UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: 6/30/05
Item 1. Report 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, 2005.
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.
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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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Performance Summary as of 6/30/05
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<Caption>
INCOME TRUST
SYMBOL: VIN
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AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET
Since Inception (4/22/88) 7.11% 6.38%
10-year 6.42 5.89
5-year 5.48 4.73
1-year 8.33 14.11
6-month 1.77 1.81
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</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, 2005
Van Kampen Income Trust is managed by the adviser's Taxable Fixed-Income
team.(1) Current team members include Gordon Loery, Jaidip Singh, and Menglin
Luo, Executive Directors of the Advisor.
MARKET CONDITIONS
As expected, the Federal Open Market Committee (the "Fed") increased the federal
funds target rate at each of its four meetings in the first half of 2005.
Consequently, the benchmark overnight rate increased from 2.25 percent at the
beginning of the review period to 3.25 percent at the end. Despite the actions
of the Fed, most U.S. Treasury yields fell during the second half of the
six-month period, erasing all of the gains posted by long-term Treasuries and
much of the gains posted by short- and intermediate-term Treasuries during the
first half of the six-month period. Nevertheless, the period concluded on a
positive note, with bond markets achieving mostly positive returns during the
month of June.
It is important to note, however, that as of the end of the period, we believe
we have yet to see the full effects of the Fed's actions on economic activity.
For the most part, the market's concerns over rising energy prices and inflation
as well as faltering growth have muted the impact of the Fed's rate increases.
With two-year and five-year Treasuries near the 3.6 percent to 3.7 percent area
at the end of June, the market reflects neither underlying fundamental trends
nor a more likely course for Fed policy.
The investment grade credit sector underperformed during the first half of the
year, with higher-quality credits generally outperforming their medium- and
lower-quality counterparts. The brunt of this weakness came from the industrial
sector, while the financial and utilities sectors posted the highest returns.
Among the corporate sub-sectors, autos performed the worst due, for the most
part, to news that General Motors had lowered it earnings guidance for the
balance of 2005 and that Standard and Poor's downgraded GM and Ford to below
investment-grade. Banking was the best performing sub-sector.
Despite good economic growth, strong underlying company fundamentals, reasonable
corporate earnings, low default rates and improving credit quality, the high
yield market encountered considerable volatility. In January, heavy new issuance
created a less favorable supply-and-demand relationship. Of greater consequence,
however, was General Motors' mid-March announcement. The realization that such a
bellwether company was struggling so significantly cast a grim shadow across the
market overall. Toward the end of the reporting period, however, the market
became more comfortable with the inclusion of General Motors and Ford Motor in
the high yield arena, while new issuance slowed. Investors seemed to turn their
attention to company fundamentals and favorable economic and corporate data.
(1)Team members may change without notice from time to time.
2
Overall, the higher-rated segment of the high yield universe greatly
outperformed issues rated CCC and lower. From an industry perspective, wireless
communications, telecommunications and food/tobacco fared the best, while
transportation, aerospace and forest products lagged most significantly.
PERFORMANCE ANALYSIS
The trust's return 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 may differ significantly. The trust returned 1.77 percent on an NAV
basis and 1.81 percent on a market price basis.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2005
<Table>
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BASED ON NAV BASED ON MARKET PRICE
1.77% 1.81%
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</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. 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.
Within the investment grade portion of the trust, an underweight to banking and
finance, and energy contributed positively to relative performance. We kept the
trust's overall interest-rate exposure well below that of its benchmark during
the period. This posture was beneficial as interest rates rose across the short-
and intermediate-portions of the curve. That said, we note that during periods
of rate declines, this position may have a negative effect on relative
performance.
During the period, the high yield portion of the trust benefited from
advantageous positioning in transportation securities, where our investment
discipline had led us to de-emphasize struggling auto and auto-related
companies. Security selection in wireless communications also enhanced
performance. The sector performed well overall, and several of the trust's
positions were particularly rewarded for their strong fundamentals. In contrast,
forest products, housing and manufacturing securities slowed the trust's pace.
Within housing, exposure to highly leveraged building product companies hindered
performance as investors worried about a potential decline in home construction.
Forest and manufacturing securities detracted from overall returns, due mostly
to company-specific reasons.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the trust in the future.
3
CHANGES IN INVESTMENT POLICIES
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 recently approved changes in its investment policies to
allow the Trust to enter into the following transactions.
Swaps. The Trust recently approved a change in its investment policies to allow
the Trust to enter into interest rate and index swaps and the purchase or sale
of related caps, floors and collars. The Trust expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, as a duration management technique or to protect
against any increase in the price of securities the Trust anticipates purchasing
at a later date. The Trust intends to use these transactions as hedges and not
as speculative investments and will not sell interest rate caps or floors where
it does not own securities or other instruments providing the income stream the
Trust may be obligated to pay.
Interest rate swaps involve the exchange by the Trust with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal. The purchase of an interest rate cap entitles the purchaser, to
the extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a contractually-based principal amount from the
party selling the interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling the interest rate
floor. An interest rate collar combines the elements of purchasing a cap and
selling a floor. The collar protects against an interest rate rise above the
maximum amount but foregoes the benefit of an interest rate decline below the
minimum amount.
An index swap is an agreement to swap cash flows on a notional amount based on
changes in the values of the reference indices. The purchase of a cap entitles
the purchaser to receive payments on a notional principal amount from the party
selling such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined interest
rate or amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
The Trust may enter into credit default swap contracts or credit-linked notes
for hedging purposes or to gain exposure to a credit in which the Trust may
otherwise invest. A credit default swap is an agreement between two parties to
exchange the credit risk of an issuer (reference entity). A buyer of a credit
default swap is said to buy protection by paying periodic fees in return for a
4
contingent payment from the seller if the reference entity has a credit event
such as a bankruptcy, a failure to pay outstanding obligations or deteriorating
credit while the swap is outstanding. A seller of a credit default swap is said
to sell protection and thus collects the periodic fees and profits if the credit
of the reference entity remains stable or improves while the swap is outstanding
but the seller in a credit default swap contract would be required to pay an
agreed-upon amount to the buyer in the event of an adverse credit event of the
reference entity. A credit-linked note is a synthetic security, typically issued
by a special purpose vehicle, that trades like a bond issued by the reference
entity but with the economics of the credit default swap. For this security, the
buyer of protection sells the note. The buyer of protection (note seller) will
pay periodic payments and profit if the reference entity defaults. Unlike the
swap, the buyer of protection in a credit-linked note will receive money at the
time of transaction from the sale of the note, and will return this money at the
contract's maturity if no credit event occurs. Conversely, the seller of
protection purchases the notes. As with a credit default swap, the note
purchaser (protection seller) receives periodic payments. Unlike the swap
transaction, the protection seller must pay for the note at the time of the
transaction and will collect this money at the contract's maturity if no credit
event occurs.
The Trust will enter into swap, cap or floor transactions only with
counterparties approved by the Adviser in accordance with guidelines established
by the Trust's Board of Trustees. The Adviser will monitor the creditworthiness
of counterparties to the Trust's swap, cap, floor and collar transactions on an
ongoing basis. If there is a default by the other party to such a transaction,
the Trust will have contractual remedies pursuant to the agreements related to
the transaction. The Trust may enter into swaps on either an asset-based or
liability-based basis, and will usually enter into swaps on a net basis, i.e.,
the two payment streams are netted out, with the Trust receiving or paying, as
the case may be, only the net amount of the two payments. The net amount of the
excess, if any, of the Trust's obligations over its entitlements with respect to
each swap will be accrued on a daily basis and the Trust segregates an amount of
cash and/or liquid securities having an aggregate net asset value at least equal
to the accrued excess. If the Trust enters into a swap transaction on other than
a net basis, the Trust would segregate the full amount accrued on a daily basis
of the Trust's obligations with respect to the swap. To the extent the Trust
sells (i.e. writes) caps, floors and collars, it will segregate cash and/or
liquid securities having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of the Trust's net obligations with respect to
the caps, floors or collars.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its forecasts of the
market values, interest rates and other applicable factors, the investment
performance of the Trust would diminish compared with what it would have been if
these investment techniques were not used. The use of swaps, caps, collars and
floors
5
may also have the effect of shifting the recognition of income between current
and future periods.
Inverse Floating Rate Obligations. The Trust may invest up to 10% of its net
assets in "inverse floating rate obligations." Floating rate obligations bear
rates of interest that are adjusted periodically to reflect changes in market
rates of interest. Inverse floating rate obligations have rates that vary
inversely with changes in market rates of interest. These securities have
varying degrees of liquidity and the market value of such securities generally
will fluctuate in response to changes in market rates of interest to a greater
extent than the value of an equal principal amount of a fixed rate security
having similar credit quality, redemption provisions and maturity.
Foreign Currency Exchange Risks. To the extent the Trust invests in securities
denominated or quoted in currencies other than the U.S. dollar, the Trust will
be affected by changes in foreign currency exchange rates (and exchange control
regulations) which affect the value of investments in the Trust and the income
and appreciation or depreciation of the investments. Changes in foreign currency
exchange ratios relative to the U.S. dollar will affect the U.S. dollar value of
the Trust's assets denominated in that currency and the Trust's yield on such
assets. In addition, the Trust will incur costs in connection with conversions
between various currencies.
The Trust's foreign currency exchange transactions may be conducted on a spot
basis (that is, cash basis) at the spot rate for purchasing or selling currency
prevailing in the foreign currency exchange market. The Trust also may enter
into contracts with banks, brokers or dealers to purchase or sell securities or
foreign currencies at a future date ("forward contracts"). A foreign currency
forward contract is a negotiated agreement between the contracting parties to
exchange a specified amount of currency at a specified future time at a
specified rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract.
The Trust may attempt to protect against adverse changes in the value of the
U.S. dollar in relation to a foreign currency by entering into a forward
contract for the purchase or sale of the amount of foreign currency invested or
to be invested or by buying or selling a foreign currency option or futures
contract for such amount. Such strategies may be employed before the Trust
purchases a foreign security traded in the currency which the Trust anticipates
acquiring or between the date the foreign security is purchased or sold and the
date on which payment therefor is made or received. Seeking to protect against a
change in the value of a foreign currency in the foregoing manner does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Furthermore, such transactions reduce
or preclude the opportunity for gain if the value of the currency should move in
the direction opposite to the position taken. Unanticipated changes in currency
prices may result in poorer overall performance for the Trust than if it had not
entered into such contracts. The Trust is not required to enter into such
transactions
6
with regard to its foreign currency-denominated securities. It also should be
realized that this method of protecting the value of portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange which one can achieve at some future point in time. In addition,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.
The Trust may cross-hedge currencies by entering into a transaction to purchase
or sell one or more currencies that are expected to decline in value relative to
other currencies to which a portfolio has or expects to have portfolio exposure.
The Trust may also engage in proxy hedging, which is defined as entering into
positions in one currency to hedge investments denominated in another currency,
where two currencies are economically linked. The Trust's entry into forward
contracts, as well as any use of proxy or cross hedging techniques, will
generally require the Trust to segregate cash and/or liquid securities at least
equal to the Trust's obligations throughout the duration of the contract. The
Trust may combine forward contracts with investments in securities denominated
in other currencies to achieve desired security and currency exposures. Such
combinations are generally referred to as synthetic securities. For example, in
lieu of purchasing a foreign bond, the Trust may purchase a U.S. dollar-
denominated security and at the same time enter into a forward contract to
exchange U.S. dollars for the contract's underlying currency at a future date.
By matching the amount of U.S. dollars to be exchanged with the anticipated
value of the U.S. dollar-denominated security, the Trust may be able to lock in
the foreign currency value of the security and adopt a synthetic position
reflecting the credit quality of the U.S. dollar-denominated security.
To the extent required by the rules and regulations of the SEC, the Trust will
segregate cash and/or liquid securities in an amount at least equal to the value
of the Trust's total assets committed to the consummation of forward foreign
currency exchange contracts. If the value of the segregated assets declines,
additional cash and/or liquid securities will be segregated on a daily basis so
that the value of the segregated assets will be at least equal to the amount of
the Trust's commitments with respect to such contracts.
Collateralized Mortgage Obligations and Multiclass Pass-Through Securities. The
Trust may invest in collateralized mortgage obligations ("CMOs"). CMOs are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by GNMA, FNMA or FHLMC
certificates, but also may be collateralized by whole loans or private pass-
through securities (such collateral collectively hereinafter referred to as
"Mortgage Assets"). Multiclass pass-through securities are equity interests in a
trust composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment
7
income thereon, provide the funds to pay debt service on the CMOs or make
scheduled distributions on the multiclass pass-through securities. CMOs deemed
to be U.S. government securities are those issued or guaranteed as to principal
and interest by a person controlled or supervised by and acting as an agency or
instrumentality of the U.S. government. The issuer of a series of CMOs may elect
to be treated as a Real Estate Mortgage Investment Conduit (a "REMIC").
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semi-annual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in innumerable ways.
The Trust may invest in, among others, parallel pay CMOs and Planned
Authorization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes. Substantially
all of the CMOs in which the Trust invests are PAC Bonds.
Stripped Mortgage-Backed Securities. The Trust also may invest in stripped
mortgage-backed securities ("SMBS"). An SMBS is a derivative multiclass mortgage
security. SMBS usually are structured with two classes that receive different
proportions of the interest and principal distribution on a pool of Mortgage
Assets. In the most extreme case, one class will receive all of the interest
(the interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). The yield to maturity on an IO
class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on such security's yield
to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Trust may fail to fully recoup its
initial investment in these securities. Conversely, if the underlying mortgage
assets experience less than anticipated prepayments of principal, the yield of
POs could be materially adversely affected. The market values of IOs and POs are
subject to greater risk of fluctuation in response to changes in market rates of
interest than many other types of government securities and, to the extent the
Trust invests in IOs and POs, increases the risk of fluctuations in the net
asset value of the Trust. The Adviser will seek to manage these risks (and
potential benefits) by investing in a variety of such securities and through the
use of derivative transactions.
8
<Table>
<Caption>
RATINGS ALLOCATION AS OF 6/30/05
AAA/Aaa 42.8%
BBB/Baa 1.9
BB/Ba 16.9
B/B 31.1
CCC/Caa 6.6
CC/Ca 0.4
Non-Rated 0.3
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 6/30/05
U.S. Government Agency Obligations 33.8%
Chemicals 3.8
Media-Cable 3.0
Media-Noncable 2.7
Electric 2.4
Healthcare 2.4
Home Construction 2.4
Paper 2.3
Integrated Energy 2.1
Gaming 2.0
Consumer Products 1.8
Retail 1.7
Wireless Communications 1.7
Food/Beverage 1.4
Metals 1.4
Transportation Services 1.3
Oil Field Services 1.2
Natural Gas Pipelines 1.0
Automotive 0.9
Packaging 0.9
Refining 0.9
Services 0.9
Wireline Communications 0.9
Building Materials 0.8
Technology 0.8
Lodging 0.7
Electric Utilities 0.5
Supermarkets 0.5
Aerospace & Defense 0.4
Brokerage 0.4
Construction Machinery 0.4
Diversified Manufacturing 0.4
Railroads 0.4
Wireless Telecommunication Services 0.4
Environmental & Facilities Services 0.3
Independent Energy 0.2
Pharmaceuticals 0.2
</Table>
<Table>
(continued on next page)
</Table>
9
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 6/30/05
(continued from previous page)
Sovereigns 0.2
Advertising 0.1
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Total Long-Term Investments 79.6%
Short Term Investments 20.4
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Total Investments 100.0%
</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 industries shown above. Ratings are as a percentage of
long-term debt and summary of investments by industry classification are as a
percentage of total investments. 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.
10
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 1-800-SEC-0330. 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.
You may obtain copies of a trust's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
11
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free 800-847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 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.
12
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 25, 2005, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
breakpoints in the Fund's investment advisory fee schedule. The Board of
Trustees considered comparative advisory fees of the Fund and other investment
companies and/or other products at different asset levels, and considered the
trends in the industry. The Board of Trustees evaluated other benefits the
investment adviser and its affiliates derive from their relationship with the
Fund. The Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
together, has determined, in the exercise of its business judgment, that
approval
13
of the investment advisory agreement is in the best interests of the Fund and
its shareholders. The following summary provides more detail on certain matters
considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with investment
adviser the resources available and used in managing the Fund. The trustees also
discuss certain other services which are provided on a cost-reimbursement basis
by the investment adviser or its affiliates to the Van Kampen funds including
certain accounting, administrative and legal services. The Board has determined
that the nature, extent and quality of the services provided by the investment
adviser support its decision to approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, a performance committee of the
Board spends more focused time on the performance of the Fund and other funds in
the Van Kampen complex, paying specific attention to underperforming funds. The
trustees discuss with the investment adviser the performance goals and the
actual results achieved in managing the Fund. When considering a fund's
performance, the trustees and the investment adviser place emphasis on trends
and longer-term returns (focusing on one-year, three-year and five-year
performance with special attention to three-year performance) and, when a fund's
weighted performance is under the fund's benchmark, they discuss the causes and
where necessary seek to make specific changes to investment strategy or
investment personnel. The Fund discloses more information about its performance
elsewhere in this report and in the Fund's prospectus. The trustees discuss with
the investment adviser the level of advisory fees for this Fund relative to
comparable funds and other products advised by the adviser and others in the
marketplace. The trustees review not only the advisory fees but other fees and
expenses (whether paid to the adviser, its affiliates or others) and the Fund's
overall expense ratio. The Board has determined that the performance, fees and
expenses of the Fund support its decision to approve the investment advisory
contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of a special ad hoc
committee of the Board. The trustees discuss with the investment adviser its
revenues and expenses, including among other things, revenues for advisory
services, portfolio management-related expenses, revenue sharing arrangement
costs and allocated expenses both on an aggregate basis and per fund. The
14
Board has determined that the analysis of the investment adviser's expenses and
profitability support its decision to approve the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
of the Fund and how that relates to the Fund's expense ratio and particularly
the Fund's advisory fee rate. In conjunction with its review of the investment
adviser's profitability, the trustees discuss with the investment adviser how
more (or less) assets can affect the efficiency or effectiveness of managing the
Fund's portfolio and whether the advisory fee level is appropriate relative to
current asset levels and/or whether the advisory fee structure reflects
economies of scale as asset levels change. The Board has determined that its
review of the actual and potential economies of scale of the Fund support its
decision to approve the investment advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and it affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
15
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
DOMESTIC CORPORATE BONDS 40.1%
AEROSPACE & DEFENSE 0.4%
$ 400 K & F Acquisition, Inc. ........... 7.750% 11/15/14 $ 411,000
------------
AUTOMOTIVE 1.0%
150 Arvinmeritor, Inc. ................ 6.800 02/15/09 149,250
115 Arvinmeritor, Inc. ................ 8.750 03/01/12 120,462
85 AutoNation, Inc. .................. 9.000 08/01/08 93,287
75 Commercial Vehicle Group, Inc.,
144A--Private Placement (a)........ 8.000 07/01/13 76,594
50 General Motors Acceptance Corp. ... 6.875 09/15/11 46,211
390 General Motors Acceptance Corp. ... 6.875 08/28/12 357,501
125 Lear Corp. ........................ 8.110 05/15/09 129,361
------------
972,666
------------
BROKERAGE 0.4%
400 Refco Finance Holdings LLC......... 9.000 08/01/12 426,000
------------
BUILDING MATERIALS 0.8%
290 NMHG Holdings Co. ................. 10.000 05/15/09 305,950
380 NTK Holdings, Inc., 144A--Private
Placement (a) (b).................. 0/10.750 03/01/14 180,500
355 Trimas Corp. ...................... 9.875 06/15/12 299,975
------------
786,425
------------
CHEMICALS 3.1%
100 Equistar Chemicals LP.............. 10.625 05/01/11 110,875
110 Huntsman Advanced Materials LLC.... 11.000 07/15/10 124,850
240 Huntsman ICI Chemicals LLC......... 10.125 07/01/09 248,100
250 Innophos, Inc., 144A--Private
Placement (a)...................... 8.875 08/15/14 256,250
138 Innophos, Inc., 144A--Private
Placement (Variable Rate Coupon)
(a)................................ 11.268 02/15/15 127,532
140 ISP Chemco, Inc., Ser B............ 10.250 07/01/11 153,300
300 ISP Holdings, Inc., Ser B.......... 10.625 12/15/09 324,000
230 JohnsonDiversey, Inc. ............. 9.625 05/15/12 234,600
80 Koppers, Inc. ..................... 9.875 10/15/13 86,800
225 Lyondell Chemical Co. ............. 10.500 06/01/13 258,469
225 Millennium America, Inc. .......... 7.000 11/15/06 231,187
95 Nalco Co. ......................... 7.750 11/15/11 101,650
370 Nalco Co. ......................... 8.875 11/15/13 398,675
280 Rockwood Specialties Group,
Inc. .............................. 10.625 05/15/11 310,100
75 Rockwood Specialties Group, Inc.,
144A--Private Placement (a)........ 7.625 11/15/14 91,896
------------
3,058,284
------------
</Table>
16 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CONSTRUCTION MACHINERY 0.4%
$ 85 Flowserve Corp. ................... 12.250% 08/15/10 $ 92,225
214 Manitowoc Co., Inc. ............... 10.500 08/01/12 242,890
25 Manitowoc Co., Inc. (EUR).......... 10.375 05/15/11 33,582
------------
368,697
------------
CONSUMER PRODUCTS 1.9%
160 Amscan Holdings, Inc. ............. 8.750 05/01/14 147,200
370 Iron Mountain, Inc. ............... 8.625 04/01/13 384,800
170 Iron Mountain, Inc. ............... 7.750 01/15/15 171,700
485 Levi Strauss & Co. (Variable Rate
Coupon)............................ 7.730 04/01/12 460,750
120 Oxford Industrials, Inc. .......... 8.875 06/01/11 129,000
375 Rayovac Corp. ..................... 8.500 10/01/13 393,750
115 Rayovac Corp., 144A--Private
Placement (a)...................... 7.375 02/01/15 111,837
89 Tempur-Pedic, Inc. ................ 10.250 08/15/10 98,345
------------
1,897,382
------------
DIVERSIFIED MANUFACTURING 0.4%
250 Hexcel Corp. ...................... 6.750 02/01/15 251,250
200 Propex Fabrics, Inc. .............. 10.000 12/01/12 191,000
------------
442,250
------------
ELECTRIC 2.5%
41 AES Corp. ......................... 9.375 09/15/10 46,637
26 AES Corp. ......................... 8.875 02/15/11 29,120
160 AES Corp. ......................... 7.750 03/01/14 174,400
260 AES Corp., 144A--Private Placement
(a)................................ 9.000 05/15/15 293,150
135 Allegheny Energy, Inc. ............ 7.750 08/01/05 135,472
35 CMS Energy Corp. .................. 7.500 01/15/09 37,012
220 CMS Energy Corp. .................. 8.500 04/15/11 246,400
100 CMS Energy Corp. .................. 6.300 02/01/12 101,000
200 Dynegy Holdings, Inc.,
144A--Private Placement (a)........ 9.875 07/15/10 222,000
75 IPALCO Enterprises, Inc. .......... 7.625 11/14/11 84,750
260 Monongahela Power Co. ............. 5.000 10/01/06 262,182
170 Nevada Power Co. .................. 8.250 06/01/11 192,525
140 Nevada Power Co. .................. 9.000 08/15/13 158,200
205 PSEG Energy Holdings............... 8.625 02/15/08 218,837
310 Reliant Energy, Inc. .............. 6.750 12/15/14 304,575
------------
2,506,260
------------
</Table>
See Notes to Financial Statements 17
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
ENVIRONMENTAL & FACILITIES SERVICES 0.4%
$ 110 Allied Waste North America,
Inc. .............................. 6.500% 11/15/10 $ 108,900
115 Allied Waste North America, Inc.,
144A--Private Placement (a)........ 7.250 03/15/15 111,837
123 Allied Waste North America, Inc.,
Ser B.............................. 9.250 09/01/12 133,455
------------
354,192
------------
FOOD/BEVERAGE 1.5%
195 Michael Foods, Inc. ............... 8.000 11/15/13 199,387
435 Pilgrim's Pride Corp. ............. 9.625 09/15/11 477,412
140 Pilgrim's Pride Corp. ............. 9.250 11/15/13 156,100
150 Smithfield Foods, Inc. ............ 7.000 08/01/11 158,625
430 Smithfield Foods, Inc., Ser B...... 8.000 10/15/09 466,550
------------
1,458,074
------------
GAMING 2.1%
250 Caesars Entertainment.............. 8.875 09/15/08 279,687
210 Harrahs Operating Co., Inc. ....... 7.875 12/15/05 213,675
370 Isle of Capri Casinos, Inc. ....... 7.000 03/01/14 373,700
725 MGM Mirage, Inc. .................. 6.000 10/01/09 732,250
60 MGM Mirage, Inc. .................. 5.875 02/27/14 58,575
465 Station Casinos, Inc. ............. 6.000 04/01/12 474,300
------------
2,132,187
------------
HEALTHCARE 2.5%
230 AmerisourceBergen Corp. ........... 8.125 09/01/08 250,700
200 Community Health Systems, Inc. .... 6.500 12/15/12 204,500
205 DaVita, Inc., 144A--Private
Placement (a)...................... 6.625 03/15/13 212,687
110 Del Laboratories, Inc. ............ 8.000 02/01/12 95,150
105 Fisher Scientific International,
Inc. .............................. 6.750 08/15/14 110,250
120 Fisher Scientific International,
Inc. 144A--Private Placement (a)
(j)................................ 6.125 07/01/15 120,750
240 Fresenius Medical Care Capital
Trust IV........................... 7.875 06/15/11 259,200
240 Medcath Holdings Corp. ............ 9.875 07/15/12 269,400
50 National Nephrology Associates,
Inc., 144A--Private Placement
(a)................................ 9.000 11/01/11 56,375
80 Tenet Healthcare Corp. ............ 7.375 02/01/13 79,400
135 Tenet Healthcare Corp. ............ 9.875 07/01/14 145,462
480 Ventas Realty Ltd Partnership,
144A--Private Placement (a)........ 6.750 06/01/10 500,424
110 VWR International, Inc. ........... 6.875 04/15/12 108,900
140 VWR International, Inc. ........... 8.000 04/15/14 134,050
------------
2,547,248
------------
</Table>
18 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
HOME CONSTRUCTION 2.5%
$ 725 Associated Materials, Inc. (b)..... 0/11.250% 03/01/14 $ 464,000
365 Goodman Global Holdings Inc.,
144A--Private Placement (a)........ 7.875 12/15/12 339,450
85 Goodman Global Holdings Inc.,
144A--Private Placement (Variable
Rate Coupon) (a)................... 6.410 06/15/12 84,150
65 Interface, Inc. ................... 7.300 04/01/08 66,625
75 Interface, Inc. ................... 10.375 02/01/10 82,875
255 Interface, Inc. ................... 9.500 02/01/14 261,375
360 Nortek, Inc. ...................... 8.500 09/01/14 336,600
155 Ply Gem Industries, Inc. .......... 9.000 02/15/12 131,750
260 RMCC Acquisition Co., 144A--Private
Placement (a)...................... 9.500 11/01/12 249,600
75 Technical Olympic USA, Inc. ....... 9.000 07/01/10 77,531
180 Technical Olympic USA, Inc. ....... 9.000 07/01/10 186,075
180 Technical Olympic USA, Inc. ....... 10.375 07/01/12 189,000
75 Technical Olympic USA, Inc. ....... 7.500 01/15/15 67,875
------------
2,536,906
------------
INDEPENDENT ENERGY 0.3%
240 Equistar Chemicals LP.............. 10.125 09/01/08 261,000
------------
INTEGRATED ENERGY 1.9%
345 Chesapeake Energy Corp. ........... 7.500 09/15/13 375,187
260 Chesapeake Energy Corp.,
144A--Private Placement (a)........ 6.625 01/15/16 269,750
525 El Paso Production Holding Co. .... 7.750 06/01/13 563,062
60 Hanover Compressor Co. ............ 8.625 12/15/10 63,750
95 Hanover Equipment Trust............ 8.750 09/01/11 101,412
205 Hanover Equipment Trust, Ser A..... 8.500 09/01/08 214,225
50 MSW Energy Holdings LLC............ 8.500 09/01/10 53,125
215 Pacific Energy Partners............ 7.125 06/15/14 224,944
------------
1,865,455
------------
LODGING 0.7%
33 HMH Properties, Inc. .............. 7.875 08/01/08 33,660
500 Host Marriott LP, 144A--Private
Placement (a)...................... 6.375 03/15/15 497,500
155 Starwood Hotels & Resorts
Worldwide, Inc. ................... 7.875 05/01/12 175,538
------------
706,698
------------
MEDIA-CABLE 1.5%
175 Cablevision Systems Corp. ......... 7.890 04/01/09 176,313
565 Charter Communications Holdings
LLC................................ 9.625 11/15/09 425,163
320 Echostar DBS Corp. ................ 6.375 10/01/11 318,800
120 General Cable Corp. ............... 9.500 11/15/10 129,000
</Table>
See Notes to Financial Statements 19
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MEDIA-CABLE (CONTINUED)
$ 45 PanAmSat Corp. .................... 9.000% 08/15/14 $ 49,331
440 PanAmSat Holding Corp. ............ * 11/01/14 304,700
1,000 Park N View, Inc., Ser B (c) (d)
(e)................................ 13.000 05/15/08 0
135 Renaissance Media Group............ 10.000 04/15/08 134,325
------------
1,537,632
------------
MEDIA-NONCABLE 2.4%
45 Advanstar Communications, Inc. .... 10.750 08/15/10 49,388
393 Advanstar Communications, Inc.
(Variable Rate Coupon)............. 10.768 08/15/08 421,689
175 AMC Entertainment, Inc. (Variable
Rate Coupon)....................... 7.518 08/15/10 181,781
127 Dex Media East LLC................. 12.125 11/15/12 152,718
171 Dex Media West LLC, Ser B.......... 9.875 08/15/13 195,795
40 Houghton Mifflin Co. .............. 8.250 02/01/11 41,700
310 Houghton Mifflin Co. .............. 9.875 02/01/13 332,475
185 Houghton Mifflin Co. (b)........... 0/11.500 10/15/13 135,975
80 Interpublic Group of Companies,
Inc. .............................. 5.400 11/15/09 76,483
120 Interpublic Group of Companies,
Inc. .............................. 6.250 11/15/14 112,658
235 Nebraska Book Co., Inc. ........... 8.625 03/15/12 220,313
375 Primedia, Inc. .................... 8.875 05/15/11 394,688
140 Vertis, Inc., 144A--Private
Placement (a)...................... 13.500 12/07/09 105,175
------------
2,420,838
------------
METALS 0.8%
361 Doe Run Resources Corp. (Acquired
03/06/98 to 10/15/04, Cost
$524,900) (f) (g).................. 13.063 11/01/08 290,720
85 Foundation PA Coal Co. ............ 7.250 08/01/14 89,675
245 UCAR Finance, Inc. ................ 10.250 02/15/12 259,088
189 United States Steel Corp. ......... 9.750 05/15/10 205,065
------------
844,548
------------
NATURAL GAS PIPELINES 1.0%
315 Dynegy Holdings, Inc. ............. 6.875 04/01/11 312,638
55 Northwest Pipeline Corp. .......... 8.125 03/01/10 59,950
105 Southern Natural Gas Co. .......... 8.875 03/15/10 115,702
470 Williams Cos., Inc. ............... 7.875 09/01/21 536,975
------------
1,025,265
------------
OIL FIELD SERVICES 1.2%
225 Hanover Compressor Co. ............ 9.000 06/01/14 240,750
350 Hilcorp Energy Finance Corp.,
144A--Private Placement (a)........ 10.500 09/01/10 388,500
104 Magnum Hunter Resources, Inc. ..... 9.600 03/15/12 115,960
</Table>
20 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
OIL FIELD SERVICES (CONTINUED)
$ 230 MSW Energy Holdings II LLC......... 7.375% 09/01/10 $ 236,900
160 Plains E & P Co. .................. 7.125 06/15/14 172,000
------------
1,154,110
------------
PACKAGING 0.8%
65 Owens-Illinois, Inc. .............. 7.350 05/15/08 67,763
680 Owens-Illinois, Inc. .............. 7.500 05/15/10 717,400
------------
785,163
------------
PAPER 1.6%
570 Georgia-Pacific Corp. ............. 8.875 02/01/10 649,800
130 Graham Packaging Co., Inc.,
144A--Private Placement (a)........ 8.500 10/15/12 131,950
285 Graham Packaging Co., Inc.,
144A--Private Placement (a)........ 9.875 10/15/14 287,138
365 Graphic Packaging International,
Inc. .............................. 9.500 08/15/13 369,563
150 Pliant Corp. ...................... 13.000 06/01/10 122,250
110 Pliant Corp. ...................... 13.000 06/01/10 89,650
------------
1,650,351
------------
PHARMACEUTICALS 0.2%
245 Warner Chilcott Corp.,
144A--Private Placement (a)........ 8.750 02/01/15 239,488
------------
RAILROADS 0.4%
390 Amsted Industries, Inc.,
144A--Private Placement (a)........ 10.250 10/15/11 423,150
------------
REFINING 1.0%
390 CITGO Petroleum Corp. ............. 6.000 10/15/11 390,975
135 Tesoro Petroleum Corp. ............ 9.625 04/01/12 150,019
390 Vintage Petroleum, Inc. ........... 7.875 05/15/11 413,400
------------
954,394
------------
RETAIL 1.2%
210 Brown Shoe Co., Inc. .............. 8.750 05/01/12 219,975
295 General Nutrition Center, Inc. .... 8.500 12/01/10 237,475
350 Petro Shopping Center Financial.... 9.000 02/15/12 353,500
210 Rite Aid Corp. .................... 8.125 05/01/10 217,350
1,000 Sleepmaster LLC, Ser B (c) (d)
(e)................................ 11.000 05/15/09 220,000
------------
1,248,300
------------
SERVICES 0.9%
525 Allied Waste North America,
Inc. .............................. 6.375 04/15/11 506,625
300 Buhrmann US, Inc. ................. 8.250 07/01/14 301,500
100 Buhrmann US, Inc., 144A--Private
Placement (a)...................... 7.875 03/01/15 98,000
------------
906,125
------------
</Table>
See Notes to Financial Statements 21
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
SUPERMARKETS 0.5%
$ 225 Delhaize America, Inc. ............ 8.125% 04/15/11 $ 253,481
228 Kroger Co., 144A--Private Placement
(a)................................ 8.500 07/15/17 261,027
------------
514,508
------------
TECHNOLOGY 0.3%
345 Sanmina-SCI Corp., 144A--Private
Placement (a)...................... 6.750 03/01/13 331,200
------------
TRANSPORTATION SERVICES 0.9%
495 Sonic Automotive, Inc. ............ 8.625 08/15/13 502,425
356 TRW Automotive, Inc. .............. 9.375 02/15/13 396,050
------------
898,475
------------
WIRELESS COMMUNICATIONS 1.6%
185 American Tower Corp. .............. 7.500 05/01/12 198,413
190 American Tower Corp. .............. 7.125 10/15/12 201,875
250 Nextel Communications, Inc. ....... 6.875 10/31/13 268,438
145 Rural Cellular Corp. (Variable Rate
Coupon)............................ 7.910 03/15/10 150,075
282 SBA Communications Corp. (b)....... 0/9.750 12/15/11 260,850
190 SBA Communications Corp. .......... 8.500 12/01/12 205,675
250 UbiquiTel Operating Co. ........... 9.875 03/01/11 275,625
------------
1,560,951
------------
WIRELINE COMMUNICATIONS 1.0%
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
300 Qwest Communications International,
Inc. (Variable Rate Coupon)........ 7.268 02/15/09 296,250
495 Qwest Services Corp. .............. 13.500 12/15/10 574,200
95 Qwest Services Corp. .............. 14.000 12/15/14 115,663
------------
986,113
------------
TOTAL DOMESTIC CORPORATE BONDS 40.1%......................................... 40,211,335
------------
FOREIGN BONDS AND DEBT SECURITIES (US $) 7.1%
BELGIUM 0.2%
215 Telenet Group Holding NV,
144A--Private Placement (a) (b).... 0/11.500 06/15/14 168,237
------------
</Table>
22 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
BERMUDA 0.5%
$ 25 Intelsat Bermuda Ltd.,
144A--Private Placement (a)........ 8.250% 01/15/13 $ 25,937
270 Intelsat Bermuda Ltd.,
144A--Private Placement (a)........ 8.625 01/15/15 286,200
205 Intelsat Bermuda Ltd.,
144A--Private Placement (Variable
Rate Coupon) (a)................... 7.805 01/15/12 209,612
------------
521,749
------------
CANADA 3.5%
205 Abitibi-Consolidated, Inc. ........ 8.550 08/01/10 214,737
80 Abitibi-Consolidated, Inc. ........ 7.750 06/15/11 80,800
60 Abitibi-Consolidated, Inc. ........ 6.000 06/20/13 55,500
398 Canwest Media, Inc. ............... 8.000 09/15/12 420,974
300 CHC Helicopter Corp. .............. 7.375 05/01/14 300,750
205 CHC Helicopter Corp., 144A--Private
Placement (a)...................... 7.375 05/01/14 205,512
285 Husky Oil Ltd. (Variable Rate
Coupon)............................ 8.900 08/15/28 316,582
90 Jean Coutu Group (PJC), Inc. ...... 7.625 08/01/12 93,375
430 Jean Coutu Group (PJC), Inc. ...... 8.500 08/01/14 426,775
260 Nortel Networks Corp. ............. 4.250 09/01/08 243,750
250 Nortel Networks Ltd. .............. 6.125 02/15/06 252,812
410 Novelis, Inc. 144A--Private
Placement (a)...................... 7.250 02/15/15 413,588
170 Rogers Wireless Communications,
Inc. .............................. 7.500 03/15/15 185,725
350 Tembec Industries, Inc. ........... 7.750 03/15/12 259,000
------------
3,469,880
------------
FRANCE 0.7%
115 Compagnie Generale de Geophysique
SA, 144A--Private Placement (a).... 7.500 05/15/15 120,463
125 Crown European Holdings SA (EUR)... 6.250 09/01/11 159,967
150 Rhodia SA (EUR).................... 8.000 06/01/10 181,069
285 Rhodia SA.......................... 8.875 06/01/11 275,738
------------
737,237
------------
GERMANY 0.7%
260 Cognis Deutschland, 144A--Private
Placement (Variable Rate Coupon)
(EUR) (a).......................... 6.897 11/15/13 322,505
325 Kabel Deutschland, 144A--Private
Placement (a)...................... 10.625 07/01/14 354,250
------------
676,755
------------
IRELAND 0.2%
160 JSG Funding PLC (EUR).............. 10.125 10/01/12 202,337
------------
</Table>
See Notes to Financial Statements 23
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
LUXEMBOURG 0.8%
$ 345 Cablecom Luxembourg, 144A--Private
Placement (EUR) (a)................ 9.375% 04/15/14 $ 473,343
110 JohnsonDiversey, Inc. (EUR)........ 9.625 05/15/12 131,120
140 SGL Carbon Luxembourg SA,
144A--Private Placement (EUR)
(a)................................ 8.500 02/01/12 186,363
------------
790,826
------------
MEXICO 0.5%
350 Axtel SA........................... 11.000 12/15/13 383,250
250 Satelites Mexicanos SA, Ser B
(c)................................ 10.125 11/01/04 133,750
------------
517,000
------------
TOTAL FOREIGN BONDS AND DEBT SECURITIES 7.1%................................. 7,084,021
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 2.3%
299 Federal Home Loan Mortgage Corp. .. 5.000 08/15/12 299,696
344 Federal Home Loan Mortgage Corp.
(Interest Only) (h)................ 3.750 06/17/27 21,517
120 Federal Home Loan Mortgage Corp.
(Interest Only) (h)................ 4.780 03/15/32 12,447
719 Federal Home Loan Mortgage Corp.
(Interest Only).................... 5.000 09/15/14 to 12/15/16 68,260
197 Federal Home Loan Mortgage Corp.
(Interest Only).................... 6.000 05/15/30 13,905
344 Federal National Mortgage
Association........................ 3.514 05/25/35 344,321
389 Federal National Mortgage
Association........................ 3.660 12/18/32 391,662
512 Federal National Mortgage
Association (Interest Only)........ 5.500 06/25/26 to 05/25/27 31,458
389 Federal National Mortgage
Association (Interest Only)
(REMIC)............................ 6.000 08/25/32 to 07/25/33 53,662
840 Federal National Mortgage
Association (Interest Only)........ 6.500 07/01/31 to 05/25/33 142,950
49 Federal National Mortgage
Association (Interest Only)........ 8.000 05/01/30 10,012
209 Federal National Mortgage
Association (Interest Only)
(REMIC)............................ 7.000 03/01/32 to 04/25/33 38,414
589 Federal National Mortgage
Association (REMIC)................ 3.685 05/28/35 589,096
240 Federal National Mortgage
Association (REMIC)................ 3.696 05/28/35 240,355
398 Government National Mortgage
Association (Interest Only) (REMIC)
(h)................................ 5.164 06/16/27 21,482
</Table>
24 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
$ 157 Government National Mortgage
Association (Interest Only) (REMIC)
(h)................................ 4.164% 05/16/32 $ 9,326
151 Government National Mortgage
Association (Interest Only) (REMIC)
(h)................................ 4.764 05/16/32 9,633
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 2.3%............................... 2,298,196
------------
MORTGAGE BACKED SECURITIES 11.6%
0 Federal Home Loan Mortgage Corp. .. 3.470 01/15/35 0
1,450 Federal Home Loan Mortgage Corp. .. 5.000 06/01/20 1,467,617
478 Federal Home Loan Mortgage Corp. .. 7.500 11/01/29 to 06/01/32 512,813
121 Federal Home Loan Mortgage Corp.
(ARM).............................. 3.637 07/01/34 119,320
300 Federal Home Loan Mortgage Corp.
(ARM).............................. 4.182 08/01/34 301,063
1,200 Federal Home Loan Mortgage Corp.,
July............................... 5.500 TBA 1,231,500
1,088 Federal National Mortgage
Association........................ 6.500 06/01/15 to 01/01/34 1,128,568
821 Federal National Mortgage
Association........................ 7.000 03/01/15 to 07/01/32 863,587
515 Federal National Mortgage
Association........................ 7.500 03/01/15 to 03/01/32 550,532
149 Federal National Mortgage
Association (ARM).................. 3.725 07/01/34 148,986
195 Federal National Mortgage
Association (ARM).................. 4.111 09/01/34 195,237
174 Federal National Mortgage
Association (ARM).................. 4.237 10/01/34 176,051
199 Federal National Mortgage
Association (ARM).................. 4.269 10/01/34 200,012
400 Federal National Mortgage
Association, August................ 6.000 TBA 409,750
1,500 Federal National Mortgage
Association, July.................. 4.500 TBA 1,484,687
500 Federal National Mortgage
Association, July.................. 6.000 TBA 512,656
126 Government National Mortgage
Association........................ 7.000 07/15/29 to 01/15/30 133,443
407 Government National Mortgage
Association........................ 7.500 07/15/23 to 09/15/29 438,542
</Table>
See Notes to Financial Statements 25
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES (CONTINUED)
$ 218 Government National Mortgage
Association........................ 8.000% 03/15/17 to 10/15/22 $ 236,630
118 Government National Mortgage
Association........................ 8.500 07/15/24 to 12/15/24 129,760
249 Government National Mortgage
Association........................ 9.000 08/15/16 to 12/15/24 273,432
78 Government National Mortgage
Association........................ 9.500 11/15/09 to 01/15/17 85,461
1,000 Government National Mortgage
Association, July.................. 5.500 TBA 1,021,250
------------
TOTAL MORTGAGE BACKED SECURITIES 11.6%....................................... 11,620,897
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 3.3%
1,100 Federal Home Loan Mortgage Corp. .. 7.000 03/15/10 1,241,910
415 Federal National Mortgage
Association........................ 6.625 11/15/30 540,413
1,250 Federal National Mortgage
Association........................ 7.125 06/15/10 1,425,099
100 Federal National Mortgage
Association........................ 7.250 01/15/10 113,505
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS...................................... 3,320,927
------------
UNITED STATES TREASURY OBLIGATIONS 18.3%
1,600 United States Treasury Bonds....... 5.250 02/15/29 1,830,438
1,590 United States Treasury Bonds....... 6.125 08/15/29 2,030,667
1,810 United States Treasury Bonds....... 7.625 02/15/25 2,608,239
685 United States Treasury Notes....... 3.875 02/15/13 686,044
10,400 United States Treasury Notes....... 4.250 08/15/13 10,663,255
1,200 United States Treasury Notes
(STRIPS)........................... 0.000 05/15/25 504,331
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS...................................... 18,322,974
------------
FOREIGN GOVERNMENT AGENCY OBLIGATION 0.2%
180 United Mexican States (Mexico)..... 8.375 01/14/11 209,970
------------
</Table>
26 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION VALUE
- ---------------------------------------------------------------------------------------------
EQUITIES 0.6%
Doe Run Resources Corp. (1 Common Stock Warrant) (e) (i)...................... $ 0
HF Holdings, Inc. (5,260 Common Stock Warrants) (e) (i)....................... 0
Optel, Inc. (500 Common Shares) (e) (i)....................................... 0
Park N View, Inc., 144A--Private Placement Common Stock Warrants) (a) (e)
(i)........................................................................... 0
Paxon Communications Corp. (9 Preferred Shares) (f)........................... 58,072
TNP Enterprises, Inc. (463 Preferred Shares) (f).............................. 525,505
------------
TOTAL EQUITIES................................................................ 583,577
------------
TOTAL LONG-TERM INVESTMENTS 83.5%
(Cost $83,908,997).......................................................... 83,651,897
------------
SHORT-TERM INVESTMENTS 21.4%
REPURCHASE AGREEMENT 11.4%
State Street Bank & Trust Co. ($11,407,000 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 3.25%, dated
06/30/05, to be sold on 07/01/05 at $11,408,030).............................. 11,407,000
U.S. GOVERNMENT AGENCY OBLIGATIONS 10.0%
Federal Home Loan Bank ($9,905,000 par, yielding 3.185%, 07/19/05 maturity)... 9,889,251
United States Treasury Bills ($100,000 par, yielding 2.836%, 07/14/05
maturity)..................................................................... 99,898
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS...................................... 9,989,149
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $21,396,153).......................................................... 21,396,149
------------
TOTAL INVESTMENTS 104.9%
(Cost $105,305,150)......................................................... 105,048,046
LIABILITIES IN EXCESS OF OTHER ASSETS (4.9%)................................. (4,952,418)
------------
NET ASSETS 100.0%............................................................ $100,095,628
============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(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.
See Notes to Financial Statements 27
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) continued
(f) Payment-in-kind security.
(g) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 0.3% of net
assets.
(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 each day with the change in
value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly.
(i) Non-income producing security.
(j) Securities purchased on a when-issued or delayed delivery basis.
ARM--Adjustable Rate Mortgage
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. Upon
settlement and delivery of the mortgage pools, maturity dates will be assigned.
28 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments, including repurchase agreement of
$11,407,000
(Cost $105,305,150)....................................... $105,048,046
Cash........................................................ 394,278
Receivables:
Investments Sold.......................................... 1,564,507
Interest.................................................. 1,328,776
Forward Foreign Currency Contracts.......................... 196,514
Other....................................................... 32,276
------------
Total Assets............................................ 108,564,397
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 8,163,509
Investment Advisory Fee................................... 53,294
Income Distributions...................................... 14,810
Variation Margin on Futures............................... 9,219
Other Affiliates.......................................... 1,729
Trustees' Deferred Compensation and Retirement Plans........ 161,432
Accrued Expenses............................................ 64,776
------------
Total Liabilities....................................... 8,468,769
------------
NET ASSETS.................................................. $100,095,628
============
NET ASSET VALUE PER COMMON SHARE ($100,095,628 divided by
15,371,738 shares outstanding)............................ $ 6.51
============
NET ASSETS CONSIST OF:
Common Shares (no par value with unlimited shares
authorized, 15,371,738 shares issued and outstanding)..... $120,152,605
Accumulated Undistributed Net Investment Income............. (230,876)
Net Unrealized Depreciation................................. (66,526)
Accumulated Net Realized Loss............................... (19,759,575)
============
NET ASSETS.................................................. $100,095,628
============
</Table>
See Notes to Financial Statements 29
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended June 30, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 2,965,058
Dividends................................................... 36,722
Other....................................................... 32,007
-----------
Total Income................................................ 3,033,787
-----------
EXPENSES:
Investment Advisory Fee..................................... 322,167
Trustees' Fees and Related Expenses......................... 29,628
Accounting.................................................. 26,509
Custody..................................................... 23,906
Legal....................................................... 2,783
Other....................................................... 59,524
-----------
Total Expenses.......................................... 464,517
Less Credits Earned on Cash Balances.................... 714
-----------
Net Expenses............................................ 463,803
-----------
NET INVESTMENT INCOME....................................... $ 2,569,984
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (242,319)
Forward Foreign Currency Contracts........................ (91,766)
Foreign Currency Transactions............................. 104,107
-----------
Net Realized Loss........................................... (229,978)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 791,159
-----------
End of the Period:
Investments............................................. (257,104)
Futures................................................. (4,660)
Forward Foreign Currency Contracts...................... 196,514
Foreign Currency Translation............................ (1,276)
-----------
(66,526)
-----------
Net Unrealized Depreciation During the Period............... (857,685)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,087,663)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,482,321
===========
</Table>
30 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, 2005 DECEMBER 31, 2004
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 2,569,984 $ 5,138,752
Net Realized Gain/Loss................................ (229,978) 897,502
Net Unrealized Appreciation/Depreciation During the
Period.............................................. (857,685) 833,683
------------ ------------
Change in Net Assets from Operations.................. 1,482,321 6,869,937
Distributions from Net Investment Income.............. (2,536,267) (5,072,676)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (1,053,946) 1,797,261
------------ ------------
NET ASSETS:
Beginning of the Period............................... 101,149,574 99,352,313
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of ($230,876) and ($264,593),
respectively)....................................... $100,095,628 $101,149,574
============ ============
</Table>
See Notes to Financial Statements 31
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, ---------------
2005 2004 2003
-----------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 6.58 $ 6.46 $6.10
------ ------ -----
Net Investment Income..................................... .17 .33 .32
Net Realized and Unrealized Gain/Loss..................... (.07) .12 .41
------ ------ -----
Total from Investment Operations............................ .10 .45 .73
------ ------ -----
Less:
Distributions from Net Investment Income.................. .17 .33 .34
Return of Capital Distributions........................... -0- -0- .03
------ ------ -----
Total Distributions......................................... .17 .33 .37
------ ------ -----
NET ASSET VALUE, END OF THE PERIOD.......................... $ 6.51 $ 6.58 $6.46
====== ====== =====
Common Share Market Price at End of the Period.............. $ 5.79 $ 5.85 $5.81
Total Return (b)............................................ 1.81%* 6.62% 8.42%
Net Assets at End of the Period (In millions)............... $100.1 $101.1 $99.4
Ratio of Expenses to Average Net Assets..................... .94% .92% .92%
Ratio of Net Investment Income to Average Net Assets........ 5.19% 5.17% 5.14%
Portfolio Turnover.......................................... 86%* 225% 299%(c)
</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.
32
VAN KAMPEN INCOME TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------
2002 2001 (a) 2000 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
$ 6.51 $ 6.85 $ 7.25 $ 7.84 $ 8.05 $ 7.93 $ 7.94 $ 7.28
------ ------ ------- ------- ------ ------ ------ ------
.39 .53 .60 .64 .66 .66 .66 .65
(.33) (.29) (.40) (.63) (.22) .18 (.01) .66
------ ------ ------- ------- ------ ------ ------ ------
.06 .24 .20 .01 .44 .84 .65 1.31
------ ------ ------- ------- ------ ------ ------ ------
.47 .58 .60 .60 .65 .72 .66 .65
-0- -0- -0- -0- -0- -0- -0- -0-
------ ------ ------- ------- ------ ------ ------ ------
.47 .58 .60 .60 .65 .72 .66 .65
------ ------ ------- ------- ------ ------ ------ ------
$ 6.10 $ 6.51 $ 6.85 $ 7.25 $ 7.84 $ 8.05 $ 7.93 $ 7.94
====== ====== ======= ======= ====== ====== ====== ======
$ 5.71 $ 6.33 $6.5625 $5.6875 $ 7.75 $ 8.00 $ 7.50 $ 7.25
-2.59% 5.05% 26.59% -19.81% 5.05% 16.97% 12.95% 21.83%
$ 93.8 $100.0 $ 104.8 $ 110.9 $120.0 $123.1 $121.2 $121.4
.89% .93% .96% .95% .96% .91% 1.00% .94%
6.29% 7.88% 8.51% 8.46% 8.17% 8.32% 8.40% 8.50%
101% 46% 60% 28% 47% 55% 36% 34%
</Table>
See Notes to Financial Statements 33
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (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. Securities listed on a
foreign exchange are valued at their closing price. 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. Futures contracts are valued at the
settlement price established each day on the exchange on which they are traded.
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, 2005, the Trust had $8,163,509 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
34
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (UNAUDITED) continued
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 Subchapter M 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, 2004, the Trust had an accumulated capital loss
carryforward for tax purposes of $19,474,366, which will expire according to the
following schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$1,416,375.................................................. December 31, 2007
1,347,021.................................................. December 31, 2008
5,081,926.................................................. December 31, 2009
6,212,026.................................................. December 31, 2010
4,974,996.................................................. December 31, 2011
442,022.................................................. December 31, 2012
</Table>
At June 30, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $105,521,608
============
Gross tax unrealized appreciation........................... $ 3,334,279
Gross tax unrealized depreciation........................... (3,807,841)
------------
Net tax unrealized depreciation on investments.............. $ (473,562)
============
</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,
2004 was as follows:
<Table>
Distribution paid from:
Ordinary Income........................................... $5,081,293
==========
</Table>
35
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (UNAUDITED) continued
As of December 31, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $186,578
</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 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, 2005, the Trust's
custody fee was reduced by $714 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, 2005, the Trust recognized expenses of
approximately $2,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust
is a partner of such firm and he and his law firm provide legal services as
legal counsel to the Trust.
Under separate Accounting Services and Chief Compliance Officer ("CCO")
Employment agreements, the Adviser provides accounting services and the CCO
provides compliance services to the Trust. The costs of these services are
allocated to each trust. For the six months ended June 30, 2005, the Trust
recognized expenses of approximately $6,000, representing Van Kampen Investment
Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing
accounting services to the Trust, as well as, the salary, benefits and related
costs of the CCO and related support staff paid by Van Kampen. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Other" expenses on 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
also 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.
36
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (UNAUDITED) continued
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
$75,336,085 and $84,526,894, 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 to 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 futures or forward commitment. In
this instance, the recognition of gain or loss is postponed until the disposal
of the security underlying the futures or forward commitment.
Risks may arise as a result of the potential inability of the counterparties
to meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. FORWARD FOREIGN CURRENCY CONTRACTS 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 forward foreign currency contracts. The
following forward foreign currency contracts were outstanding as of June 30,
2005.
<Table>
<Caption>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
LONG CONTRACTS:
Euro Currency
190,000 expiring 7/26/05.................................. $ 230,128 $(15,840)
220,000 expiring 7/26/05.................................. 266,464 (13,083)
150,000 expiring 7/26/05.................................. 181,680 (7,395)
60,000 expiring 7/26/05................................... 72,672 (762)
136,000 expiring 7/26/05.................................. 164,723 (797)
180,000 expiring 7/26/05.................................. 218,016 727
---------- --------
1,133,683 (37,150)
---------- --------
</Table>
37
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
SHORT CONTRACTS:
Euro Currency
669,000 expiring 7/26/05.................................. $ 810,294 $ 65,829
45,000 expiring 7/26/05................................... 54,504 4,459
300,000 expiring 7/26/05.................................. 363,360 30,034
1,340,000 expiring 7/26/05................................ 1,623,010 133,342
---------- --------
2,851,168 233,664
---------- --------
$3,984,851 $196,514
========== ========
</Table>
B. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures contracts on U.S. Treasury
Bonds and Notes and typically closes the contract prior to the delivery date.
Upon entering into futures contracts, the Fund maintains an amount of cash or
liquid securities with a value equal to a percentage of the contract amount with
either a futures commission merchant pursuant to rules and regulations
promulgated under the 1940 Act, as amended, or with its custodian in an account
in the broker's name. This amount is known as initial margin. During the period
the futures contract is open, payments are received from or made to the broker
based upon changes in the value of the contract (the variation margin). The risk
of loss associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended June 30, 2005,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at December 31, 2004............................ -0-
Futures Opened.............................................. 81
Futures Closed.............................................. -0-
---
Outstanding at June 30, 2005................................ 81
===
</Table>
The futures contracts outstanding as of June 30, 2005, and the descriptions
and the unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
2-Year U.S. Treasury Note -- September 2005 (Current
Notional Value of $207,688 per contract).................. 22 $ 1,986
5-Year U.S. Treasury Note -- September 2005 (Current
Notional Value of $108,891 per contract).................. 59 (6,646)
-- --------
81 ($ 4,660)
== ========
</Table>
38
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (UNAUDITED) continued
6. 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.
39
VAN KAMPEN INCOME TRUST
BOARD OF TRUSTEES, OFFICERS, AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
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
SUZANNE H. WOOLSEY
OFFICERS
MITCHELL M. MERIN
President and Chief Executive Officer
RONALD E. ROBISON
Executive Vice President and
Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and
Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, NY 10020
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
TRANSFER AGENT
EQUISERVE TRUST COMPANY, N.A.
c/o Computershare Investor Services
P.O. Box 43010
Providence, Rhode Island 02940-3010
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606-4301
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
40
Van Kampen Income Trust
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen Income Trust
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen Income Trust
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
920,957,107
VIN SAR 8/05
(VAN KAMPEN INVESTMENTS SHINE LOGO) RN05-02002P-Y06/05
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. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable for semi-annual reports.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. 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 12. 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 23, 2005
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 23, 2005
By: /s/ Phillip G. Goff
-------------------
Name: Phillip G. Goff
Title: Principal Financial Officer
Date: August 23, 2005