<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 25
Statement of Operations.......................... 26
Statement of Changes in Net Assets............... 27
Financial Highlights............................. 28
Notes to Financial Statements.................... 30
Dividend Reinvestment Plan....................... 34
</TABLE>
VGM SAR 6/99
<PAGE> 2
LETTER TO SHAREHOLDERS
May 20, 1999
Dear Shareholder,
With the volatility that we've experienced in many financial markets in
recent months, some investors have sold securities because of uncertainty about
where the markets were going, only to be left rethinking whether they made the
right decision. We've witnessed this kind of market activity numerous times over
the past several years, sparked by concerns such as the impact of the Asian
economic crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the latest rally. That's partly because most of the recent big gains happened
in relatively short periods of time. This kind of volatility--and the danger of
making short-term decisions--highlights the importance of investing for the long
term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather whatever the markets have in store.
Sincerely,
[SIG]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
A surge in consumer confidence led to strong economic growth over the past
six months, as fears about the impact of the Asian financial crisis subsided. In
the fourth quarter, the nation's gross domestic product (GDP) rose at an
astounding 6.0 percent annual rate and remained strong at 4.5 percent through
the first quarter of 1999. This powerful level of growth is attributed to a
continued increase in consumer spending, a strong housing market, and high
retail sales--all the result of a more confident consumer given the positive
employment environment. The economy began to show signs of slowing down early in
1999, however, as corporate profits and wage growth declined.
Despite continued improvements in Asia and Latin America and the record
economic growth in the United States, inflation remained at bay in late 1998 as
commodity prices tumbled. Although rising oil prices pushed inflation up 3.3
percent on an annualized basis in the first four months of 1999, price increases
remained moderate enough overall to keep inflation-adjusted interest rates
attractive.
Our outlook for the domestic economy remains positive, although we
anticipate slower growth in the second half of the year. We look for a gradual
but steady rise in inflation throughout 1999 to more normal but certainly not
alarming levels. Internationally, low interest rates and improving financial
conditions should continue to support the economic progress we've witnessed
overseas.
INTEREST RATES AND INFLATION
April 30, 1997, through April 30, 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Apr 1997 6.0000 2.5000
5.6250 2.2000
6.5000 2.3000
Jul 1997 6.0000 2.2000
5.5000 2.2000
6.2500 2.2000
Oct 1997 5.7500 2.1000
5.6875 1.8000
6.5000 1.7000
Jan 1998 5.5625 1.6000
5.6250 1.4000
6.1250 1.4000
Apr 1998 5.6250 1.4000
5.6875 1.7000
6.0000 1.7000
Jul 1998 5.5625 1.7000
5.9375 1.6000
5.7500 1.5000
Oct 1998 5.2500 1.5000
4.8750 1.5000
4.0000 1.6000
Jan 1999 4.8125 1.7000
4.8750 1.6000
5.1250 1.7000
Apr 1999 4.9375 2.3000
</TABLE>
Interest rates are represented by the closing midline federal funds 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.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1999
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
(NYSE TICKER SYMBOL--VGM)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1).......... .75%
Six-month total return based on NAV(2)................... 1.19%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 5.98%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 9.34%
SHARE VALUATIONS
Net asset value.......................................... $ 17.28
Closing common stock price............................... $16.5625
Six-month high common stock price (12/30/98)............. $17.4375
Six-month low common stock price (01/26/99).............. $16.0000
Preferred share (Series A) rate(5)....................... 3.350%
Preferred share (Series B) rate(5)....................... 3.100%
Preferred share (Series C) rate(5)....................... 3.189%
Preferred share (Series D) rate(5)....................... 3.200%
</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 bracket.
(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
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.
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.
INSURED BOND: A bond that is insured against default by the bond insurer. If the
issuer defaults, the insurance company will step in and take over payments
of interest and principal when due. Once a bond is insured, it typically
carries the rating of the insurer. Most insurers are rated AAA.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's 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 1998
and maturing in 2008 is a 10-year bond.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
government entity to finance capital expenditures of public projects, such
as the construction of highways, public works, or school buildings. Interest
on public-purpose municipal bonds is exempt from federal income taxes and,
in some states, from state and local income taxes.
PREMIUM BOND: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond does.
REFUNDING: Retiring an outstanding bond issue at maturity using money from the
sale of a new offering.
YIELD: The annual rate of return on an investment, expressed as a percentage.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower 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.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
We recently spoke with the management team of the Van Kampen Trust for
Investment Grade Municipals about the key events and economic forces that shaped
the markets during the reporting period. The team includes Thomas M. Byron,
portfolio manager, and Peter W. Hegel, chief investment officer for fixed-income
investments. The following comments reflect their views on the Trust's
performance during the six months ended April 30, 1999.
Q HOW WOULD YOU DESCRIBE THE CONDITIONS IN THE MUNICIPAL MARKET DURING THE
PAST SIX MONTHS?
A Although most of the financial markets experienced volatility during the
period, the municipal market remained relatively stable. For the majority
of the six months, long-term municipal bond yields remained within a range
of about 5.1 to 5.3 percent, even as the Federal Reserve cut interest rates.
Much of the stability in the municipal market can be attributed to its isolation
from turbulence abroad. Concerns about the financial conditions in Asia and
Latin America hurt the stock and high-yield bond markets last fall, but had
little effect on municipals.
The positive economic and market conditions encouraged more municipalities
to take advantage of low interest rates and issue new bonds. Although the amount
of municipal debt increased, the credit quality of many issuers was not
compromised--in fact, it improved as the positive economic environment led to
stronger balance sheets. As a result, we saw more issuers using municipal bonds
to finance special growth and expansion projects, as opposed to financing their
regular operations.
The proportion of higher-yielding municipal bonds also increased during the
period as the number of insured bonds declined. Because bond insurers tightened
their underwriting criteria, more issuers came to market without insurance and
offered higher yields to compensate bondholders for the increased credit risk.
This benefited the Trust because it allowed our experienced research staff to
seek out those higher-yielding bonds that we felt had strong underlying quality.
Q WHY WERE MUNICIPAL BONDS SO ATTRACTIVE RELATIVE TO COMPARABLE TREASURY
BONDS?
A Toward the end of 1998, the yields on 30-year insured municipal bonds and
comparable U.S. Treasury bonds reached equivalent levels, which is a rare
occurrence. Typically, investment-grade municipal bonds have offered about
85 to 90 percent as much yield as comparable Treasury bonds because their
interest payments are exempt from federal income taxes. However, as Treasury
yields fell and municipal yields remained stable, the yield difference between
the two types of bonds shrank.
5
<PAGE> 7
Early in 1999, investors recognized the tremendous opportunities available in
the municipal market, and demand for municipals began to increase. In
conjunction with a recent slowdown in supply, this boost in municipal demand
pushed the municipal-to-Treasury yield ratio back to more traditional but still
attractive levels.
Q WHAT STRATEGIES DID YOU USE TO MANAGE THE TRUST?
A Our focus was on supporting the Trust's income stream while monitoring its
risk level and price volatility. As a result, we found value in bonds with
15- to 20-year maturities, as the intermediate range of the yield curve
offered almost as much yield as comparable 30-year bonds but is potentially less
volatile.
In addition, we sought to limit the Trust's exposure to bond calls, which
can lower its income stream because we must invest the proceeds of called bonds
into bonds paying current lower interest rates. We sold bonds in the portfolio
that had a high risk of being called, or repaid early by the issuer. Because
these higher-yielding bonds had increased in value since we purchased them, we
took advantage of the opportunity to sell them at a premium and contribute to
the Trust's total return. To help protect the Trust from future bond calls, we
also began to replace some of our housing bonds. These bonds carry a risk that
the mortgage holder will refinance the mortgage or pay it off early, especially
during a low interest-rate environment like we are currently experiencing. As a
result, higher-yielding housing bonds are more likely than many other issues to
be called from the portfolio.
Another strategy we used to enhance performance was to purchase bonds issued
in states that have strong demand for municipal securities as a result of heavy
state and local taxation. In particular, we purchased bonds issued in
Pennsylvania and Florida. The large supply in these states provided a number of
opportunities to find attractive bonds with appreciation potential. For
additional portfolio highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A During the past six months, the Trust generated a total return of 0.75
percent(1) based on market price. This reflects a decrease in market price
from $17.00 per share on October 31, 1998, to $16.5625 on April 30, 1999.
In addition, the Trust provided a distribution rate of 5.98 percent(3) based on
its closing common stock price on April 30, 1999. Because the Trust is exempt
from federal income taxes, this distribution rate is equivalent to a yield of
9.34 percent(4) on a taxable investment for shareholders in the 36 percent
federal income tax bracket. The Trust's monthly dividend of $.0825 per share was
unchanged during the reporting period. Past performance does not guarantee
future results. Please refer to the footnotes and chart on page 3 for additional
Trust performance results.
6
<PAGE> 8
Q WHAT DO YOU SEE AHEAD FOR THE MUNICIPAL MARKET?
A Strong economic performance should continue to bolster the credit
conditions of municipal issuers. In addition, we expect that this economic
strength will continue to make municipalities more likely to issue debt
for special projects rather than for general operating financing.
Although insured debt has been increasing in recent years, we have started
to see a reversal of this trend in the last few months, as municipal bond
insurers have become more cautious. If this caution continues, credit spreads
may widen as the proportion of higher-yielding uninsured bonds increases.
Finally, we see the potential for changes in traditional economic activity
toward the end of the year because of investor concerns about the year 2000
computer problem. These temporary concerns, however, may result in attractive
investment opportunities that our research staff can explore to uncover
potential value.
[SIG]
Thomas M. Byron
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF APRIL 30, 1999
<S> <C>
General Purpose............. 18.1%
Industrial Revenue.......... 17.4%
Health Care................. 13.7%
Transportation.............. 7.0%
Single-Family Housing....... 6.3%
<CAPTION>
AS OF OCTOBER 31, 1998
<S> <C>
General Purpose............. 17.3%
Industrial Revenue.......... 16.6%
Health Care................. 13.5%
Single-Family Housing....... 8.7%
Transportation.............. 6.9%
</TABLE>
PORTFOLIO COMPOSITION BY CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF APRIL 30, 1999
<S> <C>
AAA/Aaa..............53.4%
AA/Aa................ 8.4%
A/A..................12.1%
BBB/Baa..............23.7%
BB/Ba................ 0.2%
Non-Rated............ 2.2%
</TABLE>
[PIE CHART]
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1998
<S> <C>
AAA/Aaa..............51.7%
AA/Aa................10.0%
A/A..................12.9%
BBB/Baa..............23.0%
BB/Ba................ 0.2%
Non-Rated............ 2.2%
</TABLE>
[PIE CHART]
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DISTRIBUTION HISTORY
FOR THE PERIOD ENDED APRIL 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
Distribution per Common Share DIVIDENDS CAPITAL GAINS
- ----------------------------- --------- -------------
<S> <C> <C>
Nov 1998 0.0825 0.0000
Dec 1998 0.0825 0.0733
Jan 1999 0.0825 0.0000
Feb 1999 0.0825 0.0000
Mar 1999 0.0825 0.0000
Apr 1999 0.0825 0.0000
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 100.9%
ALABAMA 3.6%
$ 1,395 Birmingham, AL Arpt Auth Arpt Rev
Rfdg (AMBAC Insd) (a)................ 5.500% 07/01/12 $ 1,462,016
6,500 Birmingham, AL North Med Clinic Brd
Rev Ser A Carraway Methodist Hosp
(Prerefunded @ 01/01/01)............. 7.500 07/01/15 7,010,900
8,600 Birmingham, AL North Med Clinic Brd
Rev Ser B Carraway Methodist Hosp
(Prerefunded @ 01/01/01)............. 8.000 07/01/15 9,344,932
4,000 Courtland, AL Indl Dev Brd Solid
Waste Disp Rev Champion Intl Corp
Proj................................. 7.750 01/01/20 4,156,920
4,250 Courtland, AL Indl Dev Brd Solid
Waste Disp Rev Champion Intl Corp
Proj Ser A........................... 6.500 09/01/25 4,560,675
------------
26,535,443
------------
ARKANSAS 1.8%
12,500 Blytheville, AR Solid Waste Recycling
& Swr Treatment Rev Nucor Corp
Proj................................. 6.900 12/01/21 13,446,250
------------
CALIFORNIA 6.1%
1,300 Anaheim, CA Pub Fin Auth Lease Rev
Pub Impt Proj Ser C (FSA Insd)....... 6.000 09/01/16 1,491,230
670 California Edl Fac Auth Rev Univ of
La Verne............................. 5.600 04/01/00 681,229
2,000 California Pollutn Ctl Fin Auth
Pollutn Ctl Rev Southn CA Edison Co
(AMBAC Insd) (b)..................... 6.000 07/01/27 2,144,180
5,000 Desert Hosp Dist CA Hosp Rev Com
Partn (Prerefunded @ 07/23/02) (FSA
Insd)................................ 6.392 07/28/20 5,462,600
25,750 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Sr Lien Ser A................. * 01/01/23 7,283,645
2,000 Los Angeles Cnty, CA Metro Trans Auth
Sales Tax Rev 1st Tier Sr Ser C Rfdg
(AMBAC Insd) (a)..................... 5.000 07/01/26 1,966,300
13,765 Orange Cnty, CA Recovery Ctfs Ser A
(MBIA Insd).......................... 6.000 07/01/06 15,406,201
2,000 Orange Cnty, CA Recovery Ctfs Ser A
Rfdg (MBIA Insd)..................... 6.000 06/01/09 2,273,160
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 2,000 Pajaro Vly, CA Unified Sch Dist Ctfs
Partn Sch Fac Brdg Fdg Pgm (FSA
Insd)................................ 5.850% 09/01/32 $ 2,173,280
7,080 San Joaquin Hills, CA Tran Toll Cap
Apprec Ser A Rfdg (MBIA Insd)........ * 01/15/26 1,762,354
2,000 Santa Clara Cnty, CA Fin Auth Lease
Rev Multi Fac Projs Ser B (AMBAC
Insd) (a)............................ 5.500 05/15/08 2,141,300
2,000 Southern CA Pub Pwr Auth (FSA
Insd)................................ 6.000 07/01/12 2,149,560
------------
44,935,039
------------
COLORADO 4.0%
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 1,187,810
1,000 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser B1........................ 7.650 11/01/26 1,105,820
2,500 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser B2........................ 7.450 11/01/27 2,796,975
6,395 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.500 11/15/23 6,889,589
3,675 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.750 11/15/23 4,100,859
7,230 Denver, CO City & Cnty Arpt Rev Ser
A.................................... 8.000 11/15/25 7,735,956
1,685 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)................. 7.000 12/01/00 1,766,318
3,250 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)................. 7.500 12/01/11 3,525,925
------------
29,109,252
------------
CONNECTICUT 0.3%
2,000 Connecticut St Dev Auth Wtr Fac Rev
Brdgeport Hydraulic.................. 6.150 04/01/35 2,173,780
------------
DISTRICT OF COLUMBIA 0.2%
1,600 District of Columbia Ser E (FSA
Insd)................................ 6.000 06/01/13 1,743,824
------------
FLORIDA 2.9%
995 Broward Cnty, FL Hsg Fin Auth
Multi-Family Hsg Rev Pompano Oaks
Apts Proj Rfdg (GNMA
Collateralized)...................... 6.000 12/01/27 1,059,227
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FLORIDA (CONTINUED)
$16,490 Dade Cnty, FL Spl Oblig Cap Apprec
Ser B Rfdg (Prerefunded @ 10/01/08)
(AMBAC Insd)......................... * 10/01/26 $ 3,650,556
2,500 Florida St Brd of Edl Cap Outlay Pub
Edl Ser B Rfdg (MBIA Insd)........... 4.500% 06/01/24 2,280,675
1,400 Florida St Dept Corrections Ctfs
Partn Okeechobee Correctional (AMBAC
Insd)................................ 6.250 03/01/15 1,554,798
1,000 Hillsborough Cnty, FL Indl Dev Auth
Pollutn Ctl Rev Tampa Elec Co Proj
Ser 92 Rfdg.......................... 8.000 05/01/22 1,135,540
2,000 Martin Cnty, FL Indl Dev Auth Indl
Dev Rev Indiantown Cogeneration Proj
Ser A Rfdg........................... 7.875 12/15/25 2,137,960
4,000 Orange Cnty, FL Sch Brd Ctfs Partn
Ser A (MBIA Insd) (a)................ 5.000 08/01/24 3,918,200
2,300 Orange Cnty, FL Sch Brd Ctfs Partn
Ser A (MBIA Insd).................... 5.375 08/01/17 2,377,717
3,465 Reedy Creek Impt Dist FL Ser C (AMBAC
Insd)................................ 4.750 06/01/15 3,432,187
------------
21,546,860
------------
GEORGIA 1.6%
3,150 Burke Cnty, GA Dev Auth Pollutn Ctl
Rev GA Pwr Co Plant Vogtle Proj (MBIA
Insd)................................ 6.350 05/01/19 3,222,607
1,500 George L Smith II GA Wrld Congress
Cent Auth Rev Domed Stadium Proj Rfdg
(MBIA Insd) (a)...................... 5.500 07/01/20 1,502,235
5,900 Georgia Muni Electric Auth Pwr Rev
Ser Y (MBIA Insd).................... 6.500 01/01/17 6,972,148
------------
11,696,990
------------
HAWAII 1.1%
6,000 Hawaii St Arpt Sys Rev Ser 2 (MBIA
Insd)................................ 6.750 07/01/21 6,439,500
2,000 Honolulu, HI City & Cnty Wastewtr Sys
Rev (FGIC Insd)...................... 4.500 07/01/28 1,800,540
------------
8,240,040
------------
ILLINOIS 10.3%
1,000 Berwyn, IL Corp Purp (AMBAC Insd).... 4.250 12/01/18 889,190
1,995 Bolingbrook, IL Cap Apprec Ser C Rfdg
(a).................................. * 01/01/23 577,054
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,000 Chicago, IL Brd of Ed Chicago Sch
Reform (AMBAC Insd).................. 5.750% 12/01/20 $ 2,141,580
4,865 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)............... * 07/01/16 1,875,409
1,600 Chicago, IL Cent Pub Lib Ser A
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.650 01/01/05 1,760,752
1,800 Chicago, IL Cent Pub Lib Ser A
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.700 01/01/06 1,983,312
1,600 Chicago, IL Cent Pub Lib Ser B
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.650 01/01/05 1,760,752
1,400 Chicago, IL Cent Pub Lib Ser C
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.650 01/01/05 1,540,658
1,500 Chicago, IL Cent Pub Lib Ser C
(Prerefunded @ 04/01/02) (AMBAC
Insd)................................ 6.700 01/01/06 1,652,760
7,000 Chicago, IL O'Hare Intl Arpt Rev Genl
Arpt Second Lien Ser A Rfdg (MBIA
Insd) (b)............................ 6.375 01/01/12 7,764,190
13,645 Chicago, IL O'Hare Intl Arpt Spl Fac
Rev United Airls Inc................. 8.500 05/01/18 14,465,883
3,445 Chicago, IL O'Hare Intl Arpt Spl Fac
Rev United Airls Inc Proj Ser 84A.... 8.850 05/01/18 3,772,241
4,395 East Peoria, IL Ser C Rfdg........... 7.000 05/01/17 4,859,771
3,285 Illinois Dev Fin Auth Rev
Presbyterian Home Lake Proj Ser B.... 6.300 09/01/22 3,625,293
2,000 Illinois Edl Fac Auth Rev Lewis
Univ................................. 6.100 10/01/16 2,104,460
2,000 Illinois Hlth Fac Auth Rev Edward
Hosp Assn Proj (Prerefunded @
02/15/02)............................ 7.000 02/15/12 2,206,960
1,900 Illinois Hlth Fac Auth Rev
Evangelical Hosps Ser C (FSA Insd)... 6.750 04/15/17 2,099,215
1,000 Illinois Hlth Fac Auth Rev Highland
Park Hosp Proj Ser A (MBIA Insd)..... 5.750 10/01/17 1,064,890
1,000 Illinois Hlth Fac Auth Rev Midwest
Physician Grp Ltd Rfdg............... 5.500 11/15/19 956,370
2,000 Illinois Hlth Fac Auth Rev OSF
Hlthcare Sys Rfdg.................... 6.000 11/15/10 2,143,520
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,400 Illinois Hlth Fac Auth Rev Sarah Bush
Lincoln Hlth Cent (Prerefunded @
05/15/02)............................ 7.250% 05/15/22 $ 2,685,480
2,275 Illinois Hlth Fac Auth Rev South
Suburban Hosp........................ 7.000 02/15/18 2,754,388
1,475 Illinois Hlth Fac Auth Rev South
Suburban Hosp (Prerefunded @
02/15/02)............................ 7.000 02/15/18 1,625,553
3,185 Illinois Hsg Dev Auth Multi-Family
Hsg Ser C............................ 7.400 07/01/23 3,382,311
8,845 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Pl
Expansion Ser A (FGIC Insd).......... * 06/15/16 3,708,974
1,105 Saint Clair Cnty, IL Pub Bldg Comm
Bldg Rev Cap Apprec Ser B (FGIC
Insd)................................ * 12/01/15 480,067
1,400 Southern IL Univ Rev Hsg & Aux Fac
Ser A Rfdg........................... 6.750 04/01/12 1,527,736
------------
75,408,769
------------
INDIANA 0.8%
4,500 Indianapolis, IN Arpt Auth Rev Spl
Fac Federal Express Corp Proj........ 7.100 01/15/17 5,020,830
1,000 Marion Cnty, IN Convention & Rec Fac
Auth Excise Tax Rev (MBIA Insd)...... * 06/01/14 472,630
------------
5,493,460
------------
IOWA 0.6%
1,865 Iowa Fin Auth Multi-Family Rev Hsg
Hamlet Apts Proj A Rfdg (GNMA
Collateralized)...................... 6.150 05/01/32 1,970,541
2,375 Iowa Student Ln Liquidity Corp Rev
Ser C................................ 6.950 03/01/06 2,522,511
------------
4,493,052
------------
KENTUCKY 3.7%
10,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.500 02/01/20 10,868,400
11,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl
Fac Delta Airls Proj Ser A........... 7.125 02/01/21 11,844,140
1,000 Kenton Cnty, KY Arpt Brd Rev
Cincinnati/Northn KY Intl Arpt Ser A
Rfdg (MBIA Insd)..................... 6.200 03/01/08 1,124,690
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KENTUCKY (CONTINUED)
$ 1,500 Kenton Cnty, KY Arpt Brd Rev
Cincinnati/Northn KY Intl Arpt Ser A
Rfdg (MBIA Insd)..................... 6.250% 03/01/09 $ 1,698,390
1,315 Kentucky Hsg Corp Hsg Rev Ser B...... 6.250 07/01/28 1,406,261
------------
26,941,881
------------
LOUISIANA 0.3%
2,000 New Orleans, LA Rfdg (FGIC Insd)..... 5.500 12/01/21 2,135,760
------------
MAINE 2.1%
2,650 Maine Muni Bd Bank Ser A Rfdg (MBIA
Insd)................................ 5.800 11/01/20 2,822,065
5,250 Maine St Hsg Auth Mtg Purch Ser D6... 7.250 11/15/19 5,514,285
6,755 Maine St Hsg Auth Mtg Purch Ser D6... 7.250 11/15/22 7,086,873
------------
15,423,223
------------
MARYLAND 0.2%
1,270 Baltimore, MD Ctfs Partn Brd of Edl
Admin Proj Ser A Rfdg (MBIA Insd)
(a).................................. 5.000 04/01/15 1,257,694
------------
MASSACHUSETTS 3.2%
2,000 Boston, MA Wtr & Swr Commn Rev Genl
Sr Ser D (FGIC Insd)................. 4.750 11/01/22 1,885,180
2,975 Massachusetts Muni Wholesale Elec Co
Pwr Supply Sys Rev Ser A (AMBAC
Insd)................................ 5.000 07/01/14 2,991,719
12,685 Massachusetts St Cons Ln Ser D
(Prerefunded @ 07/01/01)............. 6.875 07/01/10 13,793,796
2,410 Massachusetts St Hsg Fin Agy
Residential Dev Ser C (FNMA
Collateralized)...................... 6.875 11/15/11 2,611,621
1,000 Massachusetts St Indl Fin Agy Rev
Wentworth Institute Tech............. 5.650 10/01/18 1,018,920
1,000 Massachusetts St Wtr Res Auth Ser B
(MBIA Insd).......................... 4.750 12/01/21 942,460
------------
23,243,696
------------
MICHIGAN 6.2%
3,015 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/17 1,145,067
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/18 1,088,057
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MICHIGAN (CONTINUED)
$ 3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/19 $ 1,023,031
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/22 860,832
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/23 813,160
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1................. * 07/01/24 768,020
7,355 Detroit, MI Econ Dev Corp Res
Recovery Rev Ser A (FSA Insd)........ 6.875% 05/01/09 7,877,720
3,500 Grand Rapids, MI Downtown Dev Cap
Apprec (MBIA Insd)................... * 06/01/15 1,571,570
2,765 Grand Rapids, MI Downtown Dev Cap
Apprec (MBIA Insd)................... * 06/01/16 1,171,448
1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev
Hillsdale Cmty Hlth Cent............. 5.250 05/15/26 1,302,700
2,500 Kalamazoo, MI Hosp Fin Auth Hosp Fac
Rev Bronson Methodist Impt Rfdg (MBIA
Insd)................................ 5.875 05/15/26 2,665,925
1,000 Michigan St Hosp Fin Auth Rev Detroit
Med Cent Oblig Ser A................. 5.250 08/15/28 907,220
600 Michigan St Hosp Fin Auth Rev Hosp
Genesys Regl Med Ser A Rfdg.......... 5.375 10/01/13 607,806
1,000 Michigan St Hosp Fin Auth Rev Hosp
Genesys Regl Med Ser A Rfdg (ACA
Insd)................................ 5.500 10/01/18 1,005,860
2,000 Michigan St Hosp Fin Auth Rev Hosp
Genesys Regl Med Ser A Rfdg (ACA
Insd)................................ 5.500 10/01/27 2,005,400
12,995 Michigan St Hosp Fin Auth Rev Sisters
of Mercy Hlth Corp Ser J (Prerefunded
@ 02/15/01).......................... 7.000 02/15/21 13,997,824
5,000 Michigan St Strat Fd Ltd Oblig Rev
Detroit Edison Co Ser A Rfdg (MBIA
Insd) (a)............................ 5.550 09/01/29 5,074,100
1,400 Portage Lake, MI Wtr & Swr Auth Ser 3
(Prerefunded @ 10/01/02)............. 7.750 10/01/20 1,606,906
------------
45,492,646
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <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 $ 2,980,992
------------
MISSISSIPPI 0.8%
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 3,341,190
2,500 Mississippi Business Fin Corp MS
Pollutn Ctl Rev Sys Energy Res Inc
Proj................................. 5.875 04/01/22 2,512,450
------------
5,853,640
------------
MISSOURI 1.0%
6,800 Saint Louis, MO Indl Dev Auth Swg &
Solid Waste Disp Fac Rev
Anheuser-Busch Proj.................. 5.750 12/01/27 7,140,068
------------
NEBRASKA 0.1%
1,000 American Pub Energy Agy NE Gas Sup
Rev NE Pub Gas Agy Proj Ser A (AMBAC
Insd)................................ 5.250 06/01/11 1,053,540
------------
NEVADA 0.5%
3,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co
Proj Ser C Rfdg (AMBAC Insd)......... 7.200 10/01/22 3,344,460
------------
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 1,098,700
1,500 New Hampshire St Hsg Fin Auth Single
Family Rev Mtg Acquisition Ser B
Rfdg................................. 6.100 07/01/28 1,580,010
1,500 New Hampshire St Indl Dev Auth Rev
Pollutn Ctl Pub Svcs Co of NH Proj
Ser C................................ 7.650 05/01/21 1,582,740
------------
4,261,450
------------
NEW JERSEY 5.8%
25,000 New Jersey Econ Dev Auth St Contract
Econ Recovery (MBIA Insd)............ 5.900 03/15/21 28,168,000
1,400 New Jersey Hlthcare Fac Fin Auth Rev
Barnabas Hlth Ser C Rfdg (MBIA Insd)
(a).................................. 5.250 07/01/18 1,383,270
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW JERSEY (CONTINUED)
$ 2,000 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic (FSA
Insd)................................ 6.000% 07/01/06 $ 2,237,140
10,000 New Jersey St Hsg & Mtg Fin Agy Rev
Hsg Ser A Rfdg....................... 6.950 05/01/15 10,759,300
------------
42,547,710
------------
NEW MEXICO 0.4%
2,750 New Mexico St Hosp Equip Ln Council
Hosp Rev Mem Med Ctr Inc Proj........ 5.500 06/01/28 2,687,438
------------
NEW YORK 17.6%
3,000 Metropolitan Tran Auth NY Commuter
Facs Rev Ser A (MBIA Insd)........... 5.625 07/01/27 3,183,450
12,155 Metropolitan Tran Auth NY Svcs
Contract Commuter Fac Ser 5 Rfdg..... 6.500 07/01/16 12,963,308
2,000 Metropolitan Tran Auth NY Trans Fac
Rev Svcs Contract Ser R Rfdg......... 5.500 07/01/17 2,069,920
3,000 New York City Indl Dev Agy Spl Facs
United Airls Inc Proj................ 5.650 10/01/32 3,063,810
3,410 New York City Ser A.................. 6.500 08/01/14 3,706,295
1,590 New York City Ser A (Prerefunded @
08/01/02)............................ 6.500 08/01/14 1,749,668
1,740 New York City Ser A (Prerefunded @
08/15/01)............................ 8.000 08/15/20 1,932,705
2,500 New York City Ser A Rfdg............. 7.000 08/01/05 2,879,000
3,000 New York City Ser A Rfdg............. 7.000 08/01/06 3,496,800
2,355 New York City Ser C.................. 6.500 08/01/04 2,566,032
545 New York City Ser C
(Prerefunded @ 08/01/02)............. 6.500 08/01/04 599,021
210 New York City Ser C Subser C1........ 7.500 08/01/19 234,515
8,290 New York City Ser C Subser C1
(Prerefunded @ 08/01/02)............. 7.500 08/01/19 9,369,109
1,850 New York City Ser G.................. 5.875 10/15/14 2,002,625
5,000 New York City Ser I.................. 6.000 04/15/12 5,463,600
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$10,000 New York City Tran Auth Tran Fac
Livingston Plaza Proj Rfdg (FSA
Insd)................................ 5.400% 01/01/18 $ 10,537,200
2,500 New York St Dorm Auth Lease Rev Muni
Hlth Facs Impt Pgm Ser A (FSA
Insd)................................ 5.500 05/15/25 2,610,725
13,500 New York St Dorm Auth Rev City Univ
Sys Ser C............................ 7.500 07/01/10 16,280,460
1,000 New York St Dorm Auth Rev Court Fac
Lease Ser A.......................... 5.625 05/15/13 1,039,880
2,000 New York St Dorm Auth Rev Court Fac
Lease Ser A.......................... 5.375 05/15/16 2,022,540
2,170 New York St Dorm Auth Rev Mental Hlth
Svcs Fac Ser A....................... 5.750 08/15/10 2,355,448
2,000 New York St Dorm Auth Revs New York
Univ Ser A (AMBAC Insd) (a).......... 5.250 07/01/06 2,082,400
5,725 New York St Environmental Fac Corp
Spl Oblig Riverbank State Park
(Prerefunded @ 04/01/02)............. 7.375 04/01/22 6,417,553
5,000 New York St Hsg Fin Agy Svcs Contract
Oblig Rev Ser A (Prerefunded @
03/15/02)............................ 7.375 09/15/21 5,582,850
2,840 New York St Loc Govt Assistance Corp
Ser E Rfdg........................... 6.000 04/01/14 3,237,543
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 3,469,380
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 6,000,901
2,500 New York St Mtg Agy Rev Homeowner Mtg
Ser 54 Rfdg.......................... 6.200 10/01/26 2,687,575
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,500 New York St Urban Dev Corp Rev Proj
Cent for Indl Innovation Rfdg........ 5.500% 01/01/13 $ 1,597,275
3,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6 (MBIA
Insd)................................ 5.750 12/01/22 3,212,370
4,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6 (MBIA
Insd)................................ 5.750 12/01/25 4,240,080
------------
128,654,038
------------
NORTH CAROLINA 3.1%
15,000 North Carolina Muni Pwr Agy No 1
Catawba Elec Rev (MBIA Insd) (b)..... 6.000 01/01/12 16,944,300
5,150 North Carolina Muni Pwr Agy No 1
Catawba Elec Rev Rfdg (FSA Insd)..... 6.200 01/01/18 5,609,843
------------
22,554,143
------------
OHIO 0.5%
1,250 Montgomery Cnty, OH Hosp Rev
Grandview Hosp & Med Cent Rfdg....... 5.250 12/01/03 1,232,450
995 Ohio Hsg Fin Agy Mtg Rev Residential
Ser A1 (GNMA Collateralized)......... 6.150 03/01/29 1,056,670
1,000 Ohio St Air Quality Dev Auth Rev JMG
Fdg Ltd Partn Proj Rfdg (AMBAC
Insd)................................ 6.375 04/01/29 1,109,810
------------
3,398,930
------------
OKLAHOMA 3.6%
17,475 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc............................ 7.375 12/01/20 18,611,923
7,500 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc............................ 7.600 12/01/30 8,086,500
------------
26,698,423
------------
OREGON 1.0%
3,670 Oregon St Hsg & Cmnty Svcs Dept Mtg
Rev Single Family Mtg Proj Ser B..... 6.875 07/01/28 3,931,818
3,300 Oregon St Vets Welfare Ser 76A....... 6.050 10/01/28 3,506,151
------------
7,437,969
------------
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA 6.1%
$ 2,500 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser B (FSA
Insd)................................ 6.625% 01/01/22 $ 2,698,450
1,000 Allegheny Cnty, PA Hosp Dev Auth Rev
Hosp Saint Francis Med Cent Proj..... 5.750 05/15/17 990,010
2,900 Dauphin Cnty, PA Genl Auth Hlth Sys
Rev Pinnacle Hlth Sys Proj Rfdg (MBIA
Insd)................................ 5.500 05/15/27 2,995,961
4,780 Erie, PA Sch Dist Cap Apprec Rfdg
(FSA Insd)........................... * 09/01/19 1,676,155
4,000 Falls Twp, PA Hosp Auth Hosp Rev
Delaware Vly Med Rfdg (FHA Gtd)...... 7.000 08/01/22 4,251,720
1,905 Harrisburg, PA Cap Apprec Rfdg Ser D
(AMBAC Insd)......................... * 09/15/16 790,080
1,710 Harrisburg, PA Cap Apprec Rfdg Ser D
(AMBAC Insd)......................... * 03/15/19 610,504
1,735 Harrisburg, PA Cap Apprec Rfdg Ser F
(AMBAC Insd)......................... * 09/15/15 763,035
1,385 Harrisburg, PA Cap Apprec Rfdg Ser F
(AMBAC Insd)......................... * 09/15/19 481,814
1,500 McGuffey Sch Dist PA Ser B (AMBAC
Insd) (a)............................ 4.750 08/01/28 1,406,475
7,000 Montgomery Cnty, PA Indl Dev Auth Rev
Pollutn Ctl Ser E Rfdg (MBIA Insd)... 6.700 12/01/21 7,564,970
1,500 Penn Cambria Sch Dist PA Cap Apprec
(FGIC Insd) (a)...................... * 08/15/20 493,500
1,000 Penn Hills, PA (FGIC Insd)........... 5.900 12/01/17 1,077,560
1,500 Pennsylvania Hsg Fin Agy Single
Family Mtg Ser 34B (FHA Gtd)......... 7.000 04/01/24 1,562,730
3,000 Pennsylvania Hsg Fin Agy Single
Family Ser 56A....................... 6.150 10/01/27 3,168,540
2,000 Pennsylvania Intergvtl Coop Auth Spl
Tax Rev Philadelphia Fdg Prog Rfdg
(FGIC Insd).......................... 5.250 06/15/12 2,085,240
1,000 Pennsylvania St Higher Edl Fac Auth
College & Univ Rev Bryn Mawr College
(MBIA Insd).......................... 5.625 12/01/27 1,054,260
6,000 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd)...................... 6.250 07/01/08 6,622,380
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 1,000 Philadelphia, PA Hosp & Higher Edl
Fac Auth Hosp Rev Temple Univ Hosp
Ser A................................ 6.500% 11/15/08 $ 1,090,030
1,500 Philadelphia, PA Sch Dist Ser A (MBIA
Insd)................................ 4.750 04/01/27 1,408,440
1,000 Philadelphia, PA Wtr & Wastewtr Rev
Ser 1999 Rfdg (AMBAC Insd) (a)....... 5.000 12/15/06 1,045,930
2,005 Southeast Delco Sch Dist PA Cap
Apprec (MBIA Insd) (a)............... * 02/01/17 808,777
------------
44,646,561
------------
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 1,677,330
------------
SOUTH CAROLINA 0.4%
2,700 Charleston Cnty, SC Solid Waste (MBIA
Insd)................................ 6.000 01/01/14 2,926,179
------------
SOUTH DAKOTA 0.4%
1,890 South Dakota Hsg Dev Auth
Homeownership Mtg Ser C.............. 7.300 05/01/24 1,971,837
1,000 South Dakota St Hlth & Edl Fac Auth
Vocational Ed Pgm Ser A (AMBAC
Insd)................................ 5.400 08/01/13 1,054,950
------------
3,026,787
------------
TENNESSEE 1.0%
6,606 Memphis, TN Hlth Edl & Hsg Fac Brd
Mtg Rev Edgewater Terr Rfdg (GNMA
Collateralized)...................... 7.375 01/20/27 7,125,628
------------
TEXAS 3.3%
9,790 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.............. 7.500 12/01/29 10,445,538
2,000 Brazos River Auth TX Rev Houston Inds
Inc Proj Ser D Rfdg (MBIA Insd)...... 4.900 10/01/15 2,023,600
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 2,187,520
2,000 Matagorda Cnty, TX Navigation Dist 1
Houton Lighting Pwr Co Rfdg (AMBAC
Insd)................................ 5.125 11/01/28 1,976,000
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 1,500 North Cent TX Hlth Fac Dev Hlth Fac C
C Young Mem Proj..................... 6.300% 02/15/15 $ 1,587,975
6,000 Plano, TX Hlth Fac Dev Corp TX Hlth
Res Sys Ser C (MBIA Insd)............ 5.000 02/15/22 5,805,360
------------
24,025,993
------------
UTAH 0.8%
2,500 Murray City, UT Hosp Rev Inc Hlth Svc
Inc Rfdg (MBIA Insd)................. 4.750 05/15/20 2,331,300
910 Utah St Hsg Fin Agy Single Family Mtg
Mezzanine Issue H1 (AMBAC Insd)...... 6.000 07/01/12 964,773
1,890 Utah St Hsg Fin Agy Single Family Mtg
Ser A2 (FHA Gtd)..................... 7.150 07/01/25 1,998,543
415 Utah St Hsg Fin Agy Single Family Mtg
Sr Ser A1 (FHA Gtd).................. 7.100 07/01/14 422,366
------------
5,716,982
------------
VIRGINIA 0.6%
3,000 Chesapeake Bay Brdg & Tunl VA Dist
Rev Gen Resolution Rfdg (MBIA
Insd)................................ 5.500 07/01/25 3,215,100
1,000 Henrico Cnty, VA Indl Dev Auth Pub
Fac Lease Rev Henrico Cnty Regl Jail
Proj................................. 7.125 08/01/21 1,163,590
------------
4,378,690
------------
WASHINGTON 0.3%
1,000 Grant Cnty, WA Pub Util Dist No 2
Priest Rapids Hydro Elec Rev Ser B
Rfdg (MBIA Insd) (a)................. 5.250 01/01/14 998,760
1,000 King Cnty, WA Ser B.................. 6.625 12/01/15 1,164,730
------------
2,163,490
------------
WEST VIRGINIA 1.2%
3,000 Marshall Cnty, WV Pollutn Ctl Rev OH
Pwr Co Proj Ser C Rfdg (MBIA Insd)... 6.850 06/01/22 3,288,300
5,000 West Virginia St Hsg Dev Fd Hsg Fin
Ser B (FHA Gtd)...................... 7.200 11/01/20 5,186,650
------------
8,474,950
------------
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WISCONSIN 0.9%
$ 2,000 Southeast WI Professional Baseball
Park Dist Sales Tax Rev (MBIA
Insd)................................ * 12/15/18 $ 730,300
1,750 Southeast WI Professional Baseball
Park Dist Sales Tax Rev (MBIA
Insd)................................ * 12/15/19 604,590
2,000 Southeast WI Professional Baseball
Park Dist Sales Tax Rev Ser A Rfdg
(MBIA Insd).......................... 5.500% 12/15/26 2,137,820
1,500 Wisconsin St Hlth & Edl Facs Auth Rev
Franciscan Sisters Christian Ser A... 5.500 02/15/18 1,492,050
2,000 Wisconsin St Hlth & Edl Facs Auth Rev
Marquette Univ (MBIA Insd)........... 4.750 06/01/28 1,853,020
------------
6,817,780
------------
WYOMING 0.5%
1,425 Wyoming Cmnty Dev Auth Hsg Rev Ser
2.................................... 6.350 06/01/29 1,524,565
2,310 Wyoming Cmnty Dev Auth Hsg Rev Ser
4.................................... 6.550 06/01/28 2,472,970
------------
3,997,535
------------
PUERTO RICO 0.8%
4,485 Puerto Rico Comwlth Aqueduct & Swr
Auth Rev Rfdg........................ 5.000 07/01/15 4,512,583
1,110 Puerto Rico Comwlth Ser A Rfdg....... 6.000 07/01/14 1,184,425
------------
5,697,008
------------
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- -----------------------------------------------------------------------------------------
<S> <C>
TOTAL LONG-TERM INVESTMENTS 100.9%
(Cost $674,517,294).................................................... $738,605,373
SHORT-TERM INVESTMENTS 0.2%
(Cost $1,100,000)...................................................... 1,100,000
------------
TOTAL INVESTMENTS 101.1%
(Cost $675,617,294).................................................... 739,705,373
LIABILITIES IN EXCESS OF OTHER ASSETS (1.1%)............................ (8,043,578)
------------
NET ASSETS 100.0%....................................................... $731,661,795
============
</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.
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
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
24
<PAGE> 26
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $675,617,294)....................... $739,705,373
Cash........................................................ 42,606
Receivables:
Interest.................................................. 13,622,942
Investments Sold.......................................... 5,471,354
Other....................................................... 1,016
------------
Total Assets.......................................... 758,843,291
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 25,917,870
Income Distributions -- Common and Preferred Shares....... 466,205
Investment Advisory Fee................................... 391,516
Administrative Fee........................................ 120,466
Affiliates................................................ 43,985
Accrued Expenses............................................ 128,830
Trustees' Deferred Compensation and Retirement Plans........ 112,624
------------
Total Liabilities..................................... 27,181,496
------------
NET ASSETS.................................................. $731,661,795
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................. 64,088,079
Accumulated Undistributed Net Investment Income............. 1,983,082
Accumulated Net Realized Gain............................... 1,002,465
------------
Net Assets Applicable to Common Shares................ 466,661,795
------------
NET ASSETS.................................................. $731,661,795
============
NET ASSET VALUE PER COMMON SHARE ($466,661,795 divided
by 27,013,149 shares outstanding)......................... $ 17.28
============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $21,650,576
-----------
EXPENSES:
Investment Advisory Fee..................................... 2,374,196
Administrative Fee.......................................... 730,522
Preferred Share Maintenance................................. 352,866
Custody..................................................... 24,657
Trustees' Fees and Related Expenses......................... 24,574
Legal....................................................... 12,711
Other....................................................... 196,512
-----------
Total Expenses.......................................... 3,716,038
-----------
NET INVESTMENT INCOME....................................... $17,934,538
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,069,816
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 73,056,118
End of the Period......................................... 64,088,079
-----------
Net Unrealized Depreciation During the Period............... (8,968,039)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(7,898,223)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $10,036,315
===========
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1999
and the Year Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 17,934,538 $ 36,528,848
Net Realized Gain................................. 1,069,816 2,635,814
Net Unrealized Appreciation/Depreciation During
the Period...................................... (8,968,039) 8,862,774
------------ -------------
Change in Net Assets from Operations.............. 10,036,315 48,027,436
------------ -------------
Distributions from Net Investment Income:
Common Shares................................... (13,371,743) (27,077,989)
Preferred Shares................................ (4,007,358) (9,121,751)
------------ -------------
(17,379,101) (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............................... (20,014,915) (38,403,756)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (9,978,600) 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
$1,983,082 and $1,427,645, respectively)........ $731,661,795 $ 741,640,395
============ =============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended -------------------
April 30, 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period
(a)........................................ $ 17.644 $ 17.288 $16.577
-------- -------- -------
Net Investment Income........................ .664 1.352 1.370
Net Realized and Unrealized Gain/Loss........ (.293) .426 .738
-------- -------- -------
Total from Investment Operations............. .371 1.778 2.108
-------- -------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders.............. .495 1.003 1.045
Common Share Equivalent of Distributions
Paid to Preferred Shareholders......... .148 .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.......................... .740 1.422 1.397
-------- -------- -------
Net Asset Value, End of the Period........... $ 17.275 $ 17.644 $17.288
======== ======== =======
Market Price Per Share at End of the
Period..................................... $16.5625 $ 17.000 $16.125
Total Investment Return at Market Price
(b)........................................ .75%* 12.40% 8.92%
Total Return at Net Asset Value (c).......... 1.19%* 8.39% 10.94%
Net Assets at End of the Period (In
millions).................................. $ 731.7 $ 741.6 $732.0
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**.............. 1.59% 1.58% 1.60%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)..... 5.96% 5.80% 6.06%
Portfolio Turnover........................... 16%* 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.
28
<PAGE> 30
- --------------------------------------------------------------------------------
<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
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
30
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
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 April 30, 1999, for federal income tax purposes cost of long- and
short-term investments is $675,684,706, the aggregate gross unrealized
appreciation is $64,451,606 and the aggregate gross unrealized depreciation is
$430,939, resulting in a net unrealized appreciation on long- and short-term
investments of $64,020,667.
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 six months ended April 30, 1999, the Trust recognized expenses of
approximately $5,300 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.
For the six months ended April 30, 1999, the Trust recognized expenses of
approximately $94,100 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
31
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 $119,298,973 and $121,756,044,
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 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.
32
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 six months ended
April 30, 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.
As of April 30, 1999, 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. The average rate in effect on April 30, 1999, was
3.211%. During the six months ended April 30, 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.
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.
33
<PAGE> 35
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
34
<PAGE> 36
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
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*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181
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
* "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.
35
<PAGE> 37
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> TRUST FOR INVEST GRADE MUNI
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