<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 27
Statement of Operations.......................... 28
Statement of Changes in Net Assets............... 29
Financial Highlights............................. 30
Notes to Financial Statements.................... 32
Report of Independent Accountants................ 38
Dividend Reinvestment Plan....................... 39
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
November 19, 1999
Dear Shareholder:
As we approach the end of the century--and the millennium--it seems
appropriate to take a look back at the progress we've made over the last 100
years and how the world of investing has changed over the generations. Although
rapid advances in technology and science have dramatically altered the world
that we live in today, one of the greatest shifts we've seen this century is the
increasing importance of investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is
now available to most people. In fact, almost 79 million individuals--who
represent almost half of all U.S. households--own stocks either directly or
through mutual funds. This is even more impressive when considering that just 16
years earlier, only 19 percent of households owned stocks. Another important
shift has been the need for retirement planning beyond a pension plan or Social
Security. The Investment Company Institute, the leading mutual fund industry
association, reports that 77 percent of all mutual fund shareholders earmarked
retirement as their primary financial goal in 1998.
Through all the changes in the investment environment over the past century,
the general principles that have made generations of investors successful remain
the same. Those that have stood the test of time include:
- Investing for the long-term
- Basing investment decisions on sound research
- Building a diversified portfolio
- Believing in the value of professional investment advice
While no one can predict the future, at Van Kampen, we believe that these
ideas will remain important tenets for investors well into the next century. As
we continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we enter the new
millennium.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Source: Investment Company Institute
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree over the past year, keeping the
economy growing at a healthy pace. High levels of consumer confidence fueled
this heavy retail activity, which pushed the personal savings rate to a record
low as spending rates outpaced income growth. Although the U.S. economy
experienced a slowdown during the second quarter of 1999, growth rebounded
toward the end of the reporting period.
EMPLOYMENT SITUATION
The strong job market helped support the strength of the economy. During the
reporting period, the unemployment rate reached its lowest level in almost 30
years, and wages continued to climb. The wage pressures were balanced somewhat
by productivity gains. However, these pressures ultimately pushed the cost of
labor higher in the second quarter, as the employment cost index recorded its
biggest gain in eight years before returning to a more moderate level in the
third quarter.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report. The Federal Reserve Board remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
its three interest rate cuts from the fall of 1998, raising rates in June,
August, and November 1999 to keep the economy from overheating.
U.S. GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
Third Quarter 1997 through Third Quarter 1999
[BAR GRAPH]
<TABLE>
<S> <C>
97Q3 4.0
97Q4 3.1
98Q1 6.7
98Q2 2.1
98Q3 3.8
98Q4 5.9
99Q1 3.7
99Q2 1.9
99Q3 5.5
</TABLE>
Source: Bureau of Economic Analysis
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1999
VAN KAMPEN MUNICIPAL TRUST
(NYSE TICKER SYMBOL--VKQ)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ (14.47%)
One-year total return based on NAV(2)..................... (8.64%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 7.28%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 11.38%
SHARE VALUATIONS
Net asset value........................................... $14.60
Closing common stock price................................ $13.1875
One-year high common stock price (12/07/98)............... $17.375
One-year low common stock price (10/26/99)................ $12.9375
Preferred share (Series A) rate(5)........................ 3.600%
Preferred share (Series B) rate(5)........................ 3.600%
Preferred share (Series C) rate(5)........................ 3.450%
Preferred share (Series D) rate(5)........................ 3.500%
</TABLE>
(1) Total return based on market price assumes an investment at the 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 stock price at the end of the period indicated.
(2) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) The taxable-equivalent distribution rate is calculated assuming a 36%
federal income tax bracket.
(5) See "Notes to Financial Statements" footnote #6, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN MUNICIPAL TRUST
We recently spoke with representatives of the adviser of the Van Kampen
Municipal Trust about the key events and economic forces that shaped the markets
during the past year. David C. Johnson, portfolio manager, has managed the Trust
since its inception in 1991 and worked in the investment industry since 1981. He
is joined by Peter W. Hegel, chief investment officer for fixed-income
investments. The following discussion reflects their views on the Trust's
performance during the 12 months ended October 31, 1999.
Q WHAT HAPPENED IN THE MUNICIPAL MARKET DURING THE REPORTING PERIOD?
A Bonds of all types experienced price declines during the past 12 months as
interest rates rose, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two
interest-rate increases during the summer, the bond market declined as the
nation's strong economic growth continued to spark inflation fears, leading to
concern about future rate hikes. Because of low institutional demand for
municipal bonds during the period, these conditions affected municipals more
than their taxable counterparts--corporate and Treasury bonds. The yields of
newly issued 30-year AAA municipal bonds rose more than a full percentage point
during the 12-month period, so the prices of existing bonds dropped
concurrently. The bonds in the Trust's portfolio were not spared by this market
movement and suffered price declines along with the rest of the municipal
market.
The interest-rate increases also suppressed municipal bond supply, bringing
overall nationwide issuance down more than 20 percent in the first ten months of
the year compared with 1998. Supply was down in almost every sector, with
electric-utility and health-care bonds experiencing the most significant drops.
Although new issuance kept pace with last year's active market, the amount of
bonds issued through refinancing was down more than 50 percent for the year
through October. Many municipalities simply chose not to refinance outstanding
bonds because of the higher interest rates they would have to pay in the current
marketplace.
Q DID MUNICIPAL BONDS BENEFIT FROM THE STRONG ECONOMY?
A Yes. The effects of the healthy economy were reflected in the good credit
conditions in the municipal market, even though prices suffered. With the
exception of the health-care sector, overall credit quality remained high, and
we witnessed a number of credit upgrades as tax revenues kept municipal finances
strong.
4
<PAGE> 6
Q WHAT TECHNIQUES DID YOU USE TO MANAGE THE TRUST IN THESE CONDITIONS?
A Many of the Trust's more seasoned holdings were nearing their call dates,
so we took advantage of higher interest rates in the municipal market to
replace these bonds with new issues. This allowed us to extend the Trust's
protection from bond calls with securities that were paying similar rates.
Because bond prices had declined during the period, we were also able to enhance
the Trust's tax management by selling these and other holdings at a capital
loss. Using this strategy, we offset some of the gains we had earned early in
1999 to avoid the need to distribute taxable capital gains to shareholders this
year.
We used a related strategy by increasing the portfolio's duration, or
sensitivity to interest-rate changes. We sold the bonds that were about to be
called and purchased longer-duration securities such as zero-coupon bonds. We
feel that the longer duration will benefit the Trust in a declining
interest-rate environment by allowing it to participate more fully in a market
rally. In the short term, however, the longer duration negatively affected the
Trust's total return as interest rates climbed.
Q WHAT AREAS OF THE MUNICIPAL MARKET WERE MOST ATTRACTIVE TO YOU?
A One of the most attractive sectors during the past year was
transportation--especially tollway bonds--because we've seen such heavy
issuance in that area. These projects are visible ways for voters to see
their tax dollars at work, so they tend to be well-funded when the economy is
strong. As a result, we saw many attractive offerings and were able to increase
our exposure to this sector. At the end of October, transportation represented
the Trust's fourth largest sector at 9.6 percent of the portfolio.
In addition, we found value in the general-purpose category, which
historically has been a strong sector through a range of market conditions.
General-purpose bonds represented the Trust's largest sector at the end of
October at 16.4 percent. To focus more on sectors such as general purpose and
transportation, we reduced our position in health care. Although many
health-care bonds remain attractive, the challenges imposed by managed care and
changing Medicare reimbursement policies have led us to focus on other areas of
the market in recent months. Reducing health care benefited the Trust's total
return because this sector underperformed the rest of the market during the
year. For additional portfolio highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A Total return performance was disappointing because of the general downturn
in bond prices and the Trust's increased duration. In addition, the
Trust's leverage component hurt its performance during the period.
Although leverage helps the Trust provide higher income levels to common
shareholders, it made the portfolio more sensitive to the interest-rate
increases we experienced during the reporting period. For the one-year period
ended October 31, 1999, the Trust returned -14.47 percent(1) based on market
5
<PAGE> 7
price. This reflects a decrease in market price from $16.8125 per share on
October 31, 1998, to $13.1875 per share on October 31, 1999.
On the positive side, the dividend remained unchanged during the past 12
months. The monthly federally tax-exempt dividend of $0.08 per share translates
to a distribution rate of 7.28 percent(3) based on the Trust's closing market
price on October 31, 1999. Because the Trust is exempt from federal income
taxes, this distribution rate is equivalent to a taxable yield of 11.38
percent(4) for an investor in the 36 percent federal income tax bracket. Please
refer to the chart and footnotes on page 3 for additional performance results.
Past performance does not guarantee future performance.
Q WHAT DO YOU SEE AHEAD FOR THE ECONOMY AND THE MUNICIPAL MARKET?
A In the coming months, we will probably see a slowing economy, which may be
partly the result of year 2000 concerns. Wage increases will likely keep
inflation fears at the forefront, although increasing productivity should
be able to offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided, but we believe that market activity should
pick up early in 2000. In the meantime, we will continue to focus on finding
attractive-yielding bonds and protecting the Trust from bond calls as much as
possible. We will also use our extensive research capabilities to look for
attractive opportunities throughout the coming months.
[SIG]
David C. Johnson
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues and lower-quality issues. Normally, lower-quality
issues provide higher yields to compensate investors for the additional
credit risk.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has
more potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates (i.e. a 5-year duration means the bond will fall about 5 percent in
value if interest rates rise by 1 percent). The longer a bond's duration,
the greater the effect of interest rate movements on its price. Typically,
funds with shorter durations perform better in rising rate environments,
while funds with longer durations perform better when rates decline.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody Investors Service. Bonds rated below BBB or Baa are
noninvestment grade.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from
the new bonds are generally invested in U.S. government securities.
Prerefunding typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
ZERO COUPON BONDS: A corporate or municipal bond that is traded at a deep
discount to face value and pays no interest. It is redeemed at maturity for
full face value.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN MUNICIPAL TRUST
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
General Purpose 16.4 13.6
Health Care 14.9 18.0
Industrial Revenue 10.2 12.3
Transportation 9.6 4.3
Higher Education 6.0 4.8
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
SEPTEMBER 1991 THROUGH OCTOBER 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Sep 1991 14.81 15.00
Oct 1991 14.81 15.05
14.88 15.10
15.13 15.24
15.25 15.19
15.25 15.18
14.75 15.18
15.00 15.31
15.25 15.61
15.63 15.98
16.25 17.01
16.13 16.33
15.75 16.24
Oct 1992 15.13 15.75
15.50 16.01
15.63 16.00
16.00 16.05
16.50 16.78
16.50 16.57
16.50 16.68
16.25 16.66
16.25 16.86
16.63 16.79
16.75 17.04
16.63 17.26
Oct 1993 16.88 17.11
16.25 16.81
16.50 17.27
16.88 17.45
15.63 16.81
14.88 15.53
15.00 15.46
15.25 15.57
15.13 15.39
15.13 15.54
15.00 15.56
14.38 15.13
Oct 1994 13.50 14.59
13.50 14.00
13.00 14.48
14.50 15.03
14.88 15.58
14.88 15.72
14.63 15.57
14.38 15.81
14.38 15.50
14.25 15.58
14.25 15.73
14.00 15.76
Oct 1995 14.13 15.95
14.63 16.35
14.13 16.56
15.00 16.60
14.88 16.42
14.13 15.99
13.75 15.76
13.75 15.72
14.00 15.80
14.25 15.90
14.50 15.84
14.50 16.02
Oct 1996 14.38 16.17
14.50 16.32
13.88 16.27
14.63 16.19
14.75 16.29
14.13 15.96
14.50 16.05
14.63 16.24
15.06 16.39
15.63 16.96
15.75 16.60
15.69 16.77
Oct 1997 15.69 16.84
16.00 16.86
16.19 17.09
16.31 17.21
16.19 17.15
15.81 17.09
15.63 16.80
15.88 17.04
16.13 17.04
16.19 16.99
16.19 17.32
17.00 17.51
Oct 1998 16.81 17.39
17.00 17.35
16.94 16.82
16.19 18.92
16.31 16.66
16.31 16.55
16.00 16.52
15.25 16.24
15.19 15.71
15.06 15.64
14.50 15.20
13.94 15.03
Oct 1999 13.19 14.60
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN MUNICIPAL TRUST
CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS
AS OF OCTOBER 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa BB/Ba
------- ----- --- ------- -----
<S> <C> <C> <C> <C> <C>
As of October 31, 1999 45.80 7.80 13.90 20.00 0.60
</TABLE>
<TABLE>
<CAPTION>
NON-RATED
---------
<S> <C>
As of October 31, 1999 11.90
</TABLE>
AS OF OCTOBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa BB/Ba
------- ----- --- ------- -----
<S> <C> <C> <C> <C> <C>
As of October 31, 1998 46.50 9.20 13.70 19.00 0.60
</TABLE>
<TABLE>
<CAPTION>
NON-RATED
---------
<S> <C>
As of October 31, 1998 11.00
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DISTRIBUTION HISTORY
FOR THE PERIOD ENDED OCTOBER 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS CAPITAL GAINS
--------- -------------
<S> <C> <C>
'Nov 1998' 0.08
'Dec 1998' 0.08 0.5064
'Jan 1999' 0.08
'Feb 1999' 0.08
'Mar 1999' 0.08
'Apr 1999' 0.08
'May 1999' 0.08
'Jun 1999' 0.08
'Jul 1999' 0.08
'Aug 1999' 0.08
'Sep 1999' 0.08
'Oct 1999' 0.08
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 103.6%
CALIFORNIA 9.4%
$ 3,000 California Hlth Facs Fin Auth
Rev Casa De Las-A (MBIA Insd)... 5.250% 08/01/17 $ 2,779,140
10,000 California Hlth Facs Fin Auth
Rev Cedars Sinai Med Ctr Ser A
(a)............................. 6.125 12/01/24 9,823,400
5,000 Contra Costa, CA Home Mtg Fin
Auth Home Mtg Rev (MBIA Insd)... * 09/01/17 1,746,200
1,500 Davis, CA Pub Fac Fin Auth Loc
Agy Rev......................... 6.600 09/01/25 1,506,825
2,000 Del Mar, CA Race Track Auth Rev
Rfdg............................ 6.000 08/15/06 2,061,000
7,210 Delano, CA Ctfs Partn Ser A
(Prerefunded @ 01/01/03)........ 9.250 01/01/22 8,358,913
11,150 Foothill/Eastern Corridor Agy CA
Toll Rd Rev Cap Apprec Sr Lien-Ser
A............................... * 01/01/18 3,825,007
3,000 Foothill/Eastern Corridor Agy CA
Toll Rev Cap Apprec Rfdg........ * 01/15/27 1,545,270
15,000 Foothill/Eastern Corridor Agy CA
Toll Rd Rev Cap Apprec Rfdg..... * 01/15/30 2,137,200
47,810 Foothill/Eastern Corridor Agy CA
Toll Rd Rev Cap Apprec Rfdg..... * 01/15/33 5,577,515
15,000 Foothill/Eastern Corridor Agy CA
Toll Rd Rev Cap Apprec Rfdg..... * 01/15/37 1,347,150
25,000 Foothill/Eastern Corridor Agy CA
Toll Rd Rev Cap Apprec Rfdg..... * 01/15/38 2,102,750
18,000 Foothill/Eastern Corridor Agy CA
Toll Rd Rev Rfdg Cap Apprec..... * 01/15/25 3,557,880
2,240 Huntington Park, CA Redev Agy
Rev Tax Alloc Santa Fe Redev.... 6.200 10/01/27 2,123,789
16,540 Lodi, CA Elec Sys Rev Ctfs Partn
Cap Apprec Ser B (MBIA Insd).... * 01/15/29 2,630,025
3,000 Los Angeles, CA Uni Sch Dist
Ctfs Partn Multiple Pptys Proj
Ser A (FSA Insd)................ 5.500 10/01/16 2,924,130
3,860 Midpeninsula Reg Open Space Dist
CA Fin Auth Rev Cap Apprec
(AMBAC Insd).................... * 09/01/27 663,766
3,670 Midpeninsula Reg Open Space Dist
CA Fin Auth Rev Cap Apprec
(AMBAC Insd).................... * 09/01/30 518,901
10,000 Orange Cnty, CA Recovery Ctfs
Ser A Rfdg (MBIA Insd) (b)...... 6.000 06/01/09 10,734,200
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 5,695 Sacramento, CA City Fin Auth Rev
Comb Proj B (MBIA Insd)......... * 11/01/14 $ 2,416,616
1,375 San Bernadino, CA Jt Pwrs Fin
Auth Alloc Rev Central City
Merged Proj A Rfdg (AMBAC
Insd)........................... 5.750% 07/01/20 1,360,948
11,950 San Joaquin Hills, CA Tran
Corridor Agy Toll Rd Rev Cap
Apprec Ser A Rfdg (MBIA Insd)... * 01/15/31 1,785,330
16,000 San Joaquin Hills, CA Tran
Corridor Agy Toll Rd Rev Cap
Apprec Ser A Rfdg (MBIA Insd)... * 01/15/34 1,977,920
5,500 San Joaquin Hills, CA Tran
Corridor Agy Toll Rd Rev Cap
Apprec Ser A Rfdg (MBIA Insd)... * 01/15/32 770,715
7,000 San Joaquin Hills, CA Tran
Corridor Agy Toll Rd Rev Cap
Apprec Ser A Rfdg (MBIA Insd)... * 01/15/30 1,111,460
9,000 San Joaquin Hills, CA Tran
Corridor Agy Toll Rd Rev Cap
Apprec Ser A Rfdg (MBIA Insd)... * 01/15/26 1,832,580
1,000 Stockton, CA Cmnty Fac Dist Spl
Tax No. 1-A (b)................. 5.800 09/01/14 944,330
------------
78,162,960
------------
COLORADO 11.3%
5,000 Boulder Cnty, CO Rev Natl Cent
Atmosphere Impt & Rfdg.......... 6.900 12/01/07 5,275,850
8,500 Boulder Cnty, CO Rev Natl Cent
Atmosphere Impt & Rfdg.......... 7.000 12/01/13 8,936,900
1,160 Colorado Hsg Fin Auth Single
Family Pgm Sr Gtd Mtg Ln D3 (FHA
Gtd)............................ 7.200 08/01/23 1,219,752
2,000 Colorado Springs, CO Utils Rev
Sub Lien Sys Impt Ser A......... 4.750 11/15/26 1,645,620
9,135 Denver, CO City & Cnty Arpt Rev
Ser A (b)....................... 8.250 11/15/12 9,587,639
6,695 Denver, CO City & Cnty Arpt Rev
Ser A (b)....................... 8.500 11/15/23 7,042,738
7,795 Denver, CO City & Cnty Arpt Rev
Ser A (b)....................... 8.000 11/15/25 8,160,741
865 Denver, CO City & Cnty Arpt Rev
Ser A (Prerefunded @
11/15/00)....................... 8.250 11/15/12 919,599
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLORADO (CONTINUED)
$ 8,790 Denver, CO City & Cnty Arpt Rev
Ser D (b)....................... 7.000% 11/15/25 $ 9,051,766
2,310 Denver, CO City & Cnty Arpt Rev
Ser D (Prerefunded @
11/15/01)....................... 7.000 11/15/25 2,434,232
8,000 Denver, CO City & Cnty Spl Fac
Arpt Rev United Airls Proj Ser
A............................... 6.875 10/01/32 8,002,720
10,000 E-470 Pub Hwy Auth CO Rev Cap
Apprec Sr Ser B (MBIA Insd)..... * 09/01/20 2,796,000
15,000 E-470 Pub Hwy Auth CO Rev Cap
Apprec Sr Ser B (MBIA Insd)..... * 09/01/24 3,268,050
10,000 E-470 Pub Hwy Auth CO Rev Cap
Apprec Sr Ser B (MBIA Insd)..... * 09/01/22 2,468,600
22,000 Meridian Metro Dist CO
Peninsular & Oriental Steam
Navig Co Rfdg (LOC: Meridian
Assoc East) (b)................. 7.500 12/01/11 23,261,700
------------
94,071,907
------------
CONNECTICUT 3.8%
7,140 Connecticut St Hlth & Edl Fac
Auth Rev
Nursing Home Proj AHF/Hartford
(Prerefunded @ 11/01/04)........ 7.125 11/01/24 8,012,365
3,540 Mashantucket Western Pequot
Tribe CT Spl Rev Ser A,
144A--Private Placement (c)..... 6.400 09/01/11 3,643,014
3,460 Mashantucket Western Pequot
Tribe CT Spl Rev Ser A,
144A--Private Placement
(Prerefunded @ 09/01/07) (c).... 6.400 09/01/11 3,821,432
6,500 Mashantucket Western Pequot
Tribe CT Spl Rev Ser B,
144A--Private Placement (c)..... 5.750 09/01/18 6,044,025
7,000 Mashantucket Western Pequot
Tribe CT Spl Rev Ser B,
144A--Private Placement (c)..... 5.750 09/01/27 6,356,840
4,000 Stamford, CT Hsg Auth
Multi-Family Rev Fairfield Apts
Proj Rfdg....................... 4.750 12/01/28 3,741,240
------------
31,618,916
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DELAWARE 0.4%
$ 900 Delaware St Econ Dev Auth Rev
Exempt Fac Delmarva Pwr & Lt
Co.............................. 7.500% 10/01/17 $ 919,485
2,460 Delaware St Hsg Auth Rev Sr Home
Mtg Ser B Subser B2............. 7.200 12/01/21 2,539,950
------------
3,459,435
------------
DISTRICT OF COLUMBIA 0.3%
1,000 District of Columbia Hosp Rev
Medlantic Hlthcare Group A Rfdg
(MBIA Insd) (b)................. 5.875 08/15/19 1,011,620
2,000 District of Columbia Rev
Carnegie Endowment.............. 5.750 11/15/26 1,892,360
------------
2,903,980
------------
FLORIDA 3.4%
2,600 Brevard Cnty, FL Sch Brd Ctfs
Partn Ser A (AMBAC Insd)........ 5.400 07/01/10 2,609,204
6,500 Gulf Breeze, FL Rev Cap Fdg Ser
B (MBIA Insd)................... 4.500 10/01/27 5,131,425
1,000 Hillsborough Cnty, FL Indl Dev
Auth Indl Dev Rev Univ Cmnty
Hosp (MBIA Insd)................ 5.750 08/15/14 1,001,290
3,000 Martin Cnty, FL Indl Dev Auth
Indl Dev Rev Indiantown
Cogeneration Proj Ser A Rfdg.... 7.875 12/15/25 3,055,560
23,000 Miami-Dade Cnty, FL Spl Oblig
Sub Ser A Rfdg (MBIA Insd)...... * 10/01/21 5,942,280
8,775 Miami-Dade Cnty, FL Spl Oblig
Sub Ser A Rfdg (MBIA Insd)...... * 10/01/22 2,131,010
7,530 Sarasota Cnty, FL Hlth Fac Auth
Rev Hlthcare Kobernick/Meadow Pk
(Prerefunded @ 07/01/02)........ 10.000 07/01/22 8,627,648
------------
28,498,417
------------
GEORGIA 4.7%
45,000 Georgia Loc Govt Ctfs Partn
Grantor Trust Ser A (MBIA Insd)
(b)............................. 4.750 06/01/28 36,851,850
2,000 Royston, GA Hosp Auth Hosp Ctfs
Rev Ty Cobb Healthcare Sys Rfdg
Inc............................. 6.500 07/01/27 1,902,740
------------
38,754,590
------------
HAWAII 1.0%
2,420 Honolulu, HI City & Cnty Ser D
(FGIC Insd) (a)................. 4.650 02/01/07 2,319,473
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HAWAII (CONTINUED)
$ 2,565 Honolulu, HI City & Cnty Ser D
(FGIC Insd) (a)................. 4.700% 02/01/08 $ 2,438,110
2,000 Honolulu, HI City & Cnty Ser D
(FGIC Insd) (a)................. 4.750 02/01/09 1,880,400
4,000 Honolulu, HI City & Cnty
Wastewtr Sys Rev Cap Apprec
(FGIC Insd)..................... * 07/01/12 1,940,600
------------
8,578,583
------------
ILLINOIS 9.5%
4,650 Bedford Park, IL Tax Increment
Rev Sr Lien Bedford City Sq
Proj............................ 9.250 02/01/12 5,077,660
3,650 Carol Stream, IL First Mtg Rev
Windsor Pk Mnr Proj............. 7.000 12/01/13 3,674,565
1,500 Champaign Cnty, IL Cmnty Unit
Sch Dist No 116 Urbana Ser C
(FGIC Insd)..................... * 01/01/16 550,095
1,300 Champaign Cnty, IL Cmnty Unit
Sch Dist No 116 Urbana Ser C
(FGIC Insd)..................... * 01/01/18 417,430
22,000 Chicago, IL Brd Ed Sch Reform
Cap Apprec B-1 (FGIC Insd)...... * 12/01/20 6,020,740
14,400 Chicago, IL Brd Ed Sch Reform
Cap Apprec B-1 (FGIC Insd)...... * 12/01/22 3,477,312
10,000 Chicago, IL Brd of Ed Sch Reform
Cap Apprec Ser A (FGIC Insd).... * 12/01/31 1,364,300
2,500 Chicago, IL O'Hare Intl Arpt Spl
Fac Rev American Airls Inc Proj
Rfdg............................ 8.200 12/01/24 2,825,975
7,475 Chicago, IL O'Hare Intl Arpt Spl
Fac Rev United Airls Inc........ 8.400 05/01/04 7,729,299
4,315 Chicago, IL O'Hare Intl Arpt Spl
Fac Rev United Airls Inc Ser
B............................... 8.950 05/01/18 4,582,573
1,000 Hodgkins, IL Tax Increment...... 9.500 12/01/09 1,105,640
4,000 Hodgkins, IL Tax Increment Ser A
Rfdg............................ 7.625 12/01/13 4,258,360
2,500 Illinois Dev Fin Auth Rev
Catholic Charities
Hsg Dev......................... 6.350 01/01/25 2,301,725
2,705 Illinois Dev Fin Auth Rev Loc
Govt Pgm Aurora East Sch (MBIA
Insd)........................... * 12/01/15 1,035,204
2,000 Illinois Dev Fin Auth Solid
Waste Disp Rev Waste Mgmt Inc
Proj............................ 5.050 01/01/10 1,756,520
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 1,740 Illinois Edl Fac Auth Rev
Riverside Hlth Sys
Ser A Rfdg...................... 5.900% 10/01/14 $ 1,629,284
2,500 Illinois Hlth Fac Auth Rev
Evangelical Hosp Ser C Rfdg (FSA
Insd)........................... 6.750 04/15/12 2,685,525
7,750 Illinois Hlth Fac Auth Rev
Fairview Oblig Group Proj Ser A
(Prerefunded @ 10/01/02)........ 9.500 10/01/22 8,925,210
4,335 Illinois Hlth Fac Auth Rev
Hinsdale Hosp Ser B Rfdg........ 9.000 11/15/15 4,645,776
1,500 Illinois Hlth Fac Auth Rev Sarah
Bush Lincoln Hlth Cent
(Prerefunded @ 5/15/02)......... 7.250 05/15/12 1,627,335
4,575 Illinois Hlth Facs Auth Rev West
Suburban Hosp Ser A Rfdg........ 5.750 07/01/20 4,040,777
1,510 Roselle, IL Multi-Family Hsg Rev
Waterbury Apts Ser A Rfdg (GNMA
Collateralized)................. 7.000 01/01/25 1,601,838
3,230 St Clair Cnty, IL Cap Impt Rev
McKendree Clg Proj Rfdg......... 6.000 02/01/24 2,863,686
3,060 Will Cnty, IL Cmnty Sch Dist No
161 Summit Hill Cap Apprec (FGIC
Insd)........................... * 01/01/12 1,527,521
3,505 Will Cnty, IL Cmnty Sch Dist No
161 Summit Hill Cap Apprec (FGIC
Insd)........................... * 01/01/14 1,518,541
2,010 Will Cnty, IL Cmnty Sch Dist No
161 Summit Hill Cap Apprec (FGIC
Insd)........................... * 01/01/16 755,861
2,415 Will Cnty, IL Cmnty Sch Dist No
161 Summit Hill Cap Apprec (FGIC
Insd)........................... * 01/01/19 744,907
------------
78,743,659
------------
INDIANA 0.7%
2,500 Indiana Bond Bank Spl Pgm Ser
F............................... 7.150 08/01/15 2,607,125
2,739 Indiana St Dev Fin Auth Indl Dev
Rev Unr-Rohn Inc Proj........... 7.500 03/01/11 2,855,105
------------
5,462,230
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KENTUCKY 0.8%
$ 2,000 Ashland, KY Solid Waste Rev
Ashland Oil
Inc Proj........................ 7.200% 10/01/20 $ 2,085,760
4,000 Elsmere, KY Indl Dev Rev Rfdg... 6.750 04/01/10 4,394,880
------------
6,480,640
------------
LOUISIANA 1.6%
710 East Baton Rouge, LA Mtg Fin
Auth Single Family Mtg Pur Ser A
Rfdg (GNMA
Collateralized) (b)............. 7.100 10/01/24 732,408
3,645 East Baton Rouge, LA Mtg Fin
Auth Single Family Mtg Pur Ser C
Rfdg (GNMA
Collateralized) (b)............. 7.000 04/01/32 3,744,727
9,588 Louisiana St Univ & Agricultural
& Mechanical College Univ Rev... 5.750 10/30/18 8,569,780
------------
13,046,915
------------
MAINE 0.1%
1,000 Maine Vets Homes ME Rev......... 7.750 10/01/20 1,063,970
------------
MARYLAND 2.0%
2,300 Baltimore, MD Cap Apprec Cons
Pub Impt & Rfdg (FGIC Insd)..... * 10/15/06 1,605,285
1,845 Baltimore, MD Cap Apprec Ser A
(FGIC Insd)..................... * 10/15/07 1,208,991
2,075 Baltimore, MD Cap Apprec Ser A
(Prerefunded @ 10/15/05) (FGIC
Insd)........................... * 10/15/07 1,376,389
105,060 Maryland St Cmnty Dev Admin Dept
Hsg & Cmnty Dev Single Family
Rev Pgm 6....................... * 04/01/30 11,255,078
1,000 Maryland St Econ Dev Corp
Student Hsg Rev Collegiate Hsg
Towson Ser A.................... 5.750 06/01/29 891,180
------------
16,336,923
------------
MASSACHUSETTS 1.3%
940 Massachusetts St Dev Fin Agy Rev
Boston Architectural Cent....... 6.100 09/01/18 861,736
1,000 Massachusetts St Dev Fin Agy Rev
Boston Architectural Cent....... 6.250 09/01/28 903,490
2,600 Massachusetts St Hlth & Edl Fac
Auth
Rev Med Cent of Central MA Ser A
(Prerefunded @ 07/01/01)........ 7.100 07/01/21 2,766,686
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 5,000 Massachusetts St Hlth & Edl Fac
Auth Rev New England Med Cent
Hosp Ser G (Embedded Swap) (MBIA
Insd) (d)....................... 3.100/5.000% 07/01/13 $ 4,655,600
1,375 Massachusetts St Hlth & Edl Fac
Auth Rev Winchester Hosp Ser D
Rfdg
(Connie Lee Insd)............... 5.750 07/01/14 1,362,116
------------
10,549,628
------------
MICHIGAN 1.6%
4,000 Detroit, MI Loc Dev Fin Auth Tax
Increment Sr Ser B.............. 6.700 05/01/21 3,897,440
1,000 Detroit, MI Loc Dev Fin Auth Ser
C............................... 6.850 05/01/21 981,160
1,180 Hillsdale, MI Hosp Fin Auth Hosp
Rev Hillsdale Cmnty Hlth Cent... 5.750 05/15/18 1,048,772
2,000 Michigan Muni Bond Auth Rev Loc
Govt Ln Ser C-A (FSA Insd)...... * 06/15/13 915,140
5,000 Michigan St Hosp Fin Auth Rev
Detroit Med Cent Oblig Ser A.... 5.250 08/15/28 3,906,600
1,000 Michigan St Hosp Fin Auth Rev
Hosp Genesys Regl Med Ser A
Rfdg............................ 5.375 10/01/13 970,410
1,635 Michigan St Hosp Fin Auth Rev
Saratoga Cmnty Hosp Rfdg
(Prerefunded @ 06/01/02)........ 8.750 06/01/10 1,803,863
------------
13,523,385
------------
MISSISSIPPI 0.5%
1,985 Mississippi Home Corp Single
Family Rev Mtg Ser F (GNMA
Collateralized)................. 7.550 12/01/27 2,180,582
2,000 Perry Cnty, MS Pollutn Ctl Rev
Leaf River Forest Proj Rfdg..... 5.200 10/01/12 1,809,820
------------
3,990,402
------------
MISSOURI 1.0%
1,400 Ellisville, MO Indl Dev Auth Rev
Rfdg & Impt Gambrill Gardens
Proj............................ 6.100 06/01/20 1,257,242
1,000 Ellisville, MO Indl Dev Auth Rev
Rfdg & Impt Gambrill Gardens
Proj............................ 6.200 06/01/29 893,180
1,740 Good Shepherd Nursing Home Dist
MO Nursing Home Fac Rev
(Prerefunded @ 08/15/05)........ 7.625 08/15/15 2,011,858
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSOURI (CONTINUED)
$ 1,250 Hannibal, MO Indl Dev Auth Hlth
Fac Rev
Hannibal Regl Hlthcare Sys Inc
(Prerefunded @ 09/01/01)........ 9.500% 03/01/22 $ 1,414,263
2,810 Perry Cnty, MO Nursing Home Rev
Rfdg............................ 5.900 03/01/28 2,411,092
------------
7,987,635
------------
MONTANA 0.5%
3,900 Montana St Coal Severance Tax
Broadwater Pwr Proj Ser A
Rfdg............................ 6.875 12/01/17 4,039,893
------------
NEBRASKA 0.2%
1,250 American Pub Energy Agy NE Gas
Sup Rev NE Pub Gas Agy Proj Ser
A (AMBAC Insd).................. 4.375 06/01/10 1,126,550
690 Nebraska Invt Fin Auth Single
Family Hsg Rev Ser D Rfdg (GNMA
Collateralized)................. 5.850 09/01/28 663,939
------------
1,790,489
------------
NEVADA 0.6%
3,720 Clark Cnty, NV Transn Ser A
(FGIC Insd)..................... 4.500 12/01/16 3,088,344
2,545 Clark Cnty, NV Transn Ser B
(FGIC Insd)..................... 4.500 12/01/16 2,112,859
------------
5,201,203
------------
NEW HAMPSHIRE 1.1%
4,800 New Hampshire High Edl & Hlth
Fac Auth Rev Daniel Webster
College Issue................... 6.300 07/01/29 4,362,384
3,955 New Hampshire High Edl & Hlth
Fac Auth Rev Cheshire Med Ctr... 4.875 07/01/28 3,115,354
2,000 New Hampshire High Edl & Hlth
Fac Auth Rev Riverwoods at
Exeter Ser A.................... 6.500 03/01/23 1,875,780
------------
9,353,518
------------
NEW JERSEY 6.2%
4,000 Camden Cnty, NJ Impt Auth Lease
Rev-A........................... 8.000 06/01/27 4,272,720
1,000 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/00 986,900
1,000 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/02 900,080
1,000 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/03 857,300
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW JERSEY (CONTINUED)
$ 1,000 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/04 $ 814,850
1,460 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/05 1,128,361
1,465 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/06 1,072,893
1,615 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/07 1,117,984
1,555 Eastern Camden Cnty, NJ Regl Sch
Dist Rfdg (FGIC Insd)........... * 03/01/08 1,015,539
25,000 New Jersey Econ Dev Auth St
Contract Econ Recovery (MBIA
Insd) (b)....................... 5.900% 03/15/21 25,286,750
5,000 New Jersey Econ Dev Auth Wtr Fac
Rev (FGIC Insd) (b)............. 6.500 04/01/22 5,145,300
4,825 New Jersey St Transn Tr Fd Auth
Transn Sys Ser A................ 5.750 06/15/18 4,805,507
3,500 New Jersey St Turnpike Auth
Turnpike Rev Ser C (FSA Insd)... 6.500 01/01/16 3,811,185
------------
51,215,369
------------
NEW MEXICO 0.0%
361 Santa Fe, NM Single Family Mtg
Rev Rfdg........................ 8.450 12/01/11 377,839
------------
NEW YORK 9.2%
5,550 Metro Tran Auth NY Svcs Contract
Commuter Fac Ser N Rfdg (b)..... 6.000 07/01/11 5,690,970
1,900 Metro Tran Auth NY Svcs Contract
Tran Fac Ser N Rfdg............. 6.000 07/01/11 1,948,260
2,250 Metro Transn Auth NY Tran Facs
Rev
Ser A Rfdg...................... 4.750 07/01/24 1,861,200
7,000 New York City Ser A (b)......... 6.250 08/01/08 7,448,630
25 New York City Ser A (Prerefunded
@ 08/15/01)..................... 7.750 08/15/12 26,876
265 New York City Ser C............. 7.100 08/15/10 276,541
400 New York City Ser C (Prerefunded
@ 8/15/01)...................... 7.100 08/15/10 420,036
420 New York City Ser F............. 8.250 11/15/02 454,772
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 5,000 New York, NY ADJ SubSer A1
(Embedded Swap)................. 6.170% 08/01/12 $ 5,006,750
5,000 New York, NY City Muni Wtr Fin
Auth Wtr & Swr Sys Rev Cap
Apprec Ser B Rfdg (FSA Insd).... * 06/15/13 2,306,150
4,000 New York, NY City Tran Auth Met
Transn Auth Triborough Ser A
(AMBAC Insd).................... 5.625 01/01/15 3,907,960
5,000 New York St Dorm Auth Rev City
Univ Ser F (b).................. 5.500 07/01/12 4,872,800
6,800 New York St Dorm Auth Rev Cons
City Univ Sys Ser A (b)......... 5.625 07/01/16 6,620,208
1,250 New York St Dorm Auth Rev
FHA-Sarah Neuman Nursing Home
(AMBAC Insd).................... 5.500 08/01/37 1,135,562
3,835 New York St Dorm Auth Rev Mental
Hlth Svcs Facs Ser C Rfdg (MBIA
Insd)........................... 4.750 08/15/19 3,188,381
2,750 New York St Dorm Auth Rev Mental
Hlth Svcs Facs Ser C Rfdg (MBIA
Insd)........................... 4.750 08/15/22 2,288,467
3,250 New York St Energy Resh & Dev
Auth Fac Rev Cons Edison Co Proj
Ser B Rfdg (MBIA Insd).......... 5.250 08/15/20 2,960,490
4,425 New York St Environmental Fac
Corp Pollutn Ctl Rev Ser E
(Prerefunded @ 6/15/04)......... 6.700 06/15/10 4,851,172
2,950 New York St Environmental Fac
Corp Pollutn Ctl Rev St Wtr
Revolving Fd Ser E.............. 6.700 06/15/10 3,192,431
2,000 New York St Med Care Facs Fin
Agy Rev Hosp-A Rfdg (MBIA
Insd)........................... 5.375 02/15/25 1,820,080
2,920 New York St Med Care Fac Fin Agy
Rev Mental Hlth Svcs Fac Ser
D............................... 7.400 02/15/18 3,122,298
3,930 New York St Urban Dev Corp Sub
Lien Corp Purp Rfdg (a)......... 5.500 07/01/22 3,612,731
3,000 Onondaga Cnty, NY Indl Dev Agy
Swr Fac Rev Bristol--Meyers
Squibb Co Proj.................. 5.750 03/01/24 2,917,440
6,218 Plainedge, NY Union Free Sch
Dist #2063...................... 6.000 06/01/12 6,319,708
------------
76,249,913
------------
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH CAROLINA 1.9%
$ 2,500 North Carolina Eastern Muni Pwr
Agy Pwr Sys Rev Ser C (ACA
Insd)........................... 5.000% 01/01/21 $ 2,090,650
13,300 North Carolina Muni Pwr Agy #1
Catawba Elec Rev (MBIA
Insd) (b)....................... 6.000 01/01/12 13,745,949
------------
15,836,599
------------
OHIO 3.9%
3,195 Cleveland Cuyahoga Cnty, OH Dev
Port Auth Rev Cleveland Bond Fd
Ser B........................... 5.375 05/15/18 2,782,813
5,375 Franklin Cnty, OH Hosp Rev Holy
Cross Hlth Sys Ser B Rfdg (MBIA
Insd) (b)....................... 5.250 06/01/10 5,338,127
1,905 Jefferson Cnty, OH Impt & Rfdg
(FSA Insd)...................... 5.700 12/01/13 1,948,491
3,700 Lucas Cnty, OH Hosp Rev Promedia
Hlthcare Oblig Grp Rfdg (AMBAC
Insd)........................... 5.625 11/15/16 3,554,960
2,070 Montgomery Cnty, OH Hosp Rev
Grandview Hosp & Med Cent
Rfdg............................ 5.250 12/01/02 2,048,389
2,400 Montgomery Cnty, OH Hosp Rev
Grandview Hosp & Med Cent
Rfdg............................ 5.375 12/01/05 2,315,520
2,270 Montgomery Cnty, OH Hosp Rev
Kettering Med Cent Impt & Rfdg
(MBIA Insd)..................... 6.250 04/01/20 2,359,325
1,000 Ohio St Air Qual Dev Auth Rev
JMG Funding Ltd Partn Proj Rfdg
(AMBAC Insd).................... 6.375 04/01/29 1,011,630
7,000 Parma, OH Hosp Impr Rev Parma
Cmnty Gen Hosp Assoc Rfdg....... 5.375 11/01/29 5,998,790
5,000 Reynoldsburg, OH Hlth Care Fac
Rev Wesley Ridge Proj (GNMA
Collateralized)................. 6.150 10/20/38 5,024,800
------------
32,382,845
------------
OKLAHOMA 1.7%
2,110 Cleveland Cnty, OK Home Ln Auth
Single Family Mtg Rev Rfdg...... 8.000 08/01/12 2,193,387
1,240 Kay Cnty, OK Home Fin Auth Rev
Single Family Mtg Ser A Rfdg
(AMBAC Insd).................... 7.000 11/01/11 1,418,932
3,000 Oklahoma Dev Fin Auth Rev St
John Hlth
Sys Rfdg (a).................... 5.750 02/15/25 2,867,070
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OKLAHOMA (CONTINUED)
$ 6,075 Oklahoma Hsg Fin Agy Single
Family Rev Mtg Class B (GNMA
Collateralized)................. 7.997% 08/01/18 $ 6,549,458
1,500 Tulsa, OK Muni Arpt Tran Rev
American Airls Inc.............. 7.600 12/01/30 1,571,430
------------
14,600,277
------------
PENNSYLVANIA 3.2%
1,500 Allegheny Cnty, PA Ser C-49 Rfdg
(MBIA Insd) (a)................. 5.000 04/01/06 1,487,415
2,500 Allegheny Cnty, PA Hosp Dev Auth
Rev Hosp OH Vly Genl Hosp
Rfdg............................ 5.875 04/01/11 2,417,200
2,000 Berks Cnty, PA Muni Auth Rev
Phoebe Devitt Homes Proj A1
Rfdg............................ 5.700 05/15/18 1,740,600
1,000 Berks Cnty, PA Muni Auth Rev
Phoebe Devitt Homes Proj A1
Rfdg............................ 5.750 05/15/22 854,730
2,165 Clarion Cnty, PA Hosp Auth Hosp
Rev Clarion Hosp Proj
(Prerefunded @ 07/01/01)........ 8.500 07/01/21 2,345,171
2,475 Harrisburg, PA Cap Apprec Notes
Ser F Rfdg (AMBAC Insd)......... * 03/15/14 1,063,805
4,000 Lancaster, PA Ser A Rfdg (FGIC
Insd)........................... 4.500 05/01/28 3,119,920
135 Lehigh Cnty, PA Gen Purp Auth
Rev First Mtg Bible Fellowship
Proj A Rfdg..................... 4.800 12/15/03 128,312
210 Lehigh Cnty, PA Gen Purp Auth
Rev First Mtg Bible Fellowship
Proj A Rfdg..................... 5.000 12/15/05 195,493
275 Lehigh Cnty, PA Gen Purp Auth
Rev First Mtg Bible Fellowship
Proj A Rfdg..................... 5.100 12/15/06 255,098
295 Lehigh Cnty, PA Gen Purp Auth
Rev First Mtg Bible Fellowship
Proj A Rfdg..................... 5.250 12/15/07 273,241
210 Lehigh Cnty, PA Gen Purp Auth
Rev First Mtg Bible Fellowship
Proj A Rfdg..................... 5.300 12/15/08 193,135
320 Lehigh Cnty, PA Gen Purp Auth
Rev First Mtg Bible Fellowship
Proj A Rfdg..................... 5.300 12/15/09 290,080
240 Lehigh Cnty, PA Gen Purp Auth
Rev First Mtg Bible Fellowship
Proj A Rfdg..................... 5.400 12/15/10 216,967
2,000 Montgomery Cnty, PA Indl Dev
Auth Retirement Cmnty Rev Adult
Cmntys Total Svcs Ser B......... 5.625 11/15/12 1,905,820
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 2,700 Pennsylvania Econ Dev Fin Auth
Res Recovery Rev Colver Proj Ser
D............................... 7.125% 12/01/15 $ 2,862,729
9,000 Philadelphia, PA Sch Dist Ser A
(MBIA Insd)..................... 4.500 04/01/23 7,183,530
------------
26,533,246
------------
RHODE ISLAND 1.2%
2,390 Providence, RI Redev Agy Ctfs
Partn Ser A..................... 8.000 04/01/24 2,522,956
4,750 Rhode Island Hsg & Mtg Fin Corp
Ser 8 (Inverse Fltg)............ 10.215 04/01/24 5,112,187
2,000 Rhode Island St Hlth & Edl Bldg
Corp Rev Higher Edl Fac Roger
Williams (Prerefunded @
11/15/04) (Connie Lee Insd)..... 7.250 11/15/24 2,262,600
------------
9,897,743
------------
TENNESSEE 0.9%
4,000 Municipal Energy Acquisition
Corp TN Gas Rev (FSA Insd)...... 4.000 03/01/05 3,775,800
4,500 Municipal Energy Acquisition
Corp TN Gas Rev (FSA Insd)...... 4.125 03/01/07 4,155,840
------------
7,931,640
------------
TEXAS 8.3%
2,600 Alief, TX Indpt Sch Dist (PSF
Gtd) (a)........................ 4.750 02/15/18 2,235,298
2,600 Alief, TX Indpt Sch Dist (PSF
Gtd) (a)........................ 4.750 02/15/19 2,221,960
6,500 Alliance Arpt Auth Inc TX Spl
Fac Rev American Airls Inc Proj
(b)............................. 7.500 12/01/29 6,777,355
6,000 Brazos River Auth TX Pollutn Ctl
Rev Coll TX Util Elec Co Proj A
(AMBAC Insd) (b)................ 6.750 04/01/22 6,350,700
420 Brazos, TX Higher Edl Auth Inc
Student Ln Rev Subser C2 Rfdg... 7.100 11/01/04 451,219
2,500 Coastal Bend Hlth Fac Dev TX Ser
C (Inverse Fltg) (AMBAC Insd)... 7.828 11/15/13 2,637,500
6,000 Dallas Cnty, TX Util &
Reclamation Dist Ser B Rfdg
(AMBAC Insd) (a)................ 5.875 02/15/29 5,874,120
15,000 Dallas-Fort Worth, TX Intl Arpt
Fac Impt Corp Rev American Airls
Inc (b)......................... 7.500 11/01/25 15,582,600
3,600 Dallas-Fort Worth, TX Intl Arpt
Fac Impt Corp Rev Delta Airls
Inc............................. 7.625 11/01/21 3,780,612
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 3,885 Houston, TX Indpt Sch Dist Pub
Cap Apprec Cesar E Chavez Ser A
(AMBAC Insd).................... * 09/15/18 $ 1,217,948
3,885 Houston, TX Indpt Sch Dist Pub
Cap Apprec Cesar E Chavez Ser A
(AMBAC Insd).................... * 09/15/20 1,068,414
3,885 Houston, TX Indpt Sch Dist Pub
Cap Apprec Cesar E Chavez Ser A
(AMBAC Insd).................... * 09/15/21 1,002,213
39,250 Houston, TX Wtr & Sew Sys Rev
Cap Apprec Jr Lien Ser A Rfdg
(FSA Insd)...................... * 12/01/28 6,533,162
4,575 Keller, TX Indpt Sch Dist Cap
Apprec Rfdg (PSF Gtd)........... * 08/15/12 2,212,379
4,784 Region One Ed Svc Cent Sub-Tech
Fac Proj........................ 6.590% 12/15/17 4,725,556
2,200 Rockwall, TX Indpt Sch Dist Cap
Apprec Rfdg (PSF Gtd)........... * 08/15/17 734,624
1,655 Texas Gen Svcs Comm Partn Int
Lease Purch Ctfs................ 7.250 08/15/11 1,687,019
4,000 Trinity River Auth TX Regl
Wastewtr Sys Rev Unrefunded Bal
Ser A Rfdg (AMBAC Insd)......... 5.000 08/01/16 3,578,600
------------
68,671,279
------------
UTAH 0.6%
3,810 Bountiful, UT Hosp Rev South
Davis Cmnty Hosp Proj
(Prerefunded @ 06/15/04)........ 9.500 12/15/18 4,646,447
630 Utah St Hsg Fin Agy Single
Family Mtg Insd Ser E2 (FHA
Gtd)............................ 7.150 07/01/24 646,519
------------
5,292,966
------------
VIRGINIA 3.1%
7,500 Charles City Cnty, VA Indl Dev
Auth Solid Waste Disp Fac Rev
Waste Mgmt VA Inc Proj Rfdg..... 4.875 02/01/09 6,580,575
1,500 Henrico Cnty, VA Indl Dev Auth
Pub Fac Lease Rev Henrico Cnty
Regl Jail Proj.................. 6.500 08/01/10 1,627,470
1,500 Henrico Cnty, VA Indl Dev Auth
Pub Fac Lease Rev Henrico Cnty
Regl Jail Proj.................. 7.125 08/01/21 1,658,985
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIRGINIA (CONTINUED)
$ 1,630 Richmond, VA (FSA Insd) (a)..... 5.125% 01/15/08 $ 1,598,508
1,340 Richmond, VA (FSA Insd) (a)..... 5.500 01/15/10 1,326,854
4,165 Richmond, VA (FSA Insd) (a)..... 5.500 01/15/12 4,066,748
3,755 Richmond, VA (FSA Insd) (a)..... 5.500 01/15/18 3,516,032
5,000 Roanoke, VA Indl Dev Auth Hosp
Rev Roanoke Mem Hosp Rfdg Ser B
Rfdg (MBIA Insd) (d)............ 4.700/6.250 07/01/20 5,069,900
------------
25,445,072
------------
WASHINGTON 2.0%
4,000 Bellevue, WA Convention Cent
Auth Spl Oblig Rev Rfdg (MBIA
Insd)........................... * 02/01/24 901,120
4,275 Washington St Higher Ed Facs
Auth Rev Gonzaga Univ Proj Rfdg
(MBIA Insd)..................... 4.750 04/01/22 3,540,555
1,750 Washington St Pub Pwr Supply Sys
Nuclear Proj No 1 Rev (MBIA
Insd)........................... 5.750 07/01/12 1,770,685
10,495 Washington St Pub Pwr Supply Sys
Nuclear Proj No 1 Rev Ser B Rfdg
(MBIA Insd) (b)................. 5.600 07/01/15 10,180,150
------------
16,392,510
------------
WEST VIRGINIA 0.8%
6,550 Harrison Cnty, WV Cnty Cmnty
Solid Waste Disp Rev Potomac
Edison Co Ser A (b)............. 6.875 04/15/22 6,798,376
------------
WISCONSIN 2.0%
1,000 Madison, WI Indl Dev Rev Madison
Gas & Elec Co Proj A............ 6.750 04/01/27 1,049,070
5,250 Wisconsin Hsg & Econ Dev Auth
Hsg Rev Ser B (b)............... 7.050 11/01/22 5,566,995
2,130 Wisconsin St Hlth & Edl Fac Auth
Rev Kenosha Hosp & Med Ctr
Proj............................ 5.700 05/15/20 1,921,495
7,280 Wisconsin St Hlth & Edl Fac Auth
Rev Children's Hosp (FGIC
Insd)........................... 5.000 08/15/10 6,977,443
1,500 Wisconsin St Hlth & Edl Facs
Auth Rev Kenosha Hosp & Med Ctr
Proj............................ 5.625 05/15/29 1,311,765
------------
16,826,768
------------
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WYOMING 0.7%
$ 1,615 Wyoming Cmnty Dev Auth Single
Family Ser G (FHA Gtd).......... 7.250% 06/01/21 $ 1,679,229
4,000 Wyoming Cmnty Dev Auth Single
Family Ser H (FHA Gtd).......... 7.100 06/01/12 4,210,440
------------
5,889,669
------------
PUERTO RICO 2.1%
14,875 Puerto Rico Comwlth Hwy & Tran
Auth Tran Rev Ser A (b)......... 4.750 07/01/38 11,749,911
2,000 Puerto Rico Indl Tourist Edl Med
& Environmental Ctl Fac Fin Auth
Higher Ed Rev................... 5.375 02/01/29 1,777,040
4,000 Puerto Rico Pub Bldgs Auth Gtd
Pub Ed & Hlth Fac Ser M......... 5.700 07/01/16 3,934,200
------------
17,461,151
------------
TOTAL INVESTMENTS 103.6%
(Cost $871,157,597)................................................. 861,422,540
LIABILITIES IN EXCESS OF OTHER ASSETS (3.6%)......................... (30,534,461)
------------
NET ASSETS 100.0%.................................................... $830,888,079
============
</TABLE>
* Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, open option and open futures transactions.
(c) 144A securities are those which are exempt from registration under rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(d) Security is a "Step-up" bond where the coupon increases or steps up at a
predetermined date.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
CA Mtg--California Mortgage Insurance
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Assoc.
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
PSF--Public School Fund
See Notes to Financial Statements
26
<PAGE> 28
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $871,157,597)....................... $861,422,540
Receivables:
Interest................................................... 14,733,324
Investments Sold........................................... 6,794,577
Options at Market Value (Net premiums paid of $145,472)..... 18,750
Other....................................................... 121,368
------------
Total Assets........................................... 883,090,559
------------
LIABILITIES:
Payables:
Investments Purchased...................................... 47,974,678
Custodian Bank............................................. 1,913,254
Income Distributions - Common and Preferred Shares......... 810,781
Investment Advisory Fee.................................... 496,158
Variation Margin on Futures................................ 433,000
Administrative Fee......................................... 141,760
Preferred Share Maintenance Expense........................ 102,222
Affiliates................................................. 50,715
Accrued Expenses............................................ 146,950
Trustees' Deferred Compensation and Retirement Plans........ 132,962
------------
Total Liabilities...................................... 52,202,480
------------
NET ASSETS.................................................. $830,888,079
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 12,000 issued with liquidation preference of
$25,000 per share)......................................... $300,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 36,365,393 shares issued and
outstanding)............................................... 363,654
Paid in Surplus............................................. 538,413,671
Net Unrealized Depreciation................................. (8,294,834)
Accumulated Undistributed Net Investment Income............. 4,618,528
Accumulated Net Realized Loss............................... (4,212,940)
------------
Net Assets Applicable to Common Shares................. 530,888,079
------------
NET ASSETS.................................................. $830,888,079
============
NET ASSET VALUE PER COMMON SHARE ($530,888,079 divided
by 36,365,393 shares outstanding)...................... $ 14.60
============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................... $ 53,029,016
------------
EXPENSES:
Investment Advisory Fee.................................... 6,215,012
Administrative Fee......................................... 1,775,718
Preferred Share Maintenance................................ 787,224
Custody.................................................... 59,018
Trustees' Fees and Related Expenses........................ 55,219
Legal...................................................... 29,894
Other...................................................... 447,486
------------
Total Expenses......................................... 9,369,571
Less Credits Earned on Cash Balances................... 1,334
------------
Net Expenses........................................... 9,368,237
------------
NET INVESTMENT INCOME...................................... $ 43,660,779
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments.............................................. $ (4,204,754)
Options.................................................. 1,027,815
Futures.................................................. 400,017
------------
Net Realized Loss.......................................... (2,776,922)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period.................................. 72,656,123
------------
End of the Period:
Investments............................................ (9,735,057)
Futures................................................ 1,566,945
Options................................................ (126,722)
------------
(8,294,834)
------------
Net Unrealized Depreciation During the Period.............. (80,950,957)
------------
NET REALIZED AND UNREALIZED LOSS........................... $(83,727,879)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS................. $(40,067,100)
============
</TABLE>
See Notes to Financial Statements
28
<PAGE> 30
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended October 31, 1999, the Two Months Ended October 31, 1998 and
the Year Ended August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Two Months Ended Year Ended
October 31, 1999 October 31, 1998 August 31, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............... $ 43,660,779 $ 7,585,417 $45,706,310
Net Realized Gain/Loss.............. (2,776,922) 4,823,009 13,636,918
Net Unrealized
Appreciation/Depreciation During
the Period........................ (80,950,957) (1,915,326) 12,546,410
------------ ------------ ------------
Change in Net Assets from
Operations........................ (40,067,100) 10,493,100 71,889,638
------------ ------------ ------------
Distributions from Net Investment
Income:
Common Shares..................... (34,894,640) (5,803,033) (34,818,029)
Preferred Shares.................. (8,719,281) (758,421) (10,827,208)
------------ ------------ ------------
(43,613,921) (6,561,454) (45,645,237)
------------ ------------ ------------
Distributions from Net Realized
Gains:
Common Shares..................... (15,464,760) -0- -0-
Preferred Shares.................. (2,188,669) (1,479,439) -0-
------------ ------------ ------------
(17,653,429) (1,479,439) -0-
------------ ------------ ------------
Total Distributions................. (61,267,350) (8,040,893) (45,645,237)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES............. (101,334,450) 2,452,207 26,244,401
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued
through Dividend Reinvestment..... 1,596,622 -0- -0-
------------ ------------ ------------
TOTAL INCREASE/DECREASE IN NET
ASSETS............................ (99,737,828) 2,452,207 26,244,401
NET ASSETS:
Beginning of the Period............. 930,625,907 928,173,700 901,929,299
------------ ------------ ------------
End of the Period (Including
accumulated undistributed net
investment income of $4,618,528,
$4,571,670 and $3,547,707,
respectively...................... $830,888,079 $930,625,907 $928,173,700
============ ============ ============
</TABLE>
See Notes to Financial Statements
29
<PAGE> 31
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Two Months Ended
October 31, 1999 October 31, 1998 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a).......................... $ 17.387 $ 17.319 $ 16.596
-------- -------- ---------
Net Investment Income............. 1.201 .210 1.260
Net Realized and Unrealized
Gain/Loss....................... (2.304) .080 .722
-------- -------- ---------
Total from Investment Operations.... (1.103) .290 1.982
-------- -------- ---------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders..... .960 .160 .960
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders........ .240 .021 .299
Distributions from Net Realized
Gain:
Paid to Common Shareholders..... .425 -0- -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders........ .060 .041 -0-
-------- -------- ---------
Total Distributions................. 1.685 .222 1.259
-------- -------- ---------
Net Asset Value, End of the
Period............................ $ 14.599 $ 17.387 $ 17.319
======== ======== =========
Market Price Per Share at End of the
Period............................ $13.1875 $16.8125 $ 16.1875
Total Investment Return at Market
Price (b)......................... (14.47%) 4.84%* 9.06%
Total Return at Net Asset Value
(c)............................... (8.64%) 1.33%* 10.38%
Net Assets at End of the Period (In
millions)......................... $ 830.9 $ 930.6 $ 928.2
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**.......................... 1.60% 1.57% 1.57%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)................. 5.95% 6.48% 5.66%
Portfolio Turnover.................. 80% 6%* 94%
* Non-Annualized
** Ratio of Expenses to Average Net
Assets Including Preferred
Shares............................ 1.06% 1.07% 1.06%
</TABLE>
(a) Net Asset Value at September 27, 1991, is adjusted for common and preferred
share offering costs of $.192 per common share.
(b) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(d) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
30
<PAGE> 32
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 27, 1991
(Commencement
Year Ended August 31, of Investment
- --------------------------------------------------- Operations) to
1997 1996 1995 1994 1993 August 31, 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$15.842 $15.734 $15.562 $17.035 $16.328 $14.808
------- ------- ------- ------- ------- -------
1.275 1.295 1.311 1.347 1.410 1.166
.734 .105 .266 ( 1.424) .780 1.370
------- ------- ------- ------- ------- -------
2.009 1.400 1.577 ( .077) 2.190 2.536
------- ------- ------- ------- ------- -------
.960 .990 1.084 1.116 1.100 .811
.295 .302 .321 .280 .246 .205
-0- -0- -0- -0- .111 -0-
-0- -0- -0- -0- .026 -0-
------- ------- ------- ------- ------- -------
1.255 1.292 1.405 1.396 1.483 1.016
------- ------- ------- ------- ------- -------
$16.596 $15.842 $15.734 $15.562 $17.035 $16.328
======= ======= ======= ======= ======= =======
$15.750 $14.500 $14.250 $15.000 $16.750 $16.125
15.87% 8.98% 2.39% ( 3.94%) 11.90% 13.24%*
11.14% 7.09% 8.55% ( 2.22%) 12.31% 14.64%*
$ 901.9 $ 874.6 $ 870.7 $ 864.4 $ 917.9 $ 891.7
1.61% 1.61% 1.65% 1.64% 1.59% 1.49%
6.04% 6.20% 6.48% 6.52% 7.08% 6.85%
54% 36% 49% 47% 48% 100%*
1.07% 1.06% 1.07% 1.09% 1.06% 1.03%
</TABLE>
See Notes to Financial Statements
31
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Municipal 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 a high level of
current income exempt from federal income tax, consistent with preservation of
capital. The Trust will invest in a portfolio consisting substantially of
municipal obligations rated investment grade at the time of investment, but may
invest up to 20% of its assets in unrated securities which are believed to be of
comparable quality to those rated investment grade. The Trust commenced
investment operations on September 27, 1991.
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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Municipal bonds are valued by independent pricing
services or dealers using the mean of the bid and asked prices or, in the
absence of market quotations, at fair value based upon yield data relating to
municipal bonds with similar characteristics and general market conditions.
Securities which are not valued by independent pricing services are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made.
32
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1999, the Trust had an accumulated capital loss
carryforward for tax purposes of $2,772,714 which will expire on October 31,
2007. Net realized gains or losses may differ for financial reporting and tax
purposes as a result of gains or losses recognized for tax purposes on open
option and futures positions at October 31, 1999.
At October 31, 1999, for federal income tax purposes, cost of long-term
investments is $871,157,597; the aggregate gross unrealized appreciation is
$24,749,161 and the aggregate gross unrealized depreciation is $34,484,218,
resulting in net unrealized depreciation on long-term investments of $9,735,057.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends
monthly from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
F. EXPENSE REDUCTION--During the period ended October 31, 1999, the Trust's
custody fee was reduced by $1,334 as a result of credits earned on overnight
cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. (the "Adviser") will provide investment advice and
facilities to the Trust for an annual fee payable monthly of .70% of the average
net assets of the Trust. In addition, the Trust will pay a monthly
administrative fee to Van Kampen Funds Inc. or its affiliates
33
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
(collectively "Van Kampen"), the Trust's Administrator, at an annual rate of
.20% of the average net assets of the Trust. The administrative services
provided by the Administrator include record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $16,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $204,500 representing Van Kampen's cost of providing accounting
and legal services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Trust. The maximum
annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At October 31, 1999, October 31, 1998, and August 31, 1998 common share paid in
surplus aggregated $538,413,671, $536,817,998 and $536,817,998 respectively:
<TABLE>
<CAPTION>
YEAR ENDED TWO MONTHS ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998 AUGUST 31, 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning Shares....... 36,270,469 36,270,469 36,270,469
Shares Issued Through
Dividend
Reinvestment......... 94,924 -0- -0-
---------- ---------- ----------
Ending Shares.......... 36,365,393 36,270,469 36,270,469
========== ========== ==========
</TABLE>
4. INVESTMENT TRANSACTIONS
For the year ended October 31, 1999, the cost of purchases and proceeds from
sales of investments, excluding short-term investments, were $720,178,707 and
$724,435,694.
34
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index. The Trust has a variety of reasons to use derivative instruments, such
as to attempt to protect the Trust against possible changes in the market value
of its portfolio and to manage the portfolio's effective yield, maturity and
duration. All of the Trust's portfolio holdings, including derivative
instruments, are marked to market each day with the change in value reflected in
the unrealized appreciation/depreciation. Upon disposition, a realized gain or
loss is recognized accordingly, except when exercising a call option contract or
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION 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
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
Transactions in options for the year ended October 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1998............... 2,100 $ 498,615
Options Written and Purchased (Net)........... 3,575 716,072
Options Terminated in Closing Transactions
(Net)....................................... (4,250) (1,390,753)
Options Expired (Net)......................... (1,125) 30,595
------ -----------
Outstanding at October 31, 1999............... 300 $ (145,472)
====== ===========
</TABLE>
The related futures contracts of the outstanding option transactions as of
October 31, 1999, and the descriptions and market values are as follows:
<TABLE>
<CAPTION>
EXPIRATION MARKET
MONTH/ VALUE OF
DESCRIPTION CONTRACTS EXERCISE PRICE OPTIONS
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bond Future -- Dec 99 --
Purchased Put 300 Dec/110 $18,750
=== =======
</TABLE>
35
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
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 futures on U.S. Treasury Bonds and the Municipal Bond
Index 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, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. 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 October 31, 1999 were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1998........................... 739
Futures Opened............................................ 5,136
Futures Closed............................................ (5,442)
------
Outstanding at October 31, 1999........................... 433
======
</TABLE>
The futures contracts outstanding as of October 31, 1999 and the
descriptions and unrealized appreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C>
Short Contracts--December 1999 Municipal
Bond Index Future (Current notional value of
$110,375 per contract)...................... 433 $1,566,945
=== ==========
</TABLE>
C. INDEXED SECURITIES--These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.
An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yield of the portfolio.
36
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
An Embedded Swap security includes a swap component such that the fixed
coupon component of the underlying bond is adjusted by the difference between
the security's fixed swap rate and the floating swap index. As the floating rate
rises, the coupon is reduced. Conversely, as the floating rate declines, the
coupon is increased. The Trust invests in these instruments as a hedge against a
rise in the short-term interest rates which it pays on its preferred shares.
6. PREFERRED SHARES
Effective with the close of business on April 23, 1999, the liquidation
preference on the Trust's preferred shares decreased from $50,000 to $25,000 per
share. This decrease was effected by means of a 2 for 1 stock split that doubled
the Trust's number of outstanding preferred shares. The total liquidation value
for the Trust was unchanged.
As of October 31, 1999, the Trust had outstanding 12,000 Auction Preferred
Shares ("APS") in four series of 3,000 shares each. Dividends are cumulative and
the dividend rate is periodically reset through an auction process. The dividend
period for Series A is generally seven days. However, effective with the auction
on August 9, 1999, the dividend period for Series A was extended through April
10, 2000. Following this extended dividend period, Series A will revert to its
normal seven day reset period. The dividend period for Series C is 7 days and
the dividend periods for Series B and D are 28 days. The average rate in effect
on October 31, 1999, was 3.5375%. During the year ended October 31, 1999, the
rates ranged from 2.70% to 5.875%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests, and the APS are subject to
mandatory redemption if the tests are not met.
37
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Municipal Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Municipal Trust (the "Trust"), including the portfolio of investments, as
of October 31, 1999, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended, for the
two-month period ended October 31, 1998, and for the year ended August 31, 1998,
and the financial highlights for each of the periods presented. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Municipal Trust as of October 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for the year then ended, for
the two-month period ended October 31, 1998, and for the year ended August 31,
1998, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
December 9, 1999
38
<PAGE> 40
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be
re-registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common Shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
prorata share of brokerage commissions incurred with respect to the Plan Agent's
open market purchases in connection with the reinvestment of dividends and
distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
39
<PAGE> 41
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income
Global Franchise
Global Government Securities
Global Managed Assets
International Magnum
Latin American
Short-Term Global Income*
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM--to view a prospectus, select Download
Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
* Closed to new investors
40
<PAGE> 42
VAN KAMPEN MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
STEVEN MULLER
THEODORE A. MYERS
RICHARD F. POWERS, III* -Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Trust during its taxable year ended
October 31, 1999. The Trust designated 99.6% of the income distributions as a
tax-exempt income distribution. Additionally, during the period, the Trust
designated and paid $10,344,372 as a 20% rate gain distribution. These
distributions, where applicable, were included on 1998's Form 1099-DIV which was
mailed to shareholders in January of 1999. In January, 2000, the Trust will
provide tax information to shareholders for the 1999 calendar year.
41
<PAGE> 43
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where
shareholders voted on the election of trustees and the selection of independent
public accountants.
1) With regard to the election of the following trustees by the common
shareholders:
<TABLE>
<CAPTION>
# OF SHARES
------------------------
IN FAVOR WITHHELD
- -----------------------------------------------------------------------
<S> <C> <C>
David C. Arch................................ 30,086,596 340,556
Howard J Kerr................................ 30,083,164 343,988
Dennis J. McDonnell.......................... 30,086,713 340,439
</TABLE>
The other trustees whose terms did not expire in 1999 are: Rod Dammeyer, Steven
Muller, Theodore A. Myers, Don G. Powell*, Hugo F. Sonnenschein and Wayne W.
Whalen.
2) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 29,988,796 shares voted for the proposal, 166,885
shares voted against, and 271,472 shares abstained.
* On August 9, 1999, Don G. Powell resigned and the Board of Trustees appointed
Richard F. Powers, III.
42
<PAGE> 44
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
43
<PAGE> 45
VAN KAMPEN FUNDS
YOUR NOTES:
44
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877463
<NAME> VAN KAMPEN MUNICIPAL TRUST FUND
<SERIES>
<NUMBER> 11
<NAME> MUNICIPAL TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 871,157,597
<INVESTMENTS-AT-VALUE> 861,422,540
<RECEIVABLES> 21,527,901
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 140,118
<TOTAL-ASSETS> 883,090,559
<PAYABLE-FOR-SECURITIES> 47,974,678
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,227,802
<TOTAL-LIABILITIES> 52,202,480
<SENIOR-EQUITY> 300,000,000
<PAID-IN-CAPITAL-COMMON> 538,777,325
<SHARES-COMMON-STOCK> 36,365,393
<SHARES-COMMON-PRIOR> 36,270,469
<ACCUMULATED-NII-CURRENT> 4,618,528
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,212,940)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,294,834)
<NET-ASSETS> 830,888,079
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,029,016
<OTHER-INCOME> 0
<EXPENSES-NET> (9,368,237)
<NET-INVESTMENT-INCOME> 43,660,779
<REALIZED-GAINS-CURRENT> (2,776,922)
<APPREC-INCREASE-CURRENT> (80,950,957)
<NET-CHANGE-FROM-OPS> (40,067,100)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (43,613,921)
<DISTRIBUTIONS-OF-GAINS> (61,267,350)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 94,924
<NET-CHANGE-IN-ASSETS> (99,737,828)
<ACCUMULATED-NII-PRIOR> 4,571,670
<ACCUMULATED-GAINS-PRIOR> 16,217,411
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,215,012
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,369,571
<AVERAGE-NET-ASSETS> 587,320,206
<PER-SHARE-NAV-BEGIN> 17.387
<PER-SHARE-NII> 1.201
<PER-SHARE-GAIN-APPREC> (2.304)
<PER-SHARE-DIVIDEND> (1.200)
<PER-SHARE-DISTRIBUTIONS> (0.485)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.599
<EXPENSE-RATIO> 1.60
</TABLE>
