N-CSR 1 c77312nvcsr.txt SEMIANNUAL 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 811-6471 Van Kampen Trust for Investment Grade Municipals -------------------------------------------------------------------------------- (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: 10/31/03 ----------- Date of reporting period: 04/30/03 ----------- Item 1. Report to Shareholders PERFORMANCE SUMMARY RETURN HIGHLIGHTS (as of April 30, 2003) ------------------------------- NYSE Ticker Symbol - VGM -------------------------------
----------------------------------------------------------------------- Six-month total return(1) 8.04% ----------------------------------------------------------------------- One-year total return(1) 17.95% ----------------------------------------------------------------------- Five-year average annual total return(1) 8.30% ----------------------------------------------------------------------- Ten-year average annual total return(1) 7.19% ----------------------------------------------------------------------- Life-of-Trust average annual total return(1) 7.99% ----------------------------------------------------------------------- Commencement date 01/24/92 ----------------------------------------------------------------------- Distribution rate as a % of closing common share market price(2) 6.83% ----------------------------------------------------------------------- Taxable-equivalent distribution rate as a % of closing common share market price(3) 11.12% ----------------------------------------------------------------------- Preferred share (Series A) rate(4) 1.200% ----------------------------------------------------------------------- Preferred share (Series B) rate(4) 1.080% ----------------------------------------------------------------------- Preferred share (Series C) rate(4) 0.980% ----------------------------------------------------------------------- Preferred share (Series D) rate(4) 0.970% ----------------------------------------------------------------------- Net asset value $17.54 ----------------------------------------------------------------------- Closing common share market price $16.16 ----------------------------------------------------------------------- Six-month high common share market price (4/30/03) $16.16 ----------------------------------------------------------------------- Six-month low common share market price (12/12/02) $15.15 -----------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE 1 (1) 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. (2) Distribution rate represents the monthly annualized distributions of the Trust at the end of the period and not the earnings of the Trust. (3) The taxable-equivalent distribution rate is calculated assuming the maximum 38.6% federal income tax rate effective for calendar year 2003. (4) See "Notes to Financial Statements" footnote #5, for more information concerning Preferred Share reset periods. A portion of the interest income may be taxable for those investors subject to the federal alternative minimum tax (AMT). Past performance is no guarantee of future results. Investment return, common share market price and net asset value will fluctuate and Trust shares, when sold, may be worth more or less than their original cost. An investment in the Trust is subject to investment risks, and you could lose money on your investment in the Trust. 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. 2 PORTFOLIO AT A GLANCE CREDIT QUALITY (as a percentage of long-term investments)
As of April 30, 2003 AAA/Aaa........................... 75.7% AA/Aa............................. 8.7% A/A............................... 12.6% BBB/Baa........................... 2.6% BB/Ba............................. 0.2% Non-Rated......................... 0.2%
TOP FIVE SECTORS (as a percentage of long-term investments)
As of April 30, 2003 General Purpose................... 21.6% Public Education.................. 11.7% Transportation.................... 9.0% Higher Education.................. 8.9% Health Care....................... 8.5%
Based upon the credit quality ratings as issued by Standard & Poor's Credit Market Services/Moody's Investor Services, respectively. Subject to change daily. NET ASSET VALUE AND COMMON SHARE MARKET PRICE (based upon quarter-end values--April 1993 through April 2003) [LINE GRAPH]
NET ASSET VALUE COMMON SHARE MARKET PRICE --------------- ------------------------- 4/93 $17.0600 $16.5000 $17.3900 $16.5000 $18.0900 $17.2500 $17.9100 $16.8750 $16.1100 $15.2500 6/94 $15.8400 $15.6250 $15.5700 $14.2500 $14.8500 $13.7500 $16.0800 $15.3750 6/95 $16.1600 $15.3750 $16.3200 $15.2500 $17.1300 $15.7500 $16.3800 $15.8750 6/96 $16.1400 $15.0625 $16.4400 $15.8750 $16.6900 $15.3750 $16.3100 $15.0000 6/97 $16.8500 $15.8125 $17.2600 $16.3750 $17.5300 $16.3750 $17.4600 $16.3750 6/98 $17.4600 $16.2500 $17.8700 $17.1875 $17.4800 $17.3750 $17.3000 $16.6875 6/99 $16.5700 $15.5620 $16.0000 $14.5000 $15.4200 $13.0000 $15.8200 $13.3125 6/00 $15.7700 $13.4375 $16.0200 $13.6875 $17.0000 $14.1600 $17.1200 $14.8000 6/01 $16.9000 $14.6100 $17.2600 $14.7500 $16.5400 $14.5600 $16.4100 $14.7500 6/02 $17.0700 $15.7000 $18.2100 $16.8700 $17.3900 $15.8300 $17.3800 $15.7700 4/03 $17.5400 $16.1600
The solid line above represents the trust's net asset value (NAV), which indicates overall changes in value among the trust's underlying securities. The trust's common share market price is represented by the dashed line, which indicates the price the market is willing to pay for shares of the trust at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions. 3 Q&A WITH YOUR PORTFOLIO MANAGER WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE SIX MONTHS ENDED APRIL 30, 2003. TOM BYRON, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 2000 AND HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1981. THE FOLLOWING DISCUSSION REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE. Q WHAT WAS THE MARKET ENVIRONMENT OF THE PAST SIX MONTHS, AND HOW DID THE TRUST PERFORM IN THAT ENVIRONMENT? A The environment over the past six months has been defined by two major themes. The first of these was the level of interest rates. The period began with interest rates at levels not seen in over three decades and, surprisingly for many, ended with rates slightly lower. The Federal Reserve Board (the Fed) helped keep rates low with a widely anticipated rate cut in November, driven by economic uncertainty and geopolitical risk. The low level of rates led to a boom in issuance by municipalities seeking to lock in low financing costs. As a result, issuance reached a record level of $354 billion in 2002 and continued to be exceptional in the first quarter of 2003. The other theme in the market during the period was the relative attractiveness of municipal bonds, which produced enough demand to absorb the record issuance. Investors, wary of volatility in the equity market and in the geopolitical arena, flocked to perceived safe haven investments. Their risk aversion counteracted growing expectations for economic recovery and rising interest rates, and was a key factor in keeping interest rates at historically low levels. In their ongoing preference for low-risk assets, investors bid Treasury prices up to such high levels that municipal bonds became as attractively valued as they have ever been relative to Treasuries. Insurance companies also moved heavily into municipal bonds as their mainstay corporate bond holdings became less attractive. At the same time, issuers recognized investor concerns over economic weakness by insuring roughly 50 percent of all issuance. This credit enhancement feature made municipal bonds even more attractive to risk-averse investors. While lower financing costs were a boon to municipal issuers, the continuing weakness in the economy had a negative impact on municipal credit quality, particularly in the first quarter of 2003. Moody's upgrades barely exceeded the number of downgrades in the first quarter, with 4 credit quality facing continued pressure from rising social service costs and weak national and regional economic conditions. As a result, municipalities face enormous deficits in 2003, when their combined shortfall is expected to reach $90 billion. Performance along the yield curve was varied. The Fed's November rate cut fueled a rally in short-term bonds that helped pull yields lower at the front end of the curve. Despite that rally, the best performing segment of the curve was the long-intermediate portion where performance was largely driven by buying activity among institutional investors drawn to the bonds' attractive total return potential. The trust's monthly dividend of $0.0920 per share translated to a distribution rate of 6.83 percent based on the trust's closing common share market price on April 30, 2003. Based on these figures, investors would have to earn a distribution rate of 11.12 percent on a taxable investment (for an investor in the 38.60 percent federal income tax bracket) to match the tax-exempt yield provided by the trust. For the six months ended April 30, 2003, the trust produced a total return of 8.04 percent based on common share market price. By comparison, the Lehman Brothers Municipal Bond Index posted a total return of 3.59 percent for the same period. Of course, past performance is no guarantee of future results. Investment return, common share market price and net asset value 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 Lehman Brothers Municipal Bond Index is an unmanaged, broad-based statistical composite of municipal bonds. Index returns do not include any sales charges or fees that would be paid by an investor purchasing the securities the index represents. Such costs would lower performance. It is not possible to invest directly in an index. For additional information, please refer to the performance summary section. Q WHAT STRATEGIES DID YOU PURSUE IN MANAGING THE TRUST? A While interest rates fell somewhat during the period, they remained largely confined to a relatively tight trading range at historically low levels. As a result, there were fewer compelling opportunities for reinvesting the proceeds of sales from the portfolio than we've seen in some time. This kept the portfolio's turnover relatively low as we attempted to protect the dividend by limiting the likelihood of having to reinvest in lower-yielding securities. Overall, our focus over the period was on positioning the portfolio to perform well in the event of rising interest rates, while also maintaining an attractive yield. One of our primary methods for doing this was to purchase premium bonds with maturities of between 15 and 20 years and shorter call dates. The yield of these bonds is competitive, yet their interest rate volatility is more closely related to the 10-year call feature. Our quantitative 5 analysis showed that this segment of the yield curve offered the optimal combination of total return potential and downside protection. Our approach also continued to emphasize active trading of highly liquid bonds to capture shifts in relative value between various sectors and state markets. For example, California was a major issuer of debt during the period, and issued so much that prices for the state's debt temporarily dropped due to the influx of supply. We took advantage of this issuance by purchasing several well-structured deals for the portfolio. We anticipate that these bonds should return to fair value, and when they do we may consider selling them. The portfolio also enjoyed the fruits of a long-running strategy during the period. Several years ago, we purchased some securities that were at the time deeply discounted, with coupons well below the market rate. They were so out of favor that we were able to purchase them at extremely attractive prices. As interest rates have fallen over the intervening years, however, the bonds have come closer and closer to being current coupons. Their falling yields have given the portfolio a substantial boost in terms of price performance, and once the bonds met their performance objectives we sold them into strong retail demand and reinvested the proceeds into premium intermediate and other securities with better total return prospects. The troubled economy led us to trim some of the portfolio's holdings, and to avoid some sectors altogether. In the course of their credit monitoring, our analysts came to the conclusion that one of the portfolio's healthcare holdings was likely to experience credit--and thus price--performance difficulties. We sold the position in order to protect the trust from any deterioration in the issuer's financial health. One of the sectors we avoided during the period was tobacco bonds. These bonds were issued by states seeking to securitize their future income streams resulting from settlements from class action suits against the major tobacco companies. Recent litigation in Illinois resulted in a judge awarding billions more in a suit alleging that the companies misled smokers about the amount of nicotine in "light" cigarettes. In order to appeal, the law required the companies to put up such substantial amounts of money that some began talking about potential bankruptcy, and the tobacco bonds' credit ratings and price performance suffered accordingly. Our decision not to invest in these securities was a benefit to shareholders during the period. 6 BY THE NUMBERS YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited) 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 152.1% ALABAMA 1.3% $ 750 Birmingham Baptist Med Ctr AL Baptist Hlth Sys Ser A........................ 5.875% 11/15/24 $ 791,722 2,000 Jefferson Cnty, AL Swr Rev Cap Impt Wts Ser A (FGIC Insd)................. 5.000 02/01/41 2,021,760 3,000 Jefferson Cnty, AL Wts Ser A (AMBAC Insd)................................. 5.000 04/01/09 3,352,980 ------------- 6,166,462 ------------- ARIZONA 1.8% 2,800 Phoenix, AZ Civic Impt Corp Arpt Rev Jr Lien (FGIC Insd)................... 5.375 07/01/29 2,847,712 4,375 Salt River Proj AZ Agric Impt Salt River Proj Ser A Rfdg................. 5.250 01/01/06 4,791,194 1,000 Scottsdale, AZ Indl Dev Auth Hosp Rev Scottsdale Hlthcare................... 5.800 12/01/31 1,034,640 ------------- 8,673,546 ------------- CALIFORNIA 10.8% 2,895 ABC CA Uni Sch Dist Cap Apprec Ser B (FGIC Insd)........................... * 08/01/20 1,246,326 1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt Proj Ser C (FSA Insd)............ 6.000 09/01/16 1,579,435 1,000 California St Dept Wtr Res Pwr Ser A..................................... 6.000 05/01/15 1,154,090 2,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).......................... 5.500 05/01/16 2,259,180 4,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).......................... 5.375 05/01/18 4,422,800 1,320 California St Dept Wtr Res Pwr Ser A (MBIA Insd)........................... 5.125 05/01/19 1,416,096 1,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)..... 5.375 10/01/20 1,091,000 3,000 Florin, CA Res Consv Dist Cap Impt Elk Grove Wtr Svc B (MBIA Insd)........... 5.000 03/01/33 3,084,840 2,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg (MBIA Insd).... * 01/15/17 1,001,200
See Notes to Financial Statements 7 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $20,750 Foothill/Eastern Corridor Agy CA Toll Rd Rev Sr Lien Ser A (Escrowed to Maturity) (a)......................... * 01/01/23 $ 7,984,392 3,000 Fremont, CA Uni Sch Dist Ser A (FGIC Insd)................................. 5.000% 08/01/25 3,113,160 2,500 Los Angeles, CA Uni Sch Dist Ser A (FSA Insd)............................ 5.250 07/01/20 2,725,025 4,020 Oakland, CA Uni Sch Dist (FGIC Insd)................................. 5.250 08/01/18 4,387,307 3,000 Port Oakland, CA Ser M (FGIC Insd).... 5.250 11/01/18 3,295,290 2,000 Salinas, CA Uni High Sch Dist Ser A (MBIA Insd)........................... 5.000 06/01/27 2,066,020 3,000 San Francisco, CA City & Cnty Second Ser Issue 29 B Rfdg (FGIC Insd)....... 5.125 05/01/20 3,218,400 3,745 Santa Clarita, CA Cmnty College (FGIC Insd)................................. 5.000 08/01/23 3,912,589 3,000 Temecula, CA Redev Agy Tax Temecula Redev Proj No 1 (MBIA Insd)........... 5.250 08/01/36 3,148,680 ------------- 51,105,830 ------------- COLORADO 2.6% 4,000 Adams & Arapahoe Cntys CO Sch Dist 28 Ser A (FSA Insd)...................... 5.250 12/01/20 4,339,800 1,000 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev E-470 Proj Ser B (Prerefunded @ 08/31/05)............................. 6.950 08/31/20 1,155,530 2,000 Aurora, CO Ctfs Part (AMBAC Insd)..... 5.500 12/01/30 2,173,560 1,000 Colorado Hlth Fac Auth Rev Catholic Hlth Initiatives Ser A................ 5.500 03/01/32 1,029,890 1,125 Colorado Hlth Fac Auth Rev Hosp Portercare Adventist Hlth............. 6.500 11/15/31 1,226,779 181 Colorado Hsg Fin Auth Single Family Pgm Sr Ser B1......................... 7.650 11/01/26 185,947 1,805 Lakewood, CO Ctfs Part (AMBAC Insd)... 5.300 12/01/16 1,999,615 ------------- 12,111,121 ------------- CONNECTICUT 1.1% 3,000 Bridgeport, CT Ser A Rfdg (FGIC Insd)................................. 5.375 08/15/14 3,382,590 1,830 Connecticut St Spl Oblig Pkg Rev Bradley Intl Arpt Ser A (ACA Insd).... 6.600 07/01/24 1,981,066 ------------- 5,363,656 -------------
See Notes to Financial Statements 8 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE DISTRICT OF COLUMBIA 0.8% $ 1,600 District of Columbia Ser E (Prerefunded @ 06/01/03) (FSA Insd)... 6.000% 06/01/13 $ 1,637,952 2,000 Metropolitan Washington DC Arpt Auth Sys Ser A (FGIC Insd)................. 5.250 10/01/32 2,043,900 ------------- 3,681,852 ------------- FLORIDA 10.5% 10,950 Dade Cnty, FL Spl Oblig Cap Apprec Ser B Rfdg (Prerefunded @ 10/01/08) (AMBAC Insd)................................. * 10/01/26 3,135,094 3,000 Escambia Cnty, FL Hlth Fac Auth Hlth Fac Rev FL Hlthcare Fac Ln (AMBAC Insd)................................. 5.950 07/01/20 3,288,420 2,500 Florida St Brd Ed Cap Outlay Pub Ed Ser C (FGIC Insd)..................... 5.750 06/01/29 2,806,175 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd)........................... 6.000 07/01/14 1,173,740 1,400 Florida St Dept Corrections Ctf Part Okeechobee Correctional (AMBAC Insd)................................. 6.250 03/01/15 1,538,530 1,200 Gulf Breeze, FL Rev Loc Govt Ln E (FGIC Insd)........................... 5.050 12/01/20 1,310,280 2,000 Gulf Breeze, FL Rev Loc Govt Ln E (FGIC Insd)........................... 5.150 12/01/20 2,231,820 4,550 Hillsborough Cnty, FL Sch Dist (AMBAC Insd) (a)............................. 5.375 10/01/17 5,029,297 1,000 Hillsborough Cnty, FL Util Jr Lien Rfdg (AMBAC Insd)..................... 5.000 08/01/06 1,104,140 2,000 Jacksonville, FL Sales Tax Rev Better Jacksonville (MBIA Insd).............. 5.250 10/01/19 2,194,260 1,000 Jea, FL Elec Sys Rev Ser 3 Ser A...... 5.500 10/01/41 1,075,010 2,000 Miami-Dade Cnty, FL Aviation Miami Intl Arpt (FGIC Insd)................. 5.375 10/01/27 2,067,400 1,500 Miami-Dade Cnty, FL Aviation Ser A (FSA Insd)............................ 5.000 10/01/33 1,507,215 2,000 Miami-Dade Cnty, FL Aviation Ser A (FSA Insd)............................ 5.125 10/01/35 2,020,320 2,000 Miami-Dade Cnty, FL Hlth Fac Miami Children Hosp Ser A Rfdg (AMBAC Insd)................................. 5.000 08/15/20 2,110,100 1,980 Miami-Dade, FL Sch Brd Ser C (FSA Insd)................................. 5.500 10/01/13 2,246,013
See Notes to Financial Statements 9 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE FLORIDA (CONTINUED) $ 2,000 Palm Beach Cnty, FL Sch Brd Ctf Ser E Rfdg (AMBAC Insd)..................... 5.250% 08/01/11 $ 2,270,820 1,655 Reedy Creek Impt Dist FL Ser A Rfdg (AMBAC Insd).......................... 5.500 06/01/11 1,907,321 3,465 Reedy Creek Impt Dist FL Ser C (AMBAC Insd)................................. 4.750 06/01/15 3,573,697 1,210 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA Insd)............................ 5.500 07/01/14 1,377,222 1,000 Tallahassee, FL Lease Rev FL St Univ Proj Ser A (MBIA Insd)................ 5.500 08/01/17 1,121,320 1,250 Tampa, FL Hosp Rev Cap Impt H Lee Moffitt Ser A......................... 5.750 07/01/19 1,311,750 2,880 Tampa, FL Occupational License Ser A Rfdg (FGIC Insd)...................... 5.375 10/01/15 3,256,963 ------------- 49,656,907 ------------- GEORGIA 2.8% 1,500 George L Smith ll GA World Congress Cent Auth Rev Domed Stadium Proj Rfdg (MBIA Insd)........................... 5.500 07/01/20 1,595,700 5,660 Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA Insd) (a)....................... 6.500 01/01/17 7,032,550 240 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (MBIA Insd).... 6.500 01/01/17 300,838 4,000 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd) (a).... 5.250 11/01/16 4,420,360 ------------- 13,349,448 ------------- HAWAII 0.3% 1,385 Honolulu, HI City & Cnty Ser B (FGIC Insd)................................. 5.500 10/01/11 1,595,257 ------------- ILLINOIS 15.7% 1,395 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA Insd)........................... * 01/01/23 507,250 2,000 Chicago, IL Brd of Ed (FGIC Insd)..... 5.500 12/01/31 2,160,180 2,000 Chicago, IL Brd of Ed Chicago Sch Reform (AMBAC Insd)................... 5.750 12/01/20 2,261,480 4,865 Chicago, IL Cap Apprec (Prerefunded @ 07/01/05) (AMBAC Insd)................ * 07/01/16 2,343,860 1,500 Chicago, IL Lakefront Millennium Pk Facs (MBIA Insd)...................... 5.125 01/01/28 1,543,185
See Notes to Financial Statements 10 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE ILLINOIS (CONTINUED) $ 7,000 Chicago, IL O'Hare Intl Arpt Rev Genl Arpt Second Lien Ser A Rfdg (MBIA Insd) (a)............................. 6.375% 01/01/12 $ 7,641,620 2,000 Chicago, IL O'Hare Intl Arpt Rev Second Lien Passenger Fac B (AMBAC Insd)................................. 5.500 01/01/17 2,220,200 3,500 Chicago, IL Proj Ser A Rfdg (MBIA Insd) (a)............................. 5.000 01/01/31 3,560,130 2,000 Chicago, IL Wastewtr Transmission Rev Second Lien (MBIA Insd)............... 5.750 01/01/25 2,227,800 1,000 Chicago, IL Wastewtr Transmission Rev Second Lien (Prerefunded @ 01/01/10) (MBIA Insd)........................... 6.000 01/01/30 1,185,270 2,870 Cook Cnty, IL Cap Impt Ser A (FGIC Insd)................................. 5.000 11/15/28 2,925,735 3,500 Du Page Cnty, IL Fst Presv Dist....... * 11/01/10 2,660,875 2,545 Du Page Cnty, IL Trans Rev (FSA Insd)................................. 5.750 01/01/15 2,903,056 845 East Peoria, IL Ser C Rfdg............ 7.000 05/01/17 888,805 1,310 Elgin, IL Ser B Rfdg.................. 5.750 12/15/13 1,548,525 1,600 Grundy, Kendall, & Will Cntys (AMBAC Insd)................................. 5.500 05/01/15 1,791,456 1,250 Illinois Dev Fin Auth Rev Bradley Univ Proj (AMBAC Insd)..................... 5.375 08/01/24 1,334,325 1,475 Illinois Dev Fin Auth Rev Loc Govt Pgm Geneva Cmnty 304 B (FSA Insd)......... 5.750 01/01/15 1,671,529 1,145 Illinois Dev Fin Auth Rev Loc Govt Pgm Geneva Cmnty 304 B (FSA Insd)......... 5.750 01/01/17 1,284,587 3,285 Illinois Dev Fin Auth Rev Presbyterian Home Lake Proj Ser B (FSA Insd)....... 6.300 09/01/22 3,735,669 2,000 Illinois Edl Fac Auth Rev Lewis Univ.................................. 6.100 10/01/16 2,047,300 1,250 Illinois Hlth Fac Auth Rev Evangelical Hosp Ser C (FSA Insd)................. 6.750 04/15/17 1,277,687 700 Illinois Hlth Fac Auth Rev Highland Park Hosp Proj Ser A (Prerefunded @ 10/01/07) (MBIA Insd)................. 5.750 10/01/17 817,292 1,000 Illinois Hlth Fac Auth Rev Midwest Physician Grp Ltd Rfdg................ 5.500 11/15/19 797,230 2,000 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys Rfdg..................... 6.000 11/15/10 2,059,880 2,275 Illinois Hlth Fac Auth Rev South Suburban Hosp (Escrowed to Maturity)............................. 7.000 02/15/18 2,896,848 1,000 Illinois St (FGIC Insd)............... 5.250 12/01/20 1,070,780
See Notes to Financial Statements 11 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE ILLINOIS (CONTINUED) $ 2,000 Illinois St First Ser (FGIC Insd)..... 5.375% 11/01/14 $ 2,239,080 4,000 Illinois St First Ser (FSA Insd)...... 5.250 12/01/20 4,310,480 250 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Proj (FGIC Insd)............ 5.375 12/15/18 274,945 8,845 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Ser A (FGIC Insd) (a)....... * 06/15/16 4,869,261 3,000 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Ser A (MBIA Insd)........... 5.250 06/15/42 3,136,980 1,005 Naperville, IL Ser A.................. 5.000 12/01/10 1,125,097 1,105 Saint Clair Cnty, IL Pub Bldg Comm Bldg Rev Cap Apprec Ser B (FGIC Insd)................................. * 12/01/15 631,596 1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux (MBIA Insd)....................... * 04/01/29 252,580 ------------- 74,202,573 ------------- INDIANA 3.6% 2,000 Indiana Transn Fin Auth Toll Rd Lease Rev Rfdg (AMBAC Insd)................. 5.375 07/01/09 2,251,080 4,500 Indianapolis, IN Arpt Auth Rev Spl Fac Fed Express Corp Proj (a)............. 7.100 01/15/17 4,785,345 1,935 Logansport, IN Sch Bldg Corp First Mtg (FGIC Insd)........................... 5.500 07/15/13 2,181,558 1,000 Marion Cnty, IN Convention & Rec Fac Auth Excise Tax Rev (MBIA Insd)....... * 06/01/14 617,240 1,280 North Adams, IN Cmnty Schs Renovation Bldg Corp Cap Apprec First Mtg (FSA Insd)................................. * 01/15/19 594,701 1,200 North Adams, IN Cmnty Schs Renovation Bldg Corp Cap Apprec First Mtg (FSA Insd)................................. * 07/15/15 694,512 1,500 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt.................................. 5.950 12/01/29 1,373,220 1,605 Richland Beanblossom, IN Sch First Mtg (FGIC Insd)........................... 5.500 07/15/12 1,822,895 2,530 Vigo Cnty, IN Sch Bldg Corp First Mtg Impt & Rfdg (FSA Insd)................ 5.250 07/10/24 2,664,368 ------------- 16,984,919 -------------
See Notes to Financial Statements 12 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE IOWA 0.8% $ 1,685 Des Moines, IA Pub Pkg Sys Ser A (FGIC Insd)................................. 5.750% 06/01/15 $ 1,939,654 1,785 Des Moines, IA Pub Pkg Sys Ser A (FGIC Insd)................................. 5.750 06/01/16 2,052,090 ------------- 3,991,744 ------------- KANSAS 0.5% 1,975 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (MBIA Insd)................... 6.000 09/01/09 2,332,218 ------------- KENTUCKY 2.0% 1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/ Northn KY Intl Arpt Ser A Rfdg (MBIA Insd)...................... 6.200 03/01/08 1,146,690 1,500 Kenton Cnty, KY Arpt Brd Rev Cincinnati/ Northn KY Intl Arpt Ser A Rfdg (MBIA Insd)...................... 6.250 03/01/09 1,722,480 945 Kentucky Hsg Corp Hsg Rev Ser B....... 6.250 07/01/28 1,003,562 1,500 Kentucky St Ppty & Bldg Proj No 69 Ser A..................................... 5.000 08/01/05 1,618,200 1,000 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (FSA Insd)... 5.625 07/01/14 1,129,240 2,450 Louisville & Jefferson Cnty, KY Swr Ser A (MBIA Insd)..................... 5.500 05/15/16 2,766,221 ------------- 9,386,393 ------------- LOUISIANA 0.4% 2,000 Louisiana St Ser A (FGIC Insd)........ 5.500 11/15/03 2,047,540 ------------- MAINE 0.6% 2,650 Maine Muni Bank Ser A Rfdg (Prerefunded @ 06/01/03) (MBIA Insd)................................. 5.800 11/01/20 2,713,679 ------------- MARYLAND 1.0% 2,250 Maryland St Trans Auth Arpt Baltimore/ Wash Intl Arpt B (AMBAC Insd)......... 5.125 03/01/24 2,306,295 2,350 Northeast MD Waste Disp Auth Rfdg (AMBAC Insd).......................... 5.500 04/01/16 2,584,647 ------------- 4,890,942 -------------
See Notes to Financial Statements 13 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MASSACHUSETTS 3.1% $ 2,000 Massachusetts Muni Whsl Elec Co Nuclear Proj 5 (MBIA Insd)............ 5.250% 07/01/13 $ 2,227,600 2,625 Massachusetts Muni Whsl Elec Co Pwr Supply Sys Rev Ser A (Prerefunded @ 07/01/04) (AMBAC Insd)................ 5.000 07/01/14 2,795,257 5,000 Massachusetts St Cons Ln Ser E (FSA Insd)................................. 5.250 01/01/20 5,403,050 1,500 Massachusetts St Fed Hwy Grant Antic Nt Ser A.............................. 5.750 06/15/14 1,722,900 500 Massachusetts St Hlth & Ed Fac Auth Rev Hlthcare Sys Covenant Hlth........ 6.000 07/01/31 523,480 1,000 Massachusetts St Hlth & Ed Fac Auth Rev Partn Hlthcare Sys Ser C.......... 5.750 07/01/32 1,057,180 1,000 Massachusetts St Indl Fin Agy Rev Wentworth Institute Tech.............. 5.650 10/01/18 1,044,870 ------------- 14,774,337 ------------- MICHIGAN 5.9% 2,500 Detroit, MI Downtown Dev Auth Tax Increment Rev Dev Area No 1 Proj Ser A Rfdg (MBIA Insd)...................... 4.750 07/01/25 2,514,075 3,015 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1.................. * 07/01/17 1,489,320 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1.................. * 07/01/18 1,412,394 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1.................. * 07/01/19 1,323,578 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1.................. * 07/01/22 1,081,987 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1.................. * 07/01/23 1,011,044 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1.................. * 07/01/24 945,439 2,965 Detroit, MI Wtr Supply Sys Rev Sr Lien Ser C Rfdg (MBIA Insd)................ 5.250 07/01/20 3,206,321 3,500 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA Insd).................... * 06/01/15 2,087,995 2,765 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA Insd).................... * 06/01/16 1,558,382 1,000 Grand Rapids, MI Wtr Supply Sys Rfdg (FGIC Insd)........................... 5.750 01/01/13 1,140,400
See Notes to Financial Statements 14 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MICHIGAN (CONTINUED) $ 1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Cent............. 5.250% 05/15/26 $ 1,208,060 2,000 Michigan Muni Bd Auth Rev Clean Wtr Rev Fd................................ 5.250 10/01/18 2,197,020 2,850 Michigan St Hosp Fin Auth Rev Ascension Hlth Cr Ser A (Prerefunded @ 11/15/09) (MBIA Insd)................. 5.750 11/15/18 3,377,791 1,500 Michigan St Strategic Fd Detroit Edison Co Proj C Rfdg (XLCA Insd)..... 5.450 12/15/32 1,558,875 1,000 Michigan St Strategic Fd Detroit Edison Pollutn Ctl Ser B Rfdg......... 5.650 09/01/29 1,021,430 1,000 Wayne Charter Cnty, MI Arpt Rev Detroit Met Wayne Cnty Ser A (MBIA Insd)................................. 5.000 12/01/22 1,015,410 ------------- 28,149,521 ------------- MINNESOTA 1.7% 5,000 Minneapolis & Saint Paul, MN Metro Arpts Comm Arpt Rev Ser A (FGIC Insd) (a)................................... 5.125 01/01/31 5,169,800 2,800 Minnesota Agriculture & Econ Dev Brd Rev Hlthcare Sys Fairview Hosp Ser A (MBIA Insd)........................... 5.750 11/15/26 3,078,740 ------------- 8,248,540 ------------- MISSISSIPPI 1.5% 500 Gulfport, MS Hosp Fac Rev Mem Hosp at Gulfport Proj A....................... 5.750 07/01/31 517,235 3,000 Medical Cent Edl Bldg Corp MS Rev Univ MS Med Cent Proj (Prerefunded @ 12/01/04) (MBIA Insd)................. 5.900 12/01/23 3,279,960 3,250 Mississippi Business Fin Corp MS Pollutn Ctl Rev Sys Energy Res Inc Proj.................................. 5.875 04/01/22 3,209,635 ------------- 7,006,830 -------------
See Notes to Financial Statements 15 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MISSOURI 1.3% $ 1,500 Cape Girardeau Cnty, MO Indl Dev Auth Hlthcare Fac Rev Southeast MO Hosp Assoc................................. 5.625% 06/01/27 $ 1,535,265 1,625 Jefferson Cnty, MO Reorg Sch Dist No R-6 (FGIC Insd)....................... 5.625 03/01/20 1,808,495 1,500 Kansas City, MO Met Cmnty Impt Leasehold Jr College Rfdg (FGIC Insd)................................. 5.500 07/01/17 1,665,885 1,000 Missouri St Hwys & Trans Ser A........ 5.125 02/01/17 1,085,950 ------------- 6,095,595 ------------- NEBRASKA 0.3% 1,190 Dodge Cnty, NE Sch Dist No 001 Fremont (FSA Insd)............................ 5.750 12/15/13 1,379,424 ------------- NEVADA 0.3% 1,500 Reno, NV Sr Lien Retrac Reno Trans Proj (AMBAC Insd)..................... 5.125 06/01/32 1,544,070 ------------- NEW HAMPSHIRE 0.5% 1,000 New Hampshire Hlth & Ed Fac Auth Rev Derryfield Sch........................ 7.000 07/01/30 1,034,360 1,000 New Hampshire St Bus Fin Auth Wtr Fac Rev Pennichuck Wtrwks Inc (AMBAC Insd)................................. 6.300 05/01/22 1,142,580 ------------- 2,176,940 ------------- NEW JERSEY 10.4% 1,500 New Jersey Econ Dev Auth Rev Trans Proj Sublease Ser A (FSA Insd)........ 5.250 05/01/17 1,645,440 4,000 New Jersey Econ Dev Auth Sch Facs Constr Ser C (MBIA Insd).............. 5.000 06/15/16 4,342,920 25,000 New Jersey Econ Dev Auth St Contract Econ Recovery (MBIA Insd) (a)......... 5.900 03/15/21 29,796,250 2,000 New Jersey Hlthcare Fac Fin Auth Rev Gen Hosp Ctr at Passaic (Escrowed to Maturity) (FSA Insd).................. 6.000 07/01/06 2,225,000 3,000 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser A (AMBAC Insd)........... 5.250 09/01/19 3,268,860 1,000 New Jersey St Tpk Auth Tpk Rev Ser A (MBIA Insd)........................... 6.000 01/01/11 1,175,280
See Notes to Financial Statements 16 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW JERSEY (CONTINUED) $ 3,500 New Jersey St Trans Corp Ctfs Fed Trans Admin Grant Ser A (AMBAC Insd)................................. 5.500% 09/15/13 $ 4,047,715 2,385 New Jersey St Trans Corp Ctfs Fed Trans Admin Grants Ser A (Prerefunded @ 09/15/09) (AMBAC Insd).............. 5.750 09/15/11 2,797,486 ------------- 49,298,951 ------------- NEW YORK 23.1% 1,500 Long Island Pwr Auth NY Elec Sys Rev Gen Ser A (MBIA Insd)................. 5.500 12/01/29 1,519,695 3,000 Metropolitan Trans Auth NY Commuter Fac Rev Ser A (Prerefunded @ 01/01/08) (MBIA Insd)........................... 5.625 07/01/27 3,474,510 2,000 Metropolitan Trans Auth NY Trans Fac Rev Svc Contract Ser R (Prerefunded @ 07/01/15)............................. 5.500 07/01/17 2,361,920 2,000 Nassau Cnty, NY Interim Fin Auth Sales Tax Secured Ser A..................... 5.750 11/15/13 2,256,140 2,500 New York City Ser A Rfdg.............. 7.000 08/01/05 2,771,450 3,000 New York City Ser A Rfdg.............. 7.000 08/01/06 3,428,370 1,850 New York City Ser G................... 5.875 10/15/14 2,042,030 1,000 New York City Ser H................... 5.750 03/15/13 1,092,790 5,000 New York City Ser I................... 6.000 04/15/12 5,554,750 10,000 New York City Trans Auth Trans Fac Livingston Plaza Proj Rfdg (Escrowed to Maturity) (FSA Insd)............... 5.400 01/01/18 11,505,600 3,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser A (b)......... 5.500/14.000 11/01/26 3,350,520 5,305 New York City Transitional Future Tax Secd Ser C (AMBAC Insd)............... 5.250 08/01/20 5,730,196 2,000 New York City Transitional Future Tax Secd Ser C (AMBAC Insd)............... 5.250 08/01/22 2,136,560 4,545 New York City Transitional Future Tax Secd Ser D (MBIA Insd)................ 5.250 02/01/21 4,895,101 2,500 New York St Dorm Auth Lease Rev Muni Hlth Fac Impt Pgm Ser A (FSA Insd).... 5.500 05/15/25 2,695,150 1,250 New York St Dorm Auth Lease Rev St Univ Dorm Fac Ser C (MBIA Insd)....... 5.500 07/01/29 1,360,900 13,500 New York St Dorm Auth Rev City Univ Sys Ser C............................. 7.500 07/01/10 16,368,210
See Notes to Financial Statements 17 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW YORK (CONTINUED) $ 2,000 New York St Dorm Auth Rev Court Fac Lease Ser A........................... 5.375% 05/15/16 $ 2,035,700 3,000 New York St Dorm Auth Rev St Univ Ed Fac (Prerefunded @ 5/15/10) (FGIC Insd)................................. 5.750 05/15/24 3,549,270 2,000 New York St Dorm Auth Rev St Univ Ed Fac 1989 Res (MBIA Insd).............. 6.000 05/15/16 2,345,260 2,330 New York St Dorm Auth Rev St Univ Ed Fac Ser B............................. 5.250 05/15/10 2,612,443 2,800 New York St Environmental Fac Revolving Fds Ser C................... 5.000 07/15/21 2,948,652 2,840 New York St Loc Govt Assistance Corp Ser E Rfdg............................ 6.000 04/01/14 3,384,797 3,000 New York St Med Care Fac Fin Agy Rev NY Hosp Mtg Ser A (Prerefunded @ 02/15/05) (AMBAC Insd)................ 6.750 08/15/14 3,348,030 5,875 New York St Med Care Fac Fin Agy Rev Saint Peter's Hosp Proj Ser A (AMBAC Insd)................................. 5.375 11/01/20 6,083,386 1,500 New York St Urban Dev Corp Rev Proj Cent for Indl Innovation Rfdg......... 5.500 01/01/13 1,694,925 3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl Arpt Terminal 6 (MBIA Insd)................................. 5.750 12/01/22 3,269,640 3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl Arpt Terminal 6 (MBIA Insd)................................. 5.750 12/01/25 3,266,490 2,150 Triborough Brdg & Tunl Auth Gen Purp Ser A................................. 5.000 01/01/27 2,194,591 ------------- 109,277,076 ------------- NORTH CAROLINA 5.0% 2,000 Johnston Cnty, NC (FGIC Insd)......... 5.900 03/01/19 2,324,620 1,000 North Carolina Eastern Muni Pwr Agy Pwr Sys Rev Ser D..................... 6.750 01/01/26 1,089,000 15,000 North Carolina Muni Pwr Agy No. 1 Catawba Elec Rev Rfdg (MBIA Insd) (a)................................... 6.000 01/01/12 17,714,850 2,500 North Carolina Muni Pwr Agy Ser A (MBIA Insd)........................... 5.250 01/01/19 2,707,725 ------------- 23,836,195 -------------
See Notes to Financial Statements 18 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NORTH DAKOTA 0.4% $ 1,925 North Dakota St Hsg Fin Agy Rev Hsg Fin Pgm Home Mtg Fin Ser B (MBIA Insd)................................. 5.500% 07/01/29 $ 1,988,102 ------------- OHIO 3.5% 1,400 Bowling Green St Univ OH Gen Rcpt (FGIC Insd)........................... 5.750 06/01/12 1,603,938 1,550 Cleveland, OH City Sch Dist Rev Antic Nts (AMBAC Insd)...................... 6.000 06/01/04 1,630,864 1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj.............................. 7.500 01/01/30 1,109,430 1,000 Delaware Cnty, OH Cap Fac............. 6.000 12/01/25 1,155,160 2,000 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd)................................. 5.250 12/01/13 2,254,580 1,000 Hamilton, OH One Renaissance Ctr Ser A (AMBAC Insd).......................... 5.500 11/01/16 1,132,520 1,000 Mahoning Cnty, OH Hosp Fac Forum Hlth Oblig Group Ser A..................... 6.000 11/15/32 1,038,350 1,250 Montgomery Cnty, OH Hosp Rev Grandview Hosp & Med Cent Hosp Rfdg (Escrowed to Maturity)............................. 5.250 12/01/03 1,279,800 1,000 Ohio St Air Quality Dev Auth Rev JMG Fdg Ltd Part Proj Rfdg (AMBAC Insd)... 6.375 04/01/29 1,078,720 1,675 Ohio St Infrastructure Impt Ser A..... 5.500 08/01/13 1,943,402 1,840 Pickerington, OH Loc Sch Dist Cap Apprec Sch Fac Contr (FGIC Insd)...... * 12/01/12 1,278,046 1,000 University Cincinnati OH Gen Ser A (FGIC Insd)........................... 5.500 06/01/09 1,148,530 ------------- 16,653,340 ------------- OKLAHOMA 2.4% 1,500 Jenks, OK Aquarium Auth Rev First Mtg (MBIA Insd)........................... 6.100 07/01/30 1,760,655 1,575 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser B (FSA Insd)...................... 5.750 07/01/16 1,725,192 2,305 Oklahoma St Cap Impt Auth St (MBIA Insd)................................. 5.000 06/01/06 2,535,062
See Notes to Financial Statements 19 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE OKLAHOMA (CONTINUED) $ 2,500 Pottawatomie Cnty, OK Dev Auth North Dear Creek Reservoir Proj (AMBAC Insd)................................. 5.000% 07/01/23 $ 2,606,150 2,250 Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev (AMBAC Insd)...................... 6.250 11/01/22 2,678,985 ------------- 11,306,044 ------------- OREGON 3.1% 4,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA Insd)........................... 5.250 07/01/22 4,276,560 3,000 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)................................. 5.250 11/01/17 3,284,730 2,120 Oregon St Veterans Welfare Ser 76A.... 6.050 10/01/28 2,227,314 1,190 Portland, OR Cmnty College Dist Ser B..................................... 5.250 06/01/12 1,337,929 1,985 Portland, OR Urban Renewal & Redev Downtown Wtrfront Ser A (AMBAC Insd).. 5.750 06/15/16 2,289,142 1,000 Washington Multnomah & Yamhill (MBIA Insd)................................. 5.000 06/01/13 1,097,210 ------------- 14,512,885 ------------- PENNSYLVANIA 3.9% 1,250 Allegheny Cnty, PA Ctf Part (AMBAC Insd)................................. 5.000 12/01/28 1,278,213 1,250 Allegheny Cnty, PA San Auth Swr Rev (MBIA Insd)........................... 5.750 12/01/16 1,442,363 4,680 Erie, PA Sch Dist Cap Apprec Rfdg (FSA Insd)................................. * 09/01/19 2,170,163 3,865 Falls Twp, PA Hosp Auth Hosp Rev DE Vly Med Rfdg (FHA Gtd) (a)............ 7.000 08/01/22 4,104,630 1,905 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC Insd).......................... * 09/15/16 1,060,171 1,710 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC Insd).......................... * 03/15/19 810,335 1,385 Harrisburg, PA Cap Apprec Ser F Rfdg (AMBAC Insd).......................... * 09/15/19 641,075 1,500 Penn Cambria Sch Dist PA Cap Apprec (FGIC Insd)........................... * 08/15/20 654,960 60 Penn Hills, PA (Prerefunded @ 12/01/07) (FGIC Insd)................. 5.900 12/01/17 69,664 1,000 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Bryn Mawr College (MBIA Insd)........................... 5.625 12/01/27 1,102,220
See Notes to Financial Statements 20 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PENNSYLVANIA (CONTINUED) $ 1,000 Philadelphia, PA Auth Indl Dev Philadelphia Arpt Sys Proj Ser A (FGIC Insd)................................. 5.125% 07/01/19 $ 1,042,960 1,400 Philadelphia, PA Sch Dist Ser A (FSA Insd)................................. 5.750 02/01/12 1,613,514 365 Pittsburgh & Allegheny Cnty, PA Pub Aud Hotel Room (AMBAC Insd)........... 4.500 02/01/29 354,937 1,500 Pittsburgh, PA Ser A (Prerefunded @ 09/01/09) (FGIC Insd)................. 5.750 09/01/23 1,758,255 1,005 Southeast Delco Sch Dist PA Cap Apprec (MBIA Insd)........................... * 02/01/17 542,770 ------------- 18,646,230 ------------- RHODE ISLAND 0.9% 1,490 Providence, RI Redev Agy Rev Pub Safety & Muni Bldgs Ser A (AMBAC Insd)................................. 5.500 04/01/14 1,681,048 2,420 Rhode Island St Cons Cap Dev Ln Ser A..................................... 5.000 08/01/12 2,475,176 ------------- 4,156,224 ------------- SOUTH CAROLINA 3.7% 2,275 Beaufort Cnty, SC Tax Incre New River Redev Proj Area (MBIA Insd)........... 5.500 06/01/19 2,530,050 2,375 Berkeley Cnty, SC Sch Dist Ctfs Part Berkeley Sch Facs Grp Inc (MBIA Insd)................................. 5.250 02/01/16 2,584,404 2,700 Charleston Cnty, SC Solid Waste (MBIA Insd)................................. 6.000 01/01/14 2,933,766 3,750 South Carolina Jobs Econ Dev Auth Indl Rev Proj Ser B (AMBAC Insd)........... 5.450 11/01/32 3,916,200 3,500 South Carolina Jobs Econ Elec & Gas Co Proj Ser A (AMBAC Insd)............... 5.200 11/01/27 3,667,055 2,000 South Carolina St Pub Svc Auth Rev Ser D Rfdg (FSA Insd)..................... 5.000 01/01/20 2,115,360 ------------- 17,746,835 -------------
See Notes to Financial Statements 21 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE SOUTH DAKOTA 0.8% $ 1,375 Deadwood, SD Ctf Part (ACA Insd)...... 6.375% 11/01/20 $ 1,490,748 1,000 South Dakota St Hlth & Ed Fac Auth Rev Childrens Care Hosp Rfdg.............. 6.125 11/01/29 1,054,540 1,000 South Dakota St Hlth & Ed Fac Auth Vocational Ed Pgm Ser A (AMBAC Insd).. 5.400 08/01/13 1,125,100 ------------- 3,670,388 ------------- TENNESSEE 2.4% 1,500 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn States Rfdg (MBIA Insd)........................... 7.500 07/01/25 1,904,775 3,000 Memphis, TN Gen Impt (c).............. 5.000 05/01/20 3,173,760 5,500 Montgomery Cnty, TN Pub Impt Rfdg (FGIC Insd) (a)....................... 5.500 05/01/16 6,222,920 ------------- 11,301,455 ------------- TEXAS 10.4% 2,685 Beaumont, TX Wtrwks & Swr Sys (FGIC Insd)................................. 6.250 09/01/15 3,193,351 1,250 Brazos River Auth TX Pollutn Adj TXU Elec Co Proj Ser C Rfdg............... 5.750 05/01/36 1,230,563 1,275 Cameron Cnty, TX Ctf Oblig (AMBAC Insd)................................. 5.750 02/15/13 1,461,928 3,000 Dallas Cnty, TX Util & Reclamation Dist Ser B Rfdg (AMBAC Insd).......... 5.875 02/15/29 3,196,920 2,000 Dallas, TX Wtrwks & Swr Sys Rev Rfdg.................................. 5.750 10/01/17 2,286,420 4,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser A Rfdg (FGIC Insd) (a).... 5.500 11/01/31 4,172,320 4,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A (FGIC Insd) (a)................. 5.750 11/01/30 4,269,680 1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FSA Insd).......................... 5.625 07/01/30 1,041,780 2,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FSA Insd) (a)...................... 5.125 07/01/32 2,018,800 3,000 Houston, TX Hotel Occupancy Tax & Spl Rev Convention & Entmt Ser B (AMBAC Insd)................................. 5.750 09/01/15 3,424,800 1,500 Houston, TX Pub Impt Rfdg (FSA Insd)................................. 5.750 03/01/15 1,715,580 1,925 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser C (FGIC Insd)..................... 5.375 12/01/27 2,044,985 1,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj.......... 7.250 01/01/31 1,356,360
See Notes to Financial Statements 22 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE TEXAS (CONTINUED) $ 1,500 North Cent TX Hlth Fac Dev Hosp Baylor Hlthcare Sys Proj Ser A............... 5.125% 05/15/29 $ 1,509,780 4,000 North Cent TX Hlth Fac Dev Hosp Childrens Med Ctr Dallas (AMBAC Insd)................................. 5.250 08/15/32 4,126,480 3,000 San Antonio, TX Elec & Gas Sys Rfdg... 5.375 02/01/16 3,324,090 2,750 Texas St Vets Housing Assistance Pgm Vet Ser B (FHA Gtd)................... 6.100 06/01/31 2,958,203 3,000 University of TX Univ Rev Fin Sys Ser A..................................... 5.250 08/15/20 3,249,090 2,300 University of TX Univ Rev Fin Sys Ser C..................................... 5.375 08/15/19 2,501,710 ------------- 49,082,840 ------------- UTAH 1.9% 255 Utah St Hsg Fin Agy Single Family Mtg Mezzanine Issue H1 (AMBAC Insd)....... 6.000 07/01/12 270,257 3,625 Utah St Ser A......................... 5.000 07/01/07 4,047,856 4,000 Utah St Ser B Rfdg.................... 5.250 07/01/08 4,537,440 ------------- 8,855,553 ------------- VIRGINIA 0.5% 1,320 Fairfax Cnty, VA Ctf Part............. 5.300 04/15/23 1,378,106 1,000 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease Rev Henrico Cnty Regl Jail Proj (Prerefunded @ 08/01/05).............. 7.125 08/01/21 1,145,580 ------------- 2,523,686 ------------- WASHINGTON 5.6% 3,245 Clark Cnty, WA Sch Dist 114 (FSA Insd)................................. 5.500 12/01/15 3,674,735 2,500 Energy Northwest WA Elec Rev Proj No. 3 Ser A Rfdg (FSA Insd)............... 5.500 07/01/18 2,754,100 5,360 Energy Northwest WA Elec Rev Proj No. 3 Ser B Rfdg (FSA Insd) (a)........... 6.000 07/01/16 6,218,190 1,485 Pierce Cnty, WA (AMBAC Insd).......... 5.750 08/01/14 1,708,997 1,000 Port Seattle, WA Rev Ser B (MBIA Insd)................................. 5.625 02/01/24 1,053,390 1,435 Radford Ct Pptys WA Student Hsg Rev (MBIA Insd)........................... 6.000 06/01/15 1,683,312 1,585 Radford Ct Pptys WA Student Hsg Rev (MBIA Insd)........................... 6.000 06/01/16 1,859,268 1,150 Seattle, WA Muni Lt & Pwr Rev......... 5.250 12/01/08 1,299,489 1,315 Seattle, WA Muni Lt & Pwr Rev......... 5.500 12/01/09 1,504,952 1,410 Seattle, WA Muni Lt & Pwr Rev......... 5.625 12/01/18 1,542,667
See Notes to Financial Statements 23 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE WASHINGTON (CONTINUED) $ 1,350 Tacoma, WA Elec Sys Rev Ser A Rfdg (FSA Insd)............................ 5.750% 01/01/15 $ 1,535,207 1,650 Tacoma, WA Elec Sys Rev Ser B Rfdg (FSA Insd)............................ 5.500 01/01/12 1,887,551 ------------- 26,721,858 ------------- WEST VIRGINIA 0.7% 3,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co Proj Ser C (MBIA Insd)......... 6.850 06/01/22 3,102,300 ------------- WISCONSIN 1.2% 1,775 De Pere, WI Uni Sch Dist Rfdg (FGIC Insd)................................. 5.000 10/01/13 1,939,223 1,340 Oconto Falls, WI Pub Sch Dist Ser A Rfdg (Prerefunded @ 03/01/11) (FSA Insd)................................. 5.750 03/01/15 1,566,514 2,000 Southeast WI Professional Baseball Pk Dist Sales Tax Rev Ser A Rfdg (MBIA Insd)................................. 5.500 12/15/20 2,303,760 ------------- 5,809,497 ------------- WYOMING 0.1% 240 Wyoming Cmnty Dev Auth Hsg Rev Ser 2..................................... 6.350 06/01/29 254,359 ------------- GUAM 0.7% 3,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)................................. 5.250 10/01/34 3,151,290 -------------
See Notes to Financial Statements 24 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PUERTO RICO 0.2% $ 1,110 Puerto Rico Comwlth Aqueduct & Swr Auth Rev Rfdg......................... 5.000% 07/01/15 $ 1,150,793 ------------- TOTAL LONG-TERM INVESTMENTS 152.1% (Cost $652,715,852).................................................... 720,675,245 SHORT-TERM INVESTMENTS 0.4% (Cost $1,800,000)...................................................... 1,800,000 ------------- TOTAL INVESTMENTS 152.5% (Cost $654,515,852).................................................... 722,475,245 OTHER ASSETS IN EXCESS OF LIABILITIES 3.5%.............................. 16,325,278 PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (56.0%).............. (265,111,064) ------------- NET ASSETS APPLICABLE TO COMMON SHARES 100.0%........................... $ 473,689,459 =============
* Zero coupon bond (a) Assets segregated as collateral for when-issued or delayed delivery purchase commitments and open futures transactions. (b) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (c) Securities purchased on a when-issued or delayed delivery basis. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FHA--Federal Housing Administration FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. See Notes to Financial Statements 25 FINANCIAL STATEMENTS Statement of Assets and Liabilities April 30, 2003 (Unaudited) ASSETS: Total Investments (Cost $654,515,852)....................... $722,475,245 Cash........................................................ 306,772 Receivables: Investments Sold.......................................... 13,615,657 Interest.................................................. 10,838,211 Other....................................................... 1,374 ------------ Total Assets............................................ 747,237,259 ------------ LIABILITIES: Payables: Investments Purchased..................................... 7,253,080 Variation Margin on Futures............................... 475,469 Investment Advisory Fee................................... 361,613 Administrative Fee........................................ 30,134 Affiliates................................................ 12,217 Trustees' Deferred Compensation and Retirement Plans........ 208,436 Accrued Expenses............................................ 95,787 ------------ Total Liabilities....................................... 8,436,736 Preferred Shares (including accrued distributions).......... 265,111,064 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $473,689,459 ============ NET ASSET VALUE PER COMMON SHARE ($473,689,459 divided by 27,013,149 shares outstanding)............................ $ 17.54 ============ NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 27,013,149 shares issued and outstanding).............................................. $ 270,131 Paid in Surplus............................................. 399,280,859 Net Unrealized Appreciation................................. 67,562,793 Accumulated Net Realized Gain............................... 2,891,623 Accumulated Undistributed Net Investment Income............. 3,684,053 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $473,689,459 ============ PREFERRED SHARES ($.01 par value, authorized 100,000,000 shares, 10,600 issued with liquidation preference of $25,000 per share)........................................ $265,000,000 ============ NET ASSETS INCLUDING PREFERRED SHARES....................... $738,689,459 ============
See Notes to Financial Statements 26 Statement of Operations For the Six Months Ended April 30, 2003 (Unaudited) INVESTMENT INCOME: Interest.................................................... $18,074,743 ----------- EXPENSES: Investment Advisory Fee..................................... 2,177,816 Preferred Share Maintenance................................. 349,791 Administrative Fee.......................................... 181,486 Trustees' Fees and Related Expenses......................... 38,182 Legal....................................................... 27,862 Custody..................................................... 21,905 Other....................................................... 162,398 ----------- Total Expenses.......................................... 2,959,440 ----------- NET INVESTMENT INCOME....................................... $15,115,303 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 5,004,749 Futures................................................... (1,846,937) ----------- Net Realized Gain........................................... 3,157,812 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 58,340,737 ----------- End of the Period: Investments............................................. 67,959,393 Futures................................................. (396,600) ----------- 67,562,793 ----------- Net Unrealized Appreciation During the Period............... 9,222,056 ----------- NET REALIZED AND UNREALIZED GAIN............................ $12,379,868 =========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(1,809,305) =========== NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS................................................ $25,685,866 ===========
See Notes to Financial Statements 27 Statements of Changes in Net Assets (Unaudited)
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2003 OCTOBER 31, 2002 ------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.............................. $ 15,115,303 $ 31,800,167 Net Realized Gain.................................. 3,157,812 9,316,751 Net Unrealized Appreciation/Depreciation During the Period........................................... 9,222,056 (4,384,608) Distributions to Preferred Shareholders: Net Investment Income............................ (1,022,984) (2,695,352) Net Realized Gain................................ (786,321) (1,890,883) ------------ ------------ Change in Net Assets Applicable to Common Shares from Operations.................................. 25,685,866 32,146,075 Distributions to Common Shareholders: Net Investment Income............................ (14,910,001) (27,767,715) Net Realized Gain................................ (8,706,338) (5,764,605) ------------ ------------ NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM INVESTMENT ACTIVITIES................ 2,069,527 (1,386,245) NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of the Period............................ 471,619,932 473,006,177 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $3,684,053 and $4,501,735, respectively).................... $473,689,459 $471,619,932 ============ ============
See Notes to Financial Statements 28 Financial Highlights (Unaudited) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED APRIL 30, ------------------- 2003 2002 (a) 2001 -------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................ $ 17.46 $ 17.51 $ 16.22 ------- ------- ------- Net Investment Income................................. .56 1.18 1.25 Net Realized and Unrealized Gain/Loss................. .46 .18 1.24 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income............................... (.04) (.10) (.32) Net Realized Gain................................... (.03) (.07) -0- ------- ------- ------- Total from Investment Operations........................ .95 1.19 2.17 Distributions Paid to Common Shareholders: Net Investment Income............................... (.55) (1.03) (.88) Net Realized Gain................................... (.32) (.21) -0- ------- ------- ------- NET ASSET VALUE, END OF THE PERIOD...................... $ 17.54 $ 17.46 $ 17.51 ======= ======= ======= Common Share Market Price at End of the Period.......... $ 16.16 $ 15.80 $ 14.94 Total Return (b)........................................ 8.04%* 14.56% 16.85% Net Assets Applicable to Common Shares at End of the Period (In millions).................................. $ 473.7 $ 471.6 $ 473.0 Ratio of Expenses to Average Net Assets Applicable to Common Shares (c)..................................... 1.28% 1.41% 1.55% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c)....................... 6.53% 6.89% 7.37% Portfolio Turnover...................................... 15%* 33% 29% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (c).................................. .82% .89% .98% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (d)....................... 6.09% 6.30% 5.49% SENIOR SECURITIES: Total Preferred Shares Outstanding...................... 10,600 10,600 10,600 Asset Coverage Per Preferred Share (e).................. $69,698 $69,511 $69,623 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 by .02%. 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. 29
YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 1994 1993 ----------------------------------------------------------------------------------------- $ 15.63 $ 17.64 $ 17.29 $ 16.58 $ 16.58 $ 15.03 $ 17.95 $ 15.56 -------- -------- -------- -------- -------- -------- -------- -------- 1.32 1.33 1.35 1.37 1.38 1.42 1.43 1.45 .64 (1.94) .42 .74 .11 1.65 (2.84) 2.42 (.40) (.32) (.34) (.35) (.35) (.38) (.30) (.29) -0- (.02) (.02) -0- -0- -0- (.01) (.03) -------- -------- -------- -------- -------- -------- -------- -------- 1.56 (.95) 1.41 1.76 1.14 2.69 (1.72) 3.55 (.97) (.99) (1.00) (1.05) (1.14) (1.14) (1.14) (1.08) -0- (.07) (.06) -0- -0- -0- (.06) (.08) -------- -------- -------- -------- -------- -------- -------- -------- $ 16.22 $ 15.63 $ 17.64 $ 17.29 $ 16.58 $ 16.58 $ 15.03 $ 17.95 ======== ======== ======== ======== ======== ======== ======== ======== $13.5625 $13.6875 $ 17.00 $ 16.125 $ 15.813 $ 15.75 $ 14.00 $ 17.375 6.41% -13.97% 12.40% 8.92% 7.84% 21.15% -13.12% 25.40% $ 438.1 $ 422.2 $ 476.6 $ 467.0 $ 447.8 $ 447.9 $ 406.1 $ 485.0 1.68% 1.61% 1.58% 1.60% 1.62% 1.68% 1.63% 1.59% 8.44% 7.87% 7.73% 8.16% 8.37% 8.96% 8.63% 8.56% 31% 33% 29% 40% 30% 15% 20% 20% 1.03% 1.02% 1.01% 1.01% 1.02% 1.04% 1.03% 1.01% 5.86% 6.00% 5.80% 6.06% 6.24% 6.55% 6.79% 6.87% 10,600 10,600 5,300 5,300 5,300 5,300 5,300 5,300 $ 66,332 $ 64,827 $139,932 $138,116 $134,491 $134,501 $126,614 $141,509 $ 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 30 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Trust for Investment Grade Municipals (the "Trust") is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The Trust's investment objective is to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Trust will invest substantially all of its assets in municipal securities rated investment grade at the time of investment. The Trust commenced investment operations on January 24, 1992. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with 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. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Trust may purchase and sell securities on a "when-issued" or "delayed delivery" basis with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Trust will maintain, in a segregated account with its custodian, assets having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At April 30, 2003, the Trust has $3,128,880 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. 31 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. At April 30, 2003, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $653,723,493 ============ Gross tax unrealized appreciation........................... $ 69,383,214 Gross tax unrealized deprecation............................ (631,462) ------------ Net tax unrealized appreciation on investments.............. $ 68,751,752 ============
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly dividends from net investment income to common shareholders. Net realized gains, if any, are distributed annually on a pro rata basis to common and preferred shareholders. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended October 31, 2002 was as follows:
2002 Distributions paid from: Ordinary income........................................... $1,959,846 Long-term capital gain.................................... 5,867,289 ---------- $7,827,135 ==========
As of October 31, 2002, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... 1,106,072 Undistributed long-term capital gain........................ 8,533,798
Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of the deferral of losses relating to wash sale transactions. 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 32 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) 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 six months ended April 30, 2003, the Trust recognized expenses of approximately $17,000 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 six months ended April 30, 2003, the Trust recognized expenses of approximately $33,000 representing Van Kampen's cost of providing accounting and legal services to the Trust, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Certain officers and trustees of the Trust are also officers and directors of Van Kampen. The Trust does not compensate its officers or trustees who are officers of Van Kampen. The Trust 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 $104,544,967 and $104,043,777, 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 33 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) against anticipated interest rate or fixed-income market changes, for duration management or for risk management purposes, but may also enter into these transactions 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 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 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 on U.S. Treasury Bonds and Notes and typically closes the contract prior to the delivery date. These contracts are generally used to manage the portfolio's effective maturity and duration. Upon entering into futures contracts, the Trust maintains, in a segregated account with its custodian, an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a futures commission merchant pursuant to rules and regulations promulgated under the 1940 Act, 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, each with a par value of $100,000, for the six months ended April 30, 2003, were as follows:
CONTRACTS Outstanding at October 31, 2002............................. 1,039 Futures Opened.............................................. 1,983 Futures Closed.............................................. (2,057) ------ Outstanding at April 30, 2003............................... 965 ======
34 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) The futures contracts outstanding as of April 30, 2003, and the description and unrealized appreciation/depreciation were as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: 10-Year U.S. Treasury Notes Future June 2003 (Current Notional Value of $115,125 per contract)....... 185 $ (54,263) 5-Year U.S. Treasury Notes Future June 2003 (Current Notional Value of $113,750 per contract)....... 780 (342,337) --- --------- 965 $(396,600) === =========
5. PREFERRED SHARES The Trust has outstanding 10,600 Auction Preferred Shares ("APS") in four series. Series A, B, and C contain 3,000 shares each while Series D contains 1,600 shares. Dividends are cumulative and the dividend rate is currently reset through an auction process. The dividend period is 28 days for Series A, B, C and D. The average rate in effect on April 30, 2003 was 1.069%. During the six months ended April 30, 2003, the rates ranged from 0.970% to 2.100%. 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. 35 DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's Common Shares, resulting in 36 the acquisition of fewer Common Shares than if the dividend or distribution had been paid in Common Shares issued by the Trust. All reinvestments are in full and fractional Common shares and are carried to three decimal places. Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to all Common Shareholders of the Trust at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days written notice to all Common Shareholders of the Trust. COSTS OF THE PLAN The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. No other charges will be made to participants for reinvesting dividends or capital gains distributions, except for certain brokerage commissions, as described above. TAX IMPLICATIONS You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. RIGHT TO WITHDRAW Plan participants may withdraw at any time by calling 1-800-341-2929 or by writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will receive, without charge, a share certificate issued in your name for all full Common Shares credited to your account under the Plan and a cash payment will be made for any fractional Common Share credited to your account under the Plan. You may again elect to participate in the Plan at any time by calling 1-800-341-2929 or writing to the Trust at: Van Kampen Funds Inc. Attn: Closed-End Funds 2800 Post Oak Blvd. Houston, TX 77056 37 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS BOARD OF TRUSTEES DAVID C. ARCH ROD DAMMEYER HOWARD J KERR THEODORE A. MYERS RICHARD F. POWERS, III* - Chairman HUGO F. SONNENSCHEIN WAYNE W. WHALEN* 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 * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. 38 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 make with us, our affiliates, or third parties. We may also collect information you provide when using our web site, and text files (a.k.a. "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 Trust Company, 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. VGM SAR 6/03 Member NASD/SIPC. 11163F03-AS-6/03 Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semi-annual reports. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable for semi-annual reports. Item 8. [Reserved.] Item 9. 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. Item 10. Exhibits. (a) Code of Ethics - Not applicable for semi-annual reports. (b) Certifications of Principal Executive Officer and Principal Financial Officer 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 Trust for Investment Grade Municipals ------------------------------------------------------------------- By: /s/ Ronald E. Robison ---------------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: June 23, 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: June 23, 2003 By: /s/ John L. Sullivan ---------------------------------------------------------------------------- Name: John Sullivan Title: Principal Financial Officer Date: June 23, 2003