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
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas NY NY 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison 1221 Avenue of the Americas New York, NY 10020
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(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
<Table>
<Caption>
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
- ----------------------------------------------------
</Table>
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
<Table>
<Caption>
- ----------------------------------------------------------
BASED ON BASED ON LEHMAN BROTHERS
NAV MARKET PRICE MUNICIPAL BOND INDEX
7.18% 7.60% 5.11%
- ----------------------------------------------------------
</Table>
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.
<Table>
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
</Table>
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.
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 5
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
-------------
</Table>
6 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 7
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
8 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 9
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
10 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 11
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
12 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 13
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
14 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 15
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
16 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
-------------
</Table>
See Notes to Financial Statements 17
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
-------------
</Table>
18 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 19
YOUR TRUST'S INVESTMENTS
October 31, 2003
<Table>
<Caption>
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
=============
</Table>
* 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
<Table>
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
============
</Table>
See Notes to Financial Statements 21
Statement of Operations
For the Year Ended October 31, 2003
<Table>
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
===========
</Table>
22 See Notes to Financial Statements
Statements of Changes in Net Assets
<Table>
<Caption>
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
============ ============
</Table>
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.
<Table>
<Caption>
------------------------------
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
</Table>
(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
<Table>
<Caption>
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
</Table>
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:
<Table>
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
============
</Table>
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:
<Table>
<Caption>
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
========== ==========
</Table>
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:
<Table>
Undistributed ordinary income............................... $ 123,357
Undistributed long-term capital gain........................ 3,036,707
</Table>
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:
<Table>
<Caption>
CONTRACTS
Outstanding at October 31, 2002............................. 1,039
Futures Opened.............................................. 3,595
Futures Closed.............................................. (3,778)
------
Outstanding at October 31, 2003............................. 856
======
</Table>
The futures contracts outstanding as of October 31, 2003, and the
description and unrealized appreciation/depreciation were as follows:
<Table>
<Caption>
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)
=== ===========
</Table>
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:
<Table>
<Caption>
# 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
</Table>
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:
<Table>
<Caption>
# OF SHARES
----------------------------------
IN FAVOR AGAINST ABSTAIN
----------------------------------
22,421,710 1,809,446 363,574
</Table>
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
<Table>
<Caption>
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.
</Table>
36
<Table>
<Caption>
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.
</Table>
37
<Table>
<Caption>
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.
</Table>
38
<Table>
<Caption>
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.
</Table>
39
<Table>
<Caption>
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.
</Table>
40
INTERESTED TRUSTEES*
<Table>
<Caption>
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.
</Table>
41
<Table>
<Caption>
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.
</Table>
* 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
<Table>
<Caption>
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.
</Table>
43
<Table>
<Caption>
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.
</Table>
44
<Table>
<Caption>
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.
</Table>
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