<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
CREDIT QUALITY 6
TWELVE-MONTH DIVIDEND HISTORY 6
TOP FIVE SECTORS 7
NET ASSET VALUE AND MARKET PRICE 7
Q&A WITH YOUR PORTFOLIO MANAGERS 8
GLOSSARY OF TERMS 12
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 13
FINANCIAL STATEMENTS 25
NOTES TO FINANCIAL STATEMENTS 30
REPORT OF INDEPENDENT AUDITORS 33
DIVIDEND REINVESTMENT PLAN 34
TRUST OFFICERS AND IMPORTANT ADDRESSES 36
RESULTS OF SHAREHOLDER VOTES 37
</TABLE>
Our generations of money-management experience may help you pursue life's true
wealth.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
November 20, 2000
Dear Shareholder,
The first three quarters of 2000 proved to be especially volatile, with all of
the major markets declining in the spring and spending the following months
trying to recover. To manage one's portfolio during such unpredictable times
requires investment-management experience, and the following pages should give
you some insight into how we have performed in this difficult environment.
In this report, the portfolio managers will explain how your investment
performed during the reporting period and describe the strategies they used to
manage your trust during that span. The report will also show you how your
investment has performed over time. Helpful charts summarize the trust's largest
investments, and you can examine the complete portfolio to see all of your
trust's holdings as of the end of your trust's reporting period.
At Van Kampen, we place a high priority on providing you and
your financial advisor with the information you need to help
you monitor your investments during all types of markets. With
nearly four generations of investment-management experience,
we've been around long enough to understand that by investing
with Van Kampen you're entrusting us with much more than your
money. Your investments may help make it possible to afford your next house,
keep up with rising college costs, or enjoy a comfortable retirement.
No matter what your reasons for investing, we're thankful that you've chosen to
place your investments with Van Kampen. We will continue to apply our
generations of money-management experience to helping you pursue life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED RELATIVELY STRONG DURING THE REPORTING PERIOD,
UNDERPINNED BY LOW UNEMPLOYMENT AND RISING PRODUCTIVITY, YET THERE WERE SIGNS
THAT A HEALTHY SLOWDOWN WAS UNDERWAY. GROSS DOMESTIC PRODUCT, THE PRIMARY
MEASURE OF ECONOMIC GROWTH, INCREASED AT A 2.4 PERCENT ANNUALIZED RATE FOR THE
THIRD QUARTER OF 2000. FOLLOWING RELATIVELY MILD FIRST- AND SECOND-QUARTER DATA,
THIS THIRD-QUARTER FIGURE OFFERS FURTHER EVIDENCE THAT GROWTH MIGHT BE SETTLING
BACK TO A MORE MODERATE AND SUSTAINABLE PACE THAN ITS RAPID RATE IN LATE 1999.
CONSUMER SPENDING AND EMPLOYMENT
CONCERNS ABOUT INFLATION REMAINED AT BAY DUE IN PART TO A GRADUAL SLOWDOWN IN
CONSUMER SPENDING. RISING INTEREST RATES, HIGHER ENERGY COSTS, AND A
DISAPPOINTING STOCK MARKET BEGAN TO TEMPER RETAIL SALES, WHICH LEVELED OFF FROM
THE BLISTERING PACE OF LATE 1999 AND EARLY 2000. AND WHILE CONSUMER SPENDING WAS
BRISK, THE OVERALL TREND HAS BEEN DOWNWARD THIS YEAR.
THE JOBLESS RATE CONTINUED TO BE EXTREMELY LOW BY HISTORICAL STANDARDS, BUT A
RECENT DECLINE IN NEW JOB CREATION SUPPORTS THE POPULAR BELIEF THAT THE ECONOMY
IS MODERATING. ALTHOUGH EMPLOYER COSTS SUCH AS WAGES AND BENEFITS WERE RISING AT
THE END OF 1999 AND THE BEGINNING OF 2000, OVER THE PAST SIX MONTHS THE
EMPLOYMENT COST INDEX HAS SHOWN MARKED DECELERATION, WHICH SHOULD HELP EASE
INFLATION CONCERNS.
INTEREST RATES AND INFLATION
THE FEDERAL RESERVE BOARD (THE FED) RAISED INTEREST RATES FOUR TIMES DURING THE
LAST 12 MONTHS IN AN EFFORT TO WARD OFF INFLATION BY CURBING ECONOMIC GROWTH.
OVER THE SAME PERIOD, THE CONSUMER PRICE INDEX ROSE 3.5 PERCENT, WHICH INDICATED
THAT INFLATION GENERALLY REMAINS UNDER CONTROL.
THE FED HAS ACKNOWLEDGED THE RISK OF RISING INFLATION AND WILL STAY ON GUARD, AS
RISING ENERGY COSTS AND LOW UNEMPLOYMENT THREATEN TO PROPEL THIS FIGURE UPWARD
IN THE COMING MONTHS. AS LONG AS INFLATION IS CONTAINED AND THE PACE OF ECONOMIC
GROWTH REMAINS FAVORABLE, THE FED IS LIKELY TO HOLD INTEREST RATES STEADY IN THE
SHORT TERM, WHICH COULD HELP STABILIZE THE STOCK AND BOND MARKETS.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(September 30, 1998--September 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.60
Sep 00 2.40
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(October 31, 1998--October 31, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Oct 98 5.00 1.50
4.75 1.50
4.75 1.60
Jan 99 4.75 1.70
4.75 1.60
4.75 1.70
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.70
Apr 00 6.00 3.00
6.50 3.10
6.50 3.70
Jul 00 6.50 3.70
6.50 3.30
6.50 3.50
Oct 00 6.50 3.50
</TABLE>
Interest rates are represented by the closing midline federal funds target 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.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of October 31, 2000)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
<S> <C> <C>
NYSE Ticker Symbol VKA
-----------------------------------------------------------------------
One-year total return based on market price(1) 6.86%
-----------------------------------------------------------------------
One-year total return based on NAV(2) 10.56%
-----------------------------------------------------------------------
Distribution rate as a % of closing common stock
price(3) 6.21%
-----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 9.70%
-----------------------------------------------------------------------
Net asset value $15.52
-----------------------------------------------------------------------
Closing common stock price $12.9375
-----------------------------------------------------------------------
One-year high common stock price (08/15/00) $13.6875
-----------------------------------------------------------------------
One-year low common stock price (03/13/00) $11.8125
-----------------------------------------------------------------------
Preferred share (Series A) rate(5) 4.240%
-----------------------------------------------------------------------
Preferred share (Series B) rate(5) 4.130%
-----------------------------------------------------------------------
Preferred share (Series C) rate(5) 4.218%
-----------------------------------------------------------------------
Preferred share (Series D) rate(5) 4.250%
-----------------------------------------------------------------------
</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
<PAGE> 6
(4) The taxable-equivalent distribution rate is calculated assuming a 36%
federal income tax rate.
(5) See "Notes to Financial Statements" footnote #4, 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 is no guarantee of future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust
shares, when sold, may be worth more or less than their original cost.
5
<PAGE> 7
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of October 31, 2000
<S> <C> <C>
- AAA/Aaa............ 57.7%
- AA/Aa.............. 13.8%
- A/A................ 16.6%
- BBB/Baa............ 11.8%
- BB/Ba.............. 0.1%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 61.1%
- AA/Aa.............. 12.0%
- A/A................ 9.4%
- BBB/Baa............ 17.3%
- BB/Ba.............. 0.2%
[PIE CHART]
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
TWELVE-MONTH DIVIDEND HISTORY
(for the period ended October 31, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
11/99 0.075
12/99 0.075
1/00 0.075
2/00 0.075
3/00 0.072
4/00 0.072
5/00 0.072
6/00 0.072
7/00 0.072
8/00 0.072
9/00 0.067
10/00 0.067
</TABLE>
The dividend history represents past performance of the trust and is no
guarantee of the trust's future dividends.
6
<PAGE> 8
TOP FIVE SECTORS
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
Transportation 13.80 17.40
Industrial Revenue 12.10 15.10
General Purpose 10.80 9.20
Single-Family Housing 10.70 9.50
Health Care 10.60 11.40
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--September 1992 through October 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
9/92 14.9500 14.9600
15.4000 14.2500
16.2100 15.2500
16.6300 15.2500
9/93 17.2500 16.1250
17.0600 15.7500
15.1600 14.0000
14.9400 14.2500
9/94 14.6500 13.0625
13.8800 12.7500
15.2400 14.5000
15.1600 14.5000
9/95 15.3500 13.8750
16.2000 14.6250
15.4300 14.8750
15.2300 14.6250
9/96 15.5000 14.7500
15.7600 13.8750
15.4100 14.0000
15.8900 14.8750
9/97 16.3300 15.0825
16.6600 15.3120
16.6400 15.2500
16.6500 15.3125
9/98 17.1100 16.1250
16.8700 16.5000
16.6800 15.5825
15.8500 14.7500
9/99 15.2600 13.5000
14.6900 12.7500
15.0900 12.6875
15.0900 12.6875
15.3800 13.1875
10/00 15.5200 12.9375
</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.
7
<PAGE> 9
[PHOTO]
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGER OF THE VAN KAMPEN ADVANTAGE
MUNICIPAL INCOME TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE
MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE 12 MONTHS ENDED OCTOBER 31,
2000. DENNIS S. PIETRZAK, SENIOR PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE
AUGUST 1995 AND HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1968. THE FOLLOWING
DISCUSSION REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE.
Q WHAT WERE THE MOST IMPORTANT
DEVELOPMENTS IN THE FIXED-INCOME MARKETS AND HOW DID THE TRUST PERFORM
DURING THE REPORTING PERIOD?
A The key factor in the market's
behavior during the past fiscal year has been generally rising interest rates,
especially at the short end of the maturity spectrum. This rate environment
stemmed from the Federal Reserve Board's commitment to keeping inflation in
check by ratcheting up short-term interest rates whenever the economy threatened
to overheat and push the prices of goods and services higher. In fact, the Fed
increased short-term rates four times during the reporting period, with the last
hike occurring in May 2000.
The strength of the economy, and the accompanying Federal Reserve activity,
caused interest rates to rise across the board for the first half of the
reporting period. In the spring of 2000, the bond market rallied as investors
began to anticipate an end to the Fed's rate-tightening cycle. By the end of
October, short-term rates remained high, but rates in the intermediate to long
maturity segments of the market had actually declined from the levels we had
seen at the start of the reporting period.
Because the trust is leveraged, higher short-term rates placed pressure on
the trust's dividend, as the increased cost of borrowing cut into the fund's
earnings. However, the relatively high long-term rates that prevailed for part
of the reporting period allowed the trust to add new holdings at attractive
yields, partially offsetting the decline in income that occurred as short-term
rates climbed.
After the steady increase in short-term interest rates over the past year,
we have seen a more stable environment in recent months, as the Fed has reacted
to slower economic growth, more efficient workforce output, and moderate price
gains by keeping target lending rates unchanged. The inflation rate, as measured
by the consumer price index, peaked in March 2000 at 3.8 percent and has since
dropped back below the 3 percent level.
8
<PAGE> 10
Supply in the municipal bond market was sharply lower from the levels of a
year ago, as higher interest rates have made it unattractive for municipalities
to retire existing debt. At the same time, strong economic activity has allowed
many municipalities to generate a budget surplus, enabling them to cover
spending that would normally require municipal bond financing.
Because demand has remained strong, the lack of new issuance in the primary
market helped support bond prices, although the somewhat limited selection of
available securities required us to be very selective in choosing new bonds for
the trust's portfolio. In many cases, we found attractive values in the
secondary market, buying and selling bonds that have been in the market for a
while.
The trust continued to provide shareholders with an attractive dividend,
even though the dividend was decreased slightly during the reporting period,
once in March and once in September. Its monthly dividend of $0.067 per share
translates to a distribution rate of 6.21 percent based on the trust's closing
market price on October 31, 2000. Because income from the trust is exempt from
federal income taxes, this distribution rate is equivalent to a yield of 9.70
percent for an investor in the 36 percent federal income tax bracket.
For the 12 months through October 31, 2000, the trust produced a total
return of 6.86 percent based on market price. The trust's market price of
$12.9375 per share on October 31, 1999 was unchanged on October 31, 2000.
Of course, past performance is no guarantee of future results. As a result
of recent market activity, current performance may vary from the figures shown.
By comparison, the Lehman Brothers Municipal Bond Index posted a total return of
8.51 percent for the same period. This broad-based, unmanaged index, which
reflects the general performance of municipal bond securities, does not reflect
any commissions or fees that would be paid by an investor purchasing the
securities it represents. Such costs would lower the performance of the index.
It is not possible to invest directly in an index. For additional performance
results, please refer to the chart and footnotes on page 4.
Q HOW DID YOU REACT TO THE
MARKET CONDITIONS YOU ENCOUNTERED IN MANAGING THE TRUST?
A Much of the activity in the trust's
portfolio during the reporting period was guided by a strategic direction we
adopted early in 2000 and have gradually implemented since then. It was our goal
to lengthen the duration of the portfolio (a measure of its sensitivity to
changes in interest rates) so that it more closely mirrored the benchmark
indicators we use to gauge the trust's performance. At the time, we felt the
market had solid upside potential, and a longer duration would allow the trust
to more fully participate in the gains of the market if it rallied over time.
As we began implementing this strategy, we caught the market at a
9
<PAGE> 11
good time. Early in the year, the market presented us with attractive yields on
long-duration securities, particularly those priced at deep discounts. We
purchased some of these bonds and sold prerefunded securities and bonds with
short calls--many of which were scheduled to be called or refunded within the
next year or two. In effect, this strategy helped capture additional par value
and the potential for capital appreciation, all while achieving the desired
effect of extending the portfolio's duration. This strategy was a positive in
terms of the trust's performance, especially during the market rally that
occurred in the second and third quarters of 2000.
Q HOW DID THIS STRATEGY AFFECT THE
COMPOSITION OF THE PORTFOLIO?
A A by-product of this market
activity--and the trust's positioning within the market--was an increase in the
overall credit quality of the portfolio. The rally was strongest at the high end
of the quality spectrum, so these securities saw solid price gains while the
valuations of nonrated and lower-rated securities, such as those rated BBB or
lower, remained fairly flat or declined.
Over the course of the reporting period, the portfolio composition came to
reflect this trend, as roughly 88 percent of long-term investments were
allocated to securities rated A or better (up from 83 percent at the start of
the period) and its BBB allocation declined to 12 percent (down from 17
percent). In general, our bias toward high-quality securities was a boost to
portfolio performance.
The trust remained well diversified by industry sector and by issuer, with
the portfolio retaining a similar overall composition throughout the reporting
period.
Q YOU MENTIONED THAT THE TRUST'S
DIVIDEND WAS REDUCED DURING THE REPORTING PERIOD. CAN YOU EXPLAIN WHY?
A A combination of factors made it
necessary to cut the trust's dividend in March 2000 and in September 2000.
First, as a leveraged portfolio, the trust must pay interest on money borrowed
at short-term rates, while investing these funds in longer-term securities. As
short-term rates rose more significantly than longer-term rates, the cost of
this leverage increased during the reporting period and reduced the trust's
income stream.
Second, as we took advantage of higher rates in long-maturity bonds, we
tended to sell older, higher-yielding bonds that had strengthened the trust's
income stream but were susceptible to being called out of the portfolio in the
near future. Essentially, we exchanged their near-term contribution to the
trust's income for an improvement in the portfolio's overall structure and
long-term income potential.
Q WHAT DO YOU SEE AHEAD FOR
THE ECONOMY AND THE MUNICIPAL MARKET?
A The outlook for the municipal
bond market will be closely tied to the prospects of the U.S. economy and the
Fed's reaction to key economic indicators. While interest rates have
10
<PAGE> 12
been fairly steady of late, the Fed's next move will be based on whether
inflation shows signs of heating up. We believe inflation appears to be under
control at this time, but the Fed will be watching economic growth statistics,
the labor market, and the prices of key commodities, such as crude oil, for
signs of inflationary pressures.
Clearly, the direction of interest rates will be determined by the Fed's
reaction to inflationary signals, so we feel it would be imprudent to make a bet
on the direction of interest rates in terms of how we position the trust.
Consequently, we will seek to maintain a neutral stance with respect to the
portfolio's duration in the near term.
We believe the demand for municipal securities should remain healthy. This
will hopefully bode well for the trust, although it will be competing with a
range of investment options, such as individual bonds, mutual funds, and managed
accounts, for investor assets. Also, the stock market may continue to attract
assets away from bonds, depending on its return prospects and price volatility.
We believe bond supply should remain tight, helping to support prices, as
municipalities continue to operate with budget surpluses that can be used for
construction projects, education funding, road improvements, and other
expenditures typically financed by new bond issuance.
We will continue to search for securities that have the potential to enhance
the trust's long-term performance. If our analysis indicates that it would be
advantageous to sell certain bonds--or as bonds are prerefunded, mature
according to schedule, or are called from the portfolio--we will strive to
replace them with bonds that offer the best relative value available at the
time.
11
<PAGE> 13
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CALL FEATURE: Allows a bond issuer to buy back a bond on specific dates at set
prices before the bond's maturity date. 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.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a 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.
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. Typically, short-term bonds mature in
five years or less, intermediate-term bonds mature in five to ten years, and
long-term bonds mature after ten years.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding 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.
SECONDARY MARKET: A market where securities are traded after they are initially
offered.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower credit 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.
12
<PAGE> 14
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
October 31, 2000
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 98.7%
ALABAMA 1.7%
$1,000 Alabama Bldg Renovation Fin Auth Rev Rfdg
(AMBAC Insd)............................... 5.625% 09/01/24 $ 1,003,130
6,050 Alabama Wtr Pollutn Ctl Auth Revolving Fund
Ser A (AMBAC Insd)......................... 5.000 08/15/15 5,868,076
1,550 Birmingham, AL Arpt Auth Arpt Rev Rfdg
(AMBAC Insd)............................... 5.500 07/01/14 1,557,952
------------
8,429,158
------------
ALASKA 1.9%
10,000 Alaska St Hsg Fin Corp Ser A Rfdg.......... 5.000 12/01/18 9,269,100
------------
ARIZONA 1.1%
1,425 Arizona Cap Fac Fin Corp Student Hsg Rev AZ
St Univ Proj............................... 6.250 09/01/32 1,406,048
3,635 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease
Oblig Irvington Proj Tucson Ser A Rfdg (FSA
Insd)...................................... 7.250 07/15/10 3,825,510
------------
5,231,558
------------
ARKANSAS 0.3%
1,500 Arkansas St Dev Fin Auth Hosp Rev
Washington Regl Med Cent................... 7.375 02/01/29 1,502,730
------------
CALIFORNIA 2.4%
2,630 Anaheim, CA Pub Fing Auth Lease Rev Cap
Apprec Sub Pub Impts Proj C (FSA Insd)..... * 09/01/20 871,871
3,865 California Hlth Fac Fin Auth Rev Kaiser
Permanente Med Cent........................ 5.450 10/01/13 3,878,219
5,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Rfdg........................ * 01/15/25 1,089,500
2,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Rfdg................... * 01/15/20 1,137,460
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$10,000 Foothill/Eastern Trans Corridor Agy CA Toll
Rd Rev Rfdg................................ * 01/15/21 $ 2,825,000
2,000 Los Angeles, CA Regl Arpts Impt Corp Lease
Rev Rfdg................................... 6.350% 11/01/25 1,982,680
------------
11,784,730
------------
COLORADO 2.0%
8,500 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy
Rev E-470 Proj Ser C (Prerefunded @
08/31/05).................................. * 08/31/26 1,409,385
1,010 Colorado Hsg Fin Auth Single Family Pgm Sr
Ser B1..................................... 7.900 12/01/25 1,051,551
450 Colorado Hsg Fin Auth Single Family Pgm Sr
Ser D1 Rfdg................................ 8.000 12/01/24 481,140
1,271 Colorado Hsg Fin Auth Single Family Pgm Sr
Ser E...................................... 8.125 12/01/24 1,332,284
3,215 Denver, CO City & Cnty Arpt Rev Ser C...... 6.350 11/15/01 3,269,141
1,300 Denver, CO City & Cnty Sch Dist No 1 Rfdg
(FGIC Insd)................................ 5.000 12/01/23 1,189,981
1,000 Meridian Metro Dist, CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC: Meridian
Assoc East)................................ 7.500 12/01/11 1,034,200
------------
9,767,682
------------
CONNECTICUT 0.9%
3,250 Connecticut St Spl Oblig Pkg Rev Bradley
Intl Arpt Ser A (ACA Insd)................. 6.600 07/01/24 3,405,318
1,000 Hartford, CT Pkg Sys Rev Ser A............. 6.400 07/01/20 1,009,210
------------
4,414,528
------------
FLORIDA 1.0%
2,000 Escambia Cnty, FL Hlth Facs Auth Rev FL
Hlthcare (AMBAC Insd)...................... 5.950 07/01/20 2,082,880
3,000 Tampa Bay Wtr FL Util Sys Rev Ser A (FGIC
Insd)...................................... 4.750 10/01/27 2,619,300
------------
4,702,180
------------
GEORGIA 1.1%
1,000 Atlanta, GA Arpt Rev Ser B (FGIC Insd)..... 5.625 01/01/30 984,420
3,770 Monroe Cnty, GA Dev Auth Pollutn Ctl Rev
Oglethorpe Pwr Corp Scherer Ser A.......... 6.800 01/01/12 4,221,721
------------
5,206,141
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS 9.6%
$ 465 Aurora, IL Single Family Mtg Rev Ser B Rfdg
(GNMA Collateralized)...................... 8.050% 09/01/25 $ 493,435
3,750 Bolingbrook, IL Cap Apprec Ser B (MBIA
Insd)...................................... * 01/01/30 670,537
2,000 Chicago, IL Brd of Ed (FGIC Insd).......... 5.500 12/01/31 1,947,620
5,000 Chicago, IL Brd of Edl Cap Apprec Sch
Reform Ser A (FGIC Insd)................... * 12/01/28 968,300
3,000 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Inc Proj Ser B.............. 7.875 11/01/25 3,063,420
5,000 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
Intl Terminal (MBIA Insd).................. 6.750 01/01/18 5,180,750
5,000 Chicago, IL Sch Fin Auth Ser A (MBIA
Insd)...................................... 5.000 06/01/09 5,042,150
1,000 Chicago, IL Wastewtr Transmission Rev 2nd
Lien (MBIA Insd)........................... 5.750 01/01/25 1,008,720
3,000 Cicero, IL Alt Rev Source (Prerefunded @
12/01/04) (MBIA Insd)...................... 6.500 12/01/14 3,266,130
5,500 Cook Cnty, IL Cap Impt Ser A (FGIC Insd)... 5.000 11/15/23 5,004,835
2,360 Cook Cnty, IL Cmnty High Sch Dist No 219
Niles Twp (FSA Insd)....................... * 12/01/11 1,339,206
2,260 Cook Cnty, IL Cmnty High Sch Dist No 219
Niles Twp (FSA Insd)....................... * 12/01/12 1,205,687
2,235 Cook Cnty, IL Cmnty High Sch Dist No 219
Niles Twp (FSA Insd)....................... * 12/01/13 1,118,752
3,695 Illinois Dev Fin Auth Rev Local Govt Pgm
Aurora East Sch (MBIA Insd)................ * 12/01/16 1,518,534
2,800 Illinois Dev Fin Auth Solid Waste Disposal
Rev Armstrong World Inds Inc............... 5.950 12/01/24 2,079,700
1,500 Illinois Hsg Dev Auth Rev Homeowner Mtg G
2.......................................... 6.050 08/01/29 1,519,560
2,000 Metropolitan Pier & Expo Auth IL Dedicated
St Tax Rev McCormick Pl Expn Proj (FGIC
Insd)...................................... 5.250 12/15/28 1,883,800
1,250 Metropolitan Pier & Expo Auth IL Dedicated
St Tax Rev McCormick Pl Expn Proj (FGIC
Insd)...................................... 5.375 12/15/18 1,234,250
1,000 Metropolitan Pier & Expo Auth IL Dedicated
St Tax Rev McCormick Pl Expn Proj (FGIC
Insd)...................................... 5.500 12/15/24 982,240
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$5,000 Regional Tran Auth IL Ser B (AMBAC Insd)... 8.000% 06/01/17 $ 6,460,650
1,150 Will Cnty, IL Cmnty Sch Dist 365U Vly View
Ser B (FSA Insd)........................... * 11/01/15 509,910
------------
46,498,186
------------
INDIANA 1.6%
4,000 Indiana Hlth Fac Fin Auth Hosp Rev Cmnty
Hosp Proj (MBIA Insd)...................... 6.850 07/01/22 4,186,640
2,000 Indiana Hlth Fac Fin Auth Hosp Rev Columbus
Regl Hosp Rfdg (FSA Insd).................. 7.000 08/15/15 2,334,960
1,220 North Adams, IN Com Sch Cap Appr First Mtg
(FSA Insd)................................. * 07/15/16 512,437
1,230 North Adams, IN Com Sch Cap Appr First Mtg
(FSA Insd)................................. * 01/15/17 497,842
------------
7,531,879
------------
KANSAS 0.5%
900 Sedgwick & Shawnee Cntys, KS Single Family
Rev Coll Mtg Ser A Rfdg (GNMA
Collateralized)............................ 8.050 05/01/24 972,270
1,495 Sedgwick Cnty, KS Single Family Mtg Rev Ser
A Rfdg (GNMA Collateralized)............... 8.125 05/01/24 1,600,771
------------
2,573,041
------------
KENTUCKY 2.5%
7,750 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A..................... 7.125 02/01/21 7,970,797
4,450 Louisville & Jefferson Cnty, KY Met Swr
Dist Drainage Rev Rfdg (MBIA Insd)......... 5.300 05/15/19 4,339,685
------------
12,310,482
------------
LOUISIANA 1.7%
1,920 Louisiana Hsg Fin Agy Mtg Rev Multi-Family
Emerald Pointe Apts (FHA Insd)............. 7.100 11/01/33 2,013,773
1,385 Louisiana Hsg Fin Agy Mtg Rev Single Family
Access Pgm Ser B (GNMA Collateralized)..... 8.000 03/01/25 1,540,147
2,000 New Orleans, LA Rfdg (FGIC Insd)........... 4.750 12/01/26 1,724,860
3,000 Saint Charles Parish, LA Environmental Impt
Rev LA Pwr & Lt Co Ser A (AMBAC Insd)...... 6.875 07/01/24 3,204,300
------------
8,483,080
------------
MARYLAND 0.2%
1,000 Maryland St Econ Dev Corp Student Hsg Rev
Collegiate Hsg Towson Ser A................ 5.750 06/01/29 920,660
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MASSACHUSETTS 2.2%
$3,955 Massachusetts Bay Tran Auth MA Genl Tran
Sys Ser A Rfdg............................. 5.500% 03/01/12 $ 4,146,936
2,175 Massachusetts Bay Tran Auth MA Genl Tran
Sys Ser B Rfdg (MBIA Insd)................. 6.000 03/01/10 2,278,139
75 Massachusetts Bay Tran Auth MA Genl Tran
Sys Ser B Rfdg (Prerefunded @ 03/01/03)
(MBIA Insd)................................ 6.000 03/01/10 78,975
3,500 Massachusetts Muni Whsl Elec Co Pwr Supply
Sys Rev Ser A Rfdg (AMBAC Insd)............ 5.000 07/01/10 3,526,530
1,000 Massachusetts St Hlth & Edl Fac Auth Rev
Saint Mem Med Cent Ser A................... 6.000 10/01/23 778,830
------------
10,809,410
------------
MICHIGAN 1.6%
1,680 Michigan Higher Edl Fac Auth Rev Ltd Oblig
Hope College Proj Rfdg (Connie Lee Insd)... 7.000 10/01/14 1,818,466
3,350 Michigan St Hosp Fin Auth Rev Hosp Mid-MI
Oblig Group (Prerefunded @ 12/01/02)....... 6.800 12/01/14 3,568,922
2,500 Wayne St Univ MI Univ Rev Genl (FGIC
Insd)...................................... 5.125 11/15/29 2,339,025
------------
7,726,413
------------
MINNESOTA 1.0%
5,000 Minneapolis & St Paul, MN Met Arpt Commn
Arpt Rev Ser A (FGIC Insd)................. 5.125 01/01/31 4,672,850
------------
MISSISSIPPI 2.3%
1,000 Mississippi Business Fin Corp Miss Pollutn
Ctl Rev Sys Energy Res Inc Proj Rfdg....... 5.900 05/01/22 929,930
2,000 Mississippi Business Fin Corp Sys Energy
Res Inc.................................... 5.875 04/01/22 1,841,300
4,805 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser B (GNMA Collateralized)..... 7.900 03/01/25 5,166,240
1,265 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser C (GNMA Collateralized)..... 8.125 12/01/24 1,363,278
1,854 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser E (GNMA Collateralized)..... 8.100 12/01/25 2,002,802
------------
11,303,550
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MISSOURI 1.1%
$2,100 Kansas City, MO Arpt Rev Genl Impt Ser A
(FSA Insd)................................. 6.900% 09/01/10 $ 2,257,857
2,175 Missouri St Hlth & Edl Fac Rev BJC Hlth
Sys........................................ 5.000 05/15/28 1,898,884
1,400 St Louis, MO Arpt Rev...................... 6.000 01/01/04 1,416,520
------------
5,573,261
------------
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 2,009,813
------------
NEW HAMPSHIRE 0.5%
1,155 New Hampshire Hlth & Ed Facs Auth Rev
Derryfield Sch............................. 7.000 07/01/30 1,168,155
1,000 New Hampshire St Business Fin Auth Wtr Fac
Rev Pennichuck Wtrwks Inc (AMBAC Insd)..... 6.300 05/01/22 1,046,080
------------
2,214,235
------------
NEW JERSEY 5.3%
10,000 New Jersey Econ Dev Auth St Contract Econ
Recovery (MBIA Insd)....................... 5.900 03/15/21 10,659,900
8,000 New Jersey Econ Dev Auth Wtr Facs Rev NJ
American Wtr Co Inc Proj Ser A (FGIC
Insd)...................................... 6.875 11/01/34 8,544,240
1,750 New Jersey St Hwy Auth Garden St Pkwy Genl
Rev Sr Pkwy................................ 6.250 01/01/14 1,813,560
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 4,943,461
------------
25,961,161
------------
NEW YORK 27.2%
1,500 Broome Cnty, NY Ctfs Partn Pub Safety Fac
(MBIA Insd)................................ 5.250 04/01/15 1,496,175
1,550 Long Island Pwr Auth NY Elec Sys Rev Cap
Apprec (FSA Insd).......................... * 06/01/18 584,412
2,500 Long Island Pwr Auth NY Elec Sys Rev Genl
Ser A (FSA Insd)........................... 5.000 12/01/18 2,361,925
5,000 Long Island Pwr Auth NY Elec Sys Rev Genl
Ser A (MBIA Insd).......................... 5.500 12/01/29 4,875,850
1,500 Metropolitan Transn Auth NY Commuter Facs
Rev Ser A (MBIA Insd)...................... 5.625 07/01/27 1,500,375
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$1,500 Metropolitan Transn Auth NY Tran Facs Rev
Ser K Rfdg (Prerefunded @ 07/01/02)........ 6.250% 07/01/11 $ 1,565,805
3,000 Metropolitan Transn Auth NY Tran Facs Rev
Svc Contract Ser R......................... 5.500 07/01/17 2,975,520
3,605 Metropolitan Transn Auth NY Transit Facs
Rev (FGIC Insd)............................ 4.750 07/01/26 3,152,464
1,000 New York City Adj Subser A1................ 5.750 08/01/12 1,025,540
4,250 New York City Indl Dev Agy Civic Fac Rev
USTA Natl Tennis Cent Proj (FSA Insd)...... 6.375 11/15/14 4,555,872
1,300 New York City Indl Dev Civic YMCA Greater
NY Proj.................................... 5.800 08/01/16 1,308,528
10 New York City Ser A (Prerefunded @
08/15/01).................................. 8.000 08/15/19 10,434
1,325 New York City Ser B1 (Prerefunded @
08/15/04).................................. 7.000 08/15/16 1,454,903
3,025 New York City Ser F........................ 5.000 08/01/23 2,751,298
2,225 New York City Ser F Rfdg................... 6.000 08/01/11 2,357,054
2,500 New York City Ser H........................ 5.000 03/15/29 2,237,425
5,000 New York City Transitional Fin Auth Rev
Future Tax Secd Ser C...................... 5.000 05/01/26 4,585,800
2,250 New York City Transitional Fin Auth Rev Ser
B (FGIC Insd).............................. 4.750 11/01/23 1,979,258
4,015 New York City Transitional Fin Auth Rev Ser
C.......................................... 5.000 05/01/29 3,660,676
1,625 New York St Dorm Auth Lease Rev St Univ
Dorm Facs Ser A............................ 6.000 07/01/14 1,721,736
2,525 New York St Dorm Auth Lease Rev Muni Hlth
Fac Impt Pgm Ser A (FSA Insd).............. 5.500 05/15/25 2,489,802
1,450 New York St Dorm Auth Lease Rev St Univ
Dorm Facs Ser C (MBIA Insd)................ 5.500 07/01/29 1,428,279
2,545 New York St Dorm Auth Rev Mental Hlth Svcs
Facs Impt D (FSA Insd)..................... 5.875 02/15/14 2,692,279
2,500 New York St Dorm Auth Rev St Univ Edl Fac
Ser B (FSA Insd)........................... 5.250 05/15/13 2,563,500
1,000 New York St Dorm Auth Rev Univ Rochester
Ser A (MBIA Insd).......................... 5.000 07/01/23 922,820
3,970 New York St Dorm Auth Rev City Univ Ser F.. 5.000 07/01/14 3,789,921
3,100 New York St Dorm Auth Rev City Univ Sys
Cons Ser A................................. 5.625 07/01/16 3,207,756
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$2,600 New York St Dorm Auth Rev Cons City Univ
Sys Second Genl Res Ser A.................. 5.750% 07/01/13 $ 2,749,838
5,050 New York St Dorm Auth Rev Cons City Univ
Sys Second Genl Res Ser B.................. 5.375 07/01/07 5,206,398
4,050 New York St Dorm Auth Rev Court Facs Lease
Ser A...................................... 5.300 05/15/07 4,127,477
2,550 New York St Dorm Auth Rev Mental Hlth Svcs
Facs Ser B Rfdg............................ 5.750 08/15/11 2,663,322
5,000 New York St Dorm Auth Rev St Univ Edl Facs
Ser A Rfdg................................. 5.500 05/15/08 5,227,150
2,000 New York St Dorm Auth Rev St Univ Edl Facs
Ser B Rfdg................................. 7.500 05/15/11 2,327,640
1,560 New York St Med Care Facs Fin Agy Rev
Mental Hlth Svcs Fac Ser A................. 7.500 02/15/21 1,602,354
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 5,538,200
6,750 New York St Med Care Facs Fin Agy Rev NY
Hosp Mtg Ser A (Prerefunded @ 02/15/05)
(AMBAC Insd)............................... 6.300 08/15/06 7,346,700
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 7,645,820
4,250 New York St Mtg Agy Rev Homeowner Mtg Ser
82......................................... 5.650 04/01/30 4,177,367
3,500 New York St Thruway Auth Genl Rev Ser E
Rfdg....................................... 5.000 01/01/25 3,203,970
5,695 New York St Thruway Auth Svc Contract Rev
Loc Hwy & Brdg............................. 5.750 04/01/08 6,019,900
7,500 New York St Thruway Auth Svc Contract Rev
Loc Hwy & Brdg............................. 5.250 04/01/13 7,489,500
1,550 New York St Urban Dev Corp Rev Correctional
Cap Fac Ser 7.............................. 5.700 01/01/27 1,540,483
2,000 Triborough Brdg & Tunl Auth NY Rev Genl
Purp Ser X................................. 6.500 01/01/19 2,068,780
------------
132,190,306
------------
NORTH CAROLINA 2.4%
11,000 North Carolina Muni Pwr Agy No 1 Catawba
Elec Rev Indexed Caps Rfdg (MBIA Insd)..... 6.000 01/01/12 11,887,590
------------
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NORTH DAKOTA 0.5%
$2,455 North Dakota St Hsg Fin Agy Rev Hsg Fin Pgm
Home Mtg Fin Ser B (MBIA Insd)............. 5.500% 07/01/29 $ 2,329,500
------------
OHIO 0.4%
1,000 Cuyahoga Cnty, OH Hosp Fac Canton Inc
Proj....................................... 7.500 01/01/30 1,037,260
1,000 Marion Cnty, OH Hosp Impt Rev Cmnty Hosp
Rfdg....................................... 6.375 05/15/11 974,940
------------
2,012,200
------------
OKLAHOMA 0.9%
1,100 Oklahoma City, OK Indl & Cultural Fac Trust
Rev Dist Heating & Cooling Trigen (LOC:
Societe Generale).......................... 6.750 09/15/17 1,100,330
2,000 Sapulpa, OK Muni Auth Cap Impt Rev Rfdg
(FSA Insd)................................. 5.750 07/01/30 2,024,420
1,250 Tulsa Cnty, OK Pub Facs Auth Cap Impt Rev.. 6.250 11/01/22 1,264,988
------------
4,389,738
------------
OREGON 0.9%
4,000 Portland, OR Swr Sys Rev Ser A (FGIC
Insd)...................................... 5.750 08/01/18 4,139,920
------------
PENNSYLVANIA 6.2%
700 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC
Insd)...................................... * 03/15/14 344,624
1,830 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC
Insd)...................................... * 09/15/14 877,394
5,330 McGuffey Sch Dist PA Ser B (AMBAC Insd).... 4.750 08/01/28 4,581,028
4,000 Pennsylvania Intergovt Coop Auth Spl Tax
Rev Philadelphia Funding Pgm (Prerefunded @
06/15/05) (FGIC Insd)...................... 6.750 06/15/21 4,363,720
1,250 Pennsylvania St Tpk Comm Oil Franchise Tax
Rev Subser B (AMBAC Insd).................. 4.750 12/01/27 1,089,562
3,000 Philadelphia, PA (FSA Insd)................ 5.000 03/15/28 2,711,640
3,000 Philadelphia, PA Gas Wks Rev First Ser A
(FSA Insd)................................. 5.000 07/01/26 2,716,530
1,350 Philadelphia, PA Ind For Auth Dev Arpt Rev
Philadelphia Arpt Sys Proj Ser A (FGIC
Insd)...................................... 5.000 07/01/23 1,214,325
7,500 Pittsburgh & Allegheny Cnty, PA Pub Aud
Regl Asset Dist Sales Tax (AMBAC Insd)..... 5.000 02/01/29 6,831,000
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$2,000 Radnor Twp, PA Sch Dist.................... 5.750% 03/15/26 $ 2,016,280
4,075 Southeastern PA Transn Auth PA Spl Rev Ser
A (FGIC Insd).............................. 4.750 03/01/24 3,557,149
------------
30,303,252
------------
RHODE ISLAND 1.6%
7,800 Rhode Island Hsg & Mtg Fin Corp
Homeownership Oppty Ser 5.................. 6.400 04/01/24 7,900,932
------------
TENNESSEE 0.8%
1,500 Elizabethton, TN Hlth & Edl Facs Brd Rev &
Impt Hosp First Mtg Ser B Rfdg............. 7.750 07/01/29 1,480,395
1,300 Franklin, TN Spl Sch Dist Cap Apprec (FSA
Insd)...................................... * 06/01/16 553,085
1,930 Tennessee Hsg Dev Agy Homeowner Pgm........ 5.300 01/01/24 1,795,170
------------
3,828,650
------------
TEXAS 7.6%
2,000 Brazos River Auth TX Rev Houston Inds Inc
Proj Ser D Rfdg (MBIA Insd)................ 4.900 10/01/15 1,854,440
1,000 Brazos River Auth TX Rev Houston Lighting &
Pwr Co Proj Rfdg (AMBAC Insd).............. 5.050 11/01/18 911,580
825 Brazos, TX Higher Edl Auth Inc Student Rev
Subser A2 Rfdg............................. 6.800 12/01/04 875,597
1,084 Brazos, TX Higher Edl Auth Inc Student Rev
Subser C2 Rfdg............................. 7.100 11/01/04 1,160,834
3,000 Dallas Cnty, TX Util & Reclamation Dist Ser
B Rfdg (AMBAC Insd)........................ 5.875 02/15/29 3,031,350
5,000 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev American Airls Inc................ 7.250 11/01/30 5,153,250
5,340 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev Delta Airls Inc................... 7.625 11/01/21 5,518,943
1,500 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev Delta Airls Inc................... 7.125 11/01/26 1,514,115
2,500 Dallas-Fort Worth, TX Intl Arpt Rev JT Ser
A (FGIC Insd).............................. 5.750 11/01/30 2,473,550
2,910 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser C
(FGIC Insd)................................ 5.375 12/01/27 2,813,621
5,140 Little Elm, TX Indpt Sch Dist Rfdg (PSFG
Insd)...................................... 6.750 08/15/29 5,574,073
1,750 Sabine River Auth TX Pollutn Ctl Rev TX
Elec Proj Ser A Rfdg....................... 6.450 06/01/21 1,741,793
2,000 Tarrant Cnty, TX Jr College Dist........... 5.050 02/15/10 2,024,020
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$2,000 Texas St Dept Hsg & Cmnty Affairs Single
Family Rev Mtg Jr Lien Ser A Rfdg.......... 8.100% 09/01/15 $ 2,181,420
------------
36,828,586
------------
UTAH 0.3%
1,525 Salt Lake City, UT Arpt Rev Delta Airls Inc
Proj....................................... 7.900 06/01/17 1,540,464
------------
WASHINGTON 0.3%
1,400 King Cnty, WA Hsg Auth Hsg Rev Pooled Sr
Ser A Rfdg................................. 6.700 03/01/15 1,441,944
------------
WEST VIRGINIA 2.3%
2,500 Berkeley Cnty, WV Bldg Comm Hosp Rev City
Hosp Proj.................................. 6.500 11/01/22 2,384,950
5,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co
Proj Ser C Rfdg (MBIA Insd)................ 6.850 06/01/22 5,248,850
2,000 West Virginia St Hsg Dev Fund Hsg Fin Ser
A.......................................... 5.550 05/01/17 1,930,900
1,505 West Virginia St Hsg Dev Fund Hsg Fin Ser
A.......................................... 5.450 11/01/21 1,431,014
------------
10,995,714
------------
WISCONSIN 1.9%
5,000 Madison, WI Indl Dev Rev Madison Gas & Elec
Co Proj Ser A.............................. 6.750 04/01/27 5,197,600
1,000 Nekoosa, WI Pollutn Ctl Rev Nekoosa Papers
Inc Proj B................................. 5.500 07/01/15 922,250
3,000 Wisconsin Hsg & Econ Dev Auth Homeownership
Rev Ser A.................................. 6.450 03/01/17 3,059,160
------------
9,179,010
------------
PUERTO RICO 2.5%
1,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev
Ser V Rfdg................................. 5.750 07/01/18 1,007,240
10,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev
Ser Y (FSA Insd)........................... 6.250 07/01/21 11,244,400
------------
12,251,640
------------
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
MARKET
VALUE
<C> <S> <C> <C> <C>
TOTAL INVESTMENTS 98.7%
(Cost $454,003,343).................................................. $480,115,274
OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%............................ 6,393,471
------------
NET ASSETS 100.0%..................................................... $486,508,745
============
</TABLE>
* Zero coupon bond
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corporation
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
PSFG--Permanent School Fund Guaranty
See Notes to Financial Statements
24
<PAGE> 26
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $454,003,343)....................... $480,115,274
Receivables:
Interest.................................................. 8,613,707
Investments Sold.......................................... 423,242
Other....................................................... 11,830
------------
Total Assets............................................ 489,164,053
------------
LIABILITIES:
Payables:
Custodian Bank............................................ 1,655,128
Income Distributions--Preferred Shares.................... 345,786
Investment Advisory Fee................................... 273,524
Administrative Fee........................................ 84,161
Affiliates................................................ 15,945
Accrued Expenses............................................ 146,705
Trustees' Deferred Compensation and Retirement Plans........ 134,059
------------
Total Liabilities....................................... 2,655,308
------------
NET ASSETS.................................................. $486,508,745
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................. 26,111,931
Accumulated Undistributed Net Investment Income............. 360,982
Accumulated Net Realized Loss............................... (12,186,942)
------------
Net Assets Applicable to Common Shares.................. 296,508,745
------------
NET ASSETS.................................................. $486,508,745
============
NET ASSET VALUE PER COMMON SHARE ($296,508,745 divided by
19,106,785 shares outstanding)............................ $ 15.52
============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
Statement of Operations
For the Year Ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $28,642,933
-----------
EXPENSES:
Investment Advisory Fee..................................... 3,098,827
Administrative Fee.......................................... 953,486
Preferred Share Maintenance................................. 523,783
Custody..................................................... 45,368
Trustees' Fees and Related Expenses......................... 35,258
Legal....................................................... 24,420
Other....................................................... 285,360
-----------
Total Expenses.......................................... 4,966,502
-----------
NET INVESTMENT INCOME....................................... $23,676,431
===========
NET REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 900,101
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 14,026,765
End of the Period......................................... 26,111,931
-----------
Net Unrealized Appreciation During the Period............... 12,085,166
-----------
NET REALIZED AND UNREALIZED GAIN............................ $12,985,267
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $36,661,698
===========
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
Statement of Changes in Net Assets
For the Years Ended October 31, 2000 and 1999
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................... $ 23,676,431 $ 23,440,046
Net Realized Gain/Loss.............................. 900,101 (3,368,920)
Net Unrealized Appreciation/Depreciation During the
Period............................................ 12,085,166 (35,946,548)
------------ ------------
Change in Net Assets from Operations................ 36,661,698 (15,875,422)
------------ ------------
Distributions from Net Investment Income:
Common Shares..................................... (16,545,654) (17,195,559)
Preferred Shares.................................. (7,756,640) (6,177,707)
------------ ------------
Total Distributions................................. (24,302,294) (23,373,266)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES........................................ 12,359,404 (39,248,688)
NET ASSETS:
Beginning of the Period............................. 474,149,341 513,398,029
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $360,982
and $986,845, respectively)....................... $486,508,745 $474,149,341
============ ============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
-----------------------------------------
2000 1999 1998 1997
-----------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD
(A)...................................... $ 14.87 $ 16.93 $ 16.35 $ 15.68
-------- -------- -------- --------
Net Investment Income.................... 1.24 1.22 1.25 1.26
Net Realized and Unrealized Gain/Loss.... 0.68 (2.06) 0.59 0.72
-------- -------- -------- --------
Total from Investment Operations........... 1.92 (0.84) 1.84 1.98
-------- -------- -------- --------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders............ 0.87 0.90 0.91 0.96
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... 0.40 0.32 0.35 0.35
Distributions from Net Realized Gain:
Paid to Common Shareholders............ -0- -0- -0- -0-
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... -0- -0- -0- -0-
-------- -------- -------- --------
Total Distributions........................ 1.27 1.22 1.26 1.31
-------- -------- -------- --------
NET ASSET VALUE, END OF THE PERIOD......... $ 15.52 $ 14.87 $ 16.93 $ 16.35
======== ======== ======== ========
Market Price Per Share at End of the
Period................................... $12.9375 $12.9375 $15.8125 $15.0625
Total Investment Return at Market Price
(b)...................................... 6.86% -13.16% 11.33% 8.96%
Total Return at Net Asset Value (c)........ 10.56% -7.16% 9.35% 10.74%
Net Assets at End of the Period (In
millions)................................ $ 486.5 $ 474.1 $ 513.4 $ 502.5
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............ 1.75% 1.66% 1.64% 1.66%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common Shares
(d)...................................... 5.61% 5.56% 5.35% 5.76%
Portfolio Turnover......................... 26% 33% 30% 49%
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares.............. 1.05% 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 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.
(c) 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.
(d) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
28
<PAGE> 30
<TABLE>
<CAPTION>
SEPTEMBER 25, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31 OF INVESTMENT
------------------------------------------ OPERATIONS) TO
1996 1995 1994 1993 OCTOBER 31, 1992
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 15.61 $ 13.99 $ 17.18 $ 14.59 $ 14.77
------- ------- ------- ------- -------
1.29 1.33 1.35 1.37 0.06
0.16 1.70 (3.15) 2.41 (0.24)
------- ------- ------- ------- -------
1.45 3.03 (1.80) 3.78 (0.18)
------- ------- ------- ------- -------
1.02 1.02 1.02 0.89 -0-
0.36 0.39 0.28 0.30 -0-
-0- -0- 0.07 -0- -0-
-0- -0- 0.02 -0- -0-
------- ------- ------- ------- -------
1.38 1.41 1.39 1.19 --
------- ------- ------- ------- -------
$ 15.68 $ 15.61 $ 13.99 $ 17.18 $ 14.59
======= ======= ======= ======= =======
$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
29
<PAGE> 31
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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 seek 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 accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION 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, which approximates market value.
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. At October 31, 2000, there were no
when-issued or delayed delivery purchase commitments.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and original issue discount is accreted over the expected
life of each applicable security.
30
<PAGE> 32
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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, 2000, the Trust had an accumulated capital loss
carryforward for tax purposes of $12,103,642, which will expire between October
31, 2002 and October 31, 2007. Net realized gains or losses differ for financial
reporting and tax purposes primarily as a result of the deferral of losses
relating to wash sale transactions.
At October 31, 2000, for federal income tax purposes the cost of long-term
investments is $454,086,643, the aggregate gross unrealized appreciation is
$28,457,928 and the aggregate gross unrealized depreciation is $2,429,297,
resulting in net unrealized appreciation on long-term investments of
$26,028,631.
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, 2000, the Trust recognized expenses of
approximately $10,400 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.
31
<PAGE> 33
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each Trust. For the year ended October
31, 2000, the Trust recognized expenses of approximately $43,800 representing
Van Kampen's cost of providing accounting and legal services to the Trust, which
are reported as part of other and legal expenses, respectively, in the statement
of operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable 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 $121,696,367 and $140,447,197,
respectively.
4. PREFERRED SHARES
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, 2000 was
4.207%. During the year ended October 31, 2000, the rates ranged from 3.440% to
4.850%.
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.
32
<PAGE> 34
REPORT OF INDEPENDENT AUDITORS
To 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, 2000, and the related statements of
operations, changes in net assets and the financial highlights for the year then
ended. 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
audit. The Trust's financial statements and financial highlights for the periods
ended prior to October 31, 2000 were audited by other auditors whose report,
dated December 6, 1999, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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, 2000, by correspondence with the Trust's
custodian. 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 audit provides 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, 2000, the results of
its operations, the changes in its net assets and the financial highlights for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 6, 2000
33
<PAGE> 35
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
34
<PAGE> 36
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
changes 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
35
<PAGE> 37
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN ADVANTAGE MUNICIPAL
INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
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
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, 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
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, IL 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, 2000. The Trust designated 99.97% of the income distributions as a
tax-exempt income distribution. In January, 2001, the Trust will provide tax
information to shareholders for the 2000 calendar year.
(1) Independent auditors for the Trust perform an annual audit of the Trust's
financial statements. The Board of Trustees has engaged Deloitte & Touche
LLP to be the Trust's independent auditors.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"),
ceased being the Trust's independent accountants effective April 14, 2000.
The cessation of the client- auditor relationship between the Trust and KPMG
was based solely on a possible future business relationship by KPMG with an
affiliate of the Trust's investment adviser.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
36
<PAGE> 38
RESULTS OF
SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 21, 2000, where
shareholders voted on the election of trustees and the ratification of Deloitte
& Touche LLP as the independent auditors.
1) With regards to the election of the following trustee by common shareholders
of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
<S> <C> <C>
Wayne W. Whalen....................................... 17,417,385 252,577
</TABLE>
2) With regards to the election of the following trustee by preferred
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
<S> <C> <C>
Rod Dammeyer.......................................... 5,761 -0-
</TABLE>
The other trustees of the Trust whose terms did not expire in 2000 were David C.
Arch, Howard J Kerr, Theodore A. Myers, Richard F. Powers, III, and Hugo F.
Sonnenschein.
3) With regards to the ratification of Deloitte & Touche LLP as the independent
auditors for the Trust, 17,428,535 common shares and 5,761 preferred shares
voted in favor of the proposal, 79,021 shares voted against and 162,406 shares
abstained.
37
