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
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(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: 6/30/04
Item 1. Reports to Shareholders.
The Trust's semi-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 semiannual 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 June 30, 2004.
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
that the value of the trust shares may therefore be less than what you
paid for them. Accordingly, you can lose money investing in this trust.
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 6/30/04
<Table>
<Caption>
INCOME TRUST
SYMBOL: VIN
- ------------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (04/22/88) 7.03% 5.92%
10-year 6.58 5.83
5-year 4.66 2.98
1-year 5.46 -3.90
6-month 1.33 -4.88
- ------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, 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.
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 SIX-MONTH PERIOD ENDED JUNE 30, 2004
Van Kampen Income Trust is managed by the Adviser's Taxable Fixed-Income
team.(1) Current team members include Sheila Finnerty, Managing Director of the
Adviser; Gordon Loery and Jaidip Singh, Executive Directors of the Adviser; and
Menglin Luo, Vice President of the Adviser.
MARKET CONDITIONS
After a year in which deflation concerns dominated the bond markets, the first
six months of 2004 were overshadowed by entirely different concerns, foremost
among them rising interest rates. When the year began, the market was
anticipating that the Federal Reserve Bank's Federal Open Market Committee (the
Fed) would soon raise the target federal funds rate from its 46-year low of 1.0
percent. Continued low inflation and sluggish job growth, however, led the Fed
to maintain its accommodative stance. The lack of expected Fed activity led
investors to believe that an increase in interest rates was likely to be further
away than anticipated and, as a result, bond prices rose and yields fell.
In April, though, the market reversed course. Unexpectedly high payroll data
released early that month and again in early May indicated a sharp pick-up in
job growth, which caused investors to once again anticipate an increase in
interest rates. These expectations, coupled with climbing oil prices and growing
tensions in Iraq, hit the credit markets hard, driving bond prices down. In
June, market volatility subsided as investors awaited the results of the
month-end Fed meeting. At that meeting, the Fed finally announced it was raising
the federal funds rate by 25 basis points to 1.25 percent--the first rate
increase since 2000. Bond yields remained relatively unchanged, however, as the
market had already priced in higher rates.
Government-security yields were somewhat volatile during the reporting period,
due to their greater sensitivity to interest rates, but yields on lower-rated,
high-yield bonds remained relatively stable. Overall, the lowest-credit tiers of
the market, such as CCC-rated high-yield bonds, continued to outperform higher
credit-quality paper.
(1)Team members may change without notice at any time.
2
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, minus all
liabilities, by the total number of common shares outstanding, whereas market
price reflects the supply and demand for trust shares. As a result, the two
returns may differ significantly, as they did during the reporting period when
the trust realized a 1.33 percent gain on an NAV basis, but a 4.88 percent
decline on a market-price basis. (See table below.)
The trust continued to maintain a balanced credit-quality profile. Approximately
46 percent of holdings were in very high-quality Treasury, agency and
mortgage-backed securities, offset by approximately 43 percent in high-yield
corporate securities. The mortgage-backed securities portion of the trust--
roughly 22 percent of holdings--performed well during the reporting period. We
had positioned the trust in preparation for rising interest rates by emphasizing
higher-coupon paper within this sector--securities with yields between 5.5 and
6.5 percent. This strategy was particularly helpful in maintaining performance
when the difference in yields on mortgage-backed securities versus Treasuries
narrowed late in the reporting period.
The trust's reduced holdings in telecommunications also contributed to
performance. We trimmed the trust's holdings here last year, a strategy that
proved beneficial during the period when the sector became more expensive. The
portfolio's positioning in economically-sensitive industries also helped boost
returns. On the industrial side, holdings in chemical companies performed well,
as did consumer-product and food-and-beverage companies on the consumer side.
On a less positive note, the trust's focus on higher-rated securities did keep
the portfolio from more fully participating in the stronger performance of
lower-rated debt during the period. Security selection in the cable and energy
sectors also detracted from performance.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2004
<Table>
<Caption>
- ---------------------------------------
BASED ON
BASED ON NAV MARKET PRICE
1.33% -4.88%
- ---------------------------------------
</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
Looking forward, finding solid value within the high-yield bond market may prove
more challenging in the coming months. However, we believe that given the
trust's moderate weighting in this segment of the market, along with its
diversified mix of government securities and high-coupon bias within its
mortgage-backed holdings, the portfolio should be well positioned to weather the
months ahead.
<Table>
TOP 5 SECTORS AS OF 06/30/04 RATINGS ALLOCATIONS AS OF 06/30/04
Media-Noncable 4.8% AAA/Aaa 47.8%
Media-Cable 3.7 BBB/Baa 2.3
Chemicals 3.6 BB/Ba 14.2
Healthcare 2.9 B/B 28.4
Paper 2.8 CCC/Caa 6.0
CC/Ca 1.0
Non-Rated 0.3
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. Sectors percentages are as a percentage
of long-term investments. Securities are classified by sectors that represent
broad groupings of related industries. Ratings allocation percentages are as a
percentage of long-term debt investments. Ratings allocations based upon ratings
as issued by Standard & Poor's and Moody's. 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
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen trust provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
trust's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to trust shareholders, and makes these reports available on its
public web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public web site, each trust files a
complete schedule of portfolio holdings with the SEC for the trust's
first and third fiscal quarters on Form N-Q. Van Kampen does not deliver
the reports for the first and third fiscal quarters to shareholders, nor
are the reports posted to the Van Kampen public web site. You may,
however, obtain the Form N-Q filings (as well as the Form N-CSR and
N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You
may also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-202-942-8090. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
In addition to filing a complete schedule of portfolio holdings with the
SEC each fiscal quarter, each Van Kampen trust makes portfolio holdings
information available by periodically providing the information on its
public web site, www.vankampen.com. Each Van Kampen trust provides a
complete schedule of portfolio holdings on the public web site on a
calendar-quarter basis approximately 30 days after the close of the
calendar quarter. Furthermore, each Van Kampen trust provides partial
lists of its portfolio holdings (such as top 10 or top 15 trust holdings)
to the public web site each with a delay of approximately 15 days.
You may obtain copies of a trust's fiscal quarter filings, or its monthly
or calendar-quarter web site postings, by contacting Van Kampen Client
Relations at 1-800-847-2424.
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
The trust's policies and procedures with respect to the voting of proxies
relating to the trust's portfolio securities and information on how the
trust voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by calling 1-800-847-2424 or by visiting our web site at
www.vankampen.com. This information is also available on the Securities
and Exchange Commission's web site at http://www.sec.gov.
5
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
DOMESTIC CORPORATE BONDS 40.8%
AUTOMOTIVE 0.3%
$ 250 Autonation, Inc. .................... 9.000% 08/01/08 $ 283,750
------------
BUILDING MATERIALS 1.4%
125 Brand Services, Inc. ................ 12.000 10/15/12 143,125
290 NMHG Holdings Co. ................... 10.000 05/15/09 320,450
530 Nortek Holdings, Inc., 144A--Private
Placement (a) (b).................... 0/10.000 05/15/11 426,650
140 Schuler Homes, Inc. ................. 9.375 07/15/09 154,350
280 Trimas Corp. ........................ 9.875 06/15/12 298,200
------------
1,342,775
------------
CHEMICALS 2.9%
100 Equistar Chemicals LP................ 10.625 05/01/11 111,500
120 FMC Corp. ........................... 10.250 11/01/09 138,600
110 Huntsman Advanced Materials, LLC,
144A--Private Placement (a).......... 11.000 07/15/10 124,575
395 Huntsman ICI Chemicals, LLC.......... 10.125 07/01/09 404,875
250 Hydrochem Industrial Services, Inc.,
Ser B................................ 10.375 08/01/07 253,125
140 ISP Chemco, Inc. .................... 10.250 07/01/11 156,450
300 ISP Holdings, Inc. .................. 10.625 12/15/09 331,500
230 Johnsondiversey, Inc. ............... 9.625 05/15/12 251,850
225 Millennium America, Inc. ............ 7.000 11/15/06 232,312
305 Nalco Co., 144A--Private Placement
(a).................................. 7.750 11/15/11 321,012
160 Nalco Co., 144A--Private Placement
(a).................................. 8.875 11/15/13 168,400
185 Rockwood Specialties Group, Inc. .... 10.625 05/15/11 197,950
120 Westlake Chemical Corp. ............. 8.750 07/15/11 130,800
------------
2,822,949
------------
CONSTRUCTION MACHINERY 1.0%
85 Flowserve Corp. ..................... 12.250 08/15/10 96,687
25 Manitowoc Co., Inc. (EUR)............ 10.375 05/15/11 33,906
330 Manitowoc, Inc. ..................... 10.500 08/01/12 379,500
230 United Rentals North America,
Inc. ................................ 6.500 02/15/12 218,500
290 United Rentals North America,
Inc. ................................ 7.750 11/15/13 275,500
------------
1,004,093
------------
CONSUMER PRODUCTS 2.1%
160 Amscan Holdings, Inc., 144A--Private
Placement (a)........................ 8.750 05/01/14 158,000
255 Iron Mountain, Inc. ................. 8.625 04/01/13 271,575
170 Iron Mountain, Inc. ................. 7.750 01/15/15 169,575
155 Leiner Health Products, Inc.,
144A--Private Placement (a).......... 11.000 06/01/12 160,812
145 Muzak, LLC........................... 10.000 02/15/09 128,325
245 Muzak, LLC........................... 9.875 03/15/09 189,875
</Table>
6 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
CONSUMER PRODUCTS (CONTINUED)
$ 220 Prestige Brands, Inc., 144A--Private
Placement (a)........................ 9.250% 04/15/12 $ 212,300
180 Rayovac Corp. ....................... 8.500 10/01/13 189,900
89 Tempur Pedic, Inc. .................. 10.250 08/15/10 100,792
465 Xerox Corp. ......................... 7.125 06/15/10 476,625
------------
2,057,779
------------
DIVERSIFIED MANUFACTURING 0.1%
80 Koppers, Inc. ....................... 9.875 10/15/13 88,000
------------
ELECTRIC 1.9%
41 AES Corp. ........................... 9.375 09/15/10 43,921
26 AES Corp. ........................... 8.875 02/15/11 27,105
160 AES Corp. ........................... 7.750 03/01/14 154,600
260 AES Corp., 144A--Private Placement
(a).................................. 9.000 05/15/15 279,825
135 Allegheny Energy, Inc. .............. 7.750 08/01/05 140,400
445 Calpine Corp., 144A--Private
Placement (a)........................ 8.500 07/15/10 370,462
35 CMS Energy Corp. .................... 7.500 01/15/09 35,000
220 CMS Energy Corp. .................... 8.500 04/15/11 225,500
75 IPALCO Enterprises, Inc. ............ 7.625 11/14/11 81,750
260 Monongahela Power Co. ............... 5.000 10/01/06 266,765
20 PSEG Energy Holdings, Inc. .......... 7.750 04/16/07 21,050
205 PSEG Energy Holdings, Inc. .......... 8.625 02/15/08 221,400
------------
1,867,778
------------
ENTERTAINMENT 0.2%
350 Cinemark, Inc., 144A--Private
Placement (a) (b).................... 0/9.750 03/15/14 230,125
------------
ENVIRONMENTAL SERVICES 0.3%
185 Allied Waste North America, Inc. .... 9.250 09/01/12 208,125
110 Allied Waste North America, Inc.,
144A--Private Placement (a).......... 6.500 11/15/10 109,450
------------
317,575
------------
FOOD/BEVERAGE 1.3%
195 Michael Foods, Inc. ................. 8.000 11/15/13 202,312
435 Pilgrim's Pride Corp. ............... 9.625 09/15/11 482,850
125 Pilgrim's Pride Corp. ............... 9.250 11/15/13 133,750
430 Smithfield Foods, Inc. .............. 8.000 10/15/09 465,475
------------
1,284,387
------------
GAMING 1.9%
210 Harrahs Operating Co., Inc. ......... 7.875 12/15/05 222,337
215 Horseshoe Gaming, LLC................ 8.625 05/15/09 225,212
420 MGM Mirage, Inc. .................... 6.000 10/01/09 413,700
180 Park Place Entertainment Corp. ...... 7.875 12/15/05 189,675
</Table>
See Notes to Financial Statements 7
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
GAMING (CONTINUED)
$ 250 Park Place Entertainment Corp. ...... 8.875% 09/15/08 $ 271,875
100 Station Casinos, Inc. ............... 6.000 04/01/12 97,250
260 Station Casinos, Inc. ............... 6.500 02/01/14 251,550
170 Venetian Casino Resort, LLC.......... 11.000 06/15/10 197,200
------------
1,868,799
------------
HEALTHCARE 2.7%
390 AmerisourceBergen Corp. ............. 8.125 09/01/08 422,175
226 Fisher Scientific International,
Inc. ................................ 8.125 05/01/12 242,950
165 Fresenius Medical Care Capital Trust
II................................... 7.875 02/01/08 174,487
240 Fresenius Medical Care Capital Trust
IV................................... 7.875 06/15/11 255,600
335 HCA, Inc. ........................... 8.750 09/01/10 382,987
115 HCA, Inc. ........................... 6.300 10/01/12 115,242
145 Medcath Hldgs Corp., 144A--Private
Placement (a) (c).................... 9.875 07/15/12 147,175
50 National Nephrology Associates, Inc.,
144A--Private Placement (a).......... 9.000 11/01/11 57,500
220 Team Health, Inc., 144A--Private
Placement (a)........................ 9.000 04/01/12 212,300
50 Tenet Healthcare Corp. .............. 6.500 06/01/12 43,750
215 Tenet Healthcare Corp. .............. 7.375 02/01/13 195,650
135 Tenet Healthcare Corp., 144A--Private
Placement (a)........................ 9.875 07/01/14 138,037
110 VWR International, Inc.,
144A--Private Placement (a).......... 6.875 04/15/12 110,962
140 VWR International, Inc.,
144A--Private Placement (a).......... 8.000 04/15/14 144,200
------------
2,643,015
------------
HOME CONSTRUCTION 1.7%
590 Associated Materials, Inc.,
144A--Private Placement (a) (b)...... 0/11.250 03/01/14 398,250
65 Interface, Inc. ..................... 7.300 04/01/08 64,756
75 Interface, Inc. ..................... 10.375 02/01/10 84,000
255 Interface, Inc., 144A--Private
Placement (a)........................ 9.500 02/01/14 255,000
245 LNR Property Corp. .................. 7.625 07/15/13 245,000
95 Technical Olympic USA, Inc. ......... 9.000 07/01/10 97,850
180 Technical Olympic USA, Inc. ......... 9.000 07/01/10 185,400
180 Technical Olympic USA, Inc. ......... 10.375 07/01/12 188,550
110 WII Components, Inc., 144A--Private
Placement (a)........................ 10.000 02/15/12 108,350
------------
1,627,156
------------
INDEPENDENT ENERGY 0.3%
240 Equistar Chemicals LP................ 10.125 09/01/08 264,000
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
INTEGRATED ENERGY 2.3%
$ 345 BRL Universal Equipment.............. 8.875% 02/15/08 $ 371,306
345 Chesapeake Energy Corp. ............. 7.500 09/15/13 360,525
525 El Paso Production Holding Co. ...... 7.750 06/01/13 484,312
60 Hanover Compressor Co. .............. 8.625 12/15/10 62,400
225 Hanover Compressor Co. .............. 9.000 06/01/14 234,562
205 Hanover Equipment Trust.............. 8.500 09/01/08 217,812
95 Hanover Equipment Trust.............. 8.750 09/01/11 102,125
50 MSW Energy Holdings, LLC............. 8.500 09/01/10 53,125
230 MSW Energy Holdings, LLC,
144A--Private Placement (a).......... 7.375 09/01/10 230,000
95 Transcontinental Gas Pipe Line
Corp. ............................... 8.875 07/15/12 107,825
------------
2,223,992
------------
LODGING 1.0%
250 Hilton Hotels Corp. ................. 7.950 04/15/07 271,250
130 Hilton Hotels Corp. ................. 7.625 12/01/12 140,400
155 HMH Properties, Inc. ................ 7.875 08/01/08 159,650
65 Starwood Hotels & Resorts Worldwide,
Inc. ................................ 7.375 05/01/07 68,737
275 Starwood Hotels & Resorts Worldwide,
Inc. ................................ 7.875 05/01/12 295,625
------------
935,662
------------
MEDIA-CABLE 1.9%
63 Avalon Cable, LLC.................... 11.875 12/01/08 67,117
565 Charter Communications Holdings,
LLC.................................. 9.625 11/15/09 460,475
160 CSC Holdings, Inc. .................. 8.125 07/15/09 167,200
65 CSC Holdings, Inc. .................. 10.500 05/15/16 73,287
290 DirecTV Holdings, LLC................ 8.375 03/15/13 322,263
81 Echostar DBS Corp. .................. 9.125 01/15/09 89,201
320 Echostar DBS Corp. .................. 6.375 10/01/11 316,800
120 General Cable Corp. ................. 9.500 11/15/10 129,600
1,000 Park N View, Inc., Ser B (d) (e)
(f).................................. 13.000 05/15/08 0
140 Pegasus Communications Corp., Ser B
(d) (e).............................. 9.750 12/01/06 68,600
15 Pegasus Communications Corp., Ser B
(d) (e).............................. 12.500 08/01/07 7,350
135 Renaissance Media Group.............. 10.000 04/15/08 139,725
------------
1,841,618
------------
MEDIA-NONCABLE 3.0%
45 Advanstar Communications, Inc. ...... 10.750 08/15/10 50,006
397 Advanstar Communications, Inc.
(Variable Rate Coupon)............... 8.750 08/15/08 417,843
195 Dex Media East Finance Corp., LLC.... 12.125 11/15/12 228,638
175 Dex Media West Finance Corp. ........ 9.875 08/15/13 192,938
370 Dex Media, Inc., 144A--Private
Placement (a) (b).................... 0/9.000 11/15/13 240,500
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MEDIA-NONCABLE (CONTINUED)
$ 100 Granite Broadcasting Corp.,
144A--Private Placement (a).......... 9.750% 12/01/10 $ 93,500
350 Hollinger Participation Trust,
144A--Private Placement (a) (g)...... 12.125 11/15/10 409,434
225 Interep National Radio Sales, Inc.,
Ser B................................ 10.000 07/01/08 187,875
235 Nebraska Book, Co, Inc. ............. 8.625 03/15/12 231,475
385 Nevada Power Co. .................... 9.000 08/15/13 420,613
83 PEI Holdings, Inc. .................. 11.000 03/15/10 96,695
325 Primedia, Inc. ...................... 8.875 05/15/11 323,375
------------
2,892,892
------------
METALS 0.8%
342 Doe Run Resources Corp.,
144A--Private Placement (a) (g)...... 7.025 11/01/08 264,667
750 GS Technologies Operating, Inc. (d)
(e) (f).............................. 12.000 09/01/04 75
245 UCAR Finance, Inc. .................. 10.250 02/15/12 273,788
189 United States Steel Corp. ........... 9.750 05/15/10 210,263
------------
748,793
------------
NATURAL GAS PIPELINES 1.7%
340 Dynegy Holdings, Inc. ............... 6.875 04/01/11 294,525
200 Dynegy Holdings, Inc., 144A--Private
Placement (a)........................ 9.875 07/15/10 216,000
54 Gulfterra Energy Partners LP......... 8.500 06/01/10 58,995
211 Gulfterra Energy Partners LP......... 10.625 12/01/12 252,145
55 Northwest Pipeline Corp. ............ 8.125 03/01/10 59,538
215 Pacific Energy Partners,
144A--Private Placement (a).......... 7.125 06/15/14 219,300
105 Southern Natural Gas Co. ............ 8.875 03/15/10 115,238
470 Williams Cos., Inc. ................. 7.875 09/01/21 454,725
------------
1,670,466
------------
OIL FIELD SERVICES 0.7%
320 Hilcorp Energy Finance Corp.,
144A--Private Placement (a).......... 10.500 09/01/10 348,000
160 Magnum Hunter Resources, Inc. ....... 9.600 03/15/12 176,800
115 Plains Exploration & Production Co.,
144A--Private Placement (a).......... 7.125 06/15/14 117,588
------------
642,388
------------
OTHER DIVERSIFIED FINANCIAL SERVICES 0.2%
145 Global Cash Access, LLC,
144A--Private Placement (a).......... 8.750 03/15/12 151,525
------------
PACKAGING 1.0%
65 Owens-Illinois, Inc. ................ 7.350 05/15/08 65,163
575 Owens-Illinois, Inc. ................ 7.500 05/15/10 566,375
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
PACKAGING (CONTINUED)
$ 90 Tekni-Plex, Inc., 144A--Private
Placement (a)........................ 8.750% 11/15/13 $ 86,400
250 Tekni-Plex, Inc., Ser B.............. 12.750 06/15/10 241,250
------------
959,188
------------
PAPER 1.3%
435 Georgia-Pacific Corp. ............... 8.875 02/01/10 494,813
340 Graphic Packaging International
Corp. ............................... 9.500 08/15/13 370,600
25 Owens-Brockway Glass Containers,
Inc. ................................ 7.750 05/15/11 26,125
80 Owens-Brockway Glass Containers,
Inc. ................................ 8.750 11/15/12 87,200
150 Pliant Corp. ........................ 13.000 06/01/10 135,000
185 Pliant Corp. ........................ 13.000 06/01/10 166,500
------------
1,280,238
------------
RAILROADS 0.3%
235 Amsted Industries, Inc.,
144A--Private Placement (a).......... 10.250 10/15/11 256,150
------------
REAL ESTATE INVESTMENT TRUSTS 0.2%
158 Istar Financial, Inc. ............... 8.750 08/15/08 175,542
------------
REFINING 1.1%
120 Citgo Petroleum Corp. ............... 11.375 02/01/11 139,800
250 Frontier Oil Corp. .................. 11.750 11/15/09 274,375
145 Tesoro Petroleum Corp. .............. 9.000 07/01/08 150,075
135 Tesoro Petroleum Corp. .............. 9.625 04/01/12 152,213
390 Vintage Petroleum, Inc. ............. 7.875 05/15/11 401,700
------------
1,118,163
------------
RETAIL 1.3%
135 Big 5 Corp., Ser B................... 10.875 11/15/07 141,075
165 General Nutrition Center, Inc.,
144A--Private Placement (a).......... 8.500 12/01/10 172,013
120 Oxford Industrials, Inc.,
144A--Private Placement (a).......... 8.875 06/01/11 127,200
135 Penney JC Co., Inc. ................. 9.000 08/01/12 159,975
245 Petro Stopping Center Financial,
144A--Private Placement (a).......... 9.000 02/15/12 243,775
175 Rite Aid Corp. ...................... 7.125 01/15/07 179,813
65 Rite Aid Corp. ...................... 8.125 05/01/10 68,738
1,000 Sleepmaster, LLC, Ser B (d) (e)
(f).................................. 11.000 05/15/09 220,000
------------
1,312,589
------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
SERVICES 0.7%
$ 300 Buhrmann US, Inc., 144A--Private
Placement (a)........................ 8.250% 07/01/14 $ 300,750
55 CB Richard Ellis Service, Inc. ...... 9.750 05/15/10 60,775
315 CB Richard Ellis Service, Inc. ...... 11.250 06/15/11 360,675
------------
722,200
------------
SUPERMARKETS 0.6%
325 Delhaize America, Inc. .............. 8.125 04/15/11 356,373
246 Kroger Co., 144A--Private Placement
(a).................................. 8.500 07/15/17 273,159
------------
629,532
------------
TRANSPORTATION SERVICES 1.3%
335 Laidlaw International, Inc. ......... 10.750 06/15/11 367,244
245 Sonic Automotive, Inc. .............. 8.625 08/15/13 256,638
225 Tenneco Automotive, Inc. ............ 11.625 10/15/09 243,000
391 TRW Automotive, Inc. ................ 9.375 02/15/13 442,808
------------
1,309,690
------------
WIRELESS COMMUNICATIONS 2.1%
270 American Tower Corp. ................ 9.375 02/01/09 289,575
175 American Tower Corp., 144A--Private
Placement (a)........................ 7.500 05/01/12 170,188
345 Centennial Communications,
144A--Private Placement (a).......... 8.125 02/01/14 321,713
275 Metro PCS, Inc. ..................... 10.750 10/01/11 299,750
145 Rural Cellular Corp., 144A--Private
Placement (Variable Rate Coupon)
(a).................................. 6.020 03/15/10 150,075
495 SBA Communications Corp. ............ 10.250 02/01/09 509,850
90 Ubiquitel Operating Co. (b).......... 0/14.000 04/15/10 89,550
235 US Unwired, Inc., 144A--Private
Placement (a)........................ 10.000 06/15/12 238,525
------------
2,069,226
------------
WIRELINE COMMUNICATIONS 1.2%
250 Exodus Communications, Inc. (d) (e)
(f).................................. 11.250 07/01/08 0
400 Exodus Communications, Inc. (d) (e)
(f).................................. 11.625 07/15/10 0
535 Primus Telecom Group................. 8.000 01/15/14 473,475
250 Qwest Communications International,
Inc., 144A--Private Placement
(Variable Rate Coupon) (a)........... 4.750 02/15/09 235,000
</Table>
12 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
WIRELINE COMMUNICATIONS (CONTINUED)
$ 110 Qwest Corp. ......................... 6.625% 09/15/05 $ 112,750
310 Qwest Services Corp., 144A--Private
Placement (a)........................ 13.500 12/15/07 354,950
------------
1,176,175
------------
TOTAL DOMESTIC CORPORATE BONDS 40.8%.......................................... 39,818,210
------------
FOREIGN BONDS AND DEBT SECURITIES (US$) 7.5%
BELGIUM 0.4%
170 Telenet Communications, 144A--Private
Placement (EUR) (a).................. 9.000 12/15/13 207,813
215 Telenet Group Holding NV,
144A--Private Placement (a) (b)...... 0/11.500 06/15/14 137,600
------------
345,413
------------
BRAZIL 0.4%
500 Multicanal Participacoes, Ser B
(d).................................. 12.625 06/18/04 377,500
------------
CANADA 2.1%
80 Abitibi Consolidated, Inc.,
144A--Private Placement (a).......... 7.750 06/15/11 80,280
205 Abitibi-Consolidated, Inc. .......... 8.550 08/01/10 217,184
80 Abitibi-Consolidated, Inc. .......... 6.000 06/20/13 71,206
355 Alliance Atlantis
Communications, Inc. ................ 13.000 12/15/09 392,275
300 CHC Helicopter Corp., 144A--Private
Placement (a)........................ 7.375 05/01/14 296,250
285 Husky Oil Ltd. (Variable Rate
Coupon).............................. 8.900 08/15/28 322,993
125 Norampac, Inc. ...................... 6.750 06/01/13 123,125
250 Nortel Networks Ltd. ................ 6.125 02/15/06 252,500
350 Tembec Industries, Inc. ............. 7.750 03/15/12 339,500
------------
2,095,313
------------
FRANCE 0.6%
220 Rhodia SA, 144A--Private Placement
(a).................................. 8.875 06/01/11 187,000
85 Vivendi Universal SA ................ 6.250 07/15/08 90,553
235 Vivendi Universal SA ................ 9.250 04/15/10 277,758
------------
555,311
------------
GERMANY 0.7%
260 Cognis Deutschland, 144A--Private
Placement (Variable Rate Coupon)
(EUR) (a)............................ 6.897 11/15/13 313,088
325 Kabel Deutschland, 144A--Private
Placement (a) (c).................... 10.625 07/01/14 335,563
------------
648,651
------------
</Table>
See Notes to Financial Statements 13
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
GUERNSEY 0.2%
$ 145 ABB International Finance Ltd.
(EUR)................................ 11.000% 01/15/08 $ 205,272
------------
LUXEMBOURG 1.4%
380 Cablecom Luxembourg, 144A--Private
Placement (EUR) (a).................. 9.375 04/15/14 454,124
110 Johnsondiversey, Inc. (EUR).......... 9.625 05/15/12 145,171
200 Lighthouse Intl., 144A--Private
Placement (EUR) (a).................. 8.000 04/30/14 235,972
305 Safilo Capital International SA,
144A--Private Placement (EUR) (a).... 9.625 05/15/13 350,582
140 SGL Carbon Luxembourg SA,
144A--Private Placement (EUR) (a).... 8.500 02/01/12 166,032
------------
1,351,881
------------
MEXICO 1.0%
350 Axtel SA, 144A--Private Placement
(a).................................. 11.000 12/15/13 333,375
475 Satelites Mexicanos SA (d)........... 10.125 11/01/04 201,875
460 TV Azteca SA......................... 10.500 02/15/07 471,500
------------
1,006,750
------------
UNITED KINGDOM 0.7%
145 Avecia Group Plc..................... 11.000 07/01/09 110,925
140 Dunlop Stand Aero Holdings,
144A--Private Placement (a).......... 11.875 05/15/09 149,450
325 JSG Funding Plc (EUR)................ 10.125 10/01/12 430,892
------------
691,267
------------
TOTAL FOREIGN BONDS AND DEBT SECURITIES 7.5%.................................. 7,277,358
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 0.7%
998 Federal Home Loan Mortgage Corp.
(Interest Only)...................... 5.000 09/15/14 to 12/15/16 114,702
362 Federal Home Loan Mortgage Corp.
(Interest Only)...................... 6.000 05/15/30 42,057
200 Federal Home Loan Mortgage Corp.
(Interest Only) (h).................. 6.760 03/15/32 18,075
1,100 Federal National Mortgage Association
(Interest Only)...................... 5.500 06/25/26 to 05/25/27 104,996
442 Federal National Mortgage Association
(Interest Only) REMIC................ 6.000 08/25/32 to 11/25/32 78,235
693 Federal National Mortgage Association
(Interest Only)...................... 6.500 07/01/31 to 05/25/33 158,561
357 Federal National Mortgage Association
(Interest Only) REMIC................ 7.000 03/01/32 to 04/25/33 79,260
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
$ 82 Federal National Mortgage Association
(Interest Only)...................... 8.000% 05/01/30 $ 17,706
299 Government National Mortgage
Association (Interest Only) REMIC
(h).................................. 6.148 05/16/32 19,188
297 Government National Mortgage
Association (Interest Only) REMIC
(h).................................. 6.748 05/16/32 19,591
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 0.7%................................ 652,371
------------
MORTGAGE BACKED SECURITIES 22.2%
1,878 Federal Home Loan Mortgage Corp. .... 6.500 09/01/31 to 09/01/32 1,959,474
430 Federal Home Loan Mortgage Corp. .... 7.500 11/01/29 to 10/01/31 463,214
1,450 Federal Home Loan Mortgage Corp.,
July................................. 5.000 TBA 1,450,906
400 Federal Home Loan Mortgage Corp.,
July................................. 7.500 TBA 430,000
200 Federal National Mortgage
Association, July.................... 4.885 TBA 199,000
523 Federal National Mortgage
Association.......................... 6.000 04/01/28 to 12/01/28 537,129
587 Federal National Mortgage
Association.......................... 6.500 06/01/15 to 08/01/32 613,005
3,143 Federal National Mortgage
Association.......................... 7.000 03/01/15 to 12/01/32 3,328,068
792 Federal National Mortgage
Association.......................... 7.500 03/01/15 to 03/01/32 848,453
2,600 Federal National Mortgage
Association, August.................. 5.500 TBA 2,649,561
1,575 Federal National Mortgage
Association, August.................. 6.500 TBA 1,634,554
1,000 Federal National Mortgage
Association, July.................... 4.500 TBA 977,188
1,800 Federal National Mortgage
Association, July.................... 5.500 TBA 1,791,562
1,475 Federal National Mortgage
Association, July.................... 6.500 TBA 1,535,844
400 Federal National Mortgage
Association, July.................... 6.000 TBA 408,375
230 Government National Mortgage
Association.......................... 7.000 07/15/29 to 01/15/30 244,934
551 Government National Mortgage
Association.......................... 7.500 07/15/23 to 09/15/29 596,476
329 Government National Mortgage
Association.......................... 8.000 03/15/17 to 10/15/22 364,288
144 Government National Mortgage
Association.......................... 8.500 07/15/24 to 12/15/24 160,079
393 Government National Mortgage
Association.......................... 9.000 08/15/16 to 12/15/24 443,213
</Table>
See Notes to Financial Statements 15
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES (CONTINUED)
$ 86 Government National Mortgage
Association.......................... 9.500% 11/15/09 to 01/15/17 $ 97,086
1,000 Government National Mortgage
Association, July.................... 5.500 TBA 998,438
------------
TOTAL MORTGAGE BACKED SECURITIES 22.2%........................................ 21,730,847
------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 10.3%
4,850 Federal Home Loan Mortgage Corp. .... 2.750 08/15/06 4,819,013
150 Federal Home Loan Mortgage Corp.
(c).................................. 3.642 07/01/34 148,359
1,100 Federal Home Loan Mortgage Corp. .... 6.625 09/15/09 1,216,887
1,100 Federal Home Loan Mortgage Corp. .... 7.000 03/15/10 1,240,728
1,250 Federal National Mortgage
Association.......................... 7.125 06/15/10 1,420,813
1,100 Federal National Mortgage
Association.......................... 7.250 01/15/10 1,253,694
------------
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS........................ 10,099,494
------------
UNITED STATES TREASURY OBLIGATIONS 11.1%
1,600 United States Treasury Bonds......... 5.250 02/15/29 1,569,251
3,375 United States Treasury Bonds......... 6.125 08/15/29 3,713,556
2,230 United States Treasury Bonds......... 7.625 02/15/25 2,862,328
1,900 United States Treasury Bonds
(STRIPS)............................. 0.000 02/15/25 597,400
1,560 United States Treasury Notes......... 3.875 02/15/13 1,491,812
2,000 United States Treasury Notes
(STRIPS)............................. 0.000 05/15/25 616,320
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS....................................... 10,850,667
------------
FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATION 0.2%
180 United Mexican States (Mexico)....... 8.375 01/14/11 203,850
------------
</Table>
16 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------------
EQUITIES 0.8%
Doe Run Resources Corp. (1 Common Stock Warrant) (f) (j)........................... $ 0
HF Holdings, Inc. (5,260 Common Stock Warrants) (f) (j)............................ 0
Optel, Inc. (500 Common Shares) (f) (j)............................................ 0
Park N View, Inc., 144A--Private Placement (1,000 Common Stock Warrants) (a) (e)
(f) (j)............................................................................ 0
Paxon Communications Corp. (4,100 Preferred Shares) (g)............................ 360,287
Republic Technologies International, Inc., 144A--Private Placement (250 Common
Stock Warrants) (a) (f) (j) ..................................................... 0
Startec Global Communications, 144A--Private Placement (1,000 Common Stock
Warrants) (a) (f) (j)............................................................ 0
TNP Enterprises, Inc. (4,030 Preferred Shares) (g)................................. 452,368
------------
TOTAL EQUITIES..................................................................... 812,655
------------
TOTAL LONG-TERM INVESTMENTS 93.6%
(Cost $92,991,932)............................................................... 91,445,452
------------
SHORT-TERM INVESTMENTS 18.4%
REPURCHASE AGREEMENT 10.7%
UBS Securities ($10,451,000 par collateralized by U.S. Government obligations in a
pooled cash account, interest rate of 1.25%, dated 06/30/04, to be sold on
07/01/04 at $10,451,363)......................................................... 10,451,000
U.S. GOVERNMENT AGENCY OBLIGATIONS 7.7%
Federal National Mortgage Association Discount Note ($7,500,000 par, yielding
1.11%, 07/15/04 maturity)........................................................ 7,496,762
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $17,947,762)............................................................... 17,947,762
------------
TOTAL INVESTMENTS 112.0%
(Cost $110,939,694).............................................................. 109,393,214
LIABILITIES IN EXCESS OF OTHER ASSETS (12.0%)..................................... (11,686,259)
------------
NET ASSETS 100.0%................................................................. $ 97,706,955
============
</Table>
Percentages are calculated as a percentage of net assets.
(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) Security purchased on a when-issued or delayed delivery basis.
(d) Non-income producing as security is in default.
See Notes to Financial Statements 17
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) continued
(e) This borrower has filed for protection in federal bankruptcy court.
(f) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(g) Payment-in-kind security.
(h) 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.
(j) Non-income producing security.
EUR--Eurodollar
REMIC--Real Estate Mortgage Investment Conduits
STRIPS--Separate Trading of Registered Interest and Principal of Securities
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.
18 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $110,939,694), including repurchase
agreement of 10,451,000................................... $109,393,214
Cash........................................................ 372
Receivables:
Investments Sold.......................................... 4,788,179
Interest.................................................. 1,351,381
Other....................................................... 26,844
------------
Total Assets............................................ 115,559,990
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 17,527,287
Investment Advisory Fee................................... 51,739
Income Distributions...................................... 20,301
Other Affiliates.......................................... 3,625
Trustees' Deferred Compensation and Retirement Plans........ 127,233
Accrued Expenses............................................ 62,933
Forward Foreign Currency Contracts.......................... 59,917
------------
Total Liabilities....................................... 17,853,035
------------
NET ASSETS.................................................. $ 97,706,955
============
NET ASSET VALUE PER COMMON SHARE
($97,706,955 divided by 15,371,738 shares outstanding).... $ 6.36
============
NET ASSETS CONSIST OF:
Common Shares (no par value with unlimited shares
authorized, 15,371,738 shares issued and outstanding)..... $120,152,592
Accumulated Undistributed Net Investment Income............. (411,918)
Net Unrealized Depreciation................................. (1,606,169)
Accumulated Net Realized Loss............................... (20,427,550)
------------
NET ASSETS.................................................. $ 97,706,955
============
</Table>
See Notes to Financial Statements 19
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended June 30, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 2,931,630
Dividends................................................... 70,008
Other....................................................... 12,984
-----------
Total Income............................................ 3,014,622
-----------
EXPENSES:
Investment Advisory Fee..................................... 319,200
Accounting.................................................. 27,159
Shareholder Reports......................................... 25,973
Trustees' Fees and Related Expenses......................... 20,985
Custody..................................................... 17,083
Legal....................................................... 2,729
Other....................................................... 40,183
-----------
Total Expenses.......................................... 453,312
Less Credits Earned on Cash Balances.................... 298
-----------
Net Expenses............................................ 453,014
-----------
NET INVESTMENT INCOME....................................... $ 2,561,608
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (132,395)
Forward Foreign Currency Contracts........................ 23,396
Foreign Currency Transactions............................. 2,016
-----------
Net Realized Loss........................................... (106,983)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (42,524)
-----------
End of the Period:
Investments............................................. (1,546,480)
Forward Foreign Currency Contracts...................... (59,917)
Foreign Currency Translation............................ 228
-----------
(1,606,169)
-----------
Net Unrealized Depreciation During the Period............... (1,563,645)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,670,628)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 890,980
===========
</Table>
20 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 2,561,608 $ 4,979,071
Net Realized Loss..................................... (106,983) (4,732,962)
Net Unrealized Appreciation/Depreciation During the
Period.............................................. (1,563,645) 11,053,582
----------- -----------
Change in Net Assets from Operations.................. 890,980 11,299,691
----------- -----------
Distributions from Net Investment Income.............. (2,536,338) (5,291,984)
Return of Capital Distribution........................ -0- (464,494)
----------- -----------
Total Distributions................................... (2,536,338) (5,756,478)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (1,645,358) 5,543,213
NET ASSETS:
Beginning of the Period............................... 99,352,313 93,809,100
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of ($411,918) and ($437,188),
respectively)....................................... $97,706,955 $99,352,313
=========== ===========
</Table>
See Notes to Financial Statements 21
VAN KAMPEN INCOME TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE TRUST
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED
JUNE 30, ---------------------------
2004 2003 2002 2001 (a)
-----------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD............ $6.46 $6.10 $ 6.51 $ 6.85
----- ----- ------ ------
Net Investment Income............................. .17 .32 .39 .53
Net Realized and Unrealized Gain/Loss............. (.11) .41 (.33) (.29)
----- ----- ------ ------
Total from Investment Operations.................... .06 .73 .06 .24
Less:
Distributions from Net Investment Income.......... .16 .34 .47 .58
Return of Capital Distributions................... -0- .03 -0- -0-
----- ----- ------ ------
Total Distributions................................. .16 .37 .47 .58
----- ----- ------ ------
NET ASSET VALUE, END OF THE PERIOD.................. $6.36 $6.46 $ 6.10 $ 6.51
===== ===== ====== ======
Common Share Market Price at End of the Period...... $5.37 $5.81 $ 5.71 $ 6.33
Total Return (b).................................... 1.33%* 8.42% -2.59% 5.05%
Net Assets at End of the Period (In millions)....... $97.7 $99.4 $ 93.8 $100.0
Ratio of Expenses to Average Net Assets............. .92% .92% .89% .93%
Ratio of Net Investment Income to Average Net
Assets............................................ 5.22% 5.14% 6.29% 7.88%
Portfolio Turnover.................................. 109%* 299%(c) 101% 46%
</Table>
* Non-Annualized
(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,
- -------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------
$ 7.25 $ 7.84 $ 8.05 $ 7.93 $ 7.94 $ 7.28 $ 8.15
------- ------- ------ ------ ------ ------ ------
.60 .64 .66 .66 .66 .65 .65
(.40) (.63) (.22) .18 (.01) .66 (.86)
------- ------- ------ ------ ------ ------ ------
.20 .01 .44 .84 .65 1.31 (.21)
.60 .60 .65 .72 .66 .65 .66
-0- -0- -0- -0- -0- -0- -0-
------- ------- ------ ------ ------ ------ ------
.60 .60 .65 .72 .66 .65 .66
------- ------- ------ ------ ------ ------ ------
$ 6.85 $ 7.25 $ 7.84 $ 8.05 $ 7.93 $ 7.94 $ 7.28
======= ======= ====== ====== ====== ====== ======
$6.5625 $5.6875 $ 7.75 $ 8.00 $ 7.50 $ 7.25 $ 6.50
26.59% -19.81% 5.05% 16.97% 12.95% 21.83% -8.06%
$ 104.8 $ 110.9 $120.0 $123.1 $121.2 $121.4 $111.4
.96% .95% .96% .91% 1.00% .94% .96%
8.51% 8.46% 8.17% 8.32% 8.40% 8.50% 7.94%
60% 28% 47% 55% 36% 34% 45%
</Table>
See Notes to Financial Statements 23
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)
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
June 30, 2004, the Trust had $12,530,672 of when-issued, delayed delivery and
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 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
24
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) continued
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 June 30, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $111,115,622
============
Gross tax unrealized appreciation........................... $ 3,187,352
Gross tax unrealized depreciation........................... (4,909,760)
------------
Net tax unrealized depreciation on investments.............. $ (1,722,408)
============
</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 year ended December 31,
2003 was as follows:
<Table>
Distribution paid from:
Ordinary Income........................................... $5,265,713
Long-term capital gain.................................... -0-
Return of Capital......................................... 464,494
----------
$5,730,207
==========
</Table>
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.
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
25
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) continued
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.
G. EXPENSE REDUCTION During the six months ended June 30, 2004, the Trust's
custody fee was reduced by $298 as a result of credits earned on cash balances.
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 six months ended June 30, 2004, the Trust recognized expenses of
approximately $2,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, 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 six months ended June 30, 2004, the Trust recognized expenses of
approximately $5,100 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing 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. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
including principal paydowns and excluding short-term investments, were
$102,029,529 and $101,337,517, respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio, 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.
26
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED) continued
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 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 June 30, 2004.
<Table>
<Caption>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
LONG CONTRACTS:
Euro Currency
55,000 expiring 7/26/04................................... $ 66,960 $ 1,620
SHORT CONTRACTS:
Euro Currency
1,310,000 expiring 7/26/04................................ 1,594,869 (43,829)
290,000 expiring 7/26/04.................................. 353,062 (9,732)
70,000 expiring 7/26/04................................... 85,222 (2,272)
100,000 expiring 7/26/04.................................. 121,746 (2,556)
290,000 expiring 7/26/04.................................. 353,063 (3,148)
---------- --------
2,507,962 (61,537)
---------- --------
$2,574,922 $(59,917)
========== ========
</Table>
5. INDEMNIFICATIONS
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
27
VAN KAMPEN INCOME TRUST
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
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 LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
28
VAN KAMPEN INCOME TRUST
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 23, 2004, where
shareholders voted on the election of trustees.
With regards to the election of the following trustees by common shareholders of
the Trust:
<Table>
<Caption>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------------------------
David C. Arch............................................. 13,889,782 568,790
Jerry D. Choate........................................... 13,872,767 585,805
Howard J. Kerr............................................ 13,866,618 591,954
Suzanne H. Woolsey........................................ 13,888,099 570,473
</Table>
Trustees not voted on include: J. Miles Branagan, Rod Dammeyer, Linda Hutton
Heagy, R. Craig Kennedy, Mitchell M. Merin, Jack E. Nelson, Richard F. Powers
III, Hugo F. Sonnenschein, and Wayne W. Whalen.
29
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 SAR 8/04 RN04-01591P-Y06/04
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. 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 Fund 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 11. Exhibits.
(a) Code of Ethics -- Not applicable for semi-annual reports.
(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: August 19, 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: August 19, 2004
By: /s/ James M. Dykas
--------------------
Name: James M. Dykas
Title: Principal Financial Officer
Date: August 19, 2004