N-30D 1 c69893nv30d.txt SEMI-ANNUAL REPORT Table of Contents OVERVIEW LETTER TO SHAREHOLDERS 1 ECONOMIC SNAPSHOT 2 PERFORMANCE SUMMARY RETURN HIGHLIGHTS 4 PORTFOLIO AT A GLANCE CREDIT QUALITY 6 SIX-MONTH DIVIDEND HISTORY 6 TOP FIVE SECTORS 7 NET ASSET VALUE AND MARKET PRICE 7 Q&A WITH YOUR PORTFOLIO MANAGER 8 GLOSSARY OF TERMS 11 BY THE NUMBERS YOUR TRUST'S INVESTMENTS 12 FINANCIAL STATEMENTS 29 NOTES TO FINANCIAL STATEMENTS 34 DIVIDEND REINVESTMENT PLAN 38 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES 40
Given the market's ups and downs-- diversifying has never been more important. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE OVERVIEW LETTER TO SHAREHOLDERS May 20, 2002 Dear Shareholder, We seem to be at an economic crossroads--good news about the economy and earnings have been offset by escalating concerns abroad. Given the market's ups and downs, taking steps so your portfolio can be properly diversified has never been more important. So how do you decide what to do next? Contact your financial advisor. Your financial advisor can help you review your current asset allocation and determine whether it remains appropriate for your goals, risk tolerance and time horizon. Remember, while no portfolio is immune to volatility, owning a variety of stock and fixed-income investments may help manage your portfolio's overall risk and improve its long-term performance potential. When reviewing your investment selections with your financial advisor, be sure to keep your long-term goals in mind--don't let short-term volatility distract you from your long-term retirement planning and investment goals. Thank you for your continued trust in Van Kampen. We appreciate the opportunity to help you and your loved ones enjoy life's true wealth--family, friends and life's daily pleasures. Sincerely, [SIG] Richard F. Powers, III President and CEO Van Kampen Investment Advisory Corp. 1 ECONOMIC SNAPSHOT THE ECONOMY ECONOMIC DATA RELEASED IN APRIL 2002 DEPICTED AN ECONOMY ON THE PATH OF RECOVERY, BUT MANY MARKET OBSERVERS AND ANALYSTS WERE SLOW TO VIEW RECENT DEVELOPMENTS--SUCH AS IMPROVED PRODUCTIVITY AND STRONG GROWTH--POSITIVELY. UNEMPLOYMENT DATA, RELEASED EARLY IN THE MONTH, REVEALED NEW JOBS HAD BEEN ADDED TO THE ECONOMY--ALBEIT AT A SUBDUED PACE. THE BELEAGUERED MANUFACTURING SECTOR REPORTED FACTORY PRODUCTION LEVELS THAT WERE CONSISTENT WITH RECENT INCREASES. HOUSING STARTS, ALTHOUGH STILL AT HISTORICALLY HIGH LEVELS, RETREATED MORE THAN ANALYSTS HAD ANTICIPATED. AT THE SAME TIME, RETAIL SALES CONTINUED TO DISPLAY SURPRISING STRENGTH. CONTENT WITH WHAT THEY PERCEIVED TO BE GOOD--BUT NOT-GOOD-ENOUGH--RESULTS, THESE SAME MARKET OBSERVERS AND ANALYSTS SEEMED SURPRISED WHEN FIRST QUARTER GROSS DOMESTIC PRODUCT, THE PRIMARY MEASURE OF ECONOMIC GROWTH, CAME IN AT A STRONGER- THAN-EXPECTED 5.6 PERCENT. 2 U.S. GROSS DOMESTIC PRODUCT SEASONALLY ADJUSTED ANNUALIZED RATES (March 31, 2000--March 31, 2002) [BAR GRAPH]
U.S. GROSS DOMESTIC PRODUCT --------------------------- Mar 00 4.8% Jun 00 5.7% Sep 00 1.3% Dec 00 1.9% Mar 01 1.3% Jun 01 0.3% Sep 01 -1.3% Dec 01 1.7% Mar 02 5.6%
Source: Bureau of Economic Analysis INTEREST RATES AND INFLATION (April 30, 2000--April 30, 2002) [LINE GRAPH]
INTEREST RATES INFLATION -------------- --------- Apr 00 6.00 3.10 6.50 3.20 6.50 3.70 Jul 00 6.50 3.70 6.50 3.40 6.50 3.50 Oct 00 6.50 3.40 6.50 3.40 6.50 3.40 Jan 01 5.50 3.70 5.50 3.50 5.00 2.90 Apr 01 4.50 3.30 4.00 3.60 3.75 3.20 Jul 01 3.75 2.70 3.50 2.70 3.00 2.60 Oct 01 2.50 2.10 2.00 1.90 1.75 1.60 Jan 02 1.75 1.10 1.75 1.10 1.75 1.50 Apr 02 1.75 1.60
Interest rates are represented by the closing midline federal funds target rate on the last day of each month. Inflation is indicated by the annual percentage change of the Consumer Price Index for all urban consumers at the end of each month. Source: Bloomberg 3 PERFORMANCE SUMMARY RETURN HIGHLIGHTS (as of April 30, 2002) ------------------------------- NYSE Ticker Symbol - VGM ------------------------------- ----------------------------------------------------------------------- Six-month total return(1) 4.93% ----------------------------------------------------------------------- One-year total return(1) 8.91% ----------------------------------------------------------------------- Five-year average annual total return(1) 6.61% ----------------------------------------------------------------------- Ten-year average annual total return(1) 7.47% ----------------------------------------------------------------------- Life-of-Trust average annual total return(1) 7.07% ----------------------------------------------------------------------- Commencement date 01/24/92 ----------------------------------------------------------------------- Distribution rate as a % of closing common share market price(2) 6.82% ----------------------------------------------------------------------- Taxable-equivalent distribution rate as a % of closing common share market price(3) 11.11% ----------------------------------------------------------------------- Preferred share (Series A) rate(4) 1.570% ----------------------------------------------------------------------- Preferred share (Series B) rate(4) 1.400% ----------------------------------------------------------------------- Preferred share (Series C) rate(4) 1.460% ----------------------------------------------------------------------- Preferred share (Series D) rate(4) 1.620% ----------------------------------------------------------------------- Net asset value $16.82 ----------------------------------------------------------------------- Closing common share market price $14.96 ----------------------------------------------------------------------- Six-month high common share market price (11/12/01) $15.56 ----------------------------------------------------------------------- Six-month low common share market price (12/18/01) $14.16 -----------------------------------------------------------------------
4 (1) Total return assumes an investment at the common share market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Trust's dividend reinvestment plan, and sale of all shares at the closing common share market price at the end of the period indicated. (2) Distribution rate represents the monthly annualized distributions of the Trust at the end of the period and not the earnings of the Trust. (3) The taxable-equivalent distribution rate is calculated assuming a 38.6% federal income tax rate. (4) See "Notes to Financial Statements" footnote #4, for more information concerning Preferred Share reset periods. A portion of the interest income may be taxable for those investors subject to the federal alternative minimum tax (AMT). Past performance is no guarantee of future results. Investment return, common share market price and net asset value will fluctuate and Trust shares, when sold, may be worth more or less than their original cost. An investment in the Trust is subject to investment risks, and you could lose money on your investment in the Trust. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. 5 PORTFOLIO AT A GLANCE CREDIT QUALITY (as a percentage of long-term investments)
As of April 30, 2002 - AAA/Aaa............ 69.8% [PIE CHART] - AA/Aa.............. 10.0% - A/A................ 15.8% - BBB/Baa............ 3.8% - BB/Ba.............. 0.6% As of October 31, 2001 - AAA/Aaa............ 65.9% [PIE CHART] - AA/Aa.............. 8.1% - A/A................ 18.4% - BBB/Baa............ 4.4% - BB/Ba.............. 2.7% - Non-Rated.......... 0.5%
Based upon the credit quality ratings as issued by Standard & Poor's Credit Market Services/Moody's Investor Services, respectively. Subject to change daily. SIX-MONTH DIVIDEND HISTORY (for the six months ending April 30, 2002, for common shares) [BAR GRAPH]
DIVIDENDS CAPITAL GAINS --------- ------------- 11/01 0.0780 12/01 0.0780 0.2134 1/02 0.0825 2/02 0.0850 3/02 0.0850 4/02 0.0850
The dividend history represents dividends that were paid on the trust and is no guarantee of the trust's future dividends. 6 TOP FIVE SECTORS (as a percentage of long-term investments) [BAR GRAPH]
APRIL 30, 2002 OCTOBER 31, 2001 -------------- ---------------- General Purpose 21.5% 20.0% Transportation 10.3% 9.7% Public Education 9.1% 9.5% Health Care 8.9% 9.3% Public Building 8.3% 8.3%
Subject to change daily. NET ASSET VALUE AND MARKET PRICE (based upon quarter-end values--April 1992 through April 2002) [LINE GRAPH]
NET ASSET VALUE MARKET PRICE --------------- ------------ 4/92 15.1800 14.6250 15.8500 15.1250 16.1300 15.3750 12/92 16.0500 15.3750 16.9100 16.3750 17.3900 16.5000 18.0900 17.2500 12/93 17.9100 16.8750 16.1100 15.2500 15.8400 15.6250 15.5700 14.2500 12/94 14.8500 13.7500 16.0800 15.3750 16.1600 15.3750 16.3200 15.2500 12/95 17.1300 15.7500 16.3800 15.8750 16.1400 15.0625 16.4400 15.8750 12/96 16.6900 15.3750 16.3100 15.0000 16.8500 15.8125 17.2600 16.3750 12/97 17.5300 16.3750 17.4600 16.3750 17.4600 16.2500 17.8700 17.1875 12/98 17.4800 17.3750 17.3000 16.6875 16.5700 15.5620 16.0000 14.5000 12/99 15.4200 13.0000 15.8200 13.3125 15.7700 13.4375 16.0200 13.6875 12/00 17.0000 14.1600 17.1200 14.8000 16.9000 14.6100 17.2600 14.7500 12/01 16.5400 14.5600 16.4100 14.7500 04/02 16.8200 14.9600
The solid line above represents the trust's net asset value (NAV), which indicates overall changes in value among the trust's underlying securities. The trust's market price is represented by the dashed line, which indicates the price the market is willing to pay for shares of the trust at a given time. Market price is influenced by a range of factors, including supply and demand and market conditions. 7 [PHOTO] Q&A WITH YOUR PORTFOLIO MANAGER WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGER FOR THE VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE SIX-MONTH PERIOD ENDING APRIL 30, 2002. THOMAS M. BYRON, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 1997 AND HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1981. THE FOLLOWING DISCUSSION REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE. Q WHAT WAS THE MARKET ENVIRONMENT OF THE PAST SIX MONTHS, AND HOW DID THE TRUST PERFORM IN THAT ENVIRONMENT? A The market over the past six months has been driven by shifting expectations about the future growth of the economy. As economic indicators wavered between encouraging and disappointing evidence of a sustained recovery, investors responded by driving yields in diverging directions from one month to the next. The result was a decidedly choppy market. In November and December of 2001, the first two months of the period, investors appeared to assume an imminent economic recovery. Fears that credit demand and inflation would soon rise in tandem with the economy's improving strength drove yields up across the market. Those fears were allayed in the first two months of 2002 as economic indicators began to be more mixed. Investors began to sense that the economy's recovery, and the concurrent upward pressure on interest rates, might not occur as quickly as they had previously anticipated. The resulting market rally sent yields lower in January and February as Wall Street economists pushed back their timetable for future Federal Reserve ("Fed") tightening. The next two months saw even sharper reversals of fortune for the municipal bond market. In March, the market posted one of its worst months of the past 20 years in the wake of unexpectedly strong employment and manufacturing numbers. The market then rallied strongly in April as continued volatility in the equity market caused investors to turn to the perceived relative safety of tax-exempt bonds. While yields were volatile during the period, we believe the municipal market on the whole remained fairly well balanced between supply and demand. Municipalities continued to take advantage of low interest rates by issuing new bonds, and issuance overall was up 10 percent for the first three months of 2002 compared to the same period one year earlier. Retail investors continued to show strong demand for 8 the asset class as an alternative to volatile equity returns. The portfolio continued to offer a competitive level of tax-exempt income. The trust's monthly dividend of $0.0850 per share translated to a distribution rate of 6.82 percent based on the trust's closing common share market price on April 30, 2002. Based on these figures, investors would have to earn a distribution rate of 11.11 percent on a taxable investment (for an investor in the 38.6 percent federal income tax bracket) to match the tax-exempt yield provided by the trust. For the six months ending April 30, 2002, the trust produced a total return of 4.93 percent based on common share market price. This reflects an increase in common share market price from $14.94 per share on October 31, 2001 to $14.96 per share on April 30, 2002. Past performance is no guarantee of future results. As a result of recent market activity, current performance may vary from the figures shown. Investment return and principal value will fluctuate and trust shares, when sold, may be worth more or less than their original cost. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. By comparison, the Lehman Brothers Municipal Bond Index posted a total return of 1.08 percent for the same period. This index is an unmanaged, broad-based statistical composite of municipal bonds. Index returns do not include any sales charges or fees that would be paid by an investor purchasing the securities it represents. Such costs would lower performance. It is not possible to invest directly in an index. For additional performance results, please refer to the chart and footnotes on page 4. Q WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT? A Much of our activity in this trust centered around taking profits from successful positions and redeploying those assets into securities that we felt were likely to produce strong performance going forward. For example, in recent years we purchased several discount-coupon bonds that we anticipated would benefit from changes in the market's structure. Those bonds appreciated considerably as interest rates fell, and got an extra boost when they became desirable to retail investors. We sold these positions when they had reached their price targets in an attempt to lock those gains into the portfolio. The resulting assets were put to work in bonds that we felt offered better characteristics for the next phase of the market. In some instances we looked for bonds with similar or slightly higher coupons and better structural characteristics. We also favored selected intermediate-maturity, premium-coupon bonds that trade to their call date. These bonds have historically offered the dual benefits of strong income as well as moderate vulnerability to changes in interest rates, and may help the portfolio in times when interest rates are rising. We have also increased the trust's credit quality, with AAA rated holdings up by nearly 4 percent over the period. We funded much of this increase with the sale of lower-rated bonds. With 9 expectations for the economy turning to its eventual recovery, we have felt for a while that interest rates were likely to rise once a recovery was firmly underway. Rising rates could in turn put pressure on lower-rated paper with higher yields. We moved to insulate the portfolio from this potential volatility by selling positions that had appreciated to the point where we believed they no longer offered compelling relative value. For example, we reduced the trust's exposure to hospital bonds that had met or exceeded our performance expectations. In the wake of September 11, bonds backed by airline revenues have been among the hardest hit. While some of the trust's holdings have further potential for appreciation, we moved to trim exposure to those bonds that seemed unlikely to improve. The portfolio also experienced a fair amount of call activity. The trust was formed roughly ten years ago, and has many of its original holdings. These bonds were issued in a period of higher interest rates, and as a result are especially attractive candidates for refinancing in the current, lower interest-rate environment. We will continue to monitor these holdings and will attempt to minimize any adverse impact by selectively replacing callable issues when the market offers what we believe are more attractive opportunities elsewhere. Finally, we have implemented an ongoing strategy to attempt to enhance the efficiency of the trust's portfolio. Our primary means of achieving this has been to try to streamline the portfolio wherever possible by reducing the number of names and increasing position sizes. This should benefit the portfolio by boosting liquidity and keeping transaction costs low. It may also allow us greater flexibility to establish and trade around positions that correspond to our investment goals. Q WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET? A We will continue to watch the economy for any acceleration in growth that could cause the Fed to boost rates. With interest rates this low, it may be difficult to keep inflationary fears out of the picture for long. As a result, we expect that there will be increasing pressure on the Fed to act in the coming months, which may drive yields higher, particularly on the short end of the curve. For the municipal market, we expect that issuance will remain steady. Rising interest rates could put a damper on refinancing activity, but voters in most areas appear to be amenable to ballot initiatives that result in debt financing. We anticipate that equity market sentiment may continue to be a key driver of investor appetite for municipal bonds. In our view, as long as stocks remain volatile, the municipal market is likely to continue to enjoy positive inflows. 10 GLOSSARY OF TERMS A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT AND OTHER FINANCIAL PUBLICATIONS. COUPON RATE: The stated rate of interest a bond pays on an annual basis, expressed as a percentage of its face value. CREDIT RATING: An evaluation of a bond issuer's credit history and capability of repaying debt obligations. Standard & Poor's Ratings Group and Moody's Investors Service are two companies that assign credit ratings. Standard & Poor's ratings range from a high of AAA to a low of D, while Moody's ratings range from a high of Aaa to a low of C. DISCOUNT BOND: A bond whose market price is lower than its face value or "par value". Because bonds usually mature at face value, a discount bond has more potential to appreciate in price than a par bond does. FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve System, which is the central bank of the United States. Its policy-making committee, called the Federal Open Market Committee, meets at least eight times a year to establish monetary policy and monitor the economic pulse of the United States. PREMIUM BOND: A bond whose market price is above its face value, or "par value." Because bonds usually mature at face value, a premium bond has less potential to appreciate in price than a par bond. SECTOR: A group of securities that are similar with respect to industry, maturity, credit rating, or coupon. YIELD CURVE: The pattern that results from viewing the yields of U.S. Treasury securities maturing in 1, 5, 10, and 30 years. When grouped together and graphed, a pattern of increasing yield is often reflected as the time to maturity extends. This pattern creates an upward sloping "curve." A "flat" yield curve represents little difference between short- and long-term interest rates, while a "negative" yield curve represents decreasing yields as the time to maturity extends. 11 BY THE NUMBERS YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited) THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF THE REPORTING PERIOD.
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MUNICIPAL BONDS 153.2% ALABAMA 1.7% $ 1,000 Birmingham Baptist Med Ctr AL Baptist Hlth Sys Ser A..................... 5.875% 11/15/24 $ 1,000,360 1,750 Courtland, AL Indl Dev Brd Solid Waste Disp Rev Champion Intl Corp Proj Ser A.......... 6.500 09/01/25 1,789,672 2,000 Jefferson Cnty, AL Swr Rev Cap Impt Wts Ser A (FGIC Insd).............................. 5.000 02/01/41 1,890,580 3,000 Jefferson Cnty, AL Wts Ser A (AMBAC Insd)...................................... 5.000 04/01/09 3,201,150 ------------- 7,881,762 ------------- ARIZONA 3.2% 5,000 Mesa, AZ Util Sys Rev Rfdg (FGIC Insd)..... 5.250 07/01/14 5,399,300 2,800 Phoenix, AZ Civic Impt Corp Jr Lien (FGIC Insd) (a).................................. 5.375 07/01/29 2,776,060 4,375 Salt River Proj AZ Agric Impt Salt River Proj Ser A Rfdg............................ 5.250 01/01/06 4,697,919 1,750 Scottsdale, AZ Indl Dev Auth Hosp Rev Scottsdale Hlthcare........................ 5.800 12/01/31 1,753,185 ------------- 14,626,464 ------------- ARKANSAS 1.5% 1,500 Arkansas St Dev Fin Auth Hosp Rev Washington Regl Med Cent................... 7.375 02/01/29 1,567,590 5,000 Blytheville, AR Solid Waste Recycling & Swr Treatment Rev Nucor Corp Proj.............. 6.900 12/01/21 5,130,750 ------------- 6,698,340 ------------- CALIFORNIA 4.5% 2,895 ABC CA Uni Sch Dist Cap Apprec Ser B (FGIC Insd)...................................... * 08/01/20 1,074,392 2,000 ABC CA Uni Sch Dist Cap Apprec Ser B (FGIC Insd)...................................... * 08/01/23 615,200 1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt Proj Ser C (FSA Insd)...................... 6.000 09/01/16 1,488,682 3,250 Cabrillo, CA Uni Sch Dist Cap Apprec Ser A (AMBAC Insd)............................... * 08/01/17 1,472,380 5,000 Desert Hosp Dist CA Hosp Rev Com Part (Prerefunded @ 07/23/02) (FSA Insd)........ 6.392 07/28/20 5,160,450
See Notes to Financial Statements 12 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
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 $ 896,020 20,750 Foothill/Eastern Corridor Agy CA Toll Rd Rev Sr Lien Ser A (Escrowed to Maturity)... * 01/01/23 6,659,090 3,000 Temecula, CA Redev Agy Tax Temecula Redev Proj No 1 (MBIA Insd) (a).................. 5.250% 08/01/36 2,983,680 ------------- 20,349,894 ------------- COLORADO 1.8% 1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470 Proj Ser B (Prerefunded @ 08/31/05).................................. 6.950 08/31/20 1,156,320 2,000 Aurora, CO Ctfs Part (AMBAC Insd).......... 5.500 12/01/30 2,054,260 1,000 Colorado Hlth Fac Auth Rev Catholic Hlth Initiatives................................ 5.250 09/01/21 988,560 1,125 Colorado Hlth Fac Auth Rev Hosp Portercare Adventist Hlth............................. 6.500 11/15/31 1,169,989 286 Colorado Hsg Fin Auth Single Family Pgm Sr Ser B1..................................... 7.650 11/01/26 305,211 715 Colorado Hsg Fin Auth Single Family Pgm Sr Ser B2..................................... 7.450 11/01/27 748,605 1,805 Lakewood, CO Ctfs Part (AMBAC Insd)........ 5.300 12/01/16 1,886,297 ------------- 8,309,242 ------------- CONNECTICUT 0.4% 1,830 Connecticut St Spl Oblig Pkg Rev Bradley Intl Arpt Ser A (ACA Insd)................. 6.600 07/01/24 1,917,822 ------------- DISTRICT OF COLUMBIA 0.4% 1,600 District of Columbia Ser E (Prerefunded @ 06/01/03) (FSA Insd)....................... 6.000 06/01/13 1,682,272 ------------- FLORIDA 11.7% 16,490 Dade Cnty, FL Spl Oblig Cap Apprec Ser B Rfdg (Prerefunded @ 10/01/08) (AMBAC Insd)...................................... * 10/01/26 4,284,267 3,000 Escambia Cnty, FL Hlth Fac Auth Hlth Fac Rev FL Hlthcare Fac Ln (AMBAC Insd)........ 5.950 07/01/20 3,293,850 2,385 Florida St Brd Ed Cap Outlay Pub Ed Ser A Rfdg (FGIC Insd)........................... 4.500 06/01/23 2,171,185 2,500 Florida St Brd Ed Cap Outlay Pub Ed Ser C (FGIC Insd)................................ 5.750 06/01/29 2,634,525
See Notes to Financial Statements 13 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE FLORIDA (CONTINUED) $ 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd)...................................... 6.000% 07/01/14 $ 1,119,760 1,400 Florida St Dept Corrections Ctf Part Okeechobee Correctional (AMBAC Insd)....... 6.250 03/01/15 1,517,852 4,250 FSU Fin Assist Inc FL Ed (AMBAC Insd)...... 5.000 10/01/31 4,027,597 2,000 Gulf Breeze, FL Rev Loc Govt Ln E (FGIC Insd)...................................... 5.150 12/01/20 2,134,960 1,200 Gulf Breeze, FL Rev Loc Govt Ln E Tender (FGIC Insd)................................ 5.050 12/01/20 1,234,260 1,000 Highlands Cnty, FL Hlth Fac Auth Rev Hosp Adventist/Sunbelt Ser A.................... 6.000 11/15/31 1,006,260 4,550 Hillsborough Cnty, FL Sch Dist (AMBAC Insd)...................................... 5.375 10/01/17 4,769,037 1,000 Hillsborough Cnty, FL Util Jr Lien Rfdg (AMBAC Insd)............................... 5.000 08/01/06 1,071,940 4,000 Jacksonville, FL Cap Impt Rev Stadium Proj Rfdg (AMBAC Insd).......................... 4.750 10/01/25 3,750,000 2,000 Miami Dade Cnty, FL Hlth Fac Miami Children Hosp Ser A Rfdg (AMBAC Insd)............... 5.000 08/15/20 1,982,100 1,980 Miami Dade, FL Sch Brd Ser C (FSA Insd).... 5.500 10/01/13 2,155,171 2,000 Miami-Dade Cnty, FL Professional Sports Franchise Fac Tax Rfdg (MBIA Insd)......... 4.750 10/01/30 1,843,440 1,000 Polk Cnty, FL Cap Impt Rev Rfdg (FGIC Insd)...................................... 4.300 12/01/02 1,014,700 1,655 Reedy Creek Impt Dist FL Ser A Rfdg (AMBAC Insd)...................................... 5.500 06/01/11 1,823,280 3,465 Reedy Creek Impt Dist FL Ser C (AMBAC Insd)...................................... 4.750 06/01/15 3,485,409 1,210 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA Insd)...................................... 5.500 07/01/14 1,313,286 1,000 Tallahassee, FL Lease Rev FL St Univ Proj Ser A (MBIA Insd).......................... 5.500 08/01/17 1,058,240 1,325 Tampa Bay, FL Wtr Util Sys Rev Ser B (FGIC Insd)...................................... 4.750 10/01/27 1,232,555 1,250 Tampa, FL Hosp Rev Cap Impt H Lee Moffitt Ser A...................................... 5.750 07/01/19 1,268,112 2,880 Tampa, FL Occupational License Ser A Rfdg (FGIC Insd)................................ 5.375 10/01/15 3,076,531 ------------- 53,268,317 -------------
See Notes to Financial Statements 14 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE GEORGIA 1.9% $ 1,500 George L Smith II GA Wrld Congress Cent Auth Rev Domed Stadium Proj Rfdg (MBIA Insd)...................................... 5.500% 07/01/20 $ 1,527,450 5,660 Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA Insd)...................................... 6.500 01/01/17 6,700,761 240 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed to Maturity) (MBIA Insd)......... 6.500 01/01/17 285,823 ------------- 8,514,034 ------------- HAWAII 0.3% 1,385 Honolulu, HI City & Cnty Ser B (FGIC Insd)...................................... 5.500 10/01/11 1,526,658 ------------- ILLINOIS 17.2% 1,395 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA Insd)...................................... * 01/01/23 434,738 2,000 Chicago, IL Brd of Ed (FGIC Insd).......... 5.500 12/01/31 2,025,140 2,000 Chicago, IL Brd of Ed Chicago Sch Reform (AMBAC Insd)............................... 5.750 12/01/20 2,102,000 4,865 Chicago, IL Cap Apprec (Prerefunded @ 07/01/05) (AMBAC Insd)..................... * 07/01/16 2,190,953 2,500 Chicago, IL Lakefront Millennium Pkg Facs (MBIA Insd)................................ 5.125 01/01/28 2,428,575 7,000 Chicago, IL O'Hare Intl Arpt Rev Genl Arpt Second Lien Ser A Rfdg (MBIA Insd)......... 6.375 01/01/12 7,618,940 2,000 Chicago, IL O'Hare Intl Arpt Rev Second Lien Passenger Fac Ser B (AMBAC Insd)...... 5.500 01/01/17 2,089,040 1,000 Chicago, IL O'Hare Intl Arpt Rev Second Lien Passenger Fac Ser B (AMBAC Insd)...... 5.000 01/01/26 953,900 3,000 Chicago, IL Park Dist Ser D (FGIC Insd).... 5.000 01/01/29 2,849,490 4,500 Chicago, IL Proj Ser A Rfdg (MBIA Insd).... 5.000 01/01/31 4,254,345 2,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd).... 5.500 01/01/38 2,021,500 2,000 Chicago, IL Wastewtr Transmission Rev Second Lien (MBIA Insd).................... 5.750 01/01/25 2,092,160 1,000 Chicago, IL Wastewtr Transmission Rev Second Lien (Prerefunded @ 01/01/10) (MBIA Insd)...................................... 6.000 01/01/30 1,140,780 4,000 Chicago, IL Wtr Rev Sr Lien (AMBAC Insd)... 5.000 11/01/31 3,779,280 2,870 Cook Cnty, IL Cap Impt Ser A (FGIC Insd)... 5.000 11/15/28 2,727,619 3,500 DuPage Cnty, IL Fst Presv Dist............. * 11/01/10 2,391,410 2,545 DuPage Cnty, IL Trans Rev (FSA Insd)....... 5.750 01/01/15 2,758,805 3,995 East Peoria, IL Ser C Rfdg................. 7.000 05/01/17 4,208,133
See Notes to Financial Statements 15 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE ILLINOIS (CONTINUED) $ 1,310 Elgin, IL Ser B Rfdg....................... 5.750% 12/15/13 $ 1,470,147 1,600 Grundy, Kendall & Will Cntys (AMBAC Insd)...................................... 5.500 05/01/15 1,698,512 1,250 Illinois Dev Fin Auth Rev Bradley Univ Proj (AMBAC Insd)............................... 5.375 08/01/24 1,259,837 1,475 Illinois Dev Fin Auth Rev Loc Govt Pgm Geneva Cmnty 304 B (FSA Insd).............. 5.750 01/01/15 1,593,398 1,145 Illinois Dev Fin Auth Rev Loc Govt Pgm Geneva Cmnty 304 B (FSA Insd).............. 5.750 01/01/17 1,223,410 3,285 Illinois Dev Fin Auth Rev Presbyterian Home Lake Proj Ser B (FSA Insd)................. 6.300 09/01/22 3,487,422 2,000 Illinois Edl Fac Auth Rev Lewis Univ....... 6.100 10/01/16 1,990,980 1,250 Illinois Hlth Fac Auth Rev Evangelical Hosp Ser C (FSA Insd)........................... 6.750 04/15/17 1,282,925 700 Illinois Hlth Fac Auth Rev Highland Park Hosp Proj Ser A (Prerefunded @ 10/01/07) (MBIA Insd)................................ 5.750 10/01/17 790,013 1,000 Illinois Hlth Fac Auth Rev Midwest Physician Grp Ltd Rfdg..................... 5.500 11/15/19 820,920 2,000 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys Rfdg....................................... 6.000 11/15/10 2,073,140 2,275 Illinois Hlth Fac Auth Rev South Suburban Hosp (Escrowed to Maturity)................ 7.000 02/15/18 2,745,220 100 Illinois Hlth Facs Auth Rev Loyola Univ Hlth Sys Ser A............................. 6.125 07/01/31 99,922 1,000 Illinois St (FGIC Insd).................... 5.250 12/01/20 1,007,410 2,000 Illinois St First Ser (FGIC Insd).......... 5.375 11/01/14 2,130,120 8,845 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Ser A (FGIC Insd)................................ * 06/15/16 4,236,490 250 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expansion Proj (FGIC Insd)................................ 5.375 12/15/18 257,560 1,005 Naperville, IL Ser A....................... 5.000 12/01/10 1,073,250 1,105 Saint Clair Cnty, IL Pub Bldg Comm Bldg Rev Cap Apprec Ser B (FGIC Insd)............... * 12/01/15 554,522 1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux (MBIA Insd)................................ * 04/01/29 217,400 ------------- 78,079,406 -------------
See Notes to Financial Statements 16 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE INDIANA 3.2% $ 1,000 Indiana Hlth Fac Fin Auth Rev Hlth Sys Sisters St Francis......................... 5.500% 11/01/31 $ 989,200 2,000 Indiana Transn Fin Auth Toll Rd Lease Rev Rfdg (AMBAC Insd).......................... 5.375 07/01/09 2,146,840 4,500 Indianapolis, IN Arpt Auth Rev Spl Fac Fed Express Corp Proj.......................... 7.100 01/15/17 4,737,240 1,935 Logansport, IN Sch Bldg Corp First Mtg (FGIC Insd)................................ 5.500 07/15/13 2,087,749 1,000 Marion Cnty, IN Convention & Rec Fac Auth Excise Tax Rev (MBIA Insd)................. * 06/01/14 548,590 1,280 North Adams, IN Cmnty Schs Renovation Bldg Corp Cap Apprec First Mtg (FSA Insd)....... * 01/15/19 517,018 1,200 North Admas, IN Cmnty Schs Renovation Bldg Corp Cap Apprec First Mtg (FSA Insd)....... * 07/15/15 613,056 1,500 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt Conv....................................... 5.950 12/01/29 1,389,300 1,605 Richland Beanblossom, IN Sch First Mtg (FGIC Insd)................................ 5.500 07/15/12 1,743,078 ------------- 14,772,071 ------------- IOWA 1.4% 1,685 Des Moines, IA Pub Pkg Sys Ser A (FGIC Insd)...................................... 5.750 06/01/15 1,815,133 1,785 Des Moines, IA Pub Pkg Sys Ser A (FGIC Insd)...................................... 5.750 06/01/16 1,912,895 2,375 Iowa Student Ln Liquidity Corp Student Ln Rev Sub Ser I.............................. 6.950 03/01/06 2,427,939 ------------- 6,155,967 ------------- KANSAS 0.5% 1,975 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (MBIA Insd)........................ 6.000 09/01/09 2,242,000 ------------- KENTUCKY 2.6% 1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/ Northn KY Intl Arpt Ser A Rfdg (MBIA Insd)...................................... 6.200 03/01/08 1,103,970 1,500 Kenton Cnty, KY Arpt Brd Rev Cincinnati/ Northn KY Intl Arpt Ser A Rfdg (MBIA Insd)...................................... 6.250 03/01/09 1,665,465 1,260 Kentucky Hsg Corp Hsg Rev Ser B............ 6.250 07/01/28 1,311,017 1,500 Kentucky St Ppty & Bldg Proj No 69 Ser A... 5.000 08/01/05 1,594,740 1,000 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (FSA Insd)........ 5.625 07/01/14 1,082,570
See Notes to Financial Statements 17 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE KENTUCKY (CONTINUED) $ 2,450 Louisville & Jefferson Cnty, KY Swr Ser A (MBIA Insd)................................ 5.500% 05/15/16 $ 2,623,778 2,550 Louisville & Jefferson Cnty, KY Swr Ser A (FGIC Insd)................................ 5.000 05/15/30 2,447,872 ------------- 11,829,412 ------------- LOUISIANA 0.5% 2,000 Louisiana St Ser A (FGIC Insd)............. 5.500 11/15/03 2,100,740 ------------- MAINE 0.6% 2,650 Maine Muni Bank Ser A Rfdg (MBIA Insd)..... 5.800 11/01/20 2,739,437 ------------- MARYLAND 1.0% 1,000 Maryland St Econ Dev Corp Student Hsg Rev Collegiate Hsg Foundation Salisbury Ser A.......................................... 6.000 06/01/30 1,014,060 3,750 Maryland St Trans Auth Arpt Baltimore/ Washington Intl Arpt B (AMBAC Insd)........ 5.125 03/01/24 3,701,212 ------------- 4,715,272 ------------- MASSACHUSETTS 3.0% 2,000 Massachusetts Muni Whsl Elec Co Nuclear Proj 5 (MBIA Insd)......................... 5.250 07/01/13 2,125,000 2,625 Massachusetts Muni Whsl Elec Co Pwr Supply Sys Rev Ser A (Prerefunded @ 07/01/04) (AMBAC Insd)............................... 5.000 07/01/14 2,815,575 1,500 Massachusetts St Fed Hwy Grant Antic Nt Ser A.......................................... 5.750 06/15/14 1,640,010 1,000 Massachusetts St Hlth & Ed Fac Auth Rev Partn Hlthcare Sys Ser C................... 5.750 07/01/32 1,007,950 500 Massachusetts St Hlth & Edl Hlthcare Sys Covenant Hlth.............................. 6.000 07/01/31 500,365 2,410 Massachusetts St Hsg Fin Agy Residential Dev Ser C (FNMA Collateralized)............ 6.875 11/15/11 2,463,743 1,000 Massachusetts St Indl Fin Agy Rev Wentworth Institute Tech............................. 5.650 10/01/18 996,770 2,000 Pittsfield, MA (MBIA Insd)................. 5.125 04/15/22 2,003,500 ------------- 13,552,913 -------------
See Notes to Financial Statements 18 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MICHIGAN 4.3% $ 3,000 Detroit, MI Downtown Dev Auth Tax Increment Rev Dev Area No 1 Proj Ser A Rfdg (MBIA Insd)...................................... 4.750% 07/01/25 $ 2,764,200 3,015 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1................................. * 07/01/17 1,302,540 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1................................. * 07/01/18 1,233,084 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1................................. * 07/01/19 1,152,381 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1................................. * 07/01/22 943,975 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1................................. * 07/01/23 887,001 3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev Ser C1................................. * 07/01/24 833,138 3,500 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA Insd)................................ * 06/01/15 1,820,000 2,765 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA Insd)................................ * 06/01/16 1,345,366 1,000 Grand Rapids, MI Wtr Supply Sys Rfdg (FGIC Insd)...................................... 5.750 01/01/13 1,099,010 1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Cent.................. 5.250 05/15/26 1,156,218 2,850 Michigan St Hosp Fin Auth Rev Ascension Hlth Credit Ser A (MBIA Insd).............. 5.750 11/15/18 2,944,021 1,000 Michigan St Strategic Fd Detroit Edison Pollutn Ctl Ser B Rfdg..................... 5.650 09/01/29 982,560 1,000 Wayne Charter Cnty, MI Arpt Rev Detroit Met Wayne Cnty Ser A (MBIA Insd)............... 5.000 12/01/22 958,400 ------------- 19,421,894 ------------- MINNESOTA 1.7% 5,000 Minneapolis & Saint Paul, MN Metro Arpts Comm Arpt Rev Ser A (FGIC Insd)............ 5.125 01/01/31 4,918,450 2,800 Minnesota Agriculture & Econ Dev Brd Rev Hlthcare Sys Fairview Hosp Ser A (MBIA Insd)...................................... 5.750 11/15/26 2,890,580 ------------- 7,809,030 -------------
See Notes to Financial Statements 19 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MISSISSIPPI 1.6% $ 1,000 Gulfport, MS Hosp Fac Rev Mem Hosp at Gulfport Proj A............................ 5.750% 07/01/31 $ 988,750 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 3,313,140 3,250 Mississippi Business Fin Corp MS Pollutn Ctl Rev Sys Energy Res Inc Proj............ 5.875 04/01/22 3,117,400 ------------- 7,419,290 ------------- MISSOURI 1.2% 1,625 Jefferson Cnty, MO Reorg Sch Dist No R-6 (FGIC Insd)................................ 5.625 03/01/20 1,703,471 1,500 Kansas City, MO Met Cmnty Impt Leasehold Jr College Rfdg (FGIC Insd)................... 5.500 07/01/17 1,576,470 1,000 Missouri St Hwys & Trans Ser A............. 5.125 02/01/17 1,027,830 1,000 Saint Louis, MO Arpt Rev................... 6.250 01/01/03 1,017,140 ------------- 5,324,911 ------------- NEBRASKA 0.7% 1,190 Dodge Cnty, NE Sch Dist No 001 Freemont (FSA Insd)................................. 5.750 12/15/13 1,310,928 2,000 Omaha Convention Hotel Corp Convention Ctr Ser A (AMBAC Insd)......................... 5.125 04/01/32 1,968,320 ------------- 3,279,248 ------------- NEW HAMPSHIRE 0.5% 1,000 New Hampshire Hlth & Ed Fac Auth Rev Derryfield Sch............................. 7.000 07/01/30 1,031,780 1,000 New Hampshire St Bus Fin Auth Wtr Fac Rev Pennichuck Wtrwks Inc (AMBAC Insd)......... 6.300 05/01/22 1,066,620 ------------- 2,098,400 ------------- NEW JERSEY 7.8% 1,500 New Jersey Econ Dev Auth Rev Trans Proj Sublease Ser A (FSA Insd).................. 5.250 05/01/17 1,542,885 25,000 New Jersey Econ Dev Auth St Contract Econ Recovery (MBIA Insd)....................... 5.900 03/15/21 27,972,000 2,000 New Jersey Hlthcare Fac Fin Auth Rev Genl Hosp Cent at Passaic (Escrowed to Maturity) (FSA Insd)................................. 6.000 07/01/06 2,223,880
See Notes to Financial Statements 20 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW JERSEY (CONTINUED) $ 1,000 New Jersey St Tpk Auth Tpk Rev Ser A (MBIA Insd)...................................... 6.000% 01/01/11 $ 1,137,000 2,385 New Jersey St Tran Corp Ctfs Fed Tran Admin Grants Ser A (AMBAC Insd).................. 5.750 09/15/11 2,629,152 ------------- 35,504,917 ------------- NEW YORK 27.1% 1,500 Long Island Pwr Auth NY Elec Sys Rev Gen Ser A (MBIA Insd).......................... 5.500 12/01/29 1,519,365 3,000 Metropolitan Trans Auth NY Commuter Fac Rev Ser A (MBIA Insd).......................... 5.625 07/01/27 3,129,000 12,155 Metropolitan Trans Auth NY Svc Contract Commuter Fac Ser 5......................... 6.500 07/01/16 12,441,736 2,000 Metropolitan Trans Auth NY Tran Fac Rev Svc Contract Ser R............................. 5.500 07/01/17 2,110,140 2,000 Nassau Cnty, NY Interim Fin Auth Sales Tax Secured Ser A.............................. 5.750 11/15/13 2,200,180 5,000 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Ser A (FGIC Insd).................. 4.750 06/15/31 4,576,650 3,345 New York City Ser A........................ 6.500 08/01/14 3,428,190 2,500 New York City Ser A Rfdg................... 7.000 08/01/05 2,783,900 3,000 New York City Ser A Rfdg................... 7.000 08/01/06 3,405,360 2,355 New York City Ser C........................ 6.500 08/01/04 2,416,395 8,500 New York City Ser C Sub Ser C1 (Prerefunded @ 08/01/02)................................ 7.500 08/01/19 8,755,425 1,850 New York City Ser G........................ 5.875 10/15/14 1,962,850 1,000 New York City Ser H........................ 5.750 03/15/13 1,081,660 5,000 New York City Ser I........................ 6.000 04/15/12 5,454,900 10,000 New York City Tran Auth Tran Fac Livingston Plaza Proj Rfdg (FSA Insd)................. 5.400 01/01/18 10,671,900 2,500 New York St Dorm Auth Lease Rev Muni Hlth Fac Impt Pgm Ser A (FSA Insd).............. 5.500 05/15/25 2,551,800 1,250 New York St Dorm Auth Lease Rev St Univ Dorm Fac Ser C (MBIA Insd)................. 5.500 07/01/29 1,284,775 13,500 New York St Dorm Auth Rev City Univ Sys Ser C.......................................... 7.500 07/01/10 15,961,185 2,000 New York St Dorm Auth Rev Court Fac Lease Ser A...................................... 5.375 05/15/16 2,061,820 3,000 New York St Dorm Auth Rev St Univ Ed Fac (FGIC Insd)................................ 5.750 05/15/24 3,189,090 2,000 New York St Dorm Auth Rev St Univ Ed Fac 1989 Res (MBIA Insd)....................... 6.000 05/15/16 2,229,540
See Notes to Financial Statements 21 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE NEW YORK (CONTINUED) $ 2,650 New York St Dorm Auth Rev St Univ Ed Fac Ser A (MBIA Insd).......................... 4.750% 05/15/25 $ 2,482,440 2,330 New York St Dorm Auth Rev St Univ Ed Fac Ser B...................................... 5.250 05/15/10 2,514,419 2,840 New York St Loc Govt Assistance Corp Ser E Rfdg....................................... 6.000 04/01/14 3,253,618 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 3,395,820 5,875 New York St Med Care Fac Fin Agy Rev Saint Peter's Hosp Proj Ser A (AMBAC Insd)....... 5.375 11/01/20 5,934,631 2,500 New York St Mtg Agy Rev Homeowner Mtg Ser 54 Rfdg.................................... 6.200 10/01/26 2,612,900 1,500 New York St Urban Dev Corp Rev Proj Cent for Indl Innovation Rfdg................... 5.500 01/01/13 1,647,915 3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl Arpt Terminal 6 (MBIA Insd)....... 5.750 12/01/22 3,131,790 3,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl Arpt Terminal 6 (MBIA Insd)....... 5.750 12/01/25 3,094,350 2,150 Triborough Brdg &Tunl Auth Gen Purp Ser A.......................................... 5.000 01/01/27 2,077,416 ------------- 123,361,160 ------------- NORTH CAROLINA 5.3% 800 New Hanover Cnty, NC Hosp Rev New Hanover Regl Med Cent Proj (AMBAC Insd)............ 4.750 10/01/23 746,448 1,000 North Carolina Eastern Muni Pwr Agy Pwr Sys Rev Ser D.................................. 6.750 01/01/26 1,057,980 15,000 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev Rfdg (MBIA Insd) (b).............. 6.000 01/01/12 16,980,000 5,150 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev Rfdg (FSA Insd)................... 6.200 01/01/18 5,365,630 ------------- 24,150,058 ------------- NORTH DAKOTA 0.5% 2,265 North Dakota St Hsg Fin Agy Rev Hsg Fin Pgm Home Mtg Fin Ser B (MBIA Insd)............. 5.500 07/01/29 2,214,830 ------------- OHIO 3.2% 1,130 Akron, OH Rfdg (MBIA Insd)................. 5.500 12/01/15 1,212,151 1,400 Bowling Green St Univ OH Gen Rcpt (FGIC Insd)...................................... 5.750 06/01/12 1,552,852 1,550 Cleveland, OH City Sch Dist Rev Antic Nts (AMBAC Insd)............................... 6.000 06/01/04 1,661,042
See Notes to Financial Statements 22 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE OHIO (CONTINUED) $ 1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj....................................... 7.500% 01/01/30 $ 1,080,820 1,000 Delaware Cnty, OH Cap Fac.................. 6.000 12/01/25 1,085,460 1,000 Hamilton Cnty, OH Sales Tax Hamilton Cnty Football Proj Ser A (MBIA Insd)............ 4.750 12/01/27 929,080 1,250 Montgomery Cnty, OH Hosp Rev Grandview Hosp & Med Cent Hosp Rfdg (Escrowed to Maturity).................................. 5.250 12/01/03 1,307,188 1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd Partn Proj Rfdg (AMBAC Insd)... 6.375 04/01/29 1,084,080 1,000 Ohio St Com Sch Cap Fac Ser B.............. 5.000 09/15/03 1,039,670 1,500 Ohio St Com Sch Cap Fac Ser B.............. 5.000 09/15/04 1,586,550 1,840 Pickerington, OH Loc Sch Dist Cap Apprec Sch Fac Contr (FGIC Insd).................. * 12/01/12 1,119,879 1,000 University Cincinnati OH Gen Ser A (FGIC Insd)...................................... 5.500 06/01/09 1,099,170 ------------- 14,757,942 ------------- OKLAHOMA 1.3% 1,500 Jenks, OK Aquarium Auth Rev First Mtg (MBIA Insd)...................................... 6.100 07/01/30 1,621,335 1,575 Oklahoma City, OK Arpt Trust Jr Lien 27th Ser B (FSA Insd)........................... 5.750 07/01/16 1,654,931 2,250 Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev (AMBAC Insd)............................... 6.250 11/01/22 2,478,308 ------------- 5,754,574 ------------- OREGON 2.6% 3,000 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)...................................... 5.250 11/01/17 3,100,230 2,545 Oregon St Veterans Welfare Ser 76A......... 6.050 10/01/28 2,650,490 1,190 Portland, OR Cmnty College Dist Ser B...... 5.250 06/01/12 1,281,202 1,985 Portland, OR Urban Renewal & Redev Downtown Wtrfront Ser A (AMBAC Insd)................ 5.750 06/15/16 2,156,822 2,500 Washington Multnomah & Yamhill (MBIA Insd)...................................... 5.000 06/01/13 2,614,100 ------------- 11,802,844 ------------- PENNSYLVANIA 12.0% 1,500 Allegheny Cnty, PA Ctf Part (AMBAC Insd)... 5.000 12/01/28 1,435,545 1,250 Allegheny Cnty, PA San Auth Swr Rev (MBIA Insd)...................................... 5.750 12/01/16 1,360,813 4,680 Erie, PA Sch Dist Cap Apprec Rfdg (FSA Insd)...................................... * 09/01/19 1,848,085
See Notes to Financial Statements 23 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PENNSYLVANIA (CONTINUED) $ 4,000 Falls Twp, PA Hosp Auth Hosp Rev DE Vly Med Rfdg (FHA Gtd)............................. 7.000% 08/01/22 $ 4,285,200 1,905 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC Insd)...................................... * 09/15/16 909,485 1,710 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC Insd)...................................... * 03/15/19 692,396 1,385 Harrisburg, PA Cap Apprec Ser F Rfdg (AMBAC Insd)...................................... * 09/15/19 545,981 1,000 Lycoming Cnty, PA Auth College Rev PA College of Technology (AMBAC Insd)......... 5.350 07/01/26 1,009,940 1,500 Penn Cambria Sch Dist PA Cap Apprec (FGIC Insd)...................................... * 08/15/20 555,300 60 Penn Hills, PA (Prerefunded @ 12/01/07) (FGIC Insd)................................ 5.900 12/01/17 67,435 1,000 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Bryn Mawr College (MBIA Insd)... 5.625 12/01/27 1,029,770 4,650 Pennsylvania St Tpk Comn Oil Franchise Tax Sub Ser B (AMBAC Insd)..................... 4.750 12/01/27 4,282,790 5,500 Philadelphia, PA (FSA Insd)................ 5.000 03/15/28 5,280,000 1,500 Philadelphia, PA Auth for Indl Ser B (FSA Insd)...................................... 5.125 10/01/26 1,473,285 1,000 Philadelphia, PA Auth Indl Dev Philadelphia Arpt Sys Proj Ser A (FGIC Insd)............ 5.125 07/01/19 987,570 6,000 Philadelphia, PA Gas Wk Rev Ser 14 Rfdg (FSA Insd)................................. 6.250 07/01/08 6,384,180 1,500 Philadelphia, PA Auth Indl Dev Philadelphia Arpt Sys Proj Ser A (FGIC Insd)............ 5.000 07/01/23 1,434,765 1,400 Philadelphia, PA Sch Dist Ser A (FSA Insd)...................................... 5.750 02/01/12 1,549,366 10,000 Pittsburgh & Allegheny Cnty, PA Pub Aud Hotel Room (AMBAC Insd).................... 4.500 02/01/29 8,739,600 3,000 Pittsburgh & Allegheny Cnty, PA Pub Aud Regl Asset Dist Sales Tax (AMBAC Insd)..... 5.000 02/01/29 2,890,530 1,500 Pittsburgh, PA Ser A (Prerefunded @ 09/01/09) (FGIC Insd)...................... 5.750 09/01/23 1,682,085 1,005 Southeast Delco Sch Dist PA Cap Apprec (MBIA Insd)................................ * 02/01/17 463,998 3,650 Southeastern, PA Trans Auth PA Spl Rev Ser A (FGIC Insd).............................. 4.750 03/01/24 3,411,984
See Notes to Financial Statements 24 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PENNSYLVANIA (CONTINUED) $ 1,125 Southeastern, PA Trans Auth PA Spl Rev Ser A (FGIC Insd).............................. 4.750% 03/01/29 $ 1,030,095 1,250 Spring Ford Area Sch Dist PA (FGIC Insd)... 4.750 03/01/25 1,163,388 ------------- 54,513,586 ------------- SOUTH CAROLINA 1.5% 2,375 Berkeley Cnty, SC Sch Dist Ctfs Part Berkeley Sch Facs Grp Inc (MBIA Insd)...... 5.250 02/01/16 2,428,366 2,700 Charleston Cnty, SC Solid Waste (MBIA Insd)...................................... 6.000 01/01/14 2,876,391 1,500 Lancaster Cnty, SC Sch Dist (FSA Insd)..... 4.750 03/01/19 1,448,445 ------------- 6,753,202 ------------- SOUTH DAKOTA 0.8% 1,375 Deadwood, SD Ctf Part (ACA Insd)........... 6.375 11/01/20 1,445,139 1,000 South Dakota St Hlth & Ed Fac Auth Rev Childrens Care Hosp Rfdg................... 6.125 11/01/29 1,023,850 1,000 South Dakota St Hlth & Ed Fac Auth Vocational Ed Pgm Ser A (AMBAC Insd)....... 5.400 08/01/13 1,048,230 ------------- 3,517,219 ------------- TENNESSEE 1.7% 1,500 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn States Rfdg (MBIA Insd)...... 7.500 07/01/25 1,822,515 5,500 Montgomery Cnty, TN Pub Impt & Rfdg (FGIC Insd)...................................... 5.500 05/01/16 5,877,355 ------------- 7,699,870 ------------- TEXAS 11.0% 4,540 Alliance Arpt Auth Inc TX Spl Fac Rev American Airl Inc Proj..................... 7.500 12/01/29 4,231,462 2,685 Beaumont, TX Wtrwks & Swr Sys (FGIC Insd)...................................... 6.250 09/01/15 3,019,336 1,250 Brazos River Auth TX Pollutn Adj TXU Elec Co Proj Ser C Rfdg......................... 5.750 05/01/36 1,265,225 1,275 Cameron Cnty, TX Ctf Oblig (AMBAC Insd).... 5.750 02/15/13 1,385,224 3,000 Dallas Cnty, TX Util & Reclamation Dist Ser B Rfdg (AMBAC Insd)........................ 5.875 02/15/29 3,109,650 2,000 Dallas, TX Wtrwks & Swr Sys Rev Rfdg....... 5.750 10/01/17 2,140,960 4,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A (FGIC Insd).............................. 5.750 11/01/30 4,076,800 4,000 Dallas-Fort Worth, TX Intl Rfdg & Impt Jt Ser A (FGIC Insd).......................... 5.500 11/01/31 3,968,240 1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FSA Insd)................................. 5.625 07/01/30 1,009,030
See Notes to Financial Statements 25 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE TEXAS (CONTINUED) $ 3,000 Houston, TX Hotel Occupancy Tax & Spl Rev Convention & Entmt Ser B (AMBAC Insd)...... 5.750% 09/01/15 $ 3,248,610 1,500 Houston, TX Public Impt Rfdg (FSA Insd).... 5.750 03/01/15 1,620,915 1,925 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser C (FGIC Insd)................................ 5.375 12/01/27 1,931,199 1,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj........................ 7.250 01/01/31 1,557,375 2,000 North Cent TX Hlth Fac Dev Hosp Baylor Hlthcare Sys Proj Ser A.................... 5.125 05/15/29 1,882,980 4,000 North Cent TX Hlth Fac Dev Hosp Childrens Med Ctr Dallas (AMBAC Insd) (a)............ 5.250 08/15/32 3,900,760 4,000 Round Rock, TX Indpt Sch Dist (PSF Gtd).... 4.500 08/01/19 3,681,200 2,500 Texas St Pub Fin Auth Ser A Rfdg........... 5.250 10/01/07 2,712,275 2,750 Texas St Vets Housing Assistance Pgm Vet Ser B (FHA Gtd)............................ 6.100 06/01/31 2,861,953 2,300 University of TX Univ Rev Fin Sys Ser C.... 5.375 08/15/19 2,364,147 ------------- 49,967,341 ------------- UTAH 0.6% 2,500 Murray City, UT Hosp Rev Inc Hlth Svc Inc Rfdg (MBIA Insd)........................... 4.750 05/15/20 2,326,350 355 Utah St Hsg Fin Agy Single Family Mtg Mezzanine Issue H1 (AMBAC Insd)............ 6.000 07/01/12 376,041 ------------- 2,702,391 ------------- VIRGINIA 0.5% 1,320 Fairfax Cnty, VA Ctf Part.................. 5.300 04/15/23 1,307,275 1,000 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease Rev Henrico Cnty Regl Jail Proj...... 7.125 08/01/21 1,149,480 ------------- 2,456,755 ------------- WASHINGTON 6.3% 1,000 Chelan Cnty, WA Pub Util Dist No. 001 Cons Rev Chelan Hydro Ser A (MBIA Insd)......... 5.600 01/01/36 1,005,300 2,500 Energy Northwest, WA Elec Rev Proj No. 3 Ser A Rfdg (FSA Insd)...................... 5.500 07/01/18 2,599,525 5,360 Energy Northwest, WA Elec Rev Proj No. 3 Ser B Rfdg (FSA Insd)...................... 6.000 07/01/16 5,933,788 1,995 Grant Cnty, WA Pub Util Dist Ser H Rfdg (FSA Insd)................................. 5.375 01/01/15 2,096,166 1,485 Pierce Cnty, WA (AMBAC Insd)............... 5.750 08/01/14 1,611,136 2,000 Port Seattle, WA Rev Ser A (FGIC Insd)..... 5.000 04/01/31 1,887,680 1,000 Port Seattle, WA Rev Ser B (MBIA Insd)..... 5.625 02/01/24 1,017,060
See Notes to Financial Statements 26 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE WASHINGTON (CONTINUED) $ 1,435 Radford Ct Pptys WA Student Hsg Rev (MBIA Insd)...................................... 6.000% 06/01/15 $ 1,582,834 1,585 Radford Ct Pptys WA Student Hsg Rev (MBIA Insd)...................................... 6.000 06/01/16 1,742,644 1,150 Seattle, WA Muni Lt & Pwr Rev.............. 5.250 12/01/08 1,237,711 1,315 Seattle, WA Muni Lt & Pwr Rev.............. 5.500 12/01/09 1,433,495 1,410 Seattle, WA Muni Lt & Pwr Rev.............. 5.625 12/01/18 1,469,347 1,500 Seattle, WA Muni Lt & Pwr Rev Impt & Rfdg (FSA Insd)................................. 5.500 03/01/17 1,567,650 1,350 Tacoma, WA Elec Sys Rev Ser A Rfdg (FSA Insd)...................................... 5.750 01/01/15 1,467,450 1,650 Tacoma, WA Elec Sys Rev Ser B Rfdg (FSA Insd)...................................... 5.500 01/01/12 1,803,137 ------------- 28,454,923 ------------- WEST VIRGINIA 0.7% 3,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co Proj Ser C Rfdg (MBIA Insd)................ 6.850 06/01/22 3,070,440 ------------- WISCONSIN 1.4% 1,775 De Pere, WI Uni Sch Dist Rfdg (FGIC Insd)...................................... 5.000 10/01/13 1,841,776 1,340 Oconto Falls, WI Pub Sch Dist Ser A Rfdg (FSA Insd)................................. 5.750 03/01/15 1,451,274 2,000 Southeast WI Professional Baseball Pk Dist Sales Tax Rev Ser A Rfdg (MBIA Insd)....... 5.500 12/15/20 2,136,500 1,250 Wisconsin St Hlth & Ed Fac Auth Rev Froedert & Cmnty Hlth Oblig................ 5.375 10/01/30 1,170,613 ------------- 6,600,163 ------------- WYOMING 0.3% 760 Wyoming Cmnty Dev Auth Hsg Rev Ser 2....... 6.350 06/01/29 789,678 755 Wyoming Cmnty Dev Auth Hsg Rev Ser 4....... 6.550 06/01/28 775,861 ------------- 1,565,539 ------------- GUAM 0.7% 3,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)....... 5.250 10/01/34 3,010,590 -------------
See Notes to Financial Statements 27 YOUR TRUST'S INVESTMENTS April 30, 2002 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE PUERTO RICO 0.5% $ 1,110 Puerto Rico Comwlth Aqueduct & Swr Auth Rev Rfdg....................................... 5.000% 07/01/15 $ 1,128,470 1,110 Puerto Rico Comwlth Ser A Rfdg............. 6.000 07/01/14 1,135,008 ------------- 2,263,478 ------------- TOTAL LONG-TERM INVESTMENTS 153.2% (Cost $648,699,358)................................................... 696,436,618 SHORT-TERM INVESTMENTS 2.6% (Cost $11,700,000).................................................... 11,700,000 ------------- TOTAL INVESTMENTS 155.8% (Cost $660,399,358)................................................... 708,136,618 OTHER ASSETS IN EXCESS OF LIABILITIES 2.5%............................. 11,499,234 PREFERRED SHARES (58.3%)............................................... (265,153,074) ------------- NET ASSETS APPLICABLE TO COMMON SHARES 100.0%.......................... $ 454,482,778 =============
* Zero coupon bond (a) Securities purchased on a when-issued or delayed delivery basis. (b) Assets segregated as collateral for when-issued or delayed delivery purchase commitments. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. FGIC--Financial Guaranty Insurance Co. FHA--Federal Housing Administration FNMA--Federal National Mortgage Association FSA--Financial Security Assurance Inc. MBIA--Municipal Bond Investors Assurance Corp. PSF--Public School Fund See Notes to Financial Statements 28 FINANCIAL STATEMENTS Statement of Assets and Liabilities April 30, 2002 (Unaudited) ASSETS: Total Investments (Cost $660,399,358)....................... $708,136,618 Cash........................................................ 36,889 Receivables: Interest.................................................. 11,029,959 Investments Sold.......................................... 10,761,930 Other....................................................... 971 ------------ Total Assets............................................ 729,966,367 ------------ LIABILITIES: Payables: Investments Purchased..................................... 9,579,290 Investment Advisory Fee................................... 352,320 Administrative Fee........................................ 117,440 Affiliates................................................ 7,266 Trustees' Deferred Compensation and Retirement Plans........ 191,051 Accrued Expenses............................................ 83,148 ------------ Total Liabilities....................................... 10,330,515 Preferred Shares............................................ 265,153,074 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $454,482,778 ============ NET ASSET VALUE PER COMMON SHARE ($454,482,778 divided by 27,013,149 shares outstanding)............................ $ 16.82 ============ 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............................................. 399,318,038 Net Unrealized Appreciation................................. 47,737,260 Accumulated Undistributed Net Investment Income............. 4,868,319 Accumulated Net Realized Gain............................... 2,289,030 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $454,482,778 ============ PREFERRED SHARES ($.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....................... $719,482,778 ============
See Notes to Financial Statements 29 Statement of Operations For the Six Months Ended April 30, 2002 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 19,668,012 ------------ EXPENSES: Investment Advisory Fee..................................... 2,142,171 Administrative Fee.......................................... 714,057 Preferred Share Maintenance................................. 348,654 Trustees' Fees and Related Expenses......................... 30,970 Legal....................................................... 21,715 Custody..................................................... 20,967 Other....................................................... 172,231 ------------ Total Expenses.......................................... 3,450,765 ------------ NET INVESTMENT INCOME....................................... $ 16,217,247 ============ REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Gain........................................... $ 2,359,090 ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 63,039,477 End of the Period......................................... 47,737,260 ------------ Net Unrealized Depreciation During the Period............... (15,302,217) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(12,943,127) ============ DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (2,702,979) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 571,141 ============
See Notes to Financial Statements 30 Statements of Changes in Net Assets (Unaudited)
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2002 OCTOBER 31, 2001 ------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.............................. $ 16,217,247 $ 33,862,295 Net Realized Gain.................................. 2,359,090 8,033,869 Net Unrealized Appreciation/Depreciation During the Period........................................... (15,302,217) 25,473,333 Distributions to Preferred Shareholders: Net Investment Income............................ (832,318) (8,657,389) Net Realized Gain................................ (1,870,661) (112,595) ------------ ------------ Change in Net Assets from Operations............... 571,141 58,599,513 Distributions to Common Shareholders: Net Investment Income............................ (13,329,934) (23,716,504) Net Realized Gain................................ (5,764,606) -0- ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....................................... (18,523,399) 34,883,009 NET ASSETS: Beginning of the Period............................ 473,006,177 438,123,168 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $4,868,319 and $2,178,916, respectively).................... $454,482,778 $473,006,177 ============ ============
See Notes to Financial Statements 31 Financial Highlights (Unaudited) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED APRIL 30, ------------------- 2002 (a) 2001 2000 ---------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD (b)....... $ 17.51 $ 16.22 $ 15.63 ------- ------- -------- Net Investment Income............................ .60 1.25 1.32 Net Realized and Unrealized Gain/Loss............ (.49) 1.24 .64 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income.......................... (.03) (.32) (.40) Net Realized Gain.............................. (.07) -0- -0- ------- ------- -------- Total from Investment Operations................... .01 2.17 1.56 Less Distributions Paid to Common Shareholders: Net Investment Income.......................... .49 .88 .97 Net Realized Gain.............................. .21 -0- -0- ------- ------- -------- NET ASSET VALUE, END OF THE PERIOD................. $ 16.82 $ 17.51 $ 16.22 ======= ======= ======== Common Share Market Price at End of the Period..... $ 14.96 $ 14.94 $13.5625 Total Return (c)................................... 4.93%* 16.85% 6.41% Net Assets at End of the Period (In millions)...... $ 454.5 $ 473.0 $ 438.1 Ratio of Expenses to Average Net Assets Applicable to Common Shares (d)............................. 1.53% 1.55% 1.68% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (d)........... 7.19% 7.37% 8.44% Portfolio Turnover................................. 14%* 29% 31% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (d)............................. .97% .98% 1.03% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (e)........... 6.82% 5.49% 5.86% SENIOR SECURITIES: Total Preferred Shares Outstanding................. 10,600 10,600 10,600 Asset Coverage Per Preferred Share (f)............. $67,890 $69,623 $ 66,332 Involuntary Liquidating Preference Per Preferred Share............................................ $25,000 $25,000 $ 25,000 Average Market Value Per Preferred Share........... $25,000 $25,000 $ 25,000
* Non-Annualized (a) As required, effective November 1, 2001, the Trust has adopted the provisions of the AIPCA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the six months ended April 30, 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 .08%. Per share, ratios and supplemental data for periods prior to April 30, 2002 have not been restated to reflect this change in presentation. (b) Net Asset Value at January 24, 1992, is adjusted for common and preferred share offering costs of $.208 per common share. (c) 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. (d) Ratios do not reflect the effect of dividend payments to preferred shareholders. (e) Ratios reflect the effect of dividend payments to preferred shareholders. (f) 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. 32
JANUARY 24, 1992 (COMMENCEMENT OF INVESTMENT YEAR ENDED OCTOBER 31, OPERATIONS) TO ------------------------------------------------------------------------------ OCTOBER 31, 1999 1998 1997 1996 1995 1994 1993 1992 ------------------------------------------------------------------------------------------------- $ 17.64 $ 17.29 $ 16.58 $ 16.58 $ 15.03 $ 17.95 $ 15.56 $ 14.79 -------- -------- -------- -------- -------- -------- -------- -------- 1.33 1.35 1.37 1.38 1.42 1.43 1.45 1.01 (1.94) .42 .74 .11 1.65 (2.84) 2.42 .55 (.32) (.34) (.35) (.35) (.38) (.30) (.29) (.20) (.02) (.02) -0- -0- -0- (.01) (.03) -0- -------- -------- -------- -------- -------- -------- -------- -------- (.95) 1.41 1.76 1.14 2.69 (1.72) 3.55 1.36 .99 1.00 1.05 1.14 1.14 1.14 1.08 .59 .07 .06 -0- -0- -0- .06 .08 -0- -------- -------- -------- -------- -------- -------- -------- -------- $ 15.63 $ 17.64 $ 17.29 $ 16.58 $ 16.58 $ 15.03 $ 17.95 $ 15.56 ======== ======== ======== ======== ======== ======== ======== ======== $13.6875 $ 17.00 $ 16.125 $ 15.813 $ 15.75 $ 14.00 $ 17.375 $ 14.875 -13.97% 12.40% 8.92% 7.84% 21.15% -13.12% 25.40% 3.08%* $ 422.2 $ 476.6 $ 467.0 $ 447.8 $ 447.9 $ 406.1 $ 485.0 $ 420.2 1.61% 1.58% 1.60% 1.62% 1.68% 1.63% 1.59% 1.54% 7.87% 7.73% 8.16% 8.37% 8.96% 8.63% 8.56% 8.37% 33% 29% 40% 30% 15% 20% 20% 37%* 1.02% 1.01% 1.01% 1.02% 1.04% 1.03% 1.01% 1.01% 6.00% 5.80% 6.06% 6.24% 6.55% 6.79% 6.87% 6.71% 10,600 5,300 5,300 5,300 5,300 5,300 5,300 5,300 $ 64,827 $139,932 $138,116 $134,491 $134,501 $126,614 $141,509 $129,291 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements 33 NOTES TO FINANCIAL STATEMENTS April 30, 2002 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Trust for Investment Grade Municipals (the "Trust") is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The Trust's investment objective is to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Trust will invest substantially all of its assets in municipal securities rated investment grade at the time of investment. The Trust commenced investment operations on January 24, 1992. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Trust may purchase and sell securities on a "when-issued" or "delayed delivery" basis with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Trust will maintain, in a segregated account with its custodian, assets having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At April 30, 2002, the Trust has $9,660,500 of when-issued and delayed 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. 34 NOTES TO FINANCIAL STATEMENTS April 30, 2002 (Unaudited) 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. Prior to November 1, 2001, the Trust did not accrete market discount on fixed income securities. The cumulative effect of this accounting change had no impact on total net assets of the Trust, but resulted in a $634,408 increase in cost of securities and a corresponding $634,408 decrease in net unrealized appreciation based on securities held by the Trust on November 1, 2001. The effect of this change for the six months ended April 30, 2002 was to increase net investment income by $172,042; increase net unrealized depreciation by $105,928, and decrease net realized gains by $66,114. The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation. 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. Net realized gains or losses may differ for financial reporting purposes and tax reporting purposes as a result of losses relating to wash sale transactions. At April 30, 2002, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $659,728,370 ============ Gross tax unrealized appreciation........................... $ 49,620,620 Gross tax unrealized deprecation............................ 1,212,372 ------------ Net tax unrealized appreciation on investments.............. $ 48,408,248 ============
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly dividends from net investment income to common shareholders. Net realized gains, if any, are distributed annually on a pro rata basis to common and preferred shareholders. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. F. RECLASSIFICATIONS In accordance with the provisions of EITF D-98, "Classification and Measurement of Redeemable Securities", effective for the current period, the Trust has reclassified its Auction Preferred Shares ("APS") outside of permanent equity in the Net Assets section of the Statement of Assets and Liabilities. In addition, distributions to APS shareholders are now classified as a component of the "Increase in net assets from operations" on the Statement of Operations and the Statements of Changes in Net Assets and as a component of the "Total from 35 NOTES TO FINANCIAL STATEMENTS April 30, 2002 (Unaudited) investment operations" on the Financial Highlights. Prior year amounts presented have been reclassified to conform to this period's presentation. This change has no impact on the net assets applicable to common shares of the Trust. 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. Effective May 15, 2002, this fee was reduced from .20% to .05% of the average daily net assets of the Trust. The administrative services provided by the Administrator include record keeping and reporting responsibilities with respect to the Trust's portfolio and preferred shares and providing certain services to shareholders. For the six months ended April 30, 2002, the Trust recognized expenses of approximately $14,400 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust is an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Trust. The Adviser allocates the cost of such services to each trust. For the six months ended April 30, 2002, the Trust recognized expenses of approximately $27,700 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. 36 NOTES TO FINANCIAL STATEMENTS April 30, 2002 (Unaudited) 3. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $97,082,012 and $106,419,169, respectively. 4. PREFERRED SHARES The Trust has outstanding 10,600 Auction Preferred Shares ("APS") in four series. Series A, B, and C contain 3,000 shares each while Series D contains 1,600 shares. Dividends are cumulative and the dividend rate is currently reset through an auction process. The dividend period is 28 days for Series A, B, C and D. The average rate in effect on April 30, 2002 was 1.50%. During the six months ended April 30, 2002, the rates ranged from 1.40% to 3.00%. 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. 37 DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's Common Shares, resulting in 38 the acquisition of fewer Common Shares than if the dividend or distribution had been paid in Common Shares issued by the Trust. All reinvestments are in full and fractional Common shares and are carried to three decimal places. Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to all Common Shareholders of the Trust at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days written notice to all Common Shareholders of the Trust. COSTS OF THE PLAN The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. No other charges will be made to participants for reinvesting dividends or capital gains distributions, except for certain brokerage commissions, as described above. TAX IMPLICATIONS You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. RIGHT TO WITHDRAW Plan participants may withdraw at any time by calling 1-800-341-2929 or by writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will receive, without charge, a share certificate issued in your name for all full Common Shares credited to your account under the Plan and a cash payment will be made for any fractional Common Share credited to your account under the Plan. You may again elect to participate in the Plan at any time by calling 1-800-341-2929 or writing to the Trust at: Van Kampen Funds Inc. Attn: Closed-End Funds 2800 Post Oak Blvd. Houston, TX 77056 39 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS BOARD OF TRUSTEES DAVID C. ARCH ROD DAMMEYER HOWARD J KERR THEODORE A. MYERS RICHARD F. POWERS, III* - Chairman HUGO F. SONNENSCHEIN WAYNE W. WHALEN* INVESTMENT ADVISER VAN KAMPEN INVESTMENT ADVISORY CORP. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY c/o EquiServe P.O. Box 43011 Providence, Rhode Island 02940-3011 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940 as amended. 40 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you make with us, our affiliates, or third parties. We may also collect information you provide when using our web site, and text files (a.k.a. "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com [VAN KAMPEN INVESTMENTS LOGO] Copyright (C)2002 Van Kampen Funds Inc. All rights reserved. VGM SAR 6/02 Member NASD/SIPC. 6134F02-AS-6/02