N-CSR 1 c80903nvcsr.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 811-6471 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 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 Trust for Investment Grade Municipals 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
TRUST FOR INVESTMENT GRADE MUNICIPALS SYMBOL: VGM ---------------------------------------------------- AVERAGE ANNUAL BASED ON BASED ON TOTAL RETURNS NAV MARKET PRICE Since Inception (1/24/92) 8.51% 7.60% 10-year 6.92 6.24 5-year 6.94 5.69 1-year 7.18 7.60 ----------------------------------------------------
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 Trust for Investment Grade Municipals 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 at any time without notice. 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 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 slightly reduced the portfolio's exposure to the sector to 8.6 percent of holdings. Our strategy of avoiding housing bonds also helped the trust; the sector performed poorly amidst record levels of mortgage refinancing activity. 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 reinvested 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 fund 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 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. TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003
---------------------------------------------------------- BASED ON BASED ON LEHMAN BROTHERS NAV MARKET PRICE MUNICIPAL BOND INDEX 7.18% 7.60% 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 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 general-purpose and public-education sectors, 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 85 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. 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. TOP 5 SECTORS AS OF 10/31/03 RATINGS ALLOCATION AS OF 10/31/03 General Purpose 21.9% AAA/Aaa 76.6% Public Education 11.8 AA/Aa 8.0 Transportation 10.0 A/A 12.1 Higher Education 9.1 BBB/Baa 2.7 Health Care 8.6 B/B 0.2 Not-Rated 0.4
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 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 155.2% ALABAMA 1.4% $ 750 Birmingham Baptist Med Ctr AL Baptist Hlth Sys Ser A................................. 5.875% 11/15/24 $ 784,365 1,565 Jefferson Cnty, AL Swr Rev Impt Wts Ser A (Prerefunded @ 02/01/11) (FGIC Insd)...... 5.000 02/01/41 1,741,360 435 Jefferson Cnty, AL Swr Rev Impt Wts Ser A (Prerefunded @ 02/01/11) (FGIC Insd)...... 5.000 02/01/41 486,704 3,000 Jefferson Cnty, AL Wts Ser A (AMBAC Insd)..................................... 5.000 04/01/09 3,335,550 ------------- 6,347,979 ------------- ARIZONA 1.6% 2,800 Phoenix, AZ Civic Impt Corp Arpt Rev Jr Lien (FGIC Insd).......................... 5.375 07/01/29 2,835,980 3,125 Salt River Proj AZ Agric Impt Salt River Proj Ser A Rfdg........................... 5.250 01/01/06 3,372,094 1,000 Scottsdale, AZ Indl Dev Auth Hosp Rev Scottsdale Hlthcare....................... 5.800 12/01/31 1,016,100 ------------- 7,224,174 ------------- CALIFORNIA 12.2% 2,895 ABC CA Uni Sch Dist Cap Apprec Ser B (FGIC Insd)..................................... * 08/01/20 1,244,358 1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt Proj Ser C (FSA Insd)................ 6.000 09/01/16 1,536,626 3,000 California Infrastructure & Econ Dev Bk Rev Bay Area Toll Brdgs First Lien A (AMBAC Insd).............................. 5.000 07/01/33 3,019,230 1,000 California St Dept Wtr Res Pwr Ser A...... 6.000 05/01/15 1,136,960 2,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).............................. 5.500 05/01/16 2,214,180 4,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).............................. 5.375 05/01/18 4,341,720 1,320 California St Dept Wtr Res Pwr Ser A (MBIA Insd)..................................... 5.125 05/01/19 1,388,944 1,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)..................... 5.375 10/01/20 1,070,850 2,000 Florin, CA Res Consv Dist Cap Impt Elk Grove Wtr Svc A (MBIA Insd)............... 5.000 09/01/33 2,011,040 3,000 Florin, CA Res Consv Dist Cap Impt Elk Grove Wtr Svc B (MBIA Insd)............... 5.000 03/01/33 3,016,020
See Notes to Financial Statements 5 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $ 2,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg (MBIA Insd)........... * 01/15/17 $ 1,018,880 20,750 Foothill/Eastern Corridor Agy CA Toll Rd Rev Sr Lien Ser A (Escrowed to Maturity)................................. * 01/01/23 7,778,967 3,000 Fremont, CA Uni Sch Dist Ser A (FGIC Insd)..................................... 5.000% 08/01/25 3,040,230 2,500 Los Angeles, CA Uni Sch Dist Ser A (FSA Insd)..................................... 5.250 07/01/20 2,672,825 4,020 Oakland, CA Uni Sch Dist (FGIC Insd)...... 5.250 08/01/18 4,303,330 3,000 Port Oakland, CA Ser M (FGIC Insd)........ 5.250 11/01/18 3,237,570 2,000 Salinas, CA Uni High Sch Dist Ser A (MBIA Insd)..................................... 5.000 06/01/27 2,021,920 3,000 San Francisco, CA City & Cnty Second Ser Issue 29 B Rfdg (FGIC Insd)............... 5.125 05/01/20 3,161,430 1,210 Santa Clara, CA Elec Rev Sub Ser A (MBIA Insd)..................................... 5.250 07/01/19 1,302,541 3,745 Santa Clarita, CA Cmnty College (FGIC Insd)..................................... 5.000 08/01/23 3,820,537 3,000 Temecula, CA Redev Agy Tax Temecula Redev Proj No 1 (MBIA Insd)..................... 5.250 08/01/36 3,076,470 ------------- 56,414,628 ------------- COLORADO 2.6% 4,000 Adams & Arapahoe Cntys CO Sch Dist 28 Ser A (FSA Insd).............................. 5.250 12/01/20 4,282,760 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 1,132,790 2,000 Aurora, CO Ctfs Part (AMBAC Insd)......... 5.500 12/01/30 2,119,080 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 1,212,525 121 Colorado Hsg Fin Auth Single Family Pgm Sr Ser B1.................................... 7.650 11/01/26 121,234 1,805 Lakewood, CO Ctfs Part (AMBAC Insd)....... 5.300 12/01/16 1,973,226 ------------- 11,861,275 ------------- CONNECTICUT 1.1% 2,750 Bridgeport, CT Ser A Rfdg (FGIC Insd)..... 5.375 08/15/14 3,041,665 1,830 Connecticut St Spl Oblig Pkg Rev Bradley Intl Arpt Ser A (ACA Insd)................ 6.600 07/01/24 1,951,018 ------------- 4,992,683 -------------
6 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE DISTRICT OF COLUMBIA 0.5% $ 505 District of Columbia Ser E (Prerefunded @ 06/01/03) (FSA Insd)...................... 6.000% 06/01/13 $ 517,004 2,000 Metropolitan Washington DC Arpt Auth Sys Ser A (FGIC Insd)......................... 5.250 10/01/32 2,029,500 ------------- 2,546,504 ------------- FLORIDA 10.4% 10,335 Dade Cnty, FL Spl Oblig Cap Apprec Ser B Rfdg (Prerefunded @ 10/01/08) (AMBAC Insd)..................................... * 10/01/26 3,034,873 3,000 Escambia Cnty, FL Hlth Fac Auth Hlth Fac Rev FL Hlthcare Fac Ln (AMBAC Insd)....... 5.950 07/01/20 3,177,180 2,500 Florida St Brd Ed Cap Outlay Pub Ed Ser C (FGIC Insd)............................... 5.750 06/01/29 2,702,625 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd)..................................... 6.000 07/01/14 1,154,290 1,400 Florida St Dept Corrections Ctf Part Okeechobee Correctional (AMBAC Insd)...... 6.250 03/01/15 1,512,140 1,200 Gulf Breeze, FL Rev Loc Govt Ln E (FGIC Insd) (d)................................. 5.050 12/01/20 1,284,000 2,000 Gulf Breeze, FL Rev Loc Govt Ln E (FGIC Insd) (d)................................. 5.150 12/01/20 2,221,540 1,000 Highlands Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys D...................... 5.375 11/15/35 994,670 4,550 Hillsborough Cnty, FL Sch Dist (AMBAC Insd)..................................... 5.375 10/01/17 5,004,499 1,000 Hillsborough Cnty, FL Util Jr Lien Rfdg (AMBAC Insd).............................. 5.000 08/01/06 1,088,780 2,000 Jacksonville, FL Sales Tax Rev Better Jacksonville (MBIA Insd).................. 5.250 10/01/19 2,151,180 1,000 Jea, FL Elec Sys Rev Ser 3 Ser A.......... 5.500 10/01/41 1,055,330 2,000 Miami-Dade Cnty, FL Aviation Miami Intl Arpt (FGIC Insd).......................... 5.375 10/01/27 2,060,740 2,000 Miami-Dade Cnty, FL Aviation Ser A (FSA Insd)..................................... 5.125 10/01/35 2,013,720 2,000 Miami-Dade Cnty, FL Hlth Fac Miami Children Hosp Ser A Rfdg (AMBAC Insd)..... 5.000 08/15/20 2,053,520 1,980 Miami-Dade, FL Sch Brd Ser C (FSA Insd)... 5.500 10/01/13 2,211,779 2,000 Palm Beach Cnty, FL Sch Brd Ctf Ser E Rfdg (AMBAC Insd).............................. 5.250 08/01/11 2,253,020 1,655 Reedy Creek Impt Dist FL Ser A Rfdg (AMBAC Insd)..................................... 5.500 06/01/11 1,890,308 3,465 Reedy Creek Impt Dist FL Ser C (AMBAC Insd)..................................... 4.750 06/01/15 3,538,042
See Notes to Financial Statements 7 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE FLORIDA (CONTINUED) $ 1,210 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA Insd)................................ 5.500% 07/01/14 $ 1,344,032 1,000 Tallahassee, FL Lease Rev FL St Univ Proj Ser A (MBIA Insd)......................... 5.500 08/01/17 1,110,470 1,250 Tampa, FL Hosp Rev Cap Impt H Lee Moffitt Ser A..................................... 5.750 07/01/19 1,303,550 2,880 Tampa, FL Occupational License Ser A Rfdg (FGIC Insd)............................... 5.375 10/01/15 3,193,805 ------------- 48,354,093 ------------- GEORGIA 2.8% 1,500 George L Smith II GA World Congress Cent Auth Rev Domed Stadium Proj Rfdg (MBIA Insd)..................................... 5.500 07/01/20 1,575,900 5,660 Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA Insd)..................................... 6.500 01/01/17 6,858,165 240 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (MBIA Insd)........ 6.500 01/01/17 293,297 4,000 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd).................... 5.250 11/01/16 4,357,440 ------------- 13,084,802 ------------- HAWAII 0.3% 1,385 Honolulu, HI City & Cnty Ser B (FGIC Insd)..................................... 5.500 10/01/11 1,584,523 ------------- ILLINOIS 16.2% 2,000 Chicago, IL Brd of Ed (FGIC Insd)......... 5.500 12/01/31 2,111,880 2,000 Chicago, IL Brd of Ed Chicago Sch Reform (AMBAC Insd).............................. 5.750 12/01/20 2,213,860 4,865 Chicago, IL Cap Apprec (Prerefunded @ 07/01/05) (AMBAC Insd).................... * 07/01/16 2,366,871 1,500 Chicago, IL Lakefront Millennium Pk Facs (MBIA Insd)............................... 5.125 01/01/28 1,517,280 7,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Second Lien Ser A Rfdg (MBIA Insd)........ 6.375 01/01/12 7,524,160 1,500 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien C 2 (XLCA Insd)................ 5.250 01/01/34 1,514,610 2,000 Chicago, IL O'Hare Intl Arpt Rev Second Lien Passenger Fac B (AMBAC Insd)......... 5.500 01/01/17 2,177,440 3,500 Chicago, IL Proj Ser A Rfdg (MBIA Insd) (a)....................................... 5.000 01/01/31 3,512,565 2,000 Chicago, IL Wastewtr Transmission Rev Second Lien (MBIA Insd)................... 5.750 01/01/25 2,163,760 1,000 Chicago, IL Wastewtr Transmission Rev Second Lien (Prerefunded @ 01/01/10) (MBIA Insd)..................................... 6.000 01/01/30 1,178,190 2,870 Cook Cnty, IL Cap Impt Ser A (FGIC Insd)..................................... 5.000 11/15/28 2,882,771
8 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE ILLINOIS (CONTINUED) $ 3,500 Du Page Cnty, IL Fst Presv Dist........... * 11/01/10 $ 2,733,395 2,545 Du Page Cnty, IL Trans Rev (FSA Insd)..... 5.750% 01/01/15 2,880,202 845 East Peoria, IL Ser C Rfdg................ 7.000 05/01/17 884,842 1,310 Elgin, IL Ser B Rfdg...................... 5.750 12/15/13 1,518,866 1,600 Grundy, Kendall, & Will Cntys (AMBAC Insd)..................................... 5.500 05/01/15 1,777,168 1,250 Illinois Dev Fin Auth Rev Bradley Univ Proj (Prerefunded @ 08/01/09) (AMBAC Insd)..................................... 5.375 08/01/24 1,438,725 1,475 Illinois Dev Fin Auth Rev Loc Govt Pgm Geneva Cmnty 304 B (FSA Insd)............. 5.750 01/01/15 1,659,257 1,145 Illinois Dev Fin Auth Rev Loc Govt Pgm Geneva Cmnty 304 B (FSA Insd)............. 5.750 01/01/17 1,278,713 3,285 Illinois Dev Fin Auth Rev Presbyterian Home Lake Proj Ser B (FSA Insd)........... 6.300 09/01/22 3,703,903 2,000 Illinois Edl Fac Auth Rev Lewis Univ...... 6.100 10/01/16 2,030,260 1,250 Illinois Hlth Fac Auth Rev Evangelical Hosp Ser C (FSA Insd)..................... 6.750 04/15/17 1,530,537 700 Illinois Hlth Fac Auth Rev Highland Park Hosp Proj Ser A (Prerefunded @ 10/01/07) (MBIA Insd)............................... 5.750 10/01/17 810,628 1,000 Illinois Hlth Fac Auth Rev Midwest Physician Grp Ltd Rfdg.................... 5.500 11/15/19 790,280 2,000 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys Rfdg.................................. 6.000 11/15/10 2,043,040 2,275 Illinois Hlth Fac Auth Rev South Suburban Hosp (Escrowed to Maturity)............... 7.000 02/15/18 2,840,633 1,000 Illinois St (FGIC Insd)................... 5.250 12/01/20 1,051,220 2,000 Illinois St First Ser (FGIC Insd)......... 5.375 11/01/14 2,209,740 4,000 Illinois St First Ser (FSA Insd).......... 5.250 12/01/20 4,244,480 250 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Proj (FGIC Insd)............................... 5.375 12/15/18 270,935 8,845 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Ser A (FGIC Insd)............................... * 06/15/16 4,939,048 3,000 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Ser A (MBIA Insd)............................... 5.250 06/15/42 3,074,070 1,005 Naperville, IL Ser A...................... 5.000 12/01/10 1,122,937
See Notes to Financial Statements 9 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE ILLINOIS (CONTINUED) $ 1,105 Saint Clair Cnty, IL Pub Bldg Comm Bldg Rev Cap Apprec Ser B (FGIC Insd).......... * 12/01/15 $ 640,845 1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux (MBIA Insd)............................... * 04/01/29 245,670 ------------- 74,882,781 ------------- INDIANA 3.6% 2,000 Indiana Transn Fin Auth Toll Rd Lease Rev Rfdg (AMBAC Insd)......................... 5.375% 07/01/09 2,221,200 4,500 Indianapolis, IN Arpt Auth Rev Spl Fac Fed Express Corp Proj......................... 7.100 01/15/17 4,731,750 1,935 Logansport, IN Sch Bldg Corp First Mtg (FGIC Insd)............................... 5.500 07/15/13 2,158,454 1,000 Marion Cnty, IN Convention & Rec Fac Auth Excise Tax Rev (MBIA Insd)................ * 06/01/14 626,340 1,200 North Adams, IN Cmnty Schs Renovation Bldg Corp Cap Apprec First Mtg (FSA Insd)...... * 07/15/15 707,892 1,280 North Adams, IN Cmnty Schs Renovation Bldg Corp Cap Apprec First Mtg (FSA Insd)...... * 01/15/19 603,712 1,500 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt........................................ 5.950 12/01/29 1,381,245 1,605 Richland Beanblossom, IN Sch First Mtg (FGIC Insd)............................... 5.500 07/15/12 1,796,380 2,530 Vigo Cnty, IN Sch Bldg Corp First Mtg Impt & Rfdg (FSA Insd)......................... 5.250 07/10/24 2,618,373 ------------- 16,845,346 ------------- IOWA 0.8% 1,685 Des Moines, IA Pub Pkg Sys Ser A (FGIC Insd)..................................... 5.750 06/01/15 1,897,714 1,785 Des Moines, IA Pub Pkg Sys Ser A (FGIC Insd)..................................... 5.750 06/01/16 2,010,338 ------------- 3,908,052 ------------- KANSAS 1.0% 1,975 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (MBIA Insd)....................... 6.000 09/01/09 2,310,315 2,000 Wyandotte Cnty, KS Sch Dist 500 Rfdg (FSA Insd)..................................... 5.000 09/01/19 2,112,500 ------------- 4,422,815 ------------- KENTUCKY 1.9% 1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/ Northn KY Intl Arpt Ser A Rfdg (MBIA Insd)..................................... 6.200 03/01/08 1,138,060 1,500 Kenton Cnty, KY Arpt Brd Rev Cincinnati/ Northn KY Intl Arpt Ser A Rfdg (MBIA Insd)..................................... 6.250 03/01/09 1,705,815 725 Kentucky Hsg Corp Hsg Rev Ser B........... 6.250 07/01/28 758,944 1,500 Kentucky St Ppty & Bldg Proj No 69 Ser A......................................... 5.000 08/01/05 1,595,280
10 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE KENTUCKY (CONTINUED) $ 1,000 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (FSA Insd)....... 5.625% 07/01/14 $ 1,118,150 2,450 Louisville & Jefferson Cnty, KY Swr Ser A (MBIA Insd)............................... 5.500 05/15/16 2,726,164 ------------- 9,042,413 ------------- LOUISIANA 0.4% 2,000 Louisiana St Ser A (FGIC Insd)............ 5.500 11/15/03 2,003,440 ------------- MARYLAND 1.0% 2,250 Maryland St Trans Auth Arpt Baltimore/Wash Intl Arpt B (AMBAC Insd).................. 5.125 03/01/24 2,287,777 2,350 Northeast, MD Waste Disp Auth Rfdg (AMBAC Insd)..................................... 5.500 04/01/16 2,531,467 ------------- 4,819,244 ------------- MASSACHUSETTS 3.4% 2,625 Massachusetts Muni Whsl Elec Co Pwr Supply Sys Rev Ser A (Prerefunded @ 07/01/04) (AMBAC Insd).............................. 5.000 07/01/14 2,746,800 5,000 Massachusetts St Cons Ln Ser E (Prerefunded @ 01/01/13) (FSA Insd)....... 5.250 01/01/20 5,550,350 1,500 Massachusetts St Fed Hwy Grant Antic Nt Ser A..................................... 5.750 06/15/14 1,738,515 500 Massachusetts St Hlth & Ed Fac Auth Rev Hlthcare Sys Covenant Hlth................ 6.000 07/01/31 520,610 1,000 Massachusetts St Hlth & Ed Fac Auth Rev Partn Hlthcare Sys Ser C.................. 5.750 07/01/32 1,041,800 1,000 Massachusetts St Indl Fin Agy Rev Wentworth Institute Tech.................. 5.650 10/01/18 1,031,670 3,155 Massachusetts St Port Auth Rev Ser A (MBIA Insd)..................................... 5.000 07/01/22 3,238,765 ------------- 15,868,510 ------------- MICHIGAN 6.0% 3,015 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1...................... * 07/01/17 1,480,968 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1...................... * 07/01/18 1,402,054 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1...................... * 07/01/19 1,309,548 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1...................... * 07/01/22 1,058,594 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1...................... * 07/01/23 986,980 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1...................... * 07/01/24 917,074
See Notes to Financial Statements 11 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MICHIGAN (CONTINUED) $ 2,965 Detroit, MI Wtr Supply Sys Ser C (MBIA Insd)..................................... 5.250% 07/01/20 $ 3,162,736 3,500 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA Insd)............................... * 06/01/15 2,102,135 2,765 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA Insd)............................... * 06/01/16 1,565,902 1,000 Grand Rapids, MI Wtr Supply Sys Rfdg (FGIC Insd)..................................... 5.750 01/01/13 1,129,570 1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Cent................. 5.250 05/15/26 1,193,668 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 2,850 Michigan St Hosp Fin Auth Rev Ascension Hlth Cr Ser A (Prerefunded @ 11/15/09) (MBIA Insd)............................... 5.750 11/15/18 3,356,445 1,500 Michigan St Strategic Fd Detroit Edison Co Proj C Rfdg (XLCA Insd)................... 5.450 12/15/32 1,539,690 2,500 Michigan St Strategic Fd Detroit Edison Co Proj Ser A (XLCA Insd).................... 5.500 06/01/30 2,584,925 1,000 Michigan St Strategic Fd Detroit Edison Pollutn Ctl Ser B Rfdg.................... 5.650 09/01/29 1,013,480 ------------- 27,918,519 ------------- MINNESOTA 1.7% 5,000 Minneapolis & Saint Paul, MN Metro Arpts Comm Arpt Rev Ser A (FGIC Insd)........... 5.125 01/01/31 5,070,000 2,800 Minnesota Agriculture & Econ Dev Brd Rev Hlthcare Sys Fairview Hosp Ser A (MBIA Insd)..................................... 5.750 11/15/26 2,999,612 ------------- 8,069,612 ------------- MISSISSIPPI 1.4% 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 3,216,990 3,250 Mississippi Business Fin Corp MS Pollutn Ctl Rev Sys Energy Res Inc Proj........... 5.875 04/01/22 3,240,770 ------------- 6,457,760 ------------- MISSOURI 1.3% 1,500 Cape Girardeau Cnty, MO Indl Dev Auth Hlthcare Fac Rev Southeast MO Hosp Assoc.. 5.625 06/01/27 1,518,240 1,625 Jefferson Cnty, MO Reorg Sch Dist No R-6 (FGIC Insd)............................... 5.625 03/01/20 1,794,877
12 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MISSOURI (CONTINUED) $ 1,500 Kansas City, MO Met Cmnty Impt Leasehold Jr College Rfdg (FGIC Insd)............... 5.500% 07/01/17 $ 1,661,940 1,000 Missouri St Hwys & Trans Ser A............ 5.125 02/01/17 1,067,170 ------------- 6,042,227 ------------- NEBRASKA 0.8% 1,190 Dodge Cnty, NE Sch Dist No 001 Fremont (FSA Insd)................................ 5.750 12/15/13 1,356,076 2,260 University NE Univ Rev Lincoln Student Fees & Fac B (b).......................... 5.000 07/01/23 2,301,991 ------------- 3,658,067 ------------- NEVADA 0.3% 1,500 Reno, NV Sr Lien Retrac Reno Trans Proj (AMBAC Insd).............................. 5.125 06/01/32 1,517,700 ------------- NEW HAMPSHIRE 0.5% 1,000 New Hampshire Hlth & Ed Fac Auth Rev Derryfield Sch............................ 7.000 07/01/30 1,012,480 1,000 New Hampshire St Bus Fin Auth Wtr Fac Rev Pennichuck Wtrwks Inc (AMBAC Insd)........ 6.300 05/01/22 1,132,980 ------------- 2,145,460 ------------- NEW JERSEY 12.7% 5,650 Garden St Preservation Tr NJ Ser A (FSA Insd)..................................... 5.250 11/01/19 6,099,231 1,500 New Jersey Econ Dev Auth Rev Trans Proj Sublease Ser A (Prerefunded @ 05/01/09) (FSA Insd)................................ 5.250 05/01/17 1,695,510 4,000 New Jersey Econ Dev Auth Sch Facs Constr Ser C (MBIA Insd)......................... 5.000 06/15/16 4,269,560 25,000 New Jersey Econ Dev Auth St Contract Econ Recovery (MBIA Insd)...................... 5.900 03/15/21 29,004,750 2,000 New Jersey Hlthcare Fac Fin Auth Rev Gen Hosp Ctr Passaic (Escrowed to Maturity) (FSA Insd)................................ 6.000 07/01/06 2,187,540 3,000 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser A (AMBAC Insd)................... 5.250 09/01/19 3,210,870 710 New Jersey St Tpk Auth Tpk Rev Ser A (MBIA Insd)..................................... 6.000 01/01/11 829,699 290 New Jersey St Tpk Auth Tpk Rev Ser A (Escrowed to Maturity) (MBIA Insd)........ 6.000 01/01/11 340,706 3,500 New Jersey St Trans Corp Ctfs Fed Trans Admin Grants Ser A (AMBAC Insd)........... 5.500 09/15/13 3,975,020
See Notes to Financial Statements 13 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW JERSEY (CONTINUED) $ 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 $ 2,778,907 4,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser C (FSA Insd).......................... 5.500 06/15/20 4,386,360 ------------- 58,778,153 ------------- NEW MEXICO 0.3% 1,250 Jicarilla, NM Apache Nation Rev Ser A..... 5.500 09/01/23 1,282,225 ------------- NEW YORK 22.5% 3,000 Metropolitan Trans Auth NY Commuter Fac Rev Ser A (Prerefunded @ 01/01/08) (MBIA Insd)..................................... 5.625 07/01/27 3,451,170 2,000 Metropolitan Trans Auth NY Trans Fac Rev Svc Contract Ser R (Prerefunded @ 07/01/15)................................. 5.500 07/01/17 2,306,680 2,000 Nassau Cnty, NY Interim Fin Auth Sales Tax Secured Ser A............................. 5.750 11/15/13 2,261,260 2,500 New York City Ser A Rfdg.................. 7.000 08/01/05 2,725,050 3,000 New York City Ser A Rfdg.................. 7.000 08/01/06 3,387,930 1,850 New York City Ser G....................... 5.875 10/15/14 2,053,962 1,000 New York City Ser H....................... 5.750 03/15/13 1,099,030 5,000 New York City Ser I....................... 6.000 04/15/12 5,531,300 10,000 New York City Trans Auth Trans Fac Livingston Plaza Proj Rfdg (Escrowed to Maturity) (FSA Insd)...................... 5.400 01/01/18 11,283,500 3,000 New York City Transitional Fin Auth Rev Future Tax Secd Ser A (c)................. 5.500/14.000 11/01/26 3,363,780 5,305 New York City Transitional Future Tax Secd Ser C (AMBAC Insd)........................ 5.250 08/01/20 5,650,992 2,000 New York City Transitional Future Tax Secd Ser C (AMBAC Insd)........................ 5.250 08/01/22 2,105,140 4,545 New York City Transitional Future Tax Secd Ser D (MBIA Insd)......................... 5.250 02/01/21 4,823,245 2,500 New York St Dorm Auth Lease Rev Muni Hlth Fac Impt Pgm Ser A (FSA Insd)............. 5.500 05/15/25 2,678,650 1,250 New York St Dorm Auth Lease Rev St Univ Dorm Fac Ser C (MBIA Insd)................ 5.500 07/01/29 1,335,050 13,500 New York St Dorm Auth Rev City Univ Sys Ser C..................................... 7.500 07/01/10 16,262,775 3,000 New York St Dorm Auth Rev St Univ Ed Fac (Prerefunded @ 5/15/10) (FGIC Insd)....... 5.750 05/15/24 3,526,230 2,000 New York St Dorm Auth Rev St Univ Ed Fac 1989 Res (MBIA Insd)...................... 6.000 05/15/16 2,310,960
14 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW YORK (CONTINUED) $ 1,980 New York St Dorm Auth Rev St Univ Ed Fac Ser B..................................... 5.250% 05/15/10 $ 2,209,581 2,800 New York St Environmental Fac Revolving Fds Ser C................................. 5.000 07/15/21 2,898,728 2,840 New York St Loc Govt Assistance Corp Ser E Rfdg...................................... 6.000 04/01/14 3,331,803 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 3,272,970 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 6,011,652 1,500 New York St Urban Dev Corp Rev Proj Cent for Indl Innovation Rfdg.................. 5.500 01/01/13 1,681,560 3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl Arpt Terminal 6 (MBIA Insd)...... 5.750 12/01/22 3,312,180 3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl Arpt Terminal 6 (MBIA Insd)...... 5.750 12/01/25 3,201,000 2,150 Triborough Brdg &Tunl Auth Gen Purp Ser A......................................... 5.000 01/01/27 2,166,340 ------------- 104,242,518 ------------- NORTH CAROLINA 5.1% 2,000 Johnston Cnty, NC (FGIC Insd)............. 5.900 03/01/19 2,287,540 1,000 North Carolina Eastern Muni Pwr Agy Pwr Sys Rev Ser D............................. 6.750 01/01/26 1,074,120 15,000 North Carolina Muni Pwr Agy No. 1 Catawba Elec Rev Rfdg (MBIA Insd)................. 6.000 01/01/12 17,451,900 2,500 North Carolina Muni Pwr Agy Ser A (MBIA Insd)..................................... 5.250 01/01/19 2,663,575 ------------- 23,477,135 ------------- NORTH DAKOTA 0.4% 1,605 North Dakota St Hsg Fin Agy Rev Hsg Fin Pgm Home Mtg Fin Ser B (MBIA Insd)........ 5.500 07/01/29 1,633,521 ------------- OHIO 3.1% 1,400 Bowling Green St Univ OH Gen Rcpt (FGIC Insd)..................................... 5.750 06/01/12 1,584,114 1,550 Cleveland, OH City Sch Dist Rev Antic Nts (AMBAC Insd).............................. 6.000 06/01/04 1,593,911 1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj...................................... 7.500 01/01/30 1,103,390 1,000 Delaware Cnty, OH Cap Fac................. 6.000 12/01/25 1,118,270 2,000 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd)... 5.250 12/01/13 2,225,320
See Notes to Financial Statements 15 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE OHIO (CONTINUED) $ 1,000 Hamilton, OH One Renaissance Ctr Ser A (AMBAC Insd).............................. 5.500% 11/01/16 $ 1,109,480 1,000 Mahoning Cnty, OH Hosp Fac Forum Hlth Oblig Group Ser A......................... 6.000 11/15/32 1,033,860 1,250 Montgomery Cnty, OH Hosp Rev Grandview Hosp & Med Cent Hosp Rfdg (Escrowed to Maturity)................................. 5.250 12/01/03 1,254,375 1,000 Ohio St Air Quality Dev Auth Rev JMG Fdg Ltd Part Proj Rfdg (AMBAC Insd)........... 6.375 04/01/29 1,066,230 1,840 Pickerington, OH Loc Sch Dist Cap Apprec Sch Fac Contr (FGIC Insd)................. * 12/01/12 1,286,565 1,000 University Cincinnati OH Gen Ser A (FGIC Insd)..................................... 5.500 06/01/09 1,140,630 ------------- 14,516,145 ------------- OKLAHOMA 2.4% 1,500 Jenks, OK Aquarium Auth Rev First Mtg (MBIA Insd)............................... 6.100 07/01/30 1,702,920 1,575 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser B (FSA Insd).............................. 5.750 07/01/16 1,684,856 2,305 Oklahoma St Cap Impt Auth St (MBIA Insd)..................................... 5.000 06/01/06 2,501,985 2,500 Pottawatomie Cnty, OK Dev Auth North Dear Creek Reservoir Proj (AMBAC Insd)......... 5.000 07/01/23 2,550,750 2,250 Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev (AMBAC Insd).............................. 6.250 11/01/22 2,595,082 ------------- 11,035,593 ------------- OREGON 3.0% 4,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA Insd)..................................... 5.250 07/01/22 4,212,320 3,000 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)..................................... 5.250 11/01/17 3,233,220 1,740 Oregon St Veterans Welfare Ser 76A........ 6.050 10/01/28 1,804,554 1,190 Portland, OR Cmnty College Dist Ser B..... 5.250 06/01/12 1,321,590 1,985 Portland, OR Urban Renewal & Redev Downtown Wtrfront Ser A (AMBAC Insd)...... 5.750 06/15/16 2,252,558 1,000 Washington Multnomah & Yamhill (MBIA Insd)..................................... 5.000 06/01/13 1,083,670 ------------- 13,907,912 ------------- PENNSYLVANIA 3.9% 1,250 Allegheny Cnty, PA Ctf Part (AMBAC Insd)..................................... 5.000 12/01/28 1,259,288 1,250 Allegheny Cnty, PA San Auth Swr Rev (MBIA Insd)..................................... 5.750 12/01/16 1,426,125 4,680 Erie, PA Sch Dist Cap Apprec Rfdg (FSA Insd)..................................... * 09/01/19 2,174,515
16 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PENNSYLVANIA (CONTINUED) $ 3,760 Falls Twp, PA Hosp Auth Hosp Rev DE Vly Med Rfdg (FHA Gtd)........................ 7.000% 08/01/22 $ 3,997,820 1,905 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC Insd).............................. * 09/15/16 1,066,743 1,710 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC Insd).............................. * 03/15/19 813,704 1,385 Harrisburg, PA Cap Apprec Ser F Rfdg (AMBAC Insd).............................. * 09/15/19 643,319 1,500 Penn Cambria Sch Dist PA Cap Apprec (FGIC Insd)..................................... * 08/15/20 654,645 60 Penn Hills, PA (Prerefunded @ 12/01/07) (FGIC Insd)............................... 5.900 12/01/17 69,194 1,000 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Bryn Mawr College (MBIA Insd)..................................... 5.625 12/01/27 1,071,550 1,000 Philadelphia, PA Auth Indl Dev Philadelphia Arpt Sys Proj Ser A (FGIC Insd)..................................... 5.125 07/01/19 1,022,400 1,400 Philadelphia, PA Sch Dist Ser A (FSA Insd)..................................... 5.750 02/01/12 1,589,714 1,500 Pittsburgh, PA Ser A (Prerefunded @ 09/01/09) (FGIC Insd)..................... 5.750 09/01/23 1,734,375 1,005 Southeast Delco Sch Dist PA Cap Apprec (MBIA Insd)............................... * 02/01/17 543,052 ------------- 18,066,444 ------------- RHODE ISLAND 0.9% 1,490 Providence, RI Redev Agy Rev Pub Safety & Muni Bldgs Ser A (AMBAC Insd)............. 5.500 04/01/14 1,656,195 2,420 Rhode Island St Cons Cap Dev Ln Ser A..... 5.000 08/01/12 2,475,708 ------------- 4,131,903 ------------- SOUTH CAROLINA 3.8% 2,275 Beaufort Cnty, SC Tax Increment New River Redev Proj Area (MBIA Insd)............... 5.500 06/01/19 2,486,461 2,375 Berkeley Cnty, SC Sch Dist Ctfs Part Berkeley Sch Facs Grp Inc (MBIA Insd)..... 5.250 02/01/16 2,540,490 2,700 Charleston Cnty, SC Solid Waste (MBIA Insd)..................................... 6.000 01/01/14 2,889,054 3,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec & Gas Co Proj Ser A (AMBAC Insd)..... 5.200 11/01/27 3,607,800 3,750 South Carolina Jobs Econ Dev Auth Indl Rev Elec & Gas Co Proj Ser B (AMBAC Insd)..... 5.450 11/01/32 3,862,613 2,000 South Carolina St Pub Svc Auth Rev Ser D Rfdg (FSA Insd)........................... 5.000 01/01/20 2,075,080 ------------- 17,461,498 -------------
See Notes to Financial Statements 17 YOUR TRUST'S INVESTMENTS October 31, 2003
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 $ 1,469,765 1,000 South Dakota St Hlth & Ed Fac Auth Rev Childrens Care Hosp Rfdg.................. 6.125 11/01/29 1,043,220 995 South Dakota St Hlth & Ed Fac Auth Vocational Ed Pgm Ser A (AMBAC Insd)...... 5.400 08/01/13 1,101,654 ------------- 3,614,639 ------------- TENNESSEE 1.9% 1,500 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn States Rfdg (MBIA Insd)..................................... 7.500 07/01/25 1,880,850 1,000 Memphis, TN Gen Impt...................... 5.000 05/01/20 1,040,270 5,500 Montgomery Cnty, TN Pub Impt Rfdg (FGIC Insd)..................................... 5.500 05/01/16 6,091,635 ------------- 9,012,755 ------------- TEXAS 9.8% 2,685 Beaumont, TX Wtrwks & Swr Sys (FGIC Insd)..................................... 6.250 09/01/15 3,130,146 1,275 Cameron Cnty, TX Ctf Oblig (AMBAC Insd)... 5.750 02/15/13 1,439,603 3,000 Dallas Cnty, TX Util & Reclamation Dist Ser B Rfdg (AMBAC Insd)................... 5.875 02/15/29 3,133,350 2,000 Dallas, TX Wtrwks & Swr Sys Rev Rfdg...... 5.750 10/01/17 2,258,540 4,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser A Rfdg (FGIC Insd)................. 5.500 11/01/31 4,123,920 4,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A (FGIC Insd)............................. 5.750 11/01/30 4,225,520 1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FSA Insd)................................ 5.625 07/01/30 1,037,460 3,000 Houston, TX Hotel Occupancy Tax & Spl Rev Convention & Entmt Ser B (AMBAC Insd)..... 5.750 09/01/15 3,408,180 1,500 Houston, TX Pub Impt Rfdg (FSA Insd)...... 5.750 03/01/15 1,691,805 1,925 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser C (FGIC Insd)............................. 5.375 12/01/27 2,002,077 1,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj....................... 7.250 01/01/31 1,389,345 1,500 North Cent TX Hlth Fac Dev Hosp Baylor Hlthcare Sys Proj Ser A................... 5.125 05/15/29 1,495,725 4,000 North Cent TX Hlth Fac Dev Hosp Childrens Med Ctr Dallas (AMBAC Insd)............... 5.250 08/15/32 4,113,480 3,000 San Antonio, TX Elec & Gas Sys Rfdg....... 5.375 02/01/16 3,270,720 2,750 Texas St Vets Housing Assistance Pgm Vet Ser B (FHA Gtd)........................... 6.100 06/01/31 2,918,383 3,000 University of TX Univ Rev Fin Sys Ser A... 5.250 08/15/20 3,199,620 2,300 University of TX Univ Rev Fin Sys Ser C... 5.375 08/15/19 2,480,021 ------------- 45,317,895 -------------
18 See Notes to Financial Statements YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE UTAH 1.9% $ 185 Utah St Hsg Fin Agy Single Family Mtg Mezzanine Issue H1 (AMBAC Insd)........... 6.000% 07/01/12 $ 194,230 3,625 Utah St Ser A............................. 5.000 07/01/07 4,012,295 4,000 Utah St Ser B Rfdg........................ 5.250 07/01/08 4,501,240 ------------- 8,707,765 ------------- VIRGINIA 0.5% 1,320 Fairfax Cnty, VA Ctf Part................. 5.300 04/15/23 1,360,036 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 1,121,390 ------------- 2,481,426 ------------- WASHINGTON 6.3% 3,245 Clark Cnty, WA Sch Dist 114 Evergreen (FSA Insd)..................................... 5.500 12/01/15 3,596,823 2,500 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)......................... 5.500 07/01/18 2,716,325 5,360 Energy Northwest WA Elec Rev Proj No 3 Ser B Rfdg (FSA Insd)......................... 6.000 07/01/16 6,123,532 1,485 Pierce Cnty, WA (AMBAC Insd).............. 5.750 08/01/14 1,672,823 1,000 Port Seattle, WA Rev Ser B (MBIA Insd).... 5.625 02/01/24 1,039,590 1,435 Radford Ct Pptys WA Student Hsg Rev (MBIA Insd)..................................... 6.000 06/01/15 1,647,107 1,585 Radford Ct Pptys WA Student Hsg Rev (MBIA Insd)..................................... 6.000 06/01/16 1,819,279 1,150 Seattle, WA Muni Lt & Pwr Rev............. 5.250 12/01/08 1,288,863 1,315 Seattle, WA Muni Lt & Pwr Rev............. 5.500 12/01/09 1,495,826 1,000 Seattle, WA Muni Lt & Pwr Rev............. 5.625 12/01/18 1,076,650 3,000 Spokane, WA Pub Fac Dist Hotel Motel & Sales Use Tax (MBIA Insd)................. 5.250 09/01/33 3,103,140 1,350 Tacoma, WA Elec Sys Rev Ser A Rfdg (FSA Insd)..................................... 5.750 01/01/15 1,521,950 1,650 Tacoma, WA Elec Sys Rev Ser B Rfdg (FSA Insd)..................................... 5.500 01/01/12 1,864,418 ------------- 28,966,326 ------------- 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 3,114,150 ------------- WISCONSIN 1.1% 1,225 De Pere, WI Unit Sch Dist Rfdg (FGIC Insd)..................................... 5.000 10/01/13 1,322,045 1,340 Oconto Falls, WI Pub Sch Dist Ser A Rfdg (Prerefunded @ 03/01/11) (FSA Insd)....... 5.750 03/01/15 1,555,057
See Notes to Financial Statements 19 YOUR TRUST'S INVESTMENTS October 31, 2003
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE WISCONSIN (CONTINUED) $ 2,000 Southeast WI Professional Baseball Pk Dist Sales Tax Rev Ser A Rfdg (MBIA Insd)...... 5.500% 12/15/20 $ 2,248,400 ------------- 5,125,502 ------------- GUAM 0.7% 3,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)...... 5.250 10/01/34 3,087,240 ------------- PUERTO RICO 0.2% 1,110 Puerto Rico Comwlth Aqueduct & Swr Auth Rev Rfdg.................................. 5.000 07/01/15 1,142,234 ------------- TOTAL LONG-TERM INVESTMENTS 155.2% (Cost $661,426,017)......................................................... 719,115,586 SHORT-TERM INVESTMENT 0.4% (Cost $1,700,000)........................................................... 1,700,000 ------------- TOTAL INVESTMENTS 155.6% (Cost $663,126,017)......................................................... 720,815,586 OTHER ASSETS IN EXCESS OF LIABILITIES 1.6%................................... 7,628,439 PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (57.2%)................... (265,113,392) ------------- NET ASSETS APPLICABLE TO COMMON SHARES 100.0%................................ $ 463,330,633 =============
* Zero coupon bond (a) All or a portion of these securities have been physically segregated in connection with open futures contracts. (b) Security purchased on a when-issued or delayed delivery basis. (c) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (d) Security includes a put feature allowing the Trust to periodically put the security back to the issuer at amortized cost on specified put dates. The interest rate shown represents the current interest rate earned by the Trust based on the most recent reset date. 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. 20 See Notes to Financial Statements FINANCIAL STATEMENTS Statement of Assets and Liabilities October 31, 2003 ASSETS: Total Investments (Cost $663,126,017)....................... $720,815,586 Cash........................................................ 76,975 Receivables: Interest.................................................. 10,856,253 Investments Sold.......................................... 60,000 Other....................................................... 13,758 ------------ Total Assets............................................ 731,822,572 ------------ LIABILITIES: Payables: Investments Purchased..................................... 2,302,759 Investment Advisory Fee................................... 370,148 Variation Margin on Futures............................... 175,656 Income Distributions--Common Shares....................... 116,518 Administrative Fee........................................ 30,846 Affiliates................................................ 18,459 Trustees' Deferred Compensation and Retirement Plans........ 239,820 Accrued Expenses............................................ 124,341 ------------ Total Liabilities....................................... 3,378,547 Preferred Shares (including accrued distributions).......... 265,113,392 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $463,330,633 ============ NET ASSET VALUE PER COMMON SHARE ($463,330,633 divided by 27,013,149 shares outstanding)............................ $ 17.15 ============ 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............................................. 399,277,851 Net Unrealized Appreciation................................. 55,619,347 Accumulated Net Realized Gain............................... 5,105,054 Accumulated Undistributed Net Investment Income............. 3,058,250 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $463,330,633 ============ PREFERRED SHARES ($.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....................... $728,330,633 ============
See Notes to Financial Statements 21 Statement of Operations For the Year Ended October 31, 2003 INVESTMENT INCOME: Interest.................................................... $35,904,786 ----------- EXPENSES: Investment Advisory Fee..................................... 4,395,275 Preferred Share Maintenance................................. 701,753 Administrative Fee.......................................... 366,275 Trustees' Fees and Related Expenses......................... 81,058 Legal....................................................... 71,018 Custody..................................................... 44,001 Other....................................................... 336,825 ----------- Total Expenses.......................................... 5,996,205 ----------- NET INVESTMENT INCOME....................................... $29,908,581 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ 6,279,559 Futures................................................... (1,167,008) ----------- Net Realized Gain........................................... 5,112,551 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 58,340,737 End of the Period: Investments............................................. 57,689,569 Futures................................................. (2,070,222) ----------- 55,619,347 ----------- Net Unrealized Depreciation During the Period............... (2,721,390) ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 2,391,161 =========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(3,007,663) =========== NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS................................................ $29,292,079 ===========
22 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................................... $ 29,908,581 $ 31,800,167 Net Realized Gain....................................... 5,112,551 9,316,751 Net Unrealized Depreciation During the Period........... (2,721,390) (4,384,608) Distributions to Preferred Shareholders: Net Investment Income................................. (2,221,342) (2,695,352) Net Realized Gain..................................... (786,321) (1,890,883) ------------ ------------ Change in Net Assets Applicable to Common Shares from Operations............................................ 29,292,079 32,146,075 Distributions to Common Shareholders: Net Investment Income................................. (28,875,489) (27,767,715) Net Realized Gain..................................... (8,705,889) (5,764,605) ------------ ------------ NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM INVESTMENT ACTIVITIES............................ (8,289,299) (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 $3,058,250 and $4,501,735, respectively)......................................... $463,330,633 $471,619,932 ============ ============
See Notes to Financial Statements 23 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.................... $ 17.46 $ 17.51 $ 16.22 ------- ------- ------- Net Investment Income..................................... 1.10 1.18 1.25 Net Realized and Unrealized Gain/Loss..................... .09 .18 1.24 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income................................. (.08) (.10) (.32) Net Realized Gain..................................... (.03) (.07) -0- ------- ------- ------- Total from Investment Operations............................ 1.08 1.19 2.17 Distributions Paid to Common Shareholders: Net Investment Income................................. (1.07) (1.03) (.88) Net Realized Gain..................................... (.32) (.21) -0- ------- ------- ------- NET ASSET VALUE, END OF THE PERIOD.......................... $ 17.15 $ 17.46 $ 17.51 ======= ======= ======= Common Share Market Price at End of the Period.............. $ 15.58 $ 15.80 $ 14.94 Total Return (b)............................................ 7.60% 14.56% 16.85% Net Assets Applicable to Common Shares at End of the Period (In millions)............................................. $ 463.3 $ 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)........................... 6.40% 6.89% 7.37% Portfolio Turnover.......................................... 23% 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)........................... 5.92% 6.30% 5.49% SENIOR SECURITIES: Total Preferred Shares Outstanding.......................... 10,600 10,600 10,600 Asset Coverage Per Preferred Share (e)...................... $68,721 $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
(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. 24
YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 1994 ------------------------------------------------------------------------------- $ 15.63 $ 17.64 $ 17.29 $ 16.58 $ 16.58 $ 15.03 $ 17.95 -------- -------- -------- -------- -------- -------- -------- 1.32 1.33 1.35 1.37 1.38 1.42 1.43 .64 (1.94) .42 .74 .11 1.65 (2.84) (.40) (.32) (.34) (.35) (.35) (.38) (.30) -0- (.02) (.02) -0- -0- -0- (.01) -------- -------- -------- -------- -------- -------- -------- 1.56 (.95) 1.41 1.76 1.14 2.69 (1.72) (.97) (.99) (1.00) (1.05) (1.14) (1.14) (1.14) -0- (.07) (.06) -0- -0- -0- (.06) -------- -------- -------- -------- -------- -------- -------- $ 16.22 $ 15.63 $ 17.64 $ 17.29 $ 16.58 $ 16.58 $ 15.03 ======== ======== ======== ======== ======== ======== ======== $13.5625 $13.6875 $ 17.00 $ 16.125 $ 15.813 $ 15.75 $ 14.00 6.41% -13.97% 12.40% 8.92% 7.84% 21.15% -13.12% $ 438.1 $ 422.2 $ 476.6 $ 467.0 $ 447.8 $ 447.9 $ 406.1 1.68% 1.61% 1.58% 1.60% 1.62% 1.68% 1.63% 8.44% 7.87% 7.73% 8.16% 8.37% 8.96% 8.63% 31% 33% 29% 40% 30% 15% 20% 1.03% 1.02% 1.01% 1.01% 1.02% 1.04% 1.03% 5.86% 6.00% 5.80% 6.06% 6.24% 6.55% 6.79% 10,600 10,600 5,300 5,300 5,300 5,300 5,300 $ 66,332 $ 64,827 $139,932 $138,116 $134,491 $134,501 $126,614 $ 25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements 25 NOTES TO FINANCIAL STATEMENTS October 31, 2003 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. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. 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 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 has $2,302,759 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. 26 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........................ $662,385,593 ------------ Gross tax unrealized appreciation........................... $ 59,235,664 Gross tax unrealized depreciation........................... (805,671) ------------ Net tax unrealized appreciation on investments.............. $ 58,429,993 ============
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 the years ended October 31, 2003 and 2002 was as follows:
2003 2002 Distributions paid from: Ordinary income........................................... $1,160,043 $1,959,846 Long-term capital gain.................................... 8,535,890 5,867,289 ---------- ---------- $9,695,933 $7,827,135 ========== ==========
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 for the 2003 fiscal year have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Permanent book and tax differences relating to expenses which are not deductible for tax purposes totaling $3,008 were reclassified from accumulated undistributed net investment income to paid in surplus. Additionally, a permanent difference relating to book to tax accretion differences totaling $258,243 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............................... $ 123,357 Undistributed long-term capital gain........................ 3,036,707
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, and gains or losses recognized for tax purposes on open future transactions on October 31, 2003. 27 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 $48,600 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 $63,300 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 $170,050,556 and $162,502,464, 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 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 28 NOTES TO FINANCIAL STATEMENTS October 31, 2003 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 delivery date. 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, each with a par value of $100,000, for the year ended October 31, 2003, were as follows:
CONTRACTS Outstanding at October 31, 2002............................. 1,039 Futures Opened.............................................. 3,595 Futures Closed.............................................. (3,778) ------ Outstanding at October 31, 2003............................. 856 ======
The futures contracts outstanding as of October 31, 2003, and the description and unrealized appreciation/depreciation were as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION Short Contracts: U.S. Treasury Notes 10-Year Futures December 2003 (Current Notional Value of $112,297 per contract)................ 166 $ (553,172) U.S. Treasury Notes 5-Year Futures December 2003 (Current Notional Value of $111,813 per contract)................ 690 (1,517,050) --- ----------- 856 $(2,070,222) === ===========
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 October 31, 2003 29 NOTES TO FINANCIAL STATEMENTS October 31, 2003 was 0.849%. During the year ended October 31, 2003, the rates ranged from 0.700% 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. 30 REPORT OF INDEPENDENT AUDITORS To the Board of Trustees and Shareholders of Van Kampen Trust for Investment Grade Municipals: We have audited the accompanying statement of assets and liabilities of Van Kampen Trust for Investment Grade Municipals (the "Trust"), including the portfolio of investments, as of October 31, 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. 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 Trust for Investment Grade Municipals 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 31 DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's Common Shares, resulting in the acquisition of fewer Common 32 Shares than if the dividend or distribution had been paid in Common Shares issued by the Trust. All reinvestments are in full and fractional Common Shares and are carried to three decimal places. Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the changes sent to all Common Shareholders of the Trust at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days written notice to all Common Shareholders of the Trust. COSTS OF THE PLAN The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. No other charges will be made to participants for reinvesting dividends or capital gains distributions, except for certain brokerage commissions, as described above. TAX IMPLICATIONS You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. RIGHT TO WITHDRAW Plan participants may withdraw at any time by calling 1-800-341-2929 or by writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will receive, without charge, a share certificate issued in your name for all full Common Shares credited to your account under the Plan and a cash payment will be made for any fractional Common Share credited to your account under the Plan. You may again elect to participate in the Plan at any time by calling 1-800-341-2929 or writing to the Trust at: Van Kampen Funds Inc. Attn: Closed-End Funds 2800 Post Oak Blvd. Houston, TX 77056 33 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS 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 99.4% of the income distributions as a tax-exempt income distribution. The Trust designated and paid $8,535,890 as a long term capital gain 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. 34 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............................................. 24,336,588 258,142 Linda Hutton Heagy.......................................... 24,315,372 279,358 R. Craig Kennedy............................................ 24,305,682 289,048 Wayne W. Whalen............................................. 24,232,366 362,364 Suzanne H. Woolsey.......................................... 24,323,467 271,263
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 III, 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 ---------------------------------- 22,421,710 1,809,446 363,574
35 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.
36
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.
37
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.
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 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.
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 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.
40 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.
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 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. 42 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.
43
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.
44
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.
45 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. VGM ANR 12/03 Member NASD/SIPC. 12565L03-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 Trust for Investment Grade Municipals 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