<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
CREDIT QUALITY 6
TWELVE-MONTH DIVIDEND HISTORY 6
TOP FIVE SECTORS 7
NET ASSET VALUE AND MARKET PRICE 7
Q&A WITH YOUR PORTFOLIO MANAGERS 8
GLOSSARY OF TERMS 12
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 13
FINANCIAL STATEMENTS 25
NOTES TO FINANCIAL STATEMENTS 30
REPORT OF INDEPENDENT AUDITORS 34
DIVIDEND REINVESTMENT PLAN 35
TRUST OFFICERS AND IMPORTANT ADDRESSES 37
RESULTS OF SHAREHOLDER VOTES 38
</TABLE>
Our generations of money-management experience may help you pursue life's true
wealth.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
November 20, 2000
Dear Shareholder,
The first three quarters of 2000 proved to be especially volatile, with all of
the major markets declining in the spring and spending the following months
trying to recover. To manage one's portfolio during such unpredictable times
requires investment-management experience, and the following pages should give
you some insight into how we have performed in this difficult environment.
In this report, the portfolio managers will explain how your investment
performed during the reporting period and describe the strategies they used to
manage your trust during that span. The report will also show you how your
investment has performed over time. Helpful charts summarize the trust's largest
investments, and you can examine the complete portfolio to see all of your
trust's holdings as of the end of your trust's reporting period.
At Van Kampen, we place a high priority on providing you and
your financial advisor with the information you need to help
you monitor your investments during all types of markets. With
nearly four generations of investment-management experience,
we've been around long enough to understand that by investing
with Van Kampen you're entrusting us with much more than your
money. Your investments may help make it possible to afford your next house,
keep up with rising college costs, or enjoy a comfortable retirement.
No matter what your reasons for investing, we're thankful that you've chosen to
place your investments with Van Kampen. We will continue to apply our
generations of money-management experience to helping you pursue life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED RELATIVELY STRONG DURING THE REPORTING PERIOD,
UNDERPINNED BY LOW UNEMPLOYMENT AND RISING PRODUCTIVITY, YET THERE WERE SIGNS
THAT A HEALTHY SLOWDOWN WAS UNDERWAY. GROSS DOMESTIC PRODUCT, THE PRIMARY
MEASURE OF ECONOMIC GROWTH, INCREASED AT A 2.4 PERCENT ANNUALIZED RATE FOR THE
THIRD QUARTER OF 2000. FOLLOWING RELATIVELY MILD FIRST- AND SECOND-QUARTER DATA,
THIS THIRD-QUARTER FIGURE OFFERS FURTHER EVIDENCE THAT GROWTH MIGHT BE SETTLING
BACK TO A MORE MODERATE AND SUSTAINABLE PACE THAN ITS RAPID RATE IN LATE 1999.
CONSUMER SPENDING AND EMPLOYMENT
CONCERNS ABOUT INFLATION REMAINED AT BAY DUE IN PART TO A GRADUAL SLOWDOWN IN
CONSUMER SPENDING. RISING INTEREST RATES, HIGHER ENERGY COSTS, AND A
DISAPPOINTING STOCK MARKET BEGAN TO TEMPER RETAIL SALES, WHICH LEVELED OFF FROM
THE BLISTERING PACE OF LATE 1999 AND EARLY 2000. AND WHILE CONSUMER SPENDING WAS
BRISK, THE OVERALL TREND HAS BEEN DOWNWARD THIS YEAR.
THE JOBLESS RATE CONTINUED TO BE EXTREMELY LOW BY HISTORICAL STANDARDS, BUT A
RECENT DECLINE IN NEW JOB CREATION SUPPORTS THE POPULAR BELIEF THAT THE ECONOMY
IS MODERATING. ALTHOUGH EMPLOYER COSTS SUCH AS WAGES AND BENEFITS WERE RISING AT
THE END OF 1999 AND THE BEGINNING OF 2000, OVER THE PAST SIX MONTHS THE
EMPLOYMENT COST INDEX HAS SHOWN MARKED DECELERATION, WHICH SHOULD HELP EASE
INFLATION CONCERNS.
INTEREST RATES AND INFLATION
THE FEDERAL RESERVE BOARD (THE FED) RAISED INTEREST RATES FOUR TIMES DURING THE
LAST 12 MONTHS IN AN EFFORT TO WARD OFF INFLATION BY CURBING ECONOMIC GROWTH.
OVER THE SAME PERIOD, THE CONSUMER PRICE INDEX ROSE 3.5 PERCENT, WHICH INDICATED
THAT INFLATION GENERALLY REMAINS UNDER CONTROL.
THE FED HAS ACKNOWLEDGED THE RISK OF RISING INFLATION AND WILL STAY ON GUARD, AS
RISING ENERGY COSTS AND LOW UNEMPLOYMENT THREATEN TO PROPEL THIS FIGURE UPWARD
IN THE COMING MONTHS. AS LONG AS INFLATION IS CONTAINED AND THE PACE OF ECONOMIC
GROWTH REMAINS FAVORABLE, THE FED IS LIKELY TO HOLD INTEREST RATES STEADY IN THE
SHORT TERM, WHICH COULD HELP STABILIZE THE STOCK AND BOND MARKETS.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(September 30, 1998--September 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.60
Sep 00 2.40
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(October 31, 1998--October 31, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Oct 98 5.00 1.50
4.75 1.50
4.75 1.60
Jan 99 4.75 1.70
4.75 1.60
4.75 1.70
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.70
Apr 00 6.00 3.00
6.50 3.10
6.50 3.70
Jul 00 6.50 3.70
6.50 3.30
6.50 3.50
Oct 00 6.50 3.50
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of October 31, 2000)
<TABLE>
<CAPTION>
------------------------------------------------------------------------
<S> <C> <C>
NYSE Ticker Symbol VKV
------------------------------------------------------------------------
One-year total return based on market price(1) 8.56%
------------------------------------------------------------------------
One-year total return based on NAV(2) 10.44%
------------------------------------------------------------------------
Distribution rate as a % of closing common stock price(3) 6.61%
------------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 10.33%
------------------------------------------------------------------------
Net asset value $14.38
------------------------------------------------------------------------
Closing common stock price $12.2500
------------------------------------------------------------------------
One-year high common stock price (09/12/00) $13.0000
------------------------------------------------------------------------
One-year low common stock price (03/13/00) $11.0000
------------------------------------------------------------------------
Preferred share (Series A) rate(5) 4.000%
------------------------------------------------------------------------
Preferred share (Series B) rate(5) 4.110%
------------------------------------------------------------------------
Preferred share (Series C) rate(5) 4.150%
------------------------------------------------------------------------
Preferred share (Series D) rate(5) 4.200%
------------------------------------------------------------------------
Preferred share (Series E) rate(5) 4.130%
------------------------------------------------------------------------
</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.
4
<PAGE> 6
(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 is no guarantee of future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust
shares, when sold, may be worth more or less than their original cost.
5
<PAGE> 7
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of October 31, 2000
<S> <C> <C>
- AAA/Aaa............ 67.8%
- AA/Aa.............. 5.3%
- A/A................ 12.4%
- BBB/Baa............ 13.4%
- Non-Rated.......... 1.1%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 64.4%
- AA/Aa.............. 7.0%
- A/A................ 10.0%
- BBB/Baa............ 17.6%
- Non-Rated.......... 1.0%
[PIE CHART]
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
TWELVE-MONTH DIVIDEND HISTORY
(for the period ended October 31, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
11/99 0.0675
12/99 0.0675
1/00 0.0675
2/00 0.0675
3/00 0.0675
4/00 0.0675
5/00 0.0675
6/00 0.0675
7/00 0.0675
8/00 0.0675
9/00 0.0675
10/00 0.0675
</TABLE>
The dividend history represents past performance of the trust and is no
guarantee of the trust's future dividends.
6
<PAGE> 8
TOP FIVE SECTORS
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
Health Care 16.30 14.40
Industrial Revenue 12.30 13.20
Public Building 12.00 11.20
Retail Electric/Gas/Telephone 8.80 9.40
General Purpose 8.80 8.10
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--March 1993 through October 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
3/93 14.9500 14.9500
15.7000 14.7500
16.5800 15.2500
16.2500 14.5000
3/94 13.9500 12.8750
13.8400 12.8750
13.5300 11.5000
12.8200 11.0000
3/95 14.0700 12.3750
13.7500 12.3750
14.0800 12.1250
14.9600 12.5000
3/96 14.2000 12.2500
14.0300 11.8750
14.3500 12.5000
14.6300 12.1250
3/97 14.2300 12.3750
14.6700 13.0625
15.1000 13.7500
15.4300 13.9375
3/98 15.3600 14.1250
15.3600 13.9375
15.8200 14.6250
15.6000 14.7500
3/99 15.4300 14.3750
14.6800 13.7500
14.1700 12.3750
13.6200 12.0000
3/00 14.0000 11.8125
13.9900 11.7500
14.2200 12.5625
10/00 14.3800 12.2500
</TABLE>
The solid line above represents the trust's net asset value (NAV), which
indicates overall changes in value among the trust's underlying securities. The
trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
7
<PAGE> 9
[PHOTO]
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGER OF THE VAN KAMPEN VALUE
MUNICIPAL INCOME TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE
MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE 12 MONTHS ENDED OCTOBER 31,
2000. TIMOTHY D. HANEY, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 1995 AND
HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1988. THE FOLLOWING DISCUSSION
REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE.
Q WHAT WERE THE MOST IMPORTANT
DEVELOPMENTS IN THE FIXED-INCOME MARKETS AND HOW DID THE TRUST PERFORM
DURING THE REPORTING PERIOD?
A The key factor in the market's
behavior during the past fiscal year has been generally rising interest rates,
especially at the short end of the maturity spectrum. This rate environment
stemmed from the Federal Reserve Board's commitment to keeping inflation in
check by ratcheting up short-term interest rates whenever the economy threatened
to overheat and push the prices of goods and services higher. In fact, the Fed
increased short-term rates four times during the reporting period, with the last
hike occurring in May 2000.
The strength of the economy, and the accompanying Federal Reserve activity,
caused interest rates to rise across the board for the first half of the
reporting period. In the spring of 2000, the bond market rallied as investors
began to anticipate an end to the Fed's rate-tightening cycle. By the end of
October, short-term rates remained high, but rates in the intermediate to long
maturity segments of the market had actually declined from the levels we had
seen at the start of the reporting period.
Because the trust is leveraged, higher short-term rates placed pressure on
the trust's dividend, as the increased cost of borrowing cut into the fund's
earnings. However, the relatively high long-term rates that prevailed for part
of the reporting period allowed the trust to add new holdings at attractive
yields, partially offsetting the decline in income that occurred as short-term
rates climbed.
After the steady increase in short-term interest rates over the past year,
we have seen a more stable environment in recent months, as the Fed has reacted
to slower economic growth, more efficient workforce output, and moderate price
gains by keeping target lending rates unchanged. The inflation rate, as measured
by the consumer price index, peaked in March 2000 at 3.8 percent and has since
dropped back below the 3 percent level.
8
<PAGE> 10
Supply in the municipal bond market was sharply lower from the levels of a
year ago, as higher interest rates have made it unattractive for municipalities
to retire existing debt. At the same time, strong economic activity has allowed
many municipalities to generate a budget surplus, enabling them to cover
spending that would normally require municipal bond financing.
Because demand has remained strong, the lack of new issuance in the primary
market helped support bond prices, although the somewhat limited selection of
available securities required us to be very selective in choosing new bonds for
the trust's portfolio. In many cases, we found attractive values in the
secondary market, buying and selling bonds that have been in the market for a
while.
The trust continued to provide shareholders with an attractive level of
income. Its monthly dividend of $0.0675 per share translates to a distribution
rate of 6.61 percent based on the trust's closing market price on October 31,
2000. Because income from the trust is exempt from federal income taxes, this
distribution rate is equivalent to a yield of 10.33 percent for an investor in
the 36 percent federal income tax bracket.
For the 12 months through October 31, 2000, the trust produced a total
return of 8.56 percent based on market price. This reflects an increase in
market price from $12.0625 per share on October 31, 1999, to $12.2500 per share
on October 31, 2000. Of course, past performance is no guarantee of future
results. As a result of recent market activity, current performance may vary
from the figures shown. By comparison, the Lehman Brothers Municipal Bond Index
posted a total return of 8.51 percent for the same period. This broad-based,
unmanaged index, which reflects the general performance of municipal securities,
does not reflect any commissions or fees that would be paid by an investor
purchasing the securities it represents. Such costs would lower the performance
of the index. It is not possible to invest directly in an index. For additional
performance results, please refer to the chart and footnotes on page 4.
Q HOW DID YOU REACT TO THE
MARKET CONDITIONS YOU ENCOUNTERED IN MANAGING THE TRUST?
A Much of the activity in the trust's
portfolio during the reporting period was guided by a strategic direction we
adopted in February of 2000 and had largely implemented by the end of March. It
was our goal to lengthen the duration of the portfolio so that it more closely
mirrored the benchmark indicators we use to gauge the trust's performance. At
the time, we felt the market had solid upside potential, and a longer duration
would allow the trust to more fully participate in the gains of the market if it
rallied over time.
As we began implementing this strategy, we caught the market at a good time.
Early in the year, the market presented us with attractive yields on
long-duration securities, particularly those priced at deep discounts. We
purchased some of these bonds and sold prerefunded securities and bonds with
short calls--many of which were scheduled to be called or
9
<PAGE> 11
refunded within the next year or two. In effect, this strategy helped capture
additional par value and the potential for capital appreciation, all while
achieving the desired effect of extending the portfolio's duration. This
strategy was a positive in terms of the trust's performance, especially during
the market rally that occurred in the second and third quarters of 2000.
Q HOW DID THIS STRATEGY AFFECT THE
COMPOSITION OF THE PORTFOLIO?
A A by-product of this market
activity--and the trust's positioning within the market--was an increase in the
overall credit quality of the portfolio. The rallies were strongest at the high
end of the quality spectrum, so these securities saw solid price gains while the
valuations of nonrated and lower-rated securities, such as those rated BBB or
lower, remained fairly flat or decreased.
Over the course of the reporting period, the portfolio composition came to
reflect this trend, as the trust's allocation to AAA rated securities increased
by 3.4 percent, up to 67.8 percent of long-term investments, and its allocation
to A rated securities increased by 2.4 percent. At the same time, the trust's
BBB allocation declined by 4.2 percent, down to 13.4 percent of long-term
investments. In general, our bias toward high-quality securities was a boost to
portfolio performance.
Among industry sectors, the trust's allocation to health-care bonds
increased by around 2 percent, as we took advantage of the wide yield spreads on
selected health-care bonds.
Q WHAT DO YOU SEE AHEAD
FOR THE ECONOMY AND THE MUNICIPAL MARKET?
A The outlook for the municipal
bond market will be closely tied to the prospects of the U.S. economy and the
Fed's reaction to key economic indicators. While interest rates have been fairly
steady of late, the Fed's next move will be based on whether inflation shows
signs of heating up. We believe inflation appears to be under control at this
time, but the Fed will be watching economic growth statistics, the labor market,
and the prices of key commodities, such as crude oil, for signs of inflationary
pressures.
Clearly, the direction of interest rates will be determined by the Fed's
reaction to inflationary signals, so we feel it would be imprudent to make a bet
on the direction of interest rates in terms of how we position the trust.
Consequently, we will seek to maintain a neutral stance with respect to the
portfolio's duration in the near term.
We believe the demand for municipal securities should remain healthy. This
will hopefully bode well for the trust, although it will be competing with a
range of investment options, such as individual bonds, mutual funds, and managed
accounts, for investor assets. Also, the stock market may continue to attract
assets away from bonds, depending on its return prospects and price volatility.
We believe bond supply should remain tight, helping to support prices, as
municipalities continue to operate with budget surpluses that can be used for
construction projects, education funding, road improvements, and other
10
<PAGE> 12
expenditures typically financed by new bond issuance.
We will continue to search for securities that have the potential to enhance
the trust's long-term performance. If our analysis indicates that it would be
advantageous to sell certain bonds--or as bonds are prerefunded, mature
according to schedule, or are called from the portfolio--we will strive to
replace them with bonds that offer the best relative value available at the
time.
11
<PAGE> 13
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CALL FEATURE: Allows a bond issuer to buy back a bond on specific dates at set
prices before the bond's maturity date. These dates and prices are set when the
bond is issued. To compensate the bondholder for the potential loss of income
and ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly that
the issuer can save money by issuing new bonds at lower rates.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest-rate
movements on its price. Typically, funds with shorter durations perform better
in rising-rate environments, while funds with longer durations perform better
when rates decline.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond. Typically, short-term bonds mature in
five years or less, intermediate-term bonds mature in five to ten years, and
long-term bonds mature after ten years.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding bond
issue prior to its maturity or call date. The proceeds from the new bonds are
generally invested in U.S. government securities. Prerefunding typically occurs
when interest rates decline and an issuer replaces its higher-yielding bonds
with current lower-yielding issues.
SECONDARY MARKET: A market where securities are traded after they are initially
offered.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower credit ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
12
<PAGE> 14
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
October 31, 2000
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 98.5%
ALABAMA 1.9%
$5,000 Birmingham Baptist Med Cent AL Spl Care Fac
Fin Auth Rev (MBIA Insd)................... 5.750% 11/15/10 $ 5,250,700
2,650 Huntsville, AL Healthcare Auth Healthcare
Fac Rev Ser A (MBIA Insd).................. 6.375 06/01/22 2,717,416
3,000 Jefferson Cnty, AL Swr Rev Cap Impt
Warrants Ser A (FGIC Insd)................. 5.125 02/01/39 2,713,050
288 Mobile, AL Indl Dev Brd Solid Waste Disp
Rev Mobile Energy Svcs Co Proj Rfdg
(a)(e)..................................... 6.950 01/01/20 78,556
------------
10,759,722
------------
ALASKA 0.2%
1,000 North Slope Borough, AK Ser B (FSA Insd)... 7.500 06/30/01 1,019,960
------------
ARIZONA 0.7%
3,975 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease
Oblig Irvington Proj Tucson Ser A Rfdg (FSA
Insd)...................................... 7.250 07/15/10 4,183,330
------------
ARKANSAS 0.2%
3,050 Arkansas St Cap Apprec College Savings Ser
A.......................................... * 06/01/16 1,323,456
------------
CALIFORNIA 7.1%
810 California Rural Home Mtg Fin Auth Single
Family Mtg Rev Ser B (GNMA
Collateralized)............................ 7.750 09/01/26 859,920
6,000 California St Pub Wks Brd Lease Rev Dept of
Corrections St Prisons Ser A Rfdg (AMBAC
Insd)...................................... 5.250 12/01/13 6,340,620
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$2,000 California St Pub Wks Brd Lease Rev Dept of
Corrections St Prisons Ser A Rfdg (AMBAC
Insd)...................................... 5.000% 12/01/19 $ 1,955,420
30,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Sr Lien Ser A.......................... * 01/15/22 7,944,600
1,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Ser A (Prerefunded @ 01/01/07)......... 6.500 01/01/32 1,122,300
1,175 Kings Cnty, CA Waste Mgmt Auth Solid Waste
Rev........................................ 7.200 10/01/14 1,265,910
9,500 Los Angeles, CA Dept Wtr & Pwr Elec Plant
Rev Crossover Rfdg (FGIC Insd)............. 5.375 09/01/23 9,376,310
9,000 Riverside Cnty, CA Asset Leasing Corp
Leasehold Rev Riverside Cnty Hosp Proj
(MBIA Insd)................................ * 06/01/21 2,810,520
5,700 Sacramento, CA City Fin Auth Rev Comb Proj
B (MBIA Insd).............................. * 11/01/15 2,598,915
4,025 San Joaquin Hills, CA Transn Corridor Agy
Toll Rd Rev Cap Apprec Ser A Rfdg (MBIA
Insd)...................................... * 01/15/36 536,855
3,250 San Marcos, CA Pub Fac Auth Rev Pub Impt
Civic Cent Ser A Rfdg...................... 6.200 08/01/22 3,266,965
10,225 Santa Ana, CA Unified Sch Dist Ctfs Partn
Cap Apprec Fin Proj (FSA Insd) (c)......... * 04/01/32 1,710,540
------------
39,788,875
------------
COLORADO 4.1%
4,540 Adams & Arapahoe Cntys, CO Jt Sch Dist Ser
C (MBIA Insd).............................. 5.750 12/01/08 4,855,757
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 1,127,460
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 3,388,560
9,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy
Rev E-470 Proj Ser C (Prerefunded @
08/31/05).................................. * 08/31/26 1,492,290
920 Denver, CO City & Cnty Arpt Rev Ser A...... 8.875 11/15/12 971,253
330 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/01)(f)................ 8.875 11/15/12 351,008
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
COLORADO (CONTINUED)
$6,000 Denver, CO City & Cnty Arpt Rev Ser C...... 6.600% 11/15/04 $ 6,293,580
7,500 E-470 Pub Hwy Auth CO Rev Sr Ser B Rfdg
(MBIA Insd)................................ * 09/01/19 2,593,800
2,000 Meridian Metropolitan Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC: Meridian
Assoc East)................................ 7.500 12/01/11 2,068,400
------------
23,142,108
------------
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 2,776,250
------------
FLORIDA 7.0%
1,985 Bay Cnty, FL Sch Brd Ctfs Partn
(Prerefunded @ 07/01/04) (AMBAC Insd)...... 6.750 07/01/12 2,171,173
3,500 Citrus Cnty, FL Hosp Brd Rev Citrus Mem
Hosp Ser A Rfdg (FSA Insd)................. 6.500 08/15/12 3,666,285
2,500 Dade Cnty, FL Wtr & Swr Sys Rev (FGIC
Insd)...................................... 5.250 10/01/21 2,433,375
5,000 Escambia Cnty, FL Hlth Fac Auth Hlth
Fac Rev.................................... 5.950 07/01/20 5,207,200
1,370 Florida Hsg Fin Agy Single Family Mtg Ser A
Rfdg (GNMA Collateralized)................. 6.650 01/01/24 1,441,090
3,000 Hillsborough Cnty, FL Cap Impt Pgm Rev
Criminal Justice Fac Rfdg (FGIC Insd)...... 5.250 08/01/16 2,972,790
3,000 Hillsborough Cnty, FL Indl Dev Auth Pollutn
Ctl Rev Tampa Elec Co Proj Ser 92 Rfdg..... 8.000 05/01/22 3,207,780
5,000 Jacksonville, FL Cap Impt Rev Stadium Proj
Rfdg (AMBAC Insd).......................... 4.750 10/01/25 4,411,150
5,000 Miami Dade Cnty, FL Wtr & Swr Rev Ser A
(FGIC Insd)................................ 5.000 10/01/29 4,555,900
3,985 Pinellas Cnty, FL Hsg Fin Auth Single
Family Mtg Rev Multi Cnty Pgm Ser A (GNMA
Collateralized)............................ 6.700 02/01/28 4,151,254
6,000 South Miami, FL Hlth Fac Auth Hosp Rev
Baptist Hlth Sys Oblig Grp (MBIA Insd)..... 5.000 11/15/28 5,384,580
------------
39,602,577
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
GEORGIA 1.9%
$3,000 Cobb Cnty, GA Hosp Auth Rev Antic Ctfs Ser
A (AMBAC Insd)............................. 4.750% 04/01/26 $ 2,583,390
5,000 Georgia Muni Elec Auth Pwr Rev Ser B Rfdg
(FGIC Insd)................................ 5.700 01/01/19 5,179,500
2,700 Marietta, GA Dev Auth Rev First Mtg Life
College Ser B (FSA Insd)................... 5.375 09/01/09 2,790,153
------------
10,553,043
------------
ILLINOIS 6.2%
7,500 Chicago, IL Brd Ed Cap Apprec Sch Reform
B-1 (FGIC Insd)............................ * 12/01/29 1,364,925
3,500 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)..................... * 01/01/17 1,348,725
10,000 Chicago, IL Cap Apprec City Colleges (FGIC
Insd)...................................... * 01/01/29 1,965,500
5,000 Chicago, IL Lakefront Millennium Pkg Fac
(MBIA Insd)................................ 5.125 01/01/28 4,604,800
6,000 Chicago, IL Lakefront Millennium Pkg Fac
(MBIA Insd) (d)............................ 0/5.75 01/01/29 4,327,320
3,180 Illinois Hlth Fac Auth Rev Children's Mem
Hosp (MBIA Insd)........................... 6.250 08/15/13 3,493,453
2,250 Illinois Hlth Fac Auth Rev Evangelical
Hosps Ser A Rfdg (FSA Insd)................ 6.750 04/15/17 2,369,587
1,250 Illinois Hlth Fac Auth Rev Evangelical
Hosps Ser C (FSA Insd)..................... 6.750 04/15/17 1,316,438
1,000 Illinois Hlth Fac Auth Rev Highland Park
Hosp Proj Ser A (MBIA Insd)................ 5.750 10/01/17 1,014,920
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 4,709,500
2,070 Northern IL Univ Ctfs Partn Hoffman Estates
Cent Proj (FSA Insd)....................... 5.400 09/01/16 2,086,746
5,000 Regional Tran Auth IL Ser A (AMBAC Insd)... 8.000 06/01/17 6,460,650
------------
35,062,564
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
KENTUCKY 2.6%
$9,900 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A..................... 7.500% 02/01/12 $ 10,247,886
3,500 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A..................... 7.500 02/01/20 3,622,990
500 Mt Sterling, KY Lease Rev KY League Cities
Fdg Ser B.................................. 6.100 03/01/18 532,335
------------
14,403,211
------------
LOUISIANA 2.0%
2,000 Louisiana Stadium & Expo Dist Hotel
Occupancy Tax & Stadium Rev Ser B Rfdg
(FGIC Insd)................................ 4.750 07/01/21 1,764,000
3,875 New Orleans, LA Rfdg (FGIC Insd)........... 4.750 12/01/26 3,341,916
6,000 Saint Charles Parish, LA Solid Waste Disp
Rev LA Pwr & Lt Co Proj (FSA Insd)......... 7.050 04/01/22 6,167,820
------------
11,273,736
------------
MAINE 0.7%
3,000 Maine Edl Ln Mktg Corp Student Ln Rev Ser
A4......................................... 5.950 11/01/03 3,103,020
1,085 Maine St Hsg Auth Mtg Purp Ser C2.......... 6.875 11/15/23 1,127,315
------------
4,230,335
------------
MASSACHUSETTS 2.2%
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
American Hingham........................... 6.900 12/01/29 1,045,970
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
American Hingham........................... 6.950 12/01/35 1,033,270
10,000 Massachusetts St Wtr Res Auth Ser A
(Prerefunded @ 12/01/01)................... 6.500 12/01/19 10,424,000
------------
12,503,240
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MICHIGAN 4.1%
$1,250 Battle Creek, MI Downtown Dev Auth Tax
Increment Rev (Prerefunded @ 05/01/04)..... 7.600% 05/01/16 $ 1,392,363
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 5,480,400
2,750 Detroit, MI Ser B Rfdg..................... 7.000 04/01/04 2,927,292
3,000 Michigan St Bldg Auth Rev Ser I Rfdg (MBIA
Insd)...................................... 6.250 10/01/20 3,073,890
3,000 Michigan St Hosp Fin Auth Rev Detroit Med
Cent Oblig Ser A........................... 5.250 08/15/23 2,197,920
4,300 Michigan St Hosp Fin Auth Rev Detroit Med
Cent Oblig Ser A........................... 5.250 08/15/28 3,053,946
5,000 Michigan St Strategic Fd Ltd Oblig Rev
Detroit Edison Co Ser A Rfdg (MBIA Insd)... 5.550 09/01/29 4,834,300
------------
22,960,111
------------
MINNESOTA 0.8%
5,000 Minneapolis & St Paul, MN Metarpts Comm
Arpt Rev Ser A (FGIC Insd)................. 5.125 01/01/31 4,672,850
------------
MISSISSIPPI 0.3%
2,000 Mississippi Business Fin Corp MS Pollutn
Ctl Rev Sys Energy Res Inc Proj............ 5.875 04/01/22 1,841,300
------------
MISSOURI 0.4%
2,395 Kansas City, MO Port Auth Fac Riverfront
Park Proj Ser A............................ 5.750 10/01/03 2,455,138
------------
NEVADA 3.2%
5,750 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj
Ser C Rfdg (AMBAC Insd).................... 7.200 10/01/22 6,093,103
7,800 Clark Cnty, NV Passenger Fac Charge Rev Las
Vegas McCarran Intl Rfdg (MBIA Insd)....... 4.750 07/01/22 6,906,276
3,000 Director St NV Dept Business & Industry Las
Vegas Monorail Proj-1st Tier (AMBAC
Insd)...................................... 5.375 01/01/40 2,836,440
1,980 Nevada Hsg Div Single Family Pgm Mezz B.... 6.550 10/01/12 2,026,807
------------
17,862,626
------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW JERSEY 4.2%
$1,000 New Jersey Econ Dev Auth Econ Dev Rev
Manahawkin Convalescent Ser A Rfdg (FHA
Gtd)....................................... 6.650% 08/01/18 $ 1,062,510
2,500 New Jersey Econ Dev Auth Mkt Transition Fac
Rev Sr Lien Ser A (MBIA Insd).............. 5.800 07/01/09 2,631,450
4,000 New Jersey Econ Dev Auth Transn Proj
Sublease Ser B (FSA Insd).................. 5.750 05/01/09 4,295,880
1,695 New Jersey Hlthcare Fac Fin Auth Rev Genl
Hosp Cent at Passaic (FSA Insd)............ 6.000 07/01/06 1,814,243
2,500 New Jersey Hlthcare Fac Fin Auth Rev Genl
Hosp Cent at Passaic (FSA Insd)............ 6.750 07/01/19 2,865,075
4,000 New Jersey St Transn Trust Fund Auth Transn
Sys Ser A.................................. 5.750 06/15/16 4,257,400
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 6,533,123
------------
23,459,681
------------
NEW YORK 15.6%
5,000 Long Island Pwr Auth NY Elec Sys Rev Gen
Ser A (MBIA Insd).......................... 5.250 12/01/26 4,751,400
4,000 Nassau Cnty, NY Indl Dev Agy Civic Fac Rev
Hofstra Univ Proj Rfdg (MBIA Insd)......... 4.750 07/01/28 3,473,840
10,000 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Ser B (FGIC Insd).................. 5.250 06/15/29 9,455,300
6,000 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Ser A (FGIC Insd).................. 4.750 06/15/31 5,170,800
7,270 New York City Ser A........................ 7.000 08/01/04 7,865,340
5,700 New York City Ser E Rfdg................... 6.600 08/01/03 6,006,603
5,000 New York City Ser G........................ 5.750 02/01/14 5,122,950
3,000 New York City Transitional Fin Auth Rev
Future Tax Secured Ser C................... 5.000 05/01/29 2,735,250
2,330 New York NY Ser H (MBIA Insd).............. 5.375 08/01/27 2,260,356
7,500 New York St Dorm Auth Rev St Univ Edl Fac
Ser A (MBIA Insd).......................... 4.750 05/15/25 6,560,100
7,575 New York St Dorm Auth Rev City Univ Sys
Cons Ser A................................. 5.625 07/01/16 7,838,307
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 2,124,920
4,000 New York St Dorm Auth Rev Court Fac Lease
Ser A...................................... 5.250 05/15/21 3,758,360
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$2,500 New York St Dorm Auth Rev Dept of Hlth..... 5.500% 07/01/25 $ 2,394,125
5,885 New York St Energy Resh & Dev Auth Fac
Rev........................................ 7.125 12/01/29 6,345,737
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 2,334,186
3,130 New York St Urban Dev Corp Rev Correctional
Fac Ser A Rfdg............................. 5.500 01/01/16 3,105,930
5,000 New York St Urban Dev Corp Rev St Fac
Rfdg....................................... 5.700 04/01/20 5,121,150
1,500 Niagara, NY Frontier Arpt Rev Buffalo
Niagara Intl Arpt Ser A (MBIA Insd)........ 5.625 04/01/29 1,483,140
------------
87,907,794
------------
OHIO 3.9%
1,150 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc
Proj Canton Inc Proj....................... 7.500 01/01/30 1,192,849
2,000 Cuyahoga Cnty, OH Multi-Family Rev Hsg Dale
Bridge Apt (GNMA Collateralized)........... 6.600 10/20/30 2,052,620
3,540 Franklin Cnty, OH Hosp Rev & Impt Doctor's
Hosp Proj Rfdg............................. 5.875 12/01/23 3,592,498
3,685 Lucas Cnty, OH Hosp Rev Promedica Hlthcare
Oblig (MBIA Insd).......................... 6.000 11/15/06 3,939,228
1,905 Miami Cnty, OH Hosp Fac Rev Upper Vly Med
Cent Ser C Rfdg & Impt..................... 5.600 05/15/02 1,909,648
5,130 Muskingum Cnty, OH Hosp Fac Rev Bethesda
Care Sys Rfdg & Impt (Connie Lee Insd)..... 6.250 12/01/10 5,570,924
2,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac Rev OH
Edison Co Proj Rfdg........................ 5.950 05/15/29 1,814,880
1,700 Toledo Lucas Cnty, OH Port Auth Dev Rev
Northwest Ohio Bond Fd Ser C (b)........... 6.600 11/15/15 1,700,493
------------
21,773,140
------------
OKLAHOMA 2.1%
1,500 Jenks, OK Aquarium Auth Rev First Mtg (MBIA
Insd)...................................... 6.100 07/01/30 1,573,800
10,000 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc (c).................................... 7.375 12/01/20 10,207,000
------------
11,780,800
------------
OREGON 0.5%
2,745 Oregon St Dept Admin Serv Ctfs Partn Ser A
(MBIA Insd)................................ 5.250 11/01/10 2,808,025
------------
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
PENNSYLVANIA 3.6%
$9,450 Philadelphia, PA Gas Wks Rev Ser 14 Rfdg
(FSA Insd)................................. 6.250% 07/01/08 $ 9,972,018
2,525 Philadelphia, PA Gas Wks Rev Ser 14 Rfdg
(FSA Insd)................................. 6.375 07/01/26 2,629,358
1,370 Philadelphia, PA Hosps & Higher Ed Fac Auth
Rev Cmnty College Ser B Rfdg (MBIA Insd)... 6.500 05/01/08 1,521,166
3,310 Pittsburgh, PA Ser A (AMBAC Insd).......... 5.500 09/01/14 3,431,676
1,950 Ridley Park, PA Hosp Auth Rev Taylor Hosp
Ser A...................................... 6.000 12/01/05 2,002,611
1,000 Southeastn PA Tran Auth PA Spl Rev Ser A
(FGIC Insd)................................ 4.750 03/01/24 872,920
------------
20,429,749
------------
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 1,168,471
------------
SOUTH CAROLINA 0.4%
1,015 Rock Hill, SC Util Sys Rev Comb Ser C Rfdg
(FSA Insd) (b)............................. 5.000 01/01/11 1,023,384
1,070 Rock Hill, SC Util Sys Rev Comb Ser C Rfdg
(FSA Insd) (b)............................. 5.000 01/01/12 1,070,353
------------
2,093,737
------------
TENNESSEE 1.1%
2,500 Johnson City, TN Hlth & Edl Facs Brd Hosp
Rev 1st Mtg Ser A Rfdg..................... 7.500 07/01/25 2,427,325
14,175 Johnson City, TN Hlth & Edl Facs Brd Hosp
Rev Cap Apprec 1st Mtg Ser A Rfdg (MBIA
Insd)...................................... * 07/01/26 3,139,621
690 Tennessee Hsg Dev Agy Mtg Fin Ser A........ 7.125 07/01/26 711,535
------------
6,278,481
------------
TEXAS 7.2%
9,065 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.................... 7.500 12/01/29 9,255,365
3,000 Brazos River Auth TX Rev Houston Inds Inc
Proj Ser D Rfdg (MBIA Insd)................ 4.900 10/01/15 2,781,660
7,170 Dallas, TX Rev Spl Tax Ser A (AMBAC
Insd)...................................... 4.750 08/15/27 6,242,202
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 2,415,803
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$3,000 Houston, TX Arpt Sys Rev Amt Subordinated
Lien Ser A (FSA Insd) (b).................. 5.625% 07/01/30 $ 2,919,600
1,275 Matagorda Cnty, TX Navig Dist No 1 Rev
Houston Lt & Pwr Ser A Rfdg (AMBAC Insd)... 6.700 03/01/27 1,328,155
5,000 Matagorda Cnty, TX Navig Dist No 1 Rev
Houston Lt Rfdg (AMBAC Insd)............... 5.125 11/01/28 4,552,800
6,285 Round Rock, TX Indpt Sch Dist (PSF Gtd).... 4.500 08/01/20 5,454,563
3,960 Stafford,TX Econ Dev Corp (FGIC Insd)...... 5.500 09/01/30 3,888,482
2,250 Tomball, TX Hosp Auth Rev Rfdg............. 6.125 07/01/23 1,927,980
------------
40,766,610
------------
UTAH 0.4%
4,950 Intermountain Pwr Agy UT Pwr Supply Rev Ser
A Rfdg (FGIC Insd)......................... * 07/01/17 1,984,504
------------
VIRGINIA 1.4%
1,125 Fredericksburg, VA Indl Dev Auth Hosp Facs
Rev (Inverse fltg) (FGIC Insd)............. 8.586 08/15/23 1,203,750
3,000 Isle Wight Cnty, VA Indl Dev Auth Solid
Waste Disp Fac Rev Union Camp Corp Proj.... 6.550 04/01/24 3,031,020
2,000 Loudoun Cnty, VA Ctfs Partn (FSA Insd)..... 6.900 03/01/19 2,148,780
1,500 Virginia St Hsg Dev Auth Multi-Family Ser E
Rfdg....................................... 5.900 11/01/17 1,520,040
------------
7,903,590
------------
WASHINGTON 4.9%
5,000 King Cnty, WA Ser B........................ 5.900 12/01/14 5,299,200
2,500 King Cnty, WA Ser B........................ 6.625 12/01/15 2,783,675
5,000 Washington St Hlthcare Fac Childrens Hosp &
Reg Med Cent (FSA Insd).................... 5.000 10/01/28 4,404,800
4,000 Washington St Pub Pwr Supply Ser A Rfdg
(FGIC Insd)................................ 7.000 07/01/08 4,557,160
10,000 Washington St Pub Pwr Supply Sys Nuclear
Proj No 1 Rev (AMBAC Insd)................. 5.700 07/01/09 10,547,900
------------
27,592,735
------------
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
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 $ 6,333,334
4,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co
Proj Ser C Rfdg (MBIA Insd)................ 6.850 06/01/22 4,199,080
3,000 West Virginia St Wtr Dev Auth Wtr Dev Rev
Ln Pgm II Ser A (Prerefunded @ 11/01/04)
(FSA Insd) (c)............................. 6.750 11/01/33 3,293,070
------------
13,825,484
------------
WISCONSIN 1.1%
2,000 Wisconsin St Hlth & Edl Fac Auth Rev (FGIC
Insd)...................................... 5.000 08/15/10 1,999,080
2,675 Wisconsin St Hlth & Edl Fac Auth Rev FH
Hlthcare Dev Inc Proj...................... 6.250 11/15/28 2,358,895
2,090 Wisconsin St Hlth & Edl Facs Auth Rev
Kenosha Hosp & Med Cent Proj............... 5.625 05/15/29 1,821,164
------------
6,179,139
------------
PUERTO RICO 3.3%
7,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev
Ser Y (FSA Insd)........................... 6.250 07/01/21 7,871,080
10,000 Puerto Rico Pub Bldgs Auth Gtd Pub Edl &
Hlth Fac Rfdg Ser M (MBIA Insd)............ 5.600 07/01/08 10,756,200
------------
18,627,280
------------
TOTAL LONG-TERM INVESTMENTS 98.5%
(Cost $530,946,510).................................................. 554,993,652
SHORT-TERM INVESTMENTS 0.6%
(Cost $3,400,000).................................................... 3,400,000
------------
TOTAL INVESTMENTS 99.1%
(Cost $534,346,510).................................................. 558,393,652
OTHER ASSETS IN EXCESS OF LIABILITIES 0.9%............................ 5,287,547
------------
NET ASSETS 100.0%..................................................... $563,681,199
============
</TABLE>
* Zero coupon bond
(a) Non-Income producing security.
(b) Securities purchased on a when-issued or delayed basis.
See Notes to Financial Statements
23
<PAGE> 25
YOUR TRUST'S INVESTMENTS
October 31, 2000
(c) Assets segregated as collateral for when-issued or delayed delivery purchase
commitments.
(d) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(e) Issuer has filed for protection in federal bankruptcy court.
(f) This security is restricted and may be resold only in transactions exempt
from registration which are normally those transactions with qualified
institutional buyers.
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
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
PSF--Public School Funding
See Notes to Financial Statements
24
<PAGE> 26
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $534,346,510)....................... $558,393,652
Cash........................................................ 170,051
Receivables:
Interest.................................................. 9,727,945
Investments Sold.......................................... 3,176,629
Other....................................................... 14,728
------------
Total Assets............................................ 571,483,005
------------
LIABILITIES:
Payables:
Investment Purchased...................................... 6,706,261
Income Distributions--Preferred Shares.................... 356,937
Investment Advisory Fee................................... 308,819
Administrative Fee........................................ 94,991
Affiliates................................................ 11,550
Accrued Expenses............................................ 187,949
Trustees' Deferred Compensation and Retirement Plans........ 135,299
------------
Total Liabilities....................................... 7,801,806
------------
NET ASSETS.................................................. $563,681,199
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................. 24,047,142
Accumulated Undistributed Net Investment Income............. 1,118,895
Accumulated Net Realized Loss............................... (34,838,469)
------------
Net Assets Applicable to Common Shares.................. 338,681,199
------------
NET ASSETS.................................................. $563,681,199
============
NET ASSET VALUE PER COMMON SHARE ($338,681,199 divided
by 23,555,115 shares outstanding)......................... $ 14.38
============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
Statement of Operations
For the Year Ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $32,846,918
-----------
EXPENSES:
Investment Advisory Fee..................................... 3,590,159
Administrative Fee.......................................... 1,104,665
Preferred Share Maintenance................................. 630,307
Trustees' Fees and Related Expenses......................... 35,255
Custody..................................................... 33,275
Legal....................................................... 26,734
Other....................................................... 320,507
-----------
Total Expenses.......................................... 5,740,902
-----------
NET INVESTMENT INCOME....................................... $27,106,016
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... 221,246
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 9,607,307
End of the Period:
Investments............................................. 24,047,142
-----------
Net Unrealized Appreciation During the Period............... 14,439,835
-----------
NET REALIZED AND UNREALIZED GAIN............................ $14,661,081
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $41,767,097
===========
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
Statement of Changes in Net Assets
For the Years Ended October 31, 2000 and 1999
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................... $ 27,106,016 $ 26,790,518
Net Realized Gain/Loss.............................. 221,246 (2,201,262)
Net Unrealized Appreciation/Depreciation During the
Period............................................ 14,439,835 (41,605,009)
------------ ------------
Change in Net Assets from Operations................ 41,767,097 (17,015,753)
------------ ------------
Distributions from Net Investment Income:
Common Shares..................................... (19,078,916) (19,079,222)
Preferred Shares.................................. (9,114,147) (7,302,425)
------------ ------------
Total Distributions................................. (28,193,063) (26,381,647)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES........................................ 13,574,034 (43,397,400)
------------ ------------
NET ASSETS:
Beginning of the Period............................. 550,107,165 593,504,565
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $1,118,895
and $2,205,942, respectively)..................... $563,681,199 $550,107,165
============ ============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
-----------------------------------------
2000 1999 1998 1997
-----------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD
(A)....................................... $ 13.80 $ 15.64 $ 15.14 $ 14.50
-------- -------- -------- --------
Net Investment Income..................... 1.15 1.14 1.14 1.16
Net Realized and Unrealized Gain/Loss..... .63 (1.86) .51 .63
-------- -------- -------- --------
Total from Investment Operations............ 1.78 (.72) 1.65 1.79
-------- -------- -------- --------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders............. .81 .81 .81 .81
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........ .39 .31 .34 .34
Distributions from Net Realized Gain on
Investments:
Paid to Common Shareholders............. -0- -0- -0- -0-
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........ -0- -0- -0- -0-
-------- -------- -------- --------
Total Distributions......................... 1.20 1.12 1.15 1.15
-------- -------- -------- --------
NET ASSET VALUE, END OF THE PERIOD.......... $ 14.38 $ 13.80 $ 15.64 $ 15.14
======== ======== ======== ========
Market Price Per Share at End of the
Period.................................... $12.2500 $12.0625 $14.7500 $13.5625
Total Investment Return at Market Price
(b)....................................... 8.56% -13.29% 15.10% 16.61%
Total Return at Net Asset Value (c)......... 10.44% -6.88% 8.86% 10.30%
Net Assets at End of the Period (In
millions)................................. $ 563.7 $ 550.1 $ 593.5 $ 581.6
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............. 1.77% 1.67% 1.67% 1.70%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common
Shares (d)................................ 5.55% 5.50% 5.21% 5.61%
Portfolio Turnover.......................... 25% 35% 24% 32%
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares............... 1.05% 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 return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions
for the period in accordance with the Trust's dividend reinvestment plan,
and sale of all shares at the closing common stock price at the end of the
period indicated.
(c) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
28
<PAGE> 30
<TABLE>
<CAPTION>
MARCH 26, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31 OF INVESTMENT
-------------------------------- OPERATIONS) TO
1996 1995 1994 OCTOBER 31, 1993
---------------------------------------------------
<S> <C> <C> <C> <C>
$ 14.37 $ 12.90 $ 16.43 $ 14.79
------- ------- ------- -------
1.17 1.18 1.18 .64
.13 1.57 (3.34) 1.49
------- ------- ------- -------
1.30 2.75 (2.16) 2.13
------- ------- ------- -------
.83 .90 .91 .38
.34 .38 .24 .11
-0- -0- .18 -0-
-0- -0- .04 -0-
------- ------- ------- -------
1.17 1.28 1.37 .49
------- ------- ------- -------
$ 14.50 $ 14.37 $ 12.90 $ 16.43
======= ======= ======= =======
$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
29
<PAGE> 31
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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 accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services are valued at fair value
using procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and original issue discount is accreted over the expected
life of each applicable security.
30
<PAGE> 32
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 2000, the Trust had an accumulated capital loss carry
forward for tax purposes of $34,838,469 which will expire between October 31,
2002 and October 31, 2007.
At October 31, 2000, for federal income tax purposes, cost of long and
short-term investments is $534,346,510; the aggregate gross unrealized
appreciation is $28,512,720 and the aggregate gross unrealized depreciation is
$4,465,578, resulting in net unrealized appreciation on long and short-term
investments of $24,047,142.
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, 2000, the Trust recognized expenses of
approximately $12,600 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.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each Trust. For the year ended October
31, 2000, the
31
<PAGE> 33
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
Trust recognized expenses of approximately $41,800 representing Van Kampen's
cost of providing accounting and legal services to the Trust, which are reported
as part of other and legal expenses, respectively, in the statement of
operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust 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 $138,198,845 and $141,705,198,
respectively.
4. INDEXED SECURITIES
These instruments are identified in the portfolio of investments. The price of
these securities may be more volatile than the price of a comparable fixed rate
security.
An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yields of the portfolio.
5. PREFERRED SHARES
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 when it reverted 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, 2000
was 4.117%. During the year ended October 31, 2000, the rates ranged from 3.300%
to 6.000%.
32
<PAGE> 34
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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.
33
<PAGE> 35
REPORT OF INDEPENDENT AUDITORS
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, 2000, and the related statement of operations,
changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The Trust's
financial statements and financial highlights for the periods ended prior to
October 31, 2000 were audited by other auditors whose report, dated December 6,
1999, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000, by correspondence with the Trust's
custodian 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Value Municipal Income Trust as of October 31, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 6, 2000
34
<PAGE> 36
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
35
<PAGE> 37
the acquisition of fewer Common Shares than if the dividend or distribution had
been paid in Common Shares issued by the Trust. All reinvestments are in full
and fractional Common Shares and are carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
36
<PAGE> 38
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J. KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, 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, 2000. The Trust designated 99.87% of the income distributions as a
tax-exempt income distribution. In January, 2001, the Trust will provide tax
information to shareholders for the 2000 calendar year.
(1) Independent auditors for the Trust perform an annual audit of the Trust's
financial statements. The Board of Trustees has engaged Deloitte & Touche
LLP to be the Trust's independent auditors.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"),
ceased being the Trust's independent accountants effective April 14, 2000.
The cessation of the client- auditor relationship between the Trust and KPMG
was based solely on a possible future business relationship by KPMG with an
affiliate of the Trust's investment adviser.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
37
<PAGE> 39
RESULTS OF
SHAREHOLDER VOTES
An Annual Meeting of Shareholders of the Trust was held on June 21, 2000, where
shareholders voted on the election of trustees and the ratification of Deloitte
& Touche LLP as the independent auditors.
1) With regard to the election of the following trustees by common shareholders:
<TABLE>
<CAPTION>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
<S> <C> <C>
David C. Arch......................................... 21,712,167 319,443
Howard J Kerr......................................... 21,706,101 325,509
</TABLE>
The other trustees whose term did not expire in 2000 were: Rod Dammeyer, Richard
F. Powers, III, Theodore A. Myers, Hugo F. Sonnenschein and Wayne W. Whalen.
2) With regards to the ratification of Deloitte & Touche LLP as the independent
auditors for the Trust 21,767,452 shares voted in favor of the proposal, 107,794
shares voted against and 156,364 shares abstained.
38
