<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 27
Statement of Operations.......................... 28
Statement of Changes in Net Assets............... 29
Financial Highlights............................. 30
Notes to Financial Statements.................... 32
Report of Independent Accountants................ 37
Dividend Reinvestment Plan....................... 38
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
November 19, 1999
Dear Shareholder:
As we approach the end of the century--and the millennium--it seems
appropriate to take a look back at the progress we've made over the last 100
years and how the world of investing has changed over the generations. Although
rapid advances in technology and science have dramatically altered the world
that we live in today, one of the greatest shifts we've seen this century is the
increasing importance of investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is
now available to most people. In fact, almost 79 million individuals--who
represent almost half of all U.S. households--own stocks either directly or
through mutual funds. This is even more impressive when considering that just 16
years earlier, only 19 percent of households owned stocks. Another important
shift has been the need for retirement planning beyond a pension plan or Social
Security. The Investment Company Institute, the leading mutual fund industry
association, reports that 77 percent of all mutual fund shareholders earmarked
retirement as their primary financial goal in 1998.
Through all the changes in the investment environment over the past century,
the general principles that have made generations of investors successful remain
the same. Those that have stood the test of time include:
- Investing for the long-term
- Basing investment decisions on sound research
- Building a diversified portfolio
- Believing in the value of professional investment advice
While no one can predict the future, at Van Kampen, we believe that these
ideas will remain important tenets for investors well into the next century. As
we continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we enter the new
millennium.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Source: Investment Company Institute
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree over the past year, keeping the
economy growing at a healthy pace. High levels of consumer confidence fueled
this heavy retail activity, which pushed the personal savings rate to a record
low as spending rates outpaced income growth. Although the U.S. economy
experienced a slowdown during the second quarter of 1999, growth rebounded
toward the end of the reporting period.
EMPLOYMENT SITUATION
The strong job market helped support the strength of the economy. During the
reporting period, the unemployment rate reached its lowest level in almost 30
years, and wages continued to climb. The wage pressures were balanced somewhat
by productivity gains. However, these pressures ultimately pushed the cost of
labor higher in the second quarter, as the employment cost index recorded its
biggest gain in eight years before returning to a more moderate level in the
third quarter.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report. The Federal Reserve Board remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
its three interest rate cuts from the fall of 1998, raising rates in June,
August, and November 1999 to keep the economy from overheating.
U.S. GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
Third Quarter 1997 through Third Quarter 1999
[BAR GRAPH]
<TABLE>
<S> <C>
97Q3 4.0
97Q4 3.1
98Q1 6.7
98Q2 2.1
98Q3 3.8
98Q4 5.9
99Q1 3.7
99Q2 1.9
99Q3 5.5
</TABLE>
Source: Bureau of Economic Analysis
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1999
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
(NYSE TICKER SYMBOL--VGM)
<TABLE>
<CAPTION>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)........... (13.97%)
One-year total return based on NAV(2).................... (5.66%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)............................................... 7.23%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................. 11.30%
SHARE VALUATIONS
Net asset value.......................................... $ 15.63
Closing common stock price............................... $13.6875
One-year high common stock price (12/30/98).............. $17.4375
One-year low common stock price (10/26/99)............... $13.2500
Preferred share (Series A) rate(5)....................... 3.850%
Preferred share (Series B) rate(5)....................... 3.429%
Preferred share (Series C) rate(5)....................... 4.000%
Preferred share (Series D) rate(5)....................... 3.875%
</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 common 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 rate.
(5) See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
We recently spoke with representatives of the adviser of the Van Kampen Trust
for Investment Grade Municipals about the key events and economic forces that
shaped the markets during the past year. Thomas M. Byron, portfolio manager, has
managed the Trust since January 1997 and worked in the investment industry since
1981. He is joined by Peter W. Hegel, chief investment officer for fixed-income
investments. The following discussion reflects their views on the Trust's
performance during the 12 months ended October 31, 1999.
Q WHAT HAPPENED IN THE MUNICIPAL MARKET DURING THE REPORTING PERIOD?
A Bonds of all types experienced price declines during the past 12 months as
interest rates rose, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two
interest-rate increases during the summer, the bond market declined as the
nation's strong economic growth continued to spark inflation fears, leading to
concern about future rate hikes. Because of low institutional demand for
municipal bonds during the period, these conditions affected municipals more
than their taxable counterparts--corporate and Treasury bonds. The yields of
newly issued 30-year AAA municipal bonds rose more than a full percentage point
during the 12-month period, so the prices of existing bonds dropped
concurrently. The bonds in the Trust's portfolio were not spared by this market
movement and suffered price declines along with the rest of the municipal
market.
The interest-rate increases also suppressed municipal bond supply, bringing
overall nationwide issuance down more than 20 percent in the first ten months of
the year compared with 1998. Supply was down in almost every sector, with
electric-utility and health-care bonds experiencing the most significant drops.
Although new issuance kept pace with last year's active market, the amount of
bonds issued through refinancing was down more than 50 percent for the year
through October. Many municipalities simply chose not to refinance outstanding
bonds because of the higher interest rates they would have to pay in the current
marketplace.
Q DID MUNICIPAL BONDS BENEFIT FROM THE STRONG ECONOMY?
A Yes. The effects of the healthy economy were reflected in the good credit
conditions in the municipal market, even though prices suffered. With the
exception of the health-care sector, overall credit quality remained high,
and we witnessed a number of credit upgrades as tax revenues kept municipal
finances strong.
4
<PAGE> 6
Q WHAT TECHNIQUES DID YOU USE TO MANAGE THE TRUST IN THESE CONDITIONS?
A Many of the Trust's older bonds were nearing their call dates, so we took
advantage of higher interest rates in the municipal market to replace
these bonds with new issues. Our research analysts helped us identify
those issues that seemed most likely to be called from the portfolio. This
allowed us to lock in attractive rates in the event that the interest-rate
environment is not as favorable when the bonds reach their call dates. Although
we believe this will benefit the Trust if interest rates decline in the future,
the strategy temporarily had a negative effect on the Trust because the
longer-maturity bonds we purchased reacted more strongly to rising interest
rates than the bonds they replaced.
Because bond prices declined during the period, we were also able to enhance
the tax management of the Trust by selling these and other holdings at a capital
loss. Using this strategy, we offset some of the gains we had earned early in
1999 so that the Trust could avoid the need to distribute taxable capital gains
to shareholders this year.
Q WHAT AREAS OF THE MUNICIPAL MARKET WERE MOST ATTRACTIVE TO YOU?
A One of the most attractive sectors during the past year was
transportation, which is a traditionally strong sector that experienced
heavy issuance during the period. Transportation projects are visible ways
for voters to see their tax dollars at work, so they tend to be well-funded when
the economy is strong. As a result, we were able to find more issues that met
our purchasing criteria and add to our position in transportation. At the end of
October, this represented one of the Trust's largest sectors at 8.4 percent of
long-term investments.
To focus more on areas such as transportation, we reduced our position in
the housing sector. Because many homeowners refinance their mortgages when
interest rates decline over time, these bonds carry high call risk. Rather than
accepting the possibility that these higher-yielding bonds might be called at
par value, we sold them at a premium and contributed to the Trust's total
return. For additional portfolio highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A Total return performance was disappointing because of the general downturn
in bond prices. In addition, the Trust's leverage component hurt its
performance during the period. Although leverage helps the Trust provide
higher income levels to common shareholders, it made the portfolio more
sensitive to the interest-rate increases during the reporting period. However,
the Trust's total return was supported by its moderate duration, which was
relatively short even though we increased it slightly during the period. For the
one-year period ended October 31, 1999, the Trust returned -13.97 percent(1)
based on market price. This reflects a decrease in market price from $17.00 per
share on October 31, 1998, to $13.6875 per share on October 31, 1999.
5
<PAGE> 7
In addition, the dividend remained unchanged during the past 12 months. The
monthly federally tax-exempt dividend of $0.0825 per share translates to a
distribution rate of 7.23 percent(3) based on the Trust's closing market price
on October 31, 1999. Because the Trust is exempt from federal income taxes, this
distribution rate is equivalent to a taxable yield of 11.30 percent(4) for an
investor in the 36 percent federal income tax bracket. Please refer to the chart
and footnotes on page 3 for additional performance results. Past performance
does not guarantee future performance.
Q WHAT DO YOU SEE AHEAD FOR THE ECONOMY AND THE MUNICIPAL MARKET?
A In the coming months, we will probably see a slowing economy, which may be
partly the result of year 2000 concerns. Wage increases will likely keep
inflation fears at the forefront, although increasing productivity should
be able to offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided, but we believe that market activity should
pick up early in 2000. In the meantime, we will continue to focus on finding
attractive-yielding bonds and protecting the Trust from bond calls as much as
possible. We will also use our extensive research capabilities to look for
attractive opportunities throughout the coming months.
[SIG]
Thomas M. Byron
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues and lower-quality issues. Normally, lower-quality
issues provide higher yields to compensate investors for the additional
credit risk.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has
more potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates (i.e. a 5-year duration means the bond will fall about 5 percent in
value if interest rates rise by 1 percent). The longer a bond's duration,
the greater the effect of interest rate movements on its price. Typically,
funds with shorter durations perform better in rising rate environments,
while funds with longer durations perform better when rates decline.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody Investors Service. Bonds rated below BBB or Baa are
noninvestment grade.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from
the new bonds are generally invested in U.S. government securities.
Prerefunding typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
ZERO COUPON BONDS: A corporate or municipal bond that is traded at a deep
discount to face value and pays no interest. It is redeemed at maturity for
full face value.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TOP FIVE PORTFOLIO INDUSTRIES*
[GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
General Purpose 18.60 17.30
Industrial Revenue 17.30 16.60
Health Care 13.00 13.50
Transportation 8.40 8.70
Public Building 6.20 6.90
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
JANUARY 1992 THROUGH OCTOBER 1999
[GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Jan 1992 14.96 14.96
14.63 15.02
14.63 15.00
14.63 15.18
14.88 15.44
15.13 15.85
15.88 17.06
15.63 16.27
15.38 16.13
Oct 1992 14.88 15.56
15.00 16.01
15.38 16.05
15.25 16.17
16.38 17.19
16.38 16.91
16.50 17.06
16.00 17.07
16.50 17.39
16.63 17.40
17.00 17.83
17.25 18.09
Oct 1993 17.38 17.95
16.63 17.61
16.88 17.91
17.25 18.09
15.88 17.39
15.25 16.11
15.50 16.01
15.63 16.07
15.63 15.84
15.50 16.09
15.13 16.06
14.25 15.57
Oct 1994 14.00 15.03
13.75 14.33
13.75 14.85
15.00 15.35
15.63 15.99
15.38 16.08
15.38 15.96
15.25 16.49
15.38 16.16
15.63 16.18
15.63 16.31
15.25 16.32
Oct 1995 15.75 16.58
15.81 16.94
15.75 17.13
16.36 17.14
15.75 16.91
15.88 16.38
15.63 16.14
15.63 16.05
15.06 16.14
15.63 16.26
16.00 16.22
15.88 16.44
Oct 1996 15.81 16.58
15.88 16.88
15.38 16.69
15.50 16.60
15.25 16.70
15.00 16.31
15.25 16.39
15.69 16.64
15.81 16.85
16.38 17.45
16.06 17.06
16.38 17.26
Oct 1997 16.13 17.29
15.94 17.32
16.38 17.53
16.88 17.66
16.81 17.55
16.38 17.46
15.56 17.20
15.94 17.48
16.25 17.46
16.38 17.40
16.50 17.68
17.19 17.87
Oct 1998 17.00 17.64
17.25 17.64
17.38 17.48
16.38 17.63
16.63 17.41
16.69 17.30
16.56 17.28
15.81 17.03
15.56 16.57
15.44 16.53
15.00 16.16
14.50 16.00
Oct 1999 13.69 15.63
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS
AS OF OCTOBER 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa Non-Rated
------- ----- --- ------- ---------
<S> <C> <C> <C> <C> <C>
AS OF OCTOBER 31, 1999 54 9.1 11 23.8 2.1
</TABLE>
AS OF OCTOBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa BB/Ba Non-Rated
------- ----- --- ------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
As of October 31, 1998 51.70 10.00 12.90 23.00 0.2 2.20
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DISTRIBUTION HISTORY
FOR THE PERIOD ENDED OCTOBER 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION> Distribution per Common Share
DIVIDEND CAPITAL GAIN
-------- ------------
<S> <C> <C>
Nov 1998 0.0825
Dec 1998 0.0825 0.0970
Jan 1999 0.0825
Feb 1999 0.0825
Mar 1999 0.0825
Apr 1999 0.0825
May 1999 0.0825
Jun 1999 0.0825
Jul 1999 0.0825
Aug 1999 0.0825
Sep 1999 0.0825
Oct 1999 0.0825
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
ALABAMA 4.1%
$ 1,000 Alabama Bldg Renovation Fin Auth Rev
Rfdg (AMBAC Insd).................... 5.625% 09/01/24 $ 948,720
1,000 Alabama Incentives Fin Auth Spl Oblig
Ser A (AMBAC Insd) (a)............... 6.000 10/01/29 986,940
1,395 Birmingham, AL Arpt Auth Arpt Rev
Rfdg (AMBAC Insd) (a)................ 5.500 07/01/12 1,371,787
6,000 Birmingham, AL North Med Clinic Brd
Rev Ser A Carraway Methodist Hosp
(Prerefunded @ 01/01/01)............. 7.500 07/01/15 6,324,120
8,000 Birmingham, AL North Med Clinic Brd
Rev Ser B Carraway Methodist Hosp
(Prerefunded @ 01/01/01)............. 8.000 07/01/15 8,476,320
4,000 Courtland, AL Indl Dev Brd Solid
Waste Disp Rev Champion Intl Corp
Proj................................. 7.750 01/01/20 4,091,560
4,250 Courtland, AL Indl Dev Brd Solid
Waste Disp Rev Champion Intl Corp
Proj Ser A........................... 6.500 09/01/25 4,163,640
2,000 Jefferson Cnty, AL Swr Rev Cap Impt
Warrants Ser A (FGIC Insd)........... 5.125 02/01/39 1,693,780
------------
28,056,867
------------
ARIZONA 0.1%
1,000 Mesa, AZ Indl Dev Auth Rev Discovery
Hlth Sys Ser A (MBIA Insd)........... 5.625 01/01/29 945,270
------------
ARKANSAS 1.9%
12,500 Blytheville, AR Solid Waste Recycling
& Swr Treatment Rev Nucor Corp
Proj................................. 6.900 12/01/21 13,115,375
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA 6.5%
$ 1,300 Anaheim, CA Pub Fin Auth Lease Rev
Pub Impt Proj Ser C (FSA Insd)....... 6.000% 09/01/16 $ 1,345,318
670 California Edl Fac Auth Rev Univ of
La Verne............................. 5.600 04/01/00 674,335
1,500 California Hlth Fac Fin Auth Rev
Cedars-Sinai Med Cent Ser A (a)...... 6.125 12/01/19 1,482,840
2,000 California Pollutn Ctl Fin Auth
Pollutn Ctl Rev Southn CA Edison Co
(AMBAC Insd)......................... 6.000 07/01/27 1,964,060
5,000 Desert Hosp Dist CA Hosp Rev Com
Partn (Prerefunded @ 07/23/02) (FSA
Insd)................................ 6.392 07/28/20 5,319,300
2,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Cap Apprec Rfdg (MBIA Insd)... * 01/15/17 698,680
10,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Cap Apprec Rfdg............... * 01/15/34 1,093,600
25,750 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Cap Apprec Sr Lien Ser A...... * 01/01/23 6,478,185
2,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Conv Cap Apprec Rfdg (c)...... 0/5.800 01/15/20 1,063,220
13,765 Orange Cnty, CA Recovery Ctfs Ser A
(MBIA Insd).......................... 6.000 07/01/06 14,807,286
2,000 Orange Cnty, CA Recovery Ctfs Ser A
Rfdg (MBIA Insd)..................... 6.000 06/01/09 2,146,840
2,000 Pajaro Vly, CA Unified Sch Dist Ctfs
Partn Sch Fac Brdg Fdg Pgm (FSA
Insd)................................ 5.850 09/01/32 1,959,240
7,080 San Joaquin Hills, CA Tran Toll Cap
Apprec Ser A Rfdg (MBIA Insd)........ * 01/15/26 1,441,629
2,000 Santa Clara Cnty, CA Fin Auth Lease
Rev Multi Fac Projs Ser B (AMBAC
Insd) (a)............................ 5.500 05/15/08 2,032,320
2,000 Southern CA Pub Pwr Auth (FSA
Insd)................................ 6.000 07/01/12 2,087,140
------------
44,593,993
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO 4.1%
$ 1,000 Arapahoe Cnty, CO Cap Impt Trust
Fund Hwy Rev E-470 Proj Ser B
(Prerefunded @ 08/31/05)............. 6.950% 08/31/20 $ 1,133,110
760 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser B1........................ 7.650 11/01/26 806,801
1,895 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser B2........................ 7.450 11/01/27 2,092,819
6,395 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.500 11/15/23 6,727,156
3,675 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.750 11/15/23 3,984,325
7,230 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.000 11/15/25 7,569,232
1,685 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)................. 7.000 12/01/00 1,731,405
3,250 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)................. 7.500 12/01/11 3,436,387
1,000 Metropolitan Football Stadium Cap
Apprec Ser A (MBIA Insd)............. * 01/01/12 500,970
------------
27,982,205
------------
CONNECTICUT 0.3%
2,000 Connecticut St Dev Auth Wtr Fac Rev
Brdgeport Hydraulic.................. 6.150 04/01/35 1,981,360
------------
DISTRICT OF COLUMBIA 0.4%
1,000 District of Columbia Rev Gonzaga
College High Sch (FSA Insd).......... 5.375 07/01/29 894,150
1,600 District of Columbia Ser E (FSA
Insd)................................ 6.000 06/01/13 1,653,872
------------
2,548,022
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FLORIDA 3.2%
$ 995 Broward Cnty, FL Hsg Fin Auth
Multi-Family Hsg Rev Pompano Oaks
Apts Proj Rfdg (GNMA
Collateralized)...................... 6.000% 12/01/27 $ 981,637
16,490 Dade Cnty, FL Spl Oblig Cap Apprec
Ser B Rfdg (Prerefunded @ 10/01/08)
(AMBAC Insd)......................... * 10/01/26 3,436,021
2,535 Florida St Brd of Edl Cap Outlay Pub
Ed Ser A Rfdg (FGIC Insd)............ 4.500 06/01/23 2,040,548
2,500 Florida St Brd of Edl Cap Outlay Pub
Edl Ser C (FGIC Insd) (a)............ 5.750 06/01/29 2,442,525
1,400 Florida St Dept Corrections Ctfs
Partn Okeechobee Correctional (AMBAC
Insd)................................ 6.250 03/01/15 1,458,716
2,000 Florida St Div Bond Fin Dept Genl Svs
Rev Dept Environmental Protection
Preservation Ser 2000-A (FGIC
Insd)................................ 5.250 07/01/12 1,966,260
1,000 Florida St Turnpike Auth Turnpike Rev
Ser A (FSA Insd)..................... 4.500 07/01/28 787,280
2,000 Gulf Breeze, FL Rev Cap Fdg Ser B
(MBIA Insd).......................... 4.500 10/01/27 1,578,900
1,000 Hillsborough Cnty, FL Indl Dev Auth
Pollutn Ctl Rev Tampa Elec Co Proj
Ser 92 Rfdg.......................... 8.000 05/01/22 1,095,210
2,000 Martin Cnty, FL Indl Dev Auth Indl
Dev Rev Indiantown Cogeneration Proj
Ser A Rfdg........................... 7.875 12/15/25 2,037,040
1,130 Miami Dade Cnty, FL Spl Oblig Ser B
(MBIA Insd).......................... 5.000 10/01/37 955,167
3,465 Reedy Creek Impt Dist FL Ser C (AMBAC
Insd)................................ 4.750 06/01/15 3,089,914
------------
21,869,218
------------
GEORGIA 1.1%
1,500 George L Smith II GA Wrld Congress
Cent Auth Rev Domed Stadium Proj Rfdg
(MBIA Insd) (a)...................... 5.500 07/01/20 1,380,645
5,900 Georgia Muni Elec Auth Pwr Rev Ser Y
(MBIA Insd).......................... 6.500 01/01/17 6,341,320
------------
7,721,965
------------
HAWAII 0.9%
6,000 Hawaii St Arpt Sys Rev Ser 2 (MBIA
Insd) (b)............................ 6.750 07/01/21 6,269,460
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS 10.5%
$ 1,395 Bolingbrook, IL Cap Apprec Ser C
Rfdg................................. * 01/01/23 $ 336,655
2,000 Chicago, IL Brd of Ed Chicago Sch
Reform (AMBAC Insd).................. 5.750% 12/01/20 1,927,760
4,865 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)............... * 07/01/16 1,828,364
1,600 Chicago, IL Cent Pub Lib Ser A
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.650 01/01/05 1,711,152
1,800 Chicago, IL Cent Pub Lib Ser A
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.700 01/01/06 1,927,098
1,600 Chicago, IL Cent Pub Lib Ser B
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.650 01/01/05 1,711,152
1,400 Chicago, IL Cent Pub Lib Ser C
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.650 01/01/05 1,497,258
1,500 Chicago, IL Cent Pub Lib Ser C
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.700 01/01/06 1,605,915
7,000 Chicago, IL O'Hare Intl Arpt Rev Genl
Arpt Second Lien Ser A Rfdg (MBIA
Insd) (b)............................ 6.375 01/01/12 7,371,000
13,645 Chicago, IL O'Hare Intl Arpt Spl Fac
Rev United Airls Inc................. 8.500 05/01/18 14,120,801
3,445 Chicago, IL O'Hare Intl Arpt Spl Fac
Rev United Airls Inc Proj Ser 84A.... 8.850 05/01/18 3,660,554
2,870 Cook Cnty, IL Cap Impt Ser A (FGIC
Insd)................................ 5.000 11/15/28 2,413,785
4,395 East Peoria, IL Ser C Rfdg........... 7.000 05/01/17 4,703,661
1,250 Illinois Dev Fin Auth Rev Bradley
Univ Proj (AMBAC Insd)............... 5.375 08/01/24 1,132,663
3,285 Illinois Dev Fin Auth Rev
Presbyterian Home Lake Proj Ser B.... 6.300 09/01/22 3,345,871
2,000 Illinois Edl Fac Auth Rev Lewis
Univ................................. 6.100 10/01/16 1,919,480
2,000 Illinois Hlth Fac Auth Rev Edward
Hosp Assn Proj (Prerefunded @
02/15/02)............................ 7.000 02/15/12 2,146,060
1,900 Illinois Hlth Fac Auth Rev
Evangelical Hosps Ser C (FSA Insd)... 6.750 04/15/17 2,041,455
1,000 Illinois Hlth Fac Auth Rev Highland
Park Hosp Proj Ser A (MBIA Insd)..... 5.750 10/01/17 968,990
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 1,000 Illinois Hlth Fac Auth Rev Midwest
Physician Grp Ltd Rfdg............... 5.500% 11/15/19 $ 852,520
2,000 Illinois Hlth Fac Auth Rev OSF
Hlthcare Sys Rfdg.................... 6.000 11/15/10 2,010,480
2,400 Illinois Hlth Fac Auth Rev Sarah Bush
Lincoln Hlth Cent (Prerefunded @
05/15/02) (b)........................ 7.250 05/15/22 2,603,736
2,275 Illinois Hlth Fac Auth Rev South
Suburban Hosp........................ 7.000 02/15/18 2,520,563
1,475 Illinois Hlth Fac Auth Rev South
Suburban Hosp (Prerefunded @
02/15/02)............................ 7.000 02/15/18 1,581,377
1,250 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Pl
Expansion Proj Ser A Rfdg (FGIC
Insd)................................ 5.375 12/15/18 1,155,712
8,845 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Pl
Expansion Ser A (FGIC Insd).......... * 06/15/16 3,251,422
1,105 Saint Clair Cnty, IL Pub Bldg Comm
Bldg Rev Cap Apprec Ser B (FGIC
Insd)................................ * 12/01/15 420,906
1,000 Southern IL Univ Rev Cap Apprec Hsg &
Aux (MBIA Insd)...................... * 04/01/29 161,680
1,400 Southern IL Univ Rev Hsg & Aux Fac
Ser A Rfdg........................... 6.750 04/01/12 1,479,520
------------
72,407,590
------------
INDIANA 0.8%
4,500 Indianapolis, IN Arpt Auth Rev Spl
Fac Federal Express Corp Proj........ 7.100 01/15/17 4,798,665
1,000 Marion Cnty, IN Convention & Rec Fac
Auth Excise Tax Rev (MBIA Insd)...... * 06/01/14 422,720
------------
5,221,385
------------
IOWA 0.6%
1,865 Iowa Fin Auth Multi-Family Rev Hsg
Hamlet Apts Proj A Rfdg (GNMA
Collateralized)...................... 6.150 05/01/32 1,883,687
2,375 Iowa Student Ln Liquidity Corp Rev
Ser C................................ 6.950 03/01/06 2,491,375
------------
4,375,062
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
KENTUCKY 3.8%
$10,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.500% 02/01/20 $ 10,499,400
11,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.125 02/01/21 11,462,770
1,000 Kenton Cnty, KY Arpt Brd Rev
Cincinnati/Northn KY Intl Arpt Ser A
Rfdg (MBIA Insd)..................... 6.200 03/01/08 1,059,600
1,500 Kenton Cnty, KY Arpt Brd Rev
Cincinnati/Northn KY Intl Arpt Ser A
Rfdg (MBIA Insd)..................... 6.250 03/01/09 1,595,250
1,315 Kentucky Hsg Corp Hsg Rev Ser B...... 6.250 07/01/28 1,335,751
------------
25,952,771
------------
MAINE 2.2%
2,650 Maine Muni Bd Bank Ser A Rfdg (MBIA
Insd)................................ 5.800 11/01/20 2,607,362
5,250 Maine St Hsg Auth Mtg Purch Ser D6... 7.250 11/15/19 5,402,827
6,755 Maine St Hsg Auth Mtg Purch Ser D6... 7.250 11/15/22 6,939,547
------------
14,949,736
------------
MARYLAND 0.3%
1,270 Baltimore, MD Ctfs Partn Brd of Edl
Admin Proj Ser A Rfdg (MBIA Insd)
(a).................................. 5.000 04/01/15 1,163,777
1,000 Maryland St Econ Dev Corp Student Hsg
Rev Collegiate Hsg Towson Ser A...... 5.750 06/01/29 891,180
------------
2,054,957
------------
MASSACHUSETTS 2.3%
2,975 Massachusetts Muni Wholesale Elec Co
Pwr Supply Sys Rev Ser A (AMBAC
Insd)................................ 5.000 07/01/14 2,726,617
8,000 Massachusetts St Cons Ln Ser D
(Prerefunded @ 07/01/01)............. 6.875 07/01/10 8,493,440
2,410 Massachusetts St Hsg Fin Agy
Residential Dev Ser C (FNMA
Collateralized)...................... 6.875 11/15/11 2,554,986
1,000 Massachusetts St Indl Fin Agy Rev
Wentworth Institute Tech............. 5.650 10/01/18 926,070
1,000 Massachusetts St Wtr Res Auth Ser B
(MBIA Insd).......................... 4.750 12/01/21 838,930
------------
15,540,043
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MICHIGAN 5.4%
$ 3,015 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/17 $ 992,056
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/18 935,587
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/19 874,862
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/22 719,983
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/23 674,020
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/24 632,387
7,355 Detroit, MI Econ Dev Corp Res
Recovery Rev Ser A (FSA Insd)........ 6.875% 05/01/09 7,714,365
3,500 Grand Rapids, MI Downtown Dev Cap
Apprec (MBIA Insd)................... * 06/01/15 1,388,415
2,765 Grand Rapids, MI Downtown Dev Cap
Apprec (MBIA Insd)................... * 06/01/16 1,025,400
1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev
Hillsdale Cmty Hlth Cent............. 5.250 05/15/26 1,118,320
3,000 Michigan St Hosp Fin Auth Rev
Ascension Hlth Credit Ser A (MBIA
Insd) (a)............................ 5.750 11/15/18 2,917,110
1,000 Michigan St Hosp Fin Auth Rev Detroit
Med Cent Oblig Ser A................. 5.250 08/15/28 781,320
600 Michigan St Hosp Fin Auth Rev Hosp
Genesys Regl Med Ser A Rfdg.......... 5.375 10/01/13 582,246
12,000 Michigan St Hosp Fin Auth Rev Sisters
of Mercy Hlth Corp Ser J (Prerefunded
@ 02/15/01).......................... 7.000 02/15/21 12,647,040
1,100 Michigan St Strat Fd Ltd Oblig Rev
Detroit Edison Co Ser A Rfdg (MBIA
Insd)................................ 5.550 09/01/29 1,005,312
1,400 Portage Lake, MI Wtr & Swr Auth Ser 3
(Prerefunded @ 10/01/02)............. 7.750 10/01/20 1,552,082
2,000 Wayne Charter Cnty, MI Arpt Rev
Detroit Met Wayne Cnty Ser A (MBIA
Insd)................................ 5.000 12/01/22 1,697,560
------------
37,258,065
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MINNESOTA 0.4%
$ 2,800 Minnesota Agricultural & Econ Dev Brd
Rev Hlthcare Sys Fairview Hosp Ser A
(MBIA Insd).......................... 5.750% 11/15/26 $ 2,715,916
------------
MISSISSIPPI 0.9%
3,000 Medical Cent Edl Bldg Corp MS Rev
Univ MS Med Cent Proj (Prerefunded @
12/01/04) (MBIA Insd)................ 5.900 12/01/23 3,212,010
2,500 Mississippi Business Fin Corp MS
Pollutn Ctl Rev Sys Energy Res Inc
Proj................................. 5.875 04/01/22 2,210,900
1,300 Mississippi Dev Bank Spl Oblig Cap
Proj & Equip Acquisition Ser A2
(AMBAC Insd)......................... 5.000 07/01/24 1,126,866
------------
6,549,776
------------
MISSOURI 0.5%
3,800 Saint Louis, MO Indl Dev Auth Swg &
Solid Waste Disp Fac Rev
Anheuser-Busch Proj.................. 5.750 12/01/27 3,575,990
------------
NEVADA 0.5%
3,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co
Proj Ser C Rfdg (AMBA Insd).......... 7.200 10/01/22 3,242,370
------------
NEW HAMPSHIRE 0.6%
1,000 New Hampshire St Business Fin Auth
Wtr Fac Rev Pennichuck Wtrwks Inc
(AMBAC Insd)......................... 6.300 05/01/22 1,011,600
1,450 New Hampshire St Hsg Fin Auth Single
Family Rev Mtg Acquisition Ser B
Rfdg................................. 6.100 07/01/28 1,417,607
1,500 New Hampshire St Indl Dev Auth Rev
Pollutn Ctl Pub Svcs Co of NH Proj
Ser C................................ 7.650 05/01/21 1,548,330
------------
3,977,537
------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW JERSEY 6.0%
$ 2,000 New Jersey Econ Dev Auth Rev Tran
Proj Sublease Ser A (FSA Insd)....... 5.250% 05/01/17 $ 1,876,920
25,000 New Jersey Econ Dev Auth St Contract
Econ Recovery (MBIA Insd)............ 5.900 03/15/21 25,286,750
1,400 New Jersey Hlthcare Fac Fin Auth Rev
Barnabas Hlth Ser C Rfdg (MBIA Insd)
(a).................................. 5.250 07/01/18 1,273,538
2,000 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic (FSA
Insd)................................ 6.000 07/01/06 2,132,540
10,000 New Jersey St Hsg & Mtg Fin Agy Rev
Hsg Ser A Rfdg....................... 6.950 05/01/15 10,516,800
------------
41,086,548
------------
NEW MEXICO 0.5%
2,750 New Mexico St Hosp Equip Ln Council
Hosp Rev Mem Med Cent Inc Proj....... 5.500 06/01/28 2,336,730
1,000 New Mexico St Hosp Equip Ln Council
Hosp Rev Mem Med Cent Inc (ACA
Insd)................................ 5.500 06/01/28 887,060
------------
3,223,790
------------
NEW YORK 18.2%
12,155 Metropolitan Tran Auth NY Svcs
Contract Commuter Fac Ser 5 Rfdg..... 6.500 07/01/16 12,651,775
2,000 Metropolitan Tran Auth NY Trans Fac
Rev Svcs Contract Ser R Rfdg......... 5.500 07/01/17 1,863,960
3,000 Metropolitan Trans Auth NY Commuter
Fac Rev Ser A (MBIA Insd)............ 5.625 07/01/27 2,846,790
3,000 New York City Indl Dev Agy Spl Facs
United Airls Inc Proj................ 5.650 10/01/32 2,677,470
3,410 New York City Ser A.................. 6.500 08/01/14 3,580,398
1,590 New York City Ser A (Prerefunded @
08/01/02)............................ 6.500 08/01/14 1,698,708
1,740 New York City Ser A (Prerefunded @
08/15/01)............................ 8.000 08/15/20 1,877,669
2,500 New York City Ser A Rfdg............. 7.000 08/01/05 2,743,875
3,000 New York City Ser A Rfdg............. 7.000 08/01/06 3,317,460
2,355 New York City Ser C.................. 6.500 08/01/04 2,491,095
545 New York City Ser C (Prerefunded @
08/01/02)............................ 6.500 08/01/04 581,820
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 8,500 New York City Ser C SubSer C1
(Prerefunded @ 08/01/02)............. 7.500% 08/01/19 $ 9,294,835
1,850 New York City Ser G.................. 5.875 10/15/14 1,849,945
5,000 New York City Ser I.................. 6.000 04/15/12 5,113,900
3,275 New York City Tran Auth Met Ser A
(AMBAC Insd)......................... 5.250 01/01/29 2,915,700
10,000 New York City Tran Auth Tran Fac
Livingston Plaza Proj Rfdg (FSA
Insd)................................ 5.400 01/01/18 9,443,100
2,500 New York St Dorm Auth Lease Rev Muni
Hlth Fac Impt Pgm Ser A (FSA Insd)... 5.500 05/15/25 2,317,650
1,250 New York St Dorm Auth Lease Rev St
Univ Dorm Fac Ser C (MBIA Insd)...... 5.500 07/01/29 1,159,675
13,500 New York St Dorm Auth Rev City Univ
Sys Ser C............................ 7.500 07/01/10 15,329,925
1,000 New York St Dorm Auth Rev Court Fac
Lease Ser A.......................... 5.625 05/15/13 977,750
2,000 New York St Dorm Auth Rev Court Fac
Lease Ser A.......................... 5.375 05/15/16 1,829,740
2,170 New York St Dorm Auth Rev Mental Hlth
Svcs Fac Ser A....................... 5.750 08/15/10 2,206,499
2,000 New York St Dorm Auth Revs New York
Univ Ser A (AMBAC Insd) (a).......... 5.250 07/01/06 2,009,760
5,725 New York St Environmental Fac Corp
Spl Oblig Riverbank State Park
(Prerefunded @ 04/01/02)............. 7.375 04/01/22 6,218,495
5,000 New York St Hsg Fin Agy Svcs Contract
Oblig Rev Ser A (Prerefunded @
03/15/02)............................ 7.375 09/15/21 5,414,000
2,840 New York St Loc Govt Assistance Corp
Ser E Rfdg........................... 6.000 04/01/14 2,929,914
3,000 New York St Med Care Fac Fin Agy Rev
NY Hosp Mtg Ser A (Prerefunded @
02/15/05) (AMBAC Insd)............... 6.750 08/15/14 3,320,760
5,875 New York St Med Care Fac Fin Agy Rev
Saint Peter's Hosp Proj Ser A (AMBAC
Insd)................................ 5.375 11/01/20 5,423,330
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,500 New York St Mtg Agy Rev Homeowner Mtg
Ser 54 Rfdg.......................... 6.200% 10/01/26 $ 2,540,775
1,500 New York St Urban Dev Corp Rev Proj
Cent for Indl Innovation Rfdg........ 5.500 01/01/13 1,460,835
3,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6 (MBIA
Insd)................................ 5.750 12/01/22 2,919,510
4,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6 (MBIA
Insd)................................ 5.750 12/01/25 3,871,280
------------
124,878,398
------------
NORTH CAROLINA 3.0%
15,000 North Carolina Muni Pwr Agy No 1
Catawba Elec Rev (MBIA Insd) (b)..... 6.000 01/01/12 15,502,950
5,150 North Carolina Muni Pwr Agy No 1
Catawba Elec Rev Rfdg (FSA Insd)..... 6.200 01/01/18 5,179,921
------------
20,682,871
------------
OHIO 0.7%
1,250 Montgomery Cnty, OH Hosp Rev
Grandview Hosp & Med Cent Rfdg....... 5.250 12/01/03 1,222,200
990 Ohio Hsg Fin Agy Mtg Rev Residential
Ser A1 (GNMA Collateralized)......... 6.150 03/01/29 1,000,088
1,000 Ohio St Air Quality Dev Auth Rev JMG
Fdg Ltd Partn Proj Rfdg (AMBAC
Insd)................................ 6.375 04/01/29 1,011,630
1,500 Ohio St Turnpike Commission Turnpike
Rev Ser A Rfdg (FGIC Insd)........... 5.500 02/15/26 1,428,855
------------
4,662,773
------------
OKLAHOMA 4.3%
4,000 Oklahoma Dev Fin Auth Rev St John
Hlth Sys Rfdg (a).................... 5.750 02/15/25 3,822,760
17,475 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc............................ 7.375 12/01/20 18,128,041
7,500 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc............................ 7.600 12/01/30 7,857,150
------------
29,807,951
------------
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OREGON 0.7%
$ 2,000 Oregon St Hsg & Cmnty Svcs Dept Mtg
Rev Single Family Mtg Proj Ser B..... 6.875% 07/01/28 $ 2,092,720
3,045 Oregon St Vets Welfare Ser 76A....... 6.050 10/01/28 3,096,400
------------
5,189,120
------------
PENNSYLVANIA 5.6%
2,500 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser B (FSA
Insd)................................ 6.625 01/01/22 2,604,450
1,500 Allegheny Cnty, PA Hosp Dev Auth Rev
Ser C 49 (a)......................... 5.000 04/01/06 1,487,415
1,600 Dauphin Cnty, PA Genl Auth Hlth Sys
Rev Pinnacle Hlth Sys Proj Rfdg (MBIA
Insd)................................ 5.500 05/15/27 1,469,264
4,780 Erie, PA Sch Dist Cap Apprec Rfdg
(FSA Insd)........................... * 09/01/19 1,423,484
4,000 Falls Twp, PA Hosp Auth Hosp Rev
Delaware Vly Med Rfdg (FHA Gtd)...... 7.000 08/01/22 4,289,560
1,905 Harrisburg, PA Cap Apprec Rfdg Ser D
(AMBAC Insd)......................... * 09/15/16 689,820
1,710 Harrisburg, PA Cap Apprec Rfdg Ser D
(AMBAC Insd)......................... * 03/15/19 523,773
1,735 Harrisburg, PA Cap Apprec Rfdg Ser F
(AMBAC Insd)......................... * 09/15/15 672,399
1,385 Harrisburg, PA Cap Apprec Rfdg Ser F
(AMBAC Insd)......................... * 09/15/19 411,470
1,500 Penn Cambria Sch Dist PA Cap Apprec
(FGIC Insd).......................... * 08/15/20 414,645
60 Penn Hills, PA (FGIC Insd)........... 5.900 12/01/17 60,092
940 Penn Hills, PA (Prerefunded 12/01/07)
(FGIC Insd).......................... 5.900 12/01/17 1,001,786
1,500 Pennsylvania Hsg Fin Agy Single
Family Mtg Ser 34B (FHA Gtd)......... 7.000 04/01/24 1,539,300
3,000 Pennsylvania Hsg Fin Agy Single
Family Ser 56A....................... 6.150 10/01/27 3,012,570
1,000 Pennsylvania St Higher Edl Fac Auth
College & Univ Rev Bryn Mawr College
(MBIA Insd).......................... 5.625 12/01/27 948,670
2,750 Pennsylvania St Turnpike Commission
Oil Franchise Tax Rev Subser B (AMBAC
Insd) (a)............................ 4.750 12/01/27 2,245,897
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 1,500 Philadelphia, PA Auth Indl Dev Arpt
Rev Philadelphia Arpt Sys Proj Ser A
(FGIC Insd).......................... 5.125% 07/01/28 $ 1,273,470
2,000 Philadelphia, PA Gas Wks Rev Second
Ser (FSA Insd)....................... 5.000 07/01/29 1,691,420
6,000 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd)...................... 6.250 07/01/08 6,398,460
1,000 Philadelphia, PA Hosp & Higher Edl
Fac Auth Hosp Rev Temple Univ Hosp
Ser A................................ 6.500 11/15/08 1,044,470
1,925 Philadelphia, PA Sch Dist Ser A (MBIA
Insd)................................ 4.750 04/01/27 1,575,401
2,000 Pittsburgh & Allegheny Cnty, PA Pub
Auditorium Auth Regl Asset Dist Sales
Tax Rev (AMBAC Insd)................. 5.000 02/01/24 1,726,520
2,005 Southeast Delco Sch Dist PA Cap
Apprec (MBIA Insd)................... * 02/01/17 702,632
1,500 Spring Ford Area Sch Dist PA......... 4.750 03/01/25 1,237,830
------------
38,444,798
------------
RHODE ISLAND 0.2%
1,500 Rhode Island Depositors Econ Protn
Corp Spl Oblig Ser A (Prerefunded @
08/01/02)............................ 6.950 08/01/22 1,625,490
------------
SOUTH CAROLINA 0.7%
2,700 Charleston Cnty, SC Solid Waste (MBIA
Insd)................................ 6.000 01/01/14 2,749,275
1,500 Lancaster Cnty, SC Sch Dist (FSA
Insd)................................ 4.750 03/01/19 1,272,525
1,000 South Carolina Jobs Econ Dev Auth
Hosp Fac Rev Georgetown Mem Hosp
(AMBAC Insd)......................... 5.625 11/01/19 937,310
------------
4,959,110
------------
SOUTH DAKOTA 0.1%
1,000 South Dakota St Hlth & Edl Fac Auth
Vocational Ed Pgm Ser A (AMBAC
Insd)................................ 5.400 08/01/13 980,620
------------
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS 4.4%
$ 9,790 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.............. 7.500% 12/01/29 $ 10,207,739
2,000 Brazos River Auth TX Rev Houston Inds
Inc Proj Ser D Rfdg (MBIA Insd)...... 4.900 10/01/15 1,779,120
2,000 Brazos River Auth TX Rev Houston
Lighting & Pwr Co Proj Rfdg (AMBAC
Insd)................................ 5.050 11/01/18 1,762,540
2,000 Coastal Bend Hlth Fac Dev Corp TX
Incarnate Word Hlth Svcs Ser A
(Prerefunded @ 11/15/02) (FSA
Insd)................................ 6.000 11/15/22 2,124,940
3,000 Dallas Cnty, TX Util & Reclamation
Dist Ser B Rfdg (AMBAC Insd) (a)..... 5.875 02/15/29 2,937,060
2,000 Eagle Pass, TX Intl Bridge Rev Rfdg
(AMBAC Insd)......................... 5.250 02/15/14 1,887,420
1,500 North Cent TX Hlth Fac Dev Hlth Fac C
C Young Mem Proj..................... 6.300 02/15/15 1,468,890
6,000 Plano, TX Hlth Fac Dev Corp TX Hlth
Res Sys Ser C (MBIA Insd)............ 5.000 02/15/22 5,145,540
2,750 Texas St Vets Hsg Assistance Pgm Ser
B.................................... 6.100 06/01/31 2,715,653
------------
30,028,902
------------
UTAH 0.7%
2,500 Murray City, UT Hosp Rev Inc Hlth Svc
Inc Rfdg (MBIA Insd)................. 4.750 05/15/20 2,053,100
830 Utah St Hsg Fin Agy Single Family Mtg
Mezzanine Issue H1 (AMBAC Insd)...... 6.000 07/01/12 837,379
1,425 Utah St Hsg Fin Agy Single Family Mtg
Ser A2 (FHA Gtd)..................... 7.150 07/01/25 1,466,838
300 Utah St Hsg Fin Agy Single Family Mtg
Sr Ser A1 (FHA Gtd).................. 7.100 07/01/14 301,794
------------
4,659,111
------------
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
VIRGINIA 0.9%
$ 1,000 Henrico Cnty, VA Indl Dev Auth Pub
Fac Lease Rev Henrico Cnty Regl Jail
Proj................................. 7.125% 08/01/21 $ 1,105,990
1,090 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/14 1,049,256
1,590 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/15 1,513,409
2,680 Richmond, VA (FSA Insd) (a).......... 5.500 01/15/17 2,513,465
------------
6,182,120
------------
WASHINGTON 0.3%
1,000 Grant Cnty, WA Pub Util Dist No 2
Priest Rapids Hydro Elec Rev Ser B
Rfdg (MBIA Insd)..................... 5.250 01/01/14 930,350
1,000 King Cnty, WA Ser B.................. 6.625 12/01/15 1,089,270
------------
2,019,620
------------
WEST VIRGINIA 0.7%
3,000 Marshall Cnty, WV Pollutn Ctl Rev OH
Pwr Co Proj Ser C Rfdg (MBIA Insd)... 6.850 06/01/22 3,193,770
1,530 West Virginia St Hsg Dev Fd Hsg Fin
Ser B (FHA Gtd)...................... 7.200 11/01/20 1,547,044
------------
4,740,814
------------
WISCONSIN 1.0%
2,000 Southeast WI Professional Baseball
Park Dist Sales Tax Rev (MBIA
Insd)................................ 5.500 12/15/20 1,914,420
2,000 Southeast WI Professional Baseball
Park Dist Sales Tax Rev (MBIA
Insd)................................ * 12/15/18 623,180
1,750 Southeast WI Professional Baseball
Park Dist Sales Tax Rev (MBIA
Insd)................................ * 12/15/19 512,033
2,000 Southeast WI Professional Baseball
Park Dist Sales Tax Rev Ser A Rfdg
(MBIA Insd).......................... 5.500 12/15/26 1,890,960
1,000 Wisconsin St Hlth & Edl Facs Auth Rev
Kenosha Hosp & Med Ctr Proj.......... 5.625 05/15/29 874,510
1,500 Wisconsin St Hlth & Edl Facs Auth Rev
Franciscan Sisters Christian Ser A... 5.500 02/15/18 1,334,070
------------
7,149,173
------------
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WYOMING 0.5%
$ 1,285 Wyoming Cmnty Dev Auth Hsg Rev Ser
2.................................... 6.350% 06/01/29 $ 1,306,112
1,830 Wyoming Cmnty Dev Auth Hsg Rev Ser
4.................................... 6.550 06/01/28 1,868,357
------------
3,174,469
------------
PUERTO RICO 0.7%
4,485 Puerto Rico Comwlth Aqueduct & Swr
Auth Rev Rfdg........................ 5.000 07/01/15 4,035,200
1,110 Puerto Rico Comwlth Ser A Rfdg....... 6.000 07/01/14 1,130,890
------------
5,166,090
------------
TOTAL LONG-TERM INVESTMENTS 100.6%
(Cost $670,002,159)................................................. 691,566,701
SHORT-TERM INVESTMENTS 1.7%
(Cost $11,395,000).................................................. 11,395,000
------------
TOTAL INVESTMENTS 102.3%
(Cost $681,397,159)................................................. 702,961,701
LIABILITIES IN EXCESS OF OTHER ASSETS (2.3%)......................... (15,791,559)
------------
NET ASSETS 100.0%.................................................... $687,170,142
============
</TABLE>
* Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
(c) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corporation
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
26
<PAGE> 28
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $681,397,159)....................... $702,961,701
Cash........................................................ 20,884
Receivables:
Interest.................................................. 13,011,697
Investments Sold.......................................... 6,902,000
Other....................................................... 89,275
------------
Total Assets.......................................... 722,985,557
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 34,273,591
Income Distributions -- Common and Preferred Shares....... 734,499
Investment Advisory Fee................................... 380,654
Administrative Fee........................................ 117,124
Affiliates................................................ 48,332
Accrued Expenses............................................ 135,573
Trustees' Deferred Compensation and Retirement Plans........ 125,642
------------
Total Liabilities..................................... 35,815,415
------------
NET ASSETS.................................................. $687,170,142
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 10,600 issued with liquidation preference of
$25,000 per share)........................................ $265,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 27,013,149 shares issued and
outstanding).............................................. 270,131
Paid in Surplus............................................. 399,318,038
Net Unrealized Appreciation................................. 21,564,542
Accumulated Undistributed Net Investment Income............. 2,139,794
Accumulated Net Realized Loss............................... (1,122,363)
------------
Net Assets Applicable to Common Shares................ 422,170,142
------------
NET ASSETS.................................................. $687,170,142
============
NET ASSET VALUE PER COMMON SHARE ($422,170,142 divided
by 27,013,149 shares outstanding)......................... $ 15.63
============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 43,361,502
------------
EXPENSES:
Investment Advisory Fee..................................... 4,694,905
Administrative Fee.......................................... 1,444,586
Preferred Share Maintenance................................. 703,149
Trustees' Fees and Related Expenses......................... 49,117
Custody..................................................... 47,691
Legal....................................................... 26,574
Other....................................................... 374,671
------------
Total Expenses.......................................... 7,340,693
------------
NET INVESTMENT INCOME....................................... $ 36,020,809
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (1,055,012)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 73,056,118
End of the Period......................................... 21,564,542
------------
Net Unrealized Depreciation During the Period............... (51,491,576)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(52,546,588)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(16,525,779)
============
</TABLE>
See Notes to Financial Statements
28
<PAGE> 30
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $36,020,809 $36,528,848
Net Realized Gain/Loss............................ (1,055,012) 2,635,814
Net Unrealized Appreciation/Depreciation During
the Period...................................... (51,491,576) 8,862,774
----------- -----------
Change in Net Assets from Operations.............. (16,525,779) 48,027,436
----------- -----------
Distributions from Net Investment Income:
Common Shares................................... (26,742,982) (27,077,989)
Preferred Shares................................ (8,565,678) (9,121,751)
----------- -----------
(35,308,660) (36,199,740)
----------- -----------
Distributions from Net Realized Gain on
Investments:
Common Shares................................... (1,979,233) (1,638,685)
Preferred Shares................................ (656,581) (565,331)
----------- -----------
(2,635,814) (2,204,016)
----------- -----------
Total Distributions............................... (37,944,474) (38,403,756)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (54,470,253) 9,623,680
NET ASSETS:
Beginning of the Period........................... 741,640,395 732,016,715
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of
$2,139,794 and $1,427,645, respectively)........ $687,170,142 $741,640,395
============ ============
</TABLE>
See Notes to Financial Statements
29
<PAGE> 31
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period (a)... $ 17.644 $ 17.288 $16.577
-------- -------- -------
Net Investment Income.......................... 1.333 1.352 1.370
Net Realized and Unrealized Gain/Loss.......... (1.945) .426 .738
-------- -------- -------
Total from Investment Operations............... (.612) 1.778 2.108
-------- -------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders................ .990 1.003 1.045
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........... .317 .337 .352
Distributions from Net Realized Gain:
Paid to Common Shareholders................ .073 .061 -0-
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........... .024 .021 -0-
-------- -------- -------
Total Distributions............................ 1.404 1.422 1.397
-------- -------- -------
Net Asset Value, End of the Period............. $ 15.628 $ 17.644 $17.288
======== ======== =======
Market Price Per Share at End of the Period.... $13.6875 $ 17.000 $16.125
Total Investment Return at Market Price (b).... (13.97%) 12.40% 8.92%
Total Return at Net Asset Value (c)............ (5.66%) 8.39% 10.94%
Net Assets at End of the Period (In
millions).................................... $687.2 $741.6 $732.0
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**................ 1.61% 1.58% 1.60%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)....... 6.00% 5.80% 6.06%
Portfolio Turnover............................. 33% 29% 40%
* Non-annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares................... 1.02% 1.01% 1.01%
</TABLE>
(a) Net Asset Value at January 24, 1992, is adjusted for common and preferred
share offering costs of $.208 per common share.
(b) Total Investment Return at market price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(d) Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
30
<PAGE> 32
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 24, 1992
(Commencement
Year Ended October 31 of Investment
- ------------------------------------------ Operations) to
1996 1995 1994 1993 October 31, 1992
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
$16.579 $15.032 $17.954 $15.557 $14.792
------- ------- ------- ------- -------
1.381 1.415 1.432 1.454 1.010
.109 1.652 (2.842) 2.424 .550
------- ------- ------- ------- -------
1.490 3.067 (1.410) 3.878 1.560
------- ------- ------- ------- -------
1.140 1.140 1.140 1.085 .595
.352 .380 .305 .287 .200
-0- -0- .056 .083 -0-
-0- -0- .011 .026 -0-
------- ------- ------- ------- -------
1.492 1.520 1.512 1.481 .795
------- ------- ------- ------- -------
$16.577 $16.579 $15.032 $17.954 $15.557
======= ======= ======= ======= =======
$15.813 $15.750 $14.000 $17.375 $14.875
7.84% 21.15% (13.12%) 25.40% 3.08%*
7.12% 18.51% (9.99%) 23.53% 7.68%*
$712.8 $712.9 $671.1 $750.0 $685.2
1.62% 1.68% 1.63% 1.59% 1.54%
6.24% 6.55% 6.79% 6.87% 6.71%
30% 15% 20% 20% 37%*
1.02% 1.04% 1.03% 1.01% 1.01%
</TABLE>
See Notes to Financial Statements
31
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Trust for Investment Grade Municipals (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 substantially all of its assets
in municipal securities rated investment grade at the time of investment. The
Trust commenced investment operations on January 24, 1992.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Municipal bonds are valued by independent pricing
services or dealers using the mean of the bid and asked prices or, in the
absence of market quotations, at fair value based upon yield data relating to
municipal bonds with similar characteristics and general market conditions.
Securities which are not valued by independent pricing services are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.
B. SECURITY TRANSACTIONS--Security Transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Trust may purchase and sell securities on a "when issued" or "delayed
delivery" basis with settlement to occur at a later date. The value of the
security so purchased is subject to market fluctuations during this period. The
Trust will maintain, in a segregated account with its custodian, assets having
an aggregate value at least equal to the amount of the when issued or delayed
delivery purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
32
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1999, the Trust had an accumulated capital loss
carryforward for tax purposes of 1,055,012 which expires on October 31, 2007.
Net realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of the deferral of losses relating to wash sale
transactions.
At October 31, 1999, for federal income tax purposes cost of long- and
short-term investments is $681,464,571, the aggregate gross unrealized
appreciation is $29,830,300 and the aggregate gross unrealized depreciation is
$8,333,170, resulting in a net unrealized appreciation on long- and short-term
investments of $21,497,130.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually 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.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. will provide investment advice and facilities to the
Trust for an annual fee payable monthly of .65% 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 administrative services provided by the Administrator include record keeping
and reporting responsibilities with respect to the Trust's portfolio and
preferred shares and providing certain services to shareholders.
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $14,700 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.
33
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $177,700 representing Van Kampen's cost of providing accounting
and legal services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust has implemented 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. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $239,693,543 and $245,381,600,
respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising an option contract or taking
delivery of a security underlying a futures contract. In these instances 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. FUTURES CONTRACTS--The Trust may invest in 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
34
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
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, cash or liquid 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).
There were no transactions in futures contracts during the year ended
October 31, 1999.
B. INDEXED SECURITIES--These instruments, if held, are identified in the
portfolio of investments. The price of these securities may be more volatile
than the price of a comparable fixed rate security.
An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short-term interest rates which it
pays on the preferred shares.
5. PREFERRED SHARES
Effective with the close of business on April 23, 1999, the liquidation
preference on the Trust's preferred shares decreased from $50,000 to $25,000 per
share. This decrease was effected by means of a 2 for 1 stock split that doubled
the Trust's number of outstanding preferred shares. The total liquidation value
for the Trust was unchanged.
The Trust has outstanding 10,600 Auction Preferred Shares ("APS") in four
series. Series A, B, and C contain 3,000 shares each while Series D contains
1,600 shares. Dividends are cumulative and the dividend rate is currently reset
through an auction process. The dividend period is 28 days for Series A, B, C
and D. However, effective with the auction on October 6, 1999, the dividend
period for Series C was extended through February 9, 2000. Additionally, the
dividend period for Series D was extended through February 15, 2000, with its
auction on October 15, 1999. Following these extended dividend periods, Series C
and D will revert back to their normal 28 day reset period. The average rate in
effect on October 31, 1999, was 3.777%. During the year ended October 31, 1999,
the rates ranged from 3.000% to 6.000%.
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.
35
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
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.
36
<PAGE> 38
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Trust for Investment Grade Municipals:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Trust for Investment Grade Municipals (the "Trust"), including the
portfolio of investments, as of October 31, 1999, and the related statement of
operations for the year ended, the statement of changes in net assets for each
of the two years in the period then ended, and the financial highlights for each
of the periods presented. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Trust for Investment Grade Municipals as of October 31, 1999, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
December 9, 1999
37
<PAGE> 39
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust Company,
as your Plan Agent, will automatically invest your dividends and capital gains
distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be re-
registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change 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
pro rata 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
38
<PAGE> 40
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
STEVEN MULLER
THEODORE A. MYERS
RICHARD F. POWERS, III*--Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
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, 1999. The Trust designated 99.96% of the income distributions as a
tax-exempt income distribution. Additionally during the period, the Trust
designated and paid $1,071,027 as a 20% rate gain distribution. The
distributions, where applicable, were included on 1998's Form 1099-DIV which was
mailed to shareholders in January of 1999. In January, 2000, the Trust will
provide tax information to shareholders for the 1999 calendar year.
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of
Van Kampen Funds Inc.
39
<PAGE> 41
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where
shareholders voted on the election of trustees and the selection of independent
public accountants.
1) With regard to the election of the following trustees by common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- ----------------------------------------------------------------------
<S> <C> <C>
David C. Arch................................... 23,685,264 227,805
Howard J Kerr................................... 23,689,030 224,038
Dennis J. McDonnell............................. 23,691,767 221,301
</TABLE>
The other trustees of the Trust whose terms did not expire in 1999 are Rod
Dammeyer, Steven Muller, Theodore A. Myers, Don G. Powell*, Hugo F. Sonnenschein
and Wayne W. Whalen.
2) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 23,665,714 shares voted in favor of the proposal,
109,601 shares voted against and 137,753 shares abstained.
*On August 9, 1999, Don G. Powell resigned and the Board of Trustees appointed
Richard F. Powers, III.
40
<PAGE> 42
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000880892
<NAME> VK TRUST FOR INVESTMENT GRADE MUNICIPALS
<SERIES>
<NUMBER> 11
<NAME> TRUST FOR INVEST GRADE MUNI
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 681,397,159
<INVESTMENTS-AT-VALUE> 702,961,701
<RECEIVABLES> 19,913,697
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 110,159
<TOTAL-ASSETS> 722,985,557
<PAYABLE-FOR-SECURITIES> 34,273,591
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,541,824
<TOTAL-LIABILITIES> 35,815,415
<SENIOR-EQUITY> 265,000,000
<PAID-IN-CAPITAL-COMMON> 399,588,169
<SHARES-COMMON-STOCK> 27,013,149
<SHARES-COMMON-PRIOR> 27,013,149
<ACCUMULATED-NII-CURRENT> 2,139,794
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,122,363)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,564,542
<NET-ASSETS> 687,170,142
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 43,361,502
<OTHER-INCOME> 0
<EXPENSES-NET> (7,340,693)
<NET-INVESTMENT-INCOME> 36,020,809
<REALIZED-GAINS-CURRENT> (1,055,012)
<APPREC-INCREASE-CURRENT> (51,491,576)
<NET-CHANGE-FROM-OPS> (16,525,779)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35,308,660)
<DISTRIBUTIONS-OF-GAINS> (2,635,814)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (54,470,253)
<ACCUMULATED-NII-PRIOR> 1,427,645
<ACCUMULATED-GAINS-PRIOR> 2,568,463
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,694,905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,340,693
<AVERAGE-NET-ASSETS> 722,288,252
<PER-SHARE-NAV-BEGIN> 17.644
<PER-SHARE-NII> 1.333
<PER-SHARE-GAIN-APPREC> (1.945)
<PER-SHARE-DIVIDEND> (1.307)
<PER-SHARE-DISTRIBUTIONS> (0.097)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.628
<EXPENSE-RATIO> 1.61
</TABLE>
