<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
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
Dividend Reinvestment Plan....................... 31
</TABLE>
VKV SAR 6/99
<PAGE> 2
LETTER TO SHAREHOLDERS
May 20, 1999
Dear Shareholder,
With the volatility that we've experienced in many financial markets in
recent months, some investors have sold securities because of uncertainty about
where the markets were going, only to be left rethinking whether they made the
right decision. We've witnessed this kind of market activity numerous times over
the past several years, sparked by concerns such as the impact of the Asian
economic crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the latest rally. That's partly because most of the recent big gains happened
in relatively short periods of time. This kind of volatility--and the danger of
making short-term decisions--highlights the importance of investing for the long
term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather whatever the markets have in store.
Sincerely,
[SIG.]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
A surge in consumer confidence led to strong economic growth over the past
six months, as fears about the impact of the Asian financial crisis subsided. In
the fourth quarter, the nation's gross domestic product (GDP) rose at an
astounding 6.0 percent annual rate and remained strong at 4.5 percent through
the first quarter of 1999. This powerful level of growth is attributed to a
continued increase in consumer spending, a strong housing market, and high
retail sales--all the result of a more confident consumer given the positive
employment environment. The economy began to show signs of slowing down early in
1999, however, as corporate profits and wage growth declined.
Despite continued improvements in Asia and Latin America and the record
economic growth in the United States, inflation remained at bay in late 1998 as
commodity prices tumbled. Although rising oil prices pushed inflation up 3.3
percent on an annualized basis in the first four months of 1999, price increases
remained moderate enough overall to keep inflation-adjusted interest rates
attractive.
Our outlook for the domestic economy remains positive, although we
anticipate slower growth in the second half of the year. We look for a gradual
but steady rise in inflation throughout 1999 to more normal but certainly not
alarming levels. Internationally, low interest rates and improving financial
conditions should continue to support the economic progress we've witnessed
overseas.
INTEREST RATES AND INFLATION
April 30, 1997, through April 30, 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Apr 1997 6.0000 2.5000
5.6250 2.2000
6.5000 2.3000
Jul 1997 6.0000 2.2000
5.5000 2.2000
6.2500 2.2000
Oct 1997 5.7500 2.1000
5.6875 1.8000
6.5000 1.7000
Jan 1998 5.5625 1.6000
5.6250 1.4000
6.1250 1.4000
Apr 1998 5.6250 1.4000
5.6875 1.7000
6.0000 1.7000
Jul 1998 5.5625 1.7000
5.9375 1.6000
5.7500 1.5000
Oct 1998 5.2500 1.5000
4.8750 1.5000
4.0000 1.6000
Jan 1999 4.8125 1.7000
4.8750 1.6000
5.1250 1.7000
Apr 1999 4.9375 2.3000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1999
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VKV)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)........... (2.44)%
Six-month total return based on NAV(2).................... 1.12%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 5.79%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 9.05%
SHARE VALUATIONS
Net asset value........................................... $ 15.41
Closing common stock price................................ $ 14.0000
Six-month high common stock price (12/21/98).............. $ 15.1875
Six-month low common stock price (04/30/99)............... $ 14.0000
Preferred share (Series A) rate(5)........................ 3.170%
Preferred share (Series B) rate(5)........................ 3.250%
Preferred share (Series C) rate(5)........................ 3.100%
Preferred share (Series D) rate(5)........................ 3.299%
Preferred share (Series E) rate(5)........................ 3.450%
</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
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.
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.
INSURED BOND: A bond that is insured against default by the bond insurer. If the
issuer defaults, the insurance company will step in and take over payments
of interest and principal when due. Once a bond is insured, it typically
carries the rating of the insurer. Most insurers are rated AAA.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's 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 1998
and maturing in 2008 is a 10-year bond.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
government entity to finance capital expenditures of public projects, such
as the construction of highways, public works, or school buildings. Interest
on public-purpose municipal bonds is exempt from federal income taxes and,
in some states, from state and local income taxes.
PREMIUM BOND: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond does.
REFUNDING: Retiring an outstanding bond issue at maturity using money from the
sale of a new offering.
YIELD: The annual rate of return on an investment, expressed as a percentage.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
We recently spoke with the management team of the Van Kampen Value Municipal
Income Trust about the key events and economic forces that shaped the markets
during the reporting period. The team includes Timothy D. Haney, portfolio
manager, and Peter W. Hegel, chief investment officer for fixed-income
investments. The following comments reflect their views on the Trust's
performance during the six months ended April 30, 1999.
Q HOW WOULD YOU DESCRIBE THE CONDITIONS IN THE MUNICIPAL MARKET DURING THE
PAST SIX MONTHS?
A Although most of the financial markets experienced volatility during the
period, the municipal market remained relatively stable. For the majority
of the six months, long-term municipal bond yields remained within a range
of about 5.1 to 5.3 percent, even as the Federal Reserve cut interest rates.
Much of the stability in the municipal market can be attributed to its isolation
from turbulence abroad. Concerns about the financial conditions in Asia and
Latin America hurt the stock and high-yield bond markets last fall, but had
little effect on municipals.
The positive economic and market conditions encouraged more municipalities
to take advantage of low interest rates and issue new bonds. Although the amount
of municipal debt increased, the credit quality of many issuers was not
compromised--in fact, it improved as the positive economic environment led to
stronger balance sheets. As a result, we saw more issuers using municipal bonds
to finance special growth and expansion projects, as opposed to financing their
regular operations.
The proportion of higher-yielding municipal bonds also increased during the
period as the number of insured bonds declined. Because bond insurers tightened
their underwriting criteria, more issuers came to market without insurance and
offered higher yields to compensate bondholders for the increased credit risk.
This benefited the Trust because it allowed our experienced research staff to
seek out those higher-yielding bonds that we felt had strong underlying quality.
Q WHY WERE MUNICIPAL BONDS SO ATTRACTIVE RELATIVE TO COMPARABLE TREASURY
BONDS?
A Toward the end of 1998, the yields on 30-year insured municipal bonds and
comparable U.S. Treasury bonds reached equivalent levels, which is a rare
occurrence. Typically, investment-grade municipal bonds have offered about 85 to
90 percent as much yield as comparable Treasury bonds because their interest
payments are exempt from federal income taxes. However, as Treasury yields fell
and municipal yields remained stable, the yield difference between the two types
of bonds shrank. Early in 1999, investors recognized the tremendous
opportunities available in the municipal market, and demand for municipals began
to increase. In conjunction with a recent slowdown in supply, this boost in
municipal demand pushed the municipal-to-Treasury yield ratio back to more
traditional but still attractive levels.
5
<PAGE> 7
Q WHAT STRATEGIES DID YOU USE TO MANAGE THE TRUST?
A Our focus was on supporting the Trust's income stream while monitoring its
risk level and price volatility. To do so, we sought to limit the Trust's
exposure to bond calls, which can lower its income stream because we must
invest the proceeds of called bonds into bonds paying current lower interest
rates. During the reporting period, we purchased noncallable bonds, which cannot
be paid off early by their issuers, even if interest rates decline. In addition,
we began to replace some of our housing bonds. These bonds carry a risk that the
mortgage holder will refinance the mortgage or pay it off early, especially
during a low interest-rate environment like we are currently experiencing. As a
result, housing bonds are more likely than many other issues to be called from
the portfolio.
By working closely with our experienced research analysts, we continued to
look for securities that may be temporarily out of favor but that we feel have
the potential to appreciate in price if market circumstances change. For
example, we purchased 30-year bonds with 5 percent coupon rates--which tend to
attract strong demand from individual investors--during a period where heavy
supply kept prices attractive. A few months later, we sold them at a profit when
the supply of municipal securities declined and demand for these issues
increased. For additional portfolio highlights, please refer to page 8.
In addition, our research team helped us find value in the health-care
sector, which is under pressure as a result of the challenges imposed by managed
care and changing Medicare reimbursement policies. The team sifted through the
range of health-care offerings to help us find lower-rated bonds with attractive
yields and strong underlying quality. For example, they recently uncovered a
hospital issue that was out of favor because its credit rating had been
downgraded. We felt that the market had overreacted to the lower (but still
investment-grade) rating, and we bought the bonds at an attractive price.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A During the past six months, the Trust generated a total return of -2.44
percent(1) based on market price. This reflects a decrease in market price
from $14.75 per share on October 31, 1998, to $14.00 on April 30, 1999. In
addition, the Trust provided a distribution rate of 5.79 percent(3) based on its
closing common stock price on April 30, 1999. Because the Trust is exempt from
federal income taxes, this distribution rate is equivalent to a yield of 9.05
percent(4) on a taxable investment for shareholders in the 36 percent federal
income tax bracket. The Trust's monthly dividend of $.0675 per share was
unchanged during the reporting period. Past performance does not guarantee
future results. Please refer to the footnotes and chart on page 3 for additional
Trust performance results.
6
<PAGE> 8
Q WHAT DO YOU SEE AHEAD FOR THE MUNICIPAL MARKET?
A Strong economic performance should continue to bolster the credit
conditions of municipal issuers. In addition, we expect that this economic
strength will continue to make municipalities more likely to issue debt
for special projects rather than for general operating financing.
Although insured debt has been increasing in recent years, we have started
to see a reversal of this trend in the last few months, as municipal bond
insurers have become more cautious. If this caution continues, credit spreads
may widen as the proportion of higher-yielding uninsured bonds increases.
Finally, we see the potential for changes in traditional economic activity
toward the end of the year because of investor concerns about the year 2000
computer problem. These temporary concerns, however, may result in attractive
investment opportunities that our research staff can explore to uncover
potential value.
[HANEY SIG.]
Timothy D. Haney
Portfolio Manager
[HEGEL SIG.]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF APRIL 30, 1999
<S> <C>
Health Care................. 18.2%
Industrial Revenue.......... 13.2%
Public Building............. 11.6%
Retail
Electric/Gas/Telephone.... 10.2%
Higher Education............ 7.7%
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1998
<S> <C>
Health Care................. 16.8%
Public Building............. 12.9%
Industrial Revenue.......... 12.5%
Retail
Electric/Gas/Telephone.... 10.3%
Higher Education............ 7.8%
</TABLE>
PORTFOLIO COMPOSITION BY CREDIT QUALITY AS
A PERCENTAGE OF LONG-TERM INVESTMENTS
AS OF APRIL 30, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/AAA AA/AA A/A BBB/BAA NON-RATED
------- ----- --- ------- ---------
<S> <C> <C> <C> <C> <C>
As of April 30, 1999 64.80 6.30 11.00 17.40 .50
</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 .60
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED APRIL 30, 1999
<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
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 99.4%
ALABAMA 3.5%
$ 3,815 Alabama Agricultural & Mechanical
Univ Rev (Prerefunded @ 11/01/05)
(MBIA Insd).......................... 6.500% 11/01/25 $ 4,414,146
5,000 Birmingham Baptist Med Cent AL Spl
Care Fac Fin Auth Rev (MBIA Insd).... 5.750 11/15/10 5,212,300
1,000 Birmingham, AL Wtr & Swr Rev
Wts Ser A........................... 4.750 01/01/29 928,700
2,650 Huntsville, AL Hlthcare Auth Hlthcare
Fac Rev Ser A (MBIA Insd)............ 6.375 06/01/22 2,876,231
300 Mobile, AL Indl Dev Brd Solid Waste
Disp Rev Mobile Energy Svcs Co Proj
Rfdg................................. 6.950 01/01/20 104,625
7,350 Montgomery, AL BMC Spl Care Fac Fin
Auth Rev Baptist Hlth Ser B
(MBIA Insd).......................... 5.000 11/15/29 7,077,094
------------
20,613,096
------------
ALASKA 0.2%
1,000 North Slope Borough, AK Ser B
(FSA Insd)........................... 7.500 06/30/01 1,078,890
------------
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 4,749,067
------------
ARKANSAS 0.2%
3,050 Arkansas St Cap Apprec College
Savings A............................ * 06/01/16 1,307,352
------------
CALIFORNIA 8.3%
5,000 Alameda Corridor Tran Auth CA Rev Ser
1999 A Cap Apprec (MBIA Insd)........ * 10/01/30 971,500
885 California Hsg Fin Agy Rev Home Mtg
Ser B1............................... 6.300 08/01/08 944,366
1,100 California Rural Home Mtg Fin Auth
Single Family Mtg Rev Ser B (GNMA
Collateralized)...................... 7.750 09/01/26 1,219,097
1,500 California St Pub Wks Brd Lease Rev
Dept of Corrections Monterey Ser A
(Prerefunded @ 11/01/04)
(MBIA Insd) (b)...................... 6.400 11/01/10 1,723,275
6,000 California St Pub Wks Brd Lease Rev
Dept of Corrections St Prisons Ser A
Rfdg (AMBAC Insd).................... 5.250 12/01/13 6,427,380
2,000 California St Pub Wks Brd Lease Rev
Dept of Corrections St Prisons Ser A
Rfdg (AMBAC Insd).................... 5.000 12/01/19 2,024,360
1,000 Foothill/Eastern Tran Corridor Agy CA
Toll Rd Rev Ser A.................... 6.500 01/01/32 1,113,230
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 2,213,760
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,175 Kings Cnty, CA Waste Mgmt Auth Solid
Waste Rev............................ 7.200% 10/01/14 $ 1,309,267
2,325 Los Angeles, CA Dept Wtr & Pwr Elec
Plant Rev (MBIA Insd)................ 4.250 11/15/14 2,187,221
9,500 Los Angeles, CA Dept Wtr & Pwr Elec
Plant Rev Crossover Rfdg (FGIC Insd)
(b).................................. 5.375 09/01/23 9,724,390
5,000 Orange Cnty, CA Recovery Ctfs Ser A
(MBIA Insd).......................... 6.000 07/01/06 5,596,150
1,000 Orange Cnty, CA Recovery Ser A Rfdg
(MBIA Insd).......................... 5.600 06/01/07 1,099,060
2,995 Orange Cnty, CA Recovery Ser A Rfdg
(MBIA Insd).......................... 6.000 06/01/08 3,382,912
5,700 Sacramento, CA City Fin Auth Rev Comb
Proj B (MBIA Insd)................... * 11/01/15 2,533,251
3,000 San Diego, CA Convention Cent
Expansion Fin Auth Lease Rev Ser A
(AMBAC Insd)......................... 4.750 04/01/28 2,835,480
3,250 San Marcos, CA Pub Fac Auth Rev Pub
Impt Civic Cent Ser A Rfdg........... 6.200 08/01/22 3,350,197
------------
48,654,896
------------
COLORADO 5.4%
5,640 Adams & Arapahoe Cntys, CO Jt Sch
Dist Ser C (MBIA Insd)............... 5.750 12/01/08 6,236,374
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 1,187,810
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 3,571,770
9,000 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser C (Prerefunded
@ 08/31/05).......................... * 08/31/26 1,444,860
2,825 Denver, CO City & Cnty Arpt Rev...... 8.500 11/15/23 3,043,486
920 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.875 11/15/12 1,030,041
330 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/01)............. 8.875 11/15/12 377,381
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLORADO (CONTINUED)
$ 3,000 Denver, CO City & Cnty Arpt Rev Ser B
(MBIA Insd).......................... 6.250% 11/15/07 $ 3,376,770
6,000 Denver, CO City & Cnty Arpt Rev
Ser C................................ 6.600 11/15/04 6,490,080
7,500 E-470 Pub Hwy Auth CO Rev Sr Ser B
Rfdg (MBIA Insd)..................... * 09/01/19 2,640,450
2,000 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)................. 7.500 12/01/11 2,169,800
------------
31,568,822
------------
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 2,927,425
------------
FLORIDA 5.4%
1,985 Bay Cnty, FL Sch Brd Ctfs Partn
(Prerefunded @ 07/01/04)
(AMBAC Insd)......................... 6.750 07/01/12 2,284,457
3,500 Citrus Cnty, FL Hosp Brd Rev Citrus
Mem Hosp Ser A Rfdg (FSA Insd)....... 6.500 08/15/12 3,826,830
1,400 Florida Hsg Fin Agy Single Family Mtg
Ser A Rfdg (GNMA Collateralized)..... 6.650 01/01/24 1,506,484
3,000 Hillsborough Cnty, FL Cap Impt Pgm
Rev Criminal Justice Fac Rfdg
(FGIC Insd).......................... 5.250 08/01/16 3,051,360
3,000 Hillsborough Cnty, FL Indl Dev Auth
Pollutn Ctl Rev Tampa Elec Co Proj
Ser 92 Rfdg.......................... 8.000 05/01/22 3,406,620
2,945 Hillsborough Cnty, FL Sch Brd Ctfs
Partn (Prerefunded @ 07/01/04)
(MBIA Insd).......................... 6.000 07/01/12 3,286,679
10,000 Orange Cnty, FL Sch Brd Ctfs Partn
Ser A (MBIA Insd).................... 5.375 08/01/17 10,337,900
3,985 Pinellas Cnty, FL Hsg Fin Auth Single
Family Mtg Rev Multi Cnty Pgm Ser A
(GNMA Collateralized) (b)............ 6.700 02/01/28 4,271,920
------------
31,972,250
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA 1.9%
$ 3,000 Burke Cnty, GA Dev Auth Pollutn Ctl
Rev GA Pwr Co Plant Vogtle Proj
(MBIA Insd).......................... 6.350% 05/01/19 $ 3,069,150
5,000 Georgia Muni Elec Auth Pwr Rev Ser
B Rfdg (FGIC Insd) (b)............... 5.700 01/01/19 5,431,350
2,700 Marietta, GA Dev Auth Rev First Mtg
Life College Ser B (FSA Insd)........ 5.375 09/01/09 2,863,512
------------
11,364,012
------------
HAWAII 0.4%
2,250 Hawaii St Arpt Sys Rev Third Ser Rfdg
(AMBAC Insd)......................... 5.750 07/01/09 2,424,870
------------
ILLINOIS 5.1%
5,000 Chicago Illinois Brd Ed Chicago Sch
Reform Brd Ser A (FGIC Insd)......... 5.500 12/01/26 5,328,850
3,500 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)............... * 01/01/17 1,304,205
1,000 Chicago, IL Park District
(Prerefunded @ 01/01/02) (b)......... 6.700 01/01/11 1,094,060
1,560 Illinois Hlth Fac Auth Rev Carle
Fndtn Ser A Rfdg (FGIC Insd)......... 6.750 01/01/10 1,621,090
3,180 Illinois Hlth Fac Auth Rev Children's
Mem Hosp (MBIA Insd)................. 6.250 08/15/13 3,665,173
2,250 Illinois Hlth Fac Auth Rev
Evangelical Hosps Ser A Rfdg
(FSA Insd)........................... 6.750 04/15/17 2,485,912
1,250 Illinois Hlth Fac Auth Rev
Evangelical Hosps Ser C (FSA Insd)... 6.750 04/15/17 1,381,062
1,000 Illinois Hlth Fac Auth Rev Highland
Park Hosp Proj Ser A (MBIA Insd)..... 5.750 10/01/17 1,064,890
10,060 Metro Pier & Expo Auth IL McCormick
Place Rfdg (MBIA Insd)............... * 12/15/21 3,080,372
2,070 Northern IL Univ Ctfs Partn Hoffman
Estates Cent Proj (FSA Insd)......... 5.400 09/01/16 2,188,570
5,000 Regional Tran Auth IL Ser A
(AMBAC Insd)......................... 8.000 06/01/17 6,841,300
------------
30,055,484
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDIANA 0.6%
$ 4,000 Fort Wayne, IN Hosp Auth Hosp Rev
Parkview Hlth Sys Inc Proj Rfdg
(MBIA Insd).......................... 4.750% 11/15/28 $ 3,653,880
------------
KENTUCKY 2.6%
9,900 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.500 02/01/12 10,759,716
3,500 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.500 02/01/20 3,803,940
500 Mt Sterling, KY Lease Rev KY League
Cities Fdg Ser B..................... 6.100 03/01/18 561,655
------------
15,125,311
------------
LOUISIANA 1.8%
2,000 Jefferson Parish, LA Hosp Svc Dist No
2 Hosp Rev (FSA Insd)................ 5.000 07/01/28 1,924,180
2,000 Louisiana Stadium & Expo Dist Hotel
Occupancy Tax & Stadium Rev Ser B
Rfdg (FGIC Insd)..................... 4.750 07/01/21 1,891,060
6,000 Saint Charles Parish, LA Solid Waste
Disp Rev LA Pwr & Lt Co Proj
(FSA Insd) (b)....................... 7.050 04/01/22 6,440,040
------------
10,255,280
------------
MAINE 0.9%
3,000 Maine Edl Ln Mktg Corp Student Ln Rev
Ser A4............................... 5.950 11/01/03 3,207,510
1,770 Maine St Hsg Auth Mtg Purp Ser C2.... 6.875 11/15/23 1,916,963
------------
5,124,473
------------
MASSACHUSETTS 4.1%
2,000 Massachusetts St Hlth & Edl Fac Auth
Rev (Prerefunded @ 07/01/01) (AMBAC
Insd) (b)............................ 7.100 07/01/21 2,182,020
1,000 Massachusetts St Indl Fin Agy Wtr
Treatment American Hingham........... 6.900 12/01/29 1,089,540
1,000 Massachusetts St Indl Fin Agy Wtr
Treatment American Hingham........... 6.750 12/01/20 1,083,770
1,000 Massachusetts St Indl Fin Agy Wtr
Treatment American Hingham........... 6.950 12/01/35 1,096,750
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 3,000 Massachusetts St Wtr Pollutn
Abatement Trust Wtr Pollutn Abatement
Rev New Bedford Pgm Ser A Rfdg
(FGIC Insd).......................... 4.750% 02/01/26 $ 2,807,970
14,500 Massachusetts St Wtr Res Auth Ser A
(Prerefunded @ 12/01/01) (b)......... 6.500 12/01/19 15,814,135
------------
24,074,185
------------
MICHIGAN 5.0%
1,250 Battle Creek, MI Downtown Dev Auth
Tax Increment Rev (Prerefunded @
05/01/04)............................ 7.600 05/01/16 1,468,662
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 5,704,450
2,750 Detroit, MI Ser B Rfdg............... 7.000 04/01/04 3,071,420
4,000 Michigan St Bldg Auth Rev Ser I Rfdg
(MBIA Insd).......................... 6.250 10/01/20 4,286,560
4,300 Michigan St Hosp Fin Auth Rev Detroit
Med Cent Oblig Ser A................. 5.250 08/15/28 3,901,046
1,000 Michigan St Hosp Fin Auth Rev Hosp
Genesys Regl Med Ser A Rfdg
(ACA Insd)........................... 5.500 10/01/18 1,005,860
2,000 Michigan St Hosp Fin Auth Rev Hosp
Genesys Regl Med Ser A Rfdg
(ACA Insd)........................... 5.500 10/01/27 2,005,400
5,000 Michigan St Strat Fd Ltd Oblig Rev
Detroit Edison Co Ser A Rfdg (MBIA
Insd) (a)............................ 5.550 09/01/29 5,074,100
3,000 Michigan Str Hosp Fin Auth Rev
Detroit Med Cent Oblig Ser A......... 5.250 08/15/23 2,742,480
------------
29,259,978
------------
MISSISSIPPI 0.6%
1,500 Claiborne Cnty, MS Pollutn Ctl Rev
Sys Energy Res Inc Rfdg.............. 7.300 05/01/25 1,566,705
2,000 Mississippi Business Fin Corp MS
Pollutn Ctl Rev Sys Energy Res Inc
Proj................................. 5.875 04/01/22 2,009,960
------------
3,576,665
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSOURI 0.4%
$ 2,395 Kansas City, MO Port Auth Fac
Riverfront Park Proj Ser A........... 5.750% 10/01/03 $ 2,545,717
------------
NEBRASKA 0.9%
5,000 Nebraska Invt Fin Auth............... 5.125 12/01/17 4,940,750
------------
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 6,410,215
2,485 Nevada Hsg Div Single Family
Pgm Mezz B........................... 6.550 10/01/12 2,639,095
------------
9,049,310
------------
NEW JERSEY 3.3%
1,000 Bordentown, NJ Swr Auth Rev Ser C
(MBIA Insd) (b)...................... 6.800 12/01/25 1,066,120
1,000 New Jersey Econ Dev Auth Econ Dev Rev
Manahawkin Convalescent Ser A Rfdg
(FHA Gtd)............................ 6.650 08/01/18 1,098,290
2,500 New Jersey Econ Dev Auth Mkt
Transition Fac Rev Sr Lien Ser A
(MBIA Insd).......................... 5.800 07/01/09 2,740,250
1,695 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic
(FSA Insd)........................... 6.000 07/01/06 1,895,976
2,500 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic
(FSA Insd)........................... 6.750 07/01/19 3,034,600
2,250 New Jersey St Edl Fac Auth Rev
Glassboro St College Ser A
(Prerefunded @ 07/01/01)
(MBIA Insd).......................... 6.700 07/01/21 2,437,538
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 6,884,865
------------
19,157,639
------------
NEW MEXICO 0.3%
2,000 New Mexico St Hosp Equip Ln Council
Hosp Rev Mem Med Ctr Inc Proj........ 5.500 06/01/28 1,954,500
------------
NEW YORK 13.8%
2,070 New York City Muni Wtr Fin Auth Wtr &
Swr Sys Rev Ser A.................... 7.000 06/15/09 2,228,728
2,105 New York City Muni Wtr Fin Auth Wtr &
Swr Sys Rev Ser A (Prerefunded @
06/15/01)............................ 7.000 06/15/09 2,268,432
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 7,270 New York City Ser A.................. 7.000% 08/01/04 $ 8,247,451
5,700 New York City Ser E Rfdg............. 6.600 08/01/03 6,279,690
5,000 New York City Ser G.................. 5.750 02/01/14 5,326,750
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 2,223,420
7,575 New York St Dorm Auth Rev Cons City
Univ Sys Ser A....................... 5.625 07/01/16 8,138,428
4,000 New York St Dorm Auth Rev Court Fac
Lease Ser A.......................... 5.250 05/15/21 3,992,120
2,500 New York St Dorm Auth Rev
Dept of Hlth......................... 5.500 07/01/25 2,554,875
4,000 New York St Dorm Auth Rev St Univ Edl
Fac Ser A Rfdg (AMBAC Insd).......... 5.500 05/15/09 4,359,040
5,215 New York St Dorm Auth Rev St Univ Edl
Fac Ser B Rfdg....................... 7.375 05/15/14 5,511,786
5,885 New York St Energy Research & Dev
Auth Fac Rev......................... 7.125 12/01/29 6,752,508
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 2,416,907
5,000 New York ST Urban Dev Corp Rev....... 5.000 01/01/14 4,997,100
3,130 New York St Urban Dev Corp Rev
Correctional Fac Ser A Rfdg.......... 5.500 01/01/16 3,218,485
5,000 New York St Urban Dev Corp Rev St
Fac Rfdg............................. 5.700 04/01/20 5,386,250
7,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6
(MBIA Insd).......................... 5.750 12/01/25 7,420,140
------------
81,322,110
------------
OHIO 3.9%
2,000 Cuyahoga Cnty, OH Multi-Family Rev
Hsg Dale Bridge Apt (GNMA
Collateralized)...................... 6.600 10/20/30 2,170,500
3,540 Franklin Cnty, OH Hosp Rev & Impt
Doctor's Hosp Proj Rfdg (a).......... 5.875 12/01/23 3,907,098
5,515 Lucas Cnty, OH Hosp Rev Promedica
Hlthcare Oblig (MBIA Insd)........... 6.000 11/15/06 6,133,949
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO (CONTINUED)
$ 2,780 Miami Cnty, OH Hosp Fac Rev Upper Vly
Med Cent Ser C Rfdg & Impt........... 5.600% 05/15/02 $ 2,878,106
5,130 Muskingum Cnty, OH Hosp Fac Rev
Bethesda Care Sys Rfdg & Impt (Connie
Lee Insd)............................ 6.250 12/01/10 5,723,541
2,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac
Rev OH Edison Co Proj Rfdg........... 5.950 05/15/29 2,039,820
------------
22,853,014
------------
OKLAHOMA 1.8%
10,000 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc (b)........................ 7.375 12/01/20 10,650,600
------------
OREGON 0.7%
3,795 Oregon St Dept Admin Serv Ctfs Partn
Ser A (MBIA Insd).................... 5.250 11/01/10 3,996,742
------------
PENNSYLVANIA 4.3%
1,000 Pennsylvania Hsg Fin Agy Single
Family Mtg Ser 43.................... 7.500 10/01/25 1,004,810
3,000 Pennsylvania St Higher Edl Fac Auth
Rev Med College PA Ser A (Prerefunded
@ 03/01/01) (b)...................... 7.250 03/01/11 3,247,620
9,450 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd) (b).................. 6.250 07/01/08 10,430,248
2,525 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd) (b).................. 6.375 07/01/26 2,789,166
800 Philadelphia, PA Hosps & Higher Ed
Fac Auth Rev Cmnty College Ser A
(MBIA Insd).......................... 6.100 05/01/09 886,688
1,370 Philadelphia, PA Hosps & Higher Ed
Fac Auth Rev Cmnty College Ser B Rfdg
(MBIA Insd).......................... 6.500 05/01/08 1,590,255
3,000 Philadelphia, PA Sch Dist Ser A
(MBIA Insd).......................... 4.750 04/01/27 2,816,880
2,500 Ridley Park, PA Hosp Auth Rev Taylor
Hosp Ser A........................... 6.000 12/01/05 2,665,100
------------
25,430,767
------------
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 1,237,488
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TENNESSEE 0.4%
$ 2,200 Tennessee Hsg Dev Agy Mtg Fin
Ser A................................ 7.125% 07/01/26 $ 2,357,454
------------
TEXAS 4.8%
9,065 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.............. 7.500 12/01/29 9,671,992
3,000 Brazos River Auth TX Rev Houston Inds
Inc Proj Ser D Rfdg (MBIA Insd)...... 4.900 10/01/15 3,035,400
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 2,533,725
1,275 Matagorda Cnty, TX Navig Dist No 1
Rev Houston Lt & Pwr Ser A Rfdg
(AMBAC Insd)......................... 6.700 03/01/27 1,386,805
5,000 Matagorda Cnty, TX Navig Dist No 1
Rev Houston Lt Rfdg (AMBAC Insd)..... 5.125 11/01/28 4,940,000
4,500 Tarrant Cnty, TX Hlth Fac Dev TX Hlth
Res Sys Ser A (MBIA Insd)............ 5.000 02/15/26 4,329,450
2,250 Tomball, TX Hosp Auth Rev Rfdg....... 6.125 07/01/23 2,334,420
------------
28,231,792
------------
UTAH 0.3%
4,950 Intermountain Pwr Agy UT Pwr Supply
Rev Ser A Rfdg (FGIC Insd)........... * 07/01/17 1,944,261
------------
VIRGINIA 1.6%
2,250 Fredericksburg, VA Indl Dev Auth Hosp
Fac Rev (Prerefunded @ 08/15/01)
(FGIC Insd) (b)...................... 6.600 08/15/23 2,428,898
3,000 Isle Wight Cnty, VA Indl Dev Auth
Solid Waste Disp Fac Rev Union Camp
Corp Proj............................ 6.550 04/01/24 3,242,700
2,000 Loudoun Cnty, VA Ctfs Partn
(FSA Insd)........................... 6.900 03/01/19 2,253,080
1,500 Virginia St Hsg Dev Auth Multi-Family
Ser E Rfdg........................... 5.900 11/01/17 1,580,625
------------
9,505,303
------------
WASHINGTON 4.1%
5,000 King Cnty, WA Ser B.................. 5.900 12/01/14 5,503,600
2,500 King Cnty, WA Ser B.................. 6.625 12/01/15 2,911,825
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WASHINGTON (CONTINUED)
$ 4,000 Washington St Pub Pwr Supply Ser A
Rfdg (FGIC Insd)..................... 7.000% 07/01/08 $ 4,759,120
10,000 Washington St Pub Pwr Supply Sys
Nuclear Proj No 1 Rev (AMBAC Insd)... 5.700 07/01/09 10,869,900
------------
24,044,445
------------
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 6,646,443
4,000 Marshall Cnty, WV Pollutn Ctl Rev OH
Pwr Co Proj Ser C Rfdg (MBIA Insd)... 6.850 06/01/22 4,384,400
3,000 West Virginia St Wtr Dev Auth Wtr Dev
Rev Ln Pgm II Ser A (Prerefunded @
11/01/04) (FSA Insd) (b)............. 6.750 11/01/33 3,469,080
------------
14,499,923
------------
WISCONSIN 2.2%
3,500 Wisconsin Hsg & Econ Dev Auth
Homeownership Rev Ser A.............. 6.450 03/01/17 3,717,595
5,000 Wisconsin St Hlth & Edl Fac Auth Rev
Children's Hosp (Embedded Cap) (FGIC
Insd)................................ 5.000 08/15/10 5,076,450
2,000 Wisconsin St Hlth & Edl Fac Auth Rev
Marquette Univ (MBIA Insd)........... 4.750 06/01/23 1,878,400
2,360 Wisconsin St Hlth & Edl Fac Waukesha
Mem Hosp Ser A (AMBAC Insd).......... 5.000 08/15/09 2,435,072
------------
13,107,517
------------
PUERTO RICO 5.0%
7,000 Puerto Rico Comwlth Hwy & Tran Auth
Hwy Rev Ser Y Rfdg (Embedded Cap)
(FSA Insd)........................... 5.730 07/01/21 8,201,760
10,000 Puerto Rico Elec Pwr Auth Pwr Rev
Formerly Puerto Rico Comwlth Wtr
Resources Auth Pwr Rev (MBIA Insd)... 5.375 07/01/27 10,307,400
10,000 Puerto Rico Pub Bldgs Auth Gtd Pub
Edl & Hlth Fac Rfdg Ser M (MBIA
Insd)................................ 5.600 07/01/08 11,059,700
------------
29,568,860
------------
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- -----------------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS 99.4%
(Cost $539,865,913).................................................... $584,184,128
OTHER ASSETS IN EXCESS OF LIABILITIES 0.6%.............................. 3,733,232
------------
NET ASSETS 100.0%....................................................... $587,917,360
============
</TABLE>
* Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments and open option transactions.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
20
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Total Investments (Cost $539,865,913)....................... $584,184,128
Receivables:
Interest.................................................. 10,451,608
Investments Sold.......................................... 966,675
Other....................................................... 203
------------
Total Assets.......................................... 595,602,614
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 5,279,525
Custodian Bank............................................ 1,440,007
Investment Advisory Fee................................... 314,757
Income Distributions--Common and Preferred Shares......... 212,193
Administrative Fee........................................ 96,848
Affiliates................................................ 51,193
Accrued Expenses............................................ 165,459
Trustees' Deferred Compensation and Retirement Plans........ 106,522
Options at Market Value (Net premiums received of
$98,380).................................................. 18,750
------------
Total Liabilities..................................... 7,685,254
------------
NET ASSETS.................................................. $587,917,360
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................. 44,397,845
Accumulated Undistributed Net Investment Income............. 2,003,439
Accumulated Net Realized Loss............................... (31,837,555)
------------
Net Assets Applicable to Common Shares................ 362,917,360
------------
NET ASSETS.................................................. $587,917,360
============
NET ASSET VALUE PER COMMON SHARE ($362,917,360 divided
by 23,555,115 shares outstanding)......................... $ 15.41
============
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $16,252,247
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,906,404
Administrative Fee.......................................... 586,586
Preferred Share Maintenance................................. 296,548
Trustees' Fees and Related Expenses......................... 20,686
Custody..................................................... 19,064
Legal....................................................... 4,525
Other....................................................... 146,695
-----------
Total Expenses.......................................... 2,980,508
-----------
NET INVESTMENT INCOME....................................... $13,271,739
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 897,518
Options................................................... 123,380
-----------
Net Realized Gain........................................... 1,020,898
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 51,212,316
-----------
End of the Period:
Investments............................................. 44,318,215
Options................................................. 79,630
-----------
44,397,845
-----------
Net Unrealized Depreciation During the Period............... (6,814,471)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(5,793,573)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 7,478,166
===========
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1999
and the Year Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $13,271,739 $26,890,772
Net Realized Gain................................. 1,020,898 1,629,512
Net Unrealized Appreciation/Depreciation During
the Period...................................... (6,814,471) 10,448,731
----------- -----------
Change in Net Assets from Operations.............. 7,478,166 38,969,015
----------- -----------
Distributions from Net Investment Income:
Common Shares................................... (9,539,593) (19,079,154)
Preferred Shares................................ (3,525,778) (7,977,673)
----------- -----------
Total Distributions............................... (13,065,371) (27,056,827)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (5,587,205) 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
$2,003,439 and $1,797,071, respectively)........ $587,917,360 $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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended ------------------------
April 30, 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a)........ $ 15.644 $ 15.139 $ 14.496
--------- -------- --------
Net Investment Income.............. .564 1.142 1.163
Net Realized and Unrealized
Gain/Loss........................ (.246) .512 .631
--------- -------- --------
Total from Investment Operations..... .318 1.654 1.794
--------- -------- --------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders...... .405 .810 .810
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders................... .150 .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.................. .555 1.149 1.151
--------- -------- --------
Net Asset Value, End of the Period... $ 15.407 $ 15.644 $ 15.139
========= ======== ========
Market Price Per Share at End of the
Period............................. $ 14.0000 $14.7500 $13.5625
Total Investment Return at Market
Price (b).......................... (2.44%)* 15.10% 16.61%
Total Return at Net Asset Value
(c)................................ 1.12%* 8.86% 10.30%
Net Assets at End of the Period (In
millions).......................... $ 587.9 $ 593.5 $ 581.6
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**........................... 1.64% 1.67% 1.70%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d).................. 5.36% 5.21% 5.61%
Portfolio Turnover................... 13%* 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> <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
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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, 1998, the Trust had an accumulated capital loss carry
forward for tax purposes of $32,813,198 which will expire between October 31,
2002 and October 31, 2004. Net realized gains or losses differ for financial
reporting and tax purposes as a result of gains and losses recognized for tax
purposes on open option positions at October 31, 1998.
At April 30, 1999, for federal income tax purposes, cost of long-term
investments is $539,865,913; the aggregate gross unrealized appreciation is
$45,489,115 and the aggregate gross unrealized depreciation is $1,170,900,
resulting in net unrealized appreciation on long-term investments of
$44,318,215.
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 six months ended April 30, 1999, the Trust recognized expenses of
approximately $4,200 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)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1999, the Trust recognized expenses of
approximately $64,400 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 $81,061,885 and $78,424,528,
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)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in options for the six months ended April 30, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1998................. 200 $ 123,380
Options Written................................. 200 98,380
Options Expired (Net)........................... (200) (123,380)
---- ---------
Outstanding at April 30, 1999................... 200 $ 98,380
==== =========
</TABLE>
The related futures contracts of the outstanding option transactions as of
April 30, 1999, and the description and market value is as follows:
<TABLE>
<CAPTION>
MARKET
EXP. MONTH/ VALUE OF
CONTRACTS EXERCISE PRICE OPTIONS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Bond Index Futures
June 1999--Written Calls
(Current Notional Value of
$123,188 per contract).......... 200 June/128 $(18,750)
=== ========
</TABLE>
B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).
There were no transactions in futures contracts during the six months ended
April 30, 1999.
C. EMBEDDED CAPS--These securities, which are 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
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
As of April 30, 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 and E is seven days, and for Series B, C and D is 28 days. The average
rate in effect on April 30, 1999 was 3.232%. During the six months ended April
30, 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
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
31
<PAGE> 33
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
A. THOMAS SMITH, III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND
TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999
All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
32
<PAGE> 34
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> VALUE MUNICIPAL INCOME TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<INVESTMENTS-AT-COST> 539,865,913
<INVESTMENTS-AT-VALUE> 584,184,128
<RECEIVABLES> 11,418,283
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 203
<TOTAL-ASSETS> 595,602,614
<PAYABLE-FOR-SECURITIES> 5,279,525
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,405,729
<TOTAL-LIABILITIES> 7,685,254
<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> 2,003,439
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (31,837,555)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 44,397,845
<NET-ASSETS> 587,917,360
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,252,247
<OTHER-INCOME> 0
<EXPENSES-NET> (2,980,508)
<NET-INVESTMENT-INCOME> 13,271,739
<REALIZED-GAINS-CURRENT> 1,020,898
<APPREC-INCREASE-CURRENT> (6,814,471)
<NET-CHANGE-FROM-OPS> 7,478,166
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,065,371)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,587,205)
<ACCUMULATED-NII-PRIOR> 1,797,071
<ACCUMULATED-GAINS-PRIOR> (32,858,453)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,906,404
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,980,508
<AVERAGE-NET-ASSETS> 591,423,390
<PER-SHARE-NAV-BEGIN> 15.644
<PER-SHARE-NII> 0.564
<PER-SHARE-GAIN-APPREC> (0.246)
<PER-SHARE-DIVIDEND> (0.555)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.407
<EXPENSE-RATIO> 1.64
</TABLE>
