UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05273
Van Kampen Income Trust
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 12/31
Date of reporting period: 12/31/06
Item 1. Report to Shareholders.
The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Income Trust performed during the annual period. The portfolio management
team will provide an overview of the market conditions and discuss some
of the factors that affected investment performance during the reporting
period. In addition, this report includes the trust's financial
statements and a list of trust investments as of December 31, 2006.
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 12/31/2006
INCOME TRUST
SYMBOL: VIN
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AVERAGE ANNUAL BASED BASED ON
TOTAL RETURNS ON NAV MARKET PRICE
Since Inception (4/22/88) 6.96% 6.60%
10-year 5.52 5.53
5-year 6.29 5.51
1-year 6.42 14.03
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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 (NAV) 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.
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Trust Report
FOR THE 12-MONTH PERIOD ENDED DECEMBER 31, 2006
MARKET CONDITIONS
The first half of 2006 provided few surprises in the bond market. The Federal
Open Market Committee (the "Fed") continued to pursue its monetary tightening
policy, raising the target federal funds rate at each of its meetings to 5.25
percent as of the end of June. In the second half of the year, as economic
growth moderated, the housing sector weakened, and inflation concerns eased, the
Fed finally took a widely anticipated respite from its record cycle of 17
consecutive rate increases, electing to keep the target rate unchanged for the
remainder of the year. Despite the pause in its tightening campaign, the Fed
continued to acknowledge the potential for inflation risks and reiterated
previous statements that further actions regarding interest rates would be data
dependent.
Inflation, as measured by the core PCE (Personal Consumption Expenditures)
deflator--the Fed's preferred inflation gauge--remained elevated, rising 2.4
percent for the year ended in October, notably above the Fed's comfort zone of
1-2 percent. During the last week of December, the financial markets were
surprised by stronger than expected data from the Chicago Purchasing Managers
Index, new and existing home sales, and consumer confidence reports. This data
quelled much of the ongoing speculation that the soft housing and auto markets
would translate into moderating economic growth and inflation, and perhaps an
ease in Fed policy.
Yields rose across the U.S. Treasury curve during the first six months, though
more so on the short end of the curve, which tends to more closely track changes
in the federal funds rate. In the second half of the year, however, the Fed's
pause created a brighter outlook for the bond market, yields declined, and the
market rallied. On a net basis, Treasury yields across the curve still ended
2006 at higher levels than when the year began.
Within the government sector, agency and mortgage issues posted the highest
returns for the year, while the Treasury sector underperformed due to its high
sensitivity to interest rate changes. Early in the period when yields were
rising, higher coupon mortgages performed well as mortgage prepayments slowed.
However, in response to a decline in yields in the last months of the year,
lower coupon mortgages outperformed.
While the overall environment appeared to be good for corporate credit issues
and defaults were near historic lows, much of the good news had already been
priced into the market. Because interest rates remained at relatively low levels
throughout the year, investors turned to the riskier segments of the market in
an attempt to capture higher yields. The increased appetite for risk helped
provide support to the high-yield segment of the market, causing yield spreads
to compress to near record low levels. In this environment, the lowest credit
tiers of the high-yield market--namely CCC rated securities--turned in the best
performance. High demand for high-yield bonds was met by an equally high
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supply, which was fueled in part by an unprecedented amount of leveraged buyout
and private equity activity during the year. In fact, more than $150 billion in
new high-yield issues came to market in 2006, breaking the previous issuance
record set in 2004.
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 and preferred shares, by the total number of common shares
outstanding, while market price reflects the supply and demand for the shares.
As a result, the two returns can differ, as they did during the reporting
period. The trust returned 6.42 percent on an NAV basis and 14.03 percent on a
market price basis.
TOTAL RETURNS FOR THE 12-MONTH PERIOD ENDED DECEMBER 31, 2006
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BASED ON NAV BASED ON MARKET PRICE
6.42% 14.03%
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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.
During the reporting year, we kept the portfolio's overall duration (a measure
of interest-rate sensitivity) relatively low. This posture proved beneficial to
performance as interest rates rose across much of the curve. However, when rates
declined later in the year, this defensive positioning detracted from relative
performance.
In terms of credit risk, the portfolio was also positioned defensively with a
focus on higher-quality securities during the period. This conservative posture,
coupled with a slight narrowing of yield spreads, dampened performance as the
lowest-rated segments of the credit market outperformed. On a more positive
note, however, strong security selection in several sectors was additive to
performance.
The portfolio's emphasis on higher coupon mortgages benefited performance during
the first half of the year when rates were rising as these issues outperformed
their lower coupon counterparts. Higher coupon mortgages typically have slower
pre-payment rates and as such, tend to be less sensitive to rising interest
rates. In the last months of the year, as rates began to fall, this emphasis
kept the portfolio from more fully participating in the comparatively better
performance of lower coupon mortgages.
The Trustees have approved a procedure whereby the trust may, when appropriate,
repurchase its shares in the open market or in privately negotiated
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transactions at a price not above market value or NAV, whichever is lower at the
time of purchase. This may help support the market value of the trust's shares.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the trust in
the future.
CHANGES IN INVESTMENT POLICIES
The Trust approved changes in its investment policies to allow the Trust to
enter into the following transactions.
ASSET-BACKED SECURITIES AND COMMERCIAL PAPER
Under normal market conditions, the Trust may invest up to 20% of its net assets
in asset-backed securities and/or commercial paper. The asset-backed securities
in which the Trust may invest must be rated at the time of purchase in the
highest investment grade (currently Aaa by Moody's Investors Service, Inc.
("Moody's"), AAA by Standard & Poor's ("S&P") or an equivalent rating by another
nationally recognized statistical rating organization ("NRSRO")). The commercial
paper in which the Trust may invest must be rated at the time of purchase in the
highest investment grade (currently P1 by Moody's, A1 by S&P or an equivalent
rating by another NRSRO).
ASSET-BACKED SECURITIES. Asset-backed securities are similar to mortgage-related
securities, however, the underlying assets include assets such as automobile and
credit card receivables. The assets are securitized either in a pass-through
structure (similar to a mortgage pass-through structure) or in a pay-through
structure. Although the collateral supporting asset-backed securities generally
is of a shorter maturity than mortgage loans and historically has been less
likely to experience substantial prepayments, no assurance can be given as to
the actual maturity of an asset-backed security because prepayments of principal
may be made at any time.
Investments in asset-backed securities present certain risks not ordinarily
associated with investments in mortgage-backed securities because asset-backed
securities do not have the benefit of the same type of security interest in the
related collateral as mortgage-backed securities. Credit card receivables are
generally unsecured and a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in a typical issuance, and technical requirements
under state laws. Therefore, recoveries on repossessed collateral may not always
be available to support payments on the securities.
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The rate of principal payment generally depends on the rate of principal
payments received on the underlying assets. Such rate of payments may be
affected by economic and various other factors. Therefore, the yield may be
difficult to predict and actual yield to maturity may be more or less than the
anticipated yield to maturity. The credit quality of most asset-backed
securities depends primarily on the credit quality of the assets underlying such
securities, how well the entity issuing the security is insulated from the
credit risk of the originator or affiliated entities, and the amount of credit
support provided to the securities.
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligor on underlying assets to make payments, such securities may contain
elements of credit support. Such credit support falls into two categories: (i)
liquidity protection and (ii) protection against losses resulting from ultimate
default by an obligor on the underlying assets. Liquidity protection refers to
the provision of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments due on the underlying pool is
timely.
Protection against losses resulting from ultimate default enhances the
likelihood of payment of the obligations on at least some of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. The Trust will not pay any additional fees for such credit support,
although the existence of credit support may increase the price of a security.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collaterization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceeds that required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquencies or
losses in excess of those anticipated could adversely affect the return on an
investment in such issue.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations.
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CERTAIN DERIVATIVE 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.
STRUCTURED PRODUCTS. The Trust may invest in structured notes and other types of
structured investments (referred to collectively as "structured products"). A
structured note is a derivative security for which the amount of principal
repayment and/or interest payments is based on the movement of one or more
"factors." These factors include, but are not limited to, currency exchange
rates, interest rates (such as the prime lending rate or LIBOR), referenced
bonds and stock indices. Some of these factors may or may not correlate to the
total rate of return on one or more underlying instruments referenced in such
notes. In some cases, the impact of the movements of these factors may increase
or decrease through the use of multipliers or deflators.
Generally, investments in structured products are interests in entities
organized and operated for the purpose of restructuring the investment
characteristics of underlying investment interests or securities. These
investment entities may be structured as trusts or other types of pooled
investment vehicles. This type of restructuring generally involves the deposit
with or purchase by an entity of the underlying investments and the issuance by
that entity of one or more classes of securities backed by, or representing
interests in, the underlying investments or referencing an indicator related to
such investments. The cash flow or rate of return on the underlying investments
may be apportioned among the newly issued securities to create different
investment characteristics, such as varying maturities, credit quality, payment
priorities and interest rate provisions. The cash flow or rate of return on a
structured product may be determined by applying a multiplier to the rate of
total return on the underlying investments or referenced indicator. Application
of a multiplier is comparable to the use of financial leverage, a speculative
technique. Leverage magnifies the potential for gain and the risk of loss. As a
result, a relatively small decline in the value of the underlying investments or
referenced indicator could result in a relatively large loss in the value of a
structured product. Holders of structured products bear risks of the underlying
index or reference obligation and are subject to counterparty risk.
The Trust may have the right to receive payments to which it is entitled only
from the structured product, and generally does not have direct rights against
the issuer. While certain structured investment vehicles enable the investor to
acquire interests in a pool of securities without the brokerage and other
expenses associated with directly holding the same securities, investors in
structured vehicles generally pay their share of the investment vehicle's
administrative and other expenses. Certain structured products may be thinly
traded or have a limited trading market and may have the effect of increasing
the Trust's illiquidity to the extent that the Trust, at a particular point in
time, may be unable to find qualified buyers for these securities.
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Investments in structured notes involve risks including interest rate risk,
credit risk and market risk. Where the Trust's investments in structured notes
are based upon the movement of one or more factors, including currency exchange
rates, interest rates, referenced bonds and stock indices, depending on the
factor used and the use of multipliers or deflators, changes in interest rates
and movement of the factor may cause significant price fluctuations.
Additionally, changes in the reference instrument or security may cause the
interest rate on the structured note to be reduced to zero and any further
changes in the reference instrument may then reduce the principal amount payable
on maturity. Structured notes may be less liquid than other types of securities
and more volatile than the reference instrument or security underlying the note.
SWAPS. The Trust may enter into interest rate, index, total rate of return and
credit default 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.
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A total rate of return swap is an agreement in which one party (total return
payer) transfers the total economic performance of a reference obligation to the
other party (total return receiver). Total economic performance includes income
from interest and fees, gains or losses from market movements, and credit
losses. The total return receiver assumes the entire economic exposure--that is,
both market and credit exposure--to the reference asset. The total return
payer--often the owner of the reference obligation--gives up economic exposure
to the performance of the reference asset and in return takes on counterparty
credit exposure to the total return receiver in the event of a default or fall
in value of the reference asset.
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
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, caps, collars and floors 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
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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 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.
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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 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
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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 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
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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.
12
RATINGS ALLOCATION AS OF 12/31/06
AAA/Aaa 42.8%
A/A 0.3
BBB/Baa 4.2
BB/Ba 20.7
B/B 29.2
CCC/Ccc 1.6
Not Rated 1.2
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 12/31/06
U.S. Government Agency Obligations 38.7%
Health Care 5.6
Media-Cable 3.2
Integrated Energy 2.9
Automotive 2.9
Chemicals 2.9
Gaming 2.8
Electric 2.5
Consumer Products 2.3
Paper 2.1
Food/Beverage 2.0
Media-Noncable 2.0
Oil Field Services 1.8
Transportation 1.5
Wireless 1.3
Utility 1.2
Metals 1.2
Technology 1.1
Retailers 1.1
Diversified Manufacturing 1.0
Packaging 0.9
Home Construction 0.9
Wireline 0.8
Lodging 0.8
Independent Energy 0.7
Environmental & Facilities Services 0.7
Services 0.6
Railroads 0.6
Supermarkets 0.5
Aerospace & Defense 0.4
Financial 0.4
Tobacco 0.4
Noncaptive-Consumer Finance 0.3
Construction Machinery 0.2
Sovereigns 0.2
Forest Products 0.2
Pharmaceuticals 0.2
Integrated Telecommunication Services 0.0*
(continued on next page)
13
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 12/31/06
(continued from previous page)
Broadcasting & Cable TV 0.0%*
-----
Total Long-Term Investments 88.9
Purchased Options 0.0*
Total Short-Term Investments 11.1
-----
Total Investments 100.0%
* Amount less than 0.1%
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 investments 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.
14
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
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. 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
(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 (800) 341-2929.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the trust's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 341-2929 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 trust voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge 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.
15
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
CORPORATE BONDS 43.9%
AEROSPACE & DEFENSE 0.4%
$ 400 K & F Acquisition, Inc. ................. 7.750% 11/15/14 $ 414,000
-----------
AUTOMOTIVE 2.9%
480 Arvin Meritor, Inc. ..................... 8.750 03/01/12 495,600
335 Ford Motor Credit Co. ................... 5.800 01/12/09 329,071
355 Ford Motor Credit Co. ................... 7.250 10/25/11 347,988
300 General Motors Acceptance Corp. ......... 4.375 12/10/07 295,891
770 General Motors Acceptance Corp. ......... 6.875 09/15/11 790,574
125 General Motors Corp. .................... 7.125 07/15/13 118,125
185 General Motors Corp. .................... 8.375 07/15/33 172,050
250 United Auto Group, Inc. (a).............. 7.750 12/15/16 252,500
-----------
2,801,799
-----------
CHEMICALS 2.2%
100 Equistar Chemicals LP.................... 10.625 05/01/11 107,000
190 Innophos, Inc. .......................... 8.875 08/15/14 193,800
95 Innophos Investments Holdings, Inc. (b)
(c)...................................... 13.380 02/15/15 99,636
230 JohnsonDiversey, Inc., Ser B............. 9.625 05/15/12 242,075
210 Koppers Holdings, Inc. (d)............... 0.000/9.875 11/15/14 169,050
150 Koppers, Inc. ........................... 9.875 10/15/13 163,875
225 Lyondell Chemical Co. ................... 10.500 06/01/13 248,625
210 Nalco Co. ............................... 7.750 11/15/11 215,775
295 Nalco Co. ............................... 8.875 11/15/13 313,806
204 Rockwood Specialties Group, Inc. ........ 10.625 05/15/11 218,280
215 Westlake Chemical Corp. ................. 6.625 01/15/16 209,087
-----------
2,181,009
-----------
CONSTRUCTION MACHINERY 0.2%
214 Manitowoc Co., Inc. ..................... 10.500 08/01/12 230,853
-----------
CONSUMER PRODUCTS 2.3%
425 Case New Holland, Inc. .................. 7.125 03/01/14 433,500
370 Iron Mountain, Inc. ..................... 8.625 04/01/13 383,875
545 Levi Strauss & Co. (c)................... 10.122 04/01/12 562,031
120 Oxford Industrials, Inc. ................ 8.875 06/01/11 124,500
515 Phillips Van-Heusen Corp. ............... 7.250 02/15/11 527,875
260 Steinway Musical Instruments, Inc. (a)... 7.000 03/01/14 255,450
-----------
2,287,231
-----------
DIVERSIFIED MANUFACTURING 1.0%
365 Hexcel Corp. ............................ 6.750 02/01/15 361,350
275 Propex Fabrics, Inc. .................... 10.000 12/01/12 244,750
360 RBS Global and Rexnord Corp. (a)......... 9.500 08/01/14 376,200
-----------
982,300
-----------
ELECTRIC 2.5%
160 AES Corp. ............................... 7.750 03/01/14 169,600
26 AES Corp. ............................... 8.875 02/15/11 28,015
16 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
ELECTRIC (CONTINUED)
$ 260 AES Corp. (a)............................ 9.000% 05/15/15 $ 280,800
41 AES Corp. ............................... 9.375 09/15/10 44,741
100 CMS Energy Corp. ........................ 6.300 02/01/12 101,000
535 CMS Energy Corp. ........................ 7.500 01/15/09 554,394
240 IPALCO Enterprises, Inc. ................ 8.375 11/14/08 250,200
75 IPALCO Enterprises, Inc. ................ 8.625 11/14/11 81,937
140 Nevada Power Co. ........................ 9.000 08/15/13 151,891
170 Nevada Power Co., Ser A.................. 8.250 06/01/11 186,556
275 NRG Energy, Inc. ........................ 7.375 01/15/17 276,375
255 PSEG Energy Holdings..................... 8.625 02/15/08 262,650
65 TXU Energy Co. .......................... 7.000 03/15/13 68,099
-----------
2,456,258
-----------
ENVIRONMENTAL & FACILITIES SERVICES 0.7%
115 Allied Waste North America, Inc. ........ 5.750 02/15/11 111,838
310 Allied Waste North America, Inc. ........ 6.375 04/15/11 307,675
110 Allied Waste North America, Inc. ........ 6.500 11/15/10 110,825
123 Allied Waste North America, Inc. Ser B... 9.250 09/01/12 131,302
-----------
661,640
-----------
FINANCIAL 0.4%
390 UCAR Finance, Inc. ...................... 10.250 02/15/12 412,913
-----------
FOOD/BEVERAGE 2.0%
195 Michael Foods, Inc. ..................... 8.000 11/15/13 203,288
330 Pilgrim's Pride Corp. ................... 9.250 11/15/13 345,675
795 Pilgrim's Pride Corp. ................... 9.625 09/15/11 834,750
150 Smithfield Foods, Inc. .................. 7.000 08/01/11 152,250
430 Smithfield Foods, Inc., Ser B............ 8.000 10/15/09 451,500
-----------
1,987,463
-----------
FOREST PRODUCTS 0.2%
180 Crown Americas LLC....................... 7.625 11/15/13 186,300
-----------
GAMING 2.8%
250 Caesars Entertainment, Inc. ............. 8.875 09/15/08 261,250
520 Isle of Capri Casinos, Inc. ............. 7.000 03/01/14 520,000
405 Las Vegas Sands Corp. ................... 6.375 02/15/15 394,369
60 MGM Mirage, Inc. ........................ 5.875 02/27/14 55,800
725 MGM Mirage, Inc. ........................ 6.000 10/01/09 726,812
465 Station Casinos, Inc. ................... 6.000 04/01/12 443,494
190 Station Casinos, Inc. ................... 7.750 08/15/16 192,375
165 Wimar Opco LLC (a)....................... 9.625 12/15/14 164,175
-----------
2,758,275
-----------
HEALTH CARE 5.7%
265 AmerisourceBergen Corp. ................. 5.625 09/15/12 261,840
540 Community Health Systems, Inc. .......... 6.500 12/15/12 534,600
535 DaVita, Inc. ............................ 6.625 03/15/13 539,012
See Notes to Financial Statements 17
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
$ 665 Fisher Scientific International, Inc. ... 6.125% 07/01/15 $ 658,498
38 Fresenius Medical Care Capital Trust
II....................................... 7.875 02/01/08 382,500
315 Fresenius Medical Care Capital Trust
IV....................................... 7.875 06/15/11 331,537
105 HCA, Inc. ............................... 5.750 03/15/14 87,413
140 HCA, Inc. ............................... 6.500 02/15/16 118,650
140 HCA, Inc. ............................... 8.700 02/10/10 145,624
355 HCA, Inc. ............................... 8.750 09/01/10 370,975
100 HCA, Inc. (a)............................ 9.125 11/15/14 107,125
220 National Mentor Holdings, Inc. (a)....... 11.250 07/01/14 234,850
260 Omnicare, Inc. .......................... 6.750 12/15/13 258,050
250 Res-Care, Inc. .......................... 7.750 10/15/13 257,500
120 Tenet Healthcare Corp. .................. 7.375 02/01/13 110,850
290 Tenet Healthcare Corp. .................. 9.875 07/01/14 296,525
480 Ventas Realty LP (REIT).................. 6.750 06/01/10 496,800
335 VWR International, Inc. ................. 6.875 04/15/12 338,769
-----------
5,531,118
-----------
HOME CONSTRUCTION 0.9%
61 Goodman Global Holdings, Inc., Ser B
(c)...................................... 8.360 06/15/12 62,067
65 Interface, Inc. ......................... 7.300 04/01/08 66,463
75 Interface, Inc. ......................... 10.375 02/01/10 83,250
255 Interface, Inc., Ser B................... 9.500 02/01/14 269,025
360 Nortek, Inc. ............................ 8.500 09/01/14 354,600
-----------
835,405
-----------
INDEPENDENT ENERGY 0.7%
240 Equistar Chemicals LP.................... 10.125 09/01/08 256,200
465 Massey Energy Co. ....................... 6.875 12/15/13 439,425
-----------
695,625
-----------
INTEGRATED ENERGY 2.6%
100 Chesapeake Energy Corp. ................. 6.375 06/15/15 99,500
260 Chesapeake Energy Corp. ................. 6.625 01/15/16 259,675
305 Chesapeake Energy Corp. ................. 7.500 09/15/13 319,106
80 Chesapeake Energy Corp. ................. 7.625 07/15/13 84,700
350 El Paso Production Holding Co. .......... 7.750 06/01/13 367,937
60 Hanover Compressor Co. .................. 8.625 12/15/10 63,000
91 Hanover Equipment Trust Ser A............ 8.500 09/01/08 92,592
95 Hanover Equipment Trust Ser B............ 8.750 09/01/11 99,513
435 Hilcorp Energy Finance Corp. (a)......... 7.750 11/01/15 429,563
400 Kinder Morgan, Inc. ..................... 6.500 09/01/12 402,366
50 MSW Energy Holdings LLC.................. 8.500 09/01/10 52,250
250 Pacific Energy Partners.................. 7.125 06/15/14 256,840
-----------
2,527,042
-----------
LODGING 0.8%
500 Host Marriott LP......................... 6.375 03/15/15 495,625
240 Host Marriott LP......................... 7.125 11/01/13 246,600
-----------
742,225
-----------
18 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
MEDIA-CABLE 2.0%
$ 400 Cablevision Systems Corp. (c)............ 9.870% 04/01/09 $ 424,000
148 CCH I LLC................................ 11.000 10/01/15 152,625
135 Echostar DBS Corp. ...................... 5.750 10/01/08 134,831
470 Echostar DBS Corp. ...................... 6.375 10/01/11 468,237
200 Echostar DBS Corp. ...................... 6.625 10/01/14 195,500
120 General Cable Corp. ..................... 9.500 11/15/10 127,800
295 LIN Television Corp. .................... 6.500 05/15/13 282,463
120 LIN Television Corp., Ser B.............. 6.500 05/15/13 114,900
45 PanAmSat Corp. .......................... 9.000 08/15/14 47,756
1,000 Park N View, Inc. Ser B (e) (f) (g)...... 13.000 05/15/08 0
-----------
1,948,112
-----------
MEDIA-NONCABLE 1.2%
45 Advanstar Communications, Inc. .......... 10.750 08/15/10 48,656
175 AMC Entertainment, Inc. (c).............. 9.624 08/15/10 181,782
127 Dex Media East LLC....................... 12.125 11/15/12 140,176
171 Dex Media West LLC Ser B................. 9.875 08/15/13 187,245
395 Idearc, Inc. (a)......................... 8.000 11/15/16 402,900
75 Interpublic Group of Cos., Inc. ......... 5.400 11/15/09 73,875
185 Interpublic Group of Cos., Inc. ......... 6.250 11/15/14 172,975
-----------
1,207,609
-----------
METALS 0.3%
85 Foundation, PA Coal Co. ................. 7.250 08/01/14 86,912
189 United States Steel Corp. ............... 9.750 05/15/10 201,994
-----------
288,906
-----------
NONCAPTIVE-CONSUMER FINANCE 0.3%
255 Residential Capital Corp. ............... 6.375 06/30/10 258,167
-----------
OIL FIELD SERVICES 1.5%
370 Chaparral Energy, Inc. .................. 8.500 12/01/15 370,000
225 Hanover Compressor Co. .................. 9.000 06/01/14 244,125
170 Hilcorp Energy Finance Corp. (a)......... 10.500 09/01/10 182,750
104 Magnum Hunter Resources, Inc. ........... 9.600 03/15/12 109,590
230 MSW Energy Holdings II LLC Ser B......... 7.375 09/01/10 235,750
300 Pogo Producing Co. ...................... 6.875 10/01/17 288,000
-----------
1,430,215
-----------
PACKAGING 0.8%
65 Owens-Illinois, Inc. .................... 7.350 05/15/08 65,731
680 Owens-Illinois, Inc. .................... 7.500 05/15/10 685,950
-----------
751,681
-----------
PAPER 1.9%
305 Berry Plastics Holding Corp. (a)......... 8.875 09/15/14 311,100
285 Covalence Specialty Materials Corp.
(a)...................................... 10.250 03/01/16 262,200
310 Georgia-Pacific Corp. (a)................ 7.125 01/15/17 310,775
230 Graham Packaging Co., Inc. .............. 8.500 10/15/12 233,450
285 Graham Packaging Co., Inc. .............. 9.875 10/15/14 289,275
See Notes to Financial Statements 19
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
PAPER (CONTINUED)
$ 350 Graphic Packaging International, Inc. ... 9.500% 08/15/13 $ 371,000
115 P.H. Glatfelter Co. ..................... 7.125 05/01/16 116,150
-----------
1,893,950
-----------
PHARMACEUTICALS 0.2%
159 Warner Chilcott Corp. ................... 8.750 02/01/15 163,770
-----------
RAILROADS 0.6%
505 Amsted Industries, Inc. (a).............. 10.250 10/15/11 542,875
-----------
RETAILERS 1.1%
210 Brown Shoe Co., Inc. .................... 8.750 05/01/12 222,600
480 JC Penney Corp., Inc. ................... 8.000 03/01/10 511,424
335 Linens 'n Things, Inc. (c)............... 10.999 01/15/14 326,625
-----------
1,060,649
-----------
SERVICES 0.1%
60 Buhrmann US, Inc. ....................... 7.875 03/01/15 58,800
90 Buhrmann US, Inc. ....................... 8.250 07/01/14 89,775
-----------
148,575
-----------
SUPERMARKETS 0.5%
225 Delhaize America, Inc. .................. 8.125 04/15/11 243,845
198 Kroger Co. (a)........................... 8.500 07/15/17 213,062
-----------
456,907
-----------
TECHNOLOGY 0.9%
395 Freescale Semiconductor, Inc. (a)........ 8.875 12/15/14 395,494
170 Iron Mountain, Inc. ..................... 7.750 01/15/15 174,250
235 Sungard Data Systems, Inc. .............. 9.125 08/15/13 247,925
20 Sungard Data Systems, Inc. (c)........... 9.973 08/15/13 20,875
-----------
838,544
-----------
TOBACCO 0.4%
385 Reynolds American, Inc. ................. 6.500 07/15/10 392,455
-----------
TRANSPORTATION 1.4%
350 Petro Stopping Center Financial.......... 9.000 02/15/12 364,000
640 Sonic Automotive, Inc., Ser B............ 8.625 08/15/13 662,400
356 TRW Automotive, Inc. .................... 9.375 02/15/13 383,590
-----------
1,409,990
-----------
UTILITY 1.2%
525 Colorado Interstate Gas Co. ............. 6.800 11/15/15 548,511
55 Northwest Pipeline Corp. ................ 8.125 03/01/10 57,544
105 Southern Natural Gas Co. ................ 8.875 03/15/10 110,679
470 Williams Cos., Inc. ..................... 7.875 09/01/21 506,425
-----------
1,223,159
-----------
WIRELESS COMMUNICATIONS 0.9%
190 American Tower Corp. .................... 7.125 10/15/12 196,175
185 American Tower Corp. .................... 7.500 05/01/12 192,400
20 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS (CONTINUED)
$ 250 Nextel Communications, Inc., Ser E....... 6.875% 10/31/13 $ 252,839
250 UbiquiTel Operating Co. ................. 9.875 03/01/11 271,250
-----------
912,664
-----------
WIRELINE COMMUNICATIONS 0.3%
250 Exodus Communications, Inc. (e) (f)
(g)...................................... 11.250 07/01/08 0
400 Exodus Communications, Inc. (e) (f)
(g)...................................... 11.625 07/15/10 0
300 Qwest Communications International, Inc.
(c)...................................... 8.874 02/15/09 305,250
-----------
TOTAL DOMESTIC CORPORATE BONDS 43.9%........................................... 42,924,934
-----------
FOREIGN BOND AND DEBT SECURITY (US$) 6.1%
BERMUDA 0.5%
25 Intelsat Subsidiary Holding Co., Ltd. ... 8.250 01/15/13 25,500
270 Intelsat Subsidiary Holding Co., Ltd. ... 8.625 01/15/15 282,150
205 Intelsat Subsidiary Holding Co., Ltd.
(c)...................................... 10.484 01/15/12 207,819
-----------
515,469
-----------
CANADA 2.7%
398 CanWest Media, Inc. ..................... 8.000 09/15/12 417,491
500 CHC Helicopter Corp. .................... 7.375 05/01/14 484,375
285 Husky Oil Ltd. .......................... 8.900 08/15/28 299,495
260 Nortel Networks Corp. ................... 4.250 09/01/08 252,850
685 Novelis, Inc. (a) (j).................... 8.250 02/15/15 666,162
225 OPTI Canada, Inc. (a).................... 8.250 12/15/14 232,312
335 Quebecor World Capital Corp. (a)......... 8.750 03/15/16 322,438
-----------
2,675,123
-----------
DENMARK 0.2%
105 Nordic Tel Co. Holdings (a).............. 8.875 05/01/16 112,875
85 TDC AS (EUR)............................. 6.500 04/19/12 118,357
-----------
231,232
-----------
FRANCE 0.3%
115 Compagnie Generale de Geophysique SA..... 7.500 05/15/15 116,150
125 Crown European Holdings SA (EUR)......... 6.250 09/01/11 172,844
-----------
288,994
-----------
GERMANY 0.4%
260 Cognis Deutschland (EUR) (a) (c)......... 8.477 11/15/13 353,080
-----------
IRELAND 0.1%
100 JSG Funding PLC (EUR).................... 10.125 10/01/12 143,886
-----------
LUXEMBOURG 1.3%
345 Cablecom Luxembourg SCA (EUR) (a)........ 9.375 04/15/14 506,082
110 JohnsonDiversey, Inc. (EUR).............. 9.625 05/15/12 152,466
See Notes to Financial Statements 21
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
LUXEMBOURG (CONTINUED)
$ 140 SGL Carbon Luxembourg SA (EUR) (a)....... 8.500% 02/01/12 $ 200,054
355 Wind Acquisition Finance SA (a).......... 10.750 12/01/15 405,587
-----------
1,264,189
-----------
MEXICO 0.3%
228 Axtel SA................................. 11.000 12/15/13 254,904
-----------
UNITED KINGDOM 0.3%
55 NTL Cable PLC............................ 8.750 04/15/14 57,819
100 NTL Cable PLC............................ 9.125 08/15/16 106,125
75 Rockwood Specialties Group, Inc. (EUR)... 7.625 11/15/14 105,686
-----------
269,630
-----------
TOTAL FOREIGN BONDS AND DEBT SECURITIES (US$) 6.1%............................. 5,996,507
-----------
ASSET BACKED SECURITIES 0.7%
161 Federal National Mortgage Association
(REMIC) (c).............................. 5.610 05/28/35 161,689
27 Federal National Mortgage Association
(REMIC) (c).............................. 5.620 05/28/35 26,640
503 Lehman XS Trust (c)...................... 5.620 12/25/35 505,465
-----------
TOTAL ASSET BACKED SECURITIES................................................... 693,794
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS 12.6%
345 American Home Mortgage Assets (c)........ 5.610 08/30/36 346,735
273 Bear Stearns Mortgage Funding Trust
(c)...................................... 5.500 03/25/36 272,930
322 Bear Stearns Mortgage Funding Trust
(c)...................................... 5.520 02/25/36 321,685
300 Bear Stearns Mortgage Funding Trust
(c)...................................... 5.530 04/25/36 300,060
246 Bear Stearns Mortgage Funding Trust
(c)...................................... 5.570 07/25/36 245,907
11,789 Countrywide Alternative Loan Trust (i)... * 09/25/35 263,417
13,543 Countrywide Alternative Loan Trust (i)... * 11/25/36 712,595
5,600 Countrywide Alternative Loan Trust (i)... * 02/20/47 293,849
740 Countrywide Alternative Loan Trust (c)... 5.510 09/25/35 to 740,641
11/25/46
299 Countrywide Alternative Loan Trust (c)... 5.740 12/20/35 300,637
308 Downey Savings & Loan Association
Mortgage Loan Trust (c).................. 5.520 09/19/36 308,947
214 Federal Home Loan Mortgage Corp. (REMIC)
(c) (i).................................. 1.625 06/17/27 8,380
71 Federal Home Loan Mortgage Corp. (REMIC)
(c) (i).................................. 2.650 03/15/32 5,736
398 Federal Home Loan Mortgage Corp. (REMIC)
(i)...................................... 5.000 09/15/14 to 25,969
12/15/16
22 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
$ 235 Federal Home Loan Mortgage Corp. (REMIC)
(c)...................................... 5.500% 09/25/45 $ 236,550
203 Federal Home Loan Mortgage Corp. (REMIC)
(c)...................................... 5.950 03/15/34 204,085
49 Federal Home Loan Mortgage Corp. (REMIC)
(i)...................................... 6.000 05/15/30 1,115
433 Federal National Mortgage Association.... 5.500 11/25/43 431,023
257 Federal National Mortgage Association
(c)...................................... 5.550 05/25/35 258,337
4,742 Federal National Mortgage Association
(REMIC) (i).............................. * 03/25/36 111,880
477 Federal National Mortgage Association
(REMIC) (c).............................. 5.188 11/25/28 478,384
1,432 Federal National Mortgage Association
(REMIC) (c).............................. 5.410 12/25/36 1,427,769
401 Federal National Mortgage Association
(REMIC) (c).............................. 5.460 03/25/36 401,349
58 Federal National Mortgage Association
(REMIC) (i).............................. 5.500 06/25/26 769
250 Federal National Mortgage Association
(REMIC) (c).............................. 5.750 12/18/32 252,330
241 Federal National Mortgage Association
(REMIC) (i).............................. 6.000 08/25/32 to 37,489
07/25/33
479 Federal National Mortgage Association
(REMIC) (i).............................. 6.500 05/25/33 103,279
89 Federal National Mortgage Association
(REMIC) (i).............................. 7.000 04/25/33 20,137
71 Federal National Mortgage Association
(STRIPS) (i)............................. 6.500 06/01/31 15,394
37 Federal National Mortgage Association
(STRIPS) (i)............................. 7.000 03/01/32 8,527
30 Federal National Mortgage Association
(STRIPS) (i)............................. 8.000 05/01/30 6,818
81 Government National Mortgage Association
(c) (i).................................. 2.050 05/16/32 5,555
83 Government National Mortgage Association
(c) (i).................................. 2.650 05/16/32 5,038
167 Government National Mortgage Association
(c) (i).................................. 3.050 06/16/27 5,882
283 GSR Mortgage Loan Trust (c).............. 5.610 08/25/46 284,097
696 Harborview Mortgage Loan Trust (c)....... 5.500 11/19/36 696,101
246 Harborview Mortgage Loan Trust (c)....... 5.570 08/19/46 246,692
617 Harborview Mortgage Loan Trust (c)....... 5.600 08/21/46 to 618,549
10/19/46
415 Indymac Index Mortgage Loan Trust (c).... 5.570 04/25/46 415,141
354 Luminent Mortgage Trust (c).............. 5.590 10/25/46 354,925
See Notes to Financial Statements 23
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
$ 205 Residential Accredit Loans, Inc. (c)..... 5.680% 02/25/46 $ 205,644
251 Residential Accredit Loans, Inc. (c)..... 5.750 10/25/45 252,020
297 Structured Asset Mortgage Investments,
Inc. (c)................................. 5.550 10/25/36 297,692
434 Structured Asset Mortgage Investments,
Inc. (c)................................. 5.580 08/25/36 435,687
168 Wamu Alternative Mortgage Pass-Through
Certificates (c)......................... 5.540 08/25/46 168,255
8,883 Washington Mutual, Inc. (i).............. * 09/25/10 90,605
5,512 Washington Mutual, Inc. (i).............. * 01/25/45 86,988
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 12.6%................................ 12,311,594
-----------
MORTGAGE BACKED SECURITIES 14.5%
242 Federal Home Loan Mortgage Corp. ........ 7.500 11/01/29 to 252,987
06/01/32
71 Federal Home Loan Mortgage Corp. (ARM)... 3.536 07/01/34 70,635
166 Federal Home Loan Mortgage Corp. (ARM)... 4.152 08/01/34 166,694
500 Federal Home Loan Mortgage Corp., January
(h)...................................... 4.500 TBA 468,438
570 Federal National Mortgage Association.... 6.500 06/01/15 to 583,118
11/01/33
2,619 Federal National Mortgage Association.... 7.000 03/01/15 to 2,694,761
02/01/36
287 Federal National Mortgage Association.... 7.500 03/01/15 to 298,546
12/01/33
91 Federal National Mortgage Association
(ARM).................................... 3.612 07/01/34 91,715
81 Federal National Mortgage Association
(ARM).................................... 4.113 10/01/34 81,233
96 Federal National Mortgage Association
(ARM).................................... 4.164 09/01/34 95,779
325 Federal National Mortgage Association
(ARM).................................... 4.338 02/01/34 323,516
94 Federal National Mortgage Association
(ARM).................................... 4.436 10/01/34 94,166
1,134 Federal National Mortgage Association
(ARM).................................... 4.736 01/01/35 1,130,395
119 Federal National Mortgage Association
(ARM).................................... 5.960 07/01/33 120,528
454 Federal National Mortgage Association
(ARM).................................... 6.731 03/01/36 463,530
819 Federal National Mortgage Association
(ARM).................................... 6.774 01/01/36 836,442
799 Federal National Mortgage Association
(ARM).................................... 6.778 01/01/36 815,627
24 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES (CONTINUED)
$ 385 Federal National Mortgage Association
(ARM).................................... 6.786% 03/01/36 $ 392,970
269 Federal National Mortgage Association
(ARM).................................... 7.120 03/01/36 274,805
337 Federal National Mortgage Association
(ARM).................................... 7.146 05/01/36 344,227
343 Federal National Mortgage Association
(ARM).................................... 7.205 07/01/36 351,307
452 Federal National Mortgage Association
(ARM).................................... 7.216 05/01/36 462,007
1,169 Federal National Mortgage Association
(ARM).................................... 7.245 to 04/01/36 to 1,195,642
7.246 08/01/36
803 Federal National Mortgage Association
(ARM).................................... 7.271 04/01/36 826,043
246 Federal National Mortgage Association
(ARM).................................... 7.528 03/01/36 251,445
600 Federal National Mortgage Association,
January (h).............................. 7.000 TBA 615,937
109 Government National Mortgage
Association.............................. 7.000 07/15/29 to 112,761
01/15/30
242 Government National Mortgage
Association.............................. 7.500 07/15/23 to 252,967
09/15/29
158 Government National Mortgage
Association.............................. 8.000 03/15/17 to 167,709
10/15/22
99 Government National Mortgage
Association.............................. 8.500 07/15/24 to 106,587
12/15/24
183 Government National Mortgage
Association.............................. 9.000 08/15/16 to 197,229
12/15/24
52 Government National Mortgage
Association.............................. 9.500 11/15/09 to 56,489
01/15/17
-----------
TOTAL MORTGAGE BACKED SECURITIES 14.5%......................................... 14,196,235
-----------
UNITED STATES TREASURY OBLIGATIONS 9.6%
1,600 United States Treasury Bonds............. 5.250 02/15/29 1,678,501
840 United States Treasury Bonds............. 6.125 08/15/29 982,013
1,230 United States Treasury Bonds............. 6.375 08/15/27 1,463,989
1,410 United States Treasury Bonds............. 7.625 02/15/25 1,866,599
2,300 United States Treasury Notes............. 3.125 05/15/07 2,284,549
180 United States Treasury Notes............. 3.875 02/15/13 172,329
1,000 United States Treasury Notes............. 4.250 11/15/13 973,907
-----------
TOTAL UNITED STATES TREASURY OBLIGATIONS........................................ 9,421,887
-----------
See Notes to Financial Statements 25
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 3.9%
$1,100 Federal Home Loan Mortgage Corp. ........ 7.000% 03/15/10 $ 1,167,178
275 Federal National Mortgage Association.... 3.920 01/01/08 271,994
785 Federal National Mortgage Association.... 6.625 11/15/30 939,775
1,250 Federal National Mortgage Association.... 7.125 06/15/10 1,337,397
100 Federal National Mortgage Association.... 7.250 01/15/10 106,462
-----------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS............................... 3,822,806
-----------
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 0.2%
1,890 United Mexican States (MXN).............. 10.000 12/05/24 217,202
-----------
DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
EQUITIES 0.0%
Doe Run Resources Corp. (1 Common Stock Warrant, expiring 10/29/12) (f)
(k)........................................................................ 5,465
HF Holdings, Inc. (5,260 Common Stock Warrants, expiring 09/27/09) (f) (k)... 0
OpTel, Inc. (500 Common Shares) (a) (f) (k).................................. 0
Park N View, Inc. (1,000 Common Stock Warrants, expiring 5/15/08) (a) (f) (g)
(k)........................................................................ 0
XO Holdings, Inc. (164 Common Shares) (k).................................... 705
XO Holdings, Inc., Ser A (330 Common Stock Warrants, expiring 01/16/10)
(k)........................................................................ 237
XO Holdings, Inc., Ser B (248 Common Stock Warrants, expiring 01/16/10)
(k)........................................................................ 112
XO Holdings, Inc., Ser C (248 Common Stock Warrants, expiring 01/16/10)
(k)........................................................................ 56
-----------
TOTAL EQUITIES............................................................... 6,575
-----------
TOTAL LONG-TERM INVESTMENTS 91.5%
(Cost $90,382,365)......................................................... 89,591,534
-----------
DESCRIPTION CONTRACTS EXPIRATION DATE EXERCISE PRICE MARKET VALUE
---------------------------------------------------------------------------------------------
PURCHASED OPTIONS 0.1%
90-day EuroDollar Futures Put,
September, 2007.............. 70 09/21/07 94.75 $ 24,938
EuroDollar Futures Put, June,
2007......................... 27 06/22/07 94.25 675
EuroDollar Futures Put, June,
2007......................... 79 06/22/07 94.50 $ 6,912
EuroDollar Futures Put, June,
2007......................... 42 06/22/07 94.75 13,650
------------
TOTAL PURCHASED OPTIONS
(Cost $62,303).............................................................. 46,175
------------
26 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 8.5%
REPURCHASE AGREEMENTS 8.4%
Citigroup Global Markets, Inc. ($1,680,910 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.230%,
dated 12/29/06, to be sold on 01/02/07 at $1,681,887)...................... 1,680,910
State Street Bank & Trust Co. ($6,546,090 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.080%,
dated 12/29/06, to be sold on 01/02/07 at $6,549,785)...................... 6,546,090
-----------
TOTAL REPURCHASE AGREEMENTS.................................................. 8,227,000
-----------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 0.1%
United States Treasury Bill ($100,000 par, yielding 5.297%, 01/11/07
maturity) (l).............................................................. 99,901
TOTAL SHORT-TERM INVESTMENTS
(Cost $8,326,901).......................................................... 8,326,901
-----------
TOTAL INVESTMENTS 100.1%
(Cost $98,771,569)......................................................... 97,964,610
FOREIGN CURRENCY 0.0%
(Cost $4,583).............................................................. 4,557
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)................................. (124,712)
-----------
NET ASSETS 100.0%........................................................... $97,844,455
===========
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) 144A-Private Placement security which is exempt from registration under Rule
144A of the Securities Act of 1933, as amended. This security may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Payment-in-kind security.
(c) Floating Rate Coupon
(d) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(e) Non-income producing as security is in default.
(f) Market value is determined in accordance with procedures established in good
faith by the Board of Directors.
(g) This borrower has filed for protection in federal bankruptcy court.
(h) Security purchased on a when-issued or delayed delivery basis.
(i) IO--Interest Only
See Notes to Financial Statements 27
VAN KAMPEN INCOME TRUST
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006 continued
(j) Variable Rate Coupon
(k) Non-income producing security.
(l) All or a portion of this security has been physically segregated in
connection with open futures contracts.
ARM--Adjustable Rate Mortgage
REIT--Real Estate Investment Trust
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.
Currency Abbreviations:
MXN--Mexico nuevo peso
EUR--Euro Dollar
The obligations of certain United States Government sponsored entities are
neither issue or guaranteed by the United States Treasury.
FUTURES CONTRACTS OUTSTANDING AS OF DECEMBER 31, 2006:
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
LONG CONTRACTS:
U.S. Treasury Notes 10-Year Futures, March 2007 (Current
Notional Value of $107,469 per contract).................. 142 $(124,987)
SHORT CONTRACTS:
U.S. Treasury Bonds Futures, March 2007 (Current Notional
Value of $111,438 per contract)........................... 17 41,847
U.S. Treasury Notes 2-Year Futures, March 2007 (Current
Notional Value of $204,031 per contract).................. 43 28,391
U.S. Treasury Notes 5-Year Futures, March 2007 (Current
Notional Value of $105,063 per contract).................. 46 34,100
--- ---------
248 $ (20,649)
=== =========
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING AS OF DECEMBER 31, 2006:
UNREALIZED
APPRECIATION/
SHORT CONTRACTS: IN EXCHANGE FOR CURRENT VALUE DEPRECIATION
Euro Currency
233,000 expiring 1/29/07...................... US $ $ 308,045 $(13,227)
874,000 expiring 1/29/07...................... US $ 1,155,498 (49,443)
212,000 expiring 1/29/07...................... US $ 280,281 (11,910)
------------- -------------
$1,743,824 $(74,580)
============= =============
28 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2006
ASSETS:
Total Investments (Cost $98,771,569)........................ $ 97,964,610
Foreign Currency (Cost $4,583).............................. 4,557
Cash........................................................ 876
Receivables:
Interest.................................................. 1,338,163
Investments Sold.......................................... 15,161
Other....................................................... 22,882
------------
Total Assets............................................ 99,346,249
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,094,096
Forward Foreign Currency Contracts........................ 74,580
Investment Advisory Fee................................... 54,100
Income Distributions...................................... 14,752
Variation Margin on Futures............................... 9,922
Trustees' Deferred Compensation and Retirement Plans........ 200,735
Accrued Expenses............................................ 53,609
------------
Total Liabilities....................................... 1,501,794
------------
NET ASSETS.................................................. $ 97,844,455
============
NET ASSET VALUE PER COMMON SHARE ($97,844,455 divided by
15,371,738 shares outstanding)............................ $ 6.37
============
NET ASSETS CONSIST OF:
Common Shares (no par value with an unlimited number of
shares authorized, 15,371,738 shares issued and
outstanding).............................................. $120,152,605
Accumulated Undistributed Net Investment Income............. (465,916)
Net Unrealized Depreciation................................. (901,361)
Accumulated Net Realized Loss............................... (20,940,873)
------------
NET ASSETS.................................................. $ 97,844,455
============
See Notes to Financial Statements 29
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended December 31, 2006
INVESTMENT INCOME:
Interest.................................................... $ 6,406,542
Other....................................................... 42,899
-----------
Total Income............................................ 6,449,441
-----------
EXPENSES:
Investment Advisory Fee..................................... 630,447
Trustees' Fees and Related Expenses......................... 58,247
Accounting and Administrative Expenses...................... 55,162
Custody..................................................... 49,628
Professional Fees........................................... 44,674
Reports to Shareholders..................................... 38,232
Registration Fees........................................... 25,343
Transfer Agent Fees......................................... 19,786
Other....................................................... 30,873
-----------
Total Expenses.......................................... 952,392
Less Credits Earned on Cash Balances.................... 1,097
-----------
Net Expenses............................................ 951,295
-----------
NET INVESTMENT INCOME....................................... $ 5,498,146
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (116,368)
Futures................................................... 86,539
Foreign Currency Transactions............................. (47,051)
-----------
Net Realized Loss........................................... (76,880)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (1,123,764)
-----------
End of the Period:
Investments............................................. (806,959)
Futures................................................. (20,649)
Forward Foreign Currency Contracts...................... (74,580)
Foreign Currency Translation............................ 827
-----------
(901,361)
-----------
Net Unrealized Appreciation During the Period............... 222,403
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 145,523
===========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 5,643,669
===========
30 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 5,498,146 $ 5,220,518
Net Realized Loss.................................... (76,880) (765,638)
Net Unrealized Appreciation/Depreciation During the
Period............................................. 222,403 (1,914,923)
----------- ------------
Change in Net Assets from Operations................. 5,643,669 2,539,957
Distributions from Net Investment Income............. (5,664,487) (5,824,258)
----------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... (20,818) (3,284,301)
Beginning of the Period.............................. 97,865,273 101,149,574
----------- ------------
End of the Period (Including accumulated
undistributed net investment income of $(465,916)
and $(430,333), respectively)...................... $97,844,455 $ 97,865,273
=========== ============
See Notes to Financial Statements 31
VAN KAMPEN INCOME TRUST
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED DECEMBER 31,
--------------------------------------------
2006 2005 2004 2003 2002
--------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $ 6.37 $6.58 $ 6.46 $6.10 $ 6.51
------ ----- ------ ----- ------
Net Investment Income...................... 0.36(a) 0.34(a) 0.33 0.32 0.39
Net Realized and Unrealized Gain/Loss...... 0.01 (0.17) 0.12 0.41 (0.33)
------ ----- ------ ----- ------
Total from Investment Operations............. 0.37 0.17 0.45 0.73 0.06
Less:
Distributions from Net Investment Income... 0.37 0.38 0.33 0.34 0.47
Return of Capital Distributions............ -0- -0- -0- 0.03 -0-
------ ----- ------ ----- ------
Total Distributions.......................... 0.37 0.38 0.33 0.37 0.47
------ ----- ------ ----- ------
NET ASSET VALUE, END OF THE PERIOD........... $ 6.37 $6.37 $ 6.58 $6.46 $ 6.10
====== ===== ====== ===== ======
Common Share Market Price at End of the
Period..................................... $ 5.97 $5.58 $ 5.85 $5.81 $ 5.71
Total Return (b)............................. 14.03% 1.83% 6.62% 8.42% -2.59%
Net Assets at End of the Period (In
millions).................................. $ 97.8 $97.9 $101.1 $99.4 $ 93.8
Ratio of Expenses to Average Net Assets...... 0.98% 0.93% 0.92% 0.92% 0.89%
Ratio of Net Investment Income to Average Net
Assets..................................... 5.67% 5.25% 5.17% 5.14% 6.29%
Portfolio Turnover........................... 117% 180% 225% 299%(c) 101%
(a) Based on average shares outstanding.
(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 market 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. Beginning with the fiscal year ended December 31, 2003, the Trust's
portfolio turnover rate reflects mortgage pool forward commitments as
purchases and sales, which has not been the case in the past. This caused
the reported portfolio turnover rate to be higher in previous fiscal years.
32 See Notes to Financial Statements
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006
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
sale 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 sale 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. Options are valued at the last sale price.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded.
B. SECURITY TRANSACTION 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 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 segregate assets having an aggregate value at
least equal to the amount of the when-issued, delayed delivery, or forward
purchase commitments until payment is made. At December 31, 2006, the Trust had
$1,093,859 of when-issued, delayed delivery or 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
33
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 continued
agreements are fully collateralized by the underlying debt security. The Trust
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is required
to maintain the value of the underlying security at not less than the repurchase
proceeds due the Trust.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts are accreted and
premiums are amortized over the expected life of each applicable security.
D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements
of 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, 2006, the Trust had an accumulated capital loss
carryforward for tax purposes of $20,559,161, which will expire according to the
following schedule.
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
697,384................................................... December 31, 2013
387,411................................................... December 31, 2014
At December 31, 2006, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $99,171,470
===========
Gross tax unrealized appreciation........................... $ 2,107,380
Gross tax unrealized depreciation........................... (3,314,240)
-----------
Net tax unrealized depreciation on investments.............. $(1,206,860)
===========
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually. Distributions from net realized gains for book
purposes may include short-term capital gains and a portion of futures gains,
which are included as ordinary income for tax purposes.
34
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 continued
The tax character of distributions paid during the years ended December 31,
2006, and 2005 was as follows:
2006 2005
Distributions paid from:
Ordinary income........................................... $5,688,193 $5,803,454
Long-term capital gain.................................... -0- -0-
---------- ----------
$5,688,193 $5,803,454
========== ==========
Permanent differences primarily due to net realized losses from paydowns on
mortgage backed securities resulted in the following reclassifications among the
Trust's components of net assets at December 31, 2006:
ACCUMULATED
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED LOSS COMMON SHARES
$130,758 $ (130,758) $-0-
As of December 31, 2006, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income............................... $114,682
Undistributed long-term capital gain........................ 0
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 sales
transactions, gains or losses recognized for tax purposes on open futures and
options transactions on December 31, 2006 and from net short-term capital gains
or losses received from interests in partnerships.
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 REDUCTIONS During the year ended December 31, 2006, the Trust's
custody fee was reduced by $1,097 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.
35
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 continued
For the year ended December 31, 2006, the Trust recognized expenses of
approximately $12,600 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, 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 year ended December 31, 2006, the Trust
recognized expenses of approximately $12,200 representing Van Kampen Investments
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 "Accounting and Administrative 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.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments and U.S. Government securities, were
$24,598,980 and $23,417,504, respectively. The cost of purchases and proceeds
from sales of long-term U.S. Government securities, including paydowns on
mortgage-backed securities, for the period were $80,245,756 and $72,510,091,
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.
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 exercising an option contract or taking
delivery of a security underlying a futures or forward contract. In these
instances, the recognition of gain or loss is postponed until the disposal of
the security underlying the option, futures or forward contract.
Risks may arise as a result of the potential inability of the counterparties
to meet the terms of their contracts.
Summarized below are 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
36
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 continued
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 contacts.
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
Trust generally invests in exchange traded futures contracts on U.S. Treasury
securities and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration. Upon entering into futures contracts, the Trust 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 the 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 year ended December 31, 2006 were
as follows:
CONTRACTS
Outstanding at December 31, 2005............................ 181
Futures Opened.............................................. 1,103
Futures Closed.............................................. (1,036)
-------
Outstanding at December 31, 2006............................ 248
=======
C. PURCHASED OPTIONS CONTRACTS An option contract gives the buyer the right, but
not the obligation to buy (call) or sell (put) an underlying item at a fixed
exercise (strike) price during a specified period. The Trust may purchase put
and call options. Purchasing call options tends to increase the Trust's exposure
to the underlying (or similar) instrument. Purchasing put options tends to
decrease the Trust's exposure to the underlying (or similar) instrument. The
risk associated with purchasing put and call options is limited to the premium
paid. Purchased options are reported as part of "Total Investments" on the
Statement of Assets and Liabilities. Premiums paid for purchasing options which
expire are treated as realized losses.
5. INDEMNIFICATIONS
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
37
VAN KAMPEN INCOME TRUST
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 continued
6. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for the fiscal
years beginning after December 15, 2006 and is to be applied to all open tax
years as of the effective date. Recent SEC guidance allows implementing FIN 48
in the fund NAV calculations as late as the fund's last NAV calculation in the
first required financial statement period. As a result, the Trust will
incorporate FIN 48 in its semi annual report on June 30, 2007. The impact to the
Trust's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Trust's financial statement disclosures.
38
VAN KAMPEN INCOME TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of Van Kampen Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Income Trust (the "Trust"), including the portfolio of investments, as of
December 31, 2006, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Trust is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2006, by correspondence with the Trust's
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Income Trust as of December 31, 2006, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
February 8, 2007
39
VAN KAMPEN INCOME TRUST
DIVIDEND REINVESTMENT PLAN
The dividend reinvestment plan offers you a prompt and simple way to
reinvest your dividends and capital gains distributions into additional shares
of your trust. Under the plan, the money you earn from dividends and capital
gains distributions will be reinvested automatically in more shares of your
trust, allowing you to potentially increase your investment over time.
PLAN BENEFITS
- ADD TO YOUR ACCOUNT
You may increase your shares in your trust easily and automatically with the
dividend reinvestment plan.
- LOW TRANSACTION COSTS
Shareholders who participate in the plan are able to buy shares at below-
market prices when the trust is trading at a premium to its net asset value. In
addition, transaction costs are low because when new shares are issued by the
trust, there is no brokerage fee, and when shares are bought in blocks on the
open market, the brokerage commission is shared among all participants.
- CONVENIENCE
You will receive a detailed account statement from Computershare Trust
Company, N.A., which administers the plan, whenever shares are reinvested for
you. The statement shows your total distributions, date of investment, shares
acquired, and price per share, as well as the total number of shares in your
reinvestment account.
- SAFEKEEPING
Computershare Trust Company, N.A. will hold the shares it has acquired for
you in safekeeping, which provides added protection against loss, theft, or
inadvertent destruction of certificates. However, you may request that a
certificate representing your reinvested shares be issued to you.
HOW DOES THE PLAN WORK?
If you choose to participate in the plan, your dividends and capital gains
distributions will be promptly reinvested for you, automatically increasing your
shares. If your trust is trading at a share price that is equal to its net asset
value (NAV), you'll pay that amount for your reinvested shares. However, if your
trust is trading above or below its NAV, the price is determined by one of two
ways:
1. PREMIUM If your trust is trading at a premium--a market price that is
higher than its NAV--you'll pay either the NAV or 95 percent of the market
price, whichever is greater. When your trust trades at a premium, you'll pay
less for your reinvested shares than an ordinary investor purchasing shares
on the stock exchange. Keep in mind, a portion of your price reduction may be
taxable because you are receiving shares at less than market price.
2. DISCOUNT If your trust is trading at a discount--a market price that is
lower than its NAV--you'll pay the market price for your reinvested shares.
40
VAN KAMPEN INCOME TRUST
DIVIDEND REINVESTMENT PLAN continued
HOW TO PARTICIPATE IN THE PLAN
If you own shares in your own name, you can participate directly in the
plan. If your shares are held in "street name"--in the name of your brokerage
firm, bank, or other financial institution--you must instruct that entity to
participate on your behalf. If they are unable to participate on your behalf,
you may request that they reregister your shares in your own name so that you
may enroll in the plan. If you choose to participate in the plan, whenever your
trust declares a dividend or capital gains distribution, it will be invested in
additional shares of your trust that are purchased on the open market.
HOW TO ENROLL
To enroll in the Dividend Reinvestment Plan please visit vankampen.com or
call (800) 341-2929 or notify us in writing at the address below.
Van Kampen Closed-End Funds
Computershare Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
Please include your Trust name and account number and ensure that all
shareholders listed on the account sign these written instructions. Your
participation in the plan will begin with the next dividend or capital gains
distribution payable after Computershare Trust Company, N.A. receives your
authorization, as long as they receive it before the "record date," which is
generally ten business days before the dividend is paid. If your authorization
arrives after such record date, your participation in the plan will begin with
the following dividend or distribution.
COSTS OF THE PLAN
There is no direct charge to you for reinvesting dividends and capital gains
distributions because the plan's fees are paid by your trust. If your trust is
trading at or above its NAV, your new shares are issued directly by the trust
and there are no brokerage charges or commissions. However, if your trust is
trading at a discount, the shares are purchased on the open market, and you will
pay your portion of any brokerage commissions. These brokerage commissions are
typically less than the standard brokerage charges for individual transactions
because shares are purchased for all participants in blocks, resulting in lower
commissions for each individual participant. Any brokerage commissions or
service fees are averaged into the purchase price.
TAX IMPLICATIONS
The automatic reinvestment of dividends and capital gains distributions does
not relieve you of any income tax that may be due on dividends or
41
VAN KAMPEN INCOME TRUST
DIVIDEND REINVESTMENT PLAN continued
distributions. You will receive tax information annually to help you prepare
your federal and state income tax returns.
HOW TO WITHDRAW FROM THE PLAN
To withdraw from the Dividend Reinvestment Plan please visit vankampen.com
or call (800) 341-2929 or notify us in writing at the address below.
Van Kampen Closed-End Funds
Computershare Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
All shareholders listed on the account must sign any written withdrawal
instructions. If you withdraw, you have two choices for receiving your shares:
- CERTIFICATE
We will issue a certificate for the full shares and send you a check for any
fractional shares without a charge.
- CHECK
We will sell all full and fractional shares and send the proceeds to your
address of record after deducting brokerage commissions and a $2.50 service fee.
The Trust and Computershare Trust Company, N.A. may amend or terminate the
plan. Participants will receive written notice at least 30 days before the
effective date of any amendment. In the case of termination, participants will
receive written notice at least 30 days before the record date for the payment
of any dividend or capital gains distribution by your trust.
TO OBTAIN A COMPLETE COPY OF THE DIVIDEND REINVESTMENT PLAN, PLEASE CALL OUR
CLIENT RELATIONS DEPARTMENT AT 800-341-2929 OR VISIT VANKAMPEN.COM.
42
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
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
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, New York 10020
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
TRANSFER AGENT
COMPUTERSHARE TRUST COMPANY, N.A.
c/o Computershare Investor Services
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606-4301
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Trust during its taxable year ended
December 31, 2006. As provided by the American Jobs Creation Act of 2004,
certain interest-related dividends paid by the Trust to Foreign shareholders
may not be subject to U.S. withholding tax. The Trust intends to designate up
to a maximum of $5,688,193 as qualifying as interest-related dividends. In
January, the Trust provides tax information to shareholders for the preceding
calendar year.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
43
VAN KAMPEN INCOME TRUST
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of the Shareholders of the Trust was held on October 27,
2006, where shareholders voted on the election of trustees.
With regard to the election of the following trustees by the common shareholders
of the Trust:
# OF SHARES
-------------------------------
IN FAVOR WITHHELD
------------------------------------------------------------------------------------------
Jack E. Nelson........................................... 13,207,318 1,203,734
R. Craig Kennedy......................................... 13,201,874 1,209,178
Hugo F. Sonnenschein..................................... 13,207,649 1,203,403
The other trustees of the Trust whose terms did not expire in 2006 are David C.
Arch, Jerry D. Choate, Rod Dammeyer, Linda Hutton Heagy, Howard J Kerr, Wayne W.
Whalen, and Suzanne H. Woolsey.
44
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS
The business and affairs of the Trust are managed under the direction of the
Trust's Board of Trustees and the Trust's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Trust
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments,
the Adviser, the Distributor, Van Kampen Advisors Inc., Van Kampen Exchange
Corp. and Investor Services. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Annual
Report. Trustees of the Trust generally serve three year terms or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
INDEPENDENT TRUSTEES:
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (61) Trustee Trustee Chairman and Chief 72 Trustee/Director/Managing
Blistex Inc. since 1997 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
Jerry D. Choate (68) Trustee Trustee Prior to January 1999, 72 Trustee/Director/Managing
33971 Selva Road since 2003 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
45
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (66) Trustee Trustee President of CAC, L.L.C., 72 Trustee/Director/Managing
CAC, L.L.C. since 1997 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Quidel
San Diego, CA 92122-6223 advisory services. Prior Corporation, Stericycle,
to February 2001, Vice Inc., Ventana Medical
Chairman and Director of Systems, Inc., and GATX
Anixter International, Corporation, and Trustee
Inc., a global of The Scripps Research
distributor of wire, Institute. Prior to
cable and communications January 2005, Trustee of
connectivity products. the University of Chicago
Prior to July 2000, Hospitals and Health
Managing Partner of Systems. Prior to April
Equity Group Corporate 2004, Director of
Investment (EGI), a TheraSense, Inc. Prior to
company that makes January 2004, Director of
private investments in TeleTech Holdings Inc.
other companies. and Arris Group, Inc.
Prior to May 2002,
Director of Peregrine
Systems Inc. Prior to
February 2001, Director
of IMC Global Inc. Prior
to July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
46
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (58) Trustee Trustee Managing Partner of 72 Trustee/Director/Managing
Heidrick & Struggles since 2003 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1990, Executive Vice
President of The Exchange
National Bank.
R. Craig Kennedy (54) Trustee Trustee Director and President of 72 Trustee/Director/Managing
1744 R Street, NW since 2003 the German Marshall Fund General Partner of funds
Washington, DC 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (71) Trustee Trustee Prior to 1998, President 72 Trustee/Director/Managing
14 Huron Trace since 1997 and Chief Executive General Partner of funds
Galena, IL 61036 Officer of Pocklington in the Fund Complex.
Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation.
47
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (70) Trustee Trustee President of Nelson 72 Trustee/Director/Managing
423 Country Club Drive since 2003 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (66) Trustee Trustee President Emeritus and 72 Trustee/Director/Managing
1126 E. 59th Street since 1997 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
48
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Suzanne H. Woolsey, Ph.D. (65) Trustee Trustee Chief Communications 72 Trustee/Director/Managing
815 Cumberstone Road since 2003 Officer of the National General Partner of funds
Harwood, MD 20776 Academy of in the Fund Complex.
Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of Sciences/
National Research
Council. From 1980
through 1989, Partner of
Coopers & Lybrand.
49
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS continued
INTERESTED TRUSTEE*:
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Wayne W. Whalen* (67) Trustee Trustee Partner in the law firm 72 Trustee/Director/Managing
333 West Wacker Drive since 1997 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the Director of the Abraham
Fund Complex. Lincoln Presidential
Library Foundation.
* Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act) of certain funds in the Fund Complex by reason of he and
his firm currently providing legal services as legal counsel to such funds
in the Fund Complex.
50
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS continued
OFFICERS:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
Ronald E. Robison (68) President and Officer President of funds in the Fund Complex since September 2005,
1221 Avenue of the Americas Principal since 2003 and Principal Executive Officer of funds in the Fund Complex
New York, NY 10020 Executive since May 2003. Managing Director of Van Kampen Advisors
Officer Inc. since June 2003. Director of Investor Services since
September 2002. Director of the Adviser, Van Kampen
Investments and Van Kampen Exchange Corp. since January
2005. Managing Director of Morgan Stanley and Morgan Stanley
& Co. Incorporated. Managing Director and Director of Morgan
Stanley Investment Management Inc. Chief Administrative
Officer, Managing Director and Director of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley Services Company
Inc. Managing Director and Director of Morgan Stanley
Distributors Inc. and Morgan Stanley Distribution Inc. Chief
Executive Officer and Director of Morgan Stanley Trust.
Executive Vice President and Principal Executive Officer of
the Institutional and Retail Morgan Stanley Funds. Director
of Morgan Stanley SICAV. Previously, Chief Global Operations
Officer of Morgan Stanley Investment Management Inc. and
Executive Vice President of funds in the Fund Complex from
May 2003 to September 2005.
Dennis Shea (53) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
1221 Avenue of the Americas since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
New York, NY 10020 and Van Kampen Advisors Inc. Chief Investment Officer-Global
Equity of the same entities since February 2006. Vice
President of Morgan Stanley Institutional and Retail Funds
since February 2006. Vice President of funds in the Fund
Complex since March 2006. Previously, Managing Director and
Director of Global Equity Research at Morgan Stanley from
April 2000 to February 2006.
J. David Germany (52) Vice President Officer Managing Director of Morgan Stanley Investment Advisors
25 Cabot Square, since 2006 Inc., Morgan Stanley Investment Management Inc., the Adviser
Canary Wharf and Van Kampen Advisors Inc. Chief Investment Officer -
London, GBR E14 4QA Global Fixed Income of the same entities since December
2005. Managing Director and Director of Morgan Stanley
Investment Management Ltd. Director of Morgan Stanley
Investment Management (ACD) Limited since December 2003.
Vice President of Morgan Stanley Institutional and Retail
Funds since February 2006. Vice President of funds in the
Fund Complex since March 2006.
51
VAN KAMPEN INCOME TRUST
TRUSTEES AND OFFICERS continued
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
Amy R. Doberman (44) Vice President Officer Managing Director and General Counsel - U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management Inc., Morgan Stanley Investment Advisors Inc. and
the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex since August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeltus Investment Management,
Inc. from January 1997 to July 2000.
Stefanie V. Chang (40) Vice President Officer Executive Director of Morgan Stanley Investment Management
1221 Avenue of the Americas and Secretary since 2003 Inc. Vice President and Secretary of funds in the Fund
New York, NY 10020 Complex.
John L. Sullivan (51) Chief Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Compliance since 1998 August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181 Officer Director of Van Kampen Investments, the Adviser, Van Kampen
Advisors Inc. and certain other subsidiaries of Van Kampen
Investments, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management Inc.
Prior to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
James W. Garrett (38) Chief Officer Managing Director of Morgan Stanley Investment Management
1221 Avenue of the Americas Financial since 2006 Inc. since December 2006; Chief Financial Officer and
New York, NY 10020 Officer and Treasurer of Morgan Stanley Institutional Funds since 2002
Treasurer and of funds in the Fund Complex from January 2005 to August
2005 and since September 2006. Previously, Executive
Director of Morgan Stanley Investment Management Inc. from
2002 to December 2006.
In accordance with Section 303A.12(a) of the New York Stock Exchange Listed
Company Manual, the Trust's Chief Executive Officer has certified to the New
York Stock Exchange that, as of October 27, 2006, he was not aware of any
violation by the Trust of NYSE corporate governance listing standards.
The certifications by the Trust's principal executive officer and principal
financial officer required by Rule 30a-2 under the 1940 Act were filed with the
Trust's report to the SEC on Form N-CSR and are available on the Securities and
Exchange Commission's web site at http://www.sec.gov.
52
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.
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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)2007 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
920, 957, 107
VINANR 2/07
(VAN KAMPEN INVESTMENTS LOGO) RN07-00478P-Y12/06
Item 2. Code of Ethics.
(a) The Trust has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the Trust or
a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Due to personnel changes at the Adviser, the list of covered officers
set forth in Exhibit B was amended in November 2006. Both editions of
Exhibit B are attached.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Trust's Code of Ethics is attached hereto as Exhibit 12(1).
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Trust's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Rod Dammeyer, Jerry Choate and R. Craig Kennedy. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2006
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES........................... $26,800 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES......... $0 $244,200(2)
TAX FEES................... $1,600(3) $0
ALL OTHER FEES............. $0 $0
TOTAL NON-AUDIT FEES................. $1,600 $244,200
TOTAL................................ $28,400 $244,200
2005
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES........................... $26,000 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES......... $0 $321,000(2)
TAX FEES................... $1,600(3) $0
ALL OTHER FEES............. $0 $0
TOTAL NON-AUDIT FEES................. $1,600 $321,000
TOTAL................................ $27,600 $321,000
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any
entity controlling, controlled by or under common control with the Adviser
that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that
are reasonably related to the performance of the audit of the financial
statements of the Covered Entities' and funds advised by the Adviser or its
affiliates, specifically attestation services provided in connection with a
SAS 70 Report.
(3) Tax Fees represent tax advice and compliance services provided in
connection with the review of the Registrant's tax.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider
whether such services are consistent with the SEC's rules on auditor
independence. The Audit Committee will also consider whether the Independent
Auditors are best positioned to provide the most effective and efficient
services, for reasons such as its familiarity with the Fund's business, people,
culture, accounting systems, risk profile and other factors, and whether the
service might enhance the Fund's ability to manage or control risk or improve
audit quality. All such factors will be considered as a whole, and no one factor
should necessarily be determinative.
The Audit Committee is also mindful of the relationship between fees
for audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax
and All Other services that have the general pre-approval of the Audit
Committee. The term of any general pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee considers and provides a different
period and states otherwise. The Audit Committee will annually review and
pre-approve the services that may be provided by the Independent Auditors
without obtaining specific pre-approval
----------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval
Policy and Procedures (the "Policy"), amended as of the date above,
supercedes and replaces all prior versions that may have been amended
from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have
the meanings as defined in the Joint Audit Committee Charter.
from the Audit Committee. The Audit Committee will add to or subtract from the
list of general pre-approved services from time to time, based on subsequent
determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes
that implementation of the Policy will not adversely affect the Independent
Auditors' independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the
Audit Committee, the Audit Committee may grant general pre-approval to other
Audit services, which are those services that only the Independent Auditors
reasonably can provide. Other Audit services may include statutory audits and
services associated with SEC registration statements (on Forms N-1A, N-2, N-3,
N-4, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix
B.1. All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in
Appendix B.2. All other Audit-related services not listed in Appendix B.2 must
be specifically pre-approved by the Audit Committee (or by any member of the
Audit Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide
Tax services to the Fund and, to the extent they are Covered Services, the
Covered Entities, such as tax compliance, tax planning and tax advice without
impairing the auditor's independence, and the SEC has stated that the
Independent Auditors may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax services that have
historically been provided by the Independent Auditors, that the Audit Committee
has reviewed and believes would not impair the independence of the Independent
Auditors, and that are consistent with the SEC's rules on auditor independence.
The Audit Committee will not permit the retention of the Independent Auditors in
connection with a transaction initially recommended by the Independent Auditors,
the sole business purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code and related regulations.
The Audit Committee will consult with Director of Tax or outside counsel to
determine that the tax planning and reporting positions are consistent with this
policy.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the Tax Services in Appendix B.3. All Tax services involving large
and complex transactions not listed in Appendix B.3 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated), including tax services proposed to be
provided by the Independent Auditors to any executive officer or
trustee/director/managing general partner of the Fund, in his or her individual
capacity, where such services are paid for by the Fund (generally applicable
only to internally managed investment companies).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix B.5. The SEC's rules and relevant guidance should be
consulted to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be
provided by the Independent Auditors will be established annually by the Audit
Committee. Any proposed services exceeding these levels or amounts will require
specific pre-approval by the Audit Committee. The Audit Committee is mindful of
the overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the
Independent Auditors that do not require specific approval by the Audit
Committee will be submitted to the Fund's Chief Financial Officer and must
include a detailed description of the services to be rendered. The Fund's Chief
Financial Officer will determine whether such services are included within the
list of services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be informed on a timely basis of any such
services rendered by the Independent Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Fund's
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer
to monitor the performance of all services provided by the Independent Auditors
and to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. A sample report is included as Appendix
B.7. Both the Fund's Chief Financial Officer and management will immediately
report to the chairman of the Audit Committee any breach of this Policy that
comes to the attention of the Fund's Chief Financial Officer or any member of
management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an
annual basis to meet its responsibility to oversee the work of the Independent
Auditors and to assure the auditor's independence from the Fund, such as
reviewing a formal written statement from the Independent Auditors delineating
all relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any
entity controlling, controlled by or under common control with the Fund's
investment adviser(s) that provides ongoing services to the Fund(s). Beginning
with non-audit service contracts entered into on or after May 6, 2003, the
Fund's audit committee must pre-approve non-audit services provided not only to
the Fund but also to the Covered Entities if the engagements relate directly to
the operations and financial reporting of the Fund. This list of Covered
Entities would include:
- Van Kampen Investments Inc.
- Van Kampen Asset Management
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Investor Services Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Trust Company
- Morgan Stanley Investment Management Ltd.
- Morgan Stanley Investment Management Company
- Morgan Stanley Asset & Investment Trust Management Company Ltd.
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services
are determined to have a direct impact on the operations or financial reporting
of the Registrant. 100% of such services were pre-approved by the audit
committee pursuant to the Audit Committee's pre-approval policies and procedures
(included herein).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Trust has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: R.
Craig Kennedy, Jerry D. Choate, Rod Dammeyer.
(b) Not applicable.
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.
The Trust's and its investment advisor's Proxy Voting Policies and Procedures
are as follows:
MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND PROCEDURES
I. POLICY STATEMENT
Introduction - Morgan Stanley Investment Management's ("MSIM") policy and
procedures for voting proxies ("Policy") with respect to securities held in the
accounts of clients applies to those MSIM entities that provide discretionary
investment management services and for which a MSIM entity has authority to vote
proxies. The Policy will be reviewed and, updated, as necessary, to address new
or revised proxy voting issues. The MSIM entities covered by the Policy
currently include the following: Morgan Stanley Investment Advisors Inc., Morgan
Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley
Investment Management Limited, Morgan Stanley Investment Management Company,
Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley
Investment Management Private Limited, Morgan Stanley Hedge Fund Partners GP LP,
Morgan Stanley Hedge Fund Partners LP, Van Kampen Asset Management, and Van
Kampen Advisors Inc. (each an "MSIM Affiliate" and collectively referred to as
the "MSIM Affiliates").
Each MSIM Affiliate will use its best efforts to vote proxies as part of its
authority to manage, acquire and dispose of account assets. With respect to the
MSIM registered management investment companies (Van Kampen, Institutional and
Advisor Funds)(collectively referred to herein as the "MSIM Funds"), each MSIM
Affiliate will vote proxies under this Policy (except for the Morgan Stanley KLD
Social Index Fund, which votes proxies pursuant to the Institutional Shareholder
Services' Social Investment Research Proxy Voting Guidelines) pursuant to
authority granted under its applicable investment advisory agreement or, in the
absence of such authority, as authorized by the Board of
Directors or Trustees of the MSIM Funds. A MSIM Affiliate will not vote proxies
if the "named fiduciary" for an ERISA account has reserved the authority for
itself, or in the case of an account not governed by ERISA, the investment
management or investment advisory agreement does not authorize the MSIM
Affiliate to vote proxies. MSIM Affiliates will, in a prudent and diligent
manner, vote proxies in the best interests of clients, including beneficiaries
of and participants in a client's benefit plan(s) for which the MSIM Affiliates
manage assets, consistent with the objective of maximizing long-term investment
returns ("Client Proxy Standard"). In certain situations, a client or its
fiduciary may provide a MSIM Affiliate with a proxy voting policy. In these
situations, the MSIM Affiliate will comply with the client's policy.
Proxy Research Services - Institutional Shareholder Services ("ISS") and Glass
Lewis (together with other proxy research providers as MSIM Affiliates may
retain from time to time, the "Research Providers") are independent advisers
that specialize in providing a variety of fiduciary-level proxy-related services
to institutional investment managers, plan sponsors, custodians, consultants,
and other institutional investors. The services provided include in-depth
research, global issuer analysis, and voting recommendations. While the MSIM
Affiliates may review and utilize the recommendations of the Research Providers
in making proxy voting decisions, they are in no way obligated to follow such
recommendations. In addition to research, ISS provides vote execution,
reporting, and recordkeeping. MSIM's Proxy Review Committee (see Section IV.A.
below) will carefully monitor and supervise the services provided by the
Research Providers.
Voting Proxies for Certain Non-U.S. Companies - While the proxy voting process
is well established in the United States and other developed markets with a
number of tools and services available to assist an investment manager, voting
proxies of non-U.S. companies located in certain jurisdictions, particularly
emerging markets, may involve a number of problems that may restrict or prevent
a MSIM Affiliate's ability to vote such proxies. These problems include, but are
not limited to: (i) proxy statements and ballots being written in a language
other than English; (ii) untimely and/or inadequate notice of shareholder
meetings; (iii) restrictions on the ability of holders outside the issuer's
jurisdiction of organization to exercise votes; (iv) requirements to vote
proxies in person, (v) the imposition of restrictions on the sale of the
securities for a period of time in proximity to the shareholder meeting; and
(vi) requirements to provide local agents with power of attorney to facilitate
the MSIM Affiliate's voting instructions. As a result, clients' non-U.S. proxies
will be voted on a best efforts basis only, after weighing the costs and
benefits to MSIM's clients of voting such proxies, consistent with the Client
Proxy Standard. ISS has been retained to provide assistance to the MSIM
Affiliates in connection with voting their clients' non-U.S. proxies.
II. GENERAL PROXY VOTING GUIDELINES
To ensure consistency in voting proxies on behalf of its clients, MSIM
Affiliates will follow (subject to any exception set forth herein) this Policy,
including the guidelines set forth below. These guidelines address a broad range
of issues, including board size and composition, executive compensation,
anti-takeover proposals, capital structure proposals and social responsibility
issues and are meant to be general voting parameters on issues that arise most
frequently. The MSIM Affiliates, however, may, pursuant to the procedures set
forth in Section IV. below, vote in a manner that is not in accordance with the
following general guidelines, provided the vote is approved by the Proxy Review
Committee and is consistent with the Client Proxy Standard. Morgan Stanley AIP
GP LP will follow the procedures as described in Appendix A. A MSIM Affiliate
will not generally vote a proxy if it has sold the affected security between the
record date and the meeting date.
III. GUIDELINES
A. CORPORATE GOVERNANCE MATTERS. The following proposals will generally be
voted as indicated below, unless otherwise determined by the Proxy Review
Committee.
i. General.
1. Generally, routine management proposals will be supported. The
following are examples of routine management proposals:
- Approval of financial statements, director and
auditor reports.
- General updating/corrective amendments to the
charter.
- Proposals related to the conduct of the annual
meeting, except those proposals that relate to the
"transaction of such other business which may come
before the meeting."
2. Proposals to eliminate cumulative voting generally will be
supported; proposals to establish cumulative voting in the
election of directors will not be supported.
3. Proposals requiring confidential voting and independent
tabulation of voting results will be supported.
4. Proposals requiring a U.S. company to have a separate Chairman
and CEO will not be supported. Proposals requiring non-U.S.
companies to have a separate Chairman and CEO will be
supported.
5. Proposals by management of non-U.S. companies regarding items
that are clearly related to the regular course of business
will be supported.
6. Proposals to require the company to expense stock options will
be supported.
7. Open-ended requests for adjournment generally will not be
supported. However, where management specifically states the
reason for requesting an adjournment and the requested
adjournment is necessary to permit a proposal that would
otherwise be supported under this Policy to be carried out
(i.e. an uncontested corporate transaction), the adjournment
request will be supported.
8. Proposals to declassify the Board of Directors (if management
supports a classified board) generally will not be supported.
9. Proposal requiring that the company prepare reports that are
costly to provide or that would require duplicative efforts or
expenditures that are of a non-business nature or would
provide no pertinent information from the perspective of
institutional shareholders generally will not be supported.
ii. Election of Directors. In situations where no conflict exists
and where no specific governance deficiency has been noted,
unless otherwise determined by the
Proxy Review Committee, proxies will be voted in support of
nominees of management.
1. The following proposals generally will be supported:
- Proposals requiring that a certain percentage (up to
66 2/3%) of the company's board members be
independent directors.
- Proposals requiring that members of the company's
compensation, nominating and audit committees be
comprised of independent or unaffiliated directors.
2. Unless otherwise determined by the Proxy Review Committee, a
withhold vote will be made in the following circumstances:
(a) If a company's board is not comprised of a majority of
disinsterested directors, a withhold vote will be made for
interested directors. A director nominee may be deemed to
be interested if the nominee has, or any time during the
previous five years had, a relationship with the issuer
(e.g., investment banker, counsel or other professional
service provider, or familial relationship with a senior
officer of the issuer) that may impair his or her
independence;
(b) If a nominee who is interested is standing for election
as a member of the company's compensation, nominating or
audit committees;
(c) A direct conflict exists between the interests of the
nominee and the public shareholders;
(d) Where the nominees standing for election have not taken
action to implement generally accepted governance
practices for which there is a "bright line" test. These
would include elimination of dead hand or slow hand poison
pills, requiring audit, compensation or nominating
committees to be composed of independent directors and
requiring a majority independent board;
(e) A nominee has failed to attend at least 75% of board
meetings within a given year without a reasonable excuse;
or
(f) A nominee serves on the board of directors for more than
six companies (excluding investment companies).
iii. Auditors
1. Generally, management proposals for selection or ratification
of auditors will be supported. However, such proposals may not
be supported if the fees paid to auditors are excessive.
Generally, to determine if such fees are excessive, a 50% test
will be applied: i.e., non-audit fees should be less than 50%
of the total fees paid to the auditor.
2. Proposals requiring auditors to attend the annual meeting of
shareholders will be supported.
3. Proposals to indemnify auditors will not be supported.
iv. Anti-Takeover Matters
1. Proposals to modify or rescind existing supermajority vote
requirements to amend the charter or bylaws will be supported;
proposals to amend by-laws to require a supermajority
shareholder vote to pass or repeal certain provisions will not
be supported.
2. Proposals relating to the adoption of anti-greenmail
provisions will be supported, provided that the proposal: (i)
defines greenmail; (ii) prohibits buyback offers to large
block holders (holders of at least 1% of the outstanding
shares and in certain cases, a greater amount, as determined
by the Proxy Review Committee) not made to all shareholders or
not approved by disinterested shareholders; and (iii) contains
no anti-takeover measures or other provisions restricting the
rights of shareholders.
3. Proposals requiring shareholder approval or ratification of a
shareholder rights plan or poison pill will be supported.
B. CAPITALIZATION CHANGES. The following proposals generally will be voted
as indicated below, unless otherwise determined by the Proxy Review Committee.
1. The following proposals generally will be supported:
- Proposals relating to capitalization changes that
eliminate other classes of stock and/or eliminate unequal
voting rights.
- Proposals to increase the authorization of existing
classes of common stock (or securities convertible into
common stock) if: (i) a clear and legitimate business
purpose is stated; (ii) the number of shares requested is
reasonable in relation to the purpose for which
authorization is requested; and (iii) the authorization
does not exceed 100% of shares currently authorized and at
least 30% of the new authorization will be outstanding.
- Proposals to create a new class of preferred stock or for
issuances of preferred stock up to 50% of issued capital.
- Proposals for share repurchase plans.
- Proposals to reduce the number of authorized shares of
common or preferred stock, or to eliminate classes of
preferred stock.
- Proposals to effect stock splits.
- Proposals to effect reverse stock splits if management
proportionately reduces the authorized share amount set
forth in the corporate charter. Reverse stock splits that
do not adjust proportionately to the authorized share
amount generally will be approved if the resulting
increase in
authorized shares coincides with the proxy guidelines
set forth above for common stock increases.
2. The following proposals generally will not be supported
(notwithstanding management support).
- Proposals relating to capitalization changes that add
classes of stock which substantially dilute the voting
interests of existing shareholders.
- Proposals to increase the authorized number of shares of
existing classes of stock that carry preemptive rights or
supervoting rights.
- Proposals to create "blank check" preferred stock.
- Proposals relating to changes in capitalization by 100%
or more.
C. COMPENSATION. The following proposals generally will be voted as
indicated below, unless otherwise determined by the Proxy Review Committee.
1. The following proposals generally will be supported:
- Proposals relating to director fees, provided the amounts
are not excessive relative to other companies in the
country or industry.
- Proposals for employee stock purchase plans that permit
discounts up to 15%, but only for grants that are part of
a broad-based employee plan, including all non-executive
employees.
- Proposals for the establishment of employee stock option
plans and other employee ownership plans, provided that
our research does not indicate that approval of the plan
would be against shareholder interest.
- Proposals for the establishment of employee retirement and
severance plans, provided that our research does not
indicate that approval of the plan would be against
shareholder interest.
2. Blanket proposals requiring shareholder approval of all
severance agreements will not be supported, however, proposals
that require shareholder approval for agreements in excess of
three times the annual compensation (salary and bonus)
generally will be supported.
3. Blanket proposals requiring shareholder approval of executive
compensation generally will not be supported.
4. Proposals that request or require disclosure of executive
compensation in addition to the disclosure required by the
Securities and Exchange Commission ("SEC") regulations
generally will not be supported.
D. OTHER RECURRING ITEMS. The following proposals generally will be voted
as indicated below, unless otherwise determined by the Proxy Review Committee.
1. Proposals to add restrictions related to social, political,
environmental or special interest issues that do not relate
directly to the business of the company and which do not
appear to be directed specifically to the business or
financial interest of the company generally will not be
supported.
2. Proposals requiring adherence to workplace standards that are
not required or customary in market(s) to which the proposals
relate will not be supported.
E. ITEMS TO BE REVIEWED BY THE PROXY REVIEW COMMITTEE
The following types of non-routine proposals, which potentially may have a
substantive financial or best interest impact on an issuer, will be voted as
determined by the Proxy Review Committee.
i. Corporate Transactions
- Proposals relating to mergers, acquisitions and other
special corporate transactions (i.e., takeovers,
spin-offs, sales of assets, reorganizations,
restructurings and recapitalizations) will be examined on
a case-by-case basis. In all cases, Research Providers'
research and analysis will be used along with MSIM
Affiliates' research and analysis, including, among other
things, MSIM internal company-specific knowledge.
Proposals for mergers or other significant transactions
that are friendly and approved by the Research Providers
generally will be supported where there is no portfolio
manager objection and where there is no material conflict
of interest and in those instances will not need to be
reviewed by the Proxy Review Committee.
ii. Compensation
- Proposals relating to change-in-control provisions in
non-salary compensation plans, employment contracts, and
severance agreements that benefit management and would be
costly to shareholders if triggered. With respect to
proposals related to severance and change of control
situations, MSIM Affiliates will support a maximum of
three times salary and bonus.
- Proposals relating to Executive/Director stock option
plans. Generally, stock option plans should be incentive
based. The Proxy Review Committee will evaluate the
quantitative criteria used by a Research Provider when
considering such Research Provider's recommendation. If
the Proxy Review Committee determines that the criteria
used by the Research Provider is reasonable, the proposal
will be supported if it falls within a 5% band above the
Research Provider's threshold.
- Compensation proposals that allow for discounted stock
options that have not been offered to employees in
general.
iii. Other
- Proposals for higher dividend payouts.
- Proposals recommending set retirement ages or requiring
specific levels of stock ownership by directors.
- Proposals for election of directors, where a director
nominee is related to MSIM (i.e. on an MSIM Fund's Board
of Directors/Trustees or part of MSIM senior management)
must be considered by the Proxy Review Committee. If the
proposal relates to a director nominee who is on a Van
Kampen Fund's Board of Directors/Trustees, to the extent
that the shares of the relevant company are held by a Van
Kampen Fund, the Van Kampen Board shall vote the proxies
with respect to those shares, to the extent practicable.
In the event that the Committee cannot contact the Van
Kampen Board in advance of the shareholder meeting, the
Committee will vote such shares pursuant to the Proxy
Voting Policy.
- Proposals requiring diversity of board membership relating
to broad based social, religious or ethnic groups.
- Proposals to limit directors' liability and/or broaden
indemnification of directors. Generally, the Proxy Review
Committee will support such proposals provided that the
officers and directors are eligible for indemnification
and liability protection if they have acted in good faith
on company business and were found innocent of any civil
or criminal charges for duties performed on behalf of the
company.
F. FUND OF FUNDS. Certain Funds advised by an MSIM Affiliate invest only in
other MSIM funds. If an underlying fund has a shareholder meeting, in order to
avoid any potential conflict of interest, such proposals will be voted in the
same proportion as the votes of the other shareholders of the underlying fund,
unless otherwise determined by the Proxy Review Committee.
IV. ADMINISTRATION OF POLICY
A. PROXY REVIEW COMMITTEE
1. The MSIM Proxy Review Committee ("Committee") is responsible
for creating and implementing the Policy and, in this regard,
has expressly adopted it.
(a) The Committee, which is appointed by MSIM's Chief
Investment Officer ("CIO"), consists of senior
investment professionals who represent the different
investment disciplines and geographic locations of
the firm. The Committee is responsible for
establishing MSIM's Policy and determining how MSIM
will vote proxies on an ongoing basis.
(b) The Committee will periodically review and have the
authority to amend, as necessary, the Policy and
establish and direct voting positions consistent with
the Client Proxy Standard.
(c) The Committee will meet at least monthly to (among
other matters): (1) address any outstanding issues
relating to the Policy and (2) review proposals at
upcoming shareholder meetings of MSIM portfolio
companies in accordance with this Policy including,
as appropriate, the voting results of prior
shareholder meetings of the same issuer where a
similar proposal was presented to shareholders. The
Committee, or its designee, will timely communicate
to ISS MSIM's Policy (and any amendments to them
and/or any additional guidelines or procedures it may
adopt).
(d) The Committee will meet on an ad hoc basis to (among
other matters): (1) authorize "split voting" (i.e.,
allowing certain shares of the same issuer that are
the subject of the same proxy solicitation and held
by one or more MSIM portfolios to be voted
differently than other shares) and/or "override
voting" (i.e., voting all MSIM portfolio shares in a
manner contrary to the Policy); (2) review and
approve upcoming votes, as appropriate, for matters
for which specific direction has been provided in
this Policy; and (3) determine how to vote matters
for which specific direction has not been provided in
this Policy. Split votes generally will not be
approved within a single Global Investor Group
investment team. The Committee may take into account
Research Providers' recommendations and research as
well as any other relevant information they may
request or receive, including portfolio manager
and/or analyst research, as applicable. Generally,
proxies related to securities held in accounts that
are managed pursuant to quantitative, index or
index-like strategies ("Index Strategies") will be
voted in the same manner as those held in actively
managed accounts. Because accounts managed using
Index Strategies are passively managed accounts,
research from portfolio managers and/or analysts
related to securities held in these accounts may not
be available. If the affected securities are held
only in accounts that are managed pursuant to Index
Strategies, and the proxy relates to a matter that is
not described in this Policy, the Committee will
consider all available information from the Research
Providers, and to the extent that the holdings are
significant, from the portfolio managers and/or
analysts.
(e) In addition to the procedures discussed above, if the
Committee determines that an issue raises a potential
material conflict of interest, or gives rise to the
appearance of a potential material conflict of
interest, the Committee will request a special
committee to review, and recommend a course of action
with respect to, the conflict(s) in question
("Special Committee"). The Special Committee shall be
comprised of the Chairperson of the Proxy Review
Committee, the Compliance Director for the area of
the firm involved or his/her designee, a senior
portfolio manager (if practicable, one who is a
member of the Proxy Review Committee) designated by
the Proxy Review Committee, and MSIM's Chief
Investment Officer or his/her designee. The Special
Committee may request the assistance of MSIM's
General Counsel or his/her designee and will have
sole discretion to cast a vote. In addition to the
research provided by Research Providers, the Special
Committee may request analysis from MSIM Affiliate
investment professionals and outside sources to the
extent it deems appropriate.
(f) The Committee and the Special Committee, or their
designee(s), will document in writing all of their
decisions and actions, which documentation will be
maintained by the Committee and the Special
Committee, or their designee(s), for a period of at
least 6 years. To the extent these decisions relate
to a security held by a MSIM U.S. registered
investment company, the Committee and Special
Committee, or their designee(s), will report their
decisions to each applicable Board of
Trustees/Directors of those investment companies at
each Board's next regularly scheduled Board meeting.
The report will contain information concerning
decisions made by the Committee and Special Committee
during the most recently ended calendar quarter
immediately preceding the Board meeting.
(g) The Committee and Special Committee, or their
designee(s), will timely communicate to applicable
portfolio managers, the Compliance Departments and,
as necessary, to ISS, decisions of the Committee and
Special Committee so that, among other things, ISS
will vote proxies consistent with their decisions.
B. IDENTIFICATION OF MATERIAL CONFLICTS OF INTEREST
1. If there is a possibility that a vote may involve a
material conflict of interest, the vote must be decided
by the Special Committee in consultation with MSIM's
General Counsel or his/her designee.
2. A material conflict of interest could exist in the
following situations, among others:
(a) The issuer soliciting the vote is a client of MSIM or
an affiliate of MSIM and the vote is on a material
matter affecting the issuer;
(b) The proxy relates to Morgan Stanley common stock or any
other security issued by Morgan Stanley or its
affiliates; or
(c) Morgan Stanley has a material pecuniary interest in the
matter submitted for a vote (e.g., acting as a
financial advisor to a party to a merger or acquisition
for which Morgan Stanley will be paid a success fee if
completed).
C. PROXY VOTING REPORTS
(a) MSIM will promptly provide a copy of this Policy to any
client requesting them. MSIM will also, upon client
request, promptly provide a report indicating how each
proxy was voted with respect to securities held in that
client's account.
(b) MSIM's legal department is responsible for filing an
annual Form N-PX on behalf of each registered
management investment company for which such filing is
required, indicating how all proxies were voted with
respect to such investment company's holdings.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
TRUST MANAGEMENT
PORTFOLIO MANAGEMENT. As of the date of this report, the Trust is managed by
members of the Taxable Fixed Income team. The team consists of portfolio
managers and analysts. Current members of the team jointly and primarily
responsible for the day-to-day management of the Trust's portfolio are Gordon W.
Loery, Michael Luo and Jaidip Singh, Executive Directors of the Adviser.
Mr. Loery has been associated with the Adviser in an investment management
capacity since June 1990 and joined the team managing the Trust in April 2003.
Mr. Luo has been associated with the Adviser in an investment management
capacity since July 1998 and joined the team managing the Trust in April 2003.
Mr. Singh has been associated with the Adviser in an investment management
capacity since April 1996 and joined the team managing the Trust in April 2003.
The composition of the team may change without notice from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
The following information is dated as of December 31, 2006.
Mr. Loery managed eight mutual funds with a total of approximately $1.4 billion
in assets; three pooled investment vehicles other than mutual funds with a total
of approximately $418.6 million; and one other account with a total of
approximately $1 thousand.
Mr. Luo managed eight mutual funds with a total of approximately $8.3 billion in
assets; no pooled investment vehicles other than mutual funds; and nine other
accounts (including accounts managed under certain "wrap fee programs") with a
total of approximately $1.3 billion in assets. Of these other accounts, two
accounts with a total of approximately $791.5 million in assets, had performance
based fees.
Mr. Singh managed six mutual funds with a total of approximately $4.2 billion in
assets; no pooled investment vehicles other than mutual funds; and one other
account with a total of approximately $124 million in assets.
Because the portfolio managers manage assets for other investment companies,
pooled investment vehicles, and/or other accounts (including institutional
clients, pension plans and certain high net worth individuals), there may be an
incentive to favor one client over another resulting in conflicts of interest.
For instance, the Adviser may receive fees from certain accounts that are higher
than the fee it receives from the Fund, or it may receive a performance-based
fee on certain accounts. In those instances, the portfolio manager may have an
incentive to favor the higher and/or performance-based fee accounts over the
Fund. The portfolio managers of the Fund do not currently manage assets of other
investment companies, pooled investment vehicles or other accounts that charge a
performance fee. The Adviser has adopted trade allocation and other policies and
procedures that it believes are reasonably designed to address these and other
conflicts of interest.
PORTFOLIO MANAGER COMPENSATION STRUCTURE
Portfolio managers receive a combination of base compensation and discretionary
compensation, comprised of a cash bonus and several deferred compensation
programs described below. The methodology used to determine portfolio manager
compensation is applied across all accounts managed by the portfolio manager.
Base salary compensation. Generally, portfolio managers receive base salary
compensation based on the level of their position with the Adviser.
Discretionary compensation. In addition to base compensation, portfolio managers
may receive discretionary compensation.
Discretionary compensation can include:
- Cash Bonus.
- Morgan Stanley's Equity Incentive Compensation Program (EICP) awards -- a
mandatory program that defers a portion of discretionary year-end compensation
into restricted stock units or other awards based on Morgan Stanley common stock
that are subject to vesting and other conditions.
- Investment Management Alignment Plan (IMAP) awards -- a mandatory program that
defers a portion of discretionary year-end compensation and notionally invests
it in designated Funds advised by the Adviser or its affiliates. The award is
subject to vesting and other conditions. Portfolio managers must notionally
invest a minimum of 25% to a maximum of 100% of the IMAP deferral into a
combination of the designated open-end mutual funds they manage that are
included in the IMAP Fund menu, which may or may not include the Fund.
- Voluntary Deferred Compensation Plans -- voluntary programs that permit
certain employees to elect to defer a portion of their discretionary year-end
compensation and directly or notionally invest the deferred amount: (1) across a
range of designated investment Funds, including Funds advised by the Adviser or
its affiliates; and/or (2) in Morgan Stanley stock units.
Several factors determine discretionary compensation, which can vary by
portfolio management team and circumstances. In order of relative importance,
these factors include:
- Investment performance. A portfolio manager's compensation is linked to the
pre-tax investment performance of the funds/accounts managed by the portfolio
manager. Investment performance is calculated for one-, three- and five-year
periods measured against a fund's/account's primary benchmark, indices and/or
peer groups where applicable. Generally, the greatest weight is placed on the
three- and five-year periods.
- Revenues generated by the investment companies, pooled investment vehicles and
other accounts managed by the portfolio manager.
- Contribution to the business objectives of the Adviser.
- The dollar amount of assets managed by the portfolio manager.
- Market compensation survey research by independent third parties.
- Other qualitative factors, such as contributions to client objectives.
- Performance of Morgan Stanley and Morgan Stanley Investment Management, and
the overall performance of the investment team(s) of which the portfolio manager
is a member.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of December 31, 2006, the portfolio managers did not own any shares of the
Fund.
Item 9. Purchase 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 second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Income Trust
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: February 8, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: February 8, 2007
By: /s/ James W. Garrett
---------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: February 8, 2007