2,501,880
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA 1.4%
$ 1,000 Atlanta, GA Spl Purp Fac Rev Delta
Airls Ser B......................... 7.900% 12/01/18 $ 1,021,970
1,500 George L Smith II GA Wrld Congress
Cent Auth Rev Domed Stadium Proj
Rfdg (MBIA Insd) (a)................ 5.500 07/01/20 1,380,645
3,770 Monroe Cnty, GA Dev Auth Pollutn Ctl
Rev Oglethorpe Pwr Corp Scherer Ser
A................................... 6.800 01/01/12 4,123,475
------------
6,526,090
------------
ILLINOIS 8.6%
665 Aurora, IL Single Family Mtg Rev Ser
B Rfdg (GNMA Collateralized)........ 8.050 09/01/25 705,432
3,750 Bolingbrook, IL Cap Apprec Ser B
(MBIA Insd)......................... * 01/01/30 562,088
5,000 Chicago, IL Brd of Edl Cap Apprec
Sch Ref Ser A (FGIC Insd)........... * 12/01/28 825,250
3,000 Chicago, IL O'Hare Intl Arpt Spl
Facs Rev American Airls Inc Proj Ser
B................................... 7.875 11/01/25 3,125,880
5,000 Chicago, IL O'Hare Intl Arpt Spl
Facs Rev Intl Terminal (MBIA
Insd)............................... 6.750 01/01/18 5,273,200
5,000 Chicago, IL Sch Fin Auth Ser A (MBIA
Insd)............................... 5.000 06/01/09 4,878,950
3,000 Cicero, IL Alt Rev Source
(Prerefunded @ 12/01/05) (MBIA
Insd)............................... 6.500 12/01/14 3,318,870
2,360 Cook Cnty, IL Cmnty High Sch Dist
219 Niles Twp (FSA Insd)............ * 12/01/11 1,197,700
2,360 Cook Cnty, IL Cmnty High Sch Dist
219 Niles Twp (FSA Insd)............ * 12/01/12 1,118,050
2,235 Cook Cnty, IL Cmnty High Sch Dist
219 Niles Twp (FSA Insd)............ * 12/01/13 986,484
3,930 Illinois Dev Fin Auth Rev Loc Govt
Pgm Aurora East Sch (MBIA Insd)..... * 12/01/16 1,405,132
3,000 Illinois Dev Fin Auth Solid Waste
Disposal Rev........................ 5.950 12/01/24 2,910,540
3,545 Illinois Edl Fac Auth Rev Lake
Forest College (Prerefunded @
10/01/01) (FSA Insd)................ 6.750 10/01/21 3,776,595
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 1,250 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Pl
Expn Proj Ser A Rfdg (FGIC Insd).... 5.375% 12/15/18 $ 1,155,712
1,000 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Pl
Expn Proj Ser A Rfdg (FGIC Insd).... 5.500 12/15/24 922,690
2,000 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Pl
Expn Proj Ser A Rfdg (FGIC Insd).... 5.250 12/15/28 1,770,820
5,000 Regional Tran Auth IL Ser B (AMBAC
Insd)............................... 8.000 06/01/17 6,173,850
1,150 Will Cnty, IL Cmnty Sch Dist 365U
Vly View Ser B (FSA Insd)........... * 11/01/15 440,243
------------
40,547,486
------------
INDIANA 1.4%
4,000 Indiana Hlth Fac Fin Auth Hosp Rev
Cmnty Hosp Proj (MBIA Insd)......... 6.850 07/01/22 4,263,600
2,000 Indiana Hlth Fac Fin Auth Hosp Rev
Columbus Regl Hosp Rfdg (FSA
Insd)............................... 7.000 08/15/15 2,260,300
------------
6,523,900
------------
KANSAS 1.9%
5,500 Burlington, KS Pollutn Ctl Rev KS
Gas & Elec Co Proj Rfdg (MBIA
Insd)............................... 7.000 06/01/31 5,778,960
1,035 Sedgwick & Shawnee Cntys, KS Single
Family Rev Coll Mtg Ser A Rfdg (GNMA
Collateralized)..................... 8.050 05/01/24 1,125,676
1,790 Sedgwick Cnty, KS Single Family Mtg
Rev Coll Ser A Rfdg (GNMA
Collateralized)..................... 8.125 05/01/24 1,929,137
------------
8,833,773
------------
KENTUCKY 2.6%
7,750 Kenton Cnty, KY Arpt Brd Arpt Rev
Spl Fac Delta Airls Proj Ser A...... 7.125 02/01/21 8,076,042
4,450 Louisville & Jefferson Cnty, KY Met
Swr Dist Dr Rev Rfdg (MBIA Insd).... 5.300 05/15/19 4,095,647
------------
12,171,689
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOUISIANA 1.5%
$ 1,925 Louisiana Hsg Fin Agy Mtg Rev
Multi-Family Emerald Pointe Apts
(FHA Gtd)........................... 7.100% 11/01/33 $ 2,035,168
1,850 Louisiana Hsg Fin Agy Mtg Rev Single
Family Access Pgm Ser B (GNMA
Collateralized)..................... 8.000 03/01/25 2,022,401
3,000 Saint Charles Parish, LA
Environmental Impt Rev LA Pwr & Lt
Co Ser A (AMBAC Insd)............... 6.875 07/01/24 3,211,620
------------
7,269,189
------------
MARYLAND 0.4%
1,270 Baltimore, MD Ctfs Partn Brd of Edl
Admin Proj Ser A Rfdg (MBIA Insd)
(a)................................. 5.000 04/01/15 1,163,777
1,000 Maryland St Econ Dev Corp Student
Hsg Rev Collegiate Hsg Towson Ser
A................................... 5.750 06/01/29 891,180
------------
2,054,957
------------
MASSACHUSETTS 2.8%
2,500 Chelsea, MA Sch Proj Ln Act 1948
(Prerefunded @ 06/15/04) (AMBAC
Insd)............................... 6.500 06/15/12 2,732,475
3,955 Massachusetts Bay Trans Auth MA Genl
Trans Sys Ser A Rfdg................ 5.500 03/01/12 3,974,024
2,175 Massachusetts Bay Trans Auth MA Genl
Trans Sys Ser B Rfdg (MBIA Insd).... 6.000 03/01/10 2,273,571
75 Massachusetts Bay Trans Auth MA Genl
Trans Sys Ser B Rfdg (Prerefunded @
03/01/03) (MBIA Insd)............... 6.000 03/01/10 79,792
3,500 Massachusetts Muni Whsl Elec Co Pwr
Supply Sys Rev Ser A Rfdg (AMBAC
Insd)............................... 5.000 07/01/10 3,394,195
1,000 Massachusetts St Hlth & Edl Fac Auth
Rev Saint Mem Med Cent Ser A........ 6.000 10/01/23 885,680
------------
13,339,737
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MICHIGAN 3.4%
$ 1,680 Michigan Higher Edl Facs Auth Rev
Ltd Oblig Hope College Proj Rfdg
(Connie Lee Insd)................... 7.000% 10/01/14 $ 1,830,814
3,350 Michigan St Hosp Fin Auth Rev Hosp
Mid-MI Oblig Group (Prerefunded @
12/01/02)........................... 6.800 12/01/14 3,637,329
5,785 Michigan St Strategic Fd Ltd Oblig
Rev Detroit Edison Co Ser A Rfdg
(MBIA Insd)......................... 5.550 09/01/29 5,287,027
3,000 Michigan St Strategic Fd Ltd Oblig
Rev Ser CC Rfdg (FGIC Insd)......... 6.950 09/01/21 3,158,910
2,500 Wayne St Univ MI Univ Rev Genl (FGIC
Insd)............................... 5.125 11/15/29 2,177,125
------------
16,091,205
------------
MISSISSIPPI 2.5%
2,000 Mississippi Business Fin Corp Sys
Energy Res Inc...................... 5.875 04/01/22 1,768,720
5,300 Mississippi Home Corp Single Family
Rev Mtg Access Pgm Ser B (GNMA
Collateralized)..................... 7.900 03/01/25 5,733,116
1,520 Mississippi Home Corp Single Family
Rev Mtg Access Pgm Ser C (GNMA
Collateralized)..................... 8.125 12/01/24 1,649,474
2,314 Mississippi Home Corp Single Family
Rev Mtg Access Pgm Ser E (GNMA
Collateralized)..................... 8.100 12/01/25 2,513,166
------------
11,664,476
------------
MISSOURI 1.2%
2,100 Kansas City, MO Arpt Rev Genl Impt
Ser A (FSA Insd).................... 6.900 09/01/10 2,273,733
3,750 Missouri St Hlth & Edl Fac Rev BJC
Hlth Sys............................ 5.000 05/15/28 3,157,687
------------
5,431,420
------------
NEBRASKA 0.4%
2,250 American Pub Energy Agy NE Gas Sup
Rev NE Pub Gas Agy Proj Ser A (AMBAC
Insd)............................... 4.375 06/01/10 2,027,790
------------
NEW HAMPSHIRE 0.2%
1,000 New Hampshire St Business Fin Auth
Wtr Fac Rev Pennichuck Wtrwks Inc
(AMBAC Insd)........................ 6.300 05/01/22 1,011,600
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW JERSEY 5.6%
$10,000 New Jersey Econ Dev Auth St Contract
Econ Rec (MBIA Insd)................ 5.900% 03/15/21 $ 10,114,700
8,000 New Jersey Econ Dev Auth Wtr Facs
Rev NJ American Wtr Co Inc Proj Ser
A (FGIC Insd) (b)................... 6.875 11/01/34 8,590,320
1,000 New Jersey Hlthcare Facs Fin Auth
Rev St Barnabas Hlth Ser C Rfdg
(MBIA Insd) (a)..................... 5.000 07/01/11 951,600
2,000 New Jersey St Hwy Auth Garden St
Pkwy Genl Rev Sr Pkwy............... 6.250 01/01/14 2,080,940
4,650 Salem Cnty, NJ Indl Pollutn Ctl Fin
Auth Rev Pub Svc Elec & Gas Ser D
Rfdg (MBIA Insd).................... 6.550 10/01/29 4,857,018
------------
26,594,578
------------
NEW YORK 26.7%
1,500 Broome Cnty, NY Ctfs Partn Pub
Safety Fac (MBIA Insd).............. 5.250 04/01/15 1,391,325
2,500 Long Island Pwr Auth NY Elec Sys Rev
Genl Ser A (FSA Insd)............... 5.000 12/01/18 2,188,375
1,500 Metropolitan Trans Auth NY Commuter
Fac Rev Ser A (MBIA Insd)........... 5.625 07/01/27 1,423,395
1,500 Metropolitan Trans Auth NY Trans Fac
Rev Ser K Rfdg (Prerefunded @
07/01/02)........................... 6.250 07/01/11 1,587,015
3,000 Metropolitan Trans Auth NY Trans Fac
Rev Svcs Contract Ser R Rfdg........ 5.500 07/01/17 2,795,940
4,250 New York City Indl Dev Agy Civic Fac
Rev USTA Natl Tennis Cent Proj (FSA
Insd)............................... 6.375 11/15/14 4,495,608
2,360 New York City Indl Dev Agy Spl Facs
United Airls Inc Proj............... 5.650 10/01/32 2,106,276
1,300 New York City Indl Dev Civic YMCA
Greater NY Proj..................... 5.800 08/01/16 1,246,791
10 New York City Ser A (Prerefunded @
08/15/01)........................... 8.000 08/15/19 10,780
1,325 New York City Ser B1 (Prerefunded @
08/15/04)........................... 7.000 08/15/16 1,468,855
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,650 New York City Ser C (Prerefunded @
08/15/01)........................... 7.125% 08/15/12 $ 1,733,325
2,875 New York City Ser C (Prerefunded @
08/15/01)........................... 7.250 08/15/24 3,026,081
2,225 New York City Ser F Rfdg............ 6.000 08/01/11 2,288,034
1,000 New York City Ser I (MBIA Insd)..... 5.000 04/15/24 859,420
1,000 New York City Subser A1 (Embedded
Swap)............................... 6.170 08/01/12 1,001,350
2,250 New York City Transitional Fin Auth
Rev Ser B (FGIC Insd)............... 4.750 11/01/23 1,868,490
2,525 New York St Dorm Auth Lease Rev Muni
Hlth Fac Impt Pgm Ser A (FSA
Insd)............................... 5.500 05/15/25 2,340,827
1,450 New York St Dorm Auth Lease Rev St
Univ Dorm Facs Ser C (MBIA Insd).... 5.500 07/01/29 1,345,223
3,970 New York St Dorm Auth Rev City Univ
Ser F............................... 5.000 07/01/14 3,541,359
2,600 New York St Dorm Auth Rev Cons City
Univ Sys 2nd Genl Res Ser A......... 5.750 07/01/13 2,581,540
5,050 New York St Dorm Auth Rev Cons City
Univ Sys 2nd Genl Res Ser B......... 5.375 07/01/07 5,087,471
3,100 New York St Dorm Auth Rev Cons City
Univ Sys Ser A...................... 5.625 07/01/16 3,018,036
4,050 New York St Dorm Auth Rev Court Facs
Lease Ser A......................... 5.300 05/15/07 4,051,985
2,550 New York St Dorm Auth Rev Mental
Hlth Svcs Facs Ser B Rfdg........... 5.750 08/15/11 2,574,429
5,000 New York St Dorm Auth Rev St Univ
Edl Facs Ser A Rfdg................. 5.500 05/15/08 5,090,200
2,000 New York St Dorm Auth Rev St Univ
Edl Facs Ser B Rfdg................. 7.500 05/15/11 2,290,240
3,000 New York St Energy Resh & Dev Auth
Elec Facs Rev Cons Edison Co of NY
Inc Proj Ser A...................... 6.750 01/15/27 3,085,440
2,615 New York St Med Care Facs Fin Agy
Rev Mental Hlth Svcs Facs Ser A
(Prerefunded @ 02/15/01)............ 7.500 02/15/21 2,772,292
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,560 New York St Med Care Facs Fin Agy
Rev Mental Hlth Svcs Facs Ser A..... 7.500% 02/15/21 $ 1,642,415
5,000 New York St Med Care Facs Fin Agy
Rev NY Downtown Hosp Ser A
(Prerefunded @ 02/15/05)............ 6.800 02/15/20 5,535,250
2,000 New York St Med Care Facs Fin Agy
Rev NY Hosp Mtg Ser A (Prerefunded @
02/15/01) (AMBAC Insd).............. 6.600 02/15/11 2,060,460
6,750 New York St Med Care Facs Fin Agy
Rev NY Hosp Mtg Ser A (Prerefunded @
02/15/05) (AMBAC Insd) (b).......... 6.300 08/15/06 7,317,877
7,000 New York St Med Care Facs Fin Agy
Rev NY Hosp Mtg Ser A (Prerefunded @
02/15/05) (AMBAC Insd).............. 6.400 08/15/07 7,621,320
3,000 New York St Pwr Auth Rev & Genl Purp
Ser Y (Prerefunded @ 01/01/01)...... 6.750 01/01/18 3,145,830
3,500 New York St Thruway Auth Genl Rev
Ser E Rfdg.......................... 5.000 01/01/25 3,005,625
5,695 New York St Thruway Auth Svc
Contract Rev Loc Hwy & Brdg......... 5.750 04/01/08 5,861,180
7,500 New York St Thruway Auth Svc
Contract Rev Loc Hwy & Brdg......... 5.250 04/01/13 7,055,250
3,550 New York St Urban Dev Corp Rev
Correctional Cap Facs Ser 7......... 5.700 01/01/27 3,311,263
11,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6 (MBIA
Insd)............................... 5.750 12/01/25 10,646,020
2,000 Triborough Brdg & Tunl Auth NY Rev
Genl Purp Ser X..................... 6.500 01/01/19 2,090,120
------------
126,562,712
------------
NORTH CAROLINA 2.4%
11,000 North Carolina Muni Pwr Agy No 1
Catawba Elec Rev (MBIA Insd)........ 6.000 01/01/12 11,368,830
------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO 1.1%
$ 1,000 Marion Cnty, OH Hosp Impt Rev Cmnty
Hosp Rfdg........................... 6.375% 05/15/11 $ 981,580
1,250 Montgomery Cnty, OH Hosp Rev
Grandview Hosp & Med Cent Rfdg...... 5.250 12/01/04 1,210,713
3,000 Ohio St Tpk Comm Tpk Rev Ser A Rfdg
(FGIC Insd)......................... 5.500 02/15/24 2,866,320
------------
5,058,613
------------
OKLAHOMA 0.8%
1,100 Oklahoma City, OK Indl & Cultural
Fac Trust Rev Dist Heating & Cooling
Trigen.............................. 6.750 09/15/17 1,101,419
3,000 Oklahoma Dev Fin Auth Rev St John
Hlth Sys Rfdg (a)................... 5.750 02/15/25 2,867,070
------------
3,968,489
------------
PENNSYLVANIA 5.1%
1,500 Allegheny Cnty, PA Port Auth Spl Rev
Trans (MBIA Insd) (a)............... 6.000 03/01/24 1,501,575
2,000 Berks Cnty, PA Muni Auth Hosp
Reading Hosp & Med Cent Proj (FSA
Insd) (a)........................... 6.000 11/01/29 1,982,120
2,665 Harrisburg, PA Cap Apprec Ser D Rfdg
(AMBAC Insd)........................ * 03/15/14 1,145,470
1,830 Harrisburg, PA Cap Apprec Ser D Rfdg
(AMBAC Insd)........................ * 09/15/14 763,806
2,900 Indiana Cnty, PA Indl Dev Auth
Pollutn Ctl Rev Metro Edison Co Proj
A (AMBAC Insd)...................... 5.950 05/01/27 2,820,888
4,000 Pennsylvania Intergovt Coop Auth Spl
Tax Rev Philadelphia Funding Pgm
(Prerefunded @ 06/15/05) (FGIC
Insd)............................... 6.750 06/15/21 4,389,680
3,000 Philadelphia, PA (FSA Insd)......... 5.000 03/15/28 2,544,690
1,350 Philadelphia, PA Auth Indl Dev Arpt
Rev Philadelphia Arpt Sys Proj Ser A
(FGIC Insd)......................... 5.125 07/01/28 1,146,123
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 5,200 Radnor Twp, PA Sch Dist............. 5.750% 03/15/26 $ 4,998,552
3,500 Southeastern PA Trans Auth PA Spl
Rev Ser A (FGIC Insd)............... 4.750 03/01/24 2,898,805
------------
24,191,709
------------
RHODE ISLAND 1.7%
7,800 Rhode Island Hsg & Mtg Fin Corp
Homeownership Oppty Ser 5........... 6.400 04/01/24 7,916,922
------------
TENNESSEE 0.1%
1,500 Franklin, TN Spl Sch Dist Cap Apprec
(FSA Insd).......................... * 06/01/16 554,475
------------
TEXAS 7.0%
2,355 Brazos River Auth TX Pollutn Ctl Rev
Adj Coll Util Elec Co Rfdg.......... 5.550 06/01/30 1,984,511
2,000 Brazos River Auth TX Rev Houston
Inds Inc Proj Ser D Rfdg (MBIA
Insd)............................... 4.900 10/01/15 1,779,120
1,000 Brazos River Auth TX Rev Houston
Lighting & Pwr Co Proj Rfdg (AMBAC
Insd)............................... 5.050 11/01/18 881,270
825 Brazos, TX Higher Edl Auth Inc
Student Ln Rev Subser A2 Rfdg....... 6.800 12/01/04 878,303
1,084 Brazos, TX Higher Edl Auth Inc
Student Ln Rev Subser C2 Rfdg....... 7.100 11/01/04 1,164,574
3,000 Dallas Cnty, TX Util & Reclamation
Dist Ser B Rfdg (AMBAC Insd) (a).... 5.875 02/15/29 2,937,060
5,000 Dallas-Fort Worth, TX Intl Arpt Fac
Impt Corp Rev American Airls Inc.... 7.250 11/01/30 5,268,800
5,340 Dallas-Fort Worth, TX Intl Arpt Fac
Impt Corp Rev Delta Airls Inc....... 7.625 11/01/21 5,607,908
1,500 Dallas-Fort Worth, TX Intl Arpt Fac
Impt Corp Rev Delta Airls Inc....... 7.125 11/01/26 1,533,705
5,140 Little Elm, TX Indpt Sch Dist Rfdg
(PSFG Insd)......................... 6.750 08/15/29 5,535,009
1,510 Parker Cnty, TX Hosp Dist Hosp Rev
Campbell Hlth Sys................... 6.250 08/15/19 1,435,904
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 2,000 Tarrant Cnty, TX Jr College Dist.... 5.050% 02/15/10 $ 1,957,920
2,000 Texas St Dept Hsg & Cmnty Affairs
Single Family Rev Mtg Jr Lien Ser A
Rfdg................................ 8.100 09/01/15 2,198,840
------------
33,162,924
------------
UTAH 0.6%
1,500 Intermountain Pwr Agy UT Pwr Supply
Rev Ser B Rfdg (MBIA Insd).......... 5.750 07/01/19 1,457,730
1,525 Salt Lake City, UT Arpt Rev Delta
Airls Inc Proj...................... 7.900 06/01/17 1,558,337
------------
3,016,067
------------
VIRGINIA 1.5%
2,500 Chesapeake Bay Brdg & Tunl VA Dist
Rev Gen Resolution Rfdg (MBIA
Insd)............................... 5.500 07/01/25 2,379,475
5,000 Richmond, VA (FSA Insd) (a)......... 5.500 01/15/15 4,759,150
------------
7,138,625
------------
WASHINGTON 1.1%
1,400 King Cnty, WA Hsg Auth Hsg Rev
Pooled Sr Ser A Rfdg................ 6.700 03/01/15 1,446,452
3,450 Washington St Pub Pwr Supply Sys
Nuclear Proj No 2 Rev Ser B Rfdg
(Prerefunded @ 07/01/00) (FSA
Insd)............................... 7.000 07/01/12 3,586,896
------------
5,033,348
------------
WEST VIRGINIA 2.4%
2,500 Berkeley Cnty, WV Bldg Comm Hosp Rev
City Hosp Proj...................... 6.500 11/01/22 2,503,475
5,000 Marshall Cnty, WV Pollutn Ctl Rev OH
Pwr Co Proj Ser C Rfdg (MBIA
Insd)............................... 6.850 06/01/22 5,322,950
2,000 West Virginia St Hsg Dev Fund Hsg
Fin Ser A........................... 5.550 05/01/17 1,922,120
1,785 West Virginia St Hsg Dev Fund Hsg
Fin Ser A........................... 5.450 11/01/21 1,664,263
------------
11,412,808
------------
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WISCONSIN 1.9%
$ 5,000 Madison, WI Indl Dev Rev Madison Gas
& Elec Co Proj Ser A................ 6.750% 04/01/27 $ 5,245,350
1,000 Nekoosa, WI Pollutn Ctl Rev Nekoosa
Papers Inc Proj B................... 5.500 07/01/15 907,530
3,000 Wisconsin Hsg & Econ Dev Auth
Homeownership Rev Ser A............. 6.450 03/01/17 3,066,840
------------
9,219,720
------------
WYOMING 0.2%
990 Wyoming Cmnty Dev Auth Insd Single
Family Mtg Ser B.................... 6.700 06/01/17 1,007,652
------------
PUERTO RICO 2.4%
1,000 Puerto Rico Cmwlth Hwy & Tran Auth
Hwy Rev Ser V Rfdg.................. 5.750 07/01/18 973,690
10,000 Puerto Rico Cmwlth Hwy & Tran Auth
Hwy Rev Ser Y Rfdg (FSA Insd)....... 6.250 07/01/21 10,582,000
------------
11,555,690
------------
TOTAL LONG-TERM INVESTMENTS 102.3%
(Cost $470,880,334)............................................... 484,907,099
SHORT-TERM INVESTMENTS 0.0%
(Cost $100,000)................................................... 100,000
------------
TOTAL INVESTMENTS 102.3%
(Cost $470,980,334)............................................... 485,007,099
LIABILITIES IN EXCESS OF OTHER ASSETS (2.3%)....................... (10,857,758)
------------
NET ASSETS 100.0%.................................................. $474,149,341
============
</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.
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
PSFG--Permanent School Fund Guaranty
See Notes to Financial Statements
22
<PAGE> 24
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $470,980,334)....................... $485,007,099
Cash........................................................ 81,393
Receivables:
Investments Sold.......................................... 9,013,023
Interest.................................................. 8,404,662
Other....................................................... 22,417
------------
Total Assets.......................................... 502,528,594
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 27,264,580
Income Distributions--Common and Preferred Shares......... 470,129
Investment Advisory Fee................................... 269,618
Administrative Fee........................................ 82,960
Affiliates................................................ 30,347
Accrued Expenses............................................ 143,572
Trustees' Deferred Compensation and Retirement Plans........ 118,047
------------
Total Liabilities..................................... 28,379,253
------------
NET ASSETS.................................................. $474,149,341
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 7,600 issued with liquidation preference of
$25,000 per share)........................................ $190,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 19,106,785 shares issued and
outstanding).............................................. 191,068
Paid in Surplus............................................. 282,031,706
Net Unrealized Appreciation................................. 14,026,765
Accumulated Undistributed Net Investment Income............. 986,845
Accumulated Net Realized Loss............................... (13,087,043)
------------
Net Assets Applicable to Common Shares.................... 284,149,341
------------
NET ASSETS.................................................. $474,149,341
============
NET ASSET VALUE PER COMMON SHARE ($284,149,341 divided
by 19,106,785 shares outstanding)......................... $ 14.87
============
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 28,595,635
------------
EXPENSES:
Investment Advisory Fee..................................... 3,253,508
Administrative Fee.......................................... 1,001,080
Preferred Share Maintenance................................. 531,413
Trustees' Fees and Related Expenses......................... 38,202
Custody..................................................... 35,417
Legal....................................................... 21,486
Other....................................................... 274,483
------------
Total Expenses............................................ 5,155,589
------------
NET INVESTMENT INCOME....................................... $ 23,440,046
============
NET REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (3,368,920)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 49,973,313
End of the Period......................................... 14,026,765
------------
Net Unrealized Depreciation During the Period............... (35,946,548)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(39,315,468)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(15,875,422)
============
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.......................... $ 23,440,046 $ 23,844,464
Net Realized Gain/Loss......................... (3,368,920) 1,431,062
Net Unrealized Appreciation/Depreciation During
the Period................................... (35,946,548) 9,854,569
------------ ------------
Change in Net Assets from Operations........... (15,875,422) 35,130,095
------------ ------------
Distributions from Net Investment Income:
Common Shares................................ (17,195,559) (17,434,204)
Preferred Shares............................. (6,177,707) (6,788,173)
------------ ------------
Total Distributions............................ (23,373,266) (24,222,377)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................... (39,248,688) 10,907,718
NET ASSETS:
Beginning of the Period........................ 513,398,029 502,490,311
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$986,845 and $920,065,
respectively)................................ $474,149,341 $513,398,029
============ ============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
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
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a)........................... $16.926 $ 16.354 $ 15.684
------- -------- --------
Net Investment Income.............. 1.227 1.248 1.266
Net Realized and Unrealized
Gain/Loss........................ (2.058) .592 .717
------- -------- --------
Total from Investment Operations..... (.831) 1.840 1.983
------- -------- --------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders...... .900 .913 .960
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders................... .323 .355 .353
Distributions from Net Realized
Gain:
Paid to Common Shareholders...... -0- -0- -0-
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders................... -0- -0- -0-
------- -------- --------
Total Distributions.................. 1.223 1.268 1.313
------- -------- --------
Net Asset Value, End of the Period... $14.872 $ 16.926 $ 16.354
======= ======== ========
Market Price Per Share at End of the
Period............................ $12.9375 $15.8125 $15.0625
Total Investment Return at Market
Price (b).......................... (13.16%) 11.33% 8.96%
Total Return at Net Asset Value
(c)................................ (7.16%) 9.35% 10.74%
Net Assets at End of the Period (In
millions).......................... $ 474.1 $ 513.4 $ 502.5
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**........................... 1.66% 1.64% 1.66%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d).................. 5.56% 5.35% 5.76%
Portfolio Turnover................... 33% 30% 49%
* Non-Annualized
** Ratio of Expenses to Average Net
Assets Including Preferred
Shares............................ 1.03% 1.03% 1.02%
</TABLE>
(a) Net Asset Value at September 25, 1992, is adjusted for common and preferred
share offering costs of $.229 per common 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 on NAV.
(d) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
26
<PAGE> 28
- --------------------------------------------------------------------------------
<TABLE>
September
25, 1992
(Commencement
of
Investment
Operations)
to
Year Ended October 31 October
- ------------------------------------------- 31,
1996 1995 1994 1993 1992
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$15.612 $13.992 $17.177 $14.587 $14.771
------- ------- ------- ------- -------
1.293 1.330 1.354 1.369 .056
.159 1.701 (3.148) 2.408 (.237)
------- ------- ------- ------- -------
1.452 3.031 (1.794) 3.777 (.181)
------- ------- ------- ------- -------
1.020 1.020 1.020 .884 -0-
.360 .391 .285 .303 .003
-0- -0- .067 -0- -0-
-0- -0- .019 -0- -0-
------- ------- ------- ------- -------
1.380 1.411 1.391 1.187 .003
------- ------- ------- ------- -------
$15.684 $15.612 $13.992 $17.177 $14.587
======= ======= ======= ======= =======
$14.750 $14.375 $12.750 $16.000 $13.875
9.88% 21.06% (14.17%) 22.08% (7.50%)*
7.22% 19.46% (12.71%) 24.24% (2.73%)*
$ 489.7 $ 488.3 $ 457.3 $ 518.2 $ 468.7
1.72% 1.72% 1.64% 1.66% 1.12%
5.99% 6.31% 6.81% 6.57% 3.52%
37% 79% 133% 112% 15%*
1.05% 1.03% 1.00% 1.03% 1.00%
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Advantage Municipal Income Trust (the "Trust") is registered as a
diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The Trust's investment objective is to provide
a high level of current income exempt from federal income tax, consistent with
preservation of capital. In normal market conditions, the Trust will invest
substantially all of its net assets in municipal securities rated investment
grade at the time of investment. The Trust commenced investment operations on
September 25, 1992.
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 those estimates.
A. SECURITY VALUATION--Municipal bonds are valued by independent pricing
services or dealers using the mean of the bid and asked prices or, in the
absence of market quotations, at fair value based upon yield data relating to
municipal bonds with similar characteristics and general market conditions.
Securities which are not valued by independent pricing services 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.
28
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 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 October 31, 1999, the Trust had an accumulated capital loss
carryforward for tax purposes of $13,003,743, which will expire between October
31, 2002 and October 31, 2007. Net realized gains or losses differ for financial
reporting and tax purposes as a result of the deferral of losses relating to
wash sale transactions.
At October 31, 1999, for federal income tax purposes the cost of long- and
short-term investments is $471,063,634, the aggregate gross unrealized
appreciation is $20,901,631 and the aggregate gross unrealized depreciation is
$6,958,166, resulting in net unrealized appreciation on long- and short-term
investments of $13,943,465.
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 on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
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 .65% of the average
net assets of the Trust. In addition, the Trust will pay a monthly
administrative fee to Van Kampen Funds Inc. or its affiliates (collectively "Van
Kampen"), the Trust's Administrator, at an annual rate of .20% of the average
net assets of the Trust. The administrative services provided by the
Administrator include record keeping and reporting responsibilities with respect
to the Trust's portfolio and preferred shares and providing certain services to
shareholders.
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $11,100 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 October 31, 1999, the Trust recognized expenses of
approximately $128,800 representing Van Kampen's cost of providing accounting
and legal services to the Trust.
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
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 has implemented 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. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $166,677,283 and $166,267,649,
respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio 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 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 these instances 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. 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
30
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
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).
There were no transactions in futures contracts during the year ended
October 31, 1999.
B. INDEXED SECURITIES--These instruments, when applicable, 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 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.
An Embedded Swap security includes a swap component such that the fixed
coupon component of the underlying bond is adjusted by the difference between
the security's fixed swap rate and the floating swap index. 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.
5. PREFERRED SHARES
Effective with the close of business on April 23, 1999, the liquidation
preference on the Trust's preferred shares decreased from $50,000 to $25,000 per
share. This decrease was effected by means of a 2 for 1 stock split that doubled
the Trust's number of outstanding preferred shares. The total liquidation value
for the Trust was unchanged.
As of October 31, 1999, the Trust has outstanding 7,600 Auction Preferred
Shares ("APS") in four series. Series A, B and C each contain 2,000 shares while
Series D contains 1,600 shares. Dividends are cumulative and the dividend rate
is reset every 28 days through an auction process. The average rate in effect on
October 31, 1999 was 3.496%. During the year ended October 31, 1999, the rates
ranged from 2.900% to 3.750%.
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 APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS 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 Advantage Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Advantage Municipal Income Trust (the "Trust"), including the portfolio
of investments, as of October 31, 1999, 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
October 31, 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 Advantage Municipal Income Trust as of October 31, 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 SIG
Chicago, Illinois
December 6, 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
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income
Global Franchise
Global Government Securities
Global Managed Assets
International Magnum
Latin American
Short-Term Global Income*
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
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
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 ongoing 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
* Closed to new investors
34
<PAGE> 36
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
STEVEN MULLER
THEODORE A. MYERS
RICHARD F. POWERS, III* -- Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and
Chief Investment Officer
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*
MICHAEL H. SANTO*
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
For Federal income tax purposes, the following information is furnished
with respect to the distributions paid by the Trust during its taxable year
ended October 31, 1999. The Trust designated 99.98% 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.
* "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.
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 common shareholders
of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- -----------------------------------------------------------------------
<S> <C> <C>
David C. Arch..................................... 16,968,439 180,893
Howard J Kerr..................................... 16,966,200 183,132
Dennis J. McDonnell............................... 16,968,698 180,634
</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, 16,939,666 shares voted in favor of the proposal, 62,293 shares
voted against and 147,373 shares abstained.
* On August 9, 1999, Don G. Powell resigned and the Board of Trustees appointed
Richard F. Powers, III.
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
<CIK> 0000889526
<NAME> VK ADVANTAGE MUNICIPAL INCOME TRUST
<SERIES>
<NUMBER> 11
<NAME> ADV MUNI
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 470,980,334
<INVESTMENTS-AT-VALUE> 485,007,099
<RECEIVABLES> 17,417,685
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 103,810
<TOTAL-ASSETS> 502,528,594
<PAYABLE-FOR-SECURITIES> 27,264,580
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,114,673
<TOTAL-LIABILITIES> 28,379,253
<SENIOR-EQUITY> 190,000,000
<PAID-IN-CAPITAL-COMMON> 282,222,774
<SHARES-COMMON-STOCK> 19,106,785
<SHARES-COMMON-PRIOR> 19,106,785
<ACCUMULATED-NII-CURRENT> 986,845
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13,087,043)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,026,765
<NET-ASSETS> 474,149,341
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 28,595,635
<OTHER-INCOME> 0
<EXPENSES-NET> (5,155,589)
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</TABLE>