-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qmy57IhoXUfwYRKnt9AdXtYfe/de/3vUfF7nCsJzk3aE3eNeSZ7VSD8Nj+MExpUL 9GZdAS3K2Rh80UfEVU7I2w== 0000950137-03-006533.txt : 20031230 0000950137-03-006533.hdr.sgml : 20031230 20031230173052 ACCESSION NUMBER: 0000950137-03-006533 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20031230 EFFECTIVENESS DATE: 20031230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN MUNICIPAL TRUST CENTRAL INDEX KEY: 0000877463 IRS NUMBER: 363779776 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06362 FILM NUMBER: 031078608 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLZ STREET 2: VAN KAMPEN INVESTMETNS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMETNS INC STREET 2: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST DATE OF NAME CHANGE: 19960102 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT MUNICIPAL TRUST DATE OF NAME CHANGE: 19920929 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT QUALITY MUNICIPAL TRUST DATE OF NAME CHANGE: 19600201 N-CSR 1 c80904nvcsr.txt ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6362 Van Kampen Municipal Trust - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 Avenue of the Americas NY NY 10020 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas New York, NY 10020 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: 10/31 Date of reporting period: 10/31/03 Item 1. Report to Shareholders Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Municipal Trust performed during the annual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the trust's financial statements and a list of trust investments as of October 31, 2003. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the trust will achieve its investment objective. The trust is subject to market risk, which is the possibility that the market values of securities owned by the trust will decline and, therefore, the value of the trust shares may be less than what you paid for them. Accordingly, you can lose money investing in this trust. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Performance Summary
MUNICIPAL TRUST SYMBOL: VKQ - ---------------------------------------------------- AVERAGE ANNUAL BASED ON BASED ON TOTAL RETURNS NAV MARKET PRICE Since Inception (9/27/91) 7.71% 6.74% 10-year 6.50 5.49 5-year 5.70 4.12 1-year 7.44 8.60 - ----------------------------------------------------
Past performance is no guarantee of future results. Investment return, net asset value (NAV) and common share market price will fluctuate and trust shares, when sold, may be worth more or less than their original cost. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. The NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. The common share market price is the price the market is willing to pay for shares of the trust at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions. Total return assumes an investment at the beginning of the period, reinvestment of all distributions for the period in accordance with the trust's dividend reinvestment plan, and sale of all shares at the end of the period. The Lehman Brothers Municipal Bond Index is a broad-based statistical composite of municipal bonds. The index is unmanaged and does not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. 1 Trust Report FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003 Van Kampen Municipal Trust is managed by the adviser's Municipal Fixed Income team.(1) Current members include Thomas Byron, Vice President; Robert Wimmel, Vice President; and John Reynoldson, Executive Director. MARKET CONDITIONS The economic backdrop for the 12 months ended October 31 was largely characterized by the persistent weakness of the U.S. economy. One of the most closely watched economic indicators, employment strength, was in negative territory for much of the period. Repeated comments from government and private-sector economists suggesting that the U.S. economy might be entering a deflationary period also seemed to weigh heavily on the minds of investors over the course of the year. At the same time, ongoing budgetary and fiscal difficulties at the state and local level contributed to ratings downgrades for many municipal bonds. The Federal Reserve Board (the Fed) attempted to allay these fears and keep the economy moving in the right direction by cutting the Fed Funds target rate twice during the period to a level of 1.00 percent. Although the stock markets appeared to look past the sluggish economic data, bonds, in general, were hampered. While yields on intermediate- and long-term bonds ended the period roughly where they began, the road between those two points was decidedly bumpy. The 12-month period can be divided into two distinct market environments. The first of these, which lasted from October 2002 to mid-June 2003, saw municipal yields fall by roughly 80 basis points to levels not seen since the late 1960s. These plummeting yields led to a surge in issuance as municipalities moved to lock in low financing and, in the case of older bonds, low refinancing costs. These record levels of supply met with substantial demand as investors in search of relative stability poured cash into municipal bond funds. Demand for municipal bonds was also strong from so-called "cross-over" buyers--investors who traditionally favor taxable investments, but were drawn to the relatively attractive yields of municipal bonds. The municipal market reversed abruptly in mid-June, when yields began to climb from their lows. Investors during this phase shifted their attention to the advancing equity market, which reduced demand for municipal bonds. Interest from cross-over investors also evaporated as the relative attractiveness of the taxable market returned. Issuance remained strong throughout this leg of the period, though it abated somewhat in the last three months of the reporting year. These forces combined to drive municipal bond yields off of their historic lows, ending the period where they began. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS The trust's return can be calculated based upon either the market price or the net asset value (NAV) of its shares. NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding, while market price reflects the supply and demand for the shares. As a result, the two returns can differ significantly. On both a market price and an NAV basis, the trust outperformed its benchmark, the Lehman Brothers Municipal Bond Index. (See table below.) The trust's significant position in health-care bonds generated attractive income, as well as price appreciation driven by yield-seeking investors drawn to the bonds' relatively robust yields. Certain issues in this sector met their investment objectives during the period, and we subsequently sold them in favor of bonds with superior total-return potential. These sales had the effect of slightly reducing the portfolio's exposure to the sector by period end. Our strategy of avoiding housing bonds also helped the trust; the sector performed poorly amidst record levels of mortgage refinancing activity. The trust also sold out of deeply-discounted coupon securities that were purchased several years ago, well below the market rate. As interest rates continued to fall, the bonds became closer and closer to being current coupons, and gave the portfolio a substantial boost in terms of price performance. These securities met their performance objectives and the proceeds were reinvested into other securities with better total-return prospects. The trust uses leverage to enhance its dividend to common shareholders. The trust borrows money at short-term rates through the issuance of preferred shares. The proceeds are invested in longer-term securities, taking advantage of the difference between short- and longer-term rates. With short-term rates at historic lows during the period, the difference between short- and longer-term rates was relatively high. This made using leverage a particularly profitable approach during the period, and added to the trust's strong performance. While the trust outperformed its benchmark, not all of its positions performed strongly over the entire period in question. With interest rates falling to historic lows, our analysis showed an increasing possibility of a damaging upward shift in interest rates. We positioned the trust defensively by maintaining a duration (a measure of interest-rate sensitivity) that was slightly shorter than that of the benchmark during the period. This position helped the trust when rates TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003
- ------------------------------------------------------------- BASED ON BASED ON LEHMAN BROTHERS NAV MARKET PRICE MUNICIPAL BOND INDEX 7.44% 8.60% 5.11% - -------------------------------------------------------------
Past performance is no guarantee of future results. Investment return, net asset value and common share market price will fluctuate and trust shares, when sold, may be worth more or less than their original cost. See Performance Summary for additional performance information. 3 climbed, but kept it from fully participating in the bond market rally earlier in the period. We were equally defensive in managing the portfolio's maturity structure. Given the steepness of the yield curve for much of the period (steepness is a measure of the difference in yields between long- and short-maturity securities), we focused on a strategy designed to outperform in a curve-flattening environment. We purchased premium bonds in the 15- to 20-year range that were priced to 10-year call dates. These bonds offer attractive yields compared to bonds with similar interest-rate risk. We sold bonds in the 5- to 12-year range, an area of the curve that we feel will underperform when short rates rise. This curve flattening did not occur as early as we anticipated, however, and the strategy hampered performance when short rates fell in the first part of the period. However, when long-bond yields rose in the latter part of the period, our emphasis on defensive bonds in the 15- to 20-year range helped to preserve principal. In addition to this core strategy, we also traded high-grade bonds in the 30-year range based on relative value fluctuations. We sought out issues that were cheap relative to comparable bonds, and then sold them after they achieved their performance targets in order to reinvest the proceeds into securities with greater total-return prospects. As part of this strategy, we added to the portfolio's exposure in the public-education sector, which offered attractive total-return potential compared to similar bonds in other sectors. During the period, many municipalities faced budget shortfalls and potential credit downgrades. In this challenging environment, we sought to preserve principal by emphasizing the highest credit-quality tiers of the municipal bond market. As of October 31, 2003, approximately 79 percent of the trust's long- term investments were invested in bonds rated AA and above. We will continue with our disciplined investment approach, monitoring the market closely for compelling opportunities. TOP 5 SECTORS AS OF 10/31/03 RATINGS ALLOCATION AS OF 10/31/03 General Purpose 17.9% AAA/Aaa 66.5% Public Education 12.1 AA/Aa 12.2 Health Care 10.5 A/A 7.3 Transportation 10.3 BBB/Baa 6.0 Higher Education 8.9 BB/Ba 1.5 B/B 0.1 Non-Rated 6.4
Subject to change daily. All percentages are as a percentage of long-term investments. Provided for informational purposes only and should not be deemed as a recommendation to buy securities in the sectors shown above. Securities are classified by sectors that represent broad groupings of related industries. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. 4 PROXY VOTING POLICIES AND PROCEDURES A description of the trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities is available without charge, upon request, by calling 1-800-847-2424. This information is also available on the Securities and Exchange Commission's website at http://www.sec.gov. 5 BY THE NUMBERS YOUR TRUST'S INVESTMENTS October 31, 2003 THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF THE REPORTING PERIOD.
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MUNICIPAL BONDS 148.6% ALABAMA 3.2% $ 1,000 Birmingham Baptist Med Ctr AL Baptist Hlth Sys Ser A......................................... 5.875% 11/15/24 $ 1,045,820 4,000 Jefferson Cnty, AL Swr Rev Cap Impt Wts (Prerefunded @ 08/01/12) (FGIC Insd).......... 5.125 02/01/42 4,447,480 7,950 Jefferson Cnty, AL Swr Rev Cap Impt Wts Ser A (Prerefunded @ 02/01/11) (FGIC Insd).......... 5.000 02/01/41 8,856,590 2,000 Jefferson Cnty, AL Wts Ser A (AMBAC Insd)..... 5.000 04/01/09 2,223,700 2,435 Marshall Cnty, AL Hlthcare Ser C.............. 6.000 01/01/32 2,534,859 ------------- 19,108,449 ------------- ALASKA 0.2% 1,000 Alaska St Intl Arpt Rev Ser B (AMBAC Insd).... 5.750 10/01/17 1,122,550 ------------- ARIZONA 1.9% 1,425 Arizona Cap Fac Fin Corp Student Hsg Rev AZ St Univ Proj..................................... 6.250 09/01/32 1,489,652 1,000 Arizona Hlth Fac Auth Hosp John C Lincoln Hlth Network....................................... 6.375 12/01/37 1,027,620 1,750 Arizona Sch Fac Brd Ctf Part Ser A (MBIA Insd)......................................... 5.250 09/01/17 1,899,712 4,250 Arizona St Trans Brd Hwy Rev Sub Ser A Rfdg... 4.750 07/01/11 4,432,070 2,500 Maricopa Cnty, AZ Indl Dev Auth Ed Rev AZ Charter Sch Proj 1 Ser A...................... 6.750 07/01/29 2,474,125 ------------- 11,323,179 ------------- ARKANSAS 0.3% 1,565 Fort Smith, AR Wtr & Swr Rev Ser C (FSA Insd)......................................... 5.000 10/01/21 1,621,309 ------------- CALIFORNIA 12.8% 4,000 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec Sub Pub Impts Proj C (FSA Insd)............... * 09/01/20 1,703,720 2,500 Anaheim, CA Uni High Sch Dist Ser A (FSA Insd)......................................... 5.000 08/01/25 2,530,750 4,815 California Ed Fac Auth Rev Cap Apprec Loyola Marymount Univ (Prerefunded @ 10/01/09) (MBIA Insd)......................................... * 10/01/21 1,944,923 350 California Hlth Fac Fin Auth Rev Casa De Las Ser A (MBIA Insd)............................. 5.250 08/01/17 371,815 5,500 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs First Lien A (AMBAC Insd)......................................... 5.000 07/01/33 5,535,255 1,250 California St Dept Wtr Res Pwr Ser A.......... 6.000 05/01/15 1,421,200
6 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $ 4,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)......................................... 5.375% 05/01/18 $ 4,341,720 3,705 California St Dept Wtr Res Pwr Ser A (MBIA Insd)......................................... 5.375 05/01/21 3,948,937 2,000 California St Dept Wtr Res Pwr Ser A (MBIA Insd)......................................... 5.375 05/01/22 2,117,420 1,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)......................... 5.375 10/01/20 1,070,850 5,000 California St Univ Rev Systemwide Ser A (AMBAC Insd)......................................... 5.000 11/01/23 5,092,500 2,650 California Statewide Cmnty Dev Auth Ctf Part (Acquired 11/23/99, Cost $2,650,000) (a)...... 7.250 11/01/29 2,751,574 5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (Escrowed to Maturity) (MBIA Insd)........ * 09/01/17 2,520,500 1,000 Davis, CA Pub Fac Fin Auth Mace Ranch Area Ser A............................................. 6.600 09/01/25 1,052,380 1,300 Del Mar, CA Race Track Auth Rev Rfdg.......... 6.000 08/15/06 1,366,820 18,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg (MBIA Insd)................... * 01/15/25 5,344,560 27,810 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg............................... * 01/15/33 4,871,200 6,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Sr Lien Ser A (Escrowed to Maturity)..................................... * 01/01/18 3,104,760 2,240 Huntington Park, CA Redev Agy Rev Tax Alloc Santa Fe Redev Rfdg........................... 6.200 10/01/27 2,332,243 2,000 Los Angeles, CA Uni Sch Dist Ser A (MBIA Insd)......................................... 5.375 07/01/18 2,192,500 4,400 Los Angeles, CA Uni Sch Dist Ser A (MBIA Insd)......................................... 5.250 07/01/19 4,736,512 5,585 Sacramento, CA City Fin Auth Rev Comb Proj B (MBIA Insd)................................... * 11/01/14 3,447,230 1,375 San Bernadino, CA Jt Pwr Fin Auth Alloc Rev Central City Merged Proj A Rfdg (AMBAC Insd)......................................... 5.750 07/01/20 1,586,337 1,000 Stockton, CA Cmnty Fac Dist Spl Tax No 1-A Mello Roos-Weston Ranch Ser A................. 5.800 09/01/14 1,051,430 4,000 University, CA Rev Gen Ser A (AMBAC Insd)..... 5.000 05/15/33 4,025,560 5,000 University, CA Rev Gen Ser B (AMBAC Insd) (b)........................................... 5.000 05/15/20 5,209,800 ------------- 75,672,496 ------------- COLORADO 1.9% 1,000 Colorado Hlth Fac Auth Rev Catholic Hlth Initiatives Ser A............................. 5.500 03/01/32 1,019,660 1,125 Colorado Hlth Fac Auth Rev Hosp Portercare Adventist Hlth................................ 6.500 11/15/31 1,212,525 2,200 La Plata Cnty, CO Sch Dist 9-R Durango (MBIA Insd)......................................... 5.250 11/01/21 2,328,524 6,365 Platte Riv Pwr Auth CO Pwr Rev Ser EE......... 5.375 06/01/16 6,968,720 ------------- 11,529,429 -------------
See Notes to Financial Statements 7 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CONNECTICUT 5.5% $ 7,140 Connecticut St Hlth & Ed Fac Auth Rev Nursing Home Proj AHF/Hartford (Prerefunded @ 11/01/04)..................................... 7.125% 11/01/24 $ 7,712,414 2,840 Connecticut St Spl Oblig Pkg Rev Bradley Intl Arpt Ser A (ACA Insd)......................... 6.600 07/01/24 3,027,809 3,450 Connecticut St Spl Tax Oblig Ser B (Prerefunded @ 10/01/04) (FGIC Insd).......... 6.200 10/01/13 3,646,960 3,540 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A-Private Placement (Acquired 09/16/96, Cost $3,548,986) (c)................ 6.400 09/01/11 3,819,766 3,460 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144A-Private Placement (Prerefunded @ 09/01/07) (Acquired 09/16/96, Cost $3,470,087) (c)........................................... 6.400 09/01/11 3,946,857 6,500 Mashantucket Western Pequot Tribe CT Spl Rev Ser B, 144A-Private Placement (Acquired 12/18/98, Cost $6,551,470) (c)................ 5.750 09/01/18 6,710,340 3,500 Mashantucket Western Pequot Tribe CT Spl Rev Ser B, 144A-Private Placement (Acquired 04/29/98, Cost $3,506,300) (c)................ 5.750 09/01/27 3,554,530 ------------- 32,418,676 ------------- DELAWARE 0.2% 1,325 Delaware St Hsg Auth Rev Sr Home Mtg Ser B SubSer B2..................................... 7.200 12/01/21 1,326,762 ------------- DISTRICT OF COLUMBIA 1.0% 1,000 District of Columbia Hosp Rev Medlantic Hlthcare Group A Rfdg (Escrowed to Maturity) (MBIA Insd) (d)............................... 5.875 08/15/19 1,111,140 5,000 Metropolitan Washington DC Arpt Auth Sys Ser A (FGIC Insd)................................... 5.125 10/01/26 5,035,350 ------------- 6,146,490 ------------- FLORIDA 9.3% 3,380 Brevard Cnty, FL Hlth Fac Hlth First Inc Proj (MBIA Insd)................................... 5.125 04/01/31 3,428,300 2,550 Broward Cnty, FL Wtr & Swr Util Rfdg (MBIA Insd)......................................... 5.000 10/01/20 2,654,091 3,040 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd)......................................... 5.950 07/01/20 3,219,542 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd)......................................... 5.750 07/01/11 1,149,320 3,000 Florida St Dept Environmental Protection Preservation Rev Ser A (FGIC Insd)............ 5.750 07/01/10 3,482,220 1,895 Gulf Breeze, FL Rev Loc Govt (Variable Rate Coupon) (FGIC Insd)........................... 5.625 12/01/20 2,075,821 1,155 Gulf Breeze, FL Rev Venice Loc Govt (FGIC Insd) (e)..................................... 5.050 12/01/20 1,235,850
8 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE FLORIDA (CONTINUED) $ 2,310 Hillsborough Cnty, FL Indl Dev Auth Indl Dev Rev Hlth Fac Proj Univ Cmnty Hosp Ser A....... 5.500% 08/15/14 $ 2,376,274 1,000 Hillsborough Cnty, FL Indl Dev Auth Indl Dev Rev Univ Cmnty Hosp (MBIA Insd)............... 5.750 08/15/14 1,032,340 1,000 Hillsborough Cnty, FL Util Jr Lien Rfdg (AMBAC Insd)......................................... 5.000 08/01/06 1,088,780 1,000 Jea, FL Elec Sys Rev Ser 3 Ser A.............. 5.500 10/01/41 1,055,330 1,000 Lake Cnty, FL Sch Brd Ctf Part (AMBAC Insd)... 5.375 07/01/15 1,104,820 265 Lakeland, FL Hosp Sys Rev Lakeland Regl Hlth Sys........................................... 5.500 11/15/32 266,924 1,515 Miami Beach, FL Stormwtr Rev (FGIC Insd)...... 5.250 09/01/25 1,568,480 1,855 Miami Dade Cnty, FL Hlth Fac Miami Childrens Hosp Ser A Rfdg (AMBAC Insd).................. 5.000 08/15/20 1,904,640 2,000 Miami-Dade Cnty, FL Aviation Rev Miami Intl Arpt (FGIC Insd).............................. 5.375 10/01/25 2,062,780 2,700 Miami-Dade Cnty, FL Aviation Rev Miami Intl Arpt (FGIC Insd).............................. 5.375 10/01/32 2,775,519 5,000 Miami-Dade Cnty, FL Aviation Ser A (FSA Insd)......................................... 5.125 10/01/35 5,034,300 3,750 Orange Cnty, FL Sch Brd Ctf Part Ser A (AMBAC Insd)......................................... 5.250 08/01/14 4,141,425 4,320 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC Insd)......................................... 5.625 10/01/14 4,873,046 4,300 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC Insd)......................................... 5.500 10/01/31 4,559,032 2,140 Reedy Creek, FL Impt Dist FL Ser A Rfdg (AMBAC Insd)......................................... 5.500 06/01/12 2,404,204 1,060 Tallahassee, FL Lease Rev FL St Univ Proj Ser A (MBIA Insd)................................. 5.500 08/01/18 1,172,222 ------------- 54,665,260 ------------- GEORGIA 3.4% 2,645 Georgia St Ser D.............................. 6.000 10/01/05 2,880,326 3,500 Georgia St Ser D.............................. 6.000 10/01/06 3,931,235 2,400 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd)............................. 5.250 11/01/14 2,642,976 8,030 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd)............................. 5.250 11/01/18 8,634,659 2,000 Royston, GA Hosp Auth Hosp Ctf Rev Ty Cobb Hlthcare Sys Inc Rfdg......................... 6.500 07/01/27 1,914,720 ------------- 20,003,916 -------------
See Notes to Financial Statements 9 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE HAWAII 0.4% $ 1,465 Honolulu, HI City & Cnty Ser D (FGIC Insd).... 4.700% 02/01/08 $ 1,585,394 975 Honolulu, HI City & Cnty Wastewtr Sys Rev Cap Apprec (FGIC Insd)............................ * 07/01/12 682,968 ------------- 2,268,362 ------------- ILLINOIS 15.0% 3,400 Carol Stream, IL First Mtg Rev Windsor Pk Mnr Proj.......................................... 7.000 12/01/13 3,496,050 1,500 Champaign Cnty, IL Cmnty Unit Sch Dist No 116 Urbana Ser C (Prerefunded @ 01/01/10) (FGIC Insd)......................................... * 01/01/16 862,500 1,300 Champaign Cnty, IL Cmnty Unit Sch Dist No 116 Urbana Ser C (Prerefunded @ 01/01/10) (FGIC Insd)......................................... * 01/01/18 661,570 1,285 Chicago, IL Brd Ed (FGIC Insd)................ 6.000 12/01/12 1,483,121 1,400 Chicago, IL Brd Ed Ser A (MBIA Insd).......... 5.500 12/01/28 1,473,192 4,000 Chicago, IL Neighborhoods Alive 21 Pgm Ser A (FGIC Insd)................................... 5.750 01/01/40 4,340,680 2,500 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt 3rd Lien C 2 Rfdg (FSA Insd)...................... 5.250 01/01/30 2,540,200 5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser A Rfdg (MBIA Insd)............. 5.375 01/01/32 5,108,950 1,015 Chicago, IL O'Hare Intl Arpt Rev Second Lien Passenger Fac Ser B (AMBAC Insd).............. 5.500 01/01/16 1,109,669 1,980 Chicago, IL Pk Dist Ser C (FGIC Insd)......... 5.500 01/01/19 2,159,705 2,565 Chicago, IL Proj Ser C Rfdg (FGIC Insd)....... 5.750 01/01/12 2,895,526 1,000 Cook Cnty, IL Cmnty Cons Sch Dist No 64 Park Ridge (FSA Insd).............................. 5.500 12/01/14 1,139,450 1,000 Cook Cnty, IL Ser A (FGIC Insd)............... 5.500 11/15/31 1,051,240 7,765 Du Page Cnty, IL Forest Preserve Dist......... * 11/01/17 4,008,060 5,000 Du Page Cnty, IL Trans Rev (FSA Insd)......... 5.750 01/01/15 5,658,550 4,000 Hodgkins, IL Tax Increment Ser A Rfdg......... 7.625 12/01/13 4,236,760 2,860 Illinois Dev Fin Auth Rev Adventist Hlth Ser A (MBIA Insd) (e)............................... 5.500 11/15/05 3,072,984 2,725 Illinois Dev Fin Auth Rev Cmnty Rehab Providers Fac Ser A........................... 7.375 07/01/25 2,892,669 2,705 Illinois Dev Fin Auth Rev Loc Govt Pgm Aurora East Sch (MBIA Insd).......................... * 12/01/15 1,565,059 1,565 Illinois Edl Fac Auth Rev DePaul Univ (AMBAC Insd)......................................... 5.625 10/01/15 1,762,926 1,740 Illinois Edl Fac Auth Rev Lewis Univ.......... 5.900 10/01/14 1,753,816 1,645 Illinois Hlth Fac Auth Rev Evangelical Hosp Ser C Rfdg (Partially prerefunded @ 04/15/02) (FSA Insd).................................... 6.750 04/15/12 1,995,747 2,500 Illinois St First Ser (MBIA Insd)............. 5.500 12/01/09 2,870,725 1,500 Illinois St First Ser (FGIC Insd)............. 5.375 11/01/14 1,657,305
10 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE ILLINOIS (CONTINUED) $ 3,000 Illinois St First Ser (FSA Insd).............. 5.250% 12/01/21 $ 3,167,280 3,440 Kendall Kane & Will Cntys, IL Cmnty Sch Dist No 308 Ser B (FGIC Insd)...................... 5.250 10/01/19 3,667,969 870 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec (Escrowed to Maturity) (FGIC Insd)................................... * 06/15/14 548,518 3,460 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec (Unrefunded Balance) (FGIC Insd)......................................... * 06/15/14 2,174,679 2,675 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Ser A (MBIA Insd)......................................... 5.250 06/15/42 2,741,046 1,510 Roselle, IL Multi-Family Hsg Rev Waterbury Apts Ser A Rfdg (GNMA Collateralized)......... 7.000 01/01/25 1,565,795 3,230 Saint Clair Cnty, IL Cap Impt Rev McKendree College Proj Rfdg............................. 6.000 02/01/24 3,209,070 3,060 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill Cap Apprec (FGIC Insd)................... * 01/01/12 2,189,705 3,505 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill Cap Apprec (FGIC Insd)................... * 01/01/14 2,237,907 2,010 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill Cap Apprec (FGIC Insd)................... * 01/01/16 1,144,876 1,415 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill Cap Apprec (FGIC Insd)................... * 01/01/19 665,107 9,660 Will Cnty, IL Fst Presv Dist Ser B (FGIC Insd)......................................... * 12/01/16 5,246,926 ------------- 88,355,332 ------------- INDIANA 1.3% 1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg (AMBAC Insd).................................. 5.500 01/01/18 1,090,710 1,000 Clark Pleasant, IN Cmnty Sch First Mtg (AMBAC Insd)......................................... 5.500 07/15/13 1,115,390 1,580 Indiana Trans Fin Auth Toll Rd Lease Rev Rfdg (AMBAC Insd).................................. 5.375 07/01/09 1,754,748 1,500 Petersburg, IN Pollutn Ctl Rev, IN Pwr & Lt (e)........................................... 5.950 12/01/29 1,381,245 2,500 Vigo Cnty, IN Sch Bldg Corp First Mtg Impt & Rfdg (FSA Insd)............................... 5.250 07/10/24 2,587,325 ------------- 7,929,418 ------------- KANSAS 1.1% 3,000 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (MBIA Insd)................................... 6.000 09/01/09 3,509,340 1,395 Wichita, KS Pub Bldg Comm Rev Wichita St Univ Proj Ser L Rfdg (AMBAC Insd).................. 5.000 02/01/15 1,493,640 1,465 Wichita, KS Pub Bldg Comm Rev Wichita St Univ Proj Ser L Rfdg (AMBAC Insd).................. 5.000 02/01/16 1,559,053 ------------- 6,562,033 -------------
See Notes to Financial Statements 11 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE KENTUCKY 2.9% $ 4,000 Elsmere, KY Indl Dev Rev Courtaulds Pkg Inc Proj Rfdg (Prerefunded @ 04/01/05)............ 6.750% 04/01/10 $ 4,379,600 1,500 Kentucky St Ppty & Bldg Commn Proj No 69 Ser A Rfdg (FSA Insd)............................... 5.500 08/01/11 1,715,580 3,000 Kentucky St Ppty & Bldg Commn Proj No 79 (MBIA Insd)......................................... 5.125 10/01/19 3,184,800 3,500 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (FSA Insd).......................... 5.500 07/01/07 3,924,970 1,000 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (FSA Insd).......................... 5.625 07/01/14 1,118,150 2,350 Louisville & Jefferson, KY Swr Ser A (MBIA Insd)......................................... 5.500 05/15/15 2,623,658 ------------- 16,946,758 ------------- LOUISIANA 3.1% 5,000 Ernest N Morial New Orleans LA Sr Sub Ser A (AMBAC Insd).................................. 5.250 07/15/21 5,289,900 1,675 Louisiana Loc Govt Envir Facs Pkg Facs Corp Garage Proj Ser A (AMBAC Insd)................ 5.200 10/01/19 1,783,976 3,000 Louisiana St Ser A (FGIC Insd)................ 5.500 11/15/07 3,391,110 8,209 Louisiana St Univ & Agriculture & Mechanical College Univ Rev Master Lease (Acquired 11/30/98, Cost $8,208,999) (a)................ 5.750 10/30/18 7,801,668 ------------- 18,266,654 ------------- MAINE 0.2% 1,000 Maine Vets Homes, ME Rev (Prerefunded @ 10/01/05)..................................... 7.750 10/01/20 1,134,490 ------------- MARYLAND 1.4% 2,300 Baltimore, MD Cap Apprec Cons Pub Ser A Impt & Rfdg (FGIC Insd).............................. * 10/15/06 2,093,920 670 Baltimore, MD Cap Apprec Ser A (Prerefunded @ 10/15/05) (FGIC Insd)......................... * 10/15/07 579,691 1,845 Baltimore, MD Cap Apprec Ser A (Unrefunded Balance) (FGIC Insd).......................... * 10/15/07 1,569,080 1,700 Maryland St Trans Auth Arpt Baltimore/WA Intl Arpt B (AMBAC Insd)........................... 5.125 03/01/24 1,728,543 2,365 Northeast, MD Waste Disp Auth Rfdg (AMBAC Insd)......................................... 5.500 04/01/16 2,547,625 ------------- 8,518,859 ------------- MASSACHUSETTS 3.2% 1,775 Massachusetts Muni Whsl Elec Co Nuclear Proj 5 (MBIA Insd)................................... 5.250 07/01/13 1,953,405 1,745 Massachusetts St Cons Ln Ser B (Prerefunded @ 05/01/09)..................................... 5.250 05/01/13 1,977,940
12 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MASSACHUSETTS (CONTINUED) $ 5,000 Massachusetts St Cons Ln Ser E (Prerefunded @ 01/01/13) (FSA Insd).......................... 5.250% 01/01/20 $ 5,550,350 820 Massachusetts St Dev Fin Agy Rev Boston Architectural Ctr (ACA Insd).................. 6.100 09/01/18 869,889 1,000 Massachusetts St Dev Fin Agy Rev Boston Architectural Ctr (ACA Insd).................. 6.250 09/01/28 1,048,320 1,500 Massachusetts St Fed Hwy Gnt Antic Nt Ser A... 5.750 06/15/15 1,738,515 3,700 Massachusetts St Hlth & Ed Fac Auth Rev (MBIA Insd)......................................... 5.000 07/01/13 3,854,956 1,000 Massachusetts St Hlth & Ed Fac Auth Rev Partn Hlthcare Sys Ser C............................ 5.750 07/01/32 1,041,800 825 Massachusetts St Hlth & Ed Fac Auth Rev Winchester Hosp Ser D Rfdg (Connie Lee Insd)......................................... 5.750 07/01/14 864,146 ------------- 18,899,321 ------------- MICHIGAN 4.4% 3,560 Detroit, MI Loc Dev Fin Auth Tax Increment Sr Ser B (Acquired 09/08/97, Cost $3,560,000) (a)........................................... 6.700 05/01/21 3,565,660 900 Detroit, MI Loc Dev Fin Auth Tax Increment Sub Ser C (Acquired 09/08/97, Cost $900,000) (a)........................................... 6.850 05/01/21 884,277 3,860 Detroit, MI Ser A (XLCA Insd)................. 5.250 04/01/21 4,057,362 2,930 Detroit, MI Wtr Supply Sys Rev Sr Lien Ser C Rfdg (MBIA Insd).............................. 5.250 07/01/18 3,163,726 1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Ctr................................ 5.750 05/15/18 1,111,477 1,000 Macomb Cnty, MI Hosp Fin Auth Hosp Rev Mt Clemens Gen Hosp Ser B........................ 5.875 11/15/34 951,470 2,000 Michigan Muni Bd Auth Rev Clean Wtr Rev Fd.... 5.250 10/01/18 2,163,280 500 Michigan St Hosp Fin Auth Rev Hosp Genesys Regl Med Ser A Rfdg (Escrowed to Maturity).... 5.375 10/01/13 557,220 2,640 Michigan St Hsg Dev Rental Hsg Rev Ser A (MBIA Insd)......................................... 5.300 10/01/37 2,653,358 1,500 Michigan St Strategic Fd Detroit Edison Co Proj C Rfdg (XLCA Insd)....................... 5.450 12/15/32 1,539,690 1,000 Michigan St Strategic Fd Detroit Edison Pollutn Ctl Ser B Rfdg........................ 5.650 09/01/29 1,013,480 1,750 Michigan St Strategic Fd Ltd Oblig Rev WMX Technologies Inc Proj......................... 6.000 12/01/13 1,786,820 2,500 Michigan St Trunk Line Ser A.................. 5.500 11/01/15 2,794,475 ------------- 26,242,295 -------------
See Notes to Financial Statements 13 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MISSISSIPPI 0.5% $ 2,500 Mississippi Bus Fin Corp MS Pollutn Ctl Rev Sys Energy Res Inc Proj....................... 5.875% 04/01/22 $ 2,492,900 700 Mississippi Home Corp Single Family Rev Mtg Ser F (GNMA Collateralized)................... 7.550 12/01/27 720,055 ------------- 3,212,955 ------------- MISSOURI 2.9% 1,400 Ellisville, MO Indl Dev Auth Rev Gambrill Gardens Proj Rfdg & Impt...................... 6.100 06/01/20 1,236,172 1,000 Ellisville, MO Indl Dev Auth Rev Gambrill Gardens Proj Rfdg & Impt...................... 6.200 06/01/29 847,960 1,250 Fulton 54 Trans Corp Hwt Rev MO (AMBAC Insd)......................................... 4.600 09/01/04 1,285,175 1,740 Good Shepherd Nursing Home Dist MO Nursing Home Fac Rev (Prerefunded @ 08/15/05)......... 7.625 08/15/15 1,956,613 1,000 Kearney, MO (AMBAC Insd)...................... 5.500 03/01/16 1,110,560 1,415 Missouri St Hlth & Ed Fac Rev Univ MO Columbia Arena Proj.................................... 5.000 11/01/18 1,487,222 3,085 Missouri St Hwy & Trans Commn Rd Rev Ser A.... 5.250 02/01/07 3,405,130 1,000 Missouri St Hwy & Trans Commn Rd Rev Ser A.... 5.125 02/01/17 1,067,170 2,810 Perry Cnty, MO Nursing Home Rev Rfdg.......... 5.900 03/01/28 2,283,462 2,505 St Louis, MO Arpt Rev Cap Impt Prog Ser A (MBIA Insd)................................... 5.375 07/01/20 2,672,735 ------------- 17,352,199 ------------- NEVADA 0.7% 2,500 Reno, NV Cap Impt Rev (FGIC Insd)............. 5.125 06/01/26 2,538,750 1,500 Reno, NV Sr Lien Retrac Reno Trans Proj (AMBAC Insd)......................................... 5.125 06/01/37 1,512,780 ------------- 4,051,530 ------------- NEW HAMPSHIRE 1.3% 4,800 New Hampshire Higher Ed & Hlth Fac Auth Rev Daniel Webster College Issue.................. 6.300 07/01/29 4,542,672 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Riverwoods at Exeter Ser A.................... 6.500 03/01/23 1,958,880 1,000 New Hampshire Hlth & Ed Fac Auth Rev Derryfield Sch................................ 6.750 07/01/20 1,002,800 ------------- 7,504,352 ------------- NEW JERSEY 8.8% 4,000 Camden Cnty, NJ Impt Auth Lease Rev Kaighn PT Marine Term Ser A (Asset Gty Insd) (f) (g).... 8.000 06/01/27 280,000 1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd)................................... * 03/01/04 995,970 1,460 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd)................................... * 03/01/05 1,434,187
14 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW JERSEY (CONTINUED) $ 1,465 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd)................................... * 03/01/06 $ 1,406,693 1,615 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd)................................... * 03/01/07 1,501,498 1,555 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd)................................... * 03/01/08 1,386,873 2,500 New Jersey Econ Dev Auth Sch Facs Constr Ser C (MBIA Insd)................................... 5.000% 06/15/16 2,668,475 25,000 New Jersey Econ Dev Auth St Contract Econ Recovery (MBIA Insd).......................... 5.900 03/15/21 29,004,750 2,825 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser A (AMBAC Insd)............................ 5.250 09/01/19 3,023,569 3,500 New Jersey St Tpk Auth Tpk Rev Ser C (FSA Insd)......................................... 6.500 01/01/16 4,266,115 1,000 New Jersey St Trans Corp Capital Grant Antic Nt Ser B (AMBAC Insd)......................... 5.500 02/01/08 1,124,420 3,500 New Jersey St Trans Corp Ctf Fed Trans Admin Grants Ser A (AMBAC Insd)..................... 5.500 09/15/13 3,975,020 1,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser A............................................. 5.750 06/15/18 1,152,010 ------------- 52,219,580 ------------- NEW MEXICO 0.3% 1,500 Jicarilla, NM Apache Nation Adj Ser A (Acquired 10/23/03, Cost $1,514,910) (a)...... 5.000 09/01/18 1,518,060 ------------- NEW YORK 12.2% 1,870 Long Island Pwr Auth, NY Elec Cap Apprec (FSA Insd)......................................... * 06/01/18 970,979 3,000 Metropolitan Trans Auth NY Ser A Rfdg (FGIC Insd)......................................... 5.250 11/15/31 3,108,030 2,500 Nassau Cnty, NY Impt Ser F.................... 7.000 03/01/04 2,543,500 2,500 Nassau Cnty, NY Interim Fin Auth Sales Tax Secured Ser A................................. 5.750 11/15/13 2,826,575 1,000 Nassau Cnty, NY Ser A Rfdg (FGIC Insd)........ 6.000 07/01/10 1,167,500 85 New York City Adj SubSer A-1 (Partially prerefunded @ 08/01/03)....................... 5.750 08/01/12 86,527 3,375 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (AMBAC Insd)............................ 5.000 02/15/11 3,713,783 7,000 New York City Ser A........................... 6.250 08/01/08 7,820,470 2,000 New York City Ser H (FGIC Insd)............... 6.000 08/01/12 2,345,440 1,000 New York City Ser H........................... 5.750 03/15/13 1,099,030 3,375 New York City Transitional Future Tax Secd Ser B............................................. 5.000 08/01/21 3,475,845 2,000 New York City Transitional Future Tax Secd Ser C (AMBAC Insd)................................ 5.250 08/01/22 2,105,140 1,545 New York St Dorm Auth Lease Teachers College (FSA Insd).................................... 5.250 08/15/15 1,676,819
See Notes to Financial Statements 15 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW YORK (CONTINUED) $ 6,800 New York St Dorm Auth Rev City Univ Sys Cons Ser A......................................... 5.625% 07/01/16 $ 7,697,396 3,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser D (MBIA Insd)................................. 5.500 10/01/17 3,328,680 4,200 New York St Dorm Auth Rev Secd Hosp N General Hosp Rfdg..................................... 5.750 02/15/19 4,616,430 1,250 New York St Dorm Auth Revs Cons City Univ Sys A (FSA Insd).................................. 5.750 07/01/13 1,449,425 2,070 New York St Med Care Fac Fin Agy Rev Mental Hlth Svcs Ser F Rfdg (Partially prerefunded @ 02/15/04) (MBIA Insd)......................... 5.375 02/15/14 2,132,059 4,000 New York St Twy Auth Svc Cntrct Loc Hwy Brdg (Prerefunded @ 04/01/11)...................... 5.250 04/01/16 4,528,440 5,013 Plainedge, NY Union Free Sch Dist (Acquired 07/25/97, Cost $5,012,732) (a)................ 6.000 06/01/12 5,295,551 5,000 Triborough Brdg & Tunl Auth NY Gen Ser B Rfdg.......................................... 5.000 11/15/21 5,144,600 2,000 Triborough Brdg & Tunl Auth NY Ser E Rfdg (MBIA Insd)................................... 5.000 11/15/32 2,018,060 3,000 Triborough Brdg & Tunl Auth Gen Purp Ser A.... 5.000 01/01/27 3,022,800 ------------- 72,173,079 ------------- NORTH CAROLINA 5.1% 2,000 Johnston Cnty, NC (FGIC Insd)................. 5.900 03/01/19 2,287,540 7,015 North Carolina Eastern Muni Pwr Agy Pwr Sys Rev Ser A Rfdg (MBIA Insd).................... 5.500 01/01/05 7,358,665 2,200 North Carolina Eastern Muni Pwr Agy Pwr Sys Rev Ser C (ACA Insd).......................... 5.000 01/01/21 2,196,084 8,300 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev Rfdg (MBIA Insd).......................... 6.000 01/01/12 9,656,718 6,605 North Carolina Muni Pwr Agy Ser A (MBIA Insd)......................................... 5.250 01/01/20 7,001,300 1,315 University, NC Wilmington Rev (AMBAC Insd).... 5.250 01/01/19 1,409,259 ------------- 29,909,566 ------------- OHIO 6.7% 3,950 Cincinnati, OH City Sch Dist Sch Impt (FSA Insd)......................................... 5.250 06/01/18 4,255,730 2,800 Cleveland-Cuyahoga Cnty, OH Dev Port Auth Rev Cleveland Bond Fd Ser B....................... 5.375 05/15/18 2,622,704 1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj.......................................... 7.500 01/01/30 1,103,390 2,170 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd)......... 5.250 12/01/13 2,414,472 2,350 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd)......... 5.250 12/01/17 2,548,505 1,200 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd)......... 5.250 12/01/18 1,291,944 4,800 Franklin Cnty, OH Hosp Rev Holy Cross Hlth Sys Ser B Rfdg (MBIA Insd) (d).................... 5.250 06/01/10 5,004,480
16 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE OHIO (CONTINUED) $ 2,000 Lebanon, OH City Sch Dist (FSA Insd).......... 5.500% 12/01/16 $ 2,232,600 1,000 Lorain Cnty, OH Hosp Rev Catholic Hlthcare.... 5.375 10/01/30 1,003,460 2,000 Lorain, OH City Sch Dist Classroom Fac Impt (MBIA Insd)................................... 5.250 12/01/20 2,141,880 1,000 Mahoning Cnty, OH Hosp Fac Forum Hlth Oblig Group Ser A................................... 6.000 11/15/32 1,033,860 1,520 Miami Univ OH Gen Rcpts Rfdg (AMBAC Insd)..... 5.000 12/01/21 1,571,650 1,580 Montgomery Cnty, OH Hosp Rev Grandview Hosp & Med Cent Rfdg (Escrowed to Maturity).......... 5.375 12/01/05 1,710,366 2,270 Montgomery Cnty, OH Hosp Rev Kettering Med Cent Impt & Rfdg (MBIA Insd).................. 6.250 04/01/20 2,696,760 1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd Part Proj Rfdg (AMBAC Insd)............... 6.375 04/01/29 1,066,230 2,500 Ohio St Bldg Auth St Fac Adult Correction Ser A Rfdg (FSA Insd)............................. 5.500 10/01/12 2,812,675 1,000 Ohio St Higher Ed Cap Fac Ser II A............ 5.250 12/01/05 1,079,880 2,950 Parma, OH Hosp Impt Rev Parma Cmnty Gen Hosp Assoc Rfdg.................................... 5.375 11/01/29 2,945,900 ------------- 39,536,486 ------------- OKLAHOMA 1.1% 1,240 Kay Cnty, OK Home Fin Auth Rev Single Family Mtg Ser A Rfdg (Escrowed to Maturity) (AMBAC Insd)......................................... 7.000 11/01/11 1,546,441 2,060 Oklahoma Hsg Fin Agy Single Family Rev Mtg Class B (GNMA Collateralized)................. 7.997 08/01/18 2,228,055 2,305 Oklahoma St Cap Impt Auth St (MBIA Insd)...... 5.000 06/01/06 2,501,985 ------------- 6,276,481 ------------- OREGON 2.1% 4,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA Insd)......................................... 5.250 07/01/22 4,212,320 1,500 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)... 5.250 11/01/17 1,616,610 1,250 Portland, OR Cmnty College Dist Ser B......... 5.250 06/01/12 1,388,225 1,500 Washington Multnomah & Yamhill Cntys, OR Sch Dist No 11 (MBIA Insd)........................ 5.000 06/01/13 1,625,505 3,195 Yamhill Cnty, OR Sch Dist No 029J Newberg (MBIA Insd)................................... 5.250 06/15/18 3,436,606 ------------- 12,279,266 ------------- PENNSYLVANIA 6.4% 2,500 Allegheny Cnty, PA San Auth Swr (MBIA Insd)... 5.500 12/01/30 2,645,725 3,850 Greater Latrobe, PA Sch Auth (FGIC Insd)...... 5.250 04/01/16 4,175,171 135 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg.................. 4.800 12/15/03 135,045 210 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg.................. 5.000 12/15/05 209,341
See Notes to Financial Statements 17 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PENNSYLVANIA (CONTINUED) $ 275 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg.................. 5.100% 12/15/06 $ 273,171 295 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg.................. 5.250 12/15/07 291,619 210 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg.................. 5.300 12/15/08 206,619 320 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg.................. 5.300 12/15/09 309,181 240 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg.................. 5.400 12/15/10 230,206 1,650 Montgomery Cnty, PA Indl Dev Auth Retirement Cmnty Rev Adult Cmnty Total Svc Ser B......... 5.625 11/15/12 1,733,276 2,700 Pennsylvania Econ Dev Fin Auth Res Recovery Rev Colver Proj Ser D......................... 7.150 12/01/18 2,798,145 1,000 Pennsylvania St Tpk Commn Rev Ser T Rfdg (FGIC Insd)......................................... 5.500 12/01/11 1,146,620 1,000 Philadelphia, PA Auth Indl Dev Philadelphia Arpt Sys Proj Ser A (FGIC Insd)............... 5.125 07/01/19 1,022,400 2,600 Philadelphia, PA Auth Indl Ser B (FSA Insd)... 5.500 10/01/16 2,863,640 3,200 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd).................. 5.250 08/01/19 3,420,096 4,305 Philadelphia, PA Redev Auth Rev Neighborhood Transformation Ser A (FGIC Insd).............. 5.250 04/15/11 4,833,094 1,500 Philadelphia, PA Sch Dist Ser A (FSA Insd).... 5.750 02/01/12 1,703,265 5,205 Pittsburgh, PA Ser A (AMBAC Insd)............. 5.500 09/01/17 5,617,444 4,000 State Pub Sch Bldg Auth PA Philadelphia Sch Dist Proj (FSA Insd).......................... 5.000 06/01/33 4,028,600 ------------- 37,642,658 ------------- RHODE ISLAND 1.3% 2,150 Providence, RI Redev Agy Ctf Part Ser A (Prerefunded @ 09/01/04)...................... 8.000 09/01/24 2,312,261 2,420 Rhode Island St Cons Cap Dev Ln Ser A......... 5.000 08/01/12 2,475,708 2,495 Rhode Island St Hlth & Ed Higher Ed Johnson & Wales Rfdg (XLCA Insd)........................ 5.375 04/01/18 2,707,848 ------------- 7,495,817 ------------- SOUTH CAROLINA 0.7% 2,000 Rock Hill, SC Util Sys Rev Comb Ser A Impt & Rfdg (FSA Insd)............................... 5.375 01/01/18 2,174,780 475 Rock Hill, SC Util Sys Rev Comb Ser C Rfdg (FSA Insd).................................... 5.125 01/01/13 515,043 1,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec & Gas Co Proj Ser A (AMBAC Insd)......... 5.200 11/01/27 1,546,200 ------------- 4,236,023 -------------
18 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE SOUTH DAKOTA 1.0% $ 5,835 South Dakota Hsg Dev Auth Homeownership Mtg Ser F......................................... 5.800% 05/01/28 $ 5,957,593 ------------- TENNESSEE 2.6% 4,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn St Hlth Ser A Rfdg (MBIA Insd)......................................... 7.500 07/01/25 5,015,600 2,500 Memphis, TN (Prerefunded @10/01/06)........... 5.250 10/01/14 2,781,700 2,905 Memphis, TN Gen Impt.......................... 5.000 05/01/20 3,021,984 1,000 Metropolitan Nashville Arpt Auth TN Impt Ser A Rfdg (FGIC Insd).............................. 6.600 07/01/14 1,176,710 1,425 Tennessee Hsg Dev Agy Home Ownership Pgm 2- A............................................. 5.700 07/01/31 1,467,337 1,720 Wilson Cnty, TN Sch Rfdg (FGIC Insd).......... 5.000 04/01/17 1,852,801 ------------- 15,316,132 ------------- TEXAS 8.8% 1,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp........ 5.375 01/01/32 994,170 1,350 Cameron Cnty, TX Ctfs Oblig (AMBAC Insd)...... 5.750 02/15/14 1,510,353 2,500 Coastal Bend Hlth Fac Dev, TX Ser C (Inverse Fltg) (Escrowed to Maturity) (AMBAC Insd) (h)........................................... 8.138 11/15/13 3,374,750 2,420 Dallas Cnty, TX Cmnty College Dist Rev Fing Sys (AMBAC Insd).............................. 5.375 02/15/16 2,645,447 2,000 Fort Worth, TX Wtr & Swr Rev Impt Rfdg........ 5.500 02/15/05 2,108,300 1,745 Harris Cnty, TX Perm Impt & Rfdg.............. 5.000 10/01/11 1,902,888 3,345 Houston, TX Hotel Occupancy Tax Convtn & Entertnmnt Ser B (AMBAC Insd)................. 5.750 09/01/14 3,800,121 3,000 Houston, TX Indpt Sch Dist Maintenance Tax Nt (FSA Insd).................................... 5.000 07/15/20 3,096,570 6,790 Houston, TX Indpt Sch Dist Pub Fac Corp Lease Rev Cap Apprec West Side Ser B (AMBAC Insd)... * 09/15/14 4,198,868 1,500 Houston, TX Pub Impt Rfdg (FSA Insd).......... 5.750 03/01/15 1,691,805 2,500 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser B Rfdg (FGIC Insd).............................. 6.250 12/01/05 2,746,550 1,000 Mesquite, TX Hlth Fac Dev Christian Care Retirement Fac Ser A.......................... 7.625 02/15/28 1,038,570 1,400 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj........................... 7.250 01/01/31 1,296,722 1,000 North Central, TX Hlth Fac Dev Hosp Baylor Hlth Care Sys Proj A.......................... 5.125 05/15/29 997,150 4,000 North Central, TX Hlth Fac Dev Hosp Childrens Med Ctr Dallas (AMBAC Insd)................... 5.250 08/15/32 4,113,480 4,173 Region One Ed Svc Cent Sub Tech Fac Proj (Acquired 12/30/97, Cost $4,172,840) (a)...... 6.590 12/15/17 4,270,776 4,000 San Antonio, TX Elec & Gas Rev Sys Rfdg....... 5.375 02/01/18 4,308,680 1,245 Texas Gen Svc Comm Part Int................... 7.250 08/01/11 1,262,707
See Notes to Financial Statements 19 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE TEXAS (CONTINUED) $ 65 Texas Muni Pwr Agy Rev (Escrowed to Maturity) (MBIA Insd)................................... * 09/01/15 $ 38,390 3,935 Texas Muni Pwr Agy Rev (Unrefunded Balance) (MBIA Insd)................................... * 09/01/15 2,308,507 4,000 Texas St Univ Sys Fin Rev Rfdg (FSA Insd)..... 5.000% 03/15/19 4,153,600 ------------- 51,858,404 ------------- UTAH 0.8% 3,500 Bountiful, UT Hosp Rev South Davis Cmnty Hosp Proj (Prerefunded @ 06/15/04) (Acquired 06/23/92, Cost $3,500,000) (a)................ 9.500 12/15/18 3,786,930 1,000 Utah St Ser B Rfdg............................ 5.250 07/01/08 1,125,310 ------------- 4,912,240 ------------- VIRGINIA 2.6% 1,320 Fairfax Cnty, VA Ctf Part..................... 5.300 04/15/23 1,360,036 1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease Rev Henrico Cnty Regl Jail Proj (Prerefunded @ 08/01/05)..................................... 6.500 08/01/10 1,665,915 1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease Rev Henrico Cnty Regl Jail Proj (Prerefunded @ 08/01/05)..................................... 7.125 08/01/21 1,682,085 1,630 Richmond, VA (FSA Insd)....................... 5.125 01/15/08 1,813,310 1,340 Richmond, VA (FSA Insd)....................... 5.500 01/15/10 1,527,680 2,155 Virginia Comwlth Trans Brd North VA Trans Dist Pg Ser A...................................... 5.375 05/15/14 2,377,137 5,000 Virginia St Pub Sch Auth Sch Fing 1997 Resolution Ser C (b).......................... 5.000 08/01/20 5,213,250 ------------- 15,639,413 ------------- WASHINGTON 5.5% 5,000 Bellevue, WA Convention Cent Auth Spl Oblig Rev Rfdg (MBIA Insd).......................... * 02/01/24 1,686,350 3,230 Clark Cnty, WA Pub Util Dist No. 001 Gen Sys Rev Rfdg (FSA Insd)........................... 5.500 01/01/07 3,575,642 3,000 Clark Cnty, WA Pub Util Dist No. 001 Gen Sys Rev Rfdg (FSA Insd)........................... 5.625 01/01/12 3,380,280 5,000 Cowlitz Cnty, WA Spl Swr Rev Csob Wastewtr Treatment Rfdg (FGIC Insd).................... 5.500 11/01/19 5,617,800 5,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (XLCA Insd).............................. 5.500 07/01/17 5,518,050 3,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)............................... 5.500 07/01/18 3,259,590 5,000 King Cnty, WA Ser B Rfdg (MBIA Insd).......... 5.250 01/01/34 5,096,600 1,000 Port Seattle, WA Rev Ser B (MBIA Insd)........ 5.625 02/01/24 1,039,590
20 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE WASHINGTON (CONTINUED) $ 1,345 Tacoma, WA Elec Sys Rev Ser A Rfdg (FSA Insd)......................................... 5.750% 01/01/15 $ 1,516,313 1,750 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev (MBIA Insd).......................... 5.750 07/01/12 1,954,190 ------------- 32,644,405 ------------- WEST VIRGINIA 1.1% 6,550 Harrison Cnty, WV Cnty Cmnty Solid Waste Disp Rev Potomac Edison Co Ser A (MBIA Insd)....... 6.875 04/15/22 6,646,482 ------------- WISCONSIN 2.1% 5,000 Wisconsin St Hlth & Ed Fac Auth Mercy Hlth Sys Corp (AMBAC Insd)............................. 5.500 08/15/25 5,259,250 7,280 Wisconsin St Hlth & Ed Fac Auth Rev Children's Hosp (FGIC Insd).............................. 5.000 08/15/10 7,446,202 ------------- 12,705,452 ------------- GUAM 0.9% 5,000 Guam Pwr Auth Rev Ser A (AMBAC Insd).......... 5.250 10/01/34 5,145,400 ------------- PUERTO RICO 0.4% 2,000 Puerto Rico Muni Fin Agy Ser A (FSA Insd)..... 5.250 08/01/20 2,142,480 ------------- TOTAL LONG-TERM INVESTMENTS 148.6% (Cost $831,253,260)....................................................... 878,438,091 SHORT-TERM INVESTMENTS 2.5% (Cost $14,600,000)........................................................ 14,600,000 ------------- TOTAL INVESTMENTS 151.1% (Cost $845,853,260)....................................................... 893,038,091 LIABILITIES IN EXCESS OF OTHER ASSETS (0.3%)............................... (2,102,624) PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (50.8%)................. (300,053,705) ------------- NET ASSETS APPLICABLE TO COMMON SHARES 100.0%.............................. $ 590,881,762 =============
* Zero coupon bond (a) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 5.4% of net assets including preferred shares. (b) Securities purchased on a when-issued or delayed delivery basis. See Notes to Financial Statements 21 YOUR TRUST'S INVESTMENTS October 31, 2003 (c) 144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 5.4% of net assets including preferred shares. (d) Asset segregated as collateral for open futures transactions. All or a portion of these securities have been physically segregated in connection with open futures contracts. (e) Security converts to a fixed coupon rate at a predetermined date. (f) Non-income producing security. (g) Issuer has filed for protection in federal bankruptcy court. (h) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Trust to enhance the yield of the portfolio. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. Asset Gty--Asset Guaranty Insurance Co. Connie Lee--Connie Lee Insurance Co. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. 22 See Notes to Financial Statements FINANCIAL STATEMENTS Statement of Assets and Liabilities October 31, 2003 ASSETS: Total Investments (Cost $845,853,260)....................... $893,038,091 Cash........................................................ 525,881 Receivables: Interest.................................................. 11,828,544 Investments Sold.......................................... 2,715,623 Other....................................................... 16,634 ------------ Total Assets............................................ 908,124,773 ------------ LIABILITIES: Payables: Investments Purchased..................................... 16,017,038 Investment Advisory Fee................................... 452,836 Income Distributions--Common Shares....................... 183,258 Administrative Fee........................................ 37,736 Affiliates................................................ 33,273 Variation Margin on Futures............................... 20,109 Trustees' Deferred Compensation and Retirement Plans........ 265,492 Accrued Expenses............................................ 179,564 ------------ Total Liabilities....................................... 17,189,306 Preferred Shares (including accrued distributions).......... 300,053,705 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $590,881,762 ============ NET ASSET VALUE PER COMMON SHARE ($590,881,762 divided by 36,365,393 shares outstanding)............................ $ 16.25 ============ NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 36,365,393 shares issued and outstanding).............................................. $ 363,654 Paid in Surplus............................................. 538,413,497 Net Unrealized Appreciation................................. 46,947,631 Accumulated Undistributed Net Investment Income............. 3,974,030 Accumulated Net Realized Gain............................... 1,182,950 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $590,881,762 ============ PREFERRED SHARES ($.01 par value, authorized 100,000,000 shares, 12,000 issued with liquidation preference of $25,000 per share)........................................ $300,000,000 ============ NET ASSETS INCLUDING PREFERRED SHARES....................... $890,881,762 ============
See Notes to Financial Statements 23 Statement of Operations For the Year Ended October 31, 2003 INVESTMENT INCOME: Interest.................................................... $44,506,539 ----------- EXPENSES: Investment Advisory Fee..................................... 5,355,897 Preferred Share Maintenance................................. 802,490 Administrative Fee.......................................... 446,325 Legal....................................................... 120,113 Trustees' Fees and Related Expenses......................... 101,262 Custody..................................................... 52,649 Other....................................................... 386,162 ----------- Total Expenses.......................................... 7,264,898 Less Credits Earned on Cash Balances.................... 1,302 ----------- Net Expenses............................................ 7,263,596 ----------- NET INVESTMENT INCOME....................................... $37,242,943 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 3,774,488 Futures................................................... (965,465) ----------- Net Realized Gain........................................... 2,809,023 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 45,190,571 End of the Period: Investments............................................. 47,184,831 Futures................................................. (237,200) ----------- 46,947,631 ----------- Net Unrealized Appreciation During the Period............... 1,757,060 ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 4,566,083 =========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(3,055,413) =========== NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS................................................ $38,753,613 ===========
24 See Notes to Financial Statements Statements of Changes in Net Assets
YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 ------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................... $ 37,242,943 $ 38,628,846 Net Realized Gain....................................... 2,809,023 6,482,908 Net Unrealized Appreciation/Depreciation During the Period................................................ 1,757,060 (5,984,542) Distributions to Preferred Shareholders: Net Investment Income................................. (3,055,413) (4,166,801) ------------ ------------ Change in Net Assets Applicable to Common Shares from Operations............................................ 38,753,613 34,960,411 Distributions to Common Shareholders: Net Investment Income................................. (34,036,119) (33,199,705) ------------ ------------ NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM INVESTMENT ACTIVITIES............................ 4,717,494 1,760,706 NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of the Period................................. 586,164,268 584,403,562 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $3,974,030 and $4,041,876, respectively)......................................... $590,881,762 $586,164,268 ============ ============
See Notes to Financial Statements 25 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
------------------------------ 2003 2002 (a) 2001 ------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 16.12 $ 16.07 $ 14.91 ------- ------- ------- Net Investment Income..................................... 1.02 1.06 1.13 Net Realized and Unrealized Gain/Loss..................... .13 .01 1.12 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income................................... (.08) (.11) (.27) Net Realized Gain....................................... -0- -0- -0- ------- ------- ------- Total from Investment Operations............................ 1.07 .96 1.98 Distributions Paid to Common Shareholders: Net Investment Income................................... (.94) (.91) (.82) Net Realized Gain....................................... -0- -0- -0- ------- ------- ------- NET ASSET VALUE, END OF THE PERIOD.......................... $ 16.25 $ 16.12 $ 16.07 ======= ======= ======= Common Share Market Price at End of the Period.............. $ 14.57 $ 14.30 $ 13.79 Total Return (b)............................................ 8.60% 10.49% 15.97% Net Assets Applicable to Common Shares at End of the Period (In millions)............................................. $ 590.9 $ 586.2 $ 584.4 Ratio of Expenses to Average Net Assets Applicable to Common Shares (c)................................................ 1.23% 1.35% 1.55% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c)........................... 6.28% 6.70% 7.26% Portfolio Turnover.......................................... 24% 38% 28% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (c)................................................ .81% .89% 1.01% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (d)........................... 5.77% 5.98% 5.51% SENIOR SECURITIES: Total Preferred Shares Outstanding.......................... 12,000 12,000 12,000 Asset Coverage Per Preferred Share (e)...................... $74,245 $73,861 $73,700 Involuntary Liquidating Preference Per Preferred Share...... $25,000 $25,000 $25,000 Average Market Value Per Preferred Share.................... $25,000 $25,000 $25,000
* Non-Annualized (a)As required, effective November 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses per share by $.01 and increase the ratio of net investment income to average net assets applicable to common shares from 6.69% to 6.70%. Per share, ratios and supplemental data for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (b)Total return assumes an investment at the common share 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 share market price at the end of the period indicated. (c)Ratios do not reflect the effect of dividend payments to preferred shareholders. (d)Ratios reflect the effect of dividend payments to preferred shareholders. (e)Calculated by subtracting the Trust's total liabilities (not including the preferred shares) from the Trust's total assets and dividing this by the number of preferred shares outstanding. 26
TWO MONTHS YEAR ENDED OCTOBER 31, ENDED YEAR ENDED AUGUST 31, - ----------------------- OCTOBER 31, ---------------------------------------------------- 2000 1999 1998 1998 1997 1996 1995 1994 - -------------------------------------------------------------------------------------------- $ 14.60 $ 17.39 $ 17.32 $ 16.60 $ 15.84 $ 15.73 $ 15.56 $ 17.04 ------- -------- -------- -------- -------- -------- -------- -------- 1.17 1.20 .21 1.26 1.28 1.30 1.31 1.34 .42 (2.30) .08 .72 .73 .10 .26 (1.42) (.34) (.24) (.02) (.30) (.29) (.30) (.32) (.28) -0- (.06) (.04) -0- -0- -0- -0- -0- ------- -------- -------- -------- -------- -------- -------- -------- 1.25 (1.40) .23 1.68 1.72 1.10 1.25 (.36) (.94) (.96) (.16) (.96) (.96) (.99) (1.08) (1.12) -0- (.43) -0- -0- -0- -0- -0- -0- ------- -------- -------- -------- -------- -------- -------- -------- $ 14.91 $ 14.60 $ 17.39 $ 17.32 $ 16.60 $ 15.84 $ 15.73 $ 15.56 ======= ======== ======== ======== ======== ======== ======== ======== $12.625 $13.1875 $16.8125 $16.1875 $ 15.75 $ 14.50 $ 14.25 $ 15.00 2.80% -14.47% 4.84%* 9.06% 15.87% 8.98% 2.39% -3.94% $ 542.1 $ 530.9 $ 630.6 $ 628.2 $ 601.9 $ 574.6 $ 570.7 $ 564.4 1.67% 1.60% 1.57% 1.57% 1.61% 1.61% 1.65% 1.64% 8.07% 7.43% 7.20% 7.42% 7.86% 8.08% 8.58% 8.23% 39% 80% 6%* 94% 54% 36% 49% 47% 1.07% 1.06% 1.07% 1.06% 1.07% 1.06% 1.07% 1.09% 5.71% 5.95% 6.48% 5.66% 6.04% 6.20% 6.48% 6.52% 12,000 12,000 6,000 6,000 6,000 6,000 6,000 6,000 $70,177 $ 69,241 $155,104 $154,696 $150,322 $145,764 $145,113 $144,074 $25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements 27 NOTES TO FINANCIAL STATEMENTS October 31, 2003 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Municipal Trust (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 seek to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Trust will invest in a portfolio consisting substantially of municipal obligations rated investment grade at the time of investment, but may invest up to 20% of its assets in unrated securities which are believed to be of comparable quality to those rated investment grade. The Trust commenced investment operations on September 27, 1991. 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 or dealers 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. Future contracts are valued at the settlement price established each day on the exchange on which they are traded. 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 segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At October 31, 2003, the Trust had $10,346,672 of when-issued and delayed delivery purchase commitments. C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond premium is amortized and 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 distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. 28 NOTES TO FINANCIAL STATEMENTS October 31, 2003 At October 31, 2003, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $845,123,949 ============ Gross tax unrealized appreciation........................... $ 53,837,999 Gross tax unrealized depreciation........................... (5,923,857) ------------ Net tax unrealized appreciation on investments.............. $ 47,914,142 ============
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 and a portion of futures gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during 2003 and 2002 were as follows:
2003 2002 Distribution paid from: Ordinary Income........................................... $190,906 $75,802 Long-term capital gain.................................... -0- -0- -------- ------- $190,906 $75,802 ======== =======
Due to inherent differences in the recognition of income, expenses and realized gains/losses under accounting principles generally accepted in the United States of America and federal income tax purposes, permanent differences between book and tax basis reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. A permanent book and tax difference of $219,257 related to book and tax accretion differences was reclassified from accumulated undistributed net investment income to accumulated net realized gain. As of October 31, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 65,280 Undistributed long-term capital gain........................ 945,753
Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of losses recognized for tax purposes on open futures transactions on October 31, 2003. F. EXPENSE REDUCTION During the year ended October 31, 2003, the Trust's custody fee was reduced by $1,302 as a result of credits earned on cash balances. 29 NOTES TO FINANCIAL STATEMENTS October 31, 2003 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 daily net assets of the Trust. In addition, the Trust will pay a monthly administrative fee to Van Kampen Investments Inc. or its affiliates (collectively "Van Kampen"), the Trust's Administrator, at an annual rate of ..05% of the average daily 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, 2003, the Trust recognized expenses of approximately $60,000 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, 2003, the Trust recognized expenses of approximately $74,300 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 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 upon retirement 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 $225,865,002 and $212,884,315, respectively. 4. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. In order to seek to manage the interest rate exposure of the Trust's portfolio in a changing interest rate environment, the Trust may purchase or sell financial futures contracts or engage in transactions involving interest rate swaps, caps, floors or collars. The trust expects to enter into these transactions primarily as a hedge against anticipated interest rate or fixed-income market changes, for duration management or for risk management purposes, but may also enter into these transaction to generate additional income. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed 30 NOTES TO FINANCIAL STATEMENTS October 31, 2003 until the disposal of the security underlying the futures contract. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. During the period, the Trust invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Trust generally invests in exchange traded futures contracts on U.S. Treasury Bonds and Notes and typically closes the contract prior to the delivery date. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Upon entering into futures contracts, the Trust maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a future commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the year ended October 31, 2003, were as follows:
CONTRACTS Outstanding at October 31, 2002............................. 1,063 Futures Opened.............................................. 1,438 Futures Closed.............................................. (2,403) ------ Outstanding at October 31, 2003............................. 98 ======
The futures contracts outstanding as of October 31, 2003, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 10-Year Futures December 2003 (Current Notional Value of $112,297 per contract)................................................. 19 $ (63,315) U.S. Treasury Notes 5-Year Futures December 2003 (Current Notional Value of $111,813 per contract)................................................. 79 (173,885) -- --------- 98 $(237,200) == =========
5. PREFERRED SHARES The Trust has outstanding 12,000 Auction Preferred Shares ("APS") in four series of 3,000 shares each. Dividends are cumulative and the dividend rate is periodically reset through an auction process. The dividend periods for Series A and C are generally 7 days. The dividend periods for Series B and D are 28 days. The average rate in effect on October 31, 2003 was 0.902%. During the year ended October 31, 2003, the rates ranged from 0.600% to 1.750%. 31 NOTES TO FINANCIAL STATEMENTS October 31, 2003 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 in the Statement of Operations. 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. 32 REPORT OF INDEPENDENT AUDITORS To the Board of Trustees and Shareholders of Van Kampen Municipal Trust: We have audited the accompanying statement of assets and liabilities of Van Kampen Municipal Trust (the "Trust"), including the portfolio of investments, as of October 31, 2003, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period 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 audits. The Trust's 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 financial highlights. We conducted our audits 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, 2003, by correspondence with the Trust's custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Van Kampen Municipal Trust as of October 31, 2003, the results of its operations, the changes in its net assets and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Chicago, Illinois December 8, 2003 33 DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's Common Shares, resulting in the acquisition of fewer Common 34 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 prorata 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 35 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN MUNICIPAL TRUST BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* THEODORE A. MYERS JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN INVESTMENT ADVISORY CORP. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 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 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, 2003. The Trust designated 99.5% of the income distributions as a tax-exempt income distribution. In January, the Trust provides tax information to shareholders for the preceding calendar year. * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. 36 RESULTS OF SHAREHOLDER VOTES The Annual Meeting of the Shareholders of the Trust was held on June 24, 2003, where shareholders voted on the election of trustees. 1) With regards to the election of the following trustees by the common shareholders of the Trust:
# OF SHARES ------------------------------ IN FAVOR WITHHELD - ------------------------------------------------------------------------------------------ Jerry D. Choate........................................... 32,236,795 383,490 Linda Hutton Heagy........................................ 32,234,577 385,708 R. Craig Kennedy.......................................... 32,231,321 388,964 Wayne W. Whalen........................................... 32,219,584 400,701 Suzanne H. Woolsey........................................ 32,232,764 387,521
The other trustees of the Trust whose terms did not expire in 2003 are David C. Arch, Rod Dammeyer, Howard J Kerr, Theodore A. Myers, Richard F. Powers, and Hugo F. Sonnenschein. 2) With regards to the authority to vote for the amendment to the Declaration of Trust:
# OF SHARES ---------------------------------- IN FAVOR AGAINST ABSTAIN ---------------------------------- 29,956,620 1,909,575 754,090
37 TRUSTEES AND OFFICERS The business and affairs of the Trust are managed under the direction of the Trust's Board of Trustees and the Trust's officers appointed by the Board of Trustees. The tables below list the trustees and executive officers of the Trust and their principal occupations during the last five years, other directorships held by trustees and their affiliations, if any, with Van Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are referred to herein collectively as the "Advisers." The term "Fund Complex" includes each of the investment companies advised by the Advisers or their affiliates as of the date of this Statement of Additional Information. Trustees serve until reaching their retirement age or until their successors are duly elected and qualified. Officers are annually elected by the trustees. INDEPENDENT TRUSTEES
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE David C. Arch (58) Trustee Trustee Chairman and Chief 90 Trustee/Director/Managing Blistex Inc. since 1991 Executive Officer of General Partner of funds 1800 Swift Drive Blistex Inc., a consumer in the Fund Complex. Oak Brook, IL 60523 health care products manufacturer. Former Director of the World Presidents Organization-Chicago Chapter. Director of the Heartland Alliance, a nonprofit organization serving human needs based in Chicago. J. Miles Branagan (71) Trustee Trustee Private investor. 88 Trustee/Director/Managing 1632 Morning Mountain Road since 2003 Co-founder, and prior to General Partner of funds Raleigh, NC 27614 August 1996, Chairman, in the Fund Complex. Chief Executive Officer and President, MDT Corporation (now known as Getinge/Castle, Inc., a subsidiary of Getinge Industrier AB), a company which develops, manufactures, markets and services medical and scientific equipment.
38
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jerry D. Choate (65) Trustee Trustee Prior to January 1999, 88 Trustee/Director/Managing 33971 Selva Road since 2003 Chairman and Chief General Partner of funds Suite 130 Executive Officer of the in the Fund Complex. Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a ("Allstate") and Allstate biotechnological company, Insurance Company. Prior and Director of Valero to January 1995, Energy Corporation, an President and Chief independent refining Executive Officer of company. Allstate. Prior to August 1994, various management positions at Allstate. Rod Dammeyer (63) Trustee Trustee President of CAC, llc., a 90 Trustee/Director/Managing CAC, llc. since 1991 private company offering General Partner of funds 4350 LaJolla Village Drive capital investment and in the Fund Complex. Suite 980 management advisory Director of TeleTech San Diego, CA 92122-6223 services. Prior to July Holdings Inc., 2000, Managing Partner of Stericycle, Inc., Equity Group Corporate TheraSense, Inc., GATX Investment (EGI), a Corporation, Arris Group, company that makes Inc. and Trustee of the private investments in University of Chicago other companies. Hospitals and Health Systems. Prior to May 2002, Director of Peregrine Systems Inc. Prior to February 2001, Vice Chairman and Director of Anixter International, Inc. and IMC Global Inc. Prior to July 2000, Director of Allied Riser Communications Corp., Matria Healthcare Inc., Transmedia Networks, Inc., CNA Surety, Corp. and Grupo Azcarero Mexico (GAM). Prior to April 1999, Director of Metal Management, Inc.
39
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Linda Hutton Heagy (55) Trustee Trustee Managing Partner of 88 Trustee/Director/Managing Heidrick & Struggles since 2003 Heidrick & Struggles, an General Partner of funds 233 South Wacker Drive executive search firm. in the Fund Complex. Suite 7000 Trustee on the University Chicago, IL 60606 of Chicago Hospitals Board, Vice Chair of the Board of the YMCA of Metropolitan Chicago and a member of the Women's Board of the University of Chicago. Prior to 1997, Partner of Ray & Berndtson, Inc., an executive recruiting firm. Prior to 1996, Trustee of The International House Board, a fellowship and housing organization for international graduate students. Prior to 1995, Executive Vice President of ABN AMRO, N.A., a bank holding company. Prior to 1992, Executive Vice President of La Salle National Bank. R. Craig Kennedy (51) Trustee Trustee Director and President of 88 Trustee/Director/Managing 11 DuPont Circle, N.W. since 2003 the German Marshall Fund General Partner of funds Washington, D.C. 20016 of the United States, an in the Fund Complex. independent U.S. foundation created to deepen understanding, promote collaboration and stimulate exchanges of practical experience between Americans and Europeans. Formerly, advisor to the Dennis Trading Group Inc., a managed futures and option company that invests money for individuals and institutions. Prior to 1992, President and Chief Executive Officer, Director and member of the Investment Committee of the Joyce Foundation, a private foundation. Howard J Kerr (68) Trustee Trustee Prior to 1998, President 90 Trustee/Director/Managing 736 North Western Avenue since 1992 and Chief Executive General Partner of funds P.O. Box 317 Officer of Pocklington in the Fund Complex. Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake investment holding Forest Bank & Trust. company. Director of the Marrow Foundation.
40
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Theodore A. Myers (73) Trustee Trustee Financial consultant, 36 Director of Met Life 550 Washington Avenue since 1991 Trustee or Managing Investors (formerly knows Glencoe, IL 60022 General Partner of other as COVA Financial Life funds in the Closed-End Insurance). Prior to Fund Complex. Prior to 1997, Director of McLouth 1998, Senior Financial Steel. Advisor (and, prior to 1997, an Executive Vice President, Chief Financial Officer and Director) of Qualitech Steel Corporation, a producer of high quality engineered steels for automotive, transportation and capital goods industries. Prior to 1997, member of the Arthur Andersen Chief Financial Officers' Advisory Committee. Jack E. Nelson (67) Trustee Trustee President of Nelson 88 Trustee/Director/Managing 423 Country Club Drive since 2003 Investment Planning General Partner of funds Winter Park, FL 32789 Services, Inc., a in the Fund Complex. financial planning company and registered investment adviser in the State of Florida. President of Nelson Ivest Brokerage Services Inc., a member of the NASD, Securities Investors Protection Corp. and the Municipal Securities Rulemaking Board. President of Nelson Sales and Services Corporation, a marketing and services company to support affiliated companies. Hugo F. Sonnenschein (63) Trustee Trustee President Emeritus and 90 Trustee/Director/Managing 1126 E. 59th Street since 1994 Honorary Trustee of the General Partner of funds Chicago, IL 60637 University of Chicago and in the Fund Complex. the Adam Smith Director of Winston Distinguished Service Laboratories, Inc. Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago. Trustee of the University of Rochester and a member of its investment committee. Member of the National Academy of Sciences, the American Philosophical Society and a fellow of the American Academy of Arts and Sciences.
41
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Suzanne H. Woolsey (61) Trustee Trustee Currently with Paladin 88 Trustee/Director/Managing 2101 Constitution Ave., N.W. since 2003 Capital Group/Paladin General Partner of funds Room 285 Homeland Security Fund. in the Fund Complex. Washington, D.C. 20418 Previously Chief Director of Neurogen Communications Officer of Corporation, a the National Academy of pharmaceutical company, Sciences/National since January 1998. Research Council, an independent, federally chartered policy institution, since 2001 and Chief Operating Officer from 1993 to 2001. Director of the Institute for Defense Analyses, a federally funded research and development center, Director of the German Marshall Fund of the United States, and Trustee of Colorado College. Prior to 1993, Executive Director of the Commission on Behavioral and Social Sciences and Education at the National Academy of Sciences/National Research Council. From 1980 through 1989, Partner of Coopers & Lybrand.
42 INTERESTED TRUSTEES*
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Mitchell M. Merin* (50) Trustee, Trustee President and Chief 88 Trustee/Director/Managing 1221 Avenue of the Americas President since 2002 Executive Officer of General Partner of funds New York, NY 10020 and Chief funds in the Fund in the Fund Complex. Executive Complex. Chairman, Officer President, Chief Executive Officer and Director of the Advisers and VK Advisors Inc. since December 2002. Chairman, President and Chief Executive Officer of Van Kampen Investments since December 2002. Director of Van Kampen Investments since December 1999. Chairman and Director of Van Kampen Funds Inc. since December 2002. President, Director and Chief Operating Officer of Morgan Stanley Investment Management since December 1998. President and Director since April 1997 and Chief Executive Officer since June 1998 of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Chairman, Chief Executive Officer and Director of Morgan Stanley Distributors Inc. since June 1998. Chairman since June 1998, and Director since January 1998 of Morgan Stanley Trust. Director of various Morgan Stanley subsidiaries. President of the Morgan Stanley Funds since May 1999. Previously Chief Executive Officer of Van Kampen Funds Inc. from December 2002 to July 2003, Chief Strategic Officer of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. and Executive Vice President of Morgan Stanley Distributors Inc. from April 1997 to June 1998. Chief Executive Officer from September 2002 to April 2003 and Vice President from May 1997 to April 1999 of the Morgan Stanley Funds.
43
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (57) Trustee Trustee Advisory Director of 90 Trustee/Director/Managing 1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds P.O. Box 5555 December 2002, Chairman, in the Fund Complex. Oakbrook Terrace, IL 60181 Director, President, Chief Executive Officer and Managing Director of Van Kampen Investments and its investment advisory, distribution and other subsidiaries. Prior to December 2002, President and Chief Executive Officer of funds in the Fund Complex. Prior to May 1998, Executive Vice President and Director of Marketing at Morgan Stanley and Director of Dean Witter, Discover & Co. and Dean Witter Realty. Prior to 1996, Director of Dean Witter Reynolds Inc. Wayne W. Whalen* (64) Trustee Trustee Partner in the law firm 90 Trustee/Director/Managing 333 West Wacker Drive since 1991 of Skadden, Arps, Slate, General Partner of funds Chicago, IL 60606 Meagher & Flom in the Fund Complex. (Illinois), legal counsel to funds in the Fund Complex.
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain funds in the Fund Complex by reason of his firm currently acting as legal counsel to such funds in the Fund Complex. Messrs. Merin and Powers are interested persons of funds in the Fund Complex and the Advisers by reason of their current or former positions with Morgan Stanley or its affiliates. 44 OFFICERS
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS Stephen L. Boyd (63) Vice President Officer Managing Director of Global Research Investment Management. 2800 Post Oak Blvd. since 1998 Vice President of funds in the Fund Complex. Prior to 45th Floor December 2002, Chief Investment Officer of Van Kampen Houston, TX 77056 Investments and President and Chief Operations Officer of the Advisers and Van Kampen Advisors Inc. Prior to May 2002, Executive Vice President and Chief Investment Officer of funds in the Fund Complex. Prior to May 2001, Managing Director and Chief Investment Officer of Van Kampen Investments, and Managing Director and President of the Advisers and Van Kampen Advisors Inc. Prior to December 2000, Executive Vice President and Chief Investment Officer of Van Kampen Investments, and President and Chief Operating Officer of the Advisers. Prior to April 2000, Executive Vice President and Chief Investment Officer for Equity Investments of the Advisers. Prior to October 1998, Vice President and Senior Portfolio Manager with AIM Capital Management, Inc. Prior to February 1998, Senior Vice President and Portfolio Manager of Van Kampen American Capital Asset Management, Inc., Van Kampen American Capital Investment Advisory Corp. and Van Kampen American Capital Management, Inc. Stefanie V. Chang (37) Vice President Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas since 2003 Vice President of funds in the Fund Complex. New York, NY 10020 Joseph J. McAlinden (60) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment New York, NY 10020 Investment Officer Management Inc. and Morgan Stanley Investments LP and Director of Morgan Stanley Trust for over 5 years. Executive Vice President and Chief Investment Officer of funds in the Fund Complex. Managing Director and Chief Investment Officer of Van Kampen Investments, the Advisers and Van Kampen Advisors Inc. since December 2002.
45
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS John R. Reynoldson (50) Vice President Officer Executive Director and Portfolio Specialist of the Advisers 1 Parkview Plaza since 2000 and Van Kampen Advisors Inc. Vice President of funds in the P.O. Box 5555 Fund Complex. Prior to July 2001, Principal and Co-head of Oakbrook Terrace, IL 60181 the Fixed Income Department of the Advisers and Van Kampen Advisors Inc. Prior to December 2000, Senior Vice President of the Advisers and Van Kampen Advisors Inc. Prior to May 2000, Senior Vice President of the investment grade taxable group for the Advisers. Prior to June 1999, Senior Vice President of the government securities bond group for Asset Management. Ronald E. Robison (64) Executive Vice Officer Chief Executive Officer and Chairman of Investor Services. 1221 Avenue of the Americas President and Principal since 2003 Executive Vice President and Principal Executive Officer of New York, NY 10020 Executive Officer funds in the Fund Complex. Chief Global Operations Officer and Managing Director of Morgan Stanley Investment Management Inc. Managing Director of Morgan Stanley. Managing Director and Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Vice President of the Morgan Stanley Funds. A. Thomas Smith III (46) Vice President and Officer Managing Director of Morgan Stanley, Managing Director and 1221 Avenue of the Americas Secretary since 1999 Director of Van Kampen Investments, Director of the New York, NY 10020 Advisers, Van Kampen Advisors Inc., the Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Managing Director and General Counsel-Mutual Funds of Morgan Stanley Investment Advisors, Inc. Vice President and Secretary of funds in the Fund Complex. Prior to July 2001, Managing Director, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, the Distributor, Investor Services, and certain other subsidiaries of Van Kampen Investments. Prior to December 2000, Executive Vice President, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, Van Kampen Advisors Inc., the Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Prior to January 1999, Vice President and Associate General Counsel to New York Life Insurance Company ("New York Life"), and prior to March 1997, Associate General Counsel of New York Life. Prior to December 1993, Assistant General Counsel of The Dreyfus Corporation. Prior to August 1991, Senior Associate, Willkie Farr & Gallagher. Prior to January 1989, Staff Attorney at the Securities and Exchange Commission, Division of Investment Management, Office of Chief Counsel.
46
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS John L. Sullivan (48) Vice President, Chief Officer Director and Managing Director of Van Kampen Investments, 1 Parkview Plaza Financial Officer and since 1996 the Advisers, Van Kampen Advisors Inc. and certain other P.O. Box 5555 Treasurer subsidiaries of Van Kampen Investments. Vice President, Oakbrook Terrace, IL 60181 Chief Financial Officer and Treasurer of funds in the Fund Complex. Head of Fund Accounting for Morgan Stanley Investment Management. Prior to December 2002, Executive Director of Van Kampen Investments, the Advisers and Van Kampen Advisors Inc.
47 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2003 Van Kampen Funds Inc. All rights reserved. VKQ ANR 12/03 Member NASD/SIPC. 12541L03-AS-12/03 Item 2. Code of Ethics. (a) The Trust has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Trust or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) Not applicable (d) Not applicable (e) Not applicable. (f) (1) The Trust's Code of Ethics is attached hereto as Exhibit 10A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Trust's Board of Trustees has determined that it has four "audit committee financial experts" serving on its audit committee, each of whom are "independent" Trustees : J. Miles Branagan, Jerry Choate, R. Craig Kennedy and Theodore A. Myers. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. Item 4. Principal Accountant Fees and Services. Applicable only for reports covering fiscal years ending on or after December 15, 2003. Item 5. Audit Committee of Listed Registrants. Applicable only for reports covering periods ending on or after the earlier of (i) the first annual shareholder meeting after January 15, 2004 or (ii) October 31, 2004. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. The Trust invests in exclusively non-voting securities and therefore this item is not applicable to the Trust. Item 8. [Reserved.] Item 9. Controls and Procedures (a) The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached herto. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Van Kampen Municipal Trust By: /s/ Ronald E. Robison ---------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: December 18, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison --------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: December 18, 2003 By: /s/ John L. Sullivan -------------------- Name: John L. Sullivan Title: Principal Financial Officer Date: December 18, 2003 EX-99.CODE 3 c80904exv99wcode.txt CODE OF ETHICS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS ADOPTED JULY 23, 2003 I. This Code of Ethics (the "Code") for the investment companies within the Van Kampen complex identified in Exhibit A (collectively, "Funds" and each, a "Fund") applies to each Fund's Principal Executive Officer, President, Principal Financial Officer and Treasurer (or persons performing similar functions) ("Covered Officers" each of whom are set forth in Exhibit B) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. - full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; - compliance with applicable laws and governmental rules and regulations; - prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Any question about the application of the Code should be referred to the General Counsel or his/her designee (who is set forth in Exhibit C). II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes, or appears to interfere, with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" (as defined in the Investment Company Act) of the Fund. The Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside the parameters of this Code, unless or until the General Counsel determines that any violation of such programs and procedures is also a violation of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Fund and its investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Fund and its investment adviser. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors/Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. Each Covered Officer must not: - use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly) to the detriment of the Fund; - cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or - use material non-public knowledge of portfolio transactions made or contemplated for, or actions proposed to be taken by, the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. Each Covered Officer must, at the time of signing this Code, report to the General Counsel all affiliations or significant business relationships outside the Morgan Stanley complex and must update the report annually. Conflict of interest situations should always be approved by the General Counsel and communicated to the relevant Fund or Fund's Board. Any activity or relationship that would present such a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if an immediate member of the Covered Officer's family living in the same household engages in such an activity or has such a relationship. Examples of these include: - service or significant business relationships as a director on the board of any public or private company; - accepting directly or indirectly, anything of value, including gifts and gratuities in excess of $100 per year from any person or entity with which the Fund has current or prospective business dealings, not including occasional meals or tickets for theatre or sporting events or other similar entertainment; provided it is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, principal underwriter, or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer should familiarize himself/herself with the disclosure and compliance requirements generally applicable to the Funds; - each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Directors/Trustees and auditors, or to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and their investment advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he has received, read and understands the Code; - annually thereafter affirm to the Boards that he has complied with the requirements of the Code; - not retaliate against any other Covered Officer, other officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and - notify the General Counsel promptly if he/she knows or suspects of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers(1) sought by a Covered Officer must be considered by the Board of the relevant Fund or Funds. The Funds will follow these procedures in investigating and enforcing this Code: - the General Counsel will take all appropriate action to investigate any potential violations reported to him; - if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; - any matter that the General Counsel believes is a violation will be reported to the relevant Fund's Audit Committee; - if the directors/trustees/managing general partners who are not "interested persons" as defined by the Investment Company Act (the "Independent Directors/Trustees/Managing General Partners") of the relevant Fund concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer or other appropriate disciplinary actions; - the Independent Directors/Trustees/Managing General Partners of the relevant Fund will be responsible for granting waivers of this Code, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code unless any provision of this Code conflicts with any applicable federal or state law, in which case the requirements of such law will govern. The Funds' and their investment advisers' and principal underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and Morgan Stanley's Code of Ethics are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibits A, B or C, must be approved or ratified by a majority vote of the Board of each Fund, including a majority of Independent Directors/Trustees/Managing General Partners. - ---------- (1) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics." VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Independent Directors/Trustees/Managing General Partners of the relevant Fund or Funds and their counsel, the relevant Fund or Funds and their counsel and the relevant investment adviser and its counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion I have read and understand the terms of the above Code. I recognize the responsibilities and obligations incurred by me as a result of my being subject to the Code. I hereby agree to abide by the above Code. ________________________ Date: __________________ EXHIBIT A FUND LIST Van Kampen Series Fund, Inc. on behalf of its series Van Kampen American Value Fund Van Kampen Emerging Markets Debt Fund Van Kampen Emerging Markets Fund Van Kampen Equity Growth Fund Van Kampen European Value Equity Fund Van Kampen Focus Equity Fund Van Kampen Global Equity Allocation Fund Van Kampen Global Value Equity Fund Van Kampen Growth and Income Fund II Van Kampen International Magnum Fund Van Kampen Japanese Equity Fund Van Kampen Mid Cap Growth Fund Van Kampen Global Franchise Fund Van Kampen Value Fund Van Kampen Worldwide High Income Fund Van Kampen U.S. Government Trust on behalf of its series Van Kampen U.S. Government Fund Van Kampen Tax Free Trust on behalf of its series Van Kampen Insured Tax Free Income Fund Van Kampen Strategic Municipal Income Fund Van Kampen California Insured Tax Free Fund Van Kampen Municipal Income Fund Van Kampen Intermediate Term Municipal Income Fund Van Kampen New York Tax Free Income Fund Van Kampen California Municipal Income Fund Van Kampen Michigan Tax Free Income Fund Van Kampen Missouri Tax Free Income Fund Van Kampen Ohio Tax Free Income Fund Van Kampen Trust on behalf of its series Van Kampen High Yield Fund Van Kampen Equity Trust on behalf of its series Van Kampen Utility Fund Van Kampen Growth Fund Van Kampen Aggressive Growth Fund Van Kampen Small Cap Value Fund Van Kampen Select Growth Fund Van Kampen Small Company Growth Fund Van Kampen Small Cap Growth Fund Van Kampen Value Opportunities Fund Van Kampen Tax-Exempt Trust on behalf of its Series Van Kampen High Yield Municipal Fund EXHIBIT A (CONT.) FUND LIST Van Kampen Equity Trust II on behalf of its Series Van Kampen Technology Fund Van Kampen International Advantage Van Kampen Pennsylvania Tax Free Income Fund Van Kampen Tax Free Money Fund Van Kampen Comstock Fund Van Kampen Corporate Bond Fund Van Kampen Emerging Growth Fund Van Kampen Enterprise Fund Van Kampen Equity Income Fund Van Kampen Government Securities Fund Van Kampen Growth and Income Fund Van Kampen Harbor Fund Van Kampen High Income Corporate Bond Fund Van Kampen Limited Maturity Government Fund Van Kampen Pace Fund Van Kampen Real Estate Securities Fund Van Kampen Reserve Fund Van Kampen Exchange Fund Van Kampen Life Investment Trust on behalf of its Portfolios Aggressive Growth Portfolio Comstock Portfolio Emerging Growth Portfolio Enterprise Portfolio Government Portfolio Growth and Income Portfolio Money Market Portfolio Van Kampen Municipal Income Trust Van Kampen California Municipal Trust Van Kampen High Income Trust Van Kampen High Income Trust II Van Kampen Investment Grade Municipal Trust Van Kampen Municipal Trust Van Kampen California Quality Municipal Trust Van Kampen Florida Quality Municipal Trust Van Kampen New York Quality Municipal Trust Van Kampen Ohio Quality Municipal Trust Van Kampen Pennsylvania Quality Municipal Trust Van Kampen Trust for Insured Municipals Van Kampen Trust for Investment Grade Municipals Van Kampen Trust for Investment Grade California Municipals Van Kampen Trust for Investment Grade Florida Municipals Van Kampen Trust for Investment Grade New Jersey Municipals Van Kampen Trust for Investment Grade New York Municipals Van Kampen Trust for Investment Grade Pennsylvania Municipals Van Kampen Municipal Opportunity Trust Van Kampen Advantage Municipal Income Trust Van Kampen Advantage Pennsylvania Municipal Income Trust Van Kampen Strategic Sector Municipal Trust EXHIBIT A (CONT.) FUND LIST Van Kampen Value Municipal Income Trust Van Kampen California Value Municipal Income Trust Van Kampen Massachusetts Value Municipal Income Trust Van Kampen New York Value Municipal Income Trust Van Kampen Ohio Value Municipal Income Trust Van Kampen Pennsylvania Value Municipal Income Trust Van Kampen Municipal Opportunity Trust II Van Kampen Advantage Municipal Income Trust II Van Kampen Select Sector Municipal Trust Van Kampen Senior Loan Fund Van Kampen Senior Income Trust Van Kampen Bond Fund Van Kampen Income Trust EXHIBIT B COVERED OFFICERS Mitchell M. Merin - President Ronald E. Robison - Executive Vice President and Principal Executive Officer John L. Sullivan - Vice President, Chief Financial Officer and Treasurer EXHIBIT C GENERAL COUNSEL'S DESIGNEE A. Thomas Smith III EX-99.CERT 4 c80904exv99wcert.txt CERTIFICATION I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Municipal Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: December 18, 2003 /s/ Ronald E. Robison --------------------------------- Principal Executive Officer I, John L. Sullivan, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen Municipal Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: b) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] e) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and f) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): c) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and d) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: December 18, 2003 /s/ John L. Sullivan ------------------------------- Principal Executive Officer EX-99.906CERT 5 c80904exv99w906cert.txt 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Municipal Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended October 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: December 18, 2003 /s/ Ronald E. Robison ------------------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Municipal Trust and will be retained by Van Kampen Municipal Trust and furnished to the Securities and Exchange Commission or its staff upon request. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen Municipal Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended October 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: December 18, 2003 /s/ John L. Sullivan ---------------------- John L. Sullivan Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Van Kampen Municipal Trust and will be retained by Van Kampen Municipal Trust and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----