<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 3
PORTFOLIO AT A GLANCE
CREDIT QUALITY 4
SIX-MONTH DIVIDEND HISTORY 4
TOP FIVE INDUSTRIES 5
NET ASSET VALUE AND MARKET PRICE 5
Q&A WITH YOUR PORTFOLIO MANAGERS 6
GLOSSARY OF TERMS 10
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 11
FINANCIAL STATEMENTS 27
NOTES TO FINANCIAL STATEMENTS 32
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 36
TRUST OFFICERS AND IMPORTANT ADDRESSES 37
</TABLE>
It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
May 19, 2000
Dear Shareholder,
Whether you have held your Trust for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your Trust is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we head into the second half of 2000, count on us to
continue to draw on the wisdom of our 76 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that kicked off
this spring. The message emphasizes our depth of
investment-management history, as well as our firm belief that with the right
investments, anyone can realize life's true wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED STRONG, PRIMARILY DUE TO ACTIVE CONSUMER AND BUSINESS
SPENDING. GROSS DOMESTIC PRODUCT, THE PRIMARY MEASURE OF ECONOMIC GROWTH,
INCREASED AT AN ANNUALIZED RATE OF 5.4 PERCENT IN THE FIRST QUARTER OF 2000.
WHILE THIS FIGURE INDICATES A MODEST SLOWDOWN FROM THE PREVIOUS TWO QUARTERS, IT
NEVERTHELESS REPRESENTS A HIGH RATE OF ECONOMIC GROWTH.
CONSUMER SPENDING AND EMPLOYMENT
INFLATION FEARS CONTINUED TO MOUNT BECAUSE OF STRONG CONSUMER SPENDING AND THE
TIGHT LABOR MARKET. FOR MOST OF THE REPORTING PERIOD, RISING INTEREST RATES DID
LITTLE TO REIN IN ROBUST CONSUMER SPENDING. ALTHOUGH RETAIL SALES GROWTH
MODERATED IN APRIL, THE FACTORS UNDERPINNING CONSUMER ACTIVITY REMAINED LARGELY
UNCHANGED--RISING WAGES, LOW UNEMPLOYMENT, AND A GENERALLY FAVORABLE (THOUGH
VOLATILE) STOCK MARKET.
IN ADDITION, THE JOBLESS RATE HOVERED NEAR ITS LOWEST LEVEL IN THREE DECADES.
THE EMPLOYMENT COST INDEX ACCELERATED SHARPLY IN THE FIRST QUARTER OF 2000,
REFLECTING RISING WAGES AS EMPLOYERS VIE TO ATTRACT AND RETAIN SKILLED WORKERS.
THESE WAGE PRESSURES, IN TURN, BEGAN TO AFFECT PRICES, AS COMPANIES STARTED TO
RAISE THE COST OF GOODS AND SERVICES TO COMPENSATE FOR HIGHER LABOR COSTS.
INTEREST RATES AND INFLATION
STRONG GDP DATA, CONSUMER SPENDING, AND EMPLOYMENT PROMPTED THE FEDERAL RESERVE
BOARD TO SEEK TO SLOW THE PACE OF ECONOMIC GROWTH AND WARD OFF INFLATION. THE
FED INCREASED THE FEDERAL FUNDS RATE BY 0.25 PERCENT FIVE TIMES BETWEEN JUNE
1999 AND APRIL 2000. [EDITOR'S NOTE: THE FED RAISED RATES BY 0.50 PERCENT ON MAY
16.] DESPITE THE FED'S CONCERNS, THE CONSUMER PRICE INDEX, A MEASURE OF
INFLATION, ROSE A MODERATE 3.0 PERCENT DURING THE 12 MONTHS ENDED APRIL 30,
2000.
INTEREST RATES AND INFLATION
(April 30, 1998 - April 30, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Apr 98 5.50 1.40
5.50 1.70
5.50 1.70
Jul 98 5.50 1.70
5.50 1.60
5.25 1.50
Oct 98 5.00 1.50
4.75 1.50
4.75 1.60
Jan 99 4.75 1.70
4.75 1.60
4.75 1.70
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.70
Apr 00 6.00 3.00
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
2
<PAGE> 4
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of April 30, 2000)
<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------
NYSE Ticker Symbol VGM
-----------------------------------------------------------------------
Six-month total return based on market price(1) .93%
-----------------------------------------------------------------------
Six-month total return based on NAV(2) 2.64%
-----------------------------------------------------------------------
Distribution rate as a % of closing common stock
price(3) 7.44%
-----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 11.63%
-----------------------------------------------------------------------
Net asset value $15.54
-----------------------------------------------------------------------
Closing common stock price $13.3125
-----------------------------------------------------------------------
Six-month high common stock price (11/04/99) $14.5000
-----------------------------------------------------------------------
Six-month low common stock price (12/16/99) $12.5625
-----------------------------------------------------------------------
Preferred share (Series A) rate(5) 4.450%
-----------------------------------------------------------------------
Preferred share (Series B) rate(5) 3.900%
-----------------------------------------------------------------------
Preferred share (Series C) rate(5) 3.900%
-----------------------------------------------------------------------
Preferred share (Series D) rate(5) 4.150%
-----------------------------------------------------------------------
</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 is no guarantee of future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust
shares, when sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of April 30, 2000
<S> <C> <C>
- AAA/Aaa............ 59.2%
- AA/Aa.............. 7.8%
- A/A................ 14.1%
- BBB/Baa............ 18.5%
- Non-Rated.......... 0.4%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 54.0%
- AA/Aa.............. 9.1%
- A/A................ 11.0%
- BBB/Baa............ 23.8%
- Non-Rated.......... 2.1%
[PIE CHART]
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
SIX-MONTH DIVIDEND HISTORY
(for the six months ending April 30, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C> <C>
11/99 0.0825
12/99 0.0825
1/00 0.0825
2/00 0.0825
3/00 0.0825
4/00 0.0825
</TABLE>
The dividend history represents past performance of the Trust and is no
guarantee of the Trust's future dividends.
4
<PAGE> 6
TOP FIVE INDUSTRIES
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
APRIL 30, 2000 OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
General Purpose 16.00 18.60
Industrial Revenue 16.00 17.30
Transportation 9.20 8.40
Public Building 8.00 6.20
Health Care 7.70 13.00
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--January 1992 through April 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
1/92 14.9600 14.9600
15.0000 14.6250
15.8500 15.1250
16.1300 15.3750
12/92 16.0500 15.3750
16.9100 16.3750
17.3900 16.5000
18.0900 17.2500
12/93 17.9100 16.8750
16.1100 15.2500
15.8400 15.8250
15.5700 14.2500
12/94 14.8500 13.7500
16.0800 15.3750
16.1600 15.3750
16.3200 15.2500
12/95 17.1300 15.7500
16.3800 15.8750
16.1400 15.0630
16.4400 15.8750
12/96 16.6900 15.3750
15.3100 15.0000
16.8500 15.8125
17.2600 16.3750
12/97 17.5300 16.3750
17.4600 16.3750
17.4600 18.2500
17.8700 17.1875
12/98 17.4800 17.3750
17.3000 16.6875
16.5700 15.5620
16.0000 14.5000
12/99 15.4200 13.0000
15.8200 13.3125
4/00 15.5400 13.3125
</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.
5
<PAGE> 7
Q&A WITH YOUR PORTFOLIO MANAGERS
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 SIX MONTHS. THE REPRESENTATIVES INCLUDE
THOMAS M. BYRON, PORTFOLIO MANAGER, WHO HAS MANAGED THE TRUST SINCE 1997 AND
WORKED IN THE INVESTMENT INDUSTRY SINCE 1981. THE FOLLOWING COMMENTS REFLECT THE
REPRESENTATIVES' VIEWS ON THE TRUST'S PERFORMANCE DURING THE SIX MONTHS ENDED
APRIL 30, 2000.
Q WHAT WERE THE MOST IMPORTANT
DEVELOPMENTS IN THE FIXED-INCOME MARKETS DURING THE REPORTING PERIOD?
A Generally higher interest rates,
sparked by inflation worries, set the tone for the fixed-income markets during
the past six months. As the economy continued its strong advance, the markets
reacted warily to signs of potential inflationary pressures--such as rising
employment costs, healthy job growth, strong consumer spending, and spikes in
commodities prices, especially oil. These concerns fueled a steady sell-off
through the fourth quarter of 1999 and into January 2000.
To slow the economy and keep prices from rising, the Federal Reserve Board
gradually pushed short-term interest rates higher, raising the fed funds rate (a
key short-term lending rate) three times between November 1999 and April 2000.
(Editor's note: On May 16, 2000, after the reporting period ended, the Fed
raised rates a fourth time.)
In times of rising interest rates, bond prices trend downward. Add to that
the lingering effects of the Year 2000 (Y2K) computer scare early in the first
quarter of 2000, and you can see why this was a challenging period for many
fixed-income investors.
Q HOW DID THE MUNICIPAL
BOND MARKET REACT TO THESE CONDITIONS?
A Not surprisingly, higher interest
rates hurt municipal bond prices, but we believe there's always opportunity in
the market. In the past few months, we've actually seen some fairly significant
price swings--both up and down--as investors tried to anticipate the Fed's next
move and the direction of interest rates. The market was weak in late 1999 and
early 2000, but we had a nice rally in February and March, which tapered off in
April.
The strong economy has bolstered the financial condition of many
municipalities across the country, so the pace of new municipal bond issuance
dropped sharply (about 40 percent) from a year ago. With their coffers full,
municipalities haven't needed to turn to the bond market for financing. Also,
6
<PAGE> 8
higher interest rates made it more difficult for issuers to refund outstanding
bond issues, which has been a source of new investment opportunities in the
past.
Q WHAT STRATEGIES DID YOU FOLLOW
IN MANAGING THE TRUST?
A Strategically, we've been moving in
a new direction since early this year. We made the decision to manage the Trust
relative to a new benchmark, rather than the Lipper peer group, which meant that
we needed to make some adjustments to the Trust's structure. The Trust's
benchmark is now the Lehman Brothers Municipal Bond Index with maturities
greater than five years. Specifically, we increased the duration of the
portfolio (a measure of its sensitivity to changes in interest rates) to more
closely track the performance of the new benchmark index. The benchmark provides
the shareholder with general municipal market returns, and the leveraged
structure provides the opportunity for enhanced dividends.
Fortunately, the municipal bond market played into our hands and gave us
some excellent opportunities to implement this new strategy. Beginning in late
January, we began purchasing deeply discounted bonds. These were securities that
were issued a year or so ago with coupons between 4.50 and 5.25 percent. As
interest rates went up over time, these bonds began selling at a deep discount,
with some priced as low as 80 cents on the dollar.
At the same time, the Trust held a number of older, prerefunded issues with
higher coupons in the 6.50 to 8.00 percent range. Such prerefunded issues tend
to decrease the duration of a portfolio because they have shorter lives than
their stated maturities. But because of their attractive coupons, these bonds
were trading at a premium, presenting us with an opportunity to capture some
solid gains. Because these bonds were scheduled to be called or refunded within
the next year or two, we chose to sell them while their demand--and therefore
their market price--was high.
This combination of buying deep discount bonds and selling prerefunded
issues enabled us to lengthen the duration of the portfolio without drastically
altering the Trust's income stream that the Trust will be earning over time.
While we've seen a slight decline in portfolio income in the short run, the
deeply discounted bonds enabled us to purchase more par value per dollar
invested. In some cases, for example, we were able to pick up $1 million worth
of bond par value for just $800,000.
Q WHAT AREAS OF THE MUNICIPAL
MARKET WERE MOST ATTRACTIVE TO YOU?
A Our philosophy is to seek bonds
that we feel represent the best values compared with similar offerings in the
marketplace. During the past six months, we did not specifically target one area
of the market over another, although we did maintain significant concentrations
in certain sectors, including general purpose and industrial revenue bonds, each
of which represented more than
7
<PAGE> 9
16 percent of the portfolio's long-term investments.
From a credit-quality standpoint, we boosted the AAA rated portion of the
portfolio to roughly 59 percent of long-term investments, up from 54 percent at
the start of the reporting period. Much of this shift can be attributed to the
sale of some of the Trust's BBB rated hospital bonds, as we reduced the Trust's
holdings in the health-care sector to 7.7 percent, down from 13.0 percent six
months ago.
Many of our portfolio management decisions were based on pricing issues,
such as the availability of deep discounts, or structural issues, such as
extending duration or maintaining adequate call protection and diversification
for the portfolio. For additional portfolio highlights, please refer to page 4.
Q HOW DID THE TRUST PERFORM
DURING THE PERIOD?
A For the six-month period ended
April 30, 2000, the Trust returned 0.93 percent based on market price. At the
same time, the Trust's market price decreased from $13.6875 per share on October
31, 1999, to $13.3125 per share on April 30, 2000. By comparison, the total
return of the Trust's peer group (as represented by the Lehman Brothers
Municipal Bond Index) was 2.63 percent for the same period.
The Trust's dividend remained unchanged at $0.0825 per share throughout the
reporting period. This monthly tax-exempt dividend translates to a distribution
rate of 7.44 percent based on the Trust's closing common stock price on April
30, 2000.
Because the Trust is exempt from federal income taxes, this distribution
rate is equivalent to a yield of 11.63 percent 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 is no guarantee of future
results.
Q WHAT DO YOU SEE AHEAD
FOR THE ECONOMY AND THE MUNICIPAL MARKET?
A All eyes will be on the key
economic statistics, such as GDP growth, employment costs, and the unemployment
rate. These figures measure the economy's strength and rate of growth and may
influence whether the Fed will continue to raise short-term interest rates. We
expect that the inflation rate may increase, but it's likely to remain in a
moderate range for the near term. It's anticipated that the Fed will continue to
increase short-term rates by the end of the summer, perhaps by more than 0.50
percent. Higher interest rates will, in turn, put pressure on the municipal
market in the short run.
Increased stock-price volatility in April has increased investor skepticism,
but investors continue to see price pullbacks as opportunities to buy
aggressive-growth stocks. It may take a much deeper, more sustained decline in
these stocks to convince investors to rethink their asset allocation decisions.
If the stock market does fall sharply, we could see a flight to quality, as
investors pursue investments that
8
<PAGE> 10
typically carry less risk. Such conditions might benefit investment-grade
municipal bonds.
Low municipal-bond supply could continue throughout 2000, especially if
interest rates trend higher, as expected, throughout the first half of the year.
Overall, the lower supply of bonds should help to shore up prices, as demand
remains strong. Investors can tolerate periodic price swings if they keep
long-term perspectives and continue to value the steady stream of tax-exempt
income that municipal bonds provide. As always, we will rely on our strong
research efforts to evaluate opportunities in the marketplace and identify
securities that may offer superior investment potential and value over time.
9
<PAGE> 11
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
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.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest-rate
movements on its price. Typically, funds with shorter durations perform better
in rising rate environments, while funds with longer durations perform better
when rates decline.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic indicator
that measures the change in the cost of purchased goods and services.
MATURITY DATE: The date a bond expires, usually at face value.
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.
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.
10
<PAGE> 12
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR TRUST AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 99.5%
ALABAMA 1.0%
$ 1,000 Alabama Bldg Renovation Fin Auth Rev Rfdg
(AMBAC Insd)............................. 5.625% 09/01/24 $ 969,010
4,250 Courtland, AL Indl Dev Brd Solid Waste
Disp Rev Champion Intl Corp Proj Ser A... 6.500 09/01/25 4,156,670
2,000 Jefferson Cnty, AL Swr Rev Cap Impt
Warrants Ser A (FGIC Insd)............... 5.125 02/01/39 1,707,380
------------
6,833,060
------------
ARKANSAS 2.1%
1,500 Arkansas St Dev Fin Auth Hosp Rev
Washington Regl Med Cent................. 7.375 02/01/29 1,477,755
12,500 Blytheville, AR Solid Waste Recycling &
Swr Treatment Rev Nucor Corp Proj........ 6.900 12/01/21 12,975,875
------------
14,453,630
------------
CALIFORNIA 4.5%
2,895 ABC CA Uni Sch Dist Cap Apprec Ser B
(FGIC Insd).............................. * 08/01/20 876,606
2,000 ABC CA Uni Sch Dist Cap Apprec Ser B
(FGIC Insd).............................. * 08/01/23 498,320
1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub
Impt Proj Ser C (FSA Insd)............... 6.000 09/01/16 1,391,923
3,660 California Edl Facs Auth Rev Cap Apprec
Loyola Marymount (MBIA Insd)............. * 10/01/23 837,810
5,000 Desert Hosp Dist CA Hosp Rev Com Partn
(Prerefunded @ 07/23/02) (FSA Insd)...... 6.392 07/28/20 5,268,300
4,500 East Bay, CA Muni Util Dist Wtr Sys Rev
(MBIA Insd).............................. 4.750 06/01/28 3,735,630
2,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Rfdg (MBIA Insd).......... * 01/15/17 742,760
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$10,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Rfdg...................... * 01/15/34 $ 1,111,000
2,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Rfdg (c)............. 0/5.800% 01/15/20 1,057,920
25,750 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Sr Lien Ser A........................ * 01/01/23 6,702,210
4,000 San Diego, CA Convention Cent Expansion
Fin Auth Lease Rev Ser A (AMBAC Insd).... 4.750 04/01/28 3,323,120
7,080 San Joaquin Hills, CA Tran Toll Cap
Apprec Ser A Rfdg (MBIA Insd)............ * 01/15/26 1,512,005
2,000 Santa Clara Cnty, CA Fin Auth Lease Rev
Multi Fac Projs Ser B (AMBAC Insd) (a)... 5.500 05/15/08 2,066,080
2,000 Southern CA Pub Pwr Auth (FSA Insd)...... 6.000 07/01/12 2,063,720
------------
31,187,404
------------
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 1,113,590
700 Colorado Hsg Fin Auth Single Family Pgm
Sr Ser B1................................ 7.650 11/01/26 753,501
1,745 Colorado Hsg Fin Auth Single Family Pgm
Sr Ser B2................................ 7.450 11/01/27 1,841,481
7,230 Denver, CO City & Cnty Arpt Rev Ser A.... 8.000 11/15/25 7,471,482
6,395 Denver, CO City & Cnty Arpt Rev Ser A.... 8.500 11/15/23 6,625,603
3,675 Denver, CO City & Cnty Arpt Rev Ser A.... 8.750 11/15/23 3,915,051
1,685 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)..................... 7.000 12/01/00 1,706,939
3,250 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (LOC:
Meridian Assoc East)..................... 7.500 12/01/11 3,379,090
1,000 Metropolitan Football Stadium Cap Apprec
Ser A (MBIA Insd)........................ * 01/01/12 514,730
------------
27,321,467
------------
CONNECTICUT 0.3%
1,830 Connecticut St Spl Oblig Pkg Rev Bradley
Intl Arpt Ser A.......................... 6.600 07/01/24 1,823,211
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
DISTRICT OF COLUMBIA 0.4%
$ 1,000 District of Columbia Rev Gonzaga College
High Sch (FSA Insd)...................... 5.375% 07/01/29 $ 913,670
1,600 District of Columbia Ser E (FSA Insd).... 6.000 06/01/13 1,641,792
------------
2,555,462
------------
FLORIDA 3.4%
16,490 Dade Cnty, FL Spl Oblig Cap Apprec Ser B
Rfdg (Prerefunded @ 10/01/08) (AMBAC
Insd).................................... * 10/01/26 3,507,423
1,000 Florida St Brd Edl Lottery Rev Ser A
(FGIC Insd).............................. 6.000 07/01/14 1,046,770
2,535 Florida St Brd of Edl Cap Outlay Pub Edl
Ser A Rfdg (FGIC Insd)................... 4.500 06/01/23 2,045,365
2,500 Florida St Brd of Edl Cap Outlay Pub Edl
Ser C (FGIC Insd)........................ 5.750 06/01/29 2,470,250
1,400 Florida St Dept Corrections Ctfs Partn
Okeechobee Correctional (AMBAC Insd)..... 6.250 03/01/15 1,456,238
1,000 Florida St Tpk Auth Tpk Rev Ser A (FSA
Insd).................................... 4.500 07/01/28 791,280
2,000 Gulf Breeze, FL Rev Cap Fdg Ser B (MBIA
Insd).................................... 4.500 10/01/27 1,587,680
4,600 Jacksonville, FL Cap Impt Rev Stadium
Proj Rfdg (AMBAC Insd)................... 4.750 10/01/25 3,846,796
2,765 Miami-Dade Cnty, FL Professional Sports
Franchise Fac Tax Rfdg (MBIA Insd)....... 4.750 10/01/30 2,279,189
1,790 Miami-Dade Cnty, FL Spl Oblig Ser B (MBIA
Insd).................................... 5.000 10/01/37 1,521,196
3,465 Reedy Creek Impt Dist FL Ser C (AMBAC
Insd).................................... 4.750 06/01/15 3,097,398
------------
23,649,585
------------
GEORGIA 1.1%
1,500 George L Smith ll GA Wrld Congress Cent
Auth Rev Domed Stadium Proj Rfdg (MBIA
Insd).................................... 5.500 07/01/20 1,416,975
5,900 Georgia Muni Elec Auth Pwr Rev Ser Y
(MBIA Insd).............................. 6.500 01/01/17 6,507,346
------------
7,924,321
------------
HAWAII 0.9%
6,000 Hawaii St Arpt Sys Rev Ser 2 (MBIA
Insd).................................... 6.750 07/01/21 6,226,140
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS 10.2%
$ 1,395 Bolingbrook, IL Cap Apprec Ser C Rfdg
(MBIA Insd).............................. * 01/01/23 $ 346,323
6,000 Chicago, IL Brd Edl Cap Apprec Sch Reform
B-1 (FGIC Insd).......................... * 12/01/26 1,164,900
2,000 Chicago, IL Brd of Edl Chicago Sch Reform
(AMBAC Insd)............................. 5.750% 12/01/20 1,965,560
4,865 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)................... * 07/01/16 1,845,830
10,000 Chicago, IL Cap Apprec City Colleges
(FGIC Insd).............................. * 01/01/30 1,633,400
1,800 Chicago, IL Cent Pub Lib Ser A
(Prerefunded @ 04/01/02) (AMBAC Insd).... 6.700 01/01/06 1,895,454
2,500 Chicago, IL Lakefront Millennium Pkg Facs
(MBIA Insd).............................. 5.125 01/01/28 2,171,750
7,000 Chicago, IL O'Hare Intl Arpt Rev Genl
Arpt Second Lien Ser A Rfdg (MBIA
Insd).................................... 6.375 01/01/12 7,303,940
13,645 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc......................... 8.500 05/01/18 13,937,958
3,360 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc Proj Ser 84A............ 8.850 05/01/18 3,500,347
2,000 Chicago, IL Wastewtr Transmission Rev
Second Lien (MBIA Insd).................. 5.750 01/01/25 1,944,620
1,000 Chicago, IL Wastewtr Transmission Rev
Second Lien (MBIA Insd).................. 6.000 01/01/30 1,000,290
2,870 Cook Cnty, IL Cap Impt Ser A (FGIC
Insd).................................... 5.000 11/15/28 2,447,536
4,270 East Peoria, IL Ser C Rfdg............... 7.000 05/01/17 4,523,126
1,250 Illinois Dev Fin Auth Rev Bradley Univ
Proj (AMBAC Insd)........................ 5.375 08/01/24 1,151,450
3,285 Illinois Dev Fin Auth Rev Presbyterian
Home Lake Proj Ser B (FSA Insd).......... 6.300 09/01/22 3,341,272
2,000 Illinois Edl Fac Auth Rev Lewis Univ..... 6.100 10/01/16 1,942,800
1,900 Illinois Hlth Fac Auth Rev Evangelical
Hosps Ser C (FSA Insd)................... 6.750 04/15/17 2,006,495
1,000 Illinois Hlth Fac Auth Rev Highland Park
Hosp Proj Ser A (MBIA Insd).............. 5.750 10/01/17 983,220
1,000 Illinois Hlth Fac Auth Rev Midwest
Physician Grp Ltd Rfdg................... 5.500 11/15/19 796,090
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,000 Illinois Hlth Fac Auth Rev OSF Hlthcare
Sys Rfdg................................. 6.000% 11/15/10 $ 1,983,760
2,400 Illinois Hlth Fac Auth Rev Sarah Bush
Lincoln Hlth Cent (Prerefunded @
05/15/02) (b)............................ 7.250 05/15/22 2,555,136
2,275 Illinois Hlth Fac Auth Rev South Suburban
Hosp (Escrowed To Maturity).............. 7.000 02/15/18 2,559,784
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 1,190,562
8,845 Metropolitan Pier & Expo Auth IL
Dedicated St Tax Rev McCormick Pl
Expansion Ser A (FGIC Insd).............. * 06/15/16 3,440,617
1,105 Saint Clair Cnty, IL Pub Bldg Comm Bldg
Rev Cap Apprec Ser B (FGIC Insd)......... * 12/01/15 448,332
1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux
(MBIA Insd).............................. * 04/01/29 169,090
1,400 Southern IL Univ Rev Hsg & Aux Fac Ser A
Rfdg..................................... 6.750 04/01/12 1,460,746
------------
69,710,388
------------
INDIANA 0.7%
4,500 Indianapolis, IN Arpt Auth Rev Spl Fac
Federal Express Corp Proj................ 7.100 01/15/17 4,658,805
1,000 Marion Cnty, IN Convention & Rec Fac Auth
Excise Tax Rev (MBIA Insd)............... * 06/01/14 444,340
------------
5,103,145
------------
IOWA 0.4%
2,375 Iowa Student Ln Liquidity Corp Student Ln
Rev Subser I............................. 6.950 03/01/06 2,476,484
------------
KENTUCKY 3.9%
1,250 Georgetown, KY College Rev Georgetown
College Proj Ser A (ACA Insd)............ 6.125 11/15/29 1,194,237
11,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A................... 7.125 02/01/21 11,155,100
10,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A................... 7.500 02/01/20 10,283,800
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/
Northn KY Intl Arpt Ser A Rfdg (MBIA
Insd).................................... 6.200 03/01/08 1,052,790
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <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 $ 1,588,035
1,315 Kentucky Hsg Corp Hsg Rev Ser B.......... 6.250 07/01/28 1,324,876
------------
26,598,838
------------
LOUISIANA 0.4%
3,000 New Orleans, LA Rfdg (FGIC Insd)......... 4.750 12/01/26 2,454,990
------------
MAINE 2.2%
2,650 Maine Muni Bank Ser A Rfdg (MBIA Insd)... 5.800 11/01/20 2,650,424
5,250 Maine St Hsg Auth Mtg Purch Ser D6....... 7.250 11/15/19 5,361,090
6,755 Maine St Hsg Auth Mtg Purch Ser D6....... 7.250 11/15/22 6,887,263
------------
14,898,777
------------
MARYLAND 0.1%
1,000 Maryland St Econ Dev Corp Student Hsg Rev
Collegiate Hsg Towson Ser A.............. 5.750 06/01/29 879,560
------------
MASSACHUSETTS 0.9%
2,625 Massachusetts Muni Wholesale Elec Co Pwr
Supply Sys Rev Ser A (AMBAC Insd)........ 5.000 07/01/14 2,453,824
2,410 Massachusetts St Hsg Fin Agy Residential
Dev Ser C (FNMA Collateralized).......... 6.875 11/15/11 2,529,777
1,000 Massachusetts St Indl Fin Agy Rev
Wentworth Institute Tech................. 5.650 10/01/18 916,230
------------
5,899,831
------------
MICHIGAN 4.1%
3,000 Detroit, MI Downtown Dev Auth Tax
Increment Rev Dev Area No 1 Projs Ser A
Rfdg (MBIA Insd)......................... 4.750 07/01/25 2,490,480
3,015 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1..................... * 07/01/17 1,051,180
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1..................... * 07/01/18 991,341
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1..................... * 07/01/19 925,004
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1..................... * 07/01/22 754,417
3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1..................... * 07/01/23 706,746
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MICHIGAN (CONTINUED)
$ 3,050 Detroit, MI Downtown Dev Auth Tax
Increment Rev Ser C1..................... * 07/01/24 $ 662,003
7,355 Detroit, MI Econ Dev Corp Res Recovery
Rev Ser A (FSA Insd)..................... 6.875% 05/01/09 7,632,357
3,500 Grand Rapids, MI Downtown Dev Cap Apprec
(MBIA Insd).............................. * 06/01/15 1,468,180
2,765 Grand Rapids, MI Downtown Dev Cap Apprec
(MBIA Insd).............................. * 06/01/16 1,084,765
1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev
Hillsdale Cmty Hlth Cent................. 5.250 05/15/26 1,016,120
3,000 Michigan St Hosp Fin Auth Rev Ascension
Hlth Credit Ser A (MBIA Insd)............ 5.750 11/15/18 2,951,220
1,000 Michigan St Hosp Fin Auth Rev Detroit Med
Cent Oblig Ser A......................... 5.250 08/15/28 712,630
2,500 Michigan St Strategic Fd Ltd Oblig Rev
Detroit Edison Co Ser A Rfdg (MBIA
Insd).................................... 5.550 09/01/29 2,311,425
1,400 Portage Lake, MI Wtr & Swr Auth Ser 3
(Prerefunded @ 10/01/02)................. 7.750 10/01/20 1,518,202
2,000 Wayne Charter Cnty, MI Arpt Rev Detroit
Met Wayne Cnty Ser A (MBIA Insd)......... 5.000 12/01/22 1,715,640
------------
27,991,710
------------
MINNESOTA 1.0%
5,000 Minneapolis & St Paul, MN Metarpts Comm
Arpt Rev Ser A (FGIC Insd)............... 5.125 01/01/31 4,405,800
2,800 Minnesota Agricultural & Econ Dev Brd Rev
Hlthcare Sys Fairview Hosp Ser A (MBIA
Insd).................................... 5.750 11/15/26 2,753,128
------------
7,158,928
------------
MISSISSIPPI 1.0%
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 3,154,050
4,250 Mississippi Bus Fin Corp MS Pollutn Ctl
Rev Sys Energy Res Inc Proj.............. 5.875 04/01/22 3,687,980
------------
6,842,030
------------
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 3,190,350
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW HAMPSHIRE 0.4%
$ 1,000 New Hampshire St Bus Fin Auth Wtr Fac Rev
Pennichuck Wtrwks Inc (AMBAC Insd)....... 6.300% 05/01/22 $ 1,019,520
1,500 New Hampshire St Indl Dev Auth Rev
Pollutn Ctl Pub Svcs Co of NH Proj Ser
C........................................ 7.650 05/01/21 1,537,890
------------
2,557,410
------------
NEW JERSEY 6.8%
2,000 New Jersey Econ Dev Auth Rev Tran Proj
Sublease Ser A (FSA Insd)................ 5.250 05/01/17 1,901,760
3,000 New Jersey Econ Dev Auth Rev Insd Edl
Testing Svc Ser A Rfdg
(MBIA Insd) (a).......................... 4.750 05/15/25 2,522,190
25,000 New Jersey Econ Dev Auth St Contract Econ
Recovery (MBIA Insd)..................... 5.900 03/15/21 25,743,250
1,400 New Jersey Hlthcare Fac Fin Auth Rev
Barnabas Hlth Ser C Rfdg (MBIA Insd)
(a)...................................... 5.250 07/01/18 1,304,464
2,000 New Jersey Hlthcare Fac Fin Auth Rev Genl
Hosp Cent at Passaic (FSA Insd).......... 6.000 07/01/06 2,101,180
10,000 New Jersey St Hsg & Mtg Fin Agy Rev Hsg
Ser A Rfdg............................... 6.950 05/01/15 10,428,100
2,385 New Jersey St Tran Corp Ctfs Fed Tran
Admin Grants Ser A (AMBAC Insd).......... 5.750 09/15/11 2,462,489
------------
46,463,433
------------
NEW MEXICO 0.4%
765 New Mexico St Hosp Equip Ln Council Hosp
Rev Mem Med Cent Inc (ACA Insd).......... 5.500 06/01/28 664,831
2,750 New Mexico St Hosp Equip Ln Council Hosp
Rev Mem Med Cent Inc Proj................ 5.500 06/01/28 2,160,840
------------
2,825,671
------------
NEW YORK 21.8%
5,000 Long Island Pwr Auth NY Elec Sys Rev Cap
Apprec (FSA Insd) (a).................... * 06/01/15 2,111,300
3,000 Metropolitan Tran Auth NY Commuter Fac
Rev Ser A (MBIA Insd).................... 5.625 07/01/27 2,880,840
12,155 Metropolitan Tran Auth NY Svc Contract
Commuter Fac Ser 5....................... 6.500 07/01/16 12,581,033
2,000 Metropolitan Tran Auth NY Trans Fac Rev
Svcs Contract Ser R Rfdg................. 5.500 07/01/17 1,906,920
3,000 New York City Indl Dev Agy Spl Fac United
Airls Inc Proj........................... 5.650 10/01/32 2,592,180
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 5,000 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Ser A (FGIC Insd)................ 4.750% 06/15/31 $ 4,069,450
4,000 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Ser B (FGIC Insd)................ 5.250 06/15/29 3,576,480
3,410 New York City Ser A...................... 6.500 08/01/14 3,554,823
1,590 New York City Ser A (Prerefunded @
08/01/02)................................ 6.500 08/01/14 1,669,357
2,500 New York City Ser A Rfdg................. 7.000 08/01/05 2,696,700
3,000 New York City Ser A Rfdg................. 7.000 08/01/06 3,264,150
2,355 New York City Ser C...................... 6.500 08/01/04 2,456,288
8,500 New York City Ser C Subser C1
(Prerefunded @ 08/01/02) (b)............. 7.500 08/01/19 9,104,010
1,850 New York City Ser G...................... 5.875 10/15/14 1,878,101
5,000 New York City Ser I...................... 6.000 04/15/12 5,148,200
3,250 New York City Ser I (MBIA Insd).......... 5.000 04/15/24 2,819,245
3,275 New York City Tran Auth Met Ser A (AMBAC
Insd).................................... 5.250 01/01/29 2,942,522
10,000 New York City Tran Auth Tran Fac
Livingston Plaza Proj Rfdg (FSA Insd).... 5.400 01/01/18 9,720,900
3,000 New York City Tran Fin Auth Rev Future
Tax Secured Ser C........................ 5.000 05/01/29 2,566,290
2,500 New York St Dorm Auth Lease Rev Muni Hlth
Fac Impt Pgm Ser A (FSA Insd)............ 5.500 05/15/25 2,365,250
1,250 New York St Dorm Auth Lease Rev St Univ
Dorm Fac Ser C (MBIA Insd)............... 5.500 07/01/29 1,179,850
4,500 New York St Dorm Auth Rev St Univ Edl Fac
Ser A (MBIA Insd)........................ 4.750 05/15/25 3,727,575
13,500 New York St Dorm Auth Rev City Univ Sys
Ser C.................................... 7.500 07/01/10 15,187,230
1,000 New York St Dorm Auth Rev Court Fac Lease
Ser A.................................... 5.625 05/15/13 978,290
2,000 New York St Dorm Auth Rev Court Fac Lease
Ser A.................................... 5.375 05/15/16 1,853,820
2,000 New York St Dorm Auth Rev Hosp NY &
Presbyterian (AMBAC Insd)................ 4.750 08/01/27 1,640,720
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 3,000 New York St Dorm Auth Rev St Univ Edl
Facs (FGIC Insd)......................... 5.750% 05/15/24 $ 2,951,910
2,000 New York St Dorm Auth Rev St Univ Edl
Facs (MBIA Insd)......................... 6.000 05/15/16 2,073,780
2,000 New York St Dorm Auth Revs New York Univ
Ser A (AMBAC Insd) (a)................... 5.250 07/01/06 1,998,380
5,725 New York St Environmental Fac Corp Spl
Oblig Riverbank State Park (Prerefunded @
04/01/02)................................ 7.375 04/01/22 6,102,106
5,000 New York St Hsg Fin Agy Svcs Contract
Oblig Rev Ser A (Prerefunded @
03/15/02)................................ 7.375 09/15/21 5,320,450
2,840 New York St Loc Govt Assistance Corp Ser
E Rfdg................................... 6.000 04/01/14 3,003,726
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 3,262,500
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 5,481,081
2,500 New York St Mtg Agy Rev Homeowner Mtg Ser
54 Rfdg.................................. 6.200 10/01/26 2,516,950
1,500 New York St Mtg Agy Rev Homeowner Mtg Ser
73-A (a)................................. 5.300 10/01/28 1,350,765
2,500 New York St Mtg Agy Rev Hosp NY &
Presbyterian............................. 5.300 04/01/29 2,218,550
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <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 $ 1,487,055
3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj
JFK Intl Arpt Terminal 6 (MBIA Insd)..... 5.750 12/01/22 2,923,980
4,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj
JFK Intl Arpt Terminal 6 (MBIA Insd)..... 5.750 12/01/25 3,877,400
------------
149,040,157
------------
NORTH CAROLINA 3.3%
1,000 New Hanover Cnty, NC Hosp Rev New Hanover
Regl Med Cent Proj (AMBAC Insd).......... 4.750 10/01/23 830,090
1,000 North Carolina Eastern Muni Pwr Agy Pwr
Sys Rev Ser D............................ 6.750 01/01/26 1,008,190
15,000 North Carolina Muni Pwr Agy No 1 Catawba
Elec Rev (MBIA Insd) (b)................. 6.000 01/01/12 15,763,950
5,150 North Carolina Muni Pwr Agy No 1 Catawba
Elec Rev Rfdg (FSA Insd)................. 6.200 01/01/18 5,235,953
------------
22,838,183
------------
NORTH DAKOTA 0.3%
2,440 North Dakota St Hsg Fin Agy Rev Hsg Fin
Pgm Ser B (MBIA Insd).................... 5.500 07/01/29 2,210,664
------------
OHIO 0.5%
1,250 Montgomery Cnty, OH Hosp Rev Grandview
Hosp & Med Cent Rfdg (Escrowed to
maturity)................................ 5.250 12/01/03 1,256,638
990 Ohio Hsg Fin Agy Mtg Rev Residential Ser
A1 (GNMA Collateralized)................. 6.150 03/01/29 988,574
1,000 Ohio St Air Quality Dev Auth Rev JMG Fdg
Ltd Partn Proj Rfdg (AMBAC Insd)......... 6.375 04/01/29 1,019,430
------------
3,264,642
------------
OKLAHOMA 4.0%
17,475 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc................................ 7.375 12/01/20 17,766,308
7,500 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc................................ 7.600 12/01/30 7,693,425
2,250 Tulsa, OK Pub Facs Auth Cap Impt Rev..... 6.250 11/01/22 2,194,335
------------
27,654,068
------------
OREGON 0.4%
3,045 Oregon St Vets Welfare Ser 76A........... 6.050 10/01/28 3,079,957
------------
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
PENNSYLVANIA 7.2%
$ 2,500 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser B (FSA Insd).... 6.625% 01/01/22 $ 2,551,400
2,000 Allegheny Cnty, PA Ctfs Partn (AMBAC
Insd).................................... 5.000 12/01/28 1,698,240
4,780 Erie, PA Sch Dist Cap Apprec Rfdg (FSA
Insd).................................... * 09/01/19 1,495,184
4,000 Falls Twp, PA Hosp Auth Hosp Rev Delaware
Vly Med Rfdg (FHA Gtd)................... 7.000 08/01/22 4,216,640
1,710 Harrisburg, PA Cap Apprec Ser D (AMBAC
Insd).................................... * 03/15/19 549,902
1,905 Harrisburg, PA Cap Apprec Ser D Rfdg
(AMBAC Insd)............................. * 09/15/16 726,777
1,735 Harrisburg, PA Cap Apprec Ser F (AMBAC
Insd).................................... * 09/15/15 708,348
1,385 Harrisburg, PA Cap Apprec Ser F (AMBAC
Insd).................................... * 09/15/19 432,217
1,500 Penn Cambria Sch Dist PA Cap Apprec (FGIC
Insd).................................... * 08/15/20 436,950
60 Penn Hills, PA (FGIC Insd)............... 5.900 12/01/17 60,871
1,000 Pennsylvania St Higher Edl Fac Auth
College & Univ Rev Bryn Mawr College
(MBIA Insd).............................. 5.625 12/01/27 963,490
4,750 Pennsylvania St Tpk Comm Oil Franchise
Tax Rev Subser B (AMBAC Insd)............ 4.750 12/01/27 3,907,540
5,500 Philadelphia, PA (FSA Insd).............. 5.000 03/15/28 4,708,550
2,000 Philadelphia, PA Gas Wks Rev Second Ser
(FSA Insd)............................... 5.000 07/01/29 1,705,260
6,000 Philadelphia, PA Gas Wks Rev Ser 14 Rfdg
(FSA Insd)............................... 6.250 07/01/08 6,271,020
1,500 Philadelphia, PA Indl Dev Arpt Auth Rev
(FGIC Insd).............................. 5.000 07/01/23 1,274,370
10,000 Pittsburgh & Allegheny Cnty, PA Pub
Auditorium Auth Excise Tax Rev (AMBAC
Insd).................................... 4.500 02/01/29 7,847,800
4,000 Pittsburgh & Allegheny Cnty, PA Pub
Auditorium Auth Regl Asset Dist Sales Tax
Rev (AMBAC Insd)......................... 5.000 02/01/29 3,432,880
1,500 Pittsburgh, PA Ser A (FGIC Insd)......... 5.750 09/01/23 1,479,960
2,005 Southeast Delco Sch Dist PA Cap Apprec
(MBIA Insd).............................. * 02/01/17 742,070
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 1,700 Southeastern PA Tran Auth PA Spl Rev Ser
A (FGIC Insd)............................ 4.750% 03/01/24 $ 1,414,366
1,925 Southeastern PA Tran Auth PA Spl Rev Ser
A (FGIC Insd)............................ 4.750 03/01/29 1,575,247
1,500 Spring Ford Area Sch Dist PA (FGIC
Insd).................................... 4.750 03/01/25 1,245,030
------------
49,444,112
------------
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 1,595,220
------------
SOUTH CAROLINA 0.6%
2,700 Charleston Cnty, SC Solid Waste (MBIA
Insd).................................... 6.000 01/01/14 2,772,063
1,500 Lancaster Cnty, SC Sch Dist (FSA Insd)... 4.750 03/01/19 1,280,460
------------
4,052,523
------------
SOUTH DAKOTA 0.5%
1,375 Deadwood, SD Ctfs Partn (ACA Insd)....... 6.375 11/01/20 1,368,758
1,000 South Dakota St Hlth & Edl Fac Auth
Vocational Edl Pgm Ser A (AMBAC Insd).... 5.400 08/01/13 988,820
1,000 South Dakota St Hlth & Edl Facs Auth Rev
Childrens Care Hosp Rfdg................. 6.125 11/01/29 927,050
------------
3,284,628
------------
TENNESSEE 0.8%
1,500 Johnson City, TN Hlth & Edl Facs Brd Hosp
Rev First Mtg Ser A Rfdg................. 7.500 07/01/25 1,448,865
2,500 Tennessee Hsg Dev Agy Homeowner Pgm...... 5.300 01/01/24 2,237,750
2,180 Tennessee Hsg Dev Agy Homeowner Pgm...... 5.350 07/01/23 1,970,371
------------
5,656,986
------------
TEXAS 4.6%
9,790 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.................. 7.500 12/01/29 9,981,884
2,000 Brazos River Auth TX Rev Houston Lighting
& Pwr Co Proj Rfdg (AMBAC Insd).......... 5.050 11/01/18 1,755,840
4,000 Dallas-Fort Worth, TX Intl Arpt Rev JT
Ser A (FGIC Insd)........................ 5.750 11/01/30 3,804,520
3,000 Dallas Cnty, TX Util & Reclamation Dist
Ser B Rfdg (AMBAC Insd).................. 5.875 02/15/29 2,950,590
2,000 Houston, TX Arpt Sys Rev Sub Lien Ser B
(FGIC Insd).............................. 5.000 07/01/25 1,692,580
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$ 6,000 Plano, TX Hlth Fac Dev Corp TX Hlth Res
Sys Ser C (MBIA Insd).................... 5.000% 02/15/22 $ 5,154,600
4,000 Round Rock, TX Indpt Sch Dist (PSF
Gtd)..................................... 4.500 08/01/19 3,330,000
2,750 Texas St Vets Hsg Assistance Pgm Ser B... 6.100 06/01/31 2,736,525
------------
31,406,539
------------
UTAH 0.6%
2,500 Murray City, UT Hosp Rev Inc Hlth Svc Inc
Rfdg (MBIA Insd)......................... 4.750 05/15/20 2,056,050
760 Utah St Hsg Fin Agy Single Family Mtg
Mezzanine Issue H1 (AMBAC Insd).......... 6.000 07/01/12 779,160
1,250 Utah St Hsg Fin Agy Single Family Mtg Ser
A2 (FHA Gtd)............................. 7.150 07/01/25 1,276,100
------------
4,111,310
------------
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 1,110,800
1,090 Richmond, VA (FSA Insd) (a).............. 5.500 01/15/14 1,072,756
1,590 Richmond, VA (FSA Insd) (a).............. 5.500 01/15/15 1,551,633
2,680 Richmond, VA (FSA Insd) (a).............. 5.500 01/15/17 2,572,157
------------
6,307,346
------------
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 3,149,700
1,375 West Virginia St Hsg Dev Fd Hsg Fin Ser B
(FHA Gtd)................................ 7.200 11/01/20 1,405,085
------------
4,554,785
------------
WISCONSIN 0.8%
2,000 Southeast WI Professional Baseball Park
Dist Sales Tax Rev (MBIA Insd)........... * 12/15/18 661,220
1,750 Southeast WI Professional Baseball Park
Dist Sales Tax Rev (MBIA Insd)........... * 12/15/19 542,080
2,000 Southeast WI Professional Baseball Park
Dist Sales Tax Rev (MBIA Insd)........... 5.500 12/15/20 1,945,780
1,500 Wisconsin St Hlth & Edl Facs Auth Rev
Franciscan Sisters Christian Ser A....... 5.500 02/15/18 1,246,620
1,000 Wisconsin St Hlth & Edl Facs Auth Rev
Kenosha Hosp & Med Cent Proj............. 5.625 05/15/29 848,060
------------
5,243,760
------------
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
WYOMING 0.4%
$ 1,225 Wyoming Cmnty Dev Auth Hsg Rev Ser 2..... 6.350% 06/01/29 $ 1,230,782
1,565 Wyoming Cmnty Dev Auth Hsg Rev Ser 4..... 6.550 06/01/28 1,581,495
------------
2,812,277
------------
GUAM 0.4%
3,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)..... 5.250 10/01/34 2,697,420
------------
PUERTO RICO 0.8%
4,485 Puerto Rico Comwlth Aqueduct & Swr Auth
Rev Rfdg................................. 5.000 07/01/15 4,140,731
1,110 Puerto Rico Comwlth Ser A Rfdg........... 6.000 07/01/14 1,130,147
------------
5,270,878
------------
TOTAL LONG-TERM INVESTMENTS 99.5%
(Cost $663,010,137)................................................... 681,551,280
SHORT-TERM INVESTMENTS 1.0%
(Cost $6,700,000)..................................................... 6,700,000
------------
TOTAL INVESTMENTS 100.5%
(Cost $669,710,137)................................................... 688,251,280
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%)........................... (3,585,916)
------------
NET ASSETS 100.0%...................................................... $684,665,364
============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
* 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.
PSF--Public School Funding
See Notes to Financial Statements
26
<PAGE> 28
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $669,710,137)....................... $688,251,280
Cash........................................................ 459,715
Receivables:
Interest.................................................. 12,654,558
Investments Sold.......................................... 1,619,229
Other....................................................... 26,601
------------
Total Assets............................................ 703,011,383
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 16,984,931
Income Distributions -- Common and Preferred Shares....... 576,000
Investment Advisory Fee................................... 368,115
Administrative Fee........................................ 113,266
Affiliates................................................ 11,698
Accrued Expenses............................................ 161,922
Trustees' Deferred Compensation and Retirement Plans........ 130,087
------------
Total Liabilities....................................... 18,346,019
------------
NET ASSETS.................................................. $684,665,364
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................. 18,541,143
Accumulated Undistributed Net Investment Income............. 1,487,410
Accumulated Net Realized Gain............................... 48,642
------------
Net Assets Applicable to Common Shares.................. 419,665,364
------------
NET ASSETS.................................................. $684,665,364
============
NET ASSET VALUE PER COMMON SHARE ($419,665,364 divided by
27,013,149 shares outstanding)............................ $ 15.54
============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
Statement of Operations
For the Six Months Ended April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $21,340,416
-----------
EXPENSES:
Investment Advisory Fee..................................... 2,213,861
Administrative Fee.......................................... 681,188
Preferred Share Maintenance................................. 349,485
Trustees' Fees and Related Expenses......................... 13,791
Legal....................................................... 12,779
Custody..................................................... 8,945
Other....................................................... 195,275
-----------
Total Expenses.......................................... 3,475,324
-----------
NET INVESTMENT INCOME....................................... $17,865,092
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,171,005
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 21,564,542
End of the Period......................................... 18,541,143
-----------
Net Unrealized Depreciation During the Period............... (3,023,399)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,852,394)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $16,012,698
===========
</TABLE>
See Notes to Financial Statements
28
<PAGE> 30
Statement of Changes in Net Assets
For the Six Months Ended April 30, 2000 and the Year Ended
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
----------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 17,865,092 $ 36,020,809
Net Realized Gain/Loss................................ 1,171,005 (1,055,012)
Net Unrealized Depreciation During the Period......... (3,023,399) (51,491,576)
------------ ------------
Change in Net Assets from Operations.................. 16,012,698 (16,525,779)
------------ ------------
Distributions from Net Investment Income:
Common Shares....................................... (13,371,509) (26,742,982)
Preferred Shares.................................... (5,145,967) (8,565,678)
------------ ------------
(18,517,476) (35,308,660)
------------ ------------
Distributions from Net Realized Gain on Investments:
Common Shares....................................... -0- (1,979,233)
Preferred Shares.................................... -0- (656,581)
------------ ------------
-0- (2,635,814)
------------ ------------
Total Distributions................................... (18,517,476) (37,944,474)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (2,504,778) (54,470,253)
------------ ------------
NET ASSETS:
Beginning of the Period............................... 687,170,142 741,640,395
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $1,487,410 and
$2,139,794, respectively)........................... $684,665,364 $687,170,142
============ ============
</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. (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL, 30 ----------------------------
2000 1999 1998 1997
-----------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD (A)................................ $ 15.628 $ 17.644 $17.288 $16.577
-------- -------- ------- -------
Net Investment Income..................... .661 1.333 1.352 1.370
Net Realized and Unrealized Gain/Loss..... (.067) (1.945) .426 .738
-------- -------- ------- -------
Total from Investment Operations............ .594 (.612) 1.778 2.108
-------- -------- ------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders............. .495 .990 1.003 1.045
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........ .191 .317 .337 .352
Distributions from Net Realized Gain:
Paid to Common Shareholders............. -0- .073 .061 -0-
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........ -0- .024 .021 -0-
-------- -------- ------- -------
Total Distributions......................... .686 1.404 1.422 1.397
-------- -------- ------- -------
NET ASSET VALUE, END OF THE PERIOD.......... $ 15.536 $ 15.628 $17.644 $17.288
======== ======== ======= =======
Market Price Per Share at End of the
Period.................................... $13.3125 $13.6875 $17.000 $16.125
Total Investment Return at Market
Price (b)................................. .93%* -13.97% 12.40% 8.92%
Total Return at Net Asset Value (c)......... 2.64%* -5.66% 8.39% 10.94%
Net Assets at End of the Period (In
millions)................................. $ 684.7 $ 687.2 $ 741.6 $ 732.0
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............. 1.66% 1.61% 1.58% 1.60%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common
Shares (d)................................ 6.08% 6.00% 5.80% 6.06%
Portfolio Turnover.......................... 19%* 33% 29% 40%
* Non-annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares............... 1.02% 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 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.
(c) Total Return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(d) Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
30
<PAGE> 32
<TABLE>
<CAPTION>
JANUARY 24, 1992
(COMMENCEMENT OF
YEAR ENDED OCTOBER 31 INVESTMENT
------------------------------------------ OPERATIONS) TO
1996 1995 1994 1993 OCTOBER 31, 1992
---------------------------------------------------------------
<S> <C> <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
April 30, 2000 (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, which approximates market value.
B. SECURITY TRANSACTIONS Security Transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and original issue discount is accreted over the expected
life of each applicable security.
32
<PAGE> 34
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (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.
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 April 30, 2000, for federal income tax purposes cost of long- and
short-term investments is $669,777,549, the aggregate gross unrealized
appreciation is $25,178,783 and the aggregate gross unrealized depreciation is
$6,705,052, resulting in a net unrealized appreciation on long- and short-term
investments of $18,473,731.
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, 2000, the Trust recognized expenses of
approximately $6,800 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
April 30, 2000 (Unaudited)
For the six months ended April 30, 2000, the Trust recognized expenses of
approximately $24,500 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust 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 $128,924,601 and
$138,084,141, 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.
34
<PAGE> 36
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
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 six months ended
April 30, 2000.
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
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 reverted back to their normal 28 day reset period. The average rate in
effect on April 30, 2000, was 4.093%. During the six months ended April 30,
2000, the rates ranged from 3.429% to 4.450%.
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.
35
<PAGE> 37
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth*
Mid Cap Growth
Pace
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
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TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN TRUST FOR
INVESTMENT GRADE MUNICIPALS
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer,
and Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
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(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
(1) Independent accountants for the Trust perform an annual audit of the Trust's
financial statements. The Board of Trustees has engaged Deloitte & Touche
LLP to be the Trust's independent accountants.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"),
ceased being the Trust's independent accountants effective April 14, 2000.
The cessation of the client- auditor relationship between the Trust and KPMG
was based solely on a possible future business relationship by KPMG with an
affiliate of the Trust's investment adviser.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
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