<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
CREDIT QUALITY 5
TWELVE-MONTH DIVIDEND HISTORY 5
TOP FIVE SECTORS 6
NET ASSET VALUE AND MARKET PRICE 6
Q&A WITH YOUR PORTFOLIO MANAGERS 7
GLOSSARY OF TERMS 11
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 12
FINANCIAL STATEMENTS 27
NOTES TO FINANCIAL STATEMENTS 32
REPORT OF INDEPENDENT AUDITORS 35
DIVIDEND REINVESTMENT PLAN 36
TRUST OFFICERS AND IMPORTANT ADDRESSES 38
RESULTS OF SHAREHOLDER VOTES 39
</TABLE>
Our generations
of money-
management
experience
may help you
pursue life's
true wealth.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
November 20, 2000
Dear Shareholder,
The first three quarters of 2000 proved to be especially volatile, with all of
the major markets declining in the spring and spending the following months
trying to recover. To manage one's portfolio during such unpredictable times
requires investment-management experience, and the following pages should give
you some insight into how we have performed in this difficult environment.
In this report, the portfolio managers will explain how your investment
performed during the reporting period and describe the strategies they used to
manage your trust during that span. The report will also show you how your
investment has performed over time. Helpful charts summarize the trust's largest
investments, and you can examine the complete portfolio to see all of your
trust's holdings as of the end of your trust's reporting period.
At Van Kampen, we place a high priority on providing you and
your financial advisor with the information you need to help
you monitor your investments during all types of markets. With
nearly four generations of investment-management experience,
we've been around long enough to understand that by investing
with Van Kampen you're entrusting us with much more than your
money. Your investments may help make it possible to afford your next house,
keep up with rising college costs, or enjoy a comfortable retirement.
No matter what your reasons for investing, we're thankful that you've chosen to
place your investments with Van Kampen. We will continue to apply our
generations of money-management experience to helping you pursue life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED RELATIVELY STRONG DURING THE REPORTING PERIOD,
UNDERPINNED BY LOW UNEMPLOYMENT AND RISING PRODUCTIVITY, YET THERE WERE SIGNS
THAT A HEALTHY SLOWDOWN WAS UNDERWAY. GROSS DOMESTIC PRODUCT, THE PRIMARY
MEASURE OF ECONOMIC GROWTH, INCREASED AT A 2.4 PERCENT ANNUALIZED RATE FOR THE
THIRD QUARTER OF 2000. FOLLOWING RELATIVELY MILD FIRST- AND SECOND-QUARTER DATA,
THIS THIRD-QUARTER FIGURE OFFERS FURTHER EVIDENCE THAT GROWTH MIGHT BE SETTLING
BACK TO A MORE MODERATE AND SUSTAINABLE PACE THAN ITS RAPID RATE IN LATE 1999.
CONSUMER SPENDING AND EMPLOYMENT
CONCERNS ABOUT INFLATION REMAINED AT BAY DUE IN PART TO A GRADUAL SLOWDOWN IN
CONSUMER SPENDING. RISING INTEREST RATES, HIGHER ENERGY COSTS, AND A
DISAPPOINTING STOCK MARKET BEGAN TO TEMPER RETAIL SALES, WHICH LEVELED OFF FROM
THE BLISTERING PACE OF LATE 1999 AND EARLY 2000. AND WHILE CONSUMER SPENDING WAS
BRISK, THE OVERALL TREND HAS BEEN DOWNWARD THIS YEAR.
THE JOBLESS RATE CONTINUED TO BE EXTREMELY LOW BY HISTORICAL STANDARDS, BUT A
RECENT DECLINE IN NEW JOB CREATION SUPPORTS THE POPULAR BELIEF THAT THE ECONOMY
IS MODERATING. ALTHOUGH EMPLOYER COSTS SUCH AS WAGES AND BENEFITS WERE RISING AT
THE END OF 1999 AND THE BEGINNING OF 2000, OVER THE PAST SIX MONTHS THE
EMPLOYMENT COST INDEX HAS SHOWN MARKED DECELERATION, WHICH SHOULD HELP EASE
INFLATION CONCERNS.
INTEREST RATES AND INFLATION
THE FEDERAL RESERVE BOARD (THE FED) RAISED INTEREST RATES FOUR TIMES DURING THE
LAST 12 MONTHS IN AN EFFORT TO WARD OFF INFLATION BY CURBING ECONOMIC GROWTH.
OVER THE SAME PERIOD, THE CONSUMER PRICE INDEX ROSE 3.5 PERCENT, WHICH INDICATED
THAT INFLATION GENERALLY REMAINS UNDER CONTROL.
THE FED HAS ACKNOWLEDGED THE RISK OF RISING INFLATION AND WILL STAY ON GUARD, AS
RISING ENERGY COSTS AND LOW UNEMPLOYMENT THREATEN TO PROPEL THIS FIGURE UPWARD
IN THE COMING MONTHS. AS LONG AS INFLATION IS CONTAINED AND THE PACE OF ECONOMIC
GROWTH REMAINS FAVORABLE, THE FED IS LIKELY TO HOLD INTEREST RATES STEADY IN THE
SHORT TERM, WHICH COULD HELP STABILIZE THE STOCK AND BOND MARKETS.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(September 30, 1998--September 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.60
Sep 00 2.40
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(October 31, 1998--October 31, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Oct 98 5.00 1.50
4.75 1.50
4.75 1.60
Jan 99 4.75 1.70
4.75 1.60
4.75 1.70
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.70
Apr 00 6.00 3.00
6.50 3.10
6.50 3.70
Jul 00 6.50 3.70
6.50 3.30
6.50 3.50
Oct 00 6.50 3.50
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of October 31, 2000)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
<S> <C> <C>
NYSE Ticker Symbol VGM
-----------------------------------------------------------------------
One-year total return based on market price(1) 6.41%
-----------------------------------------------------------------------
One-year total return based on NAV(2) 10.36%
-----------------------------------------------------------------------
Distribution rate as a % of closing common stock
price(3) 6.64%
-----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 10.38%
-----------------------------------------------------------------------
Net asset value $16.22
-----------------------------------------------------------------------
Closing common stock price $13.5625
-----------------------------------------------------------------------
One-year high common stock price (11/04/99) $14.5000
-----------------------------------------------------------------------
One-year low common stock price (12/16/99) $12.5625
-----------------------------------------------------------------------
Preferred share (Series A) rate(5) 4.25%
-----------------------------------------------------------------------
Preferred share (Series B) rate(5) 4.110%
-----------------------------------------------------------------------
Preferred share (Series C) rate(5) 4.150%
-----------------------------------------------------------------------
Preferred share (Series D) rate(5) 4.120%
-----------------------------------------------------------------------
</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 #4, 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.
4
<PAGE> 6
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of October 31, 2000
<S> <C> <C>
- AAA/Aaa............ 64.9%
- AA/Aa.............. 7.9%
- A/A................ 11.4%
- BBB/Baa............ 15.8%
[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.
TWELVE-MONTH DIVIDEND HISTORY
(for the period ended October 31, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <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
5/00 0.0825
6/00 0.0805
7/00 0.0805
8/00 0.0805
9/00 0.0750
10/00 0.0750
</TABLE>
The dividend history represents past performance of the trust and is no
guarantee of the trust's future dividends.
5
<PAGE> 7
TOP FIVE SECTORS
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
General Purpose 18.40 18.60
Industrial Revenue 11.10 17.30
Transportation 9.80 8.40
Public Building 8.40 6.20
Health Care 7.10 13.00
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--January 1992 through October 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 15.6250
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 15.0625
16.4400 15.8750
12/96 16.6900 15.3750
16.3100 15.0000
16.8500 15.8125
17.2600 16.3750
12/97 17.5300 16.3750
17.4600 16.3750
17.4600 16.2500
17.6700 17.1875
12/98 17.4600 17.3750
17.3000 16.6875
16.5700 15.5620
16.0000 14.5000
12/99 15.4200 13.0000
15.8200 13.3125
15.7700 13.4375
16.0200 13.6875
10/00 16.2200 13.5625
</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.
6
<PAGE> 8
[PHOTO]
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGER OF THE VAN KAMPEN TRUST FOR
INVESTMENT GRADE MUNICIPALS ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE 12 MONTHS ENDED OCTOBER
31, 2000. THOMAS M. BYRON, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 1997
AND HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1981. THE FOLLOWING DISCUSSION
REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE.
Q WHAT WERE THE MOST IMPORTANT
DEVELOPMENTS IN THE FIXED-INCOME MARKETS AND HOW DID THE TRUST PERFORM
DURING THE REPORTING PERIOD?
A The key factor in the market's
behavior during the past fiscal year has been generally rising interest rates,
especially at the short end of the maturity spectrum. This rate environment
stemmed from the Federal Reserve Board's commitment to keeping inflation in
check by ratcheting up short-term interest rates whenever the economy threatened
to overheat and push the prices of goods and services higher. In fact, the Fed
increased short-term rates four times during the reporting period, with the last
hike occurring in May 2000.
The strength of the economy, and the accompanying Federal Reserve activity,
caused interest rates to rise across the board for the first half of the
reporting period. In the spring of 2000, the bond market rallied as investors
began to anticipate an end to the Fed's rate-tightening cycle. By the end of
October, short-term rates remained high, but rates in the intermediate to long
maturity segments of the market had actually declined from the levels we had
seen at the start of the reporting period.
Because the trust is leveraged, higher short-term rates placed pressure on
the trust's dividend, as the increased cost of borrowing cut into the fund's
earnings. However, the relatively high long-term rates that prevailed for part
of the reporting period allowed the trust to add new holdings at attractive
yields, partially offsetting the decline in income that occurred as short-term
rates climbed.
After the steady increase in short-term interest rates over the past year,
we have seen a more stable environment in recent months, as the Fed has reacted
to slower economic growth, more efficient workforce output, and moderate price
gains by keeping target lending rates unchanged. The inflation rate, as measured
by the consumer price index, peaked in March 2000 at 3.8 percent and has since
dropped back below the 3 percent level.
7
<PAGE> 9
Supply in the municipal bond market was sharply lower from the levels of a
year ago, as higher interest rates have made it unattractive for municipalities
to retire existing debt. At the same time, strong economic activity has allowed
many municipalities to generate a budget surplus, enabling them to cover
spending that would normally require municipal bond financing.
Because demand has remained strong, the lack of new issuance in the primary
market helped support bond prices, although the somewhat limited selection of
available securities required us to be very selective in choosing new bonds for
the trust's portfolio. In many cases, we found attractive values in the
secondary market, buying and selling bonds that have been in the market for a
while.
The trust continued to provide shareholders with an attractive dividend,
even though the dividend was decreased slightly during the reporting period. Its
monthly dividend of $0.075 per share translates to a distribution rate of 6.64
percent based on the trust's closing market price on October 31, 2000. Because
income from the trust is exempt from federal income taxes, this distribution
rate is equivalent to a yield of 10.38 percent for an investor in the 36 percent
federal income tax bracket.
For the 12 months through October 31, 2000, the trust produced a total
return of 6.41 percent based on market price. This reflects a decrease in market
price from $13.6875 per share on October 31, 1999, to $13.5625 per share on
October 31, 2000.
Of course, past performance is no guarantee of future results. As a result
of recent market activity, current performance may vary from the figures shown.
By comparison, the Lehman Brothers Municipal Bond Index posted a total return of
8.51 percent for the same period. This broad-based, unmanaged index, which
reflects the general performance of municipal securities, does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. Such costs would lower the performance of the index. It is not
possible to invest directly in an index. For additional performance results,
please refer to the chart and footnotes on page 4.
Q HOW DID YOU REACT TO THE
MARKET CONDITIONS YOU ENCOUNTERED IN MANAGING THE TRUST?
A Much of the activity in the trust's
portfolio during the reporting period was guided by a strategic direction we
adopted in February of 2000 and have gradually implemented since then. It was
our goal to lengthen the duration of the portfolio (a measure of its sensitivity
to changes in interest rates) so that it more closely mirrored the benchmark
indicators we use to gauge the trust's performance. At the time, we felt the
market had solid upside potential, and a longer duration would allow the trust
to more fully participate in the gains of the market if it rallied over time.
As we began implementing this strategy, we caught the market at a good time.
Early in the year, the market presented us with attractive yields on
long-duration securities,
8
<PAGE> 10
particularly those priced at deep discounts. We purchased some of these bonds
and sold prerefunded securities and bonds with short calls--many of which were
scheduled to be called or refunded within the next year or two. In effect, this
strategy helped capture additional par value and the potential for capital
appreciation, all while achieving the desired effect of extending the
portfolio's duration. This strategy was a positive in terms of the trust's
performance, especially during the market rally that occurred in the second and
third quarters of 2000.
Q HOW DID THIS STRATEGY AFFECT THE
COMPOSITION OF THE PORTFOLIO?
A A by-product of this market
activity--and the trust's positioning within the market--was an increase in the
overall credit quality of the portfolio. The rallies were strongest at the high
end of the quality spectrum, so these securities saw solid price gains while the
valuations of nonrated and lower-rated securities, such as those rated BBB or
lower, remained fairly flat or declined.
Over the course of the reporting period, the portfolio composition came to
reflect this trend, as the trust's allocation to AAA rated securities increased
by 10.9 percent (up to 64.9 percent of long-term investments), while its BBB
allocation declined by 8 percent (down to 15.8 percent of long-term
investments). In general, our bias toward high-quality securities was a boost to
portfolio performance.
Portfolio allocations to health-care bonds and industrial revenue bonds were
both reduced by roughly 6 percent. Much of this was due to our decision to
increase the diversification of the trust, reducing positions that we considered
to be too big for the portfolio. Also, the health-care sector has had its share
of credit-quality concerns, so we selectively sold issues that we thought would
not meet our expectations for long-term performance.
Q YOU MENTIONED THAT THE TRUST'S
DIVIDEND WAS REDUCED DURING THE REPORTING PERIOD. CAN YOU EXPLAIN WHY?
A A combination of factors made it
necessary to cut the trust's dividend in June 2000 and September 2000. First, as
a leveraged portfolio, the trust must pay interest on money borrowed at
short-term rates, while investing these funds in longer-term securities. As
short-term rates rose more significantly than longer-term rates, the cost of
this leverage increased during the reporting period and reduced the trust's
income stream.
Second, as we took advantage of higher rates in long-maturity bonds, we
tended to sell older, higher-yielding bonds that had strengthened the trust's
income stream but were susceptible to being called out of the portfolio in the
near future. Essentially, we exchanged their near-term contribution to the
trust's income for an improvement in the portfolio's overall structure and
long-term income potential.
9
<PAGE> 11
Q WHAT DO YOU SEE AHEAD
FOR THE ECONOMY AND THE MUNICIPAL MARKET?
A The outlook for the municipal
bond market will be closely tied to the prospects of the U.S. economy and the
Fed's reaction to key economic indicators. While interest rates have been fairly
steady of late, the Fed's next move will be based on whether inflation shows
signs of heating up. We believe inflation appears to be under control at this
time, but the Fed will be watching economic growth statistics, the labor market,
and the prices of key commodities, such as crude oil, for signs of inflationary
pressures.
Clearly, the direction of interest rates will be determined by the Fed's
reaction to inflationary signals, so we feel it would be imprudent to make a bet
on the direction of interest rates in terms of how we position the trust.
Consequently, we will seek to maintain a neutral stance with respect to the
portfolio's duration in the near term.
We believe the demand for municipal securities should remain healthy. This
will hopefully bode well for the trust, although it will be competing with a
range of investment options, such as individual bonds, mutual funds, and managed
accounts, for investor assets. Also, the stock market may continue to attract
assets away from bonds, depending on its return prospects and price volatility.
We believe bond supply should remain tight, helping to support prices, as
municipalities continue to operate with budget surpluses that can be used for
construction projects, education funding, road improvements, and other
expenditures typically financed by new bond issuance.
We will continue to search for securities that have the potential to enhance
the trust's long-term performance. If our analysis indicates that it would be
advantageous to sell certain bonds--or as bonds are prerefunded, mature
according to schedule, or are called from the portfolio--we will strive to
replace them with bonds that offer the best relative value available at the
time.
10
<PAGE> 12
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CALL FEATURE: Allows a bond issuer to buy back a bond on specific dates at set
prices before the bond's maturity date. These dates and prices are set when the
bond is issued. To compensate the bondholder for the potential loss of income
and ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly that
the issuer can save money by issuing new bonds at lower rates.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest-rate
movements on its price. Typically, funds with shorter durations perform better
in rising-rate environments, while funds with longer durations perform better
when rates decline.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond. Typically, short-term bonds mature in
five years or less, intermediate-term bonds mature in five to ten years, and
long-term bonds mature after ten years.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding bond
issue prior to its maturity or call date. The proceeds from the new bonds are
generally invested in U.S. government securities. Prerefunding typically occurs
when interest rates decline and an issuer replaces its higher-yielding bonds
with current lower-yielding issues.
SECONDARY MARKET: A market where securities are traded after they are initially
offered.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower credit ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
11
<PAGE> 13
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
October 31, 2000
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 97.0%
ALABAMA 0.5%
$1,750 Courtland, AL Indl Dev Brd Solid Waste Disp
Rev Champion Intl Corp Proj Ser A........... 6.500% 09/01/25 $ 1,757,455
2,000 Jefferson Cnty, AL Swr Rev Cap Impt Warrants
Ser A (FGIC Insd)........................... 5.125 02/01/39 1,808,700
------------
3,566,155
------------
ARKANSAS 1.1%
1,500 Arkansas St Dev Fin Auth Hosp Rev Washington
Regl Med Cent............................... 7.375 02/01/29 1,502,730
6,000 Blytheville, AR Solid Waste Recycling & Swr
Treatment Rev Nucor Corp Proj............... 6.900 12/01/21 6,199,140
------------
7,701,870
------------
CALIFORNIA 4.4%
2,895 ABC CA Uni Sch Dist Cap Apprec Ser B (FGIC
Insd)....................................... * 08/01/20 964,209
2,000 ABC CA Uni Sch Dist Cap Apprec Ser B (FGIC
Insd)....................................... * 08/01/23 558,700
1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt
Proj Ser C (FSA Insd)....................... 6.000 09/01/16 1,455,363
3,660 California Edl Facs Auth Rev Cap Apprec
Loyola Marymount (MBIA Insd)................ * 10/01/23 903,068
5,000 Desert Hosp Dist CA Hosp Rev Com Partn
(Prerefunded @ 07/23/02) (FSA Insd)......... 6.392 07/28/20 5,281,550
4,500 East Bay, CA Muni Util Dist Wtr Sys Rev
(MBIA Insd)................................. 4.750 06/01/28 3,997,350
2,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Cap Apprec Rfdg (MBIA Insd)................. * 01/15/17 806,300
10,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Cap Apprec Rfdg............................. * 01/15/34 1,174,500
25,750 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Sr Lien Ser A............................... * 01/01/23 7,464,410
3,000 Los Angeles, CA Regl Arpts Impt Corp Lease
Rev Rfdg Facs Sublease Intl Arpt............ 6.350 11/01/25 2,974,020
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$4,000 San Diego, CA Convention Cent Expansion Fin
Auth Lease Rev Ser A (AMBAC Insd)........... 4.750% 04/01/28 $ 3,554,360
7,080 San Joaquin Hills, CA Tran Toll Cap Apprec
Ser A Rfdg (MBIA Insd)...................... * 01/15/26 1,706,634
------------
30,840,464
------------
COLORADO 1.8%
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 1,127,460
2,000 Aurora, CO Ctfs Partn (AMBAC Insd).......... 5.500 12/01/30 1,969,540
640 Colorado Hsg Fin Auth Single Family Pgm Sr
Ser B1...................................... 7.650 11/01/26 693,715
1,590 Colorado Hsg Fin Auth Single Family Pgm Sr
Ser B2...................................... 7.450 11/01/27 1,680,153
1,805 Lakewood, CO Ctfs Partn (AMBAC Insd)........ 5.300 12/01/16 1,805,054
1,685 Meridian Metro Dist CO Peninsular & Oriental
Steam Navig Co Rfdg (LOC: Meridian Assoc
East)....................................... 7.000 12/01/00 1,687,899
3,250 Meridian Metro Dist CO Peninsular & Oriental
Steam Navig Co Rfdg (LOC: Meridian Assoc
East)....................................... 7.500 12/01/11 3,361,150
1,000 Metropolitan Football Stadium Cap Apprec Ser
A (MBIA Insd)............................... * 01/01/12 558,200
------------
12,883,171
------------
CONNECTICUT 0.3%
1,830 Connecticut St Spl Oblig Pkg Rev Bradley
Intl Arpt Ser A (ACA Insd).................. 6.600 07/01/24 1,917,456
------------
DISTRICT OF COLUMBIA 0.2%
1,600 District of Columbia Ser E (FSA Insd)....... 6.000 06/01/13 1,676,560
------------
FLORIDA 4.6%
16,490 Dade Cnty, FL Spl Oblig Cap Apprec Ser B
Rfdg (Prerefunded @ 10/01/08) (AMBAC Insd).. * 10/01/26 3,744,549
3,000 Escambia Cnty, FL Hlth Facs Auth Rev (AMBAC
Insd)....................................... 5.950 07/01/20 3,124,320
1,000 Florida St Brd Edl Lottery Rev Ser A (FGIC
Insd)....................................... 6.000 07/01/14 1,081,390
2,535 Florida St Brd of Edl Cap Outlay Pub Edl Ser
A Rfdg (FGIC Insd).......................... 4.500 06/01/23 2,152,621
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
FLORIDA (CONTINUED)
$2,500 Florida St Brd of Edl Cap Outlay Pub Edl Ser
C (FGIC Insd)............................... 5.750% 06/01/29 $ 2,550,500
1,400 Florida St Dept Corrections Ctfs Partn
Okeechobee Correctional (AMBAC Insd)........ 6.250 03/01/15 1,492,456
1,000 Florida St Tpk Auth Tpk Rev Ser A (FSA
Insd)....................................... 4.500 07/01/28 829,040
2,000 Gulf Breeze, FL Rev Cap Fdg Ser B (MBIA
Insd)....................................... 4.500 10/01/27 1,661,320
2,000 Gulf Breeze, FL Rev Loc Govt Ln E (FGIC
Insd)....................................... 5.150 12/01/20 2,053,740
4,600 Jacksonville, FL Cap Impt Rev Stadium Proj
Rfdg (AMBAC Insd)........................... 4.750 10/01/25 4,058,258
2,765 Miami-Dade Cnty, FL Professional Sports
Franchise Fac Tax Rfdg (MBIA Insd).......... 4.750 10/01/30 2,410,112
2,290 Miami-Dade Cnty, FL Spl Oblig Ser B (MBIA
Insd)....................................... 5.000 10/01/37 2,075,816
3,465 Reedy Creek Impt Dist FL Ser C (AMBAC
Insd)....................................... 4.750 06/01/15 3,284,751
1,000 Tallahassee, FL Lease Rev FL St Univ Proj
Ser A (MBIA Insd)........................... 5.500 08/01/17 1,014,910
1,325 Tampa Bay, FL Wtr Util Sys Rev Ser B (FGIC
Insd)....................................... 4.750 10/01/27 1,156,858
------------
32,690,641
------------
GEORGIA 1.2%
1,500 George L Smith ll GA Wrld Congress Cent Auth
Rev Domed Stadium Proj Rfdg (MBIA Insd)..... 5.500 07/01/20 1,478,085
5,900 Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA
Insd)....................................... 6.500 01/01/17 6,679,095
------------
8,157,180
------------
HAWAII 0.9%
6,000 Hawaii St Arpt Sys Rev Ser 2 (MBIA Insd).... 6.750 07/01/21 6,188,224
------------
ILLINOIS 8.5%
1,395 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA
Insd)....................................... * 01/01/23 387,573
2,000 Chicago, IL Brd Ed (FGIC Insd).............. 5.500 12/01/31 1,947,620
6,000 Chicago, IL Brd Ed Cap Apprec Sch Reform B-1
(FGIC Insd)................................. * 12/01/26 1,305,060
2,000 Chicago, IL Brd of Ed Chicago Sch Reform
(AMBAC Insd)................................ 5.750 12/01/20 2,034,540
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$4,865 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)...................... * 07/01/16 $ 1,939,432
10,000 Chicago, IL Cap Apprec City Colleges (FGIC
Insd)....................................... * 01/01/30 1,849,900
2,500 Chicago, IL Lakefront Millennium Pkg Facs
(MBIA Insd)................................. 5.125% 01/01/28 2,302,400
7,000 Chicago, IL O'Hare Intl Arpt Rev Genl Arpt
Second Lien Ser A Rfdg (MBIA Insd) (b)...... 6.375 01/01/12 7,469,980
3,360 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc Proj Ser 84A............... 8.850 05/01/18 3,517,685
2,000 Chicago, IL Wastewtr Transmission Rev Second
Lien (MBIA Insd)............................ 5.750 01/01/25 2,017,440
1,000 Chicago, IL Wastewtr Transmission Rev Second
Lien (MBIA Insd)............................ 6.000 01/01/30 1,035,700
2,870 Cook Cnty, IL Cap Impt Ser A (FGIC Insd).... 5.000 11/15/28 2,582,971
3,500 Du Page Cnty, IL Fst Presv Dist............. * 11/01/10 2,119,355
4,270 East Peoria, IL Ser C Rfdg.................. 7.000 05/01/17 4,514,415
1,250 Illinois Dev Fin Auth Rev Bradley Univ Proj
(AMBAC Insd)................................ 5.375 08/01/24 1,207,613
3,285 Illinois Dev Fin Auth Rev Presbyterian Home
Lake Proj Ser B (FSA Insd).................. 6.300 09/01/22 3,424,448
2,000 Illinois Edl Fac Auth Rev Lewis Univ........ 6.100 10/01/16 1,994,840
1,900 Illinois Hlth Fac Auth Rev Evangelical Hosps
Ser C (FSA Insd)............................ 6.750 04/15/17 2,000,985
700 Illinois Hlth Fac Auth Rev Highland Park
Hosp Proj Ser A (MBIA Insd)................. 5.750 10/01/17 710,444
1,000 Illinois Hlth Fac Auth Rev Midwest Physician
Grp Ltd Rfdg................................ 5.500 11/15/19 802,380
2,000 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys
Rfdg........................................ 6.000 11/15/10 2,022,860
2,400 Illinois Hlth Fac Auth Rev Sarah Bush
Lincoln Hlth Cent (Prerefunded @ 05/15/02)
(b)......................................... 7.250 05/15/22 2,544,240
2,275 Illinois Hlth Fac Auth Rev South Suburban
Hosp (Escrowed To Maturity)................. 7.000 02/15/18 2,631,219
1,000 Illinois St (FGIC Insd)..................... 5.250 12/01/20 968,010
250 Metropolitan Pier & Expo Auth IL Dedicated
St Tax Rev McCormick Pl Expansion Proj Ser A
Rfdg (FGIC Insd)............................ 5.375 12/15/18 246,850
8,845 Metropolitan Pier & Expo Auth IL Dedicated
St Tax Rev McCormick Pl Expansion Ser A
(FGIC Insd)................................. * 06/15/16 3,755,056
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$1,105 Saint Clair Cnty, IL Pub Bldg Comm Bldg Rev
Cap Apprec Ser B (FGIC Insd)................ * 12/01/15 $ 488,178
1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux
(MBIA Insd)................................. * 04/01/29 193,200
1,400 Southern IL Univ Rev Hsg & Aux Fac Ser A
Rfdg........................................ 6.750% 04/01/12 1,458,996
------------
59,473,390
------------
INDIANA 0.9%
4,500 Indianapolis, IN Arpt Auth Rev Spl Fac
Federal Express Corp Proj................... 7.100 01/15/17 4,738,635
1,000 Marion Cnty, IN Convention & Rec Fac Auth
Excise Tax Rev (MBIA Insd).................. * 06/01/14 482,550
1,200 North Adams, IN Cmnty Schs Renovation Bldg
Corp Cap Apprec- First Mtg (FSA Insd)....... * 07/15/15 538,020
1,280 North Adams, IN Cmnty Schs Renovation Bldg
Corp Cap Apprec- First Mtg (FSA Insd)....... * 01/15/19 456,026
------------
6,215,231
------------
IOWA 0.9%
1,685 Des Moines, IA Pub Pkg Sys Rev Ser A (FGIC
Insd)....................................... 5.750 06/01/15 1,750,951
1,785 Des Moines, IA Pub Pkg Sys Rev Ser A (FGIC
Insd)....................................... 5.750 06/01/16 1,845,333
2,375 Iowa Student Ln Liquidity Corp Student Ln
Rev Subser I................................ 6.950 03/01/06 2,473,420
------------
6,069,704
------------
KANSAS 0.3%
1,975 Sedgwick Cnty, KS Uni Sch Dist No 259
Wichita (MBIA Insd)......................... 6.000 09/01/09 2,160,966
------------
KENTUCKY 3.7%
10,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A...................... 7.500 02/01/20 10,351,400
11,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A...................... 7.125 02/01/21 11,313,390
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/
Northn KY Intl Arpt Ser A Rfdg (MBIA
Insd)....................................... 6.200 03/01/08 1,075,690
1,500 Kenton Cnty, KY Arpt Brd Rev Cincinnati/
Northn KY Intl Arpt Ser A Rfdg (MBIA
Insd)....................................... 6.250 03/01/09 1,624,785
1,315 Kentucky Hsg Corp Hsg Rev Ser B............. 6.250 07/01/28 1,348,230
------------
25,713,495
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
LOUISIANA 0.4%
$3,000 New Orleans, LA Rfdg (FGIC Insd)............ 4.750% 12/01/26 $ 2,587,290
------------
MAINE 2.1%
2,650 Maine Muni Bank Ser A Rfdg (MBIA Insd)...... 5.800 11/01/20 2,683,284
5,250 Maine St Hsg Auth Mtg Purch Ser D6.......... 7.250 11/15/19 5,369,805
6,755 Maine St Hsg Auth Mtg Purch Ser D6.......... 7.250 11/15/22 6,899,827
------------
14,952,916
------------
MASSACHUSETTS 1.1%
2,625 Massachusetts Muni Wholesale Elec Co Pwr
Supply Sys Rev Ser A (AMBAC Insd)........... 5.000 07/01/14 2,577,671
2,410 Massachusetts St Hsg Fin Agy Residential Dev
Ser C (FNMA Collateralized)................. 6.875 11/15/11 2,529,175
1,000 Massachusetts St Indl Fin Agy Rev Wentworth
Institute Tech.............................. 5.650 10/01/18 959,190
2,000 Route 3 North Trans Impt Assocmass Lease Rev
(MBIA Insd)................................. 5.375 06/15/33 1,928,420
------------
7,994,456
------------
MICHIGAN 3.7%
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 2,626,560
3,015 Detroit, MI Downtown Dev Auth Tax Increment
Rev Ser C1.................................. * 07/01/17 1,149,529
3,050 Detroit, MI Downtown Dev Auth Tax Increment
Rev Ser C1.................................. * 07/01/18 1,086,257
3,050 Detroit, MI Downtown Dev Auth Tax Increment
Rev Ser C1.................................. * 07/01/19 1,015,345
3,050 Detroit, MI Downtown Dev Auth Tax Increment
Rev Ser C1.................................. * 07/01/22 836,645
3,050 Detroit, MI Downtown Dev Auth Tax Increment
Rev Ser C1.................................. * 07/01/23 786,412
3,050 Detroit, MI Downtown Dev Auth Tax Increment
Rev Ser C1.................................. * 07/01/24 739,076
7,355 Detroit, MI Econ Dev Corp Res Recovery Rev
Ser A (FSA Insd)............................ 6.875 05/01/09 7,571,311
3,500 Grand Rapids, MI Downtown Dev Cap Apprec
(MBIA Insd)................................. * 06/01/15 1,597,785
2,765 Grand Rapids, MI Downtown Dev Cap Apprec
(MBIA Insd)................................. * 06/01/16 1,185,328
1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev
Hillsdale Cmnty Hlth Cent................... 5.250 05/15/26 1,024,072
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MICHIGAN (CONTINUED)
$2,850 Michigan St Hosp Fin Auth Rev Ascension Hlth
Credit Ser A (MBIA Insd).................... 5.750% 11/15/18 $ 2,857,467
1,400 Portage Lake, MI Wtr & Swr Auth Ser 3
(Prerefunded @ 10/01/02).................... 7.750 10/01/20 1,511,398
2,000 Wayne Charter Cnty, MI Arpt Rev Detroit Met
Wayne Cnty Ser A (MBIA Insd)................ 5.000 12/01/22 1,808,760
------------
25,795,945
------------
MINNESOTA 1.1%
5,000 Minneapolis & St Paul, MN Metro Arpts Comm
Arpt Rev Ser A (FGIC Insd).................. 5.125 01/01/31 4,672,850
2,800 Minnesota Agricultural & Econ Dev Brd Rev
Hlthcare Sys Fairview Hosp Ser A (MBIA
Insd)....................................... 5.750 11/15/26 2,810,696
------------
7,483,546
------------
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 3,199,740
4,250 Mississippi Bus Fin Corp MS Pollutn Ctl Rev
Sys Energy Res Inc Proj..................... 5.875 04/01/22 3,912,762
------------
7,112,502
------------
MISSOURI 0.4%
1,625 Jefferson Cnty, MO Reorg Sch Dist No R-6
(FGIC Insd)................................. 5.625 03/01/20 1,644,858
1,000 St. Louis, MO Arpt Rev...................... 6.250 01/01/03 1,014,320
------------
2,659,178
------------
NEBRASKA 0.2%
1,190 Dodge Cnty, NE Sch Dist No 001 Fremont (FSA
Insd)....................................... 5.750 12/15/13 1,256,759
------------
NEVADA 0.7%
3,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj
Ser C Rfdg (AMBAC Insd)..................... 7.200 10/01/22 3,179,010
1,750 Director St, NV Dept Bus & Ind (AMBAC
Insd)....................................... 5.375 01/01/40 1,654,590
------------
4,833,600
------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW HAMPSHIRE 0.5%
$ 1,000 New Hampshire Hlth & Ed Facs Auth Rev
Derryfield Sch.............................. 7.000% 07/01/30 $ 1,011,390
1,000 New Hampshire St Bus Fin Auth Wtr Fac Rev
Pennichuck Wtrwks Inc (AMBAC Insd).......... 6.300 05/01/22 1,046,080
1,500 New Hampshire St Indl Dev Auth Rev Pollutn
Ctl Pub Svcs Co of NH Proj Ser C............ 7.650 05/01/21 1,534,290
------------
3,591,760
------------
NEW JERSEY 6.6%
2,000 New Jersey Econ Dev Auth Rev Tran Proj
Sublease Ser A (FSA Insd)................... 5.250 05/01/17 1,988,000
3,000 New Jersey Econ Dev Auth Rev Insd Edl
Testing Svc Ser A Rfdg (MBIA Insd).......... 4.750 05/15/25 2,661,990
25,000 New Jersey Econ Dev Auth St Contract Econ
Recovery (MBIA Insd)........................ 5.900 03/15/21 26,649,750
2,000 New Jersey Hlthcare Fac Fin Auth Rev Genl
Hosp Cent at Passaic (FSA Insd)............. 6.000 07/01/06 2,140,700
10,000 New Jersey St Hsg & Mtg Fin Agy Rev Hsg Ser
A Rfdg...................................... 6.950 05/01/15 10,396,300
2,385 New Jersey St Tran Corp Ctfs Fed Tran Admin
Grants Ser A (AMBAC Insd)................... 5.750 09/15/11 2,542,553
------------
46,379,293
------------
NEW YORK 22.7%
5,000 Long Island Pwr Auth NY Elec Sys Rev Cap
Apprec (FSA Insd)........................... * 06/01/15 2,297,150
2,500 Long Island Pwr Auth NY Elec Sys Rev Gen Ser
A (MBIA Insd)............................... 5.500 12/01/29 2,437,925
3,000 Metropolitan Tran Auth NY Commuter Fac Rev
Ser A (MBIA Insd)........................... 5.625 07/01/27 3,000,750
12,155 Metropolitan Tran Auth NY Svc Contract
Commuter Fac Ser 5.......................... 6.500 07/01/16 12,515,639
2,000 Metropolitan Tran Auth NY Trans Fac Rev Svcs
Contract Ser R Rfdg......................... 5.500 07/01/17 1,983,680
2,000 Nassau Cnty, NY Interim Fin Auth Sales Tax
Secured Ser A............................... 5.750 11/15/13 2,100,300
5,000 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Ser A (FGIC Insd)................... 4.750 06/15/31 4,309,000
4,000 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Ser B (FGIC Insd)................... 5.250 06/15/29 3,782,120
3,410 New York City Ser A......................... 6.500 08/01/14 3,553,459
1,590 New York City Ser A (Prerefunded @
08/01/02)................................... 6.500 08/01/14 1,671,329
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,500 New York City Ser A Rfdg.................... 7.000% 08/01/05 $ 2,748,125
3,000 New York City Ser A Rfdg.................... 7.000 08/01/06 3,343,050
2,355 New York City Ser C......................... 6.500 08/01/04 2,456,548
8,500 New York City Ser C Subser C1 (Prerefunded @
08/01/02)................................... 7.500 08/01/19 9,075,110
1,850 New York City Ser G......................... 5.875 10/15/14 1,922,372
5,000 New York City Ser I......................... 6.000 04/15/12 5,279,450
4,110 New York City Ser I (MBIA Insd)............. 5.000 04/15/24 3,787,570
3,275 New York City Tran Auth Met Ser A (AMBAC
Insd)....................................... 5.250 01/01/29 3,111,021
10,000 New York City Tran Auth Tran Fac Livingston
Plaza Proj Rfdg (FSA Insd).................. 5.400 01/01/18 10,082,900
1,000 New York City Tran Fin Auth Rev Future Tax
Secured Ser C (FGIC Insd)................... 5.000 05/01/26 917,160
3,000 New York City Tran Fin Auth Rev Future Tax
Secured Ser C............................... 5.000 05/01/29 2,735,250
2,000 New York St Ser A........................... 5.000 03/15/14 1,962,620
2,500 New York St Dorm Auth Lease Rev Muni Hlth
Fac Impt Pgm Ser A (FSA Insd)............... 5.500 05/15/25 2,465,150
1,250 New York St Dorm Auth Lease Rev St Univ Dorm
Fac Ser C (MBIA Insd)....................... 5.500 07/01/29 1,231,275
13,500 New York St Dorm Auth Rev City Univ Sys Ser
C........................................... 7.500 07/01/10 15,469,380
1,000 New York St Dorm Auth Rev Court Fac Lease
Ser A....................................... 5.625 05/15/13 1,005,930
2,000 New York St Dorm Auth Rev Court Fac Lease
Ser A....................................... 5.375 05/15/16 1,932,520
2,000 New York St Dorm Auth Rev Hosp NY &
Presbyterian (AMBAC Insd)................... 4.750 08/01/27 1,735,460
4,500 New York St Dorm Auth Rev St Univ Edl Fac
Ser A (MBIA Insd)........................... 4.750 05/15/25 3,936,060
3,000 New York St Dorm Auth Rev St Univ Edl Facs
(FGIC Insd)................................. 5.750 05/15/24 3,046,710
2,000 New York St Dorm Auth Rev St Univ Edl Facs
(MBIA Insd)................................. 6.000 05/15/16 2,136,780
2,000 New York St Dorm Auth Revs New York Univ Ser
A (AMBAC Insd) (a).......................... 5.250 07/01/06 2,057,220
5,725 New York St Environmental Fac Corp Spl Oblig
Riverbank State Park (Prerefunded @
04/01/02)................................... 7.375 04/01/22 6,074,797
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 5,000 New York St Hsg Fin Agy Svcs Contract Oblig
Rev Ser A (Prerefunded @ 03/15/02).......... 7.375% 09/15/21 $ 5,297,050
2,000 New York St Loc Govt Assistance Corp Ser B
Rfdg (MBIA Insd)............................ 5.000 04/01/21 1,863,060
2,840 New York St Loc Govt Assistance Corp Ser E
Rfdg........................................ 6.000 04/01/14 3,104,858
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 3,317,370
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 5,720,605
2,500 New York St Mtg Agy Rev Homeowner Mtg Ser 54
Rfdg........................................ 6.200 10/01/26 2,560,950
1,500 New York St Mtg Agy Rev Homeowner Mtg Ser
73-A........................................ 5.300 10/01/28 1,390,200
2,500 New York St Mtg Agy Rev Hosp NY &
Presbyterian................................ 5.300 04/01/29 2,315,700
1,500 New York St Urban Dev Corp Rev Proj Cent for
Indl Innovation Rfdg........................ 5.500 01/01/13 1,548,975
3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)............ 5.750 12/01/22 3,045,390
3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)............ 5.750 12/01/25 3,031,950
------------
159,359,918
------------
NORTH CAROLINA 3.3%
1,000 New Hanover Cnty, NC Hosp Rev New Hanover
Regl Med Cent Proj (AMBAC Insd)............. 4.750 10/01/23 876,590
1,000 North Carolina Eastern Muni Pwr Agy Pwr Sys
Rev Ser D................................... 6.750 01/01/26 1,037,090
15,000 North Carolina Muni Pwr Agy No 1 Catawba
Elec Rev (MBIA Insd)........................ 6.000 01/01/12 16,210,350
5,150 North Carolina Muni Pwr Agy No 1 Catawba
Elec Rev Rfdg (FSA Insd).................... 6.200 01/01/18 5,314,027
------------
23,438,057
------------
NORTH DAKOTA 0.3%
2,400 North Dakota St Hsg Fin Agy Rev Hsg Fin Pgm
Ser B (MBIA Insd)........................... 5.500 07/01/29 2,277,312
------------
OHIO 0.7%
1,000 Cuyahoga Cnty, OH Hosp Facs Rev Canton Inc.
Proj Canton Inc Proj........................ 7.500 01/01/30 1,037,260
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
OHIO (CONTINUED)
$ 1,000 Delaware Cnty, OH Cap Facs.................. 6.000% 12/01/25 $ 1,048,220
1,000 Hamilton Cnty, OH Sales Tax Hamilton Cnty
Football Proj Ser A (MBIA Insd)............. 4.750 12/01/27 865,710
1,250 Montgomery Cnty, OH Hosp Rev Grandview Hosp
& Med Cent Rfdg (Escrowed to maturity)...... 5.250 12/01/03 1,275,037
1,000 Ohio St Air Quality Dev Auth Rev JMG Fdg Ltd
Partn Proj Rfdg (AMBAC Insd)................ 6.375 04/01/29 1,035,720
------------
5,261,947
------------
OKLAHOMA 4.2%
1,500 Jenks, OK Aquarium Auth Rev First Mtg (MBIA
Insd)....................................... 6.100 07/01/30 1,573,800
17,475 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc......................................... 7.375 12/01/20 17,836,732
7,500 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc......................................... 7.600 12/01/30 7,702,500
2,250 Tulsa, OK Pub Facs Auth Cap Impt Rev........ 6.250 11/01/22 2,276,978
------------
29,390,010
------------
OREGON 0.7%
2,910 Oregon St Vets Welfare Ser 76A.............. 6.050 10/01/28 2,973,264
1,985 Portland, OR Urban Renewal & Redev Downtown
Waterfront Ser A (AMBAC Insd)............... 5.750 06/15/16 2,075,595
------------
5,048,859
------------
PENNSYLVANIA 7.6%
2,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh
Intl Arpt Ser B (FSA Insd).................. 6.625 01/01/22 2,582,500
2,000 Allegheny Cnty, PA Ctfs Partn (AMBAC
Insd)....................................... 5.000 12/01/28 1,811,960
1,250 Allegheny Cnty, PA San Auth Swr Rev (MBIA
Insd)....................................... 5.750 12/01/16 1,309,300
1,000 Carbon Cnty, PA Indl Dev Auth Rfdg Panther
Creek Partners Proj (LOC: Paribas & Union Bk
of CA Intl)................................. 6.650 05/01/10 1,017,950
4,780 Erie, PA Sch Dist Cap Apprec Rfdg (FSA
Insd)....................................... * 09/01/19 1,672,618
4,000 Falls Twp, PA Hosp Auth Hosp Rev Delaware
Vly Med Rfdg (FHA Gtd)...................... 7.000 08/01/22 4,201,640
1,710 Harrisburg, PA Cap Apprec Ser D (AMBAC
Insd)....................................... * 03/15/19 613,274
1,905 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC
Insd)....................................... * 09/15/16 804,424
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$1,735 Harrisburg, PA Cap Apprec Ser F (AMBAC
Insd)....................................... * 09/15/15 $ 780,282
1,385 Harrisburg, PA Cap Apprec Ser F (AMBAC
Insd)....................................... * 09/15/19 483,046
1,500 Penn Cambria Sch Dist PA Cap Apprec (FGIC
Insd)....................................... * 08/15/20 493,830
60 Penn Hills, PA (FGIC Insd).................. 5.900% 12/01/17 62,204
1,000 Pennsylvania St Higher Edl Fac Auth College
& Univ Rev Bryn Mawr College (MBIA Insd).... 5.625 12/01/27 1,002,040
4,750 Pennsylvania St Tpk Comm Oil Franchise Tax
Rev Subser B (AMBAC Insd)................... 4.750 12/01/27 4,140,337
5,500 Philadelphia, PA (FSA Insd)................. 5.000 03/15/28 4,971,340
2,000 Philadelphia, PA Gas Wks Rev Second Ser (FSA
Insd)....................................... 5.000 07/01/29 1,807,180
6,000 Philadelphia, PA Gas Wks Rev Ser 14 Rfdg
(FSA Insd).................................. 6.250 07/01/08 6,331,440
1,500 Philadelphia, PA Indl Dev Arpt Auth Rev
(FGIC Insd)................................. 5.000 07/01/23 1,349,250
10,000 Pittsburgh & Allegheny Cnty, PA Pub Aud Auth
Excise Tax Rev (AMBAC Insd)................. 4.500 02/01/29 8,335,200
4,000 Pittsburgh & Allegheny Cnty, PA Pub
Auditorium Auth Regl Asset Dist Sales Tax
Rev (AMBAC Insd)............................ 5.000 02/01/29 3,643,200
1,500 Pittsburgh, PA Ser A (FGIC Insd)............ 5.750 09/01/23 1,524,255
1,005 Southeast Delco Sch Dist PA Cap Apprec (MBIA
Insd)....................................... * 02/01/17 410,402
1,700 Southeastern PA Tran Auth PA Spl Rev Ser A
(FGIC Insd)................................. 4.750 03/01/24 1,483,964
1,925 Southeastern PA Tran Auth PA Spl Rev Ser A
(FGIC Insd)................................. 4.750 03/01/29 1,657,964
1,500 Spring Ford Area Sch Dist PA (FGIC Insd).... 4.750 03/01/25 1,310,895
------------
53,800,495
------------
RHODE ISLAND 0.3%
2,000 Rhode Island St Hlth & Edl Bldg Corp Rev
Higher Ed Fac Johnson & Wales (MBIA Insd)... 5.000 04/01/29 1,800,140
------------
SOUTH CAROLINA 0.9%
2,375 Berkeley Cnty, SC Sch Dist Ctfs Partn
Berkeley Sch Facs Grp Inc (MBIA Insd)....... 5.250 02/01/16 2,361,249
2,700 Charleston Cnty, SC Solid Waste (MBIA
Insd)....................................... 6.000 01/01/14 2,826,252
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
SOUTH CAROLINA (CONTINUED)
$1,500 Lancaster Cnty, SC Sch Dist (FSA Insd)...... 4.750% 03/01/19 $ 1,373,430
------------
6,560,931
------------
SOUTH DAKOTA 0.5%
1,375 Deadwood, SD Ctfs Partn (ACA Insd).......... 6.375 11/01/20 1,403,284
1,000 South Dakota St Hlth & Edl Fac Auth
Vocational Ed Pgm Ser A (AMBAC Insd)........ 5.400 08/01/13 1,011,580
1,000 South Dakota St Hlth & Edl Facs Auth Rev
Childrens Care Hosp Rfdg.................... 6.125 11/01/29 977,470
------------
3,392,334
------------
TENNESSEE 0.8%
1,500 Johnson City, TN Hlth & Edl Facs Brd Hosp
Rev First Mtg Ser A Rfdg.................... 7.500 07/01/25 1,456,395
2,180 Tennessee Hsg Dev Agy Homeowner Pgm......... 5.350 07/01/23 2,048,590
2,500 Tennessee Hsg Dev Agy Homeowner Pgm......... 5.300 01/01/24 2,325,350
------------
5,830,335
------------
TEXAS 4.1%
4,790 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj..................... 7.500 12/01/29 4,890,590
2,685 Beaumont, TX Wtrwks & Swr Sys (FGIC Insd)... 6.250 09/01/15 2,913,655
2,000 Brazos River Auth TX Rev Houston Lighting &
Pwr Co Proj Rfdg (AMBAC Insd)............... 5.050 11/01/18 1,823,160
1,275 Cameron Cnty, TX Ctfs Oblig (AMBAC Insd).... 5.750 02/15/13 1,338,010
3,000 Dallas Cnty, TX Util & Reclamation Dist Ser
B Rfdg (AMBAC Insd)......................... 5.875 02/15/29 3,031,350
4,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A
(FGIC Insd)................................. 5.750 11/01/30 3,957,680
1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FSA
Insd) (a)................................... 5.625 07/01/30 973,200
2,000 Houston, TX Arpt Sys Rev Sub Lien Ser B
(FGIC Insd)................................. 5.000 07/01/25 1,775,740
2,495 Plano, TX Hlth Fac Dev Corp TX Hlth Res Sys
Ser C (MBIA Insd)........................... 5.000 02/15/22 2,196,249
4,000 Round Rock, TX Indpt Sch Dist (PSF Gtd)..... 4.500 08/01/19 3,495,040
2,750 Texas St Vets Hsg Assistance Pgm Ser B...... 6.100 06/01/31 2,814,652
------------
29,209,326
------------
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
UTAH 0.4%
$2,500 Murray City, UT Hosp Rev Inc Hlth Svc Inc
Rfdg (MBIA Insd)............................ 4.750% 05/15/20 $ 2,194,650
585 Utah St Hsg Fin Agy Single Family Mtg
Mezzanine Issue H1 (AMBAC Insd)............. 6.000 07/01/12 610,875
------------
2,805,525
------------
VIRGINIA 0.3%
1,320 Fairfax Cnty, VA Ctfs Partn................. 5.300 04/15/23 1,242,450
1,000 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease
Rev Henrico Cnty Regl Jail Proj............. 7.125 08/01/21 1,124,720
------------
2,367,170
------------
WASHINGTON 0.6%
1,000 Port Seattle, WA Rev Ser B (MBIA Insd)...... 5.625 02/01/24 980,840
1,435 Radford Ct Pptys Wash Student Hsg Rev (MBIA
Insd)....................................... 6.000 06/01/15 1,528,060
1,585 Radford Ct Pptys Wash Student Hsg Rev (MBIA
Insd)....................................... 6.000 06/01/16 1,678,515
------------
4,187,415
------------
WEST VIRGINIA 0.6%
3,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co
Proj Ser C Rfdg (MBIA Insd)................. 6.850 06/01/22 3,149,310
1,215 West Virginia St Hsg Dev Fd Hsg Fin Ser B
(FHA Gtd)................................... 7.200 11/01/20 1,244,670
------------
4,393,980
------------
WISCONSIN 0.8%
2,000 Southeast WI Professional Baseball Park Dist
Sales Tax Rev (MBIA Insd)................... 5.500 12/15/20 2,018,100
2,000 Southeast WI Professional Baseball Park Dist
Sales Tax Rev (MBIA Insd)................... * 12/15/18 726,080
1,750 Southeast WI Professional Baseball Park Dist
Sales Tax Rev (MBIA Insd)................... * 12/15/19 596,330
1,500 Wisconsin St Hlth & Edl Facs Auth Rev
Franciscan Sisters Christian Ser A.......... 5.500 02/15/18 1,275,300
1,000 Wisconsin St Hlth & Edl Facs Auth Rev
Kenosha Hosp & Med Cent Proj................ 5.625 05/15/29 871,370
------------
5,487,180
------------
WYOMING 0.4%
1,175 Wyoming Cmnty Dev Auth Hsg Rev Ser 2........ 6.350 06/01/29 1,201,414
1,450 Wyoming Cmnty Dev Auth Hsg Rev Ser 4........ 6.550 06/01/28 1,478,478
------------
2,679,892
------------
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
YOUR TRUST'S INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
GUAM 0.4%
$3,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)........ 5.250% 10/01/34 $ 2,894,520
------------
PUERTO RICO 0.3%
1,110 Puerto Rico Comwlth Aqueduct & Swr Auth Rev
Rfdg........................................ 5.000 07/01/15 1,094,615
1,110 Puerto Rico Comwlth Ser A Rfdg.............. 6.000 07/01/14 1,143,589
------------
2,238,204
------------
TOTAL INVESTMENTS 97.0%
(Cost $644,124,750)................................................... 682,325,302
OTHER ASSETS IN EXCESS OF LIABILITIES 3.0%.............................. 20,797,866
------------
NET ASSETS 100.0%....................................................... $703,123,168
============
</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.
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
October 31, 2000
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $644,124,750)....................... $682,325,302
Receivables:
Investments Sold.......................................... 14,223,050
Interest.................................................. 12,379,351
Other....................................................... 15,938
------------
Total Assets............................................ 708,943,641
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 4,276,151
Income Distributions--Preferred Shares.................... 469,712
Investment Advisory Fee................................... 385,014
Custodian Bank............................................ 219,247
Administrative Fee........................................ 118,466
Affiliates................................................ 14,080
Accrued Expenses............................................ 192,538
Trustees' Deferred Compensation and Retirement Plans........ 145,265
------------
Total Liabilities....................................... 5,820,473
------------
NET ASSETS.................................................. $703,123,168
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................. 38,200,552
Accumulated Undistributed Net Investment Income............. 690,514
Accumulated Net Realized Loss............................... (356,067)
------------
Net Assets Applicable to Common Shares.................. 438,123,168
------------
NET ASSETS.................................................. $703,123,168
============
NET ASSET VALUE PER COMMON SHARE ($438,123,168 divided by
27,013,149 shares outstanding)............................ $ 16.22
============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
Statement of Operations
For the Year Ended October 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $42,691,359
-----------
EXPENSES:
Investment Advisory Fee..................................... 4,479,573
Administrative Fee.......................................... 1,378,331
Preferred Share Maintenance................................. 705,796
Trustees' Fees and Related Expenses......................... 42,506
Custody..................................................... 40,576
Legal....................................................... 31,218
Other....................................................... 418,211
-----------
Total Expenses.......................................... 7,096,211
Less Credits Earned on Cash Balances.................... 300
-----------
Net Expenses............................................ 7,095,911
-----------
NET INVESTMENT INCOME....................................... $35,595,448
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 766,296
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 21,564,542
End of the Period......................................... 38,200,552
-----------
Net Unrealized Appreciation During the Period............... 16,636,010
-----------
NET REALIZED AND UNREALIZED GAIN............................ $17,402,306
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $52,997,754
===========
</TABLE>
See Notes to Financial Statements
28
<PAGE> 30
Statement of Changes in Net Assets
For the Years Ended October 31, 2000 and 1999
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 35,595,448 $ 36,020,809
Net Realized Gain/Loss............................. 766,296 (1,055,012)
Net Unrealized Appreciation/Depreciation During the
Period........................................... 16,636,010 (51,491,576)
------------ ------------
Change in Net Assets from Operations............... 52,997,754 (16,525,779)
------------ ------------
Distributions from Net Investment Income:
Common Shares.................................... (26,174,311) (26,742,982)
Preferred Shares................................. (10,870,417) (8,565,678)
------------ ------------
(37,044,728) (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................................ (37,044,728) (37,944,474)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... 15,953,026 (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 $690,514
and $2,139,794, respectively).................... $703,123,168 $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.
<TABLE>
<CAPTION>
---------------------------------------
2000 1999 1998 1997
---------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD (A)... $ 15.63 $ 17.64 $ 17.29 $ 16.58
-------- -------- ------- -------
Net Investment Income........................ 1.32 1.33 1.35 1.37
Net Realized and Unrealized Gain/Loss........ .64 (1.94) .42 .74
-------- -------- ------- -------
Total from Investment Operations............... 1.96 (.61) 1.77 2.11
-------- -------- ------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders................ .97 .99 1.00 1.05
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........... .40 .32 .34 .35
Distributions from Net Realized Gain:
Paid to Common Shareholders................ -0- .07 .06 -0-
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........... -0- .02 .02 -0-
-------- -------- ------- -------
Total Distributions............................ 1.37 1.40 1.42 1.40
-------- -------- ------- -------
NET ASSET VALUE, END OF THE PERIOD............. $ 16.22 $ 15.63 $ 17.64 $ 17.29
======== ======== ======= =======
Market Price Per Share at End of the Period.... $13.5625 $13.6875 $17.000 $16.125
Total Investment Return at Market Price (b).... 6.41% -13.97% 12.40% 8.92%
Total Return at Net Asset Value (c)............ 10.36% -5.66% 8.39% 10.94%
Net Assets at End of the Period (In
millions).................................... $ 703.1 $ 687.2 $ 741.6 $ 732.0
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**................ 1.68% 1.61% 1.58% 1.60%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)....... 5.86% 6.00% 5.80% 6.06%
Portfolio Turnover............................. 31% 33% 29% 40%
* Non-annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares.................. 1.03% 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>
$ 16.58 $ 15.03 $ 17.95 $ 15.56 $ 14.79
------- ------- ------- ------- -------
1.38 1.42 1.43 1.45 1.01
.11 1.65 (2.84) 2.42 .55
------- ------- ------- ------- -------
1.49 3.07 (1.41) 3.87 1.56
------- ------- ------- ------- -------
1.14 1.14 1.14 1.08 .59
.35 .38 .30 .29 .20
-0- -0- .06 .08 -0-
-0- -0- .01 .03 -0-
------- ------- ------- ------- -------
1.49 1.52 1.51 1.48 .79
------- ------- ------- ------- -------
$ 16.58 $ 16.58 $ 15.03 $ 17.95 $ 15.56
======= ======= ======= ======= =======
$15.813 $15.750 $14.000 $17.375 $14.875
7.84% 21.15% -13.12% 25.40% 3.08%*
7.12% 18.51% -9.99% 23.53% 7.68%*
$ 712.8 $ 712.9 $ 671.1 $ 750.0 $ 685.2
1.62% 1.68% 1.63% 1.59% 1.54%
6.24% 6.55% 6.79% 6.87% 6.71%
30% 15% 20% 20% 37%*
1.02% 1.04% 1.03% 1.01% 1.01%
</TABLE>
See Notes to Financial Statements
31
<PAGE> 33
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
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 accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services are valued at fair value
using procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value.
B. SECURITY TRANSACTIONS Security Transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and original issue discount is accreted over the expected
life of each applicable security.
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
32
<PAGE> 34
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 2000, the Trust had an accumulated capital loss
carryforward for tax purposes of $288,716 which expires on October 31, 2007. Net
realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of the deferral of losses relating to wash sale
transactions.
At October 31, 2000, for federal income tax purposes cost of long-term
investments is $644,192,162 the aggregate gross unrealized appreciation is
$39,964,663 and the aggregate gross unrealized depreciation is $1,831,523,
resulting in a net unrealized appreciation on long-term investments of
$38,133,140.
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.
F. EXPENSE REDUCTIONS During the year ended October 31, 2000, the Trust's
custody fee was reduced by $300 as a result of credits earned on overnight cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. will provide investment advice and facilities to the
Trust for an annual fee payable monthly of .65% of the average net assets of the
Trust. In addition, the Trust will pay a monthly administrative fee to Van
Kampen Funds Inc. or its affiliates (collectively "Van Kampen"), the Trust's
Administrator, at an annual rate of .20% of the average net assets of the Trust.
The administrative services provided by the Administrator include record keeping
and reporting responsibilities with respect to the Trust's portfolio and
preferred shares and providing certain services to shareholders.
For the year ended October 31, 2000, the Trust recognized expenses of
approximately $14,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
Under separate Accounting Services and Legal Services agreements the Adviser
provides accounting and legal services to the Trust. The Adviser allocates the
cost of such services to each Trust. For the year ended October 31, 2000, the
33
<PAGE> 35
NOTES TO
FINANCIAL STATEMENTS
October 31, 2000
Trust recognized expenses of approximately $52,000 representing Van Kampen's
cost of providing accounting and legal services to the Trust which are reported
as part of other and legal expenses, respectively, in the statement of
operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust 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 $213,966,081 and $243,015,437,
respectively.
4. 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 October 31, 2000, was 4.162%. During the year ended October 31, 2000,
the rates ranged from 3.429% to 4.775%.
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.
34
<PAGE> 36
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of Van Kampen Trust for Investment
Grade Municipals
We have audited the accompanying statement of assets and liabilities of Van
Kampen Trust for Investment Grade Municipals (the "Trust"), including the
portfolio of investments, as of October 31, 2000, and the related statements of
operations, changes in net assets and the financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The Trust's financial statements and financial highlights for the periods
ended prior to October 31, 2000 were audited by other auditors whose report,
dated December 9, 1999, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000, by correspondence with the Trust's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Trust for Investment Grade Municipals as of October 31, 2000, the results
of its operations, the changes in its net assets and the financial highlights
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 6, 2000
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<PAGE> 37
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
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<PAGE> 38
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
37
<PAGE> 39
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
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
For Federal Income tax purposes, the following information is furnished with
respect to the distributions paid by the Trust during its taxable year ended
October 31, 2000. The Trust designated 99.96% of the income distributions as a
tax-exempt income distribution. In January, 2001, the Trust will provide tax
information to shareholders for the 2000 calendar year.
(1) Independent auditors for the Trust perform an annual audit of the Trust's
financial statements. The Board of Trustees has engaged Deloitte & Touche
LLP to be the Trust's independent auditors.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"),
ceased being the Trust's independent accountants effective April 14, 2000.
The cessation of the client- auditor relationship between the Trust and KPMG
was based solely on a possible future business relationship by KPMG with an
affiliate of the Trust's investment adviser.
* "Interested" persons of the Trust, as defined in the Investment Company Act
of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
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<PAGE> 40
RESULTS OF
SHAREHOLDER VOTES
An Annual Meeting of Shareholders of the Trust was held on June 21, 2000, where
shareholders voted on the election of trustees and the ratification of Deloitte
& Touche LLP as the independent auditors.
1) With regard to the election of the following trustees by preferred
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
<S> <C> <C>
Rod Dammeyer.......................................... 7,950 -0-
</TABLE>
2) With regard to the election of the following trustees by common shareholders
of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
<S> <C> <C>
Wayne W. Whalen....................................... 24,529,546 439,223
</TABLE>
The other trustees whose term did not expire in 2000 were: Richard F. Powers,
III, Theodore A. Myers, Hugo F. Sonnenschein, David C. Arch and Howard J Kerr.
3) With regards to the ratification of Deloitte & Touche LLP as the independent
auditors for the Trust, 24,582,431 shares voted in favor of the proposal,
111,288 shares voted against and 275,049 shares abstained.
39
