<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
CREDIT QUALITY 6
TWELVE-MONTH DIVIDEND HISTORY 6
TOP FIVE SECTORS 7
NET ASSET VALUE AND MARKET PRICE 7
Q&A WITH YOUR PORTFOLIO MANAGERS 8
GLOSSARY OF TERMS 12
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 13
FINANCIAL STATEMENTS 29
NOTES TO FINANCIAL STATEMENTS 34
REPORT OF INDEPENDENT AUDITORS 39
DIVIDEND REINVESTMENT PLAN 40
TRUST OFFICERS AND IMPORTANT ADDRESSES 42
RESULTS OF SHAREHOLDER VOTES 43
</TABLE>
Our generations
of money-
management
experience
may help you
pursue life's
true wealth.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
November 20, 2000
Dear Shareholder,
The first three quarters of 2000 proved to be especially volatile, with all of
the major markets declining in the spring and spending the following months
trying to recover. To manage one's portfolio during such unpredictable times
requires investment-management experience, and the following pages should give
you some insight into how we have performed in this difficult environment.
In this report, the portfolio managers will explain how your investment
performed during the reporting period and describe the strategies they used to
manage your trust during that span. The report will also show you how your
investment has performed over time. Helpful charts summarize the trust's largest
investments, and you can examine the complete portfolio to see all of your
trust's holdings as of the end of your trust's reporting period.
At Van Kampen, we place a high priority on providing you and
your financial advisor with the information you need to help
you monitor your investments during all types of markets. With
nearly four generations of investment-management experience,
we've been around long enough to understand that by investing
with Van Kampen you're entrusting us with much more than your
money. Your investments may help make it possible to afford your next house,
keep up with rising college costs, or enjoy a comfortable retirement.
No matter what your reasons for investing, we're thankful that you've chosen to
place your investments with Van Kampen. We will continue to apply our
generations of money-management experience to helping you pursue life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED RELATIVELY STRONG DURING THE REPORTING PERIOD,
UNDERPINNED BY LOW UNEMPLOYMENT AND RISING PRODUCTIVITY, YET THERE WERE SIGNS
THAT A HEALTHY SLOWDOWN WAS UNDERWAY. GROSS DOMESTIC PRODUCT, THE PRIMARY
MEASURE OF ECONOMIC GROWTH, INCREASED AT A 2.4 PERCENT ANNUALIZED RATE FOR THE
THIRD QUARTER OF 2000. FOLLOWING RELATIVELY MILD FIRST- AND SECOND-QUARTER DATA,
THIS THIRD-QUARTER FIGURE OFFERS FURTHER EVIDENCE THAT GROWTH MIGHT BE SETTLING
BACK TO A MORE MODERATE AND SUSTAINABLE PACE THAN ITS RAPID RATE IN LATE 1999.
CONSUMER SPENDING AND EMPLOYMENT
CONCERNS ABOUT INFLATION REMAINED AT BAY DUE IN PART TO A GRADUAL SLOWDOWN IN
CONSUMER SPENDING. RISING INTEREST RATES, HIGHER ENERGY COSTS, AND A
DISAPPOINTING STOCK MARKET BEGAN TO TEMPER RETAIL SALES, WHICH LEVELED OFF FROM
THE BLISTERING PACE OF LATE 1999 AND EARLY 2000. AND WHILE CONSUMER SPENDING WAS
BRISK, THE OVERALL TREND HAS BEEN DOWNWARD THIS YEAR.
THE JOBLESS RATE CONTINUED TO BE EXTREMELY LOW BY HISTORICAL STANDARDS, BUT A
RECENT DECLINE IN NEW JOB CREATION SUPPORTS THE POPULAR BELIEF THAT THE ECONOMY
IS MODERATING. ALTHOUGH EMPLOYER COSTS SUCH AS WAGES AND BENEFITS WERE RISING AT
THE END OF 1999 AND THE BEGINNING OF 2000, OVER THE PAST SIX MONTHS THE
EMPLOYMENT COST INDEX HAS SHOWN MARKED DECELERATION, WHICH SHOULD HELP EASE
INFLATION CONCERNS.
INTEREST RATES AND INFLATION
THE FEDERAL RESERVE BOARD (THE FED) RAISED INTEREST RATES FOUR TIMES DURING THE
LAST 12 MONTHS IN AN EFFORT TO WARD OFF INFLATION BY CURBING ECONOMIC GROWTH.
OVER THE SAME PERIOD, THE CONSUMER PRICE INDEX ROSE 3.5 PERCENT, WHICH INDICATED
THAT INFLATION GENERALLY REMAINS UNDER CONTROL.
THE FED HAS ACKNOWLEDGED THE RISK OF RISING INFLATION AND WILL STAY ON GUARD, AS
RISING ENERGY COSTS AND LOW UNEMPLOYMENT THREATEN TO PROPEL THIS FIGURE UPWARD
IN THE COMING MONTHS. AS LONG AS INFLATION IS CONTAINED AND THE PACE OF ECONOMIC
GROWTH REMAINS FAVORABLE, THE FED IS LIKELY TO HOLD INTEREST RATES STEADY IN THE
SHORT TERM, WHICH COULD HELP STABILIZE THE STOCK AND BOND MARKETS.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(September 30, 1998--September 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.60
Sep 00 2.40
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(October 31, 1998--October 31, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Oct 98 5.00 1.50
4.75 1.50
4.75 1.60
Jan 99 4.75 1.70
4.75 1.60
4.75 1.70
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.70
Apr 00 6.00 3.00
6.50 3.10
6.50 3.70
Jul 00 6.50 3.70
6.50 3.30
6.50 3.50
Oct 00 6.50 3.50
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of October 31, 2000)
<TABLE>
<CAPTION>
------------------------------------------------------------------------
<S> <C> <C>
NYSE Ticker Symbol VKQ
------------------------------------------------------------------------
One-year total return based on market price(1) 2.80%
------------------------------------------------------------------------
One-year total return based on NAV(2) 8.88%
------------------------------------------------------------------------
Distribution rate as a % of closing common stock
price(3) 6.75%
------------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 10.55%
------------------------------------------------------------------------
Net asset value $14.91
------------------------------------------------------------------------
Closing common stock price $12.6250
------------------------------------------------------------------------
One-year high common stock price (07/05/00) $13.9375
------------------------------------------------------------------------
One-year low common stock price (12/22/99) $12.1250
------------------------------------------------------------------------
Preferred share (Series A) rate(5) 4.150%
------------------------------------------------------------------------
Preferred share (Series B) rate(5) 4.320%
------------------------------------------------------------------------
Preferred share (Series C) rate(5) 4.200%
------------------------------------------------------------------------
Preferred share (Series D) rate(5) 4.250%
------------------------------------------------------------------------
</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.
4
<PAGE> 6
(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 is no guarantee of 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.
5
<PAGE> 7
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of October 31, 2000
<S> <C> <C>
- AAA/Aaa............ 53.6%
- AA/Aa.............. 8.6%
- A/A................ 10.0%
- BBB/Baa............ 15.0%
- BB/Ba.............. 1.2%
- Non-Rated.......... 11.6%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 45.8%
- AA/Aa.............. 7.8%
- A/A................ 13.9%
- BBB/Baa............ 20.0%
- BB/Ba.............. 0.6%
- Non-Rated.......... 11.9%
[PIE CHART]
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
TWELVE-MONTH DIVIDEND HISTORY
(for the period ended October 31, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
11/99 0.080
12/99 0.080
1/00 0.080
2/00 0.080
3/00 0.080
4/00 0.080
5/00 0.080
6/00 0.078
7/00 0.078
8/00 0.078
9/00 0.071
10/00 0.071
</TABLE>
The dividend history represents past performance of the trust and is no
guarantee of the trust's future dividends.
6
<PAGE> 8
TOP FIVE SECTORS
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
General Purpose 19.60 16.40
Health Care 15.90 14.90
Industrial Revenue 8.80 10.20
Higher Education 7.50 6.00
Transportation 5.40 9.60
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--September 1991 through October 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
9/91 15.0000 14.8100
15.2400 15.1250
15.1800 14.7500
15.9800 15.6250
9/92 16.2400 15.7500
16.0000 15.6250
16.5700 16.5000
16.8600 16.2500
9/93 17.2600 16.6250
17.2700 16.5000
15.5300 14.8750
15.3900 15.1250
9/94 15.1300 14.3750
14.4800 13.0000
15.7200 14.8750
15.5000 14.3750
9/95 15.7600 14.0000
16.5600 14.1250
15.9900 14.1250
15.8000 14.0000
9/96 16.0200 14.5000
16.2700 13.8750
15.9600 14.1250
16.3900 15.0625
9/97 16.7700 15.6875
17.0900 16.1875
17.0900 15.8120
17.0400 16.1250
9/98 17.5100 17.0000
16.8200 16.9375
16.5500 16.3125
15.7100 15.1875
9/99 15.0300 13.9375
14.3900 12.7500
14.6400 12.8750
14.5800 13.3750
14.8200 12.8750
10/00 14.9100 12.6250
</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.
7
<PAGE> 9
[BYRON PHOTO]
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGER OF THE VAN KAMPEN MUNICIPAL
TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
AND INFLUENCED THE TRUST'S RETURN DURING THE 12 MONTHS ENDED OCTOBER 31, 2000.
THOMAS M. BYRON, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 2000 AND HAS
WORKED IN THE INVESTMENT INDUSTRY SINCE 1981. THE FOLLOWING DISCUSSION REFLECTS
HIS VIEWS ON THE TRUST'S PERFORMANCE.
Q WHAT WERE THE MOST IMPORTANT
DEVELOPMENTS IN THE FIXED-INCOME MARKETS AND HOW DID THE TRUST PERFORM
DURING THE REPORTING PERIOD?
A The key factor in the market's
behavior during the past fiscal year has been generally rising interest rates,
especially at the short end of the maturity spectrum. This rate environment
stemmed from the Federal Reserve Board's commitment to keeping inflation in
check by ratcheting up short-term interest rates whenever the economy threatened
to overheat and push the prices of goods and services higher. In fact, the Fed
increased short-term rates four times during the reporting period, with the last
hike occurring in May 2000.
The strength of the economy, and the accompanying Federal Reserve activity,
caused interest rates to rise across the board for the first half of the
reporting period. In the spring of 2000, the bond market rallied as investors
began to anticipate an end to the Fed's rate-tightening cycle. By the end of
October, short-term rates remained high, but rates in the intermediate to long
maturity segments of the market had actually declined from the levels we had
seen at the start of the reporting period.
Because the trust is leveraged, higher short-term rates placed pressure on
the trust's dividend, as the increased cost of borrowing cut into the fund's
earnings. However, the relatively high long-term rates that prevailed for part
of the reporting period allowed the trust to add new holdings at attractive
yields, partially offsetting the decline in income that occurred as short-term
rates climbed.
After the steady increase in short-term interest rates over the past year,
we have seen a more stable environment in recent months, as the Fed has reacted
to slower economic growth, more efficient workforce output, and moderate price
gains by keeping target lending rates unchanged. The inflation rate, as measured
by the consumer price index, peaked in March 2000 at 3.8 percent and has since
dropped back below the 3 percent level.
8
<PAGE> 10
Supply in the municipal bond market was sharply lower from the levels of a
year ago, as higher interest rates have made it unattractive for municipalities
to retire existing debt. At the same time, strong economic activity has allowed
many municipalities to generate a budget surplus, enabling them to cover
spending that would normally require municipal bond financing.
Because demand has remained strong, the lack of new issuance in the primary
market helped support bond prices, although the somewhat limited selection of
available securities required us to be very selective in choosing new bonds for
the trust's portfolio. In many cases, we found attractive values in the
secondary market, buying and selling bonds that have been in the market for a
while.
The trust continued to provide shareholders with an attractive dividend,
even though the dividend was decreased slightly during the reporting period,
once in June and once in September. Its monthly dividend of $0.071 per share
translates to a distribution rate of 6.75 percent based on the trust's closing
market price on October 31, 2000. Because income from the trust is exempt from
federal income taxes, this distribution rate is equivalent to a yield of 10.55
percent for an investor in the 36 percent federal income tax bracket.
For the 12 months through October 31, 2000, the trust produced a total
return of 2.80 percent based on market price. This reflects a decrease in market
price from $13.1875 per share on October 31, 1999, to $12.6250 per share on
October 31, 2000. Of course, past performance is no guarantee of future results.
As a result of recent market activity, current performance may vary from the
figures shown. By comparison, the Lehman Brothers Municipal Bond Index posted a
total return of 8.51 percent for the same period. This broad-based, unmanaged
index, which reflects the general performance of municipal securities, does not
reflect any commissions or fees that would be paid by an investor purchasing the
securities it represents. Such costs would lower the performance of the index.
It is not possible to invest directly in an index. For additional performance
results, please refer to the chart and footnotes on page 4.
Q HOW DID YOU REACT TO THE
MARKET CONDITIONS YOU ENCOUNTERED IN MANAGING THE TRUST?
A Much of the activity in the trust's
portfolio during the reporting period was guided by a strategic direction we
adopted in February of 2000 and have gradually implemented since then. It was
our goal to lengthen the duration of the portfolio (a measure of its sensitivity
to changes in interest rates) so that it more closely mirrored the benchmark
indicators we use to gauge the trust's performance. At the time, we felt the
market had solid upside potential, and a longer duration would allow the trust
to more fully participate in the gains of the market if it rallied over time.
As we began implementing this strategy, we caught the market at a good time.
Early in the year, the market presented us with attractive yields on
long-duration securities,
9
<PAGE> 11
particularly those priced at deep discounts. We purchased some of these bonds
and sold prerefunded securities and bonds with short calls--many of which were
scheduled to be called or refunded within the next year or two. In effect, this
strategy helped capture additional par value and the potential for capital
appreciation, all while achieving the desired effect of extending the
portfolio's duration. This strategy was a positive in terms of the trust's
performance, especially during the market rally that occurred in the second and
third quarters of 2000.
Q HOW DID THIS STRATEGY AFFECT THE
COMPOSITION OF THE PORTFOLIO?
A A by-product of this market
activity--and the trust's positioning within the market--was an increase in the
overall credit quality of the portfolio. The rallies were strongest at the high
end of the quality spectrum, so these securities saw solid price gains while the
valuations of nonrated and lower-rated securities, such as those rated BBB or
lower, remained fairly flat or decreased.
Over the course of the reporting period, the portfolio composition came to
reflect this trend, as the trust's allocation to AAA rated securities increased
by 7.8 percent (up to 53.6 percent of long-term investments), and its BBB
allocation declined by 5 percent (down to 15 percent of long-term investments).
In general, our bias toward high-quality securities was a boost to portfolio
performance.
In other areas, the trust held several bond issues that were called during
the period, which contributed to reduced allocations in the industrial revenue
sector (down 1.4 percent) and the health-care sector (up 1 percent). We also
engaged in some selective selling of zero-coupon bonds in the transportation
area, which reduced the allocation in that sector by approximately 4 percent.
Q YOU MENTIONED THAT THE TRUST'S
DIVIDEND WAS REDUCED DURING THE REPORTING PERIOD. CAN YOU EXPLAIN WHY?
A A combination of factors made it
necessary to cut the trust's dividend in June 2000 and in September 2000. First,
as a leveraged portfolio, the trust must pay interest on money borrowed at
short-term rates, while investing these funds in longer-term securities. As
short-term rates rose more significantly than longer-term rates, the cost of
this leverage increased during the reporting period and reduced the trust's
income stream.
Second, as we took advantage of higher rates in long-maturity bonds, we
tended to sell older, higher-yielding bonds that had strengthened the trust's
income stream but were susceptible to being called out of the portfolio in the
near future. Essentially, we exchanged their near-term contribution to the
trust's income for an improvement in the portfolio's overall structure and
long-term income potential.
10
<PAGE> 12
Q WHAT DO YOU SEE AHEAD FOR
THE ECONOMY AND THE MUNICIPAL MARKET?
A The outlook for the municipal
bond market will be closely tied to the prospects of the U.S. economy and the
Fed's reaction to key economic indicators. While interest rates have been fairly
steady of late, the Fed's next move will be based on whether inflation shows
signs of heating up. We believe inflation appears to be under control at this
time, but the Fed will be watching economic growth statistics, the labor market,
and the prices of key commodities, such as crude oil, for signs of inflationary
pressures.
Clearly, the direction of interest rates will be determined by the Fed's
reaction to inflationary signals, so we feel it would be imprudent to make a bet
on the direction of interest rates in terms of how we position the trust.
Consequently, we will seek to maintain a neutral stance with respect to the
portfolio's duration in the near term.
We believe the demand for municipal securities should remain healthy. This
will hopefully bode well for the trust, although it will be competing with a
range of investment options, such as individual bonds, mutual funds, and managed
accounts, for investor assets. Also, the stock market may continue to attract
assets away from bonds, depending on its return prospects and price volatility.
We believe bond supply should remain tight, helping to support prices, as
municipalities continue to operate with budget surpluses that can be used for
construction projects, education funding, road improvements, and other
expenditures typically financed by new bond issuance.
We will continue to search for securities that have the potential to enhance
the trust's long-term performance. If our analysis indicates that it would be
advantageous to sell certain bonds--or as bonds are prerefunded, mature
according to schedule, or are called from the portfolio--we will strive to
replace them with bonds that offer the best relative value available at the
time.
11
<PAGE> 13
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CALL FEATURE: Allows a bond issuer to buy back a bond on specific dates at set
prices before the bond's maturity date. 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.
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. 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.
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. Typically, short-term bonds mature in
five years or less, intermediate-term bonds mature in five to ten years, and
long-term bonds mature after ten years.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding 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.
SECONDARY MARKET: A market where securities are traded after they are initially
offered.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower credit ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
ZERO-COUPON BONDS: A corporate or municipal bond that is traded at a deep
discount to face value and pays no coupon interest. It may be redeemed for full
face value at maturity.
12
<PAGE> 14
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
October 31, 2000
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 94.2%
ARIZONA 0.5%
$ 1,425 Arizona Cap Facs Fin Corp Student Hsg Rev
AZ St Univ Proj............................ 6.250% 09/01/32 $ 1,406,048
2,500 Maricopa Cnty, AZ Indl Dev Auth Ed Rev AZ
Charter Schs Proj 1 Ser A.................. 6.750 07/01/29 2,514,725
------------
3,920,773
------------
ARKANSAS 0.4%
1,000 Arkansas St Dev Fin Auth Hosp Rev
Washington Regl Med Cent................... 7.250 02/01/20 1,009,890
2,500 Arkansas St Dev Fin Auth Hosp Rev
Washington Regl Med Cent................... 7.375 02/01/29 2,504,550
------------
3,514,440
------------
CALIFORNIA 5.6%
4,000 Anaheim, CA Pub Fing Auth Lease Rev Cap
Apprec Sub Pub Impts Proj C (FSA Insd)..... * 09/01/20 1,326,040
6,010 California Edl Facs Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd).......... * 10/01/21 1,694,459
6,235 California Edl Facs Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd).......... * 10/01/22 1,644,855
6,435 California Edl Facs Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd).......... * 10/01/25 1,391,183
8,435 California Edl Facs Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd).......... * 10/01/26 1,710,028
700 California Hlth Facs Fin Auth Rev Casa De
Las Ser A (MBIA Insd)...................... 5.250 08/01/17 701,932
2,650 California Statewide Cmntys Dev Auth Ctfs
Partn...................................... 7.250 11/01/29 2,719,669
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg
Rev (MBIA Insd)............................ * 09/01/17 1,987,950
1,030 Davis, CA Pub Fac Fin Auth Loc Agy Rev..... 6.600 09/01/25 1,071,859
2,000 Del Mar, CA Race Track Auth Rev Rfdg....... 6.000 08/15/06 2,053,800
7,110 Delano, CA Ctfs Partn Ser A (Prerefunded @
01/01/03).................................. 9.250 01/01/22 7,948,482
18,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Rfdg........................ * 01/15/25 3,922,200
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$47,810 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Rfdg........................ * 01/15/33 $ 5,989,637
6,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Sr Lien Ser A............... * 01/01/18 2,354,100
2,240 Huntington Park, CA Redev Agy Rev Tax Alloc
Santa Fe Redev Rfdg........................ 6.200% 10/01/27 2,271,226
16,540 Lodi, CA Elec Sys Rev Ctfs Partn Cap Apprec
Ser B (MBIA Insd).......................... * 01/15/29 3,034,263
5,585 Sacramento, CA City Fin Auth Rev Comb Proj
B (MBIA Insd).............................. * 11/01/14 2,716,488
1,375 San Bernadino, CA Jt Pwrs Fin Auth Alloc
Rev Central City Merged Proj A Rfdg (AMBAC
Insd)...................................... 5.750 07/01/20 1,468,211
1,000 Stockton, CA Cmnty Fac Dist Spl Tax No.
1-A........................................ 5.800 09/01/14 1,010,880
------------
47,017,262
------------
COLORADO 5.0%
5,000 Boulder Cnty, CO Rev Natl Cent Atmosphere
Impt & Rfdg................................ 6.900 12/01/07 5,164,950
8,500 Boulder Cnty, CO Rev Natl Cent Atmosphere
Impt & Rfdg................................ 7.000 12/01/13 8,775,995
910 Colorado Hsg Fin Auth Single Family Pgm Sr
Gtd Mtg Ln D3 (FHA Gtd).................... 7.200 08/01/23 943,270
2,000 Colorado Springs, CO Utils Rev Sub Lien Sys
Impt Ser A................................. 4.750 11/15/26 1,725,580
8,790 Denver, CO City & Cnty Arpt Rev Ser D
(b)........................................ 7.000 11/15/25 8,939,254
3,000 E-470 Pub Hwy Auth CO Rev Cap Apprec Sr Ser
B (MBIA Insd).............................. * 09/01/20 972,720
15,000 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC: Meridian
Assoc East)................................ 7.500 12/01/11 15,513,000
------------
42,034,769
------------
CONNECTICUT 3.5%
7,140 Connecticut St Hlth & Edl Fac Auth Rev
Nursing Home Proj AHF/Hartford (Prerefunded
@ 11/01/04)................................ 7.125 11/01/24 7,928,970
3,000 Connecticut St Spl Oblig Pkg Rev Bradley
Intl Arpt Ser A (ACA Insd)................. 6.600 07/01/24 3,143,370
3,540 Mashantucket Western Pequot Tribe CT Spl
Rev Ser A, 144A--Private Placement (c)..... 6.400 09/01/11 3,721,850
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CONNECTICUT (CONTINUED)
$ 3,460 Mashantucket Western Pequot Tribe CT Spl
Rev Ser A, 144A--Private Placement
(Prerefunded @ 09/01/07) (c)............... 6.400% 09/01/11 $ 3,850,807
6,500 Mashantucket Western Pequot Tribe CT Spl
Rev Ser B, 144A--Private Placement (c)..... 5.750 09/01/18 6,132,880
3,500 Mashantucket Western Pequot Tribe CT Spl
Rev Ser B, 144A--Private Placement (c)..... 5.750 09/01/27 3,226,510
1,500 Stamford, CT Hsg Auth Multi-Family Rev
Fairfield Apts Proj Rfdg (Var Rate Cpn).... 4.750 12/01/28 1,393,020
------------
29,397,407
------------
DELAWARE 0.3%
2,385 Delaware St Hsg Auth Rev Sr Home Mtg Ser B
Subser B2.................................. 7.200 12/01/21 2,459,412
------------
DISTRICT OF COLUMBIA 0.1%
1,000 District of Columbia Hosp Rev Medlantic
Hlthcare Group A Rfdg (MBIA Insd).......... 5.875 08/15/19 1,022,450
------------
FLORIDA 4.4%
3,750 Escambia Cnty, FL Hlth Fac Auth Hlth Fac
Rev FL Hlthcare Fac LN (AMBAC Insd)........ 5.950 07/01/20 3,905,400
3,000 Florida St Dept Environmental Protection
Preservation Rev Ser A (FGIC Insd)......... 5.750 07/01/10 3,231,360
6,500 Gulf Breeze, FL Rev Cap Fdg Ser B (MBIA
Insd)...................................... 4.500 10/01/27 5,399,290
3,000 Hillsborough Cnty, FL Ind Dev Auth Indl Dev
Rev Hlth Facs Proj Univ Cmnty Hosp Ser A... 5.500 08/15/14 2,688,870
1,000 Hillsborough Cnty, FL Indl Dev Auth Indl
Dev Rev Univ Cmnty Hosp (MBIA Insd)........ 5.750 08/15/14 1,027,350
1,515 Miami Beach, FL Stormwtr Rev (FGIC Insd)
(a)........................................ 5.250 09/01/25 1,460,930
1,775 Miami-Dade Cnty, FL Spl Oblig Subser A Rfdg
(MBIA Insd)................................ * 10/01/22 480,918
4,320 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC
Insd)...................................... 5.625 10/01/14 4,485,369
5,300 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC
Insd)...................................... 5.500 10/01/31 5,261,522
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
FLORIDA (CONTINUED)
$ 7,435 Sarasota Cnty, FL Hlth Fac Auth Rev
Hlthcare Kobernick/Meadow Pk (Prerefunded @
07/01/02).................................. 10.000% 07/01/22 $ 8,184,374
1,060 Tallahassee, FL Lease Rev FL St Univ Proj
Ser A (MBIA Insd).......................... 5.500 08/01/18 1,071,480
------------
37,196,863
------------
GEORGIA 5.7%
45,000 Georgia Loc Govt Ctfs Partn Grantor Trust
Ser A (MBIA Insd).......................... 4.750 06/01/28 39,639,150
2,645 Georgia St Ser D........................... 6.000 10/01/05 2,812,746
3,500 Georgia St Ser D........................... 6.000 10/01/06 3,753,960
2,000 Royston, GA Hosp Auth Hosp Ctfs Rev Ty Cobb
Hlthcare Sys Inc Rfdg...................... 6.500 07/01/27 1,872,860
------------
48,078,716
------------
HAWAII 0.5%
2,465 Honolulu, HI City & Cnty Ser D (FGIC
Insd)...................................... 4.700 02/01/08 2,406,407
4,000 Honolulu, HI City & Cnty Wastewtr Sys Rev
Cap Apprec (FGIC Insd)..................... * 07/01/12 2,128,080
------------
4,534,487
------------
ILLINOIS 10.2%
4,490 Bedford Park, IL Tax Increment Rev Sr Lien
Bedford City Sq Proj....................... 9.250 02/01/12 4,764,115
3,400 Carol Stream, IL First Mtg Rev Windsor Pk
Mnr Proj................................... 7.000 12/01/13 3,338,460
1,500 Champaign Cnty, IL Cmnty Unit Sch Dist No
116 Urbana Ser C (FGIC Insd)............... * 01/01/16 637,560
1,300 Champaign Cnty, IL Cmnty Unit Sch Dist No
116 Urbana Ser C (FGIC Insd)............... * 01/01/18 484,250
22,000 Chicago, IL Brd Edl Sch Reform Cap Apprec
B-1 (FGIC Insd)............................ * 12/01/20 6,926,480
7,200 Chicago, IL Brd Edl Sch Reform Cap Apprec
B-1 (FGIC Insd)............................ * 12/01/23 1,874,376
4,000 Chicago, IL Neighborhoods Alive 21 Pgm Ser
A (FGIC Insd).............................. 5.750 01/01/40 4,010,720
2,500 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Inc Proj Rfdg............... 8.200 12/01/24 2,787,650
3,500 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc Ser B..................... 8.950 05/01/18 3,661,490
2,565 Chicago, IL Ser C Proj & Rfdg (FGIC
Insd)...................................... 5.750 01/01/12 2,712,565
2,000 Chicago, IL Wastewtr Transmission Rev
Second Lien Ser B (MBIA Insd).............. 5.000 01/01/30 1,795,380
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 5,000 Cook Cnty, IL Cap Impt Ser A (FGIC Insd)... 5.000% 11/15/23 $ 4,549,850
7,765 Du Page Cnty, IL Forest Preserve Dist...... * 11/01/17 3,026,486
900 Hodgkins, IL Tax Increment................. 9.500 12/01/09 971,280
4,000 Hodgkins, IL Tax Increment Ser A Rfdg...... 7.625 12/01/13 4,254,080
2,860 Illinois Dev Fin Auth Rev Adventist Hlth
Ser A (MBIA Insd).......................... 5.500 11/15/05 2,962,188
2,725 Illinois Dev Fin Auth Rev Cmnty Rehab
Providers Facs Ser A....................... 7.375 07/01/25 2,759,662
2,705 Illinois Dev Fin Auth Rev Loc Govt Pgm
Aurora East Sch (MBIA Insd)................ * 12/01/15 1,186,305
2,000 Illinois Dev Fin Auth Solid Waste Disp Rev
Waste Mgmt Inc Proj........................ 5.050 01/01/10 1,757,720
1,740 Illinois Edl Fac Auth Rev Riverside Hlth
Sys Ser A Rfdg............................. 5.900 10/01/14 1,701,198
1,565 Illinois Edl Facs Auth Rev Depaul Univ
(AMBAC Insd) (a)........................... 5.625 10/01/15 1,613,875
2,500 Illinois Hlth Fac Auth Rev Evangelical Hosp
Ser C Rfdg (FSA Insd)...................... 6.750 04/15/12 2,632,525
7,660 Illinois Hlth Fac Auth Rev Fairview Oblig
Group Proj Ser A (Prerefunded @
10/01/02).................................. 9.500 10/01/22 8,432,817
1,500 Illinois Hlth Fac Auth Rev Sarah Bush
Lincoln Hlth Cent (Prerefunded @
5/15/02)................................... 7.250 05/15/12 1,590,150
4,330 Metropolitan Pier & Expo Auth IL Dedicated
St Tax Cap Apprec McCormick Plan Expansion
Ser A (FGIC Insd).......................... * 06/15/14 2,089,788
1,510 Roselle, IL Multi-Family Hsg Rev Waterbury
Apts Ser A Rfdg (GNMA Collateralized)...... 7.000 01/01/25 1,591,948
3,230 St Clair Cnty, IL Cap Impt Rev McKendree
Clg Proj Rfdg.............................. 6.000 02/01/24 2,984,649
3,060 Will Cnty, IL Cmnty Sch Dist No 161 Summit
Hill Cap Apprec (FGIC Insd)................ * 01/01/12 1,713,661
3,505 Will Cnty, IL Cmnty Sch Dist No 161 Summit
Hill Cap Apprec (FGIC Insd)................ * 01/01/14 1,733,363
2,010 Will Cnty, IL Cmnty Sch Dist No 161 Summit
Hill Cap Apprec (FGIC Insd)................ * 01/01/16 873,626
2,415 Will Cnty, IL Cmnty Sch Dist No 161 Summit
Hill Cap Apprec (FGIC Insd)................ * 01/01/19 866,888
9,660 Will Cnty, IL Forest Preserve Dist Ser B
(FGIC Insd)................................ * 12/01/16 3,996,149
------------
86,281,254
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
INDIANA 0.3%
$ 2,592 Indiana St Dev Fin Auth Indl Dev Rev
Unr-Rohn Inc Proj (e)...................... 7.500% 03/01/11 $ 2,685,234
------------
KANSAS 0.4%
3,000 Sedgwick, KS Uni Sch Dist No 259 (MBIA
Insd)...................................... 6.000 09/01/09 3,282,480
------------
KENTUCKY 0.8%
2,000 Ashland, KY Solid Waste Rev Ashland Oil Inc
Proj....................................... 7.200 10/01/20 2,060,020
4,000 Elsmere, KY Indl Dev Rev Rfdg (Prerefunded
@ 04/01/05)................................ 6.750 04/01/10 4,376,000
------------
6,436,020
------------
LOUISIANA 1.1%
680 East Baton Rouge, LA Mtg Fin Auth Single
Family Mtg Pur Ser A Rfdg (GNMA
Collateralized)............................ 7.100 10/01/24 696,646
9,167 Louisiana St Univ & Agricultural &
Mechanical College Univ Rev................ 5.750 10/30/18 8,652,052
------------
9,348,698
------------
MAINE 0.1%
1,000 Maine Vets Homes ME Rev.................... 7.750 10/01/20 1,041,870
------------
MARYLAND 1.9%
2,300 Baltimore, MD Cap Apprec Cons Pub Impt &
Rfdg (FGIC Insd)........................... * 10/15/06 1,701,448
1,845 Baltimore, MD Cap Apprec Ser A (FGIC
Insd)...................................... * 10/15/07 1,291,500
2,075 Baltimore, MD Cap Apprec Ser A (Prerefunded
@ 10/15/05) (FGIC Insd).................... * 10/15/07 1,459,534
96,915 Maryland St Cmnty Dev Admin Dept Hsg &
Cmnty Dev Single Family Rev Pgm 6.......... * 04/01/30 11,384,605
500 Maryland St Econ Dev Corp Student Hsg Rev
Collegiate Hsg Towson Ser A................ 5.750 06/01/29 460,330
------------
16,297,417
------------
MASSACHUSETTS 1.5%
910 Massachusetts St Dev Fin Agy Rev Boston
Architectural Cent......................... 6.100 09/01/18 924,241
1,000 Massachusetts St Dev Fin Agy Rev Boston
Architectural Cent......................... 6.250 09/01/28 1,015,340
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 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 $ 2,697,396
5,000 Massachusetts St Hlth & Edl Fac Auth Rev
New England Med Cent Hosp Ser G (MBIA
Insd)...................................... 5.000 07/01/13 4,828,950
825 Massachusetts St Hlth & Edl Fac Auth Rev
Winchester Hosp Ser D Rfdg (Connie Lee
Insd)...................................... 5.750 07/01/14 843,101
2,000 Route 3 North Trans Impt Assocmass Lease
Rev (MBIA Insd)............................ 5.375 06/15/33 1,928,420
------------
12,237,448
------------
MICHIGAN 2.1%
3,965 Detroit, MI Loc Dev Fin Auth Tax Increment
Sr Ser B................................... 6.700 05/01/21 3,864,685
1,000 Detroit, MI Loc Dev Fin Auth Ser C......... 6.850 05/01/21 979,650
1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev
Hillsdale Cmnty Hlth Cent.................. 5.750 05/15/18 974,326
5,000 Michigan St Hosp Fin Auth Rev Detroit Med
Cent Oblig Ser A........................... 5.250 08/15/28 3,551,100
500 Michigan St Hosp Fin Auth Rev Hosp Genesys
Regl Med Ser A Rfdg (Escrowed to
Maturity).................................. 5.375 10/01/13 504,560
1,540 Michigan St Hosp Fin Auth Rev Saratoga
Cmnty Hosp Rfdg (Prerefunded @ 06/01/02)... 8.750 06/01/10 1,640,439
5,000 Michigan St Hsg Dev Auth Rental Hsg Rev Ser
A (MBIA Insd).............................. 5.300 10/01/37 4,516,200
1,750 Michigan St Strategic Fd Ltd Oblig Rev WMX
Technologies Inc Proj...................... 6.000 12/01/13 1,648,605
------------
17,679,565
------------
MISSISSIPPI 0.5%
2,500 Mississippi Bus Fin Corp MS Pollutn Ctl Rev
Sys Energy Res Inc Proj.................... 5.875 04/01/22 2,301,625
1,985 Mississippi Home Corp Single Family Rev Mtg
Ser F (GNMA Collateralized)................ 7.550 12/01/27 2,166,052
------------
4,467,677
------------
MISSOURI 0.9%
1,400 Ellisville, MO Indl Dev Auth Rev Gambrill
Gardens Proj Rfdg & Impt................... 6.100 06/01/20 1,206,114
1,000 Ellisville, MO Indl Dev Auth Rev Gambrill
Gardens Proj Rfdg & Impt................... 6.200 06/01/29 851,840
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MISSOURI (CONTINUED)
$ 1,740 Good Shepherd Nursing Home Dist MO Nursing
Home Fac Rev (Prerefunded @ 08/15/05)...... 7.625% 08/15/15 $ 1,993,761
1,220 Hannibal, MO Indl Dev Auth Hlth Fac Rev
Hannibal Regl Hlthcare Sys Inc (Prerefunded
@ 09/01/01)................................ 9.500 03/01/22 1,323,688
2,810 Perry Cnty, MO Nursing Home Rev Rfdg....... 5.900 03/01/28 2,301,418
------------
7,676,821
------------
MONTANA 0.5%
3,900 Montana St Coal Severance Tax Broadwater
Pwr Proj Ser A Rfdg........................ 6.875 12/01/17 3,980,808
------------
NEBRASKA 0.1%
1,250 American Pub Energy Agy NE Gas Sup Rev NE
Pub Gas Agy Proj Ser A (AMBAC Insd)........ 4.375 06/01/10 1,116,563
------------
NEVADA 1.0%
3,720 Clark Cnty, NV Transn Ser A (FGIC Insd).... 4.500 12/01/16 3,296,590
2,545 Clark Cnty, NV Transn Ser B (FGIC Insd).... 4.500 12/01/16 2,255,328
1,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj
Ser C Rfdg................................. 5.500 10/01/30 839,050
1,750 Director St NV Dept Bus & Ind Las Vegas
Monorail Proj (AMBAC Insd)................. 5.375 01/01/40 1,654,590
------------
8,045,558
------------
NEW HAMPSHIRE 1.2%
4,800 New Hampshire High Edl & Hlth Fac Auth Rev
Daniel Webster College Issue............... 6.300 07/01/29 4,485,264
3,955 New Hampshire High Edl & Hlth Fac Auth Rev
Cheshire Med Cent.......................... 4.875 07/01/28 3,142,880
2,000 New Hampshire High Edl & Hlth Fac Auth Rev
Riverwoods at Exeter Ser A................. 6.500 03/01/23 1,783,580
1,000 New Hampshire Hlth & Ed Fac Auth Rev
Derryfield Sch............................. 6.750 07/01/20 991,820
------------
10,403,544
------------
NEW JERSEY 5.6%
4,000 Camden Cnty, NJ Impt Auth Lease Rev Ser A.. 8.000 06/01/27 3,209,480
1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/02 941,960
1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/03 899,630
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW JERSEY (CONTINUED)
$ 1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/04 $ 858,360
1,460 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/05 1,194,543
1,465 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/06 1,142,597
1,615 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/07 1,198,524
1,555 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/08 1,097,768
25,000 New Jersey Econ Dev Auth St Contract Econ
Recovery (MBIA Insd)....................... 5.900% 03/15/21 26,649,750
5,000 New Jersey Econ Dev Auth Wtr Fac Rev (FGIC
Insd)...................................... 6.500 04/01/22 5,165,450
1,000 New Jersey St Transn Tr Fd Auth Transn Sys
Ser A...................................... 5.750 06/15/18 1,054,000
3,500 New Jersey St Turnpike Auth Turnpike Rev
Ser C (FSA Insd)........................... 6.500 01/01/16 3,974,600
------------
47,386,662
------------
NEW MEXICO 0.0%
221 Santa Fe, NM Single Family Mtg Rev Rfdg.... 8.450 12/01/11 229,370
------------
NEW YORK 10.0%
10,000 Long Island Pwr Auth NY Elec Sys Rev Cap
Apprec (FSA Insd).......................... * 06/01/18 3,770,400
7,000 Long Island Pwr Auth NY Elec Sys Rev Cap
Apprec (FSA Insd).......................... * 06/01/22 2,065,840
5,550 Metro Tran Auth NY Svcs Contract Commuter
Fac Ser N Rfdg............................. 6.000 07/01/11 5,652,342
1,900 Metro Tran Auth NY Svcs Contract Tran Fac
Ser N Rfdg................................. 6.000 07/01/11 1,935,036
2,500 Nassau Cnty, NY Impt Ser F................. 7.000 03/01/04 2,655,875
2,500 Nassau Cnty, NY Interim Fin Auth Sales Tax
Secured Ser A.............................. 5.750 11/15/13 2,625,375
7,000 New York City Ser A........................ 6.250 08/01/08 7,574,910
25 New York City Ser A (Prerefunded @
08/15/01).................................. 7.750 08/15/12 26,042
665 New York City Ser C (Prerefunded @
08/15/01).................................. 7.100 08/15/10 679,750
420 New York City Ser F........................ 8.250 11/15/02 441,785
3,000 New York City Ser I (MBIA Insd)............ 5.000 04/15/24 2,764,650
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,500 New York City Transitional Fin Auth Rev
Future Tax Secured Ser C................... 4.750% 05/01/23 $ 2,202,425
1,780 New York City Transitional Fin Auth Rev
Future Tax Secured Ser C (FGIC Insd)....... 5.000 05/01/26 1,632,545
3,000 New York St Dorm Auth Rev City Univ Cons
Third (FGIC Insd).......................... 5.250 07/01/25 2,866,050
6,800 New York St Dorm Auth Rev City Univ Sys
Cons Ser A................................. 5.625 07/01/16 7,036,368
3,835 New York St Dorm Auth Rev Mental Hlth Svcs
Facs Ser C Rfdg (MBIA Insd)................ 4.750 08/15/19 3,448,509
2,750 New York St Dorm Auth Rev Mental Hlth Svcs
Facs Ser C Rfdg (MBIA Insd)................ 4.750 08/15/22 2,421,458
1,500 New York St Dorm Auth Rev Mount Sinai Hlth
Ser A...................................... 6.000 07/01/07 1,576,665
2,965 New York St Dorm Auth Rev Mount Sinai Hlth
Ser A...................................... 6.250 07/01/08 3,158,555
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 3,131,602
4,000 New York St Loc Govt Assistance Corp Ser B
Rfdg (MBIA Insd)........................... 5.000 04/01/21 3,726,120
5,320 New York St Med Care Fac Fin Agy Rev Mental
Hlth Svcs Ser F Rfdg (MBIA Insd)........... 5.375 02/15/14 5,365,805
1,430 New York St Urban Dev Corp Sub Lien Corp
Purp Rfdg.................................. 5.500 07/01/22 1,390,217
5,000 New York, NY City Adj Subser A-1........... 5.750 08/01/12 5,127,700
2,450 New York, NY City Mun Wtr Fin Auth Wtr &
Sew Sys Rev Cap Apprec Ser B (FSA Insd).... * 06/15/13 1,257,414
3,000 Onondaga Cnty, NY Indl Dev Agy Swr Fac Rev
Bristol - Meyers Squibb Co Proj............ 5.750 03/01/24 3,095,640
5,962 Plainedge, NY Union Free Sch Dist No 2063,
144A--Private Placement (c)................ 6.000 06/01/12 6,221,041
------------
83,850,119
------------
NORTH CAROLINA 2.2%
7,215 North Carolina Eastern Muni Pwr Agy Pwr Sys
Rev Ser A Rfdg (MBIA Insd)................. 5.500 01/01/05 7,454,033
2,500 North Carolina Eastern Muni Pwr Agy Pwr Sys
Rev Ser C (ACA Insd)....................... 5.000 01/01/21 2,131,575
8,300 North Carolina Muni Pwr Agy No 1 Catawba
Elec Rev (MBIA Insd)....................... 6.000 01/01/12 8,969,727
------------
18,555,335
------------
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
OHIO 2.7%
$ 3,085 Cleveland Cuyahoga Cnty, OH Dev Port Auth
Rev Cleveland Bond Fd Ser B................ 5.375% 05/15/18 $ 2,736,642
1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc
Proj....................................... 7.500 01/01/30 1,037,260
4,800 Franklin Cnty, OH Hosp Rev Holy Cross Hlth
Sys Ser B Rfdg (MBIA Insd)................. 5.250 06/01/10 4,903,296
2,070 Montgomery Cnty, OH Hosp Rev Grandview Hosp
& Med Cent Rfdg............................ 5.250 12/01/02 2,101,070
1,580 Montgomery Cnty, OH Hosp Rev Grandview Hosp
& Med Cent Rfdg............................ 5.375 12/01/05 1,630,181
2,270 Montgomery Cnty, OH Hosp Rev Kettering Med
Cent Impt & Rfdg (MBIA Insd)............... 6.250 04/01/20 2,495,865
1,000 Ohio Hsg Fin Agy Mtg Rev Residential Ser
A-1 (GNMA Collateralized).................. 5.250 09/01/30 906,340
1,000 Ohio St Air Qual Dev Auth Rev JMG Funding
Ltd Partn Proj Rfdg (AMBAC Insd)........... 6.375 04/01/29 1,035,720
7,000 Parma, OH Hosp Impr Rev Parma Cmnty Gen
Hosp Assoc Rfdg............................ 5.375 11/01/29 5,930,050
------------
22,776,424
------------
OKLAHOMA 1.3%
1,850 Cleveland Cnty, OK Home Ln Auth Single
Family Mtg Rev Rfdg........................ 8.000 08/01/12 1,902,910
1,240 Kay Cnty, OK Home Fin Auth Rev Single
Family Mtg Ser A Rfdg (AMBAC Insd)......... 7.000 11/01/11 1,453,057
5,295 Oklahoma Hsg Fin Agy Single Family Rev Mtg
Class B (GNMA Collateralized).............. 7.997 08/01/18 5,843,932
1,500 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc........................................ 7.600 12/01/30 1,540,500
------------
10,740,399
------------
PENNSYLVANIA 2.5%
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Hosp
OH Vly Genl Hosp Rfdg...................... 5.875 04/01/11 2,336,275
4,000 Allegheny Cnty, PA San Auth Swr............ 5.500 12/01/30 3,939,080
1,000 Carbon Cnty, PA Indl Dev Auth Panther Creek
Partners Proj Rfdg......................... 6.650 05/01/10 1,017,950
135 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg
Bible Fellowship Proj A Rfdg............... 4.800 12/15/03 129,406
210 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg
Bible Fellowship Proj A Rfdg............... 5.000 12/15/05 195,682
275 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg
Bible Fellowship Proj A Rfdg............... 5.100 12/15/06 254,686
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 295 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg
Bible Fellowship Proj A Rfdg............... 5.250% 12/15/07 $ 272,193
210 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg
Bible Fellowship Proj A Rfdg............... 5.300 12/15/08 191,747
320 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg
Bible Fellowship Proj A Rfdg............... 5.300 12/15/09 287,459
240 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg
Bible Fellowship Proj A Rfdg............... 5.400 12/15/10 213,982
2,000 Montgomery Cnty, PA Indl Dev Auth
Retirement Cmnty Rev Adult Cmntys Total
Svcs Ser B................................. 5.625 11/15/12 1,925,520
2,700 Pennsylvania Econ Dev Fin Auth Res Recovery
Rev Colver Proj Ser D...................... 7.150 12/01/18 2,755,620
9,000 Philadelphia, PA Sch Dist Ser A (MBIA
Insd)...................................... 4.500 04/01/23 7,537,320
------------
21,056,920
------------
RHODE ISLAND 0.9%
2,360 Providence, RI Redev Agy Ctfs Partn Ser
A.......................................... 8.000 09/01/24 2,433,042
4,750 Rhode Island Hsg & Mtg Fin Corp (Inverse
Fltg) (d).................................. 9.667 04/01/24 5,046,875
------------
7,479,917
------------
SOUTH CAROLINA 0.4%
2,000 Charleston Cnty, SC Hlth Fac Rev First Mtg
Episcopal Church Proj Ser A................ 5.400 04/01/04 1,947,760
1,125 Rock Hill, SC Util Sys Rev Comb Ser C Rfdg
(FSA Insd) (a)............................. 5.125 01/01/13 1,126,778
------------
3,074,538
------------
SOUTH DAKOTA 0.7%
5,975 South Dakota Hsg Dev Auth Home Ownership
Mtg Ser F.................................. 5.800 05/01/28 5,838,591
------------
TENNESSEE 1.7%
4,000 Johnson City, TN Hlth & Edl Facs Brd Hosp
Rev First Mtg Mtn States Hlth Ser A Rfdg... 7.500 07/01/25 3,883,720
4,000 Municipal Energy Acquisition Corp TN Gas
Rev (FSA Insd)............................. 4.000 03/01/05 3,720,800
4,300 Municipal Energy Acquisition Corp TN Gas
Rev (FSA Insd)............................. 4.125 03/01/07 3,912,871
2,640 Tennessee Hsg Dev Agy Home Ownership Pgm
2-A........................................ 5.700 07/01/31 2,574,792
------------
14,092,183
------------
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
TEXAS 6.9%
$ 6,500 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.................... 7.500% 12/01/29 $ 6,636,500
6,000 Brazos River Auth TX Pollutn Ctl Rev Coll
TX Util Elec Co Proj A (AMBAC Insd)........ 6.750 04/01/22 6,249,660
420 Brazos, TX Higher Edl Auth Inc Student Ln
Rev Subser C2 Rfdg (Std Lns Gtd)........... 7.100 11/01/04 449,770
1,350 Cameron Cnty, TX Ctfs Oblig................ 5.750 02/15/14 1,410,615
2,500 Coastal Bend Hlth Fac Dev TX Ser C (Inverse
Fltg) (AMBAC Insd) (d)..................... 7.178 11/15/13 2,628,125
6,000 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev American Airls Inc................ 6.375 05/01/35 5,849,040
3,600 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev Delta Airls Inc................... 7.625 11/01/21 3,720,636
2,000 Fort Worth, TX Wtr & Swr Rev Rfdg & Impt
(a)........................................ 5.500 02/15/05 2,071,160
4,000 Harris Cnty, TX Hlth Fac Dev Corp Rev
Christus Hlth Ser A (MBIA Insd)............ 5.375 07/01/24 3,731,200
5,000 Harris Cnty, TX Hlth Facs Dev Corp Hosp Rev
Mem Hermann Hosp Sys Proj (FSA Insd)....... 5.250 06/01/27 4,592,000
6,790 Houston, TX Indpt Sch Dist Pub Fac Corp
Lease Rev Cap Apprec West Side Ser B (AMBAC
Insd)...................................... * 09/15/14 3,210,923
3,500 Houston, TX Wtr & Swr Sys Rev Cap Apprec Jr
Lien Ser A Rfdg (FSA Insd)................. * 12/01/23 924,735
2,500 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser B
Rfdg (FGIC Insd)........................... 6.250 12/01/05 2,686,725
4,575 Keller, TX Indpt Sch Dist Cap Apprec Rfdg
(PSF Gtd).................................. * 08/15/12 2,458,559
1,000 Mesquite, TX Hlth Facs Dev Retirement Fac
Christian Care Cent Inc Ser A.............. 7.625 02/15/28 999,830
4,646 Region One Edl Svc Cent Sub Tech Fac
Proj (e)................................... 6.590 12/15/17 4,862,182
2,200 Rockwall, TX Indpt Sch Dist Cap Apprec Rfdg
(PSF Gtd).................................. * 08/15/17 826,386
1,000 Sabine River Auth TX Pollutn Ctl Rev TX
Elec Proj Ser A Rfdg....................... 6.450 06/01/21 995,310
1,563 Texas Gen Svcs Comm Partn Int Lease Purch
Ctfs....................................... 7.250 08/01/11 1,596,233
4,000 Texas Muni Pwr Agy Rev Rfdg (MBIA Insd).... * 09/01/15 1,788,680
------------
57,688,269
------------
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
UTAH 0.5%
$ 3,745 Bountiful, UT Hosp Rev South Davis Cmnty
Hosp Proj (Prerefunded @ 06/15/04)......... 9.500% 12/15/18 $ 4,449,285
------------
VIRGINIA 2.4%
1,320 Fairfax Cnty, VA Ctfs Partn................ 5.300 04/15/23 1,242,450
1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac
Lease Rev Henrico Cnty Regl Jail Proj...... 6.500 08/01/10 1,648,125
1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac
Lease Rev Henrico Cnty Regl Jail Proj...... 7.125 08/01/21 1,687,080
1,630 Richmond, VA (FSA Insd).................... 5.125 01/15/08 1,678,346
1,340 Richmond, VA (FSA Insd).................... 5.500 01/15/10 1,415,670
5,000 Roanoke, VA Indl Dev Auth Hosp Rev Roanoke
Mem Hosp Ser B Rfdg (MBIA Insd)............ 6.250 07/01/20 5,118,350
1,875 Virginia St Hsg Dev Auth Comwlth Mtg Subser
A-3........................................ 5.650 07/01/07 1,937,644
1,960 Virginia St Hsg Dev Auth Comwlth Mtg Subser
A-3........................................ 5.700 07/01/08 2,031,677
2,095 Virginia St Hsg Dev Auth Comwlth Mtg Subser
A-3........................................ 5.800 07/01/09 2,184,016
1,210 Virginia St Hsg Dev Auth Comwlth Mtg Subser
A-3........................................ 5.900 07/01/10 1,269,677
------------
20,213,035
------------
WASHINGTON 2.3%
5,000 Bellevue, WA Convention Cent Auth Spl Oblig
Rev Rfdg (MBIA Insd)....................... * 02/01/24 1,311,400
5,000 King Cnty, WA Ser B Rfdg (MBIA Insd)....... 5.250 01/01/34 4,690,750
1,000 Port Seattle WA Rev Ser B (MBIA Insd)...... 5.625 02/01/24 980,840
1,750 Washington St Pub Pwr Supply Sys Nuclear
Proj No 1 Rev (MBIA Insd).................. 5.750 07/01/12 1,826,370
10,495 Washington St Pub Pwr Supply Sys Nuclear
Proj No 1 Rev Ser B Rfdg (MBIA Insd)....... 5.600 07/01/15 10,626,712
------------
19,436,072
------------
WEST VIRGINIA 0.8%
6,550 Harrison Cnty, WV Cnty Cmnty Solid Waste
Disp Rev Potomac Edison Co Ser A (MBIA
Insd)...................................... 6.875 04/15/22 6,837,807
------------
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
WISCONSIN 2.8%
$ 1,000 Madison, WI Indl Dev Rev Madison Gas & Elec
Co Proj A.................................. 6.750% 04/01/27 $ 1,039,520
1,750 Wisconsin Hsg & Econ Dev Auth Home
Ownership Rev Ser F........................ 5.250 07/01/29 1,571,273
5,250 Wisconsin Hsg & Econ Dev Auth Hsg Rev Ser
B.......................................... 7.050 11/01/22 5,482,732
2,130 Wisconsin St Hlth & Edl Fac Auth Rev
Kenosha Hosp & Med Ctr Proj................ 5.700 05/15/20 1,937,001
7,280 Wisconsin St Hlth & Edl Fac Auth Rev
Children's Hosp (FGIC Insd)................ 5.000 08/15/10 7,276,651
1,500 Wisconsin St Hlth & Edl Facs Auth Rev
Kenosha Hosp & Med Ctr Proj................ 5.625 05/15/29 1,307,055
5,000 Wisconsin St Hlth & Edl Facs Auth Rev Mercy
Hlth Sys Corp (AMBAC Insd)................. 5.500 08/15/25 4,800,400
------------
23,414,632
------------
WYOMING 0.6%
910 Wyoming Cmnty Dev Auth Single Family Ser G
(FHA Gtd).................................. 7.250 06/01/21 940,221
4,000 Wyoming Cmnty Dev Auth Single Family Ser H
(FHA Gtd).................................. 7.100 06/01/12 4,178,560
------------
5,118,781
------------
GUAM 0.6%
5,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)....... 5.250 10/01/34 4,824,200
------------
PUERTO RICO 0.7%
2,000 Puerto Rico Indl Tourist Edl Med &
Environmental Ctl Fac Fin Auth Higher Edl
Rev........................................ 5.375 02/01/29 1,809,360
4,000 Puerto Rico Pub Bldgs Auth Gtd Pub Ed &
Hlth Fac Ser M............................. 5.700 07/01/16 4,085,760
------------
5,895,120
------------
TOTAL INVESTMENTS 94.2%
(Cost $778,114,164)................................................... 793,115,195
OTHER ASSETS IN EXCESS OF LIABILITIES 5.8%............................. 49,014,640
------------
NET ASSETS 100.0%...................................................... $842,129,835
============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
YOUR TRUST'S INVESTMENTS
October 31, 2000
* 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.
(c) 144A securities are those which are exempt from registration under rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
(d) 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. These derivative
instruments are marked to market each day with the change in value reflected
in unrealized appreciation/depreciation. Upon disposition, a realized gain
or loss is recognized accordingly.
(e) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
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
Std Lns--Student Loans
See Notes to Financial Statements
28
<PAGE> 30
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $778,114,164)....................... $793,115,195
Receivables:
Investments Sold.......................................... 45,982,306
Interest.................................................. 14,246,914
Other....................................................... 20,968
------------
Total Assets............................................ 853,365,383
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 7,512,045
Custodian Bank............................................ 2,224,007
Investment Advisory Fee................................... 497,674
Income Distributions--Preferred Shares.................... 473,766
Administrative Fee........................................ 142,193
Affiliates................................................ 18,487
Accrued Expenses............................................ 212,369
Trustees' Deferred Compensation and Retirement Plans........ 155,007
------------
Total Liabilities....................................... 11,235,548
------------
NET ASSETS.................................................. $842,129,835
============
NET ASSETS CONSIST OF:
Preferred Shares (Par value of $.01 per share with
100,000,000 shares authorized, 12,000 shares issued with
liquidation preference of $25,000 per share).............. $300,000,000
------------
Common Shares (Par value of $.01 per share with an unlimited
number of shares authorized, 36,365,393 shares issued and
outstanding).............................................. 363,654
Paid in Surplus............................................. 538,413,497
Net Unrealized Appreciation................................. 15,001,031
Accumulated Undistributed Net Investment Income............. 836,444
Accumulated Net Realized Loss............................... (12,484,791)
------------
Net Assets Applicable to Common Shares.................. 542,129,835
------------
NET ASSETS.................................................. $842,129,835
============
NET ASSET VALUE PER COMMON SHARE ($542,129,835 divided by
36,365,393 shares outstanding)............................ $ 14.91
============
</TABLE>
See Notes to Financial Statements
29
<PAGE> 31
Statement of Operations
For the Year Ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $51,603,210
-----------
EXPENSES:
Investment Advisory Fee..................................... 5,800,864
Administrative Fee.......................................... 1,657,384
Preferred Share Maintenance................................. 823,783
Custody..................................................... 49,802
Trustees' Fees and Related Expenses......................... 46,195
Legal....................................................... 36,604
Other....................................................... 420,206
-----------
Total Expenses.......................................... 8,834,838
Less Credits Earned on Cash Balances.................... 5,565
-----------
Net Expenses............................................ 8,829,273
-----------
NET INVESTMENT INCOME....................................... $42,773,937
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(8,206,004)
Options................................................... (202,586)
Futures................................................... 136,739
-----------
Net Realized Loss........................................... (8,271,851)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (8,294,834)
End of the Period:
Investments............................................. 15,001,031
-----------
Net Unrealized Appreciation During the Period............... 23,295,865
-----------
NET REALIZED AND UNREALIZED GAIN............................ $15,020,652
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $57,797,951
===========
</TABLE>
See Notes to Financial Statements
30
<PAGE> 32
Statement of Changes in Net Assets
For the Years Ended October 31, 2000 and 1999
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
-----------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 42,773,937 $ 43,660,779
Net Realized Loss.................................... (8,271,851) (2,776,922)
Net Unrealized Appreciation/Depreciation During the
Period............................................. 23,295,865 (80,950,957)
------------ ------------
Change in Net Assets from Operations................. 57,797,951 (40,067,100)
------------ ------------
Distributions from Net Investment Income:
Common Shares...................................... (34,036,128) (34,894,640)
Preferred Shares................................... (12,520,067) (8,719,281)
------------ ------------
(46,556,195) (43,613,921)
------------ ------------
Distributions from Net Realized Gains:
Common Shares...................................... -0- (15,464,760)
Preferred Shares................................... -0- (2,188,669)
------------ ------------
-0- (17,653,429)
------------ ------------
Total Distributions.................................. (46,556,195) (61,267,350)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.. 11,241,756 (101,334,450)
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued through Dividend
Reinvestment....................................... -0- 1,596,622
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS................ 11,241,756 (99,737,828)
NET ASSETS:
Beginning of the Period.............................. 830,888,079 930,625,907
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $836,444 and
$4,618,528, respectively).......................... $842,129,835 $830,888,079
============ ============
</TABLE>
See Notes to Financial Statements
31
<PAGE> 33
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, TWO MONTHS
---------------------- ENDED --------
2000 1999 OCT. 31, 1998 1998
-------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD (A).............................. $ 14.60 $ 17.39 $ 17.32 $ 16.60
-------- -------- -------- --------
Net Investment Income................... 1.17 1.20 .21 1.26
Net Realized and Unrealized Gain/Loss... .42 (2.30) .08 .72
-------- -------- -------- --------
Total from Investment Operations......... 1.59 (1.10) .29 1.98
-------- -------- -------- --------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders........... .94 .96 .16 .96
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders........................ .34 .24 .02 .30
Distributions from Net Realized Gain:
Paid to Common Shareholders........... -0- .43 -0- -0-
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders........................ -0- .06 .04 -0-
-------- -------- -------- --------
Total Distributions...................... 1.28 1.69 0.22 1.26
-------- -------- -------- --------
NET ASSET VALUE, END OF THE PERIOD....... $ 14.91 $ 14.60 $ 17.39 $ 17.32
======== ======== ======== ========
Market Price Per Share at End of the
Period.................................. $12.6250 $13.1875 $16.8125 $16.1875
Total Investment Return at Market
Price (b)............................... 2.80% -14.47% 4.84%* 9.06%
Total Return at Net Asset Value (c)...... 8.88% -8.64% 1.33%* 10.38%
Net Assets at End of the Period (In
millions)............................... $ 842.1 $ 830.9 $ 930.6 $ 928.2
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**........... 1.67% 1.60% 1.57% 1.57%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common
Shares (d).............................. 5.71% 5.95% 6.48% 5.66%
Portfolio Turnover....................... 39% 80% 6%* 94%
* Non-Annualized
** Ratio of Expenses to Average Net
Assets Including Preferred Shares..... 1.07% 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 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.
(c) 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.
(d) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
32
<PAGE> 34
<TABLE>
<CAPTION>
SEPTEMBER 27, 1991
(COMMENCEMENT OF
YEAR ENDED AUGUST 31, INVESTMENT
---------------------------------------------------- OPERATIONS) TO
1997 1996 1995 1994 1993 AUGUST 31, 1992
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 15.84 $ 15.73 $ 15.56 $ 17.04 $ 16.33 $ 14.81
------- ------- ------- ------- ------- -------
1.28 1.30 1.31 1.34 1.41 1.17
.73 .10 .26 (1.42) .78 1.37
------- ------- ------- ------- ------- -------
2.01 1.40 1.57 (.08) 2.19 2.54
------- ------- ------- ------- ------- -------
.96 .99 1.08 1.12 1.10 .81
.29 .30 .32 .28 .24 .21
-0- -0- -0- -0- .11 -0-
-0- -0- -0- -0- .03 -0-
------- ------- ------- ------- ------- -------
1.25 1.29 1.40 1.40 1.48 1.02
------- ------- ------- ------- ------- -------
$ 16.60 $ 15.84 $ 15.73 $ 15.56 $ 17.04 $ 16.33
======= ======= ======= ======= ======= =======
$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
33
<PAGE> 35
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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 accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION 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, which approximates market value.
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.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and original issue discount is accreted over the expected
life of each applicable security.
34
<PAGE> 36
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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, 2000, the Trust had an accumulated capital loss
carryforward for tax purposes of $12,484,791 which will expire between October
31, 2007 and October 31, 2008.
At October 31, 2000, for federal income tax purposes, cost of long-term
investments is $778,114,164; the aggregate gross unrealized appreciation is
$29,728,140 and the aggregate gross unrealized depreciation is $14,727,109,
resulting in net unrealized appreciation on long-term investments of
$15,001,031.
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.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 2000 fiscal year have been identified and appropriately reclassified. A
permanent book and tax basis difference relating to expenses not deductible for
tax purposes totaling $174 has been reclassified from capital to accumulated
undistributed net investment income.
F. EXPENSE REDUCTION During the period ended October 31, 2000, the Trust's
custody fee was reduced by $5,565 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 (collectively "Van
Kampen"), the Trust's Administrator, at an annual rate of .20% of the average
net assets of the Trust. The
35
<PAGE> 37
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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, 2000, the Trust recognized expenses of
approximately $18,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each Trust. For the year ended October
31, 2000, the Trust recognized expenses of approximately $57,500 representing
Van Kampen's cost of providing accounting and legal services to the Trust, which
are reported as part of other and legal expenses, respectively, in the statement
of operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable 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, 2000 and 1999, common share paid in surplus aggregated
$538,413,497 and $538,413,671, respectively:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
<S> <C> <C>
Beginning Shares.................................... 36,365,393 36,270,469
Shares Issued Through Dividend Reinvestment......... -0- 94,924
---------- ----------
Ending Shares....................................... 36,365,393 36,365,393
========== ==========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $315,032,933 and $405,593,900.
36
<PAGE> 38
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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
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, 2000 were as follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
<S> <C> <C>
Outstanding at October 31, 1999............................. 300 $(145,472)
Options Written............................................. 100 14,816
Options Purchased........................................... 200 (71,931)
Options Expired (Net)....................................... (600) 202,587
---- ---------
Outstanding at October 31, 2000............................. -0- $ -0-
==== =========
</TABLE>
B. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
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
37
<PAGE> 39
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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, 2000 were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
Outstanding at October 31, 1999............................. 433
Futures Opened.............................................. 2,075
Futures Closed.............................................. (2,508)
------
Outstanding at October 31, 2000............................. 0
======
</TABLE>
6. PREFERRED SHARES
The Trust has 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 reverted 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, 2000, was
4.23%. During the year ended October 31, 2000, the rates ranged from 3.45% to
6.05%.
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.
38
<PAGE> 40
REPORT OF INDEPENDENT AUDITORS
To 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, 2000, and the related statements of operations, changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The Trust's financial
statements and financial highlights for the periods ended prior to October 31,
2000 were audited by other auditors whose report, dated December 9, 1999,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000, by correspondence with the Trust's
custodian and brokers. 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
audit provides 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, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 6, 2000
39
<PAGE> 41
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
40
<PAGE> 42
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
41
<PAGE> 43
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
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
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, 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
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
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, 2000. The Trust designated 99.7% of the income distributions as a
tax-exempt income distribution. In January, 2001, the Trust will provide tax
information to shareholders for the 2000 calendar year.
(1) Independent auditors for the Trust perform an annual audit of the Trust's
financial statements. The Board of Trustees has engaged Deloitte & Touche LLP to
be the Trust's independent auditors.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"), ceased
being the Trust's independent accountants effective April 14, 2000. The
cessation of the client- auditor relationship between the Trust and KPMG was
based solely on a possible future business relationship by KPMG with an
affiliate of the Trust's investment adviser.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
42
<PAGE> 44
RESULTS OF
SHAREHOLDER VOTES
An Annual Meeting of the Shareholders of the Trust was held on June 21, 2000,
where shareholders voted on the election of trustees and the ratification of
Deloitte & Touche LLP as the independent auditors.
1) With regard to the election of the following trustees by the preferred
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
----------------------------
IN FAVOR WITHHELD
<S> <C> <C>
Rod Dammeyer............................................. 7,764 32
</TABLE>
2) With regard to the election of the following trustees by the common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
<S> <C> <C>
Wayne W. Whalen....................................... 31,684,792 588,411
</TABLE>
The other trustees of the Trust whose terms did not expire in 2000 are David C.
Arch, Howard J Kerr, Theodore A. Myers, Richard F. Powers, III, and Hugo F.
Sonnenschein.
3) With regard to the ratification of Deloitte & Touche LLP as independent
auditors for the Trust, 31,768,499 shares were voted in the affirmative and
171,464 shares were voted against the proposal and 341,035 shares abstained from
voting.
43
