UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-7088
Van Kampen Massachusetts Value Municipal Income Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas NY NY 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas
New York, NY 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
-----------------------------
Date of fiscal year end: 10/31/03
-----------
Date of reporting period: 04/30/03
-----------
Item 1. Report to Shareholders
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of April 30, 2003)
- -------------------------------
AMEX Ticker Symbol - VMV
- -------------------------------
<Table>
<Caption>
- -----------------------------------------------------------------------
Six-month total return(1) 6.19%
- -----------------------------------------------------------------------
One-year total return(1) 14.11%
- -----------------------------------------------------------------------
Five-year average annual total return(1) 9.92%
- -----------------------------------------------------------------------
Ten-year average annual total return(1) 7.48%
- -----------------------------------------------------------------------
Life-of-Trust average annual total return(1) 7.48%
- -----------------------------------------------------------------------
Commencement date 4/30/93
- -----------------------------------------------------------------------
Distribution rate as a % of closing common share market
price(2) 6.06%
- -----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common share market price(3) 10.45%
- -----------------------------------------------------------------------
Preferred share rate(4) 1.170%
- -----------------------------------------------------------------------
Net asset value $16.41
- -----------------------------------------------------------------------
Closing common share market price $17.43
- -----------------------------------------------------------------------
Six-month high common share market price (04/30/03) $17.57
- -----------------------------------------------------------------------
Six-month low common share market price (01/15/03) $15.89
- -----------------------------------------------------------------------
</Table>
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
1
(1) Total return assumes an investment at the common share 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 share market price at the end of the
period indicated.
(2) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(3) The taxable-equivalent distribution rate is calculated assuming the maximum
42.0% combined federal and state tax bracket effective for calendar year
2003, which takes into consideration the deductibility of individual state
taxes paid.
(4) 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,
common share market price and net asset value will fluctuate and Trust
shares, when sold, may be worth more or less than their original cost. An
investment in the Trust is subject to investment risks, and you could lose
money on your investment in the Trust. As a result of recent market
activity, current performance may vary from the figures shown. For more
up-to-date information, please visit vankampen.com or speak with your
financial advisor.
2
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<Table>
<Caption>
As of April 30, 2003
AAA/Aaa........................... 76.0%
AA/Aa............................. 4.0%
A/A............................... 6.8%
BBB/Baa........................... 7.2%
BB/Ba............................. 2.9%
Non-Rated......................... 3.1%
</Table>
TOP FIVE SECTORS
(as a percentage of long-term investments)
<Table>
<Caption>
As of April 30, 2003
Transportation.................... 22.8%
Health Care....................... 17.6%
General Purpose................... 12.7%
Higher Education.................. 12.6%
Public Education.................. 8.2%
</Table>
Based upon the credit quality ratings as issued by Standard & Poor's Credit
Market Services/Moody's Investor Services, respectively. Subject to change
daily.
NET ASSET VALUE AND COMMON SHARE MARKET PRICE
(based upon quarter-end values--April 1993 through April 2003)
[INVESTMENT PERFORMANCE GRAPH]
<Table>
<Caption>
NET ASSET VALUE COMMON SHARE MARKET PRICE
--------------- -------------------------
4/93 $14.8800 $15.0000
6/93 $15.1100 $14.7500
$15.5100 $14.7500
$15.3000 $14.7500
$13.0800 $13.5000
6/94 $13.0300 $12.7500
$12.7800 $11.6250
$12.1300 $11.1250
$13.4100 $12.8750
6/95 $13.6500 $12.3750
$13.9800 $12.2500
$14.8000 $12.1250
$14.1500 $12.3750
6/96 $14.0300 $12.1250
$14.3500 $12.3750
$14.6400 $12.5000
$14.3300 $13.1250
6/97 $14.7800 $13.7500
$15.2100 $14.4370
$15.5200 $14.6250
$15.5300 $14.4375
6/98 $15.5200 $14.8125
$15.9100 $15.8125
$15.7700 $15.8750
$15.6100 $15.5000
6/99 $15.0100 $14.3125
$14.6700 $14.3125
$14.2600 $14.0625
$14.4600 $13.4375
6/00 $14.4800 $13.7500
$14.6900 $14.0000
$15.4700 $14.3125
$15.5700 $14.8800
6/01 $15.3900 $14.6900
$15.7600 $15.1500
$15.3000 $15.3700
$15.2300 $15.8100
6/02 $15.8200 $16.3600
$16.6400 $17.7000
$16.3500 $16.6500
$16.3100 $16.9300
4/03 $16.4100 $17.4300
</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 common share 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. Common share market price is influenced by a range of factors,
including supply and demand and market conditions.
3
Q&A WITH YOUR PORTFOLIO MANAGER
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF VAN KAMPEN MASSACHUSETTS VALUE
MUNICIPAL INCOME TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE
MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE SIX MONTHS ENDED APRIL 30,
2003. TIMOTHY D. HANEY, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 1996 AND
HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1988. THE FOLLOWING DISCUSSION
REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE.
Q WHAT WAS THE MARKET
ENVIRONMENT OF THE PAST SIX MONTHS, AND HOW DID THE TRUST PERFORM IN THAT
ENVIRONMENT?
A The environment over the past six
months has been defined by two major themes. The first of these was the level of
interest rates. The period began with interest rates at levels not seen in over
three decades and, surprisingly for many, ended with rates slightly lower. The
Federal Reserve Board (the Fed) helped keep rates low with a widely anticipated
rate cut in November, driven by economic uncertainty and geopolitical risk. The
low level of rates led to a boom in issuance by municipalities seeking to lock
in low financing costs. As a result, issuance reached a record level of $354
billion in 2002 and continued to be exceptional in the first quarter of 2003.
The other theme in the market during the period was the relative
attractiveness of municipal bonds, which produced enough demand to absorb the
record issuance. Investors, wary of volatility in the equity market and in the
geopolitical arena, flocked to perceived safe haven investments. Their risk
aversion counteracted growing expectations for economic recovery and rising
interest rates and was a key factor in keeping interest rates at historically
low levels. In their ongoing preference for low-risk assets, investors bid
Treasury prices up to such high levels that municipal bonds became as
attractively valued as they have ever been relative to Treasuries. Insurance
companies also moved heavily into municipal bonds as their mainstay corporate
bond holdings became less attractive. At the same time, issuers recognized
investor concerns over economic weakness by insuring roughly 50 percent of all
issuance. This credit enhancement made municipal bonds even more attractive to
risk averse investors.
While lower financing costs were a boon to municipal issuers, the continuing
weakness in the economy had a negative impact on municipal credit quality,
particularly in the first quarter of 2003. Moody's upgrades barely exceeded the
number of downgrades in the first quarter, with
4
credit quality facing continued pressure from rising social service costs and
weak national and regional economic conditions. As a result, municipalities face
enormous deficits in 2003, when their combined shortfall is expected to reach
$90 billion.
Performance along the yield curve was varied. The Fed's November rate cut
fueled a rally in short-term bonds that helped pull yields lower at the front
end of the curve. Despite that rally, the best performing segment of the curve
was the long-intermediate portion where performance was largely driven by buying
activity among institutional investors drawn to the bonds' attractive total
return potential.
Like most other states, Massachusetts' budget and economy faced significant
challenges during the period. The state's budgetary difficulties were largely
due to falling capital gains tax revenues and the uncertainty over the timing of
a recovery in the economy and stock market. The state's heavy reliance on the
high technology manufacturing, software and technology services industries has
also been a drag on growth. The state's potential gap of $600 million in fiscal
2003 pales next to the possible $3.1 billion gap it faces in 2004 if anticipated
tobacco revenues fail to materialize. The Republican governor and largely
Democratic state legislature appear poised to lock horns over future budgets,
though it is clear that both sides will likely have to make concessions in the
end.
The trust's monthly dividend of $0.088 per share translated to a
distribution rate of 6.06 percent based on the trust's closing common share
market price on April 30, 2003. Based on these figures, investors would have to
earn a distribution rate of 10.45 percent on a taxable investment (for an
investor in the 42.00 percent combined federal and state income tax bracket) to
match the tax-exempt yield provided by the trust.
For the six months ended April 30, 2003, the trust produced a total return
of 6.19 percent based on common share market price. By comparison, the Lehman
Brothers Massachusetts Municipal Bond Index posted a total return of 3.77
percent for the same period. Of course, past performance is no guarantee of
future results. Investment return, common share market price and net asset value
will fluctuate and trust shares, when sold, may be worth more or less than their
original cost. As a result of recent market activity, current performance may
vary from the figures shown. For more up-to-date information, please visit
vankampen.com or speak with your financial advisor.
The Lehman Brothers Massachusetts Municipal Bond Index is an unmanaged,
broad-based statistical composite of municipal bonds. Index returns do not
include any sales charges or fees that would be paid by an investor purchasing
the securities the index represents. Such costs would lower performance. It is
not possible to invest directly in an index. For additional information, please
refer to the performance summary section.
5
Q WHAT STRATEGIES DID YOU PURSUE
IN MANAGING THE TRUST?
A The low level of interest rates had
significant implications for our management of the trust. Many of the bonds in
the portfolio were issued years ago when interest rates were substantially
higher. As these issues reached their call dates, many issuers chose to call the
bonds in order to reissue bonds at lower interest rates. The portfolio had
several of these bonds in the housing and health care sectors, and as a result
we had some cash to reinvest.
As bonds were called away, we put the cash to work wherever we could find
attractive securities. Our concern over the state's budget situation led us to
avoid credits directly backed by state revenues and to focus, instead, on bonds
backed by other sources. We made selective purchases of high-grade bonds in the
20-year part of the yield curve, as well as a BBB rated long-maturity bonds in
the higher education sector.
6
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
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
MUNICIPAL BONDS 149.8%
MASSACHUSETTS 133.7%
$1,705 Boston, MA Metro Dist Rfdg (Prerefunded @
12/01/04).................................... 6.500% 12/01/13 $ 1,880,138
1,000 Boston, MA Ser A Rfdg (MBIA Insd)............ 5.000 02/01/21 1,058,080
1,500 Chelsea, MA Sch Proj Ln Act 1948 (Prerefunded
@ 06/15/04) (AMBAC Insd)..................... 5.700 06/15/06 1,606,545
1,000 Chelsea, MA Sch Proj Ln Act 1948 (Prerefunded
@ 06/15/04) (AMBAC Insd)..................... 6.500 06/15/12 1,079,950
2,385 Greater Lawrence, MA San Dist (MBIA Insd).... 6.000 06/15/17 2,811,343
1,000 Holyoke, MA Gas & Elec Dept Rev Ser A (MBIA
Insd)........................................ 5.000 12/01/31 1,020,960
1,000 Lowell, MA (Prerefunded @ 04/01/05) (FSA
Insd)........................................ 6.625 04/01/15 1,119,610
1,500 Massachusetts Bay Tran Auth MA Gen Trans Sys
Ser B (Prerefunded @ 03/01/04)............... 5.900 03/01/12 1,589,790
480 Massachusetts Ed Ln Auth Ed Ln Rev Issue E
Ser B (AMBAC Insd)........................... 6.250 07/01/11 498,374
595 Massachusetts Ed Ln Auth Ed Ln Rev Issue E
Ser B (AMBAC Insd)........................... 6.300 07/01/12 617,420
1,000 Massachusetts St Dev Fin Agy M/Srbc Proj Ser
A (MBIA Insd)................................ 5.125 08/01/28 1,031,220
1,000 Massachusetts St Dev Fin Agy Rev MA College
of Pharmacy Ser B............................ 6.750 07/01/30 1,094,610
1,000 Massachusetts St Dev Fin Agy Rev Pharmacy &
Allied Hlth Scnces........................... 5.750 07/01/33 1,001,950
500 Massachusetts St Hlth & Ed Fac Auth Rev
(Prerefunded @ 02/15/07) (FHA Gtd)........... 5.950 02/15/17 575,845
1,500 Massachusetts St Hlth & Ed Fac Auth Rev
Baystate Med Ctr Ser D Rfdg (FGIC Insd)...... 5.000 07/01/12 1,502,955
1,000 Massachusetts St Hlth & Ed Fac Auth Rev
Brandeis Univ Ser I (MBIA Insd).............. 4.750 10/01/28 1,004,370
1,500 Massachusetts St Hlth & Ed Fac Auth Rev
Faulkner Hosp Ser C (Prerefunded @
07/01/03).................................... 6.000 07/01/13 1,541,835
1,500 Massachusetts St Hlth & Ed Fac Auth Rev
Hlthcare Sys Covenant Hlth................... 6.000 07/01/31 1,570,440
</Table>
See Notes to Financial Statements
7
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
MASSACHUSETTS (CONTINUED)
$1,000 Massachusetts St Hlth & Ed Fac Auth Rev
Newton Wellesley Hosp Issue Ser E (MBIA
Insd)........................................ 5.875% 07/01/15 $ 1,090,870
2,000 Massachusetts St Hlth & Ed Fac Auth Rev North
Shore Med Ctr Ser A (MBIA Insd).............. 5.625 07/01/14 2,115,420
1,000 Massachusetts St Hlth & Ed Fac Auth Rev Saint
Mem Med Ctr Ser A............................ 6.000 10/01/23 909,660
1,000 Massachusetts St Hlth & Ed Fac Auth Rev Vly
Regl Hlth Sys Ser C Rfdg (Connie Lee Insd)... 7.000 07/01/10 1,223,720
1,000 Massachusetts St Hlth & Ed New England Med
Ctr Hosp Ser H (FGIC Insd)................... 5.000 05/15/25 1,015,610
1,000 Massachusetts St Hlth Ed Fac Northeastern
Univ Ser G (MBIA Insd)....................... 5.000 10/01/28 1,022,410
2,185 Massachusetts St Hsg Fin Agy Hsg Rev Insd
Rental Ser A Rfdg (AMBAC Insd)............... 6.600 07/01/14 2,271,897
750 Massachusetts St Hsg Fin Agy Rental Mtg Ser D
(AMBAC Insd)................................. 6.200 07/01/15 787,642
270 Massachusetts St Hsg Fin Agy Residntl Dev Ser
D (FNMA Collateralized)...................... 6.800 11/15/12 273,415
500 Massachusetts St Indl Fin Agy Rev First Mtg
Loomis House & Vlg Proj (Prerefunded @
07/01/05).................................... 7.500 07/01/17 574,460
2,000 Massachusetts St Indl Fin Agy Rev Suffolk
Univ (AMBAC Insd)............................ 5.250 07/01/27 2,106,420
2,075 Massachusetts St Indl Fin Agy Rev Tufts Univ
Ser H (MBIA Insd)............................ 4.750 02/15/28 2,083,923
1,000 Massachusetts St Indl Fin Agy Rev Whitehead
Inst Biomedical Research..................... 5.125 07/01/26 1,011,210
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
Amern Hingham................................ 6.900 12/01/29 1,035,550
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
Amern Hingham................................ 6.950 12/01/35 1,030,670
1,000 Massachusetts St Spl Oblig Rev Ser A......... 5.700 06/01/10 1,057,240
9,750 Massachusetts St Tpk Auth Metro Hwy Ser Rev
Cap Apprec Sr Ser C (MBIA Insd).............. * 01/01/22 3,913,260
2,550 Massachusetts St Tpk Auth Metro Hwy Sys Rev
Sub Ser A (AMBAC Insd)....................... 5.000 01/01/39 2,575,016
3,000 Massachusetts St Tpk Auth Rev Ser A Rfdg
(Escrowed to Maturity)....................... 5.000 01/01/13 3,315,990
1,500 Narragansett, MA Rgl Sch Dist (AMBAC Insd)... 5.375 06/01/18 1,667,175
1,000 New Bedford, MA Muni Purp Ln (FGIC Insd)..... 5.000 05/01/20 1,065,630
</Table>
See Notes to Financial Statements
8
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
MASSACHUSETTS (CONTINUED)
$2,500 New England Ed Ln Mktg Corp MA Student Ln Rev
Sub Issue H (Std Lns Gtd).................... 6.900% 11/01/09 $ 2,867,325
1,000 Pittsfield, MA (MBIA Insd)................... 5.125 04/15/22 1,065,770
------------
58,685,718
------------
GUAM 2.3%
1,000 Guam Govt Ser A.............................. 5.750 09/01/04 1,000,100
------------
PUERTO RICO 11.3%
2,000 Puerto Rico Comwlth Hwy & Trans Auth Hwy Rev
Ser Y Rfdg (FSA Insd)........................ 6.250 07/01/21 2,501,220
1,000 Puerto Rico Comwlth Rfdg (FGIC Insd)......... 5.250 07/01/09 1,141,540
2,000 Puerto Rico Pub Bldg Auth Rev Gtd Conv Cap
Apprec Ser D (AMBAC Insd) (a)................ 0/5.450 07/01/30 1,293,940
------------
4,936,700
------------
U. S. VIRGIN ISLANDS 2.5%
1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt
Taxes Ln Nt Ser A............................ 6.375 10/01/19 1,115,930
------------
TOTAL LONG-TERM INVESTMENTS 149.8%
(Cost $59,321,106)....................................................... 65,738,448
SHORT-TERM INVESTMENTS 1.1%
(Cost $500,000).......................................................... 500,000
------------
TOTAL INVESTMENTS 150.9%
(Cost $59,821,106)....................................................... 66,238,448
OTHER ASSETS IN EXCESS OF LIABILITIES 6.1%................................ 2,645,353
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (57.0%)................ (25,002,405)
------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%............................. $ 43,881,396
============
</Table>
* Zero coupon bond
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
AMBAC--AMBAC Indemnity Corp.
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
Std Lns--Student Loans
See Notes to Financial Statements
9
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2003 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $59,821,106)........................ $66,238,448
Cash........................................................ 10,658
Receivables:
Investments Sold.......................................... 1,747,300
Interest.................................................. 1,099,982
Other....................................................... 123
-----------
Total Assets............................................ 69,096,511
-----------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 33,752
Affiliates................................................ 3,394
Administrative Fee........................................ 2,813
Trustees' Deferred Compensation and Retirement Plans........ 141,941
Accrued Expenses............................................ 30,810
-----------
Total Liabilities....................................... 212,710
Preferred Shares (including accrued distributions).......... 25,002,405
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $43,881,396
===========
NET ASSET VALUE PER COMMON SHARE ($43,881,396 divided by
2,673,322 shares outstanding)............................. $ 16.41
===========
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 2,673,322 shares issued and
outstanding).............................................. $ 26,733
Paid in Surplus............................................. 37,039,349
Net Unrealized Appreciation................................. 6,417,342
Accumulated Undistributed Net Investment Income............. 623,407
Accumulated Net Realized Loss............................... (225,435)
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $43,881,396
===========
PREFERRED SHARES ($.01 par value, authorized 100,000,000
shares, 1,000 issued with liquidation preference of
$25,000 per share)........................................ $25,000,000
===========
NET ASSETS INCLUDING PREFERRED SHARES....................... $68,881,396
===========
</Table>
See Notes to Financial Statements
10
Statement of Operations
For the Six Months Ended April 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $1,824,015
----------
EXPENSES:
Investment Advisory Fee..................................... 202,917
Preferred Share Maintenance................................. 37,591
Trustees' Fees and Related Expenses......................... 20,802
Administrative Fee.......................................... 16,910
Legal....................................................... 6,936
Custody..................................................... 1,984
Other....................................................... 49,630
----------
Total Expenses.......................................... 336,770
----------
NET INVESTMENT INCOME....................................... $1,487,245
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 138,574
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 5,602,857
End of the Period......................................... 6,417,342
----------
Net Unrealized Appreciation During the Period............... 814,485
----------
NET REALIZED AND UNREALIZED GAIN............................ $ 953,059
==========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (122,340)
==========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $2,317,964
==========
</Table>
See Notes to Financial Statements
11
Statements of Changes in Net Assets
(Unaudited)
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 1,487,245 $ 3,009,683
Net Realized Gain.................................. 138,574 302,169
Net Unrealized Appreciation/Depreciation During the
Period........................................... 814,485 (177,916)
Distributions to Preferred Shareholders:
Net Investment Income............................ (122,340) (302,617)
----------- -----------
Change in Net Assets Applicable to Common Shares
from Operations.................................. 2,317,964 2,831,319
Distributions to Common Shareholders:
Net Investment Income............................ (1,401,826) (2,504,963)
----------- -----------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON
SHARES FROM INVESTMENT ACTIVITIES................ 916,138 326,356
----------- -----------
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment..................................... 80,765 122,063
----------- -----------
TOTAL INCREASE IN NET ASSETS APPLICABLE TO COMMON
SHARES........................................... 996,903 448,419
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period............................ 42,884,493 42,436,074
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of $623,407
and $660,328, respectively)...................... $43,881,396 $42,884,493
=========== ===========
</Table>
See Notes to Financial Statements
12
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED
APRIL 30, -------------------
2003 2002 (a) 2001
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD (b).............. $ 16.07 $ 15.95 $ 14.84
------- ------- -------
Net Investment Income.................................... .55 1.13 1.09
Net Realized and Unrealized Gain/Loss.................... .36 .04 1.15
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income.................................. (.05) (.11) (.28)
Net Realized Gain...................................... -0- -0- -0-
------- ------- -------
Total from Investment Operations.......................... .86 1.06 1.96
Distributions Paid to Common Shareholders:
Net Investment Income.................................. (.52) (.94) (.85)
Net Realized Gain...................................... -0- -0- -0-
------- ------- -------
NET ASSET VALUE, END OF THE PERIOD........................ $ 16.41 $ 16.07 $ 15.95
======= ======= =======
Common Share Market Price at End of the Period............ $ 17.43 $ 16.95 $ 15.51
Total Return (c).......................................... 6.19%* 15.96% 17.71%
Net Assets Applicable to Common Shares at End of the
Period (In millions)..................................... $ 43.9 $ 42.9 $ 42.4
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (d)........................................ 1.57% 1.64% 1.86%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d).......................... 6.94% 7.16% 7.05%
Portfolio Turnover........................................ 3%* 11% 11%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
Preferred Shares (d)..................................... 1.00% 1.03% 1.16%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (e).......................... 6.37% 6.44% 5.25%
SENIOR SECURITIES:
Total Preferred Shares Outstanding........................ 1,000 1,000 1,000
Asset Coverage Per Preferred Share (f).................... $68,884 $67,889 $67,436
Involuntary Liquidating Preference Per Preferred Share.... $25,000 $25,000 $25,000
Average Market Value Per Preferred Share.................. $25,000 $25,000 $25,000
</Table>
* Non-Annualized
(a) As required, effective November 1, 2001, the Trust has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began accreting discount on fixed income securities. The effect of this
change for the year ended October 31, 2002 was to increase net investment
income per share by $.02, decrease net realized and unrealized gains and
losses per share by $.02 and increase the ratio of net investment income to
average net assets applicable to common shares from 7.02% to 7.16%. Per
share, ratios and supplemental data for periods prior to October 31, 2002
have not been restated to reflect this change in presentation.
(b) Net Asset Value at April 30, 1993, is adjusted for common and preferred
share offering costs of $.342 per common share.
(c) Total return assumes an investment at the common share 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 share market price at the end of the
period indicated.
(d) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(e) Ratios reflect the effect of dividend payments to preferred shareholders.
(f) Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets and dividing this by the
number of preferred shares outstanding.
13
<Table>
<Caption>
APRIL 30, 1993
(COMMENCEMENT
OF INVESTMENT
YEAR ENDED OCTOBER 31, OPERATIONS) TO
- ----------------------------------------------------------------------------- OCTOBER 31,
2000 1999 1998 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
$ 14.40 $ 15.77 $ 15.24 $ 14.53 $ 14.26 $ 12.27 $ 15.47 $ 14.66
-------- ------- -------- -------- -------- -------- -------- --------
1.10 1.07 1.07 1.08 1.07 1.08 1.09 .39
.50 (1.42) .56 .70 .21 2.01 (3.16) .75
(.33) (.24) (.32) (.29) (.29) (.33) (.23) (.06)
-0- -0- -0- -0- -0- -0- (.01) -0-
-------- ------- -------- -------- -------- -------- -------- --------
1.27 (.59) 1.31 1.49 .99 2.76 (2.31) 1.08
(.83) (.78) (.78) (.78) (.72) (.77) (.83) (.27)
-0- -0- -0- -0- -0- -0- (.06) -0-
-------- ------- -------- -------- -------- -------- -------- --------
$ 14.84 $ 14.40 $ 15.77 $ 15.24 $ 14.53 $ 14.26 $ 12.27 $ 15.47
======== ======= ======== ======== ======== ======== ======== ========
$13.9375 $ 13.25 $ 15.875 $ 14.50 $ 12.375 $ 12.00 $ 11.375 $ 15.375
11.68% -12.07% 13.22% 23.97% 9.26% 12.26% -20.95% 4.38%*
$ 39.5 $ 38.3 $ 41.9 $ 40.5 $ 38.6 $ 37.9 $ 32.6 $ 41.1
1.97% 1.88% 1.88% 1.95% 2.06% 2.17% 2.12% 1.91%
7.59% 6.97% 6.89% 7.29% 7.54% 8.13% 7.85% 5.23%
23% 5% 3% 8% 12% 65% 108% 35%*
1.19% 1.17% 1.17% 1.19% 1.24% 1.27% 1.26% 1.40%
5.31% 5.38% 4.84% 5.29% 5.49% 5.65% 6.22% 4.45%
1,000 1,000 500 500 500 500 500 500
$ 64,480 $63,303 $133,850 $131,032 $127,272 $125,798 $115,230 $132,161
$ 25,000 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
$ 25,000 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
</Table>
See Notes to Financial Statements
14
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Massachusetts Value Municipal Income Trust (the "Trust") is
registered as a non-diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended. The Trust's investment objective
is to seek to provide common shareholders with a high level of current income
exempt from federal income taxes and Massachusetts personal income tax,
consistent with preservation of capital. The Trust will invest substantially all
of its assets in Massachusetts municipal securities rated investment grade at
the time of investment. The Trust commenced investment operations on April 30,
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 or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made. At April 30, 2003, the Trust had no
when-issued or delayed delivery purchase commitments.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security.
15
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (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, 2002, the Trust had an accumulated capital loss
carryforward for tax purposes of $363,089 which will expire between October 31,
2003 and October 31, 2007. Of this amount, $299,665 will expire on October 31,
2003.
At April 30, 2003 the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $59,445,524
===========
Gross tax unrealized appreciation........................... $ 6,864,232
Gross tax unrealized depreciation........................... (71,308)
-----------
Net tax unrealized appreciation on investments.............. $ 6,792,924
===========
</Table>
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.
As of October 31, 2002, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $6,352
</Table>
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 .60% of the average
daily net assets of the Trust. In addition, the Trust will pay a monthly
administrative fee to Van Kampen Investments Inc. or its affiliates
(collectively "Van Kampen"), the Trust's Administrator, at an annual rate of
..05% 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.
16
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
For the six months ended April 30, 2003, the Trust recognized expenses of
approximately $2,000 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
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 six months ended
April 30, 2003, the Trust recognized expenses of approximately $11,800
representing Van Kampen's cost of providing accounting and legal services to the
Trust, which are reported as part of "Other" and "Legal" expenses, respectively,
in the Statement of Operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable upon retirement 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. CAPITAL TRANSACTIONS
At April 30, 2003 and October 31, 2002, paid in surplus related to common shares
aggregated $37,039,349 and $36,958,633, respectively. Transactions in common
shares were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
Beginning Shares.................................. 2,668,364 2,660,684
--------- ---------
Shares Issued Through Dividend Reinvestment....... 4,958 7,680
--------- ---------
Ending Shares..................................... 2,673,322 2,668,364
========= =========
</Table>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $2,000,770 and $4,916,140, respectively.
5. PREFERRED SHARES
The Trust has outstanding 1,000 Auction Preferred Shares ("APS"). Dividends are
cumulative and the dividend rate is currently reset every seven days through an
17
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
auction process. The rate in effect on April 30, 2003 was 1.170%. During the six
months ended April 30, 2003, the rates ranged from 0.540% to 1.800%.
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 in the Statement of Operations.
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.
18
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
19
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
20
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN MASSACHUSETTS 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*
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 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
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
21
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you make with us,
our affiliates, or third parties. We may also collect information you provide
when using our web site, and text files (a.k.a. "cookies") may be placed on your
computer to help us to recognize you and to facilitate transactions you
initiate. We do not disclose any nonpublic personal information about you or any
of our former customers to anyone, except as permitted by law. For instance, so
that we may continue to offer you Van Kampen investment products and services
that meet your investing needs, and to effect transactions that you request or
authorize, we may disclose the information we collect to companies that perform
services on our behalf, such as printers and mailers that assist us in the
distribution of investor materials. These companies will use this information
only for the services for which we hired them, and are not permitted to use or
share this information for any other purpose. To protect your nonpublic personal
information internally, we permit access to it only by authorized employees, and
maintain physical, electronic and procedural safeguards to guard your nonpublic
personal information.
* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van
Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as
well as the many Van Kampen mutual funds and Van Kampen unit investment
trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
[VAN KAMPEN INVESTMENTS LOGO]
Copyright (C)2003 Van Kampen Funds Inc. All rights reserved.
VMV SAR 6/03 Member NASD/SIPC.
11200F03-AS-6/03
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. [Reserved.]
Item 9.
The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
Item 10. Exhibits.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Massachusetts Value Municipal Income Trust
-------------------------------------------------------------------
By: /s/ Ronald E. Robison
----------------------------------------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
----------------------------------------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 23, 2003
By: /s/ John L. Sullivan
----------------------------------------------------------------------------
Name: John Sullivan
Title: Principal Financial Officer
Date: June 23, 2003