<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 21
NOTES TO FINANCIAL STATEMENTS 26
DIVIDEND REINVESTMENT PLAN 30
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 32
TRUST OFFICERS AND IMPORTANT ADDRESSES 33
</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 VIM
-----------------------------------------------------------------------
Six-month total return based on market price(1) 1.75%
-----------------------------------------------------------------------
Six-month total return based on NAV(2) 2.96%
-----------------------------------------------------------------------
Distribution rate as a % of closing stock price(3) 6.95%
-----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
stock price(4) 10.86%
-----------------------------------------------------------------------
Net asset value $15.30
-----------------------------------------------------------------------
Closing stock price $14.250
-----------------------------------------------------------------------
Six-month high common stock price (11/05/99) $15.1875
-----------------------------------------------------------------------
Six-month low common stock price (12/30/99) $13.5625
-----------------------------------------------------------------------
Preferred share (Series A) rate(5) 3.990%
-----------------------------------------------------------------------
Preferred share (Series B) rate(5) 4.200%
-----------------------------------------------------------------------
</TABLE>
(1) Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions
for the period in accordance with the Trust's dividend reinvestment plan,
and sale of all shares at the closing common stock price at the end of the
period indicated.
(2) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) The taxable-equivalent distribution rate is calculated assuming a 36%
federal tax bracket.
(5) See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject
to the federal alternative minimum tax (AMT).
Past performance is no guarantee of future results. Investment return, stock
price and net asset value will fluctuate with market of 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............ 100%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 100%
[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>
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>
Airport 19.30 20.30
Retail Electric/Gas/Telephone 13.50 12.50
Single-Family Housing 10.20 11.30
Multi-Family Housing 9.20 10.40
Transportation 9.00 10.20
</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 14.9000 14.9000
14.8500 14.5000
15.6700 15.0000
15.9900 15.2500
12/92 15.9500 14.8750
17.0500 16.1250
17.6000 16.2500
18.2400 17.0000
12/93 17.9800 16.5000
16.1500 15.2500
15.8700 15.3750
15.4400 14.7500
12/94 14.8300 13.2500
16.0600 15.1250
16.2800 15.7500
16.4800 15.7500
12/95 17.1400 16.0000
16.4000 16.0000
16.1800 16.2500
16.5200 16.2500
12/96 16.5500 16.2500
16.1900 16.0000
16.6000 16.6875
17.0000 17.1250
12/97 17.1600 17.1875
17.1200 16.6250
17.1100 16.9370
17.5600 17.5620
12/98 17.1800 17.5625
17.0200 17.3750
16.2300 16.3750
15.7100 15.1250
12/99 15.1300 13.6875
15.5300 14.0000
4/00 15.3000 14.2500
</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 INSURED MUNICIPALS ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE
MARKETS DURING THE PAST SIX MONTHS. THE REPRESENTATIVES INCLUDE JOSEPH PIRARO,
PORTFOLIO MANAGER, WHO HAS MANAGED THE TRUST SINCE 1992 AND WORKED IN THE
INVESTMENT INDUSTRY SINCE 1971. 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,
higher interest rates made it more
6
<PAGE> 8
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 for the Trust. These were
securities that were issued a year or so ago with coupons of 4.75, 5.00, or 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 5.75 to 6.00 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 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.
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 the airport, retail electric/gas/telephone, and housing sectors, each of
which represented more than 9 percent of the portfolio's long-term investments.
The housing sector was the best-performing sector of the municipal market last
year, and is holding up well this year. Though housing bonds typically
underperform
7
<PAGE> 9
the market during a rally, they can provide a degree of resiliency in down
markets.
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. As always, we invested the Trust's assets selectively,
looking for solid names, sector opportunities, or attractive price to coupon
situations. 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 1.75 percent based on market price. At the
same time, the Trust's market price decreased from $14.5000 per share on October
31, 1999, to $14.2500 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 6.95 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 10.86 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 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.
8
<PAGE> 10
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 100.2%
ALABAMA 1.4%
$1,500 Birmingham, AL Arpt Auth Arpt Rev Rfdg
(AMBAC Insd)............................ 5.375% 07/01/20 $ 1,378,695
2,000 Huntsville, AL Pub Bldg Auth Lease Rev
Muni Justice & Pub Safety Cent Ser A
(MBIA Insd)............................. 5.900 10/01/16 2,030,960
------------
3,409,655
------------
ARIZONA 1.5%
1,500 Arizona Hlth Fac Auth Hosp Sys Rev
Phoenix Baptist Hosp & Med Rfdg (MBIA
Insd)................................... 6.250 09/01/11 1,571,160
1,980 Pima Cnty, AZ Indl Dev Auth Indl Rev
Lease Oblig Irvington Proj Tucson Ser A
Rfdg (FSA Insd)......................... 7.250 07/15/10 2,098,899
------------
3,670,059
------------
CALIFORNIA 6.7%
2,000 California Edl Facs Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd)....... * 10/01/25 401,080
4,135 California Hsg Fin Agy Rev Home Mtg Ser
B (MBIA Insd) (b)....................... 6.100 02/01/28 4,151,209
2,500 California Pollutn Ctl Fin Auth Pollutn
Ctl Rev Pacific Gas & Elec Ser B (FSA
Insd)................................... 6.350 06/01/09 2,627,425
1,000 California Pollutn Ctl Fing Auth Pollutn
Ctl Rev Southn CA Edison Co Ser B (MBIA
Insd) (a)............................... 5.450 09/01/29 947,480
2,000 Midpeninsula Regl Open Space Dist CA Fin
Auth Rev Cap Apprec (AMBAC Insd)........ * 09/01/29 317,220
20 Paramount, CA Redev Agy Tax Alloc (MBIA
Insd)................................... 6.250 08/01/10 21,113
</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)
$2,515 Redlands, CA Redev Agy Tax Alloc Redev
Proj Ser A Rfdg (MBIA Insd)............. 4.750% 08/01/21 $ 2,146,653
1,000 Sacramento, CA Ctfs Partn Pub Fac Proj
Rfdg (AMBAC Insd)....................... 4.750 10/01/27 830,230
2,000 San Diego, CA Uni Sch Dist Cap Apprec
Ser A (FGIC Insd)....................... * 07/01/17 744,780
9,000 San Jose, CA Single Family Mtg Rev Ser A
Cap Apprec (GEMIC Mtg Collateralized)... * 04/01/16 3,663,180
1,000 Santa-Monica Malibu Uni Sch Dist CA Cap
Apprec (FGIC Insd)...................... * 08/01/23 249,160
------------
16,099,530
------------
COLORADO 0.8%
1,855 Greeley, CO Multi-Family Rev Hsg Mtg
Creek Stone (FHA Gtd)................... 5.950 07/01/28 1,798,200
------------
FLORIDA 2.6%
1,000 Miami-Dade Cnty, FL Professional Sports
Franchise Fac Tax Rfdg (MBIA Insd)...... 4.750 10/01/30 824,300
1,045 Orange Cnty, FL Hsg Fin Auth Single
Family Mtg Rev Ser A (GNMA
Collateralized)......................... 6.200 10/01/16 1,053,381
2,000 Pasco Cnty, FL Solid Waste Disp & Res
Recovery Sys Rev (AMBAC Insd)........... 6.000 04/01/11 2,092,080
1,270 Pinellas Cnty, FL Hsg Fin Auth Single
Family Mtg Rev (GNMA Collateralized).... 6.000 09/01/18 1,261,504
980 Pinellas Cnty, FL Hsg Fin Auth Single
Family Mtg Rev (GNMA Collateralized).... 6.100 09/01/29 968,034
------------
6,199,299
------------
GEORGIA 1.4%
1,860 George L Smith II GA Wrld Congress Cent
Auth Rev Domed Stadium Proj Rfdg (MBIA
Insd)................................... 6.000 07/01/10 1,942,621
1,500 George L Smith II GA Wrld Congress Cent
Auth Rev Domed Stadium Proj Rfdg (MBIA
Insd)................................... 5.500 07/01/20 1,416,975
------------
3,359,596
------------
</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>
HAWAII 4.3%
$1,450 Hawaii St Dept Budget & Fin Spl Purp Mtg
Rev Hawaiian Elec Co & Subsidiaries
(MBIA Insd)............................. 6.550% 12/01/22 $ 1,481,494
3,500 Hawaii St Dept Budget & Fin Spl Purp Mtg
Rev Hawaiian Elec Co Proj Ser B (MBIA
Insd)................................... 7.600 07/01/20 3,585,505
2,000 Hawaii St Dept Budget & Fin Spl Purp Rev
Hawaiian Elec Co Proj Ser C (AMBAC
Insd)................................... 6.200 11/01/29 2,015,180
1,250 Hawaii St Dept Budget & Fin Spl Purp Rev
Hawaiian Elec Co Ser D Rfdg (AMBAC
Insd)................................... 6.150 01/01/20 1,260,112
2,100 Honolulu, HI City & Cnty Ser D (FGIC
Insd)................................... 4.850 02/01/10 1,963,584
------------
10,305,875
------------
ILLINOIS 10.0%
2,000 Bolingbrook, IL Cap Apprec Ser B........ * 01/01/32 271,900
3,000 Chicago, IL Brd Ed Cap Apprec Sch Reform
B-1 (FGIC Insd)......................... * 12/01/26 582,450
5,000 Chicago, IL Cap Apprec City Colleges
(FGIC Insd)............................. * 01/01/28 925,250
2,000 Chicago, IL Cap Apprec City Colleges
(FGIC Insd)............................. * 01/01/29 347,260
2,000 Chicago, IL Cap Apprec City Colleges
(FGIC Insd)............................. * 01/01/30 326,680
9,050 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
Intl Terminal (MBIA Insd)............... 6.750 01/01/18 9,410,190
955 Chicago, IL Residential Mtg Rev Cap
Apprec Ser B Rfdg (MBIA Insd)........... * 10/01/09 502,053
1,000 Cook Cnty, IL Cap Impt Ser A (FGIC
Insd) (a)............................... 5.000 11/15/28 852,800
3,000 Onterie Cent Hsg Fin Corp IL Mtg Rev
Onterie Cent Proj Ser A Rfdg (MBIA
Insd)................................... 7.000 07/01/12 3,114,600
6,150 Onterie Cent Hsg Fin Corp IL Mtg Rev
Onterie Cent Proj Ser A Rfdg (MBIA
Insd)................................... 7.050 07/01/27 6,393,663
5,000 Saint Clair Cnty, IL Cap Apprec (FGIC
Insd)................................... * 10/01/21 1,293,900
------------
24,020,746
------------
</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>
INDIANA 1.1%
$2,750 Indianapolis, IN Loc Pub Impt Ser E
(AMBAC Insd)............................ 5.750% 02/01/29 $ 2,661,532
------------
IOWA 0.8%
2,000 Iowa Fin Auth Private College Rev Drake
Univ Proj Rfdg (MBIA Insd).............. 5.400 12/01/21 1,852,720
------------
KANSAS 1.8%
2,500 Burlington, KS Pollutn Ctl Rev KS Gas &
Elec Co Proj Rfdg (MBIA Insd)........... 7.000 06/01/31 2,600,625
690 Olathe Labette Cnty, KS Single Family
Mtg Rev Coll Ser A-I Rfdg (GNMA
Collateralized)......................... 8.100 08/01/23 742,399
1,000 Sedgwick Cnty, KS Uni Sch Dist No 267 &
Sch Impt Rfdg (AMBAC Insd).............. 5.000 11/01/19 895,980
------------
4,239,004
------------
LOUISIANA 2.6%
3,145 Calcasieu Parish, LA Mem Hosp Svc Dist
Hosp Rev Lake Charles Mem Hosp Proj Ser
A (Connie Lee Insd)..................... 6.650 12/01/21 3,304,011
1,000 Louisiana Hsg Fin Agy Mtg Rev Coll Mtg
Malta Square Proj (GNMA
Collateralized)......................... 6.450 09/01/27 1,029,540
25 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln Ser A (FSA Insd)......... 6.600 01/01/04 25,923
350 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln Ser A (FSA Insd)......... 6.700 01/01/05 363,132
235 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln Ser A (FSA Insd)......... 6.800 01/01/06 243,935
505 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln Ser A (FSA Insd)......... 6.850 01/01/09 523,367
1,000 New Orleans, LA Rfdg (FGIC Insd)........ 4.750 12/01/26 818,330
------------
6,308,238
------------
MARYLAND 0.6%
1,350 Prince Georges Cnty, MD Hsg Auth Mtg Rev
Riverview Terrace Ser A Rfdg (GNMA
Collateralized)......................... 6.400 12/20/10 1,397,021
------------
</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>
MASSACHUSETTS 1.6%
$3,570 Massachusetts Edl Ln Auth Rev Edl Ln Rev
Muni Forwards Issue E Ser A (AMBAC
Insd)................................... 7.000% 01/01/10 $ 3,706,874
------------
MICHIGAN 10.4%
1,000 Detroit, MI Downtown Dev Auth Tax
Increment Rev Dev Area No 1 Proj Ser A
Rfdg (MBIA Insd)........................ 4.750 07/01/25 830,160
5,510 Detroit, MI Econ Dev Corp Res Recovery
Rev Ser A (FSA Insd).................... 6.875 05/01/09 5,717,782
1,000 Monroe Cnty, MI Econ Dev Corp Ltd Oblig
Rev Coll Detroit Edison Co Ser AA Rfdg
(FGIC Insd)............................. 6.950 09/01/22 1,141,120
3,500 Monroe Cnty, MI Pollutn Ctl Rev Coll
Detroit Edison Monroe Ser 1 (MBIA
Insd)................................... 6.875 09/01/22 3,684,275
16,000 Wayne Charter Cnty, MI Arpt Rev Detroit
Metropolitan Wayne Cnty Ser A (MBIA
Insd)................................... 5.000 12/01/28 13,414,720
------------
24,788,057
------------
MISSISSIPPI 2.3%
985 Mississippi Home Corp Single Family Rev
Mtg Access Pgm Ser C (GNMA
Collateralized)......................... 8.125 12/01/24 1,057,004
990 Mississippi Home Corp Single Family Rev
Mtg Access Pgm Ser D (GNMA
Collateralized)......................... 8.100 12/01/24 1,063,339
831 Mississippi Home Corp Single Family Rev
Mtg Access Pgm Ser E (GNMA
Collateralized)......................... 8.100 12/01/25 890,998
2,500 Mississippi Hosp Equip & Fac Auth Rev
Rush Med Fndtn Proj (Connie Lee Insd)... 6.700 01/01/18 2,599,525
------------
5,610,866
------------
MISSOURI 0.9%
1,000 Missouri St Hsg Dev Comm Multi-Family
Hsg Brookstone Ser A (FSA Insd)......... 6.000 12/01/16 992,680
1,095 Missouri St Hsg Dev Comm Multi-Family
Hsg Truman Farm Ser A (FSA Insd)........ 5.750 10/01/11 1,093,128
------------
2,085,808
------------
</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>
NEBRASKA 1.6%
$1,305 Nebraska Invt Fin Auth Multi-Family Rev
Hsg Cambury Hills Apts Pgm (FSA Insd)... 5.700% 10/01/12 $ 1,288,949
1,100 Nebraska Invt Fin Auth Multi-Family Rev
Hsg Summit Club Apts Proj (FSA Insd).... 5.700 10/01/12 1,086,470
1,450 Nebraska Invt Fin Auth Single Family Mtg
Rev (Inverse Fltg) (GNMA
Collateralized) (c)..................... 8.857 09/15/24 1,513,437
------------
3,888,856
------------
NEVADA 3.9%
9,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co
Proj Ser A (FGIC Insd).................. 6.700 06/01/22 9,351,540
------------
NEW JERSEY 0.8%
1,000 New Jersey Hlthcare Facs Fin Auth Rev St
Barnabas Hlth Ser C Rfdg (MBIA
Insd) (a)............................... 5.000 07/01/09 980,670
1,000 New Jersey Hlthcare Facs Fin Auth Rev St
Barnabas Hlth Ser C Rfdg (MBIA
Insd) (a)............................... 5.000 07/01/10 972,280
------------
1,952,950
------------
NEW MEXICO 2.2%
1,900 Albuquerque, NM Arpt Rev Ser A (AMBAC
Insd)................................... 6.600 07/01/16 2,000,852
2,070 New Mexico Edl Assistance Fndtn Student
Ln Rev Ser A (AMBAC Insd)............... 6.850 04/01/05 2,155,739
990 New Mexico Mtg Fin Auth Amt Single
Family Mtg Pgm A2 (GNMA
Collateralized)......................... 6.050 07/01/16 978,843
------------
5,135,434
------------
NEW YORK 5.1%
3,000 New York, NY City Muni Wtr Fin Auth Wtr
& Sew Sys Rev Cap Apprec Ser B (FSA
Insd)................................... * 06/15/13 1,435,170
5,000 New York St Dorm Auth Rev Insd NY Univ
Ser A (AMBAC Insd) (a).................. 5.500 07/01/11 5,026,050
1,000 New York, NY City Muni Wtr Fin Auth Wtr
& Swr Sys Rev Ser A (FGIC Insd)......... 4.750 06/15/31 813,890
5,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj
JFK Intl Arpt Terminal 6 (MBIA Insd).... 5.750 12/01/25 4,846,750
------------
12,121,860
------------
</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>
NORTH CAROLINA 0.8%
$2,225 New Hanover Cnty, NC Hosp Rev New
Hanover Regl Med Ctr Proj (AMBAC
Insd)................................... 4.750% 10/01/23 $ 1,846,950
------------
OHIO 1.7%
2,500 Cuyahoga Falls, OH Ser 1 (FGIC Insd).... 5.250 12/01/17 2,385,275
1,720 Ohio Hsg Fin Agy Mtg Rev Residential Ser
A1 (GNMA Collateralized)................ 6.150 03/01/29 1,717,523
------------
4,102,798
------------
PENNSYLVANIA 8.0%
2,000 Allegheny Cnty, PA Arpt Auth Pittsburgh
Intl Arpt Rfdg (FGIC Insd).............. 5.625 01/01/10 2,025,120
7,500 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser A (FGIC
Insd) (b)............................... 6.800 01/01/10 7,809,825
4,000 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser B (FSA Insd)... 6.625 01/01/22 4,082,240
2,000 Allegheny Cnty, PA Hosp Dev Auth Rev
Pittsburgh Mercy Hlth Sys Inc (AMBAC
Insd)................................... 5.625 08/15/26 1,948,940
1,330 Allegheny Cnty, PA Residential Fin Auth
Mtg Rev Single Family (GNMA
Collateralized)......................... 7.100 05/01/24 1,361,268
1,950 Sayre, PA Hlthcare Fac Auth Rev Hosp VHA
PA/VHA East Fin Pgm B (AMBAC Insd)...... 6.375 07/01/22 1,978,607
------------
19,206,000
------------
RHODE ISLAND 0.7%
1,500 Rhode Island Port Auth & Econ Dev Corp
Arpt Rev Ser A (FSA Insd)............... 7.000 07/01/14 1,696,485
------------
</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>
SOUTH CAROLINA 4.0%
$4,575 South Carolina St Port Auth Port Rev
(AMBAC Insd)............................ 6.750% 07/01/21 $ 4,776,025
4,575 South Carolina St Port Auth Port Rev
(Escrowed to Maturity) (AMBAC Insd)..... 6.750 07/01/21 4,776,026
------------
9,552,051
------------
SOUTH DAKOTA 0.4%
1,000 South Dakota St Hlth & Edl Fac Auth
Vocational Ed Pgm Ser A (AMBAC Insd).... 5.400 08/01/13 988,820
------------
TEXAS 12.5%
1,085 Brazos River Auth TX Johnson Cnty
Surface (AMBAC Insd).................... 5.800 09/01/11 1,098,378
5,000 Brazos River Auth TX Pollutn Ctl Rev
Coll TX Util Elec Co Proj A (AMBAC
Insd)................................... 6.750 04/01/22 5,227,250
5,000 Brazos River Auth TX Pollutn Ctl Rev
Coll TX Util Elec Co Proj B (FGIC
Insd)................................... 6.625 06/01/22 5,211,900
1,000 Brazos River Auth TX Pollutn Ctl Rev
Coll TX Util Elec Co Proj C (FGIC
Insd)................................... 6.700 10/01/22 1,045,510
2,000 Dallas-Fort Worth, TX Intl Arpt Rev Ser
A (FGIC Insd)........................... 5.750 11/01/30 1,902,260
2,305 Harris Cnty, TX Hsg Fin Corp
Multi-Family Hsg Rev Cypress Ridge Apts
(FSA Insd).............................. 6.350 06/01/26 2,304,839
2,000 Harris Cnty-Houston, TX Sports Auth Spl
Rev Ser A (MBIA Insd)................... 5.000 11/15/25 1,729,700
4,000 Houston, TX Arpt Sys Rev Sub Lien Ser A
(FGIC Insd)............................. 6.750 07/01/21 4,150,760
1,800 Midland, TX Ctfs Oblig Arpt Sub Lien
(FSA Insd).............................. 5.850 03/01/13 1,817,100
3,285 Texas St Veterans Hsg Assistance (MBIA
Insd)................................... 6.800 12/01/23 3,398,595
2,000 Tyler, TX Hlth Fac Dev Corp Hosp Rev
Mother Frances Hosp of Tyler (FGIC
Insd)................................... 6.500 07/01/22 2,049,940
------------
29,936,232
------------
VIRGINIA 1.9%
1,495 Harrisonburg, VA Redev & Hsg Auth
Multi-Family Hsg Rev (FSA Insd)......... 6.200 04/01/17 1,505,091
1,000 Richmond, VA (FSA Insd) (a)............. 5.125 01/15/08 986,560
</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>
VIRGINIA (CONTINUED)
$1,000 Richmond, VA (FSA Insd) (a)............. 5.250% 01/15/09 $ 990,730
1,000 Richmond, VA (FSA Insd) (a)............. 5.500 01/15/10 1,004,730
------------
4,487,111
------------
WASHINGTON 3.1%
2,235 Grant Cnty, WA Pub Util Dist No 002
Wanapum Hydro Elec Rev Second Ser D
(AMBAC Insd)............................ 6.000 01/01/13 2,285,556
1,770 Grant Cnty, WA Pub Util Dist No 002
Wanapum Hydro Elec Rev Second Ser D
(AMBAC Insd)............................ 6.250 01/01/17 1,816,852
1,855 Grant Cnty, WA Pub Util Dist No 2 Priest
Rapids Hydro Elec Rev Second Ser D
(AMBAC Insd)............................ 6.000 01/01/13 1,896,960
1,460 Grant Cnty, WA Pub Util Dist No 2 Priest
Rapids Hydro Elec Rev Second Ser D
(AMBAC Insd)............................ 6.250 01/01/17 1,498,646
------------
7,498,014
------------
GUAM 0.4%
1,000 Guam Pwr Auth Rev Ser (AMBAC Insd)...... 5.250 10/01/34 899,140
------------
PUERTO RICO 2.3%
5,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy
Rev Ser Y (FSA Insd).................... 6.250 07/01/21 5,383,450
------------
TOTAL LONG-TERM INVESTMENTS 100.2%
(Cost $234,563,051)............................................... 239,560,771
SHORT-TERM INVESTMENTS 1.5%
(Cost $3,500,000)................................................. 3,500,000
------------
TOTAL INVESTMENTS 101.7%
(Cost $238,063,051)............................................... 243,060,771
LIABILITIES IN EXCESS OF OTHER ASSETS (1.7%)....................... (3,980,649)
------------
NET ASSETS 100.0%.................................................. $239,080,122
============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
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) An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by
the Trust to enhance the yield of the portfolio. These derivative
instruments are marked to market each day with the change in value reflected
in unrealized appreciation/depreciation. Upon disposition, a realized gain
or loss is recognized accordingly.
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
GEMIC--General Electric Mortgage Insurance Corporation
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
20
<PAGE> 22
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $238,063,051)....................... $243,060,771
Cash........................................................ 339,491
Receivables:
Interest.................................................. 4,394,370
Investments Sold.......................................... 3,778,576
Other....................................................... 12,079
------------
Total Assets............................................ 251,585,287
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 12,054,759
Investment Advisory Fee................................... 119,923
Administrative Fee........................................ 39,974
Income Distributions -- Common and Preferred Shares....... 35,900
Affiliates................................................ 10,604
Accrued Expenses............................................ 133,022
Trustees' Deferred Compensation and Retirement Plans........ 110,983
------------
Total Liabilities....................................... 12,505,165
------------
NET ASSETS.................................................. $239,080,122
============
NET ASSETS CONSIST OF:
Preferred Shares (Par value of $.01 per share, 100,000,000
shares authorized, 3,600 issued with liquidation
preference of $25,000 per share).......................... $ 90,000,000
------------
Common Shares (Par value of $.01 per share, with an
unlimited number of shares authorized, 9,741,284 shares
issued and outstanding)................................... 97,413
Paid in Surplus............................................. 143,720,454
Net Unrealized Appreciation................................. 4,997,720
Accumulated Undistributed Net Investment Income............. 607,284
Accumulated Net Realized Loss............................... (342,749)
------------
Net Assets Applicable to Common Shares.................. 149,080,122
------------
NET ASSETS.................................................. $239,080,122
============
NET ASSET VALUE PER COMMON SHARE ($149,080,122 divided by
9,741,284 shares outstanding)............................. $ 15.30
============
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
Statement of Operations
For the Six Months Ended April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 7,375,358
-----------
EXPENSES:
Investment Advisory Fee..................................... 712,461
Administrative Fee.......................................... 237,487
Preferred Share Maintenance................................. 112,269
Legal....................................................... 6,370
Trustees' Fees and Related Expenses......................... 4,714
Custody..................................................... 2,646
Other....................................................... 116,713
-----------
Total Expenses.......................................... 1,192,660
-----------
NET INVESTMENT INCOME....................................... $ 6,182,698
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,090,480
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 6,163,973
End of the Period:
Investments............................................. 4,997,720
-----------
Net Unrealized Depreciation During the Period............... (1,166,253)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $ (75,773)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 6,106,925
===========
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
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.............................. $ 6,182,698 $ 12,339,707
Net Realized Gain/Loss............................. 1,090,480 (1,433,235)
Net Unrealized Depreciation During the Period...... (1,166,253) (16,739,217)
------------ ------------
Change in Net Assets from Operations............... 6,106,925 (5,832,745)
------------ ------------
Distributions from Net Investment Income:
Common Shares.................................... (4,821,936) (9,631,079)
Preferred Shares................................. (1,758,547) (2,675,166)
------------ ------------
(6,580,483) (12,306,245)
------------ ------------
Distributions from Net Realized Gain:
Common Shares.................................... -0- (1,590,029)
Preferred Shares................................. -0- (502,115)
------------ ------------
-0- (2,092,144)
------------ ------------
Total Distributions................................ (6,580,483) (14,398,389)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... (473,558) (20,231,134)
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment..................................... -0- 670,625
------------ ------------
TOTAL DECREASE IN NET ASSETS....................... (473,558) (19,560,509)
NET ASSETS:
Beginning of the Period............................ 239,553,680 259,114,189
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $607,284
and $1,005,069, respectively).................... $239,080,122 $239,553,680
============ ============
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
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)...................................... $15.353 $17.431 $17.008 $16.688
------- ------- ------- -------
Net Investment Income.................... .635 1.268 1.276 1.297
Net Realized and Unrealized Gain/Loss.... (.008) (1.866) .594 .581
------- ------- ------- -------
Total from Investment Operations........... .627 (.598) 1.870 1.878
------- ------- ------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders............ .495 .990 .995 1.050
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... .181 .275 .306 .293
Distributions from Net Realized Gain:
Paid to Common Shareholders............ -0- .164 .113 .161
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... -0- .051 .033 .054
------- ------- ------- -------
Total Distributions........................ .676 1.480 1.447 1.558
------- ------- ------- -------
NET ASSET VALUE, END OF THE PERIOD......... $15.304 $15.353 $17.431 $17.008
======= ======= ======= =======
Market Price Per Share at End of the
Period................................... $14.250 $14.500 $17.750 $17.250
Total Investment Return at Market
Price (b)................................ 1.75%* -12.42% 9.77% 15.04%
Total Return at Net Asset Value (c)........ 2.96%* -5.64% 9.27% 9.58%
Net Assets at End of the Period (In
millions)................................ $ 239.1 $ 239.6 $ 259.1 $ 254.5
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............ 1.61% 1.56% 1.56% 1.57%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common
Shares (d)............................... 5.98% 5.97% 5.65% 6.05%
Portfolio Turnover......................... 14%* 53% 66% 36%
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares.............. 1.00% 1.00% 1.01% 1.01%
</TABLE>
(a) Net Asset Value at January 24, 1992, is adjusted for common and preferred
share offering costs of $.263 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.
24
<PAGE> 26
<TABLE>
<CAPTION>
JANUARY 24, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF INVESTMENT
------------------------------------------ OPERATIONS) TO
1996 1995 1994 1993 OCTOBER 31, 1992
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$16.693 $14.883 $18.213 $15.278 $14.737
------- ------- ------- ------- -------
1.323 1.340 1.351 1.365 .924
.054 1.883 (3.150) 2.949 .340
------- ------- ------- ------- -------
1.377 3.223 (1.799) 4.314 1.264
------- ------- ------- ------- -------
1.050 1.050 1.050 .970 .525
.332 .363 .301 .293 .198
-0- -0- .146 .086 -0-
-0- -0- .034 .030 -0-
------- ------- ------- ------- -------
1.382 1.413 1.531 1.379 .723
------- ------- ------- ------- -------
$16.688 $16.693 $14.883 $18.213 $15.278
======= ======= ======= ======= =======
$16.125 $15.750 $13.500 $17.250 $14.500
9.19% 24.96% -15.57% 26.98% .09%*
6.53% 19.80% -12.20% 26.75% 5.33%*
$ 251.0 $ 250.6 $ 233.2 $ 265.2 $ 237.0
1.60% 1.63% 1.57% 1.54% 1.51%
5.99% 6.16% 6.33% 6.29% 6.08%
35% 28% 26% 38% 90%*
1.02% 1.03% 1.01% .99% 1.01%
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Trust for Insured 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. In normal market conditions, the Trust intends to
invest substantially all of its assets in municipal securities which are covered
by insurance with respect to the timely payment of principal and interest. 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 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.
26
<PAGE> 28
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 $1,433,233 which will expire on October 31,
2007.
At April 30, 2000, for federal income tax purposes, the cost of long and
short-term investments is $238,063,051; the aggregate gross unrealized
appreciation is $7,311,179 and the aggregate gross unrealized depreciation is
$2,313,459 resulting in net unrealized appreciation on long- and short-term
investments of $4,997,720.
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. INSURANCE EXPENSE The Trust typically invests in insured bonds. Any portfolio
securities not specifically covered by a primary insurance policy are insured
either through secondary market insurance or portfolio insurance. The insurance
policies guarantee the timely payment of principal and interest on the
securities in the Trust's portfolio.
2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. (the "Adviser") will provide investment advice and
facilities to the Trust for an annual fee payable monthly of .60% 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 $2,000 representing legal services provided by Skadden, Arps,
Slate,
27
<PAGE> 29
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
For the six months ended April 30, 2000, the Trust recognized expenses of
approximately $11,600 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 provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Trust. The maximum
annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At April 30, 2000 and October 31, 1999, paid in surplus related to common shares
aggregated $143,720,454. Transactions in common shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
<S> <C> <C>
Beginning Shares.................................. 9,741,284 9,701,930
Shares Issued Through Dividend Reinvestment....... -0- 39,354
--------- ---------
Ending Shares..................................... 9,741,284 9,741,284
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $35,928,398 and $50,716,300,
respectively.
5. PREFERRED SHARES
The Trust has outstanding 3,600 Auction Preferred Shares ("APS") in two series
of 1,800 shares each. Dividends are cumulative and the dividend rate is
generally reset every 28 days for both series through an auction process. The
dividend rate for Series A is currently reset every 28 days. However, effective
with the auction on October 6, 1999, the dividend period for the Series B was
extended through February 2, 2000. Following this extended dividend period, the
Fund reverted to its normal 28 days reset period. The average rate in effect on
April 30, 2000 was 4.0950%. During the six months ended April 30, 2000, the
rates ranged from 3.380% to 4.250%.
28
<PAGE> 30
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
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.
29
<PAGE> 31
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
30
<PAGE> 32
asset value of the Trust's Common Shares, resulting in the acquisition of fewer
Common Shares than if the dividend or distribution had been paid in Common
Shares issued by the Trust. All reinvestments are in full and fractional Common
Shares and are carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
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
31
<PAGE> 33
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
Download Prospectus [COMPUTER ICON]
- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
32
<PAGE> 34
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN TRUST FOR
INSURED 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.
33
