<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 21
Statement of Operations.......................... 22
Statement of Changes in Net Assets............... 23
Financial Highlights............................. 24
Notes to Financial Statements.................... 26
Report of Independent Accountants................ 31
Dividend Reinvestment Plan....................... 32
</TABLE>
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
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
97Q3 4
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 VALUE MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VKV)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ (13.29%)
One-year total return based on NAV(2)..................... (6.88%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)............................................... 6.72%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................. 10.50%
SHARE VALUATIONS
Net asset value........................................... $13.80
Closing common stock price................................ $12.0625
One-year high common stock price (12/21/98)............... $15.1875
One-year low common stock price (10/19/99)................ $11.4375
Preferred share (Series A) rate(5)........................ 3.500%
Preferred share (Series B) rate(5)........................ 3.450%
Preferred share (Series C) rate(5)........................ 3.419%
Preferred share (Series D) rate(5)........................ 3.495%
Preferred share (Series E) rate(5)........................ 3.300%
</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 VALUE MUNICIPAL INCOME TRUST
We recently spoke with representatives of the adviser of the Van Kampen Value
Municipal Income Trust about the key events and economic forces that shaped the
markets during the past year. Timothy D. Haney, portfolio manager, has managed
the Trust since 1995 and worked in the investment industry since 1988. 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
overall 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 We took advantage of the general market price declines to enhance the
current income potential and tax management of the Trust. We sold some of
our holdings at a capital loss to offset some of the gains we had earned
early in 1999. This allowed us to avoid the need to distribute taxable capital
gains to shareholders this year. We replaced these bonds with longer-maturity,
higher-yielding issues, which protected the Trust's income stream. The new bonds
also had better protection against bond calls.
As a consequence of this strategy, there was an increase in the portfolio's
duration, or sensitivity to interest-rate changes. We feel that this 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.
Q WHAT AREAS OF THE MUNICIPAL MARKET WERE MOST ATTRACTIVE TO YOU?
A We continually looked for the bonds that we felt represented the best
values compared with the other offerings in the marketplace. In general,
the most attractive bonds were the ones 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. For example, we sought bonds issued in states
where heavy supply had temporarily suppressed prices. During the last year, we
found attractive issues that met this criteria in states like New York,
Colorado, and Michigan. When we correctly anticipated an increase in demand,
this strategy 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 during the reporting period. For the one-year period ended October 31,
1999, the Trust returned -13.29 percent(1) based on market price. This reflects
a decrease in market price from $14.75 per share on October 31, 1998, to
$12.0625 per share on October 31, 1999.
On the positive side, the dividend remained unchanged during the past 12
months. The monthly federally tax-exempt dividend of $0.0675 per share
translates to a distribution rate of 6.72 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 taxable yield of
10.5 percent(4) for an investor in the 36 percent federal income tax
5
<PAGE> 7
bracket. Please refer to the chart and footnotes on page 3 for additional
performance results. Past performance does not guarantee future performance.
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.]
Timothy D. Haney
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 VALUE MUNICIPAL INCOME TRUST
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
Health Care 14.40 16.80
Industrial Revenue 13.20 12.50
Public Building 11.20 12.90
Retail Elec/Gas/Teleph 9.40 10.30
General Purpose 8.10 6.90
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
MARCH 1993 THROUGH OCTOBER 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Mar 1993 14.95 14.95
14.50 15.20
14.63 15.13
14.75 15.70
14.75 15.61
15.00 16.22
15.25 16.58
Oct 1993 15.25 16.43
14.50 15.90
14.50 16.25
15.00 16.46
14.13 15.51
12.88 13.95
12.63 13.91
12.88 14.09
12.88 13.84
12.63 14.09
12.38 14.04
11.50 13.53
Oct 1994 10.75 12.90
11.38 12.23
11.00 12.82
12.00 13.31
12.38 14.00
12.38 14.07
12.50 13.87
12.63 14.30
12.38 13.75
12.50 13.88
12.50 14.02
12.13 14.08
Oct 1995 12.75 14.37
12.88 14.78
12.50 14.96
13.00 15.00
12.88 14.71
12.25 14.20
12.00 13.99
11.88 13.91
11.88 14.03
12.38 14.19
12.50 14.10
12.50 14.35
Oct 1996 12.38 14.50
12.63 14.86
12.13 14.63
12.63 14.51
12.63 14.63
12.38 14.23
12.63 14.29
12.75 14.52
13.06 14.67
13.75 15.28
13.50 14.90
13.75 15.10
Oct 1997 13.56 15.14
13.94 15.15
13.94 15.43
14.25 15.55
14.38 15.45
14.13 15.36
13.63 15.11
13.75 15.38
13.94 15.36
14.00 15.31
14.31 15.61
14.63 15.82
Oct 1998 14.75 15.64
14.88 15.64
14.75 15.60
14.38 15.77
14.63 15.55
14.38 15.43
14.00 15.41
13.50 15.14
13.75 14.68
13.31 14.67
12.88 14.34
12.38 14.17
Oct 1999 12.06 13.80
</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 VALUE 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 NON-RATED
------- ----- --- ------- ---------
<S> <C> <C> <C> <C> <C>
As of October 31, 1999 64.40 7.00 10.00 17.60 1.00
</TABLE>
AS OF OCTOBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/AAA AA/AA A/A BBB/BAA NON-RATED
------- ----- --- ------- ---------
<S> <C> <C> <C> <C> <C>
As of October 31, 1998 63.20 7.50 11.40 17.30 1.00
</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>
DIVIDEND
--------
<S> <C>
Nov 1998 0.0675
Dec 1998 0.0675
Jan 1999 0.0675
Feb 1999 0.0675
Mar 1999 0.0675
Apr 1999 0.0675
May 1999 0.0675
Jun 1999 0.0675
Jul 1999 0.0675
Aug 1999 0.0675
Sep 1999 0.0675
Oct 1999 0.0675
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 98.6%
ALABAMA 2.7%
$ 3,815 Alabama Agricultural & Mechanical
Univ Rev (Prerefunded @ 11/01/05)
(MBIA Insd).......................... 6.500% 11/01/25 $ 4,218,894
5,000 Birmingham Baptist Med Cent AL Spl
Care Fac Fin Auth Rev (MBIA Insd).... 5.750 11/15/10 5,089,750
2,650 Huntsville, AL Healthcare Auth
Healthcare Fac Rev Ser A
(MBIA Insd).......................... 6.375 06/01/22 2,706,710
3,000 Jefferson Cnty, AL Swr Rev Cap Impt
Warrants Ser A (FGIC Insd)........... 5.125 02/01/39 2,540,670
288 Mobile, AL Indl Dev Brd Solid Waste
Disp Rev Mobile Energy Svcs Co Proj
Rfdg (c)............................. 6.950 01/01/20 95,132
------------
14,651,156
------------
ALASKA 0.2%
1,000 North Slope Borough, AK Ser B
(FSA Insd)........................... 7.500 06/30/01 1,051,020
------------
ARIZONA 0.8%
4,295 Pima Cnty, AZ Indl Dev Auth Indl Rev
Lease Oblig Irvington Proj Tucson Ser
A Rfdg (FSA Insd).................... 7.250 07/15/10 4,620,819
------------
ARKANSAS 0.2%
3,050 Arkansas St Cap Apprec College
Savings Ser A........................ * 06/01/16 1,142,073
------------
CALIFORNIA 9.3%
825 California Hsg Fin Agy Rev Home Mtg
Ser B1............................... 6.300 08/01/08 845,840
895 California Rural Home Mtg Fin Auth
Single Family Mtg Rev Ser B (GNMA
Collateralized)...................... 7.750 09/01/26 966,358
1,500 California St Pub Wks Brd Lease Rev
Dept of Corrections Monterey Ser A
(Prerefunded @ 11/01/04)
(MBIA Insd).......................... 6.400 11/01/10 1,659,375
6,000 California St Pub Wks Brd Lease Rev
Dept of Corrections St Prisons Ser A
Rfdg (AMBAC Insd).................... 5.250 12/01/13 5,868,300
2,000 California St Pub Wks Brd Lease Rev
Dept of Corrections St Prisons Ser A
Rfdg (AMBAC Insd).................... 5.000 12/01/19 1,801,640
30,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Cap Apprec Rfdg............... * 01/15/22 7,222,500
1,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Sr Lien Ser A................. 6.500 01/01/32 1,106,200
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 2,000 Fresno, CA Hlth Fac Rev Holy Cross
Hlth Sys Saint Agnes Med (Prerefunded
@ 06/01/02) (MBIA Insd).............. 6.625% 06/01/21 $ 2,156,960
1,175 Kings Cnty, CA Waste Mgmt Auth Solid
Waste Rev............................ 7.200 10/01/14 1,255,711
2,325 Los Angeles, CA Dept Wtr & Pwr Elec
Plant Rev (MBIA Insd)................ 4.250 11/15/14 1,973,785
9,500 Los Angeles, CA Dept Wtr & Pwr Elec
Plant Rev Crossover Rfdg
(FGIC Insd)(b)....................... 5.375 09/01/23 8,802,320
5,000 Orange Cnty, CA Recovery Partn Ser A
(MBIA Insd).......................... 6.000 07/01/06 5,378,600
1,000 Orange Cnty, CA Recovery Ser A Rfdg
(MBIA Insd).......................... 5.600 06/01/07 1,052,740
2,995 Orange Cnty, CA Recovery Ser A Rfdg
(MBIA Insd).......................... 6.000 06/01/08 3,224,657
5,700 Sacramento, CA City Fin Auth Rev Comb
Proj B (MBIA Insd)................... * 11/01/15 2,249,220
7,550 San Joaquin Hills, CA Transn Corridor
Agy Toll Rd Rev Cap Apprec Ser A Rfdg
(MBIA Insd).......................... * 01/15/36 824,536
3,250 San Marcos, CA Pub Fac Auth Rev Pub
Impt Civic Cent Ser A Rfdg........... 6.200 08/01/22 3,228,062
10,225 Santa Ana, CA Unified Sch Dist Ctfs
Partn Cap Apprec Fin Proj
(FSA Insd)........................... * 04/01/32 1,404,710
------------
51,021,514
------------
COLORADO 5.6%
5,640 Adams & Arapahoe Cntys, CO Jt Sch
Dist Ser C (MBIA Insd)............... 5.750 12/01/08 5,914,160
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser B (Prerefunded
@ 08/31/05).......................... 6.950 08/31/20 1,133,110
3,000 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser B (Prerefunded
@ 08/31/05).......................... 7.000 08/31/26 3,406,230
9,000 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser C (Prerefunded
@ 08/31/05).......................... * 08/31/26 1,405,890
2,825 Denver, CO City & Cnty Arpt Rev...... 8.500 11/15/23 2,971,731
920 Denver, CO City & Cnty Arpt Rev
Ser A................................ 8.875 11/15/12 1,000,932
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO (CONTINUED)
$ 330 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/01)............. 8.875% 11/15/12 $ 365,604
3,000 Denver, CO City & Cnty Arpt Rev Ser B
(MBIA Insd).......................... 6.250 11/15/07 3,205,860
6,000 Denver, CO City & Cnty Arpt Rev
Ser C................................ 6.600 11/15/04 6,290,400
7,500 E-470 Pub Hwy Auth CO Rev Sr Ser B
Rfdg (MBIA Insd)..................... * 09/01/19 2,233,500
1,030 Loveland, CO Ctfs Partn
(FSA Insd)(a)........................ 4.850 08/15/05 1,028,125
2,000 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)................. 7.500 12/01/11 2,114,700
------------
31,070,242
------------
CONNECTICUT 0.5%
2,500 Connecticut St Hlth & Edl Fac Auth
Rev Nursing Home Pgm AHF/Hartford
(Prerefunded @ 11/01/04)............. 7.125 11/01/14 2,805,450
------------
FLORIDA 5.0%
1,985 Bay Cnty, FL Sch Brd Ctfs Partn
(Prerefunded @ 07/01/04)
(AMBAC Insd)......................... 6.750 07/01/12 2,193,207
3,500 Citrus Cnty, FL Hosp Brd Rev Citrus
Mem Hosp Ser A Rfdg (FSA Insd)....... 6.500 08/15/12 3,715,355
2,500 Dade Cnty, FL Wtr & Swr Sys Rev
(FGIC Insd).......................... 5.250 10/01/21 2,294,250
1,395 Florida Hsg Fin Agy Single Family Mtg
Ser A Rfdg (GNMA Collateralized)..... 6.650 01/01/24 1,444,606
5,000 Greater Orlando Aviation Auth Orlando
FL Arpt Fac Rev Ser A (FGIC Insd).... 5.125 10/01/28 4,344,150
3,000 Hillsborough Cnty, FL Cap Impt Pgm
Rev Criminal Justice Fac Rfdg
(FGIC Insd).......................... 5.250 08/01/16 2,810,640
3,000 Hillsborough Cnty, FL Indl Dev Auth
Pollutn Ctl Rev Tampa Elec Co Proj
Ser 92 Rfdg.......................... 8.000 05/01/22 3,285,630
2,945 Hillsborough Cnty, FL Sch Brd Ctfs
Partn (Prerefunded @ 07/01/04)
(MBIA Insd).......................... 6.000 07/01/12 3,156,893
3,985 Pinellas Cnty, FL Hsg Fin Auth Single
Family Mtg Rev Multi Cnty Pgm Ser A
(GNMA Collateralized)................ 6.700 02/01/28 4,106,542
------------
27,351,273
------------
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GEORGIA 1.8%
$ 3,000 Cobb Cnty, GA Hosp Auth Rev Antic
Ctfs Ser A (AMBAC Insd).............. 4.750% 04/01/26 $ 2,436,360
5,000 Georgia Muni Elec Auth Pwr Rev Ser B
Rfdg (FGIC Insd)..................... 5.700 01/01/19 4,910,950
2,700 Marietta, GA Dev Auth Rev First Mtg
Life College Ser B (FSA Insd)........ 5.375 09/01/09 2,725,569
------------
10,072,879
------------
ILLINOIS 5.5%
6,000 Chicago, IL Brd Ed Chicago Sch
Reform Brd Ser A (FGIC Insd)......... 5.500 12/01/26 5,627,100
3,500 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)............... * 01/01/17 1,271,515
1,000 Chicago, IL Park Dist (Prerefunded @
01/01/02)............................ 6.700 01/01/11 1,065,590
1,560 Illinois Hlth Fac Auth Rev Carle
Fndtn Ser A Rfdg (FGIC Insd)......... 6.750 01/01/10 1,597,253
3,180 Illinois Hlth Fac Auth Rev Children's
Mem Hosp (MBIA Insd)................. 6.250 08/15/13 3,343,611
2,250 Illinois Hlth Fac Auth Rev
Evangelical Hosps Ser A Rfdg
(FSA Insd)........................... 6.750 04/15/17 2,417,512
1,250 Illinois Hlth Fac Auth Rev
Evangelical Hosps Ser C (FSA Insd)... 6.750 04/15/17 1,343,063
1,000 Illinois Hlth Fac Auth Rev Highland
Park Hosp Proj Ser A (MBIA Insd)..... 5.750 10/01/17 968,990
5,000 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Plan
Expn Proj Ser A Rfdg (FGIC Insd)..... 5.250 12/15/28 4,427,050
2,070 Northern IL Univ Ctfs Partn Hoffman
Estates Cent Proj (FSA Insd)......... 5.400 09/01/16 1,970,474
5,000 Regional Tran Auth IL Ser A
(AMBAC Insd)......................... 8.000 06/01/17 6,173,850
------------
30,206,008
------------
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
KENTUCKY 2.7%
$ 9,900 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.500% 02/01/12 $ 10,394,406
3,500 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.500 02/01/20 3,674,790
500 Mt Sterling, KY Lease Rev KY League
Cities Fdg Ser B..................... 6.100 03/01/18 505,745
------------
14,574,941
------------
LOUISIANA 2.0%
2,000 Louisiana Stadium & Expo Dist Hotel
Occupancy Tax & Stadium Rev Ser B
Rfdg (FGIC Insd)..................... 4.750 07/01/21 1,674,400
3,875 New Orleans, LA Rfdg (FGIC Insd)..... 4.750 12/01/26 3,161,457
6,000 Saint Charles Parish, LA Solid Waste
Disp Rev LA Pwr & Lt Co Proj
(FSA Insd)........................... 7.050 04/01/22 6,283,260
------------
11,119,117
------------
MAINE 0.8%
3,000 Maine Edl Ln Mktg Corp Student Ln
Rev Ser A4........................... 5.950 11/01/03 3,122,370
1,125 Maine St Hsg Auth Mtg Purp Ser C2.... 6.875 11/15/23 1,174,264
------------
4,296,634
------------
MASSACHUSETTS 3.4%
1,000 Massachusetts St Indl Fin Agy Wtr
Treatment American Hingham........... 6.750 12/01/20 1,037,520
1,000 Massachusetts St Indl Fin Agy Wtr
Treatment American Hingham........... 6.900 12/01/29 1,044,250
1,000 Massachusetts St Indl Fin Agy Wtr
Treatment American Hingham........... 6.950 12/01/35 1,052,390
14,500 Massachusetts St Wtr Res Auth Ser A
(Prerefunded @ 12/01/01)............. 6.500 12/01/19 15,433,075
------------
18,567,235
------------
MICHIGAN 5.3%
1,250 Battle Creek, MI Downtown Dev Auth
Tax Increment Rev
(Prerefunded @ 05/01/04)............. 7.600 05/01/16 1,412,388
5,000 Detroit, MI Downtown Dev Auth Tax
Increment Rev Dev Area No 1 Proj
Ser C1 (Prerefunded @ 07/01/06)...... 6.250 07/01/25 5,444,750
</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 (CONTINUED)
$ 2,750 Detroit, MI Ser B Rfdg............... 7.000% 04/01/04 $ 2,954,957
4,000 Michigan St Bldg Auth Rev Ser I Rfdg
(MBIA Insd).......................... 6.250 10/01/20 4,062,800
3,000 Michigan St Hosp Fin Auth Rev Detroit
Med Cent Oblig Ser A................. 5.250 08/15/23 2,386,830
4,300 Michigan St Hosp Fin Auth Rev Detroit
Med Cent Oblig Ser A................. 5.250 08/15/28 3,359,676
5,000 Michigan St Strategic Fd Ltd Oblig
Rev Detroit Edison Co Ser A Rfdg
(MBIA Insd).......................... 5.550 09/01/29 4,569,600
6,000 Wayne Charter Cnty, MI Arpt Rev
Detroit Metro Wayne Cnty Ser A
(MBIA Insd).......................... 5.000 12/01/28 5,017,440
------------
29,208,441
------------
MISSISSIPPI 0.3%
2,000 Mississippi Business Fin Corp MS
Pollutn Ctl Rev Sys Energy Res
Inc Proj............................. 5.875 04/01/22 1,768,720
------------
MISSOURI 0.4%
2,395 Kansas City, MO Port Auth Fac
Riverfront Park Proj Ser A........... 5.750 10/01/03 2,461,150
------------
NEVADA 1.6%
5,750 Clark Cnty, NV Indl Dev Rev NV Pwr Co
Proj Ser C Rfdg (AMBAC Insd)......... 7.200 10/01/22 6,214,543
2,325 Nevada Hsg Div Single Family Pgm Mezz
Ser B................................ 6.550 10/01/12 2,365,757
------------
8,580,300
------------
NEW JERSEY 3.5%
1,000 Bordentown, NJ Swr Auth Rev Ser C
(MBIA Insd).......................... 6.800 12/01/25 1,040,970
1,000 New Jersey Econ Dev Auth Econ Dev Rev
Manahawkin Convalescent Ser A Rfdg
(FHA Gtd)............................ 6.650 02/01/23 1,046,550
2,500 New Jersey Econ Dev Auth Mkt
Transition Fac Rev Sr Lien Ser A
(MBIA Insd).......................... 5.800 07/01/09 2,586,300
1,695 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic
(FSA Insd)........................... 6.000 07/01/06 1,807,328
2,500 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic
(FSA Insd)........................... 6.750 07/01/19 2,745,450
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW JERSEY (CONTINUED)
$ 4,000 New Jersey St Transn Trust Fund Auth
Transn Sys Ser A..................... 5.750% 06/15/16 $ 4,010,320
6,750 Salem Cnty, NJ Indl Pollutn Ctl Fin
Auth Rev Pollutn Ctl Pub Svc Elec &
Gas Ser A (MBIA Insd)................ 5.450 02/01/32 6,235,110
------------
19,472,028
------------
NEW MEXICO 0.3%
2,000 New Mexico St Hosp Equip Ln Council
Hosp Rev Mem Med Cent Inc Proj....... 5.500 06/01/28 1,699,440
------------
NEW YORK 14.6%
5,000 Long Island Pwr Auth NY Elec Sys Rev
Gen Ser A (MBIA Insd)................ 5.250 12/01/26 4,467,050
1,695 New York City Muni Wtr Fin Auth Wtr &
Swr Sys Rev Ser A.................... 7.000 06/15/09 1,780,818
5,000 New York City Muni Wtr Fin Auth Wtr &
Swr Sys Rev Ser B (FGIC Insd)........ 5.250 06/15/29 4,448,400
7,270 New York City Ser A.................. 7.000 08/01/04 7,917,975
5,700 New York City Ser E Rfdg............. 6.600 08/01/03 6,058,872
5,000 New York City Ser G.................. 5.750 02/01/14 4,939,700
1,250 New York St Dorm Auth Lease Rev St
Univ Dorm Facs Ser C (MBIA Insd)..... 5.500 07/01/29 1,159,675
2,000 New York St Dorm Auth Rev City Univ
Third Genl Res Ser 2
(Prerefunded @ 07/01/04)
(MBIA Insd).......................... 6.250 07/01/19 2,135,880
7,575 New York St Dorm Auth Rev Cons City
Univ Sys Ser A....................... 5.625 07/01/16 7,374,717
4,000 New York St Dorm Auth Rev Court Fac
Lease Ser A.......................... 5.250 05/15/21 3,519,080
2,500 New York St Dorm Auth Rev Dept
Of Hlth.............................. 5.500 07/01/25 2,263,025
4,000 New York St Dorm Auth Rev St Univ Edl
Fac Ser A Rfdg (AMBAC Insd).......... 5.500 05/15/09 4,090,800
5,215 New York St Dorm Auth Rev St Univ Edl
Fac Ser B Rfdg....................... 7.375 05/15/14 5,397,368
5,885 New York St Energy Resh & Dev Auth
Fac Rev.............................. 7.125 12/01/29 6,422,183
2,310 New York St Med Care Fac Fin Agy Rev
Saint Peter's Hosp Proj Ser A
(AMBAC Insd)......................... 5.375 11/01/13 2,219,933
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 3,130 New York St Urban Dev Corp Rev
Correctional Fac Ser A Rfdg.......... 5.500% 01/01/16 $ 2,939,884
5,000 New York St Urban Dev Corp Rev St
Fac Rfdg............................. 5.700 04/01/20 4,838,750
1,500 Niagara, NY Frontier Arpt Rev Buffalo
Niagara Intl Arpt Ser A
(MBIA Insd).......................... 5.625 04/01/29 1,388,640
7,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6
(MBIA Insd).......................... 5.750 12/01/25 6,774,740
------------
80,137,490
------------
OHIO 3.9%
2,000 Cuyahoga Cnty, OH Multi-Family Rev
Hsg Dale Bridge Apt
(GNMA Collateralized)................ 6.600 10/20/30 2,089,300
3,540 Franklin Cnty, OH Hosp Rev & Impt
Doctor's Hosp Proj Rfdg.............. 5.875 12/01/23 3,572,887
5,515 Lucas Cnty, OH Hosp Rev Promedica
Hlthcare Oblig (MBIA Insd)........... 6.000 11/15/06 5,827,204
2,780 Miami Cnty, OH Hosp Fac Rev Upper Vly
Med Cent Ser C Rfdg & Impt........... 5.600 05/15/02 2,800,238
5,130 Muskingum Cnty, OH Hosp Fac Rev
Bethesda Care Sys Rfdg & Impt
(Connie Lee Insd).................... 6.250 12/01/10 5,418,922
2,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac
Rev OH Edison Co Proj Rfdg........... 5.950 05/15/29 1,813,920
------------
21,522,471
------------
OKLAHOMA 3.1%
7,000 Oklahoma Dev Fin Auth Rev St John
Hlth Sys Rfdg........................ 5.750 02/15/25 6,689,830
10,000 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc............................ 7.375 12/01/20 10,373,700
------------
17,063,530
------------
OREGON 0.7%
3,795 Oregon St Dept Admin Serv Ctfs Partn
Ser A (MBIA Insd).................... 5.250 11/01/10 3,793,406
------------
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA 3.9%
$ 3,000 Pennsylvania St Higher Edl Fac Auth
Rev Med College PA Ser A (Prerefunded
@ 03/01/01).......................... 7.250% 03/01/11 $ 3,174,240
9,450 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd)...................... 6.250 07/01/08 10,077,575
2,525 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd)...................... 6.375 07/01/26 2,579,414
800 Philadelphia, PA Hosps & Higher Ed
Fac Auth Rev Cmnty College Ser A
(MBIA Insd).......................... 6.100 05/01/09 858,824
1,370 Philadelphia, PA Hosps & Higher Ed
Fac Auth Rev Cmnty College Ser B Rfdg
(MBIA Insd).......................... 6.500 05/01/08 1,492,642
2,235 Ridley Park, PA Hosp Auth Rev Taylor
Hosp Ser A........................... 6.000 12/01/05 2,304,374
1,000 Southeastern PA Trans Auth PA Spl Rev
Ser A (FGIC Insd).................... 4.750 03/01/24 828,230
------------
21,315,299
------------
RHODE ISLAND 0.2%
1,050 Rhode Island St Hlth & Edl Bldg Corp
Rev Higher Edl Fac Roger Williams
(Prerefunded @ 11/15/04) (Connie Lee
Insd)................................ 7.200 11/15/14 1,185,534
------------
TENNESSEE 0.2%
1,320 Tennessee Hsg Dev Agy Mtg Fin Ser
A.................................... 7.125 07/01/26 1,365,764
------------
TEXAS 6.2%
9,065 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.............. 7.500 12/01/29 9,451,804
3,000 Brazos River Auth TX Rev Houston Inds
Inc Proj Ser D Rfdg (MBIA Insd)...... 4.900 10/01/15 2,668,680
6,000 Dallas, TX Rev Spl Tax Ser A (AMBAC
Insd)................................ 4.750 08/15/27 4,883,880
3,000 Dallas Cnty, TX Util & Reclamation
Dist Ser B Rfdg (AMBAC Insd) (a)..... 5.875 02/15/29 2,937,060
2,250 Harris Cnty, TX Hlth Fac Dev Corp
Hosp Rev Hermann Hosp Proj
(Prerefunded @ 10/01/04) (MBIA
Insd)................................ 6.375 10/01/24 2,434,275
1,275 Matagorda Cnty, TX Navig Dist No 1
Rev Houston Lt & Pwr Ser A Rfdg
(AMBAC Insd)......................... 6.700 03/01/27 1,344,462
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$ 5,000 Matagorda Cnty, TX Navig Dist No 1
Rev Houston Lt Rfdg (AMBAC Insd)..... 5.125% 11/01/28 $ 4,289,500
4,500 Tarrant Cnty, TX Hlth Fac Dev TX Hlth
Res Sys Ser A (MBIA Insd)............ 5.000 02/15/26 3,800,925
2,250 Tomball, TX Hosp Auth Rev Rfdg....... 6.125 07/01/23 2,095,965
------------
33,906,551
------------
UTAH 0.3%
4,950 Intermountain Pwr Agy UT Pwr Supply
Rev Ser A Rfdg (FGIC Insd)........... * 07/01/17 1,694,187
------------
VIRGINIA 2.1%
2,250 Fredericksburg, VA Indl Dev Auth Hosp
Fac Rev (Prerefunded @ 08/15/01)
(FGIC Insd).......................... 6.600 08/15/23 2,374,267
3,000 Isle Wight Cnty, VA Indl Dev Auth
Solid Waste Disp Fac Rev Union Camp
Corp Proj............................ 6.550 04/01/24 3,034,200
2,000 Loudoun Cnty, VA Ctfs Partn (FSA
Insd)................................ 6.900 03/01/19 2,147,420
3,000 Upper Occoquan Sewage Auth VA Regl
Sewage Rev Ser A (MBIA Insd)......... 4.750 07/01/29 2,445,720
1,500 Virginia St Hsg Dev Auth Multi-Family
Ser E Rfdg........................... 5.900 11/01/17 1,504,500
------------
11,506,107
------------
WASHINGTON 4.1%
5,000 King Cnty, WA Ser B.................. 5.900 12/01/14 5,047,000
2,500 King Cnty, WA Ser B.................. 6.625 12/01/15 2,723,175
4,000 Washington St Pub Pwr Supply Ser A
Rfdg (FGIC Insd)..................... 7.000 07/01/08 4,489,680
10,000 Washington St Pub Pwr Supply Sys
Nuclear Proj No 1 Rev (AMBAC Insd)... 5.700 07/01/09 10,298,900
------------
22,558,755
------------
</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
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WEST VIRGINIA 2.5%
$ 5,920 Harrison Cnty, WV Cnty Cmnty Solid
Waste Disp Rev West PA Pwr Co Ser C
(AMBAC Insd)......................... 6.750% 08/01/24 $ 6,265,491
4,000 Marshall Cnty, WV Pollutn Ctl Rev OH
Pwr Co Proj Ser C Rfdg (MBIA Insd)... 6.850 06/01/22 4,258,360
3,000 West Virginia St Wtr Dev Auth Wtr Dev
Rev Ln Pgm II Ser A (Prerefunded @
11/01/04) (FSA Insd)................. 6.750 11/01/33 3,328,260
------------
13,852,111
------------
WISCONSIN 1.6%
3,500 Wisconsin Hsg & Econ Dev Auth
Homeownership Rev Ser A.............. 6.450 03/01/17 3,577,980
3,000 Wisconsin St Hlth & Edl Fac Auth Rev
(FGIC Insd).......................... 5.000 08/15/10 2,875,320
2,675 Wisconsin St Hlth & Edl Fac Auth Rev
FH Hlthcare Dev Inc Proj............. 6.250 11/15/28 2,484,781
------------
8,938,081
------------
PUERTO RICO 3.3%
7,000 Puerto Rico Comwlth Hwy & Tran Auth
Hwy Rev Ser Y Rfdg (FSA Insd)........ 6.250 07/01/21 7,407,400
10,000 Puerto Rico Pub Bldgs Auth Gtd Pub
Edl & Hlth Fac Rfdg Ser M (MBIA
Insd)................................ 5.600 07/01/08 10,465,300
------------
17,872,700
------------
TOTAL INVESTMENTS 98.6%
(Cost $532,845,119)................................................ 542,452,426
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%.......................... 7,654,739
------------
NET ASSETS 100.0%................................................... $550,107,165
============
</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.
(c) Issuer has filed for protection in federal bankruptcy court.
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
LOC--Letter of Credit
See Notes to Financial Statements
20
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $532,845,119)....................... $542,452,426
Receivables:
Interest.................................................. 9,965,270
Investments Sold.......................................... 4,982,193
Other....................................................... 80,705
------------
Total Assets.......................................... 557,480,594
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 5,751,505
Income Distributions--Common and Preferred Shares......... 467,076
Custodian Bank............................................ 460,636
Investment Advisory Fee................................... 304,746
Administrative Fee........................................ 93,768
Affiliates................................................ 40,653
Accrued Expenses............................................ 137,181
Trustees' Deferred Compensation and Retirement Plans........ 117,864
------------
Total Liabilities..................................... 7,373,429
------------
NET ASSETS.................................................. $550,107,165
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 9,000 issued with liquidation preference of
$25,000 per share)........................................ $225,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 23,555,115 shares issued and
outstanding).............................................. 235,551
Paid in Surplus............................................. 348,118,080
Net Unrealized Appreciation................................. 9,607,307
Accumulated Undistributed Net Investment Income............. 2,205,942
Accumulated Net Realized Loss............................... (35,059,715)
------------
Net Assets Applicable to Common Shares................ 325,107,165
------------
NET ASSETS.................................................. $550,107,165
============
NET ASSET VALUE PER COMMON SHARE ($325,107,165 divided
by 23,555,115 shares outstanding)......................... $ 13.80
============
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 32,725,891
------------
EXPENSES:
Investment Advisory Fee..................................... 3,766,421
Administrative Fee.......................................... 1,158,899
Preferred Share Maintenance................................. 613,622
Trustees' Fees and Related Expenses......................... 38,760
Custody..................................................... 37,764
Legal....................................................... 9,514
Other....................................................... 310,393
------------
Total Expenses.......................................... 5,935,373
------------
NET INVESTMENT INCOME....................................... $ 26,790,518
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (2,368,152)
Options................................................... 166,890
------------
Net Realized Loss........................................... (2,201,262)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 51,212,316
End of the Period:
Investments............................................. 9,607,307
------------
Net Unrealized Depreciation During the Period............... (41,605,009)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(43,806,271)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(17,015,753)
============
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
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............................. $ 26,790,518 $26,890,772
Net Realized Gain/Loss............................ (2,201,262) 1,629,512
Net Unrealized Appreciation/Depreciation During
the Period...................................... (41,605,009) 10,448,731
------------- -------------
Change in Net Assets from Operations.............. (17,015,753) 38,969,015
------------- -------------
Distributions from Net Investment Income:
Common Shares................................... (19,079,222) (19,079,154)
Preferred Shares................................ (7,302,425) (7,977,673)
------------- -------------
Total Distributions............................... (26,381,647) (27,056,827)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (43,397,400) 11,912,188
NET ASSETS:
Beginning of the Period........................... 593,504,565 581,592,377
------------- -------------
End of the Period (Including accumulated
undistributed net investment income of
$2,205,942 and $1,797,071, respectively)........ $ 550,107,165 $ 593,504,565
============= =============
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a)..... $ 15.644 $ 15.139 $ 14.496
-------- -------- --------
Net Investment Income........... 1.137 1.142 1.163
Net Realized and Unrealized
Gain/Loss..................... (1.859) .512 .631
-------- -------- --------
Total from Investment
Operations...................... (.722) 1.654 1.794
-------- -------- --------
Less:
Distributions from Net
Investment Income:
Paid to Common Shareholders... .810 .810 .810
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders...... .310 .339 .341
Distributions from Net Realized
Gain on Investments:
Paid to Common Shareholders... -0- -0- -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders...... -0- -0- -0-
-------- -------- --------
Total Distributions............... 1.120 1.149 1.151
-------- -------- --------
Net Asset Value, End of the
Period.......................... $ 13.802 $ 15.644 $ 15.139
======== ======== ========
Market Price Per Share at End of
the Period...................... $12.0625 $14.7500 $13.5625
Total Investment Return at Market
Price (b)....................... (13.29%) 15.10% 16.61%
Total Return at Net Asset Value
(c)............................. (6.88%) 8.86% 10.30%
Net Assets at End of the Period
(In millions)................... $ 550.1 $ 593.5 $ 581.6
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**........................ 1.67% 1.67% 1.70%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)............... 5.50% 5.21% 5.61%
Portfolio Turnover................ 35% 24% 32%
* Non-Annualized
** Ratio of Expenses to Average
Net Assets Including Preferred
Shares......................... 1.02% 1.03% 1.03%
</TABLE>
(a) Net Asset Value at March 26, 1993, is adjusted for common and preferred
share offering costs of $.211 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 upon NAV.
(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
24
<PAGE> 26
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 26, 1993
Year Ended October 31 (Commencement
- --------------------------------- of Investment
1996 1995 1994 Operations) to
- --------------------------------- October 31, 1993
<S> <C> <C> <C>
$14.366 $12.901 $16.427 $14.789
------- ------- ------- -------
1.168 1.183 1.177 .639
.131 1.571 (3.340) 1.487
------- ------- ------- -------
1.299 2.754 (2.163) 2.126
------- ------- ------- -------
.829 .912 .912 .380
.340 .377 .238 .108
-0- -0- .177 -0-
-0- -0- .036 -0-
------- ------- ------- -------
1.169 1.289 1.363 .488
------- ------- ------- -------
$14.496 $14.366 $12.901 $16.427
======= ======= ======= =======
$12.375 $12.750 $10.750 $15.250
3.70% 27.67% (23.52%) 4.25%*
6.87% 19.04% (15.48%) 12.14%*
$ 566.5 $ 563.4 $ 528.9 $ 611.9
1.77% 1.80% 1.70% 1.46%
5.78% 5.90% 6.39% 5.59%
42% 50% 79% 66%*
1.06% 1.06% 1.03% 1.00%
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Value 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. The Trust will invest in a portfolio consisting
substantially of municipal obligations rated investment grade at the time of
investment. The Trust commenced investment operations on March 26, 1993.
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.
26
<PAGE> 28
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 carry
forward for tax purposes of $35,059,715 which will expire between October 31,
2002 and October 31, 2007.
At October 31, 1999, for federal income tax purposes, cost of long-term
investments is $532,845,119; the aggregate gross unrealized appreciation is
$18,519,673 and the aggregate gross unrealized depreciation is $8,912,366,
resulting in net unrealized appreciation on long-term investments of $9,607,307.
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
daily 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 $5,000 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $142,200 representing Van Kampen's cost of providing accounting
and legal services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust 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 $200,085,659 and $202,465,586,
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 the unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except for exercised option contracts where the
recognition of gain or loss is postponed until the disposal of the security
underlying the option contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
28
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
Transactions in options for the year ended October 31, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1998................. 200 $ 123,380
Options Written and Purchased (Net)............. 400 165,512
Options Terminated in Closing Transactions
(Net)......................................... (200) (67,132)
Options Expired (Net)........................... (400) (221,760)
---- ---------
Outstanding at October 31, 1999................. -0- $ -0-
==== =========
</TABLE>
B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin).
There were no transactions in futures contracts during the year ended
October 31, 1999.
C. EMBEDDED CAPS--These securities, which would be identified in the portfolio
of investments, include 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 price of these securities may be more
volatile than the price of a comparable fixed rate security. 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.
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
The Trust has outstanding 9,000 Auction Preferred Shares ("APS") in five
series. Series A, B, C and D each contain 2,000 shares and Series E contains
1,000 shares. Dividends are cumulative and the dividend rate is periodically
reset through an auction process. The dividend period for Series A is generally
seven days. However, effective with the auction on August 5, 1999, the dividend
period for Series A was extended through April 13, 2000. Following this extended
dividend period, Series A will revert back to its normal seven day reset period.
The dividend period for Series B, C and D is 28 days and for Series E is 7 days.
The average rate in effect on October 31, 1999 was 3.448%. During the year ended
October 31, 1999, the rates ranged from 2.24% to 4.50%.
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.
30
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Value Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Value 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 Value 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
Chicago, Illinois
December 6, 1999
31
<PAGE> 33
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
32
<PAGE> 34
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
33
<PAGE> 35
VAN KAMPEN VALUE 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 99.95% 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.
34
<PAGE> 36
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 trustee by the preferred
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- ----------------------------------------------------------------------
<S> <C> <C>
Theodore A. Myers............................... 7,034 82
</TABLE>
2) With regard to the election of the following trustees by the common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- ----------------------------------------------------------------------
<S> <C> <C>
Don G. Powell*.................................. 18,579,990 171,627
Hugo F. Sonnenschein............................ 18,579,651 171,966
</TABLE>
The other trustees of the Trust whose term did not expire in 1999 are David C.
Arch, Rod Dammeyer, Howard J Kerr, Dennis J. McDonnell, Steven Muller and Wayne
W. Whalen.
3) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 18,541,420 shares voted in favor of the proposal,
73,162 shares voted against and 144,151 shares abstained.
*On August 9, 1999, Don G. Powell resigned and the Board of Trustees appointed
Richard F. Powers, III.
35
<PAGE> 37
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> 0000895529
<NAME> VK VALUE MUNI INCOME TRUST
<SERIES>
<NUMBER> 6
<NAME> VALUE MUNICIPAL INCOME TRUST
<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> 532,845,119
<INVESTMENTS-AT-VALUE> 542,452,426
<RECEIVABLES> 14,947,463
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 80,705
<TOTAL-ASSETS> 557,480,594
<PAYABLE-FOR-SECURITIES> 5,751,505
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,621,924
<TOTAL-LIABILITIES> 7,373,429
<SENIOR-EQUITY> 225,000,000
<PAID-IN-CAPITAL-COMMON> 348,353,631
<SHARES-COMMON-STOCK> 23,555,115
<SHARES-COMMON-PRIOR> 23,555,115
<ACCUMULATED-NII-CURRENT> 2,205,942
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (35,059,715)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,607,307
<NET-ASSETS> 550,107,165
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 32,725,891
<OTHER-INCOME> 0
<EXPENSES-NET> (5,935,373)
<NET-INVESTMENT-INCOME> 26,790,518
<REALIZED-GAINS-CURRENT> (2,201,262)
<APPREC-INCREASE-CURRENT> (41,605,009)
<NET-CHANGE-FROM-OPS> (17,015,753)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26,381,647)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (43,397,400)
<ACCUMULATED-NII-PRIOR> 1,797,071
<ACCUMULATED-GAINS-PRIOR> (32,858,453)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,766,421
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,935,373
<AVERAGE-NET-ASSETS> 579,444,632
<PER-SHARE-NAV-BEGIN> 15.644
<PER-SHARE-NII> 1.137
<PER-SHARE-GAIN-APPREC> (1.859)
<PER-SHARE-DIVIDEND> (1.120)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.802
<EXPENSE-RATIO> 1.67
</TABLE>
