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 811-05273
Van Kampen Income Trust
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 12/31
Date of reporting period: 12/31/03
Item 1. Report to Shareholders.
The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Income Trust performed during the annual period. The portfolio management
team will provide an overview of the market conditions and discuss some
of the factors that affected investment performance during the reporting
period. In addition, this report includes the trust's financial
statements and a list of trust investments as of December 31, 2003.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the trust will achieve its investment
objective. The trust is subject to market risk, which is the possibility
that the market values of securities owned by the trust will decline and,
therefore, the value of the trust shares may be less than what you paid
for them. Accordingly, you can lose money investing in this trust.
<Table>
<Caption>
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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</Table>
Performance Summary
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
INCOME TRUST
SYMBOL: VIN
- -------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (04/22/88) 7.17% 6.45%
10-year 6.34 5.76
5-year 4.36 2.41
1-year 12.66 8.42
- -------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, net asset
value (NAV) and common share market price 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 NAV per share is determined by dividing
the value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding. The common share
market price is 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. Total return assumes an
investment at the beginning of the period, reinvestment of all distributions for
the period in accordance with the trust's dividend reinvestment plan, and sale
of all shares at the end of the period.
1
Trust Report
FOR THE 12-MONTH PERIOD ENDED DECEMBER 31, 2003
Van Kampen Income Trust is managed by the adviser's Taxable Fixed-Income
team.(1) Current team members include Gordon Loery, Executive Director; Jaidip
Singh, Executive Director; and Menglin Luo, Vice President.
MARKET CONDITIONS
The bond markets in 2003 were dominated by the Federal Reserve Bank's perceived
deflation concerns as well as by mounting evidence that the U.S. economy was
moving into a solid recovery. Interest rates rose briefly in January on
expectations of an imminent recovery, only to consolidate through the spring in
the absence of any decisive economic developments. The market moved out of this
pattern in May, when Federal Reserve minutes acknowledged heightened concern
about deflation as a possibility, "however remote." These comments sent yields
plummeting to multi-decade lows as investors sought the safety of Treasury
bonds.
Interest rates reversed course once more in June, when the Federal Reserve
reduced the federal funds target rate by 25 basis points. This cut was half of
what the market had expected, and seemed to signal that the Fed was less
concerned about deflation than had previously been thought. The economy also
began showing convincing signs of improvement in the third quarter. By
September, both consumer and corporate spending showed strength, and GDP growth
topped 8 percent. Interest rates moved sharply higher through the end of August
in one of their strongest upward moves in decades, and remained largely
unchanged through the end of the year.
The high-yield market entered the 12-month period on a strong footing and
continued to rally sharply through the end of the period, with the CSFB High
Yield Index posting its second-best return since the asset class developed in
the 1980s. Many factors contributed to the high-yield market's stellar
performance in 2003. Improving perceptions regarding the economy, the credit
cycle, and defaults led to renewed investor interest in credit-sensitive issues.
Several highly visible high-yield companies produced positive earnings
surprises, and the Moody's issuer-based default rate fell by more than half over
the course of the year. Low interest rates added to the allure of high-yield
bonds for yield-hungry investors. The resulting record inflows into the asset
class provided portfolio managers with large amounts of cash that handily offset
a near-record amount of new issuance. In addition, many high-yield portfolios,
which began the year with conservative holdings relative to the high-yield
indices, began heavily buying lower-rated credits in an attempt to catch up to
the rallying market.
These factors combined to produce significant price appreciation across all
sectors of the high-yield market, with the most speculative companies in the
(1)Team members may change without notice at any time.
2
lowest-credit tiers tending to perform most strongly. Wireless communications,
utilities, telecom, and cable--among the worst performers in 2001 and 2002--
were the best-performing sectors in 2003. More typically defensive sectors, such
as consumer products and food and drug lagged, as did forest products and
metals.
PERFORMANCE ANALYSIS
Closed-end fund returns can be calculated based upon either the market price or
the net asset value (NAV) of its shares. NAV per share is determined by dividing
the value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding, while market
price reflects the supply and demand for the shares. As a result, the two
returns can differ significantly. On a market-price basis, the fund returned
8.42 percent, while on an NAV basis, the fund returned 12.66 percent.
Within the high-yield segment of the portfolio, the greatest driver of the
trust's performance was strong credit selection. Many of the portfolio's best
performers entered the year at a steep discount to their par value, and enjoyed
robust price appreciation in addition to earning attractive coupons over the
course of the year. In the wireless sector, the portfolio's position in Nextel
benefited from the company's continued financial strength coupled with a low
valuation at the beginning of the period. The trust enjoyed similarly strong
performance from companies in the broadcasting, utilities, cable,
telecommunications and chemicals industries.
The trust uses leverage to enhance its dividend to common shareholders on an
ongoing basis. As part of this approach, the trust borrows money at short-term
rates through the issuance of preferred shares, and then invests the proceeds in
longer-term securities, taking advantage of the difference between short and
longer-term rates. With short-term rates at historic lows during the period, the
difference between short- and longer-term rates was relatively high. This made
using leverage a particularly profitable approach during the period, and added
to the trust's strong performance.
The investment-grade segment of the trust's portfolio continued to provide
liquidity and high credit quality. This segment of the portfolio remained
diversified among mortgage-backed securities, Treasuries and Agencies. One of
our key strategies over the course of the year was to modify the trust's sector
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED DECEMBER 31, 2003
<Table>
<Caption>
- -------------------------------------
BASED ON BASED ON
NAV MARKET PRICE
12.66% 8.42%
- -------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, net asset
value and common share market price will fluctuate and trust shares, when sold,
may be worth more or less than their original cost. See Performance Summary for
additional performance information.
3
mix to position the trust for an economic environment of rising interest rates.
We did this by emphasizing securities with above-Treasury yields. We took
advantage of historically attractive valuations by shifting some assets out of
Treasuries and into mortgage-backed securities. This strategy contributed to the
trust's performance as yield spreads generally tightened over the period.
While the trust's performance was positive, not all of its positions were
beneficial. The rapid rise in the market price of CCC-rated debt led us to trim
some of the trust's exposure to those securities in order to redeploy assets
into parts of the market we viewed as more attractive. While we remain convinced
of the wisdom of this approach in the longer-term, it did cause the portfolio to
miss some of the price performance of lower-rated securities during the year.
Although the trust benefited from good credit selection within utilities, our
stringent investment criteria made it difficult to find attractive companies in
that sector given its widespread problem of overcapacity. As a result, we
deemphasized utility bonds, which performed strongly as a sector during the
period.
Going forward, we will continue with our disciplined investment approach,
monitoring the market closely for opportunities to capture value.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
<Table>
TOP 5 SECTORS AS OF 12/31/03 RATINGS ALLOCATIONS AS OF 12/31/03
Media-Noncable 5.2% AAA /Aaa 48.2%
Chemicals 3.8 BBB/Baa 3.1
Media-Cable 3.3 BB/Ba 16.8
Wireless Communications 3.0 B/B 25.6
Paper 2.9 CCC/Caa 4.8
CC/Ca 0.8
Non-Rated 0.7
</Table>
Subject to change daily. All percentages are as a percentage of long-term
investments. Provided for informational purposes only and should not be deemed
as a recommendation to buy securities in the sectors shown above. Securities are
classified by sectors that represent broad groupings of related industries.
Ratings allocation based upon ratings as issued by Standard and Poor's and
Moody's, respectively. Van Kampen is a wholly owned subsidiary of a global
securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
4
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
December 31, 2003
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
DOMESTIC CORPORATE BONDS 46.6%
AUTOMOTIVE 1.1%
$ 250 Autonation, Inc. ................. 9.000% 08/01/08 $ 288,125
335 Laidlaw International, Inc.,
144A--Private Placement (a)....... 10.750 06/15/11 380,225
335 Lear Corp. ....................... 8.110 05/15/09 395,719
-----------
1,064,069
-----------
BUILDING MATERIALS 1.4%
125 Brand Services, Inc. ............. 12.000 10/15/12 145,156
160 NMHG Holdings Co. ................ 10.000 05/15/09 177,600
60 Nortek Holdings, Inc. ............ 9.250 03/15/07 61,950
585 Nortek Holdings, Inc.,
144A--Private Placement (a) (b)... 0/10.000 05/15/11 425,587
295 Schuler Homes, Inc. .............. 9.375 07/15/09 333,350
280 Trimas Corp. ..................... 9.875 06/15/12 293,300
-----------
1,436,943
-----------
CHEMICALS 2.9%
50 ABB Finance, Inc. ................ 6.750 06/03/04 48,015
100 Equistar Chemicals LP............. 10.625 05/01/11 111,000
120 FMC Corp. ........................ 10.250 11/01/09 141,000
110 Huntsman Advanced Materials LLC,
144A--Private Placement (a)....... 11.000 07/15/10 122,100
395 Huntsman ICI Chemicals, LLC....... 10.125 07/01/09 408,825
250 Hydrochem Industrial Services,
Inc., Ser B....................... 10.375 08/01/07 239,375
140 ISP Chemco, Inc. ................. 10.250 07/01/11 158,200
300 ISP Holdings, Inc. ............... 10.625 12/15/09 331,500
230 Johnsondiversey, Inc. ............ 9.625 05/15/12 257,600
80 Koppers, Inc.,144A--Private
Placement (a)..................... 9.875 10/15/13 88,600
40 Kraton Polymers LLC, 144A--Private
Placement (a)..................... 8.125 01/15/14 41,800
225 Millennium America, Inc. ......... 7.000 11/15/06 231,750
305 Nalco Co., 144A--Private Placement
(a)............................... 7.750 11/15/11 327,875
</Table>
See Notes to Financial Statements 5
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
CHEMICALS (CONTINUED)
$ 17 Pioneer Cos., Inc. ............... 4.663% 12/31/06 $ 15,747
185 Rockwood Specialties Group, Inc.,
144A--Private Placement (a)....... 10.625 05/15/11 207,200
120 Westlake Chemical Corp., 144A--
Private Placement (a)............. 8.750 07/15/11 132,000
-----------
2,862,587
-----------
CONSTRUCTION MACHINERY 0.8%
85 Flowserve Corp. .................. 12.250 08/15/10 99,025
25 Manitowoc Co., Inc. (EUR)......... 10.375 05/15/11 34,964
330 Manitowoc, Inc. .................. 10.500 08/01/12 377,437
240 United Rentals North America,
Inc., 144A--Private Placement
(a)............................... 7.750 11/15/13 246,300
-----------
757,726
-----------
CONSUMER PRODUCTS 2.1%
255 Iron Mountain, Inc. .............. 8.625 04/01/13 276,675
170 Iron Mountain, Inc. .............. 7.750 01/15/15 178,925
325 Jacuzzi Brands, Inc.,
144A--Private Placement (a)....... 9.625 07/01/10 359,125
185 Muzak, LLC........................ 10.000 02/15/09 197,950
250 Muzak, LLC........................ 9.875 03/15/09 242,812
370 Outsourcing Services Group,
Inc. ............................. 10.875 03/01/06 205,350
180 Rayovac Corp. .................... 8.500 10/01/13 191,700
60 Simmons Co., 144A--Private
Placement (a)..................... 7.875 01/15/14 60,600
114 Tempur Pedic, Inc., 144A--Private
Placement (a)..................... 10.250 08/15/10 127,680
280 Xerox Corp. ...................... 7.125 06/15/10 301,000
-----------
2,141,817
-----------
ELECTRIC 2.0%
41 AES Corp. ........................ 9.375 09/15/10 45,664
26 AES Corp. ........................ 8.875 02/15/11 28,470
260 AES Corp., 144A--Private Placement
(a)............................... 9.000 05/15/15 295,100
135 Allegheny Energy, Inc. ........... 7.750 08/01/05 136,856
240 Calpine Corp. .................... 8.500 02/15/11 191,100
130 Calpine Corp., 144A--Private
Placement (a)..................... 8.500 07/15/10 127,400
35 CMS Energy Corp. ................. 7.500 01/15/09 36,225
220 CMS Energy Corp. ................. 8.500 04/15/11 238,700
75 IPALCO Enterprises, Inc. ......... 7.625 11/14/11 84,187
260 Monongahela Power Co. ............ 5.000 10/01/06 265,850
</Table>
6 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
ELECTRIC (CONTINUED)
$ 225 Nevada Power Co., 144A--Private
Placement (a)..................... 9.000% 08/15/13 $ 250,031
20 PSEG Energy Holdings, Inc. ....... 7.750 04/16/07 21,325
205 PSEG Energy Holdings, Inc. ....... 8.625 02/15/08 224,731
-----------
1,945,639
-----------
ENVIRONMENTAL SERVICES 0.4%
235 Allied Waste North America,
Inc. ............................. 10.000 08/01/09 254,975
110 Allied Waste North America, Inc.,
144A--Private Placement (a)....... 6.500 11/15/10 113,300
-----------
368,275
-----------
FOOD/BEVERAGE 1.5%
70 Couche-Tard US Finance, 144A--
Private Placement (a)............. 7.500 12/15/13 73,675
195 Michael Foods, Inc., 144A--Private
Placement (a)..................... 8.000 11/15/13 204,262
125 National Beef Packing Co., 144A--
Private Placement (a)............. 10.500 08/01/11 129,375
435 Pilgrim's Pride Corp. ............ 9.625 09/15/11 480,675
125 PPC Escrow Corp., 144A--Private
Placement (a)..................... 9.250 11/15/13 130,000
430 Smithfield Foods, Inc. ........... 8.000 10/15/09 455,800
-----------
1,473,787
-----------
GAMING 2.0%
210 Harrahs Operating Co., Inc. ...... 7.875 12/15/05 228,900
150 Harrahs Operating Co., Inc. ...... 8.000 02/01/11 176,444
215 Horseshoe Gaming, LLC............. 8.625 05/15/09 228,169
240 MGM Mirage, Inc. ................. 6.000 10/01/09 247,800
180 Park Place Entertainment Corp. ... 7.875 12/15/05 193,275
250 Park Place Entertainment Corp. ... 8.875 09/15/08 283,750
300 Station Casinos, Inc. ............ 8.875 12/01/08 312,000
100 Station Casinos, Inc. ............ 9.875 07/01/10 110,500
170 Venetian Casino Resort, LLC....... 11.000 06/15/10 198,050
-----------
1,978,888
-----------
HEALTHCARE 2.4%
390 AmerisourceBergen Corp. .......... 8.125 09/01/08 441,675
226 Fisher Scientific International,
Inc. ............................. 8.125 05/01/12 243,515
165 Fresenius Medical Care Capital
Trust II.......................... 7.875 02/01/08 176,962
240 Fresenius Medical Care Capital
Trust IV.......................... 7.875 06/15/11 260,400
335 HCA, Inc. ........................ 8.750 09/01/10 399,414
30 Manor Care, Inc. ................. 7.500 06/15/06 32,700
85 Manor Care, Inc. ................. 8.000 03/01/08 96,475
</Table>
See Notes to Financial Statements 7
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
HEALTHCARE (CONTINUED)
$ 110 Medco Health Solutions, Inc. ..... 7.250% 08/15/13 $ 120,215
50 National Nephrology Associates,
Inc., 144A--Private Placement
(a)............................... 9.000 11/01/11 52,625
150 Omnicare, Inc. ................... 8.125 03/15/11 164,625
55 Omnicare, Inc. ................... 6.125 06/01/13 55,412
90 Tenet Healthcare Corp. ........... 6.500 06/01/12 86,737
280 Tenet Healthcare Corp. ........... 7.375 02/01/13 282,800
-----------
2,413,555
-----------
HOME CONSTRUCTION 1.1%
345 LNR Property Corp. ............... 7.625 07/15/13 364,837
110 LNR Property Corp., 144A--Private
Placement (a)..................... 7.250 10/15/13 112,475
110 Meritage Corp. ................... 9.750 06/01/11 123,475
95 Technical Olympic USA, Inc. ...... 9.000 07/01/10 102,600
145 Technical Olympic USA, Inc. ...... 9.000 07/01/10 156,600
205 Technical Olympic USA, Inc. ...... 10.375 07/01/12 230,625
-----------
1,090,612
-----------
INDEPENDENT ENERGY 0.3%
240 Equistar Chemicals LP............. 10.125 09/01/08 264,000
-----------
INTEGRATED ENERGY 1.5%
345 BRL Universal Equipment........... 8.875 02/15/08 371,737
345 Chesapeake Energy Corp. .......... 7.500 09/15/13 375,187
60 Hanover Compressor Co. ........... 8.625 12/15/10 62,700
205 Hanover Equipment Trust........... 8.500 09/01/08 218,325
95 Hanover Equipment Trust........... 8.750 09/01/11 101,175
50 MSW Energy Holdings LLC........... 8.500 09/01/10 54,750
230 MSW Energy Holdings LLC, 144A--
Private Placement (a)............. 7.375 09/01/10 241,500
95 Transcontinental Gas Pipe Line
Corp. ............................ 8.875 07/15/12 112,813
-----------
1,538,187
-----------
LODGING 1.3%
250 Hilton Hotels Corp. .............. 7.950 04/15/07 278,438
130 Hilton Hotels Corp. .............. 7.625 12/01/12 146,738
290 HMH Properties, Inc. ............. 7.875 08/01/08 303,050
155 LodgeNet Entertainment Corp. ..... 9.500 06/15/13 170,500
65 Starwood Hotels & Resorts
Worldwide, Inc. .................. 7.375 05/01/07 70,525
275 Starwood Hotels & Resorts
Worldwide, Inc. .................. 7.875 05/01/12 310,750
-----------
1,280,001
-----------
</Table>
8 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
MEDIA-CABLE 2.5%
$ 63 Avalon Cable, LLC (b)............. 0/11.875% 12/01/08 $ 66,802
565 Charter Communication Holdings
LLC............................... 9.625 11/15/09 500,025
50 CSC Holdings, Inc. ............... 7.250 07/15/08 52,250
260 CSC Holdings, Inc. ............... 8.125 07/15/09 280,800
70 CSC Holdings, Inc. ............... 9.875 02/15/13 73,500
65 CSC Holdings, Inc. ............... 10.500 05/15/16 74,750
330 DirecTV Holdings LLC.............. 8.375 03/15/13 384,450
81 Echostar DBS Corp. ............... 9.125 01/15/09 91,024
310 Echostar DBS Corp. ............... 9.375 02/01/09 325,888
320 Echostar DBS Corp., 144A--Private
Placement (a)..................... 6.375 10/01/11 329,600
1,000 Park N View, Inc., Ser B (c) (d)
(e)............................... 13.000 05/15/08 0
160 Pegasus Communications Corp., Ser
B................................. 9.750 12/01/06 145,200
20 Pegasus Satellite Communications
(b)............................... 0/13.500 03/01/07 17,025
135 Renaissance Media Group........... 10.000 04/15/08 140,231
-----------
2,481,545
-----------
MEDIA-NONCABLE 3.3%
45 Advanstar Communications, Inc.,
144A--Private Placement (a)....... 10.750 08/15/10 48,938
399 Advanstar Communications, Inc.,
144A--Private Placement (Variable
Rate Coupon) (a).................. 8.680 08/15/08 420,945
195 Dex Media East Finance Corp.
LLC............................... 12.125 11/15/12 240,825
200 Dex Media West Finance Corp.,
144A--Private Placement (a)....... 9.875 08/15/13 233,500
370 Dex Media, Inc., 144A--Private
Placement (a) (b)................. 0/9.000 11/15/13 262,700
160 Granite Broadcasting Corp., 144A--
Private Placement (a)............. 9.750 12/01/10 160,400
330 Hollinger Participation Trust,
144A--Private Placement (a) (f)... 12.125 11/15/10 393,279
275 Interep National Radio Sales,
Inc., Ser B....................... 10.000 07/01/08 244,750
95 Nexstar Finance, Inc.,
144A--Private Placement (a)....... 7.000 01/15/14 95,950
320 Nextmedia Operating, Inc. ........ 10.750 07/01/11 364,800
120 PEI Holdings, Inc. ............... 11.000 03/15/10 139,800
325 Primedia, Inc. ................... 8.875 05/15/11 344,500
275 Salem Communications Corp. ....... 7.750 12/15/10 288,063
-----------
3,238,450
-----------
</Table>
See Notes to Financial Statements 9
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
METALS 0.8%
$ 323 Doe Run Resources Corp., 144A--
Private Placement (a) (e) (f)..... 11.750% 11/01/08 $ 113,028
120 General Cable Corp., 144A--Private
Placement (a)..................... 9.500 11/15/10 129,000
750 GS Technologies Operating, Inc.
(c) (d) (e)....................... 12.000 09/01/04 75
47 Republic Engineered Products, LLC
(c) (d)........................... 10.000 08/16/09 19,529
245 UCAR Finance, Inc. ............... 10.250 02/15/12 282,975
225 United States Steel Corp. ........ 9.750 05/15/10 254,250
-----------
798,857
-----------
NATURAL GAS PIPELINES 1.9%
340 Dynegy Holdings, Inc. ............ 6.875 04/01/11 314,925
200 Dynegy Holdings, Inc.,
144A--Private Placement (a)....... 9.875 07/15/10 226,000
365 El Paso Production Holding Co.,
144A--Private Placement (a)....... 7.750 06/01/13 361,350
64 Gulfterra Energy Partners LP...... 8.500 06/01/10 72,960
211 Gulfterra Energy Partners LP...... 10.625 12/01/12 262,695
55 Northwest Pipeline Corp. ......... 8.125 03/01/10 61,325
105 Southern Natural Gas Co. ......... 8.875 03/15/10 118,650
25 Williams Cos., Inc. .............. 6.750 01/15/06 26,000
420 Williams Cos., Inc. .............. 7.875 09/01/21 445,200
-----------
1,889,105
-----------
OIL FIELD SERVICES 0.5%
265 Hilcorp Energy Finance Corp.,
144A--Private Placement (a)....... 10.500 09/01/10 291,500
160 Magnum Hunter Resources, Inc. .... 9.600 03/15/12 182,400
-----------
473,900
-----------
PACKAGING 0.8%
450 Owens-Illinois, Inc. ............. 7.500 05/15/10 464,063
90 Tekni-Plex, Inc., 144A--Private
Placement (a)..................... 8.750 11/15/13 94,275
250 Tekni-Plex, Inc., Ser B........... 12.750 06/15/10 273,750
-----------
832,088
-----------
PAPER 1.4%
435 Georgia-Pacific Corp. ............ 8.875 02/01/10 498,075
310 Graphic Packaging International,
Inc., 144A--Private Placement
(a)............................... 9.500 08/15/13 344,100
50 Louisiana Pacific Corp. .......... 10.875 11/15/08 59,750
145 Louisiana Pacific Corp. .......... 8.875 08/15/10 171,825
25 Owens-Brockway Glass Containers,
Inc. ............................. 7.750 05/15/11 26,969
</Table>
10 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
PAPER (CONTINUED)
$ 80 Owens-Brockway Glass Containers,
Inc. ............................. 8.750% 11/15/12 $ 89,500
35 Pliant Corp. ..................... 13.000 06/01/10 32,200
185 Pliant Corp. ..................... 13.000 06/01/10 170,200
-----------
1,392,619
-----------
RAILROADS 0.3%
235 Amsted Industries, Inc., 144A--
Private Placement (a)............. 10.250 10/15/11 260,850
-----------
REAL ESTATE INVESTMENT TRUSTS 0.4%
320 Istar Financial, Inc. ............ 8.750 08/15/08 371,200
-----------
REFINING 1.1%
120 Citgo Petroleum Corp. ............ 11.375 02/01/11 139,800
250 Frontier Oil Corp. ............... 11.750 11/15/09 283,750
145 Tesoro Petroleum Corp. ........... 9.000 07/01/08 151,163
135 Tesoro Petroleum Corp. ........... 9.625 04/01/12 148,500
390 Vintage Petroleum, Inc. .......... 7.875 05/15/11 413,400
-----------
1,136,613
-----------
RETAIL 1.7%
196 Big 5 Corp., Ser B................ 10.875 11/15/07 206,780
104 Elizabeth Arden, Inc. ............ 11.750 02/01/11 124,280
165 General Nutrition Centers, Inc.,
144A--Private Placement (a)....... 8.500 12/01/10 169,950
120 Oxford Industrials, Inc., 144A--
Private Placement (a)............. 8.875 06/01/11 131,850
365 Payless Shoesource, Inc. ......... 8.250 08/01/13 353,138
45 Penney JC Co., Inc. .............. 7.600 04/01/07 49,894
120 Penney JC Co., Inc. .............. 8.000 03/01/10 138,150
135 Penney JC Co., Inc. .............. 9.000 08/01/12 162,169
35 Penney JC Co., Inc. .............. 6.875 10/15/15 36,969
1,000 Sleepmaster LLC (c) (d) (e)....... 11.000 05/15/09 277,500
-----------
1,650,680
-----------
SERVICES 0.7%
315 CB Richard Ellis Service, Inc. ... 11.250 06/15/11 357,525
60 CBRE Escrow, Inc., 144A--Private
Placement (a)..................... 9.750 05/15/10 66,900
240 Intermet Corp. ................... 9.750 06/15/09 247,200
-----------
671,625
-----------
</Table>
See Notes to Financial Statements 11
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
SUPERMARKETS 0.7%
$ 330 Delhaize America, Inc. ........... 8.125% 04/15/11 $ 381,150
255 Kroger Co., 144A--Private
Placement (a)..................... 8.500 07/15/17 287,614
-----------
668,764
-----------
TECHNOLOGY 0.6%
315 Avaya, Inc. ...................... 11.125 04/01/09 370,125
250 Fairchild Semiconductor Corp. .... 10.500 02/01/09 280,000
-----------
650,125
-----------
TOBACCO 0.3%
315 Altria Group, Inc. ............... 7.000 11/04/13 336,641
-----------
TRANSPORTATION SERVICES 0.7%
14 Aran Shipping & Trading, SA (c)
(e)............................... 8.300 01/31/04 0
235 Sonic Automotive, Inc. ........... 8.625 08/15/13 249,100
90 Sonic Automotive, Inc., 144A--
Private Placement (a)............. 8.625 08/15/13 95,400
315 TRW Automotive, Inc. ............. 9.375 02/15/13 361,463
-----------
705,963
-----------
U.S. GOVERNMENT AGENCY 4.9%
4,850 Freddie Mac....................... 2.750 08/15/06 4,897,579
-----------
WIRELESS COMMUNICATIONS 2.3%
50 American Tower Corp. ............. 9.375 02/01/09 53,500
465 American Tower Corp. ............. 6.250 10/15/09 469,650
195 Dobson Communications Corp. ...... 10.875 07/01/10 213,525
275 MetroPCS, Inc., 144A--Private
Placement (a)..................... 10.750 10/01/11 275,000
475 Nextel Communications, Inc. ...... 9.375 11/15/09 520,125
75 Nextel Communications, Inc. ...... 7.375 08/01/15 81,000
225 Nextel Partners, Inc. ............ 11.000 03/15/10 249,750
62 SBA Communications Corp. ......... 12.000 03/01/08 67,735
225 SBA Communications Corp. ......... 10.250 02/01/09 222,188
160 SBA Communications Corp., 144A--
Private Placement (a) (b)......... 0/9.750 12/15/11 113,600
-----------
2,266,073
-----------
WIRELINE COMMUNICATIONS 0.9%
250 Exodus Communications, Inc. (c)
(d) (e)........................... 11.250 07/01/08 0
400 Exodus Communications, Inc. (c)
(d) (e)........................... 11.625 07/15/10 0
200 Primus Telecom Group.............. 9.875 05/15/08 208,000
15 Primus Telecom Group.............. 11.250 01/15/09 15,975
</Table>
12 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
WIRELINE COMMUNICATIONS (CONTINUED)
$ 280 Qwest Services Corp.,
144A--Private Placement (a)....... 13.000% 12/15/07 $ 330,400
205 US West Communications, Inc. ..... 6.625 09/15/05 213,713
170 US West Communications, Inc. ..... 5.625 11/15/08 169,150
-----------
937,238
-----------
TOTAL DOMESTIC CORPORATE BONDS 46.6%......................................... 46,276,001
-----------
<Caption>
PAR
AMOUNT
IN LOCAL
CURRENCY
(000)
FOREIGN BONDS AND DEBT SECURITIES (US $) 5.5%
BELGIUM 0.3%
170 Telenet Communications, 144A--
Private Placement (EUR) (a)....... 9.000 12/15/13 222,224
75 Telenet Group Holding, 144A--
Private Placement (a)............. 11.500 06/15/14 47,625
-----------
269,849
-----------
BRAZIL 0.2%
500 Multicanal Participacoes, Ser B
(c)............................... 12.625 06/18/04 252,500
-----------
CANADA 1.6%
205 Abitibi-Consolidated, Inc. ....... 8.550 08/01/10 228,636
80 Abitibi-Consolidated, Inc. ....... 6.000 06/20/13 76,915
355 Alliance Atlantis Communications,
Inc. ............................. 13.000 12/15/09 406,475
285 Husky Oil Ltd. (Variable Rate
Coupon)........................... 8.900 08/15/28 330,600
125 Norampac, Inc. ................... 6.750 06/01/13 130,938
55 PCI Chemicals Canada, Inc. ....... 10.000 12/31/08 49,728
350 Tembec Industries, Inc. .......... 7.750 03/15/12 350,000
-----------
1,573,292
-----------
FRANCE 0.6%
220 Rhodia S.A., 144A--Private
Placement (a)..................... 8.875 06/01/11 203,500
235 Vivendi Universal S.A. ........... 9.250 04/15/10 279,650
85 Vivendi Universal S.A.,
144A--Private Placement (a)....... 6.250 07/15/08 90,419
-----------
573,569
-----------
</Table>
See Notes to Financial Statements 13
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT
IN LOCAL
CURRENCY MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
GUERNSEY 0.2%
$ 145 ABB International Finance Ltd.
(EUR)............................. 11.000% 01/15/08 $ 207,069
-----------
LUXEMBOURG 0.9%
110 Johnsondiversey, Inc. (EUR)....... 9.625 05/15/12 153,147
305 Safilo Capital International S.A.,
144A--Private Placement (EUR)
(a)............................... 9.625 05/15/13 326,642
350 Tyco International Group S.A...... 6.750 02/15/11 384,125
-----------
863,914
-----------
MEXICO 0.9%
275 Axtel S.A., 144A--Private
Placement (a)..................... 11.000 12/15/13 281,875
475 Satelites Mexicanos S.A. (c)...... 10.125 11/01/04 216,125
400 TV Azteca S.A. ................... 10.500 02/15/07 411,000
-----------
909,000
-----------
UNITED KINGDOM 0.8%
240 Avecia Group Plc.................. 11.000 07/01/09 217,200
325 JSG Funding Plc (EUR)............. 10.125 10/01/12 464,764
160 Xerox Capital Europe Plc.......... 5.875 05/15/04 162,400
-----------
844,364
-----------
TOTAL FOREIGN BONDS AND DEBT SECURITIES 5.5%.................................. 5,493,557
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS 16.2%
1,197 Federal Home Loan Mortgage Corp.
(Interest Only)................... 5.000 09/15/14 to 12/15/16 112,732
533 Federal Home Loan Mortgage Corp.
(Interest Only)................... 6.000 05/15/30 45,313
403 Federal Home Loan Mortgage Corp.
(Interest Only) (g)............... 6.338 01/15/29 35,779
286 Federal Home Loan Mortgage Corp.
(Interest Only) REMIC (g)......... 6.840 03/15/32 24,502
400 Federal Home Loan Mortgage Corp.,
January........................... 7.500 TBA 429,625
738 Federal National Mortgage
Association (Interest Only)....... 5.500 06/25/26 76,503
1,031 Federal National Mortgage
Association (Interest Only)
REMIC............................. 6.000 08/25/32 to 07/25/33 179,141
984 Federal National Mortgage
Association (Interest Only)....... 6.500 07/01/31 to 05/25/33 160,871
514 Federal National Mortgage
Association (Interest Only)
REMIC............................. 7.000 03/01/32 to 04/25/33 83,895
</Table>
14 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
$ 112 Federal National Mortgage
Association (Interest Only)....... 8.000% 05/01/30 $ 20,057
1,800 Federal National Mortgage
Association, January.............. 5.500 TBA 1,823,625
3,000 Federal National Mortgage
Association, January.............. 6.000 TBA 3,101,250
5,500 Federal National Mortgage
Association, January.............. 6.500 TBA 5,752,659
3,025 Federal National Mortgage
Association, January.............. 7.000 TBA 3,203,662
472 Government National Mortgage
Association (Interest Only)
REMIC............................. 6.246 05/16/32 31,893
428 Government National Mortgage
Association (Interest Only) REMIC
(g)............................... 6.850 05/16/32 40,176
1,000 Government National Mortgage
Association, January.............. 5.500 TBA 1,016,875
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 16.2%.............................. 16,138,558
-----------
MORTGAGE BACKED SECURITIES 9.3%
2,450 Federal Home Loan Mortgage Corp.
30 Year Pools..................... 6.500 09/01/31 to 09/01/32 2,567,583
645 Federal Home Loan Mortgage Corp.
30 Year Pools..................... 7.500 11/01/29 to 10/01/31 692,635
98 Federal National Mortgage
Association 15 Year Pools......... 6.500 06/01/15 103,649
551 Federal National Mortgage
Association 15 Year Pools......... 7.000 03/01/15 to 05/01/15 589,796
109 Federal National Mortgage
Association 15 Year Pools......... 7.500 03/01/15 to 06/01/15 116,793
657 Federal National Mortgage
Association 30 Year Pools......... 6.000 04/01/28 to 12/01/28 680,997
1,081 Federal National Mortgage
Association 30 Year Pools......... 7.000 04/01/28 to 12/01/32 1,145,397
914 Federal National Mortgage
Association 30 Year Pools......... 7.500 03/01/30 to 03/01/32 976,509
303 Government National Mortgage
Association 30 Year Pools......... 7.000 07/15/29 to 01/15/30 322,826
694 Government National Mortgage
Association 30 Year Pools......... 7.500 07/15/23 to 09/15/29 748,110
435 Government National Mortgage
Association 30 Year Pools......... 8.000 03/15/17 to 10/15/22 477,779
217 Government National Mortgage
Association 30 Year Pools......... 8.500 07/15/24 to 12/15/24 239,493
</Table>
See Notes to Financial Statements 15
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
MORTGAGE BACKED SECURITIES (CONTINUED)
$ 445 Government National Mortgage
Association 30 Year Pools......... 9.000% 08/15/16 to 12/15/24 $ 498,095
90 Government National Mortgage
Association 30 Year Pools......... 9.500 11/15/09 to 01/15/17 100,264
-----------
TOTAL MORTGAGE BACKED SECURITIES 9.3%........................................ 9,259,926
-----------
UNITED STATES TREASURY OBLIGATIONS 13.8%
1,600 United States Treasury Bonds...... 5.250 02/15/29 1,614,625
1,855 United States Treasury Bonds...... 6.125 08/15/29 2,102,672
2,570 United States Treasury Bonds...... 7.625 02/15/25 3,394,911
325 United States Treasury Bonds...... 8.125 08/15/21 443,333
6,250 United States Treasury Notes...... 3.875 02/15/13 6,120,119
-----------
TOTAL UNITED STATES TREASURY OBLIGATIONS...................................... 13,675,660
-----------
FOREIGN GOVERNMENT AND GOVERNMENT AGENCY
OBLIGATIONS 0.3%
105 Republic of Colombia (Columbia)... 10.750 01/15/13 119,962
180 United Mexican States (Mexico).... 8.375 01/14/11 214,200
-----------
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS.................... 334,162
-----------
</Table>
<Table>
DESCRIPTION
EQUITIES 1.4%
Aurora Foods, Inc. (8,855 Common Shares) (h)................................. 44
Dobson Communications Corp. (3,290 Preferred Shares) (f)..................... 354,498
Dobson Communications Corp., 144A--Private Placement (410 Preferred Shares)
(a)........................................................................ 73,800
Doe Run Resources Corp. (1 Common Stock Warrant) (e) (h)..................... 0
HF Holdings, Inc. (5,260 Common Stock Warrants) (e) (h)...................... 0
Microcell Telecommunications, Inc. (1,221 Common Stock Warrants) (CAN) (h)... 2,598
Microcell Telecommunications, Inc. (1,985 Preferred Shares) (CAN) (h)........ 26,480
Microcell Telecommunications, Inc. (16 Common Shares) (CAN) (h).............. 224
Microcell Telecommunications, Inc. (733 Common Stock Warrants) (CAN) (h)..... 1,117
Microcell Telecommunications, Inc., Class B (1,973 Common Shares) (CAN)
(h)........................................................................ 26,396
Optel, Inc. (500 Common Shares) (e) (h)...................................... 0
Park N View, Inc., 144A--Private Placement (1,000 Common Stock Warrants) (a)
(e) (h).................................................................... 0
Paxon Communications Corp. (3,900 Preferred Shares) (f)...................... 359,775
Pioneer Cos., Inc. (3,533 Common Shares) (h)................................. 28,794
</Table>
16 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
December 31, 2003
<Table>
<Caption>
MARKET
DESCRIPTION VALUE
EQUITIES (CONTINUED)
Republic Technologies International, Inc., 144A--Private Placement (250
Common Stock Warrants) (a) (h)............................................. 0
Startec Global Communications, 144A--Private Placement (1,000 Common Stock
Warrants) (a) (e) (h)...................................................... 0
TNP Enterprises, Inc. (4,310 Preferred Shares) (f)........................... 468,713
-----------
TOTAL EQUITIES 1.4%......................................................... 1,342,439
-----------
TOTAL LONG-TERM INVESTMENTS 93.1%
(Cost $92,491,440)......................................................... 92,520,303
-----------
SHORT-TERM INVESTMENTS 20.9%
REPURCHASE AGREEMENT 10.8%
Banc of America Securities LLC ($10,752,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 12/31/03, to be sold
on 01/02/04 at $10,752,526)................................................ 10,752,000
U.S. GOVERNMENT AGENCY OBLIGATIONS 10.1%
Federal National Mortgage Association Discount Note ($10,000,000 par,
yielding 1.02%, 01/14/04 maturity)......................................... 9,996,317
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $20,748,317)......................................................... 20,748,317
-----------
TOTAL INVESTMENTS 114.0%
(Cost $113,239,757)........................................................ 113,268,620
LIABILITIES IN EXCESS OF OTHER ASSETS (14.0%)............................... (13,916,307)
-----------
NET ASSETS 100.0%........................................................... $99,352,313
===========
</Table>
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) Non-income producing as security is in default.
(d) This borrower has filed for protection in federal bankruptcy court.
(e) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(f) Payment-in-kind security.
See Notes to Financial Statements 17
YOUR TRUST'S INVESTMENTS
December 31, 2003
(g) An Inverse Floating Rate security is one where the coupon is inversely
indexed to a short-term floating interest rate multiplied by a specific
factor. As the floating rate rises, the coupon is reduced. Conversely, as
the floating rate declines, the coupon is increased. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. These instruments are typically used by the Trust to enhance the
yield of the portfolio. All of the Trust's portfolio holdings, including
derivative instruments, are marked to market.
(h) Non-income producing security.
TBA--To be announced, maturity date has not yet been established. The maturity
date will be determined upon settlement and delivery of the mortgage pools.
CAN--Canadian Dollar
EUR--Eurodollar
REMIC--Real Estate Mortgage Investment Conduits
18 See Notes to Financial Statements
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2003
<Table>
ASSETS:
Total Investments (Cost $113,239,757), including repurchase
agreement of $10,752,000.................................. $113,268,620
Receivables:
Investments Sold.......................................... 2,570,608
Interest.................................................. 1,369,369
Other....................................................... 30,974
------------
Total Assets............................................ 117,239,571
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 17,346,342
Custodian Bank............................................ 185,873
Investment Advisory Fee................................... 54,657
Income Distributions...................................... 26,271
Other Affiliates.......................................... 3,273
Trustees' Deferred Compensation and Retirement Plans........ 120,799
Accrued Expenses............................................ 75,899
Forward Foreign Currency Contracts.......................... 74,144
------------
Total Liabilities....................................... 17,887,258
------------
NET ASSETS.................................................. $ 99,352,313
============
NET ASSET VALUE PER COMMON SHARE ($99,352,313 divided by
15,371,738 shares outstanding)............................ $ 6.46
============
NET ASSETS CONSIST OF:
Common Shares (no par value with unlimited shares
authorized, 15,371,738 shares issued and outstanding)..... $120,152,592
Net Unrealized Depreciation................................. (42,524)
Accumulated Undistributed Net Investment Income............. (437,188)
Accumulated Net Realized Loss............................... (20,320,567)
------------
NET ASSETS.................................................. $ 99,352,313
============
</Table>
See Notes to Financial Statements 19
Statement of Operations
For the Year Ended December 31, 2003
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 5,689,443
Dividends................................................... 155,860
Other....................................................... 28,380
------------
Total Income.......................................... 5,873,683
------------
EXPENSES:
Investment Advisory Fee..................................... 629,166
Accounting.................................................. 53,597
Trustees' Fees and Related Expenses......................... 47,716
Shareholder Reports......................................... 45,562
Custody..................................................... 31,891
Legal....................................................... 6,640
Other....................................................... 80,040
------------
Total Expenses........................................ 894,612
------------
NET INVESTMENT INCOME....................................... $ 4,979,071
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (4,634,830)
Foreign Currency Contracts................................ (71,002)
Foreign Currency Transactions............................. (27,130)
------------
Net Realized Loss........................................... (4,732,962)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (11,096,106)
------------
End of the Period:
Investments............................................. 28,863
Foreign Currency Contracts.............................. (74,144)
Foreign Currency Translation............................ 2,757
------------
(42,524)
------------
Net Unrealized Appreciation During the Period............... 11,053,582
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 6,320,620
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 11,299,691
============
</Table>
20 See Notes to Financial Statements
Statements of Changes in Net Assets
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................... $ 4,979,071 $ 5,997,463
Net Realized Loss................................... (4,732,962) (6,169,169)
Net Unrealized Appreciation During the Period....... 11,053,582 1,071,689
----------- ------------
Change in Net Assets from Operations................ 11,299,691 899,983
----------- ------------
Distributions from Net Investment Income............ (5,291,984) (7,220,386)
Return of Capital Distribution...................... (464,494) -0-
----------- ------------
Total Distributions................................. (5,756,478) (7,220,386)
----------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES........................................ 5,543,213 (6,320,403)
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment...................................... -0- 81,841
----------- ------------
TOTAL INCREASE/DECREASE IN NET ASSETS............... 5,543,213 (6,238,562)
NET ASSETS:
Beginning of the Period............................. 93,809,100 100,047,662
----------- ------------
End of the Period (Including accumulated
undistributed net investment income of ($437,188)
and ($1,120,176), respectively)................... $99,352,313 $ 93,809,100
=========== ============
</Table>
See Notes to Financial Statements 21
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE TRUST
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
-------------------------------------------------
2003 2002 2001 (a) 2000 1999
-------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $6.10 $ 6.51 $ 6.85 $ 7.25 $ 7.84
----- ------ ------ ------- -------
Net Investment Income................... .32 .39 .53 .60 .64
Net Realized and Unrealized Gain/Loss... .41 (.33) (.29) (.40) (.63)
----- ------ ------ ------- -------
Total from Investment Operations.......... .73 .06 .24 .20 .01
Less:
Distributions from Net Investment
Income................................ .34 .47 .58 .60 .60
Return of Capital Distributions......... .03 -0- -0- -0- -0-
----- ------ ------ ------- -------
Total Distributions....................... .37 .47 .58 .60 .60
----- ------ ------ ------- -------
NET ASSET VALUE, END OF THE PERIOD........ $6.46 $ 6.10 $ 6.51 $ 6.85 $ 7.25
===== ====== ====== ======= =======
Common Share Market Price at End of the
Period.................................. $5.81 $ 5.71 $ 6.33 $6.5625 $5.6875
Total Return (b).......................... 8.42% -2.59% 5.05% 26.59% -19.81%
Net Assets at End of the Period (In
millions)............................... $99.4 $ 93.8 $100.0 $ 104.8 $ 110.9
Ratio of Expenses to Average Net Assets... .92% .89% .93% .96% .95%
Ratio of Net Investment Income to Average
Net Assets.............................. 5.14% 6.29% 7.88% 8.51% 8.46%
Portfolio Turnover........................ 299%(c) 101% 46% 60% 28%
</Table>
(a) As required, effective January 1, 2001, the Trust has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities and presenting paydown gains
and losses on mortgage-and asset-backed securities as interest income. The
effect of these changes for the year ended December 31, 2001 was an increase
in the ratio of net investment income to average net assets from 7.83% to
7.88%. Net investment income per share and net realized and unrealized gains
and losses per share were unaffected by the adjustments. Per share, ratios
and supplemental data for periods prior to December 31, 2001 have not been
restated to reflect this change in presentation.
(b) 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 price at the end of the period
indicated.
(c) The Trust's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Trust's portfolio securities during such fiscal year.
The turnover rate may vary greatly from year to year as well as within a
year. The accounting treatment used by the Trust for mortgage pool forward
commitments now reflects them as purchases and sales, which had not been the
case in the past. This caused the reported portfolio turnover rate to be
higher during the current fiscal year than in previous fiscal years.
22
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
- -----------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------
$ 8.05 $ 7.93 $ 7.94 $ 7.28 $ 8.15
------ ------ ------ ------ ------
.66 .66 .66 .65 .65
(.22) .18 (.01) .66 (.86)
------ ------ ------ ------ ------
.44 .84 .65 1.31 (.21)
.65 .72 .66 .65 .66
-0- -0- -0- -0- -0-
------ ------ ------ ------ ------
.65 .72 .66 .65 .66
------ ------ ------ ------ ------
$ 7.84 $ 8.05 $ 7.93 $ 7.94 $ 7.28
====== ====== ====== ====== ======
$ 7.75 $ 8.00 $ 7.50 $ 7.25 $ 6.50
5.05% 16.97% 12.95% 21.83% -8.06%
$120.0 $123.1 $121.2 $121.4 $111.4
.96% .91% 1.00% .94% .96%
8.17% 8.32% 8.40% 8.50% 7.94%
47% 55% 36% 34% 45%
</Table>
See Notes to Financial Statements 23
NOTES TO
FINANCIAL STATEMENTS
December 31, 2003
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 current income through
investing in a portfolio of U.S. Government securities and in corporate fixed
income securities, including high-yielding, lower rated or nonrated securities
believed not to involve undue risk to income or principal. The Trust commenced
investment operations on April 22, 1988.
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 Fixed income investments are stated at value using market
quotations or indications of value obtained from an independent pricing service.
Investments in securities listed on a securities exchange are valued at their
sales price as of the close of such securities exchange. Listed and unlisted
securities for which the last sales price is not available are valued at the
mean of the bid and asked prices. For those securities where quotations or
prices are not available, valuations are determined in accordance with
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. Forward foreign currency contracts are
valued using quoted foreign exchange rates.
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", "delayed delivery" or
"forward commitment" basis, with settlement to occur at a later date. The price
of the underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The value of
the security so purchased is subject to market fluctuations during this period.
Purchasing securities on this basis involves a risk that the market value at the
time of delivery may be lower than the agreed upon purchase price resulting in
an unrealized loss. 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
December 31, 2003, the Trust has $17,346,342 of forward purchase commitments.
The Trust may invest in repurchase agreements, which are short-term
investments whereby the Trust acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Trust may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase
24
NOTES TO
FINANCIAL STATEMENTS
December 31, 2003
agreements are fully collateralized by the underlying debt security. The Trust
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is required
to maintain the value of the underlying security at not less than the repurchase
proceeds due the Trust.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts are accreted and
premiums are amortized over the expected life of each applicable security.
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 these losses against any future realized capital
gains. At December 31, 2003, the Trust had an accumulated capital loss
carryforward for tax purposes of $19,032,344, which will expire between December
31, 2007 and December 31, 2011.
At December 31, 2003, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $113,429,813
============
Gross tax unrealized appreciation........................... $ 4,876,784
Gross tax unrealized depreciation........................... (5,037,977)
------------
Net tax unrealized depreciation on investments.............. $ (161,193)
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays dividends
monthly from net investment income to shareholders. Net realized gains, if any,
are distributed annually. Distributions from net realized gains for book
purposes may include short-term capital gains, which are included in ordinary
income for tax purposes.
The tax character of distributions paid during the years ended December 31,
2003 and 2002 was as follows:
<Table>
<Caption>
2003 2002
Distribution paid from:
Ordinary Income........................................... $5,265,713 $7,220,386
Long-term capital gain.................................... -0- -0-
Return of Capital......................................... 464,494 -0-
---------- ----------
$5,730,207 $7,220,386
========== ==========
</Table>
Due to inherent differences in the recognition of income, expenses, and
realized gains/losses under accounting principles generally accepted in the
United States of America
25
NOTES TO
FINANCIAL STATEMENTS
December 31, 2003
and federal income tax purposes, permanent differences between book and tax
basis reporting for the 2003 fiscal year have been identified and appropriately
reclassified. A permanent book and tax basis differences relating to paydowns on
mortgage-backed securities totaling $200,199 was reclassified from accumulated
net realized loss to accumulated undistributed net investment income. A
permanent book and tax difference related to the recognition of net realized
losses on foreign currency transactions totaling $98,132 has been reclassified
from accumulated net realized loss to accumulated undistributed net investment
income. A permanent book and tax difference relating to consent fee income
totaling $26,850 has been reclassified from accumulated undistributed net
investment income to accumulated net realized loss. A permanent book and tax
difference relating to a portion of the capital loss carry-forward expiring in
the current year totaling $1,776,125 was reclassified from accumulated net
realized loss to capital. A permanent book and tax difference related to the
portion of return of capital distributions totaling $464,494 in the current year
has been reclassified from accumulated undistributed net investment income to
capital. Additionally, a permanent difference relating to book to tax
amortization differences totaling $920,684 was reclassified from accumulated
undistributed net investment income to accumulated net realized loss.
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses relating to wash sale
transactions and post October losses of $1,203,971 which are not recognized for
tax purposes until the first day of the following fiscal year.
F. FOREIGN CURRENCY TRANSLATION Asset and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars at the mean of the quoted bid and ask prices of
such currencies against the U.S. dollar. Purchases and sales of portfolio
securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Realized gain and loss on foreign currency
transactions on the Statement of Operations includes the net realized amount
from the sale of foreign currency and the amount realized between trade date and
settlement date on securities transactions. Income and expenses are translated
at rates prevailing when accrued.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .65% of the average daily net assets of the Trust.
For the year ended December 31, 2003, the Trust recognized expenses of
approximately $6,600 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 an Accounting Services agreement, the Adviser provides accounting
services to the Trust. The Adviser allocates the cost of such services to each
trust. For the year ended December 31, 2003, the Trust recognized expenses of
approximately $11,900 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing
26
NOTES TO
FINANCIAL STATEMENTS
December 31, 2003
accounting services to the Trust, which is reported as part of "Accounting"
expenses 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 December 31, 2003 and 2002, paid in surplus related to common shares
aggregated $120,152,592 and $122,393,211, respectively.
Transactions in common shares were as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
Beginning Shares..................................... 15,371,738 15,358,477
Shares Issued Through Dividend Reinvestment.......... -0- 13,261
---------- ----------
Ending Shares........................................ 15,371,738 15,371,738
========== ==========
</Table>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
including principal paydowns and excluding short-term investments, were
$271,990,817 and $280,757,244, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio, foreign currency exposure, or generate potential gain. All of the
Trust's holdings, including derivative instruments, are marked to market each
day with the change in value reflected in unrealized appreciation/depreciation.
Upon disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a forward commitment. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the forward commitment.
Purchasing securities on a forward commitment involves a risk that the
market value at the time of delivery may be lower than the agreed upon purchase
price resulting in an unrealized loss. Selling securities on a forward
commitment involves different risks and can result in losses more significant
than those arising from the purchase of such securities. Risks
27
NOTES TO
FINANCIAL STATEMENTS
December 31, 2003
may arise as a result of the potential inability of the counterparties to meet
the terms of their contracts.
A forward currency contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward rate. Upon the settlement of
the contract, a realized gain or loss is recognized and is included as a
component of realized gain/loss on forwards. The following forward foreign
currency contracts were outstanding as of December 31, 2003.
<Table>
<Caption>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
SHORT CONTRACTS:
Euro Currency
615,000 expiring 1/26/04................................ $ 774,312 $(50,765)
100,000 expiring 1/26/04................................ 125,904 (8,105)
70,000 expiring 1/26/04................................. 88,133 (5,883)
100,000 expiring 1/26/04................................ 125,904 (4,419)
40,000 expiring 1/26/04................................. 50,362 (1,449)
185,000 expiring 1/26/04................................ 232,923 (3,523)
---------- --------
$1,397,538 $(74,144)
========== ========
</Table>
28
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
Van Kampen Income Trust
We have audited the accompanying statement of assets and liabilities of Van
Kampen Income Trust (the "Trust"), including the portfolio of investments, as of
December 31, 2003, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the four years in the
period 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
audits. The Trust's financial highlights for the periods ended prior to December
31, 2000, were audited by other auditors whose report, dated February 15, 2000,
expressed an unqualified opinion on those financial highlights.
We conducted our audits 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 December 31, 2003, by correspondence with the Trust's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Income Trust as of December 31, 2003, the results of its operations, the
changes in its net assets and the financial highlights for the respective stated
periods, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
February 6, 2004
29
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUSAN H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, NY 10020
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
For federal income tax purposes, the following is furnished with respect to the
distributions paid by the Trust during its taxable year ended December 31, 2003.
For corporate shareholders 3% of the distributions qualify for the dividends
received deduction. In January, the Trust provides tax information to
shareholders for the preceding calendar year.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
30
TRUSTEES AND OFFICERS
The business and affairs of the Trust are managed under the direction of the
Trust's Board of Trustees and the Trust's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Trust
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments
Inc. ("Van Kampen Investments"), Van Kampen Asset Management ("Asset Management"
or the "Adviser"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen
Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc.
("Investor Services"). The term "Fund Complex" includes each of the investment
companies advised by the Adviser or its affiliates as of the date of this
Statement of Additional Information. Trustees serve until reaching their
retirement age or until their successors are duly elected and qualified.
Officers are annually elected by the trustees.
INDEPENDENT TRUSTEES
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (58) Trustee Trustee Chairman and Chief 88 Trustee/Director/Managing
Blistex Inc. since 1997 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Former
Director of the World
Presidents
Organization-Chicago
Chapter. Director of the
Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago.
J. Miles Branagan (71) Trustee Trustee Private investor. 86 Trustee/Director/Managing
1632 Morning Mountain Road since 2003 Co-founder, and prior to General Partner of funds
Raleigh, NC 27614 August 1996, Chairman, in the Fund Complex.
Chief Executive Officer
and President, MDT
Corporation (now known as
Getinge/Castle, Inc., a
subsidiary of Getinge
Industrier AB), a company
which develops,
manufactures, markets and
services medical and
scientific equipment.
</Table>
31
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jerry D. Choate (65) Trustee Trustee Prior to January 1999, 86 Trustee/Director/Managing
33971 Selva Road since 2003 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
32
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (63) Trustee Trustee President of CAC, llc., a 88 Trustee/Director/Managing
CAC, llc. since 1997 private company offering General Partner of funds
4350 LaJolla Village Drive capital investment and in the Fund Complex.
Suite 980 management advisory Director of Stericycle,
San Diego, CA 92122-6223 services. Prior to July Inc., TheraSense, Inc.,
2000, Managing Partner of Ventana Medical Systems,
Equity Group Corporate Inc., GATX Corporation
Investment (EGI), a and Trustee of The
company that makes Scripps Research
private investments in Institute and the
other companies. University of Chicago
Hospitals and Health
Systems. Prior to January
2004, Director of
TeleTech Holdings Inc.
and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Vice
Chairman and Director of
Anixter International,
Inc. and IMC Global Inc.
Prior to July 2000,
Director of Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM). Prior to April
1999, Director of Metal
Management, Inc.
</Table>
33
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (55) Trustee Trustee Managing Partner of 86 Trustee/Director/Managing
Heidrick & Struggles since 2003 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1992, Executive Vice
President of La Salle
National Bank.
R. Craig Kennedy (51) Trustee Trustee Director and President of 86 Trustee/Director/Managing
11 DuPont Circle, N.W. since 2003 the German Marshall Fund General Partner of funds
Washington, D.C. 20016 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (68) Trustee Trustee Prior to 1998, President 88 Trustee/Director/Managing
736 North Western Avenue since 1997 and Chief Executive General Partner of funds
P.O. Box 317 Officer of Pocklington in the Fund Complex.
Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
</Table>
34
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (67) Trustee Trustee President of Nelson 86 Trustee/Director/Managing
423 Country Club Drive since 2003 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (63) Trustee Trustee President Emeritus and 88 Trustee/Director/Managing
1126 E. 59th Street since 1997 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, P.H.D. Trustee Trustee Currently with Paladin 86 Trustee/Director/Managing
(62) since 2003 Capital Group-Paladin General Partner of funds
2001 Pennsylvania Avenue Homeland Security Fund in the Fund Complex.
Suite 400 since November 2003. Director of Neurogen
Washington, DC 20006 Previously, Chief Corporation, a
Communications Officer of pharmaceutical company,
the National Academy of since January 1998.
Sciences/National
Research Council, an
independent, federally
chartered policy
institution, since 2001
and Chief Operating
Officer from 1993 to
2001. Director of the
Institute for Defense
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, and
Trustee of Colorado
College. Prior to 1993,
Executive Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
35
INTERESTED TRUSTEES:*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Mitchell M. Merin* (50) Trustee, Trustee President and Chief 86 Trustee/Director/Managing
1221 Avenue of the Americas President since Executive Officer of General Partner of funds
New York, NY 10020 and Chief 2003; funds in the Fund in the Fund Complex.
Executive President Complex. Chairman,
Officer and Chief President, Chief
Executive Executive Officer and
Officer Director of the Adviser
since 2002 and Van Kampen Advisors
Inc. since December 2002.
Chairman, President and
Chief Executive Officer
of Van Kampen Investments
since December 2002.
Director of Van Kampen
Investments since
December 1999. Chairman
and Director of Van
Kampen Funds Inc. since
December 2002. President,
Director and Chief
Operating Officer of
Morgan Stanley Investment
Management since December
1998. President and
Director since April 1997
and Chief Executive
Officer since June 1998
of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc.
Chairman, Chief Executive
Officer and Director of
Morgan Stanley
Distributors Inc. since
June 1998. Chairman since
June 1998, and Director
since January 1998 of
Morgan Stanley Trust.
Director of various
Morgan Stanley
subsidiaries. President
of the Morgan Stanley
Funds since May 1999.
Previously Chief
Executive Officer of Van
Kampen Funds Inc. from
December 2002 to July
2003, Chief Strategic
Officer of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc. and
Executive Vice President
of Morgan Stanley
Distributors Inc. from
April 1997 to June 1998.
Chief Executive Officer
from September 2002 to
April 2003 and Vice
President from May 1997
to April 1999 of the
Morgan Stanley Funds.
</Table>
36
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Richard F. Powers, III* (57) Trustee Trustee Advisory Director of 88 Trustee/Director/Managing
1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds
P.O. Box 5555 December 2002, Chairman, in the Fund Complex.
Oakbrook Terrace, IL 60181 Director, President,
Chief Executive Officer
and Managing Director of
Van Kampen Investments
and its investment
advisory, distribution
and other subsidiaries.
Prior to December 2002,
President and Chief
Executive Officer of
funds in the Fund
Complex. Prior to May
1998, Executive Vice
President and Director of
Marketing at Morgan
Stanley and Director of
Dean Witter, Discover &
Co. and Dean Witter
Realty. Prior to 1996,
Director of Dean Witter
Reynolds Inc.
Wayne W. Whalen* (64) Trustee Trustee Partner in the law firm 88 Trustee/Director/Managing
333 West Wacker Drive since 1997 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the
Fund Complex.
</Table>
* Such trustee is an "interested person" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain
funds in the Fund Complex by reason of his firm currently acting as legal
counsel to such funds in the Fund Complex. Messrs. Merin and Powers are
interested persons of funds in the Fund Complex and the Adviser by reason of
their current or former positions with Morgan Stanley or its affiliates.
37
OFFICERS:
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
Stephen L. Boyd (63) Vice President Officer Managing Director of Global Research Investment Management.
2800 Post Oak Blvd. since 1998 Vice President of funds in the Fund Complex. Prior to
45th Floor December 2002, Chief Investment Officer of Van Kampen
Houston, TX 77056 Investments and President and Chief Operations Officer of
the Adviser and Van Kampen Advisors Inc. Prior to May 2002,
Executive Vice President and Chief Investment Officer of
funds in the Fund Complex. Prior to May 2001, Managing
Director and Chief Investment Officer of Van Kampen
Investments, and Managing Director and President of the
Adviser and Van Kampen Advisors Inc. Prior to December 2000,
Executive Vice President and Chief Investment Officer of Van
Kampen Investments, and President and Chief Operating
Officer of the Adviser. Prior to April 2000, Executive Vice
President and Chief Investment Officer for Equity
Investments of the Adviser. Prior to October 1998, Vice
President and Senior Portfolio Manager with AIM Capital
Management, Inc. Prior to February 1998, Senior Vice
President and Portfolio Manager of Van Kampen American
Capital Asset Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American Capital
Management, Inc.
Stefanie V. Chang (37) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas since 2003 Vice President of funds in the Fund Complex.
New York, NY 10020
Joseph J. McAlinden (61) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment
New York, NY 10020 Investment Officer Management Inc. and Morgan Stanley Investments LP and
Director of Morgan Stanley Trust for over 5 years. Executive
Vice President and Chief Investment Officer of funds in the
Fund Complex. Managing Director and Chief Investment Officer
of Van Kampen Investments, the Adviser and Van Kampen
Advisors Inc. since December 2002.
</Table>
38
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
John R. Reynoldson (50) Vice President Officer Executive Director and Portfolio Specialist of the Adviser
1 Parkview Plaza since 2000 and Van Kampen Advisors Inc. Vice President of funds in the
P.O. Box 5555 Fund Complex. Prior to July 2001, Principal and Co-head of
Oakbrook Terrace, IL 60181 the Fixed Income Department of the Adviser and Van Kampen
Advisors Inc. Prior to December 2000, Senior Vice President
of the Adviser and Van Kampen Advisors Inc. Prior to May
2000, Senior Vice President of the investment grade taxable
group for the Adviser. Prior to June 1999, Senior Vice
President of the government securities bond group for Asset
Management.
Ronald E. Robison (65) Executive Vice Officer Chief Executive Officer and Chairman of Investor Services.
1221 Avenue of the Americas President and since 2003 Executive Vice President and Principal Executive Officer of
New York, NY 10020 Principal Executive funds in the Fund Complex. Chief Global Operations Officer
Officer and Managing Director of Morgan Stanley Investment
Management Inc. Managing Director of Morgan Stanley.
Managing Director and Director of Morgan Stanley Investment
Advisors Inc. and Morgan Stanley Services Company Inc. Chief
Executive Officer and Director of Morgan Stanley Trust. Vice
President of the Morgan Stanley Funds.
A. Thomas Smith III (47) Vice President and Officer Managing Director of Morgan Stanley, Managing Director and
1221 Avenue of the Americas Secretary since 1999 Director of Van Kampen Investments, Director of the Adviser,
New York, NY 10020 Van Kampen Advisors Inc., the Distributor, Investor Services
and certain other subsidiaries of Van Kampen Investments.
Managing Director and General Counsel-Mutual Funds of Morgan
Stanley Investment Advisors, Inc. Vice President and
Secretary of funds in the Fund Complex. Prior to July 2001,
Managing Director, General Counsel, Secretary and Director
of Van Kampen Investments, the Adviser, the Distributor,
Investor Services, and certain other subsidiaries of Van
Kampen Investments. Prior to December 2000, Executive Vice
President, General Counsel, Secretary and Director of Van
Kampen Investments, the Adviser, Van Kampen Advisors Inc.,
the Distributor, Investor Services and certain other
subsidiaries of Van Kampen Investments. Prior to January
1999, Vice President and Associate General Counsel to New
York Life Insurance Company ("New York Life"), and prior to
March 1997, Associate General Counsel of New York Life.
Prior to December 1993, Assistant General Counsel of The
Dreyfus Corporation. Prior to August 1991, Senior Associate,
Willkie Farr & Gallagher. Prior to January 1989, Staff
Attorney at the Securities and Exchange Commission, Division
of Investment Management, Office of Chief Counsel.
</Table>
39
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
John L. Sullivan (48) Vice President, Chief Officer Director and Managing Director of Van Kampen Investments,
1 Parkview Plaza Financial Officer and since 1996 the Adviser, Van Kampen Advisors Inc. and certain other
P.O. Box 5555 Treasurer subsidiaries of Van Kampen Investments. Vice President,
Oakbrook Terrace, IL 60181 Chief Financial Officer and Treasurer of funds in the Fund
Complex. Head of Fund Accounting for Morgan Stanley
Investment Management. Prior to December 2002, Executive
Director of Van Kampen Investments, the Adviser and Van
Kampen Advisors Inc.
</Table>
40
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 conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "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 Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., 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)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 920, 957, 107
VIN ANR 2/04 13616B04-AS-2/04
Item 2. Code of Ethics.
(a) The Trust has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the Trust or
a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Trust has not amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The Trust has not granted a waiver or an implicit waiver from a
provision of its Code of Ethics.
(e) Not applicable.
(f)
(1) The Trust's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Trust's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: J. Miles Branagan, Jerry Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2003
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES ............................... $ 21,730 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ........................ $ 0 $230,000 (2)
TAX FEES .................................. $ 1,500(3) $ 0 (4)
ALL OTHER FEES ............................ $ 0 $ 0
TOTAL NON-AUDIT FEES ...................... $ 1,500 $230,000
TOTAL ..................................... $ 23,230 $230,000
2002
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES ................................ $21,500 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES ........................ $ 0 $95,000 (2)
TAX FEES .................................. $ 1,500(3) $ 0 (4)
ALL OTHER FEES ............................ $ 0 $ 0
TOTAL NON-AUDIT FEES ...................... $ 1,500 $95,000
TOTAL ..................................... $23,000 $95,000
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors)
and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of Covered Entities' financial statements.
(3) Tax Fees represent tax compliance services provided in
connection with the review of the Registrant's tax returns.
(4) Tax Fees represent tax compliance services provided in
connection with the review of Covered Entities' tax returns.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider
whether such services are consistent with the SEC's rules on auditor
independence. The Audit Committee will also consider whether the Independent
Auditors are best positioned to provide the most effective and efficient
services, for reasons such as its familiarity with the Fund's business, people,
culture, accounting systems, risk profile and other factors, and whether the
service might enhance the Fund's ability to manage or control risk or improve
audit quality. All such factors will be considered as a whole, and no one factor
should necessarily be determinative.
The Audit Committee is also mindful of the relationship between fees
for audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax
and All Other services that have the general pre-approval of the Audit
Committee. The term of any general pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee considers and provides a different
period and states otherwise. The Audit Committee will annually review and
pre-approve the services that may be provided by the Independent Auditors
without obtaining specific pre-approval from the Audit Committee.
- -------------------------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval
Policy and Procedures (the "Policy"), adopted as of the date above,
supercedes and replaces all prior versions that may have been
adopted from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have
the meanings as defined in the Joint Audit Committee Charter.
The Audit Committee will add to or subtract from the list of general
pre-approved services from time to time, based on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes
that implementation of the Policy will not adversely affect the Independent
Auditors' independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the
Audit Committee, the Audit Committee may grant general pre-approval to other
Audit services, which are those services that only the Independent Auditors
reasonably can provide. Other Audit services may include statutory audits and
services associated with SEC registration statements (on Forms N-1A, N-2, N-3,
N-4, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the following Audit services. All
other Audit services not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
- Statutory audits or financial audits for the Fund
- Services associated with SEC registration statements
(including new funds), periodic reports and other documents
filed with the SEC or other documents issued in connection
with securities offerings (e.g., comfort letters for
closed-end fund offerings, consents), and assistance in
responding to SEC comment letters
- Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules,
standards or interpretations by the SEC, FASB, or other
regulatory or standard setting bodies (Note: Under SEC rules,
some consultations may be "audit related" services rather than
"audit" services)
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or
regulatory reporting matters; and assistance with internal control reporting
requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the following Audit-related
services. All other Audit-related services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Attest procedures not required by statute or regulation
(including agreed upon procedures related to the Closed-End
Fund asset coverage tests required by the rating agencies
and/or lenders)
- Due diligence services pertaining to potential fund mergers
- Issuance of SAS-70 reports on internal controls of Morgan
Stanley Trust Co. and MSIM Trade Operations
- Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules,
standards or interpretations by the SEC, FASB, or other
regulatory or standard-setting bodies (Note: Under SEC rules,
some consultations may be "audit" services rather than
"audit-related" services)
- Information systems reviews not performed in connection with
the audit (e.g., application data center and technical
reviews)
- General assistance with implementation of the requirements of
SEC rules or listing standards promulgated pursuant to the
Sarbanes-Oxley Act
- Audit of record keeping services performed by Morgan Stanley
Trust Fund related to the New Jersey State Retirement Plan
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide
Tax services to the Fund and, to the extent they are Covered Services, the
Covered Entities, such as tax compliance, tax planning and tax advice without
impairing the auditor's independence, and the SEC has stated that the
Independent Auditors may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax services that have
historically been provided by the Independent Auditors, that the Audit Committee
has reviewed and believes would not impair the independence of the Independent
Auditors, and that are consistent with the SEC's rules on auditor independence.
The Audit Committee will not permit the retention of the Independent Auditors in
connection with a transaction initially recommended by the Independent Auditors,
the sole business purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code and related regulations.
The Audit Committee will consult with Director of Tax or outside counsel to
determine that the tax planning and reporting positions are consistent with this
policy.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the following Tax Services. All Tax services involving large and
complex transactions not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies):
- U.S. federal, state and local tax planning and advice
- U.S. federal, state and local tax compliance
- International tax planning and advice
- International tax compliance
- Review of federal, state, local and international income,
franchise, and other tax returns
- Identification of Passive Foreign Investment Companies
- Review of closed-end funds pro rata allocation of taxable
income and capital gains to common and preferred shares.
- Domestic and foreign tax planning, compliance, and advice
- Assistance with tax audits and appeals before the IRS and
similar state, local and foreign agencies
- Tax advice and assistance regarding statutory, regulatory or
administrative developments (e.g., excise tax reviews,
evaluation of Fund's tax compliance function)
- Review the calculations of taxable income from corporate
actions including reorganizations related to bankruptcy
filings and provide guidance related to the foregoing
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the following All Other services.
Permissible All Other services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Risk management advisory services, e.g., assessment and
testing of security infrastructure controls
The following is a list of the SEC's prohibited non-audit services. The
SEC's rules and relevant guidance should be consulted to determine the precise
definitions of these services and the applicability of exceptions to certain of
the prohibitions:
- Bookkeeping or other services related to the accounting
records or financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions or
contribution-in-kind reports
- Actuarial services
- Internal audit outsourcing services
- Management functions
- Human resources
- Broker-dealer, investment adviser or investment banking
services
- Legal services
- Expert services unrelated to the audit
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be
provided by the Independent Auditors will be established annually by the Audit
Committee. Any proposed services exceeding these levels or amounts will require
specific pre-approval by the Audit Committee. The Audit Committee is mindful of
the overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the
Independent Auditors that do not require specific approval by the Audit
Committee will be submitted to the Fund's Chief Financial Officer and must
include a detailed description of the services to be rendered. The Fund's Chief
Financial Officer will determine whether such services are included within the
list of services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be informed on a timely basis of any such
services rendered by the Independent Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Fund's
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer
to monitor the performance of all services provided by the Independent Auditors
and to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. Both the Fund's Chief Financial Officer
and management will immediately report to the chairman of the Audit Committee
any breach of this Policy that comes to the attention of the Fund's Chief
Financial Officer or any member of management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an
annual basis to meet its responsibility to oversee the work of the Independent
Auditors and to assure the auditor's independence from the Fund, such as
reviewing a formal written statement from the Independent Auditors delineating
all relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any
entity controlling, controlled by or under common control with the Fund's
investment adviser(s) that provides ongoing services to the Fund(s). Beginning
with non-audit service contracts entered into on or after May 6, 2003, the
Fund's audit committee must pre-approve non-audit services provided not only to
the Fund but also to the Covered Entities if the engagements relate directly to
the operations and financial reporting of the Fund. This list of Covered
Entities would include:
- Van Kampen Investments, Inc.
- Van Kampen Investment Advisory Corporation
- Van Kampen Asset Management Inc.
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Trust Company
- Van Kampen Investor Services Inc.
- Van Kampen Management Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Investments LP
- Morgan Stanley Trust Company
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Trust's and its investment advisor's Proxy Voting Policies and Procedures
are as follows:
I. POLICY STATEMENT
Introduction - Morgan Stanley Investment Management's ("MSIM") policies and
procedures for voting proxies with respect to securities held in the accounts of
clients applies to those MSIM entities that provide discretionary Investment
Management services and for which a MSIM entity has the authority to vote their
proxies. The policies and procedures and general guidelines in this section will
be reviewed and, as necessary, updated periodically to address new or revised
proxy voting issues. The MSIM entities covered by these policies and procedures
currently include the following: Morgan Stanley Investment Advisors Inc., Morgan
Stanley Alternative Investment Partners, L.P., Morgan Stanley AIP GP LP, Morgan
Stanley Investment Management Inc., Morgan Stanley Investment Group Inc., Morgan
Stanley Investment Management Limited, Morgan Stanley Investment Management
Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan
Stanley Investment Management Private Limited, Morgan Stanley Investments LP,
Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP,
Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., and Van
Kampen Advisors Inc. (each a "MSIM Affiliate" and collectively referred to as
the "MSIM Affiliates").
Each MSIM Affiliate will vote proxies as part of its authority to manage,
acquire and dispose of account assets. With respect to the MSIM registered
management investment companies (Van Kampen, Institutional and Advisor
Funds)(collectively referred to as the "MSIM Funds"), each MSIM Fund will vote
proxies pursuant to authority granted under its applicable investment advisory
agreement or, in the absence of such authority, as authorized by its Board of
Directors or Trustees. A MSIM Affiliate will not vote proxies if the "named
fiduciary" for an ERISA account has reserved the authority for itself, or in the
case of an account not governed by ERISA, the Investment Management Agreement
does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in
a prudent and diligent manner, vote proxies in the best interests of clients,
including beneficiaries of and participants in a client's benefit plan(s) for
which we manage assets, consistent with the objective of maximizing long-term
investment returns ("Client Proxy Standard"). In certain situations, a client or
its fiduciary may provide a MSIM Affiliate with a statement of proxy voting
policy. In these situations, the MSIM Affiliate will comply with the client's
policy unless to do so would be inconsistent with applicable laws or regulations
or the MSIM Affiliate's fiduciary responsibility.
Proxy Research Services - To assist the MSIM Affiliates in their responsibility
for voting proxies and the overall global proxy voting process, Institutional
Shareholder Services ("ISS") and the Investor Responsibility Research Center
("IRRC") have been retained as experts in the proxy voting and corporate
governance area. ISS and IRRC are independent advisers that specialize in
providing a variety of fiduciary-level proxy-related services to institutional
investment managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to MSIM Affiliates include
in-depth research, global issuer analysis, and voting recommendations. In
addition to research, ISS provides vote execution, reporting, and recordkeeping.
MSIM's Proxy Review Committee (see Section IV.A. below) will carefully monitor
and supervise the services provided by the proxy research services.
Voting Proxies for certain Non-US Companies - While the proxy voting process is
well established in the United States and other developed markets with a number
of tools and services available to assist an investment manager, voting proxies
of non-US companies located in certain jurisdictions, particularly emerging
markets, may involve a number of problems that may restrict or prevent a MSIM
Affiliate's ability to vote such proxies. These problems include, but are not
limited to: (i) proxy statements and ballots being written in a language other
than English; (ii) untimely and/or inadequate notice of shareholder meetings;
(iii) restrictions on the ability of holders outside the issuer's jurisdiction
of organization to exercise votes; (iv) requirements to vote proxies in person,
(v) the imposition of restrictions on the sale of the securities for a period of
time in proximity to the shareholder meeting; and (vi) requirements to provide
local agents with power of attorney to facilitate the MSIM Affiliate's voting
instructions. As a result, clients' non-U.S. proxies will be voted on a best
efforts basis only, consistent with the Client Proxy Standard. ISS has been
retained to provide assistance to the MSIM Affiliates in connection with voting
their clients' non-US proxies.
II. GENERAL PROXY VOTING GUIDELINES
To ensure consistency in voting proxies on behalf of its clients, MSIM
Affiliates will follow (subject to any exception set forth herein) these Proxy
Voting Policies and Procedures, including the guidelines set forth below. These
guidelines address a broad range of issues, including board size and
composition, executive compensation, anti-takeover proposals, capital structure
proposals and social responsibility issues and are meant to be general voting
parameters on issues that arise most frequently. The MSIM Affiliates, however,
may vote in a manner that is contrary to the following general guidelines,
pursuant to the procedures set forth in Section IV. below, provided the vote is
consistent with the Client Proxy Standard.
III. GUIDELINES
A. MANAGEMENT PROPOSALS
1. When voting on routine ballot items the following proposals are
generally voted in support of management, subject to the review
and approval of the Proxy Review Committee, as appropriate.
o Selection or ratification of auditors.
o Approval of financial statements, director and auditor
reports.
o Election of Directors.
o Limiting Directors' liability and broadening indemnification
of Directors.
o Requirement that a certain percentage (up to 66 2/3%) of its
Board's members be comprised of independent and unaffiliated
Directors.
o Requirement that members of the company's compensation,
nominating and audit committees be comprised of independent or
unaffiliated Directors.
o Recommendations to set retirement ages or require specific
levels of stock ownership by Directors.
o General updating/corrective amendments to the charter.
o Elimination of cumulative voting.
o Elimination of preemptive rights.
o Provisions for confidential voting and independent tabulation
of voting results.
o Proposals related to the conduct of the annual meeting except
those proposals that relate to the "transaction of such other
business which may come before the meeting."
2. The following non-routine proposals, which potentially may have a
substantive financial or best interest impact on a shareholder,
are generally voted in support of management, subject to the
review and approval of the Proxy Review Committee, as
appropriate.
Capitalization changes
o Capitalization changes that eliminate other classes of stock
and voting rights.
o Proposals to increase the authorization of existing classes of
common stock (or securities convertible into common stock) if:
(i) a clear and legitimate business purpose is stated; (ii)
the number of shares requested is reasonable in relation to
the purpose for which authorization is requested; and (iii)
the authorization does not exceed 100% of shares currently
authorized and at least 30% of the new authorization will be
outstanding.
o Proposals to create a new class of preferred stock or for
issuances of preferred stock up to 50% of issued capital.
o Proposals for share repurchase plans.
o Proposals to reduce the number of authorized shares of common
or preferred stock, or to eliminate classes of preferred
stock.
o Proposals to effect stock splits.
o Proposals to effect reverse stock splits if management
proportionately reduces the authorized share amount set forth
in the corporate charter. Reverse stock splits that do not
adjust proportionately to the authorized share amount will
generally be approved if the resulting increase in authorized
shares coincides with the proxy guidelines set forth above for
common stock increases.
Compensation
o Director fees, provided the amounts are not excessive relative
to other companies in the country or industry.
o Employee stock purchase plans that permit discounts up to 15%,
but only for grants that are part of a broad based employee
plan, including all non-executive employees.
o Establishment of Employee Stock Option Plans and other
employee ownership plans.
Anti-Takeover Matters
o Modify or rescind existing supermajority vote requirements to
amend the charters or bylaws.
o Adoption of anti-greenmail provisions provided that the
proposal: (i) defines greenmail; (ii) prohibits buyback offers
to large block holders not made to all
shareholders or not approved by disinterested shareholders;
and (iii) contains no anti-takeover measures or other
provisions restricting the rights of shareholders.
3. The following non-routine proposals, which potentially may have a
substantive financial or best interest impact on the shareholder,
are generally voted against (notwithstanding management support),
subject to the review and approval of the Proxy Review Committee,
as appropriate.
o Capitalization changes that add classes of stock which
substantially dilute the voting interests of existing
shareholders.
o Proposals to increase the authorized number of shares of
existing classes of stock that carry preemptive rights or
supervoting rights.
o Creation of "blank check" preferred stock.
o Changes in capitalization by 100% or more.
o Compensation proposals that allow for discounted stock options
that have not been offered to employees in general.
o Amendments to bylaws that would require a supermajority
shareholder vote to pass or repeal certain provisions.
o Proposals to indemnify auditors.
4. The following types of non-routine proposals, which potentially
may have a potential financial or best interest impact on an
issuer, are voted as determined by the Proxy Review Committee.
Corporate Transactions
o Mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations,
restructurings and recapitalizations) will be examined on a
case-by-case basis. In all cases, ISS and IRRC research and
analysis will be used along with MSIM Affiliates' research and
analysis, based on, among other things, MSIM internal
company-specific knowledge.
o Change-in-control provisions in non-salary compensation plans,
employment contracts, and severance agreements that benefit
management and would be costly to shareholders if triggered.
o Shareholders rights plans that allow appropriate offers to
shareholders to be blocked by the board or trigger provisions
that prevent legitimate offers from proceeding.
o Executive/Director stock option plans. Generally, stock option
plans should meet the following criteria:
(i) Whether the stock option plan is incentive based;
(ii) For mature companies, should be no more than 5% of the
issued capital at the time of approval;
(iii) For growth companies, should be no more than 10% of the
issued capital at the time of approval.
Anti-Takeover Provisions
o Proposals requiring shareholder ratification of poison pills.
o Anti-takeover and related provisions that serve to prevent the
majority of shareholders from exercising their rights or
effectively deter the appropriate tender offers and other
offers.
B. SHAREHOLDER PROPOSALS
1. The following shareholder proposals are generally supported,
subject to the review and approval of the Proxy Review Committee,
as appropriate:
o Requiring auditors to attend the annual meeting of
shareholders.
o Requirement that members of the company's compensation,
nominating and audit committees be comprised of independent or
unaffiliated Directors.
o Requirement that a certain percentage of its Board's members
be comprised of independent and unaffiliated Directors.
o Confidential voting.
o Reduction or elimination of supermajority vote requirements.
2. The following shareholder proposals will be voted as determined
by the Proxy Review Committee.
o Proposals that limit tenure of directors.
o Proposals to limit golden parachutes.
o Proposals requiring directors to own large amounts of stock to
be eligible for election.
o Restoring cumulative voting in the election of directors.
o Proposals that request or require disclosure of executive
compensation in addition to the disclosure required by the
Securities and Exchange Commission ("SEC") regulations.
o Proposals that limit retirement benefits or executive
compensation.
o Requiring shareholder approval for bylaw or charter
amendments.
o Requiring shareholder approval for shareholder rights plan or
poison pill.
o Requiring shareholder approval of golden parachutes.
o Elimination of certain anti-takeover related provisions.
o Prohibit payment of greenmail.
3. The following shareholder proposals are generally not supported,
subject to the review and approval of the Committee, as
appropriate.
o Requirements that the issuer prepare reports that are costly
to provide or that would require duplicative efforts or
expenditures that are of a non-business nature or would
provide no pertinent information from the perspective of
institutional shareholders.
o Restrictions related to social, political or special interest
issues that impact the ability of the company to do business
or be competitive and that have a significant financial or
best interest impact to the shareholders.
o Proposals that require inappropriate endorsements or corporate
actions.
IV. ADMINISTRATION OF PROXY POLICIES AND PROCEDURES
A. PROXY REVIEW COMMITTEE
1. The MSIM Proxy Review Committee ("Committee") is responsible for
creating and implementing MSIM's Proxy Voting Policy and
Procedures and, in this regard, has expressly adopted them.
Following are some of the functions and responsibilities of the
Committee.
(a) The Committee, which will consist of members designated by
MSIM's Chief Investment Officer, is responsible for
establishing MSIM's proxy voting policies and guidelines and
determining how MSIM will vote proxies on an ongoing basis.
(b) The Committee will periodically review and have the
authority to amend as necessary MSIM's proxy voting policies
and guidelines (as expressed in these Proxy Voting Policy
and Procedures) and establish and direct voting positions
consistent with the Client Proxy Standard.
(c) The Committee will meet at least monthly to (among other
matters): (1) address any outstanding issues relating to
MSIM's Proxy Voting Policy and Procedures; and (2) generally
review proposals at upcoming shareholder meetings of MSIM
portfolio companies in accordance with this Policy and
Procedures including, as appropriate, the voting results of
prior shareholder meetings of the same issuer where a
similar proposal was presented to shareholders. The
Committee, or its designee, will timely communicate to ISS
MSIM's Proxy Voting Policy and Procedures (and any
amendments to them and/or any additional guidelines or
procedures it may adopt).
(d) The Committee will meet on an ad hoc basis to (among other
matters): (1) authorize "split voting" (i.e., allowing
certain shares of the same issuer that are the subject of
the same proxy solicitation and held by one or more MSIM
portfolios to be voted differently than other shares) and/or
"override voting" (i.e., voting all MSIM portfolio shares in
a manner contrary to the Procedures); (2) review and approve
upcoming votes, as appropriate, for matters for which
specific direction has been provided in Sections I, II, and
III above; and (3) determine how to vote matters for which
specific direction has not been provided in Sections I, II
and III above. Split votes will generally not be approved
within a single Global Investor Group team. The Committee
may take into account ISS recommendations and the research
provided by IRRC as well as any other relevant information
they may request or receive.
(e) In addition to the procedures discussed above, if the
Committee determines that an issue raises a potential
material conflict of interest, or gives rise to the
appearance of a potential material conflict of interest, the
Committee will designate a special committee to review, and
recommend a course of action
with respect to, the conflict(s) in question ("Special
Committee"). The Special Committee may request the
assistance of the Law and Compliance Departments and will
have sole discretion to cast a vote. In addition to the
research provided by ISS and IRRC, the Special Committee may
request analysis from MSIM Affiliate investment
professionals and outside sources to the extent it deems
appropriate.
(f) The Committee and the Special Committee, or their
designee(s), will document in writing all of their decisions
and actions, which documentation will be maintained by the
Committee and the Special Committee, or their designee(s)
for a period of at least 6 years. To the extent these
decisions relate to a security held by a MSIM U.S.
registered investment company, the Committee and Special
Committee, or their designee(s), will report their decisions
to each applicable Board of Trustees/Directors of those
investment companies at each Board's next regularly
Scheduled Board meeting. The report will contain information
concerning decisions made by the Committee and Special
Committee during the most recently ended calendar quarter
immediately preceding the Board meeting.
The Committee and Special Committee, or their designee(s), will timely
communicate to applicable PMs, the Compliance Departments and, as necessary to
ISS, decisions of the Committee and Special Committee so that, among other
things, ISS will vote proxies consistent with their decisions.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) 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.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
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 Income Trust
By: /s/ Ronald E. Robison
-------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: February 18, 2004
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: February 18, 2004
By: /s/ John L. Sullivan
-------------------------------
Name: John L. Sullivan
Title: Principal Financial Officer
Date: February 18, 2004