As filed with the Securities and Exchange Commission on May 5, 2005


                                             Securities Act File No. 333-123453
                                      Investment Company Act File No. 811-06471

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM N-14
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933


                       [X] PRE-EFFECTIVE AMENDMENT NO. 1

                       [ ] POST-EFFECTIVE AMENDMENT NO. _

                        (CHECK APPROPRIATE BOX OR BOXES)

                VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS

         (EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)

                                 (800) 341-2929
                        (AREA CODE AND TELEPHONE NUMBER)

                           1221 AVENUE OF THE AMERICAS
                            NEW YORK, NEW YORK 10020
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                              AMY R. DOBERMAN, ESQ.
                                MANAGING DIRECTOR
                           VAN KAMPEN INVESTMENTS INC.
                           1221 AVENUE OF THE AMERICAS
                            NEW YORK, NEW YORK 10020
                     (NAME AND ADDRESS OF AGENT FOR SERVICE)

                                   COPIES TO:

                              WAYNE W. WHALEN, ESQ.
                             CHARLES B. TAYLOR, ESQ.
                    SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
                              333 WEST WACKER DRIVE
                             CHICAGO, ILLINOIS 60606
                                 (312) 407-0700


================================================================================

Approximate Date of Proposed Offering: As soon as practicable after this 
Registration Statement is declared effective.




==============================================================================================================================
                               CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
------------------------------------------------------------------------------------------------------------------------------
          TITLE OF SECURITIES                AMOUNT BEING      PROPOSED MAXIMUM       PROPOSED MAXIMUM         AMOUNT OF
           BEING REGISTERED                   REGISTERED      OFFERING PRICE PER     AGGREGATE OFFERING     REGISTRATION FEE
                                                                     UNIT                  PRICE
------------------------------------------ ----------------- --------------------- ----------------------- -------------------
                                                                                                 
Common Shares ($0.01 par value)                   19,824,602 $           14.78(1)  $           293,007,617 $         34,487(2)
------------------------------------------ ----------------- --------------------- ----------------------- -------------------
Auction Preferred Shares ($0.01 par value)             6,600              25,000   $           165,000,000 $         19,421(2)
------------------------------------------ ----------------- --------------------- ----------------------- -------------------




 (1) Average of high and low reported price for common shares on May 3, 2005.



(2) Includes registration fee of $117.70 previously paid in connection with the
    initial filing of the Registration Statement.


         The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.





                                EXPLANATORY NOTE

This Registration Statement is organized as follows:

o  Questions and Answers to Shareholders of Van Kampen Municipal Income Trust
   and Van Kampen Trust for Investment Grade Municipals

o  Notice of Special Meeting of Shareholders of Van Kampen Municipal Income
   Trust and Van Kampen Trust for Investment Grade Municipals

o  Joint Proxy Statement/Prospectus of Van Kampen Municipal Income Trust and Van
   Kampen Trust for Investment Grade Municipals 

o  Statement of Additional Information regarding the Reorganization of Van
   Kampen Municipal Income Trust into Van Kampen Trust for Investment Grade
   Municipals

o  Part C Information

o  Exhibits





 
                                --  MAY 2005  --
--------------------------------------------------------------------------------
                                IMPORTANT NOTICE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                         TO SHAREHOLDERS OF VAN KAMPEN
                             MUNICIPAL INCOME TRUST
                                      AND
                                VAN KAMPEN TRUST
                        FOR INVESTMENT GRADE MUNICIPALS
--------------------------------------------------------------------------------
 
QUESTIONS & ANSWERS
 
---------------------------------------
    Although we recommend that you read the complete Joint Proxy Statement/
Prospectus, we have provided for your convenience a brief overview of the issues
                                to be voted on.
---------------------------------------
Q      WHY IS A SHAREHOLDER
       MEETING BEING HELD?

A      Shareholders of
Van Kampen Municipal Income Trust: You are being asked to vote on a
reorganization (the "Reorganization") of Van Kampen Municipal Income Trust (the
"Target Fund") into Van Kampen Trust for Investment Grade Municipals (the
"Acquiring Fund"), a closed-end investment company that pursues a similar
investment objective and has similar investment policies as the Target Fund. You
are also being asked to vote for the election of trustees of the Target Fund.

 
Shareholders of Van Kampen Trust for Investment Grade Municipals: You are being
asked to vote on the issuance of common shares of beneficial interest by the
Acquiring Fund in connection with the Reorganization.
Q      WHY IS THE
       REORGANIZATION BEING RECOMMENDED?

A      The Board of Trustees of
each Fund has determined that the Reorganization will benefit common
shareholders of the Target Fund and the Acquiring Fund. The Target Fund and the
Acquiring Fund are similar. Each Fund seeks to provide a high level of current
income exempt from federal income taxes with safety of principal or preservation
of capital by investing substantially all of its assets in municipal securities
rated investment grade at the time of investment. Each Fund is managed by the
same investment advisory personnel. After the Reorganization, it is anticipated
that common shareholders of each Fund will experience a reduced overall
operating expense ratio, as certain fixed administra-


 
tive costs will be spread across the combined fund's larger asset base. It is
not anticipated that the Reorganization will directly benefit holders of
preferred shares of the Funds; however, it is anticipated that preferred
shareholders will not be adversely effected by the Reorganization, and none of
the expenses of the Reorganization will be borne by preferred shareholders.
Q      HOW WILL THE
REORGANIZATION AFFECT ME?
A      Assuming shareholders of
the Target Fund approve the Reorganization and shareholders of the Acquiring
Fund approve the issuance of common shares of beneficial interest by that Fund,
the assets and liabilities of the Target Fund will be combined with those of the
Acquiring Fund and the Target Fund will dissolve.
 
Shareholders of the Target Fund: You will become a shareholder of the Acquiring
Fund. If you are a holder of common shares of the Target Fund, you will receive
newly-issued common shares of the Acquiring Fund, and if you are a holder of
preferred shares of the Target Fund, you will receive newly-issued preferred
shares of the Acquiring Fund. The aggregate net asset value of the common shares
you receive in the Reorganization will equal the aggregate net asset value of
the common shares you own immediately prior to the Reorganization less the costs
of the Reorganization (though you may receive cash for fractional shares). The
aggregate liquidation preference of the preferred shares you receive in the
Reorganization will equal the aggregate liquidation preference of the preferred
shares you own immediately prior to the Reorganization. No certificates for
shares of the Acquiring Fund will be issued in connection with the
Reorganization, although such certificates will be available upon request.
 
Shareholders of the Acquiring Fund: You will remain a shareholder of the
Acquiring Fund.
Q      WILL I HAVE TO PAY ANY
       SALES LOAD, COMMISSION OR OTHER SIMILAR FEE IN CONNECTION WITH THE
       REORGANIZATION?
A      You will pay no sales loads
or commissions in connection with the Reorganization. However, if the
Reorganization is completed, the costs associated with the Reorganization,
including the costs associated with the shareholder meeting, will be borne by
the Target Fund and the Acquiring Fund in proportion to their projected declines
in total operating expenses as a consequence of the Reorganization.

 
Q      WILL I HAVE TO PAY ANY
       FEDERAL TAXES AS A RESULT OF THE REORGANIZATION?

A      The Reorganization is
intended to qualify as a "reorganization" within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended. If the
Reorganization so qualifies, in general, a shareholder of the Target Fund will
recognize no gain or loss upon the receipt of shares of the Acquiring Fund in
connection with the Reorganization. Additionally, the Target Fund will not
recognize any gain or loss as a result of the transfer of all of its assets and
liabilities in exchange for the shares of the Acquiring Fund or as a result of
its dissolution. Neither the Acquiring Fund nor its shareholders will recognize
any gain or loss in connection with the Reorganization.


Q      WHY IS THE VOTE OF
COMMON SHAREHOLDERS OF THE ACQUIRING FUND BEING SOLICITED?


A      Although the Acquiring
Fund will continue its legal existence and operations after the Reorganization,
the rules of the New York Stock Exchange and the Chicago Stock Exchange, on
which the Acquiring Fund's common shares are listed, require the common
shareholders of the Acquiring Fund to approve the issuance of additional common
shares of beneficial interest by the Acquiring Fund in connection with the
Reorganization. If the issuance of additional common shares of the Acquiring
Fund is not approved, the Reorganization will not occur.


Q      WHY ARE COMMON
SHAREHOLDERS OF THE TARGET FUND BEING ASKED TO ELECT TRUSTEES?


A      The rules of the New York
Stock Exchange and the Chicago Stock Exchange, on which the Target Fund's common
shares are listed, call for listed companies to have an annual meeting to elect
trustees each fiscal year. Since the Target Fund's fiscal year ends on June 30,
2005, the Board of Trustees of the Target Fund is asking shareholders of that
Fund to elect trustees at this time. The Special Meeting will serve as the
annual meeting of shareholders of the Target Fund.

Q      HOW DOES THE BOARD OF
       TRUSTEES OF MY FUND SUGGEST I VOTE?
A      After careful consideration,
the Board of Trustees of each Fund recommend that you vote "FOR" each of the
items proposed.
Q      HOW DO I VOTE MY PROXY?
A      You may cast your vote by
mail, phone or internet. To vote by mail, please mark your vote on the enclosed
proxy card and sign, date and return the card in the postage-paid envelope
provided. If

 
you choose to vote via phone or internet, please refer to the instructions found
on the proxy card accompanying this Joint Proxy Statement/Prospectus. To vote by
phone or internet, you will need the "control number" that appears on the proxy
card.
Q      WHOM DO I CONTACT FOR
       FURTHER INFORMATION?

A      You can contact your
financial adviser for further information. You may also call Van Kampen's Client
Relations Department at (800) 341-2929 (Telecommunication Device for the Deaf
users may call (800) 421-2833) or visit our web site at www.vankampen.com where
you can send us an e-mail message by selecting "Contact Us."


 
                              ABOUT THE PROXY CARD
--------------------------------------------------------------------------------
 
Please vote on each issue using blue or black ink to mark an X in one of the
boxes provided on the proxy card.
 
SHAREHOLDERS OF VAN KAMPEN MUNICIPAL INCOME TRUST:
 
APPROVAL OF REORGANIZATION - mark "For," "Against" or "Abstain."
 

COMMON SHAREHOLDERS OF VAN KAMPEN MUNICIPAL INCOME TRUST:

 
ELECTION OF TRUSTEES - mark "For," "Withhold" or "For All Except." To withhold
authority for any individual nominee, mark "For All Except" and write the
nominee's name on the line provided.
 

COMMON SHAREHOLDERS OF VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS:

 
APPROVAL OF ISSUANCE OF COMMON SHARES - mark "For," "Against" or "Abstain."
 
Sign, date and return the proxy card in the enclosed postage-paid envelope. All
registered owners of an account, as shown in the address, must sign the card.
When signing as attorney, trustee, executor, administrator, custodian, guardian
or corporate officer, please indicate your full title.
 

  
[X]  PLEASE MARK
     VOTES AS IN
     THIS EXAMPLE

 
                                VAN KAMPEN XXXXX
                     JOINT SPECIAL MEETING OF SHAREHOLDERS
 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
 


                          FOR    AGAINST    ABSTAIN
                                        
1.   The proposal to      [ ]      [ ]        [ ]      3. The proposal to approve the issuance of
     approve the                                          Common Shares.
     Reorganization.

 

                                         
                          FOR ALL  WITHHOLD  FOR ALL       FOR    AGAINST    ABSTAIN
                                             EXCEPT
                              [ ]    [ ]       [ ]         [ ]   [ ]     [ ]
2.   Authority to vote                                  4. To transact such other business as may
     for the election as                                   properly come before the Meeting.
     Class X Trustees
     the nominees named
     below:
XXXXXXXXX, XXXXXXXXX, XXXXXXXXX
     To withhold authority to vote for any one or more
     individual nominee check "For All Except" and write
     the nominee's name on the line below.
     ----------------------------------

 
Please be sure to sign and date this Proxy, Date
 
Shareholder sign here       Co-owner sign here
 
 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
                   SAMPLE

 
                       VAN KAMPEN MUNICIPAL INCOME TRUST
                                      AND
                VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
                          1221 AVENUE OF THE AMERICAS
                            NEW YORK, NEW YORK 10020

                                 (800) 341-2929

 
                NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
                          TO BE HELD ON JUNE 22, 2005
 

  Notice is hereby given that a joint special meeting of shareholders (the
"Special Meeting") of Van Kampen Municipal Income Trust (the "Target Fund") and
Van Kampen Trust for Investment Grade Municipals (the "Acquiring Fund") will be
held at the offices of Van Kampen Investments Inc., 1 Parkview Plaza, Oakbrook
Terrace, Illinois 60181-5555, on June 22, 2005 at 10:00 a.m. for the following
purposes:

 
For shareholders of the Target Fund:
 
    1. To approve an Agreement and Plan of Reorganization (the "Reorganization
       Agreement") between the Target Fund and Acquiring Fund, the termination
       of the Target Fund's registration under the Investment Company Act of
       1940, as amended, and the dissolution of the Target Fund under applicable
       state law;
 

For common shareholders of the Target Fund:

 
    2. To elect four trustees of the Target Fund to serve for a three year term
       or until a successor shall have been duly elected and qualified;
 

For common shareholders of the Acquiring Fund:

 

    3. To approve the issuance of additional common shares of the Acquiring Fund
       in connection with the Reorganization Agreement; and

 

For shareholders of both funds:

 
    4. To transact such other business as may properly be presented at the
       Special Meeting or any adjournment thereof.
 

  Shareholders of record as of the close of business on April 25, 2005 are
entitled to vote at the Special Meeting or any adjournment thereof. This Special
Meeting will serve as the annual meeting of Shareholders of the Target Fund.

 

  THE BOARD OF TRUSTEES OF EACH FUND REQUESTS THAT YOU VOTE YOUR SHARES BY
INDICATING YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATING AND
SIGNING SUCH PROXY CARD AND RETURNING IT IN THE ENVELOPE PROVIDED, WHICH IS
ADDRESSED FOR


 

YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES, OR BY
RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET.

 
  THE BOARD OF TRUSTEES OF THE TARGET FUND RECOMMENDS THAT YOU CAST YOUR VOTE:
 
    - FOR THE REORGANIZATION AGREEMENT AS DESCRIBED IN THE JOINT PROXY
      STATEMENT/PROSPECTUS.
 

    - FOR THE ELECTION OF EACH OF THE NOMINEES FOR THE BOARD OF TRUSTEES OF THE
      TARGET FUND LISTED IN THE JOINT PROXY STATEMENT/PROSPECTUS.

 
  THE BOARD OF TRUSTEES OF THE ACQUIRING FUND RECOMMENDS THAT YOU CAST YOUR
VOTE:
 

    - FOR THE ISSUANCE OF ADDITIONAL COMMON SHARES OF THE ACQUIRING FUND IN
      CONNECTION WITH THE REORGANIZATION AGREEMENT AS DESCRIBED IN THE JOINT
      PROXY STATEMENT/PROSPECTUS.

 

  IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT
YOU MAIL YOUR PROXY CARD PROMPTLY OR RECORD YOUR VOTING INSTRUCTIONS BY
TELEPHONE OR VIA THE INTERNET.

 
                                       For the Board of Trustees,
 
                                       Lou Anne McInnis
                                       Assistant Secretary
                                       Van Kampen Municipal Income Trust
                                       Van Kampen Trust for Investment Grade
                                         Municipals

May 6, 2005

                               ------------------
 
                            YOUR VOTE IS IMPORTANT.
               PLEASE VOTE PROMPTLY BY SIGNING AND RETURNING THE

          ENCLOSED PROXY CARD OR BY RECORDING YOUR VOTING INSTRUCTIONS


                        BY TELEPHONE OR VIA THE INTERNET

                       NO MATTER HOW MANY SHARES YOU OWN.

 
     THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY
     BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
     STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
     THIS PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
     AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
     THE OFFER OR SALE IS NOT PERMITTED.
 

                    SUBJECT TO COMPLETION, DATED MAY 5, 2005

 
                        JOINT PROXY STATEMENT/PROSPECTUS
 
                       VAN KAMPEN MUNICIPAL INCOME TRUST
 
                                      AND
 
                VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
                          1221 AVENUE OF THE AMERICAS
 
                            NEW YORK, NEW YORK 10020
 

                                 (800) 341-2929

 
                     JOINT SPECIAL MEETING OF SHAREHOLDERS
 
                                 JUNE 22, 2005
 

  This Joint Proxy Statement/Prospectus is furnished to you as a shareholder of
Van Kampen Municipal Income Trust (the "Target Fund") or Van Kampen Trust for
Investment Grade Municipals (the "Acquiring Fund"). A joint special meeting of
shareholders of the Funds (the "Special Meeting") will be held at the offices of
Van Kampen Investments Inc., 1 Parkview Plaza, Oakbrook Terrace, Illinois
60181-5555 on June 22, 2005 at 10:00 a.m. to consider the items listed below and
discussed in greater detail elsewhere in this Joint Proxy Statement/Prospectus.
If you are unable to attend the Special Meeting or any adjournment thereof, the
Board of Trustees of each Fund requests that you vote your shares by completing
and returning the enclosed proxy card or by recording your voting instructions
by telephone or via the internet. The approximate mailing date of this Joint
Proxy Statement/Prospectus and accompanying form of proxy is May 10, 2005.

 
  The purposes of the Special Meeting are:
 
  For shareholders of the Target Fund:
 

    1. To approve an Agreement and Plan of Reorganization (the "Reorganization
       Agreement") between the Target Fund and the Acquiring Fund, the
       termination of the Target Fund's registration under the Investment
       Company Act of 1940, as amended, and the dissolution of the Target Fund
       under applicable state law;

 

  For common shareholders of the Target Fund:

 
    2. To elect four trustees of the Target Fund to serve for a three year term
       or until a successor shall have been duly elected and qualified;
 

  For common shareholders of the Acquiring Fund:

 

    3. To approve the issuance of additional common shares of the Acquiring Fund
       in connection with the Reorganization Agreement; and


 

  For shareholders of both funds:

 
    4. To transact such other business as may properly be presented at the
       Special Meeting or any adjournment thereof.
 

  The Reorganization Agreement that you are being asked to consider involves a
transaction that will be referred to in this Joint Proxy Statement/Prospectus as
the "Reorganization." The Reorganization seeks to combine two similar funds to
achieve certain economies of scale and other operational efficiencies. Each Fund
pursues a similar investment objective to provide a high level of current income
exempt from federal income taxes with safety of principal or preservation of
capital. Each Fund invests primarily in investment grade municipal securities.
The Target Fund and the Acquiring Fund are sometimes referred to herein each as
a "Fund" and collectively as the "Funds."

 

  In the Reorganization, the Acquiring Fund will acquire substantially all of
the assets and assume substantially all of the liabilities of the Target Fund in
exchange for an equal aggregate value of newly issued common shares of
beneficial interest, par value $0.01 per share ("Acquiring Fund Common Shares")
and newly-issued auction preferred shares of the Acquiring Fund with a par value
of $0.01 per share and a liquidation preference of $25,000 per share ("Acquiring
Fund APS"). The Target Fund will distribute Acquiring Fund Common Shares to
holders of common shares of the Target Fund ("Target Fund Common Shares") and
Acquiring Fund APS to holders of Rate Adjusted Tax-Exempt Shares of the Target
Fund ("Target Fund RATES") (the Target Fund RATES and the Acquiring Fund APS are
sometimes referred to herein collectively as "Preferred Shares"), and will then
terminate its registration under the Investment Company Act of 1940, as amended
(the "1940 Act"), and dissolve under applicable state law. The aggregate net
asset value of Acquiring Fund Common Shares received in the Reorganization will
equal the aggregate net asset value of Target Fund Common Shares held
immediately prior to the Reorganization less the costs of the Reorganization
(though common shareholders may receive cash for their fractional shares), and
the aggregate liquidation preference of the Acquiring Fund APS received in the
Reorganization will equal the aggregate liquidation preference of the Target
Fund RATES held immediately prior to the Reorganization. The Acquiring Fund will
continue to operate after the Reorganization as a registered closed-end
investment company with the investment objective and policies described in this
Joint Proxy Statement/Prospectus.

 
  In connection with the Reorganization, common shareholders of the Acquiring
Fund are being asked to approve the issuance of additional Acquiring Fund Common
Shares.
 

  The rules of the New York Stock Exchange (the "NYSE") and the Chicago Stock
Exchange (the "CHX") call for listed companies to have an annual meeting

 
                                        2

 

to elect trustees each fiscal year. Since the Target Fund's fiscal year ends on
June 30, 2005, the Board of Trustees of the Target Fund is asking shareholders
of that Fund to elect trustees at this time. The Special Meeting will serve as
the annual meeting of shareholders of the Target Fund.

 
  The Board of Trustees of each Fund has determined that including both
proposals in one Joint Proxy Statement/Prospectus will reduce costs and is in
the best interests of each Funds' shareholders.
 

  In the event that Target Fund shareholders do not approve the Reorganization
or Acquiring Fund common shareholders do not approve the issuance of Acquiring
Fund Common Shares, the Target Fund will continue to exist and the Board of
Trustees of the Target Fund will consider what additional action, if any, to
take.

 

  This Joint Proxy Statement/Prospectus sets forth concisely the information
shareholders of the Funds should know before voting on the proposals and
constitutes an offering of Acquiring Fund Common Shares and Acquiring Fund APS.
Please read it carefully and retain it for future reference. A Statement of
Additional Information, dated May 6, 2005, relating to this Joint Proxy
Statement/Prospectus (the "Reorganization Statement of Additional Information")
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated herein by reference. If you wish to request the Reorganization
Statement of Additional Information, please ask for the "Reorganization
Statement of Additional Information." Copies of each Fund's most recent annual
report and semi-annual report can be obtained on a web site maintained by Van
Kampen Investments Inc. at www.vankampen.com. In addition, each Fund will
furnish, without charge, a copy of the Reorganization Statement of Additional
Information, its most recent annual report and any more recent semi-annual
report to any shareholder upon request. Any such request should be directed to
the Van Kampen Client Relations Department by calling (800) 341-2929 (TDD users
may call (800) 421-2833) or by writing to the respective Fund at 1 Parkview
Plaza, P.O. Box 5555, Oakbrook Terrace, Illinois 60181-5555. The address of the
principal executive offices of the Funds is 1221 Avenue of the Americas, New
York, New York 10020, and the telephone number is (800) 341-2929.

 
  The Funds are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, file reports,
proxy statements, proxy material and other information with the SEC. Materials
filed with the SEC can be reviewed and copied at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549 or downloaded from the SEC's
web site at www.sec.gov. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at (202) 942-8090. You can
also request copies of these materials, upon payment at the prescribed rates of
a duplicating fee, by electronic request to the SEC's e-mail address
 
                                        3

 
(publicinfo@sec.gov) or by writing the Public Reference Branch, Office of
Consumer Affairs and Information Services, SEC, Washington, DC, 20549-0102.
 

  The Acquiring Fund Common Shares are listed on the NYSE and the CHX under the
ticker symbol "VGM" and will continue to be so listed subsequent to the
Reorganization. The Target Fund Common Shares are listed on the NYSE and the CHX
under the ticker symbol "VMT." Reports, proxy statements and other information
concerning the Funds may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.

 
  This Joint Proxy Statement/Prospectus serves as a prospectus of the Acquiring
Fund in connection with the issuance of the Acquiring Fund Common Shares and the
Acquiring Fund APS in the Reorganization. No person has been authorized to give
any information or make any representation not contained in this Joint Proxy
Statement/Prospectus and, if so given or made, such information or
representation must not be relied upon as having been authorized. This Joint
Proxy Statement/ Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction in which, or
to any person to whom, it is unlawful to make such offer or solicitation.
 
  The Board of Trustees of each Fund knows of no business other than that
discussed above that will be presented for consideration at the Special Meeting.
If any other matter is properly presented, it is the intention of the persons
named in the enclosed proxy to vote in accordance with their best judgment.
                             ---------------------
 
  THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
 

  The date of this Joint Proxy Statement/Prospectus is May 6, 2005.

 
                                        4

 
                               TABLE OF CONTENTS
 



                                                              PAGE
                                                              ----
                                                           
SUMMARY.....................................................    7
PROPOSAL 1: REORGANIZATION OF THE TARGET FUND...............   14
RISK FACTORS AND SPECIAL CONSIDERATIONS.....................   15
  Market Risk...............................................   15
  Interest Rate Risk........................................   15
  Credit Risk...............................................   15
  Income Risk...............................................   16
  Nonpayment Risk...........................................   16
  Call Risk.................................................   16
  Municipal Securities Risk.................................   16
  Risks of Using Strategic Transactions.....................   17
  Manager Risk..............................................   17
  Market Discount Risk......................................   17
  Leverage Risk.............................................   18
  Anti-Takeover Provisions..................................   19
  Special Risks Related to Preferred Shares.................   20
COMPARISON OF THE FUNDS.....................................   21
  Investment Objective and Policies.........................   21
  Other Investment Practices and Policies...................   25
  Investment Restrictions...................................   33
  Management of the Funds...................................   36
  Other Service Providers...................................   39
  Capitalization............................................   40
  Additional Information about Common Shares of the Funds...   41
  Additional Information about Preferred Shares of the
    Funds...................................................   44
  Governing Law.............................................   50
  Certain Provisions of the Declaration of Trust............   50
  Conversion to Open-End Funds..............................   52
  Voting Rights.............................................   52
  Financial Highlights......................................   56
INFORMATION ABOUT THE REORGANIZATION........................   58
  General...................................................   58
  Terms of the Reorganization Agreement.....................   60
  Material U.S. Federal Income Tax Consequences of the
    Reorganization..........................................   62


 
                                        5

 



                                                              PAGE
                                                              ----
                                                           
  Shareholder Approval......................................   64
PROPOSAL 2: ELECTION OF TARGET FUND TRUSTEES................   64
INFORMATION REGARDING TRUSTEES AND NOMINEES FOR ELECTION AS
  TRUSTEES..................................................   65
  Remuneration of Trustees..................................   75
  Board Committees and Meetings.............................   77
OTHER INFORMATION...........................................   79
  Executive Officers of the Fund............................   79
  Shareholder Information...................................   82
  Independent Registered Public Accounting Firm.............   84
  Audit and Other Fees......................................   84
  Shareholder Approval......................................   85
PROPOSAL 3: ISSUANCE OF ADDITIONAL ACQUIRING FUND COMMON
  SHARES....................................................   86
  Shareholder Approval......................................   86
OTHER INFORMATION...........................................   87
  Voting Information and Requirements.......................   87
  Shareholder Information...................................   89
  Section 16(a) Beneficial Ownership Reporting Compliance...   89
  Shareholder Proposals.....................................   89
  Solicitation of Proxies...................................   90
  Legal Matters.............................................   90
  Other Matters to Come Before the Meeting..................   91
EXHIBIT 1: DESCRIPTION OF SECURITIES RATINGS................  I-1


 
                                        6

 
 ------------------------------------------------------------------------------
                                    SUMMARY
 ------------------------------------------------------------------------------
 
  The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus and is qualified in its entirety by reference
to the more complete information contained in this Joint Proxy
Statement/Prospectus and in the Reorganization Statement of Additional
Information. Shareholders should read the entire Joint Proxy
Statement/Prospectus carefully.
 
PROPOSAL 1: REORGANIZATION OF THE TARGET FUND
 

  THE PROPOSED REORGANIZATION. The Board of Trustees of each Fund, including the
trustees who are not "interested persons," as defined in the 1940 Act, of each
Fund, has unanimously approved the Reorganization Agreement. If the shareholders
of the Target Fund approve the Reorganization Agreement and the shareholders of
the Acquiring Fund approve the issuance of Acquiring Fund Common Shares (see
"Proposal 3: Issuance of Additional Acquiring Fund Common Shares"). Acquiring
Fund Common Shares and Acquiring Fund APS will be issued to holders of Target
Fund Common Shares and Target Fund RATES, respectively, in exchange for
substantially all of the assets of the Target Fund and the assumption of
substantially all of the liabilities of the Target Fund. The Target Fund will
then terminate its registration under the 1940 Act and dissolve under applicable
state law. The aggregate net asset value of Acquiring Fund Common Shares
received in the Reorganization will equal the aggregate net asset value of
Target Fund Common Shares held immediately prior to the Reorganization, less the
costs of the Reorganization (though common shareholders may receive cash for
fractional shares). The aggregate liquidation preference of Acquiring Fund APS
received in the Reorganization will equal the aggregate liquidation preference
of Target Fund RATES held immediately prior to the Reorganization.

 

  BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION. The Reorganization
seeks to combine two similar Funds to achieve certain economies of scale and
other operational efficiencies. Each Fund is registered as a diversified,
closed-end management investment company under the 1940 Act. Each Fund invests
primarily in investment grade municipal securities. The investment objective of
the Target Fund is to provide a high level of current income exempt from federal
income taxes with safety of principal. The Target Fund seeks to achieve its
investment objective by investing primarily in a diversified portfolio of
investment grade tax-exempt municipal securities. The investment objective of
the Acquiring Fund is to provide a high level of current income exempt from
federal income tax, consistent with preservation of capital. The Acquiring Fund
seeks to achieve its investment objective by investing in a diversified
portfolio of municipal securities which the Acquiring Fund's investment adviser
believes do not involve undue risk to income or principal. Each Fund may invest
in municipal securities subject to the alternative minimum

 
                                        7

 

tax provisions of federal tax law. The Funds are managed by the same investment
advisory personnel.

 

  The proposed Reorganization will combine the assets of these similar funds by
reorganizing the Target Fund into the Acquiring Fund. The Board of Trustees of
the Target Fund (the "Target Fund Board"), based upon its evaluation of all
relevant information, anticipates that the Reorganization will benefit holders
of Target Fund Common Shares. The Board of Trustees of the Acquiring Fund (the
"Acquiring Fund Board"), based upon its evaluation of all relevant information,
anticipates that the Reorganization will benefit holders of Acquiring Fund
Common Shares. The Board of Trustees of each Fund believes, based on data
presented by Van Kampen Asset Management, investment adviser to each of the
Funds (the "Adviser"), that holders of common shares of each Fund will
experience a reduced overall operating expense ratio as a result of the
Reorganization. The combined fund resulting from the Reorganization will have a
larger asset base than either of the Funds has currently; certain fixed
administrative costs, such as costs of printing shareholder reports and proxy
statements, legal expenses, audit fees, mailing costs and other expenses, will
be spread across this larger asset base, thereby lowering the expense ratio for
common shareholders of the combined fund.

 

  The table below illustrates the anticipated reduction in operating expenses
expected as a result of the Reorganization. The table sets forth (i) the fees,
expenses and distributions to preferred shareholders paid by the Target Fund for
the 12-month period ended October 31, 2004, (ii) the fees, expenses and
distributions to preferred shareholders paid by the Acquiring Fund for the
12-month period ended October 31, 2004 and (iii) the pro forma fees, expenses
and distributions to preferred shareholders for the Acquiring Fund for the
12-month period ended October 31, 2004, assuming all of the Reorganization had
been completed at the beginning of such period. As shown below, the
Reorganization is expected to result

 
                                        8

 

in decreased total annual expenses for shareholders of each Fund (although such
savings will not be immediately realized (see footnote (c) to the table),.

 

FEE, EXPENSE AND DISTRIBUTIONS ON PREFERRED SHARES TABLE FOR COMMON SHAREHOLDERS
                      OF THE FUNDS AS OF OCTOBER 31, 2004

 



                                                 ACTUAL            PRO FORMA
                                         -----------------------   ----------
                                                      VAN KAMPEN   VAN KAMPEN
                                         VAN KAMPEN   TRUST FOR    TRUST FOR
                                         MUNICIPAL    INVESTMENT   INVESTMENT
                                           INCOME       GRADE        GRADE
                                           TRUST      MUNICIPALS   MUNICIPALS
                                         ----------   ----------   ----------
                                                          
Common Shareholder Transaction
  Expenses(a):
  Maximum Sales Load (as a percentage
    of offering price(b)(c)............     None         None         None
  Dividend Reinvestment Plan Fees......     None         None         None
Annual Expenses (as a percentage of net
  assets attributable to common
  shares):
  Investment Advisory Fees(d)..........     0.85%        0.86%        0.86%
  Interest Payments on Borrowed
    Funds..............................     0.00%        0.00%        0.00%
  Other Expenses.......................     0.30%        0.27%        0.25%
                                            ----         ----         ----
  Total Annual Expenses(d).............     1.15%        1.13%        1.11%
                                            ----         ----         ----
Distributions:
  Distributions on Preferred
    Shares(e)..........................     0.62%        0.65%        0.62%
                                            ----         ----         ----
  Total Annual Expenses and
    Distributions on Preferred
    Shares.............................     1.77%        1.78%        1.73%
                                            ----         ----         ----


 
---------------
 

(a)No expense information is presented with respect to preferred shares because
   holders of preferred shares do not bear any transaction or operating expenses
   of any of the Funds and will not bear any of the Reorganization expenses or
   any transaction or operating expenses of the combined fund.


(b)Common shares purchased in the secondary market may be subject to
brokerage commissions or other charges. No sales load will be charged on the
   issuance of common shares in the Reorganization. Common shares are not
   available for purchase from the Funds but may be purchased through a
   broker-dealer subject to individually negotiated commission rates.


(c)In connection with the Reorganization, there are certain other transaction
   expenses which include, but are not limited to: all costs related to the
   preparation, printing and distributing of this Joint Proxy
   Statement/Prospectus to shareholders; costs related to preparation and
   distribution of materials distributed to each Fund's Board; all expenses
   incurred in connection with the preparation of the Reorganization Agreement
   and registration statement on

 
                                        9

 

   Form N-14; SEC and state securities commission filing fees; legal and audit
   fees; portfolio transfer taxes (if any); and any similar expenses incurred in
   connection with the Reorganization. In accordance with applicable SEC rules,
   the Board of Trustees of each Fund reviewed the fees and expenses that will
   be borne directly or indirectly by the Funds in connection with the
   Reorganization. After considering various alternatives for allocating these
   costs, the Board of Trustees of each Fund agreed that, in the event the
   Reorganization is approved and completed, the expenses of the Reorganization
   will be shared by the Target Fund and the Acquiring Fund in proportion to
   their projected declines in total annual operating expenses as a result of
   the Reorganization. The Board of Trustees of each Fund and management have
   agreed to limit the allocation of Reorganization expenses to each Fund based
   on a maximum payback period of two years. To the extent that the expenses of
   the Reorganization exceed such amount, the additional expenses of the
   Reorganization will be borne by the Adviser. The table below summarizes each
   Fund's net assets (common shares only) at October 31, 2004, projected annual
   savings to each Fund as a result of the Reorganization, allocation of
   Reorganization expenses among the Funds and the Adviser in dollars and
   percentages, an estimated pay-back period (in years) and the resulting effect
   on each Fund's net asset value per common share at October 31, 2004. The
   Target Fund will benefit more from projected annual expense savings of the
   Reorganization than the Acquiring Fund. The projected annual expense savings
   are generally not expected to be immediately realized. If a shareholder sells
   his or her common shares prior to the estimated pay-back period, then that
   shareholder may not realize any of the projected expense savings resulting
   from the reduced expense ratio of the combined fund. The net asset value per
   common share of each Fund will be reduced at the closing date of the
   respective Reorganization to reflect the allocation of Reorganization
   expenses to each Fund. The reduction in net asset value per common share
   resulting from the allocation of Reorganization expenses, when compared to
   the relative net asset sizes of the Funds involved in the Reorganization,
   will be greater in the Target Fund than the Acquiring Fund. In the event the
   Reorganization is not completed, the Adviser will bear the costs associated
   with

 
                                        10

 

   the Reorganization. The numbers presented in the table are estimates; actual
   results may differ.

 



                                                    REORGANIZATION     ESTIMATED    EFFECT ON NET
                        NET ASSETS    PROJECTED        EXPENSE          PAYBACK      ASSET VALUE
                         (COMMON       ANNUAL       ALLOCATION IN      PERIOD (IN    PER COMMON
FUND                   SHARES ONLY)    SAVINGS    DOLLARS/PERCENTAGE     YEARS)         SHARE
----                   ------------   ---------   ------------------   ----------   -------------
                                                                     
Target Fund            $302,333,336   $120,993       $241,866/49%         2.00        < $ 0.01
Acquiring Fund         $468,334,522   $ 93,667       $187,334/38%         2.00        < $ 0.01
The Adviser                                          $ 61,800/13%
Total Expenses                                       $   491,000


 
---------------
 

(d)Expense information has been restated to reflect permanent reductions
   made to administrative fees effective as of June 1, 2004 and permanent
   reductions made to management fees effective as of November 1, 2004.


(e)In seeking to enhance the income for its common shareholders, each of
   the Funds uses preferred shares as financial leverage. Leverage created by
   borrowing or other forms of indebtedness would create interest expenses which
   would, if used by the Funds, be charged to common shareholders (shown above
   as "Interest Payments on Borrowed Funds"). Leverage created by preferred
   shares creates dividend payments and/or capital gains distributions to
   preferred shareholders which are charged to common shareholders (shown above
   as "Distributions on Preferred Shares"). The dividend rates are based on
   periodic auctions as described herein and thus will differ based on varying
   market conditions at the times of such auctions.

 

  EXAMPLE.  The following example is intended to help you compare the costs of
investing in the Acquiring Fund pro forma after the Reorganizations with the
costs of investing in the Target Funds and the Acquiring Fund without the
Reorganizations. An investor would pay the following expenses on a $1,000
investment, assuming (1) the operating expense ratio for each Fund (as a
percentage of net assets attributable to common shares) set forth in the table
above and (2) a 5% annual return throughout the period:



 



                                           1 YEAR    3 YEARS    5 YEARS    10 YEARS
                                           ------    -------    -------    --------
                                                               
Van Kampen Municipal Income Trust......     $12        $37        $63        $140
Van Kampen Trust for Investment Grade
  Municipals...........................     $12        $36        $62        $137
Pro Forma--Van Kampen Trust for
  Investment Grade Municipals..........     $11        $35        $61        $135


 
  The example set forth above assumes Common Shares of each Fund were purchased
in the initial offerings and the reinvestment of all dividends and distributions
and uses a 5% annual rate of return as mandated by SEC regulations.
 
                                        11

 
The example should not be considered a representation of past or future expenses
or annual rates of return. Actual expenses or annual rates of return may be more
or less than those assumed for purposes of the example.
 

  FURTHER INFORMATION REGARDING THE REORGANIZATION. The Target Fund Board has
determined that the Reorganization is in the best interests of holders of Target
Fund Common Shares and that the interests of such shareholders will not be
diluted as a result of the Reorganization. Similarly, the Board of Trustees of
the Acquiring Fund has determined that the Reorganization is in the best
interests of holders of Acquiring Fund Common Shares and that the interests of
such shareholders will not be diluted as a result of the Reorganization. It is
not anticipated that the Reorganization will directly benefit the holders of
Preferred Shares of either Fund; however, the Reorganization will not adversely
affect the holders of Preferred Shares of either Fund and the expenses of the
Reorganization will not be borne by the holders of Preferred Shares of either
Fund. As a result of the Reorganization, however, a shareholder of either Fund
will hold a reduced percentage of ownership in the larger combined fund than he
or she did in either of the separate Funds.

 
  The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code" or "Code"). If the Reorganization so qualifies, in
general, a shareholder of the Target Fund will recognize no gain or loss upon
the receipt solely of shares of the Acquiring Fund in connection with the
Reorganization. Additionally, the Target Fund will not recognize any gain or
loss as a result of the transfer of all of its assets and liabilities solely in
exchange for the shares of the Acquiring Fund or as a result of its dissolution.
Neither the Acquiring Fund nor its shareholders will recognize any gain or loss
in connection with the Reorganization.
 

  The Target Fund Board requests that shareholders of the Target Fund approve
the proposed Reorganization at the Special Meeting to be held on June 22, 2005.
Shareholder approval of the Reorganization requires the affirmative vote of
shareholders of the Target Fund representing more than 50% of the outstanding
Target Fund Common Shares and 66 2/3% of the outstanding Target Fund Preferred
Shares, each voting separately as a class. Subject to the requisite approval of
the shareholders of each Fund with regard to the Reorganization, it is expected
that the closing date of the transaction (the "Closing Date") will be after the
close of business on or about June 30, 2005, but it may be at a different time
as described herein.

 
  The Target Fund Board recommends that you vote "FOR" the proposed
Reorganization.
 
                                        12

 
PROPOSAL 2: ELECTION OF TARGET FUND TRUSTEES
 

  The Joint Special Meeting will serve as the annual meeting of shareholders of
the Target Fund for the current fiscal year at which trustees of the Target Fund
will be elected. Shareholders of the Target Fund are being asked to elect four
Class I trustees at the Special Meeting to serve until the later of the Target
Fund's Annual Meeting of Shareholders in 2008 or until a successor has been duly
elected and qualified. Holders of Common Shares, voting as a separate class,
will vote with respect to four Class I trustees (David C. Arch, Jerry D. Choate,
Howard J Kerr and Suzanne H. Woolsey) designated to be elected by such class of
shares. An affirmative vote of a plurality of the Target Fund Common Shares
present at the Special Meeting in person or by proxy is required to elect the
respective nominees. The "vote of a plurality" means that a nominee must receive
more votes than any other candidate for the same position, but not necessarily a
majority of the votes cast. It is the intention of the persons named in the
enclosed proxy to vote the shares represented by them for the election of the
respective nominees listed unless the proxy is marked otherwise.

 

  The Target Fund Board recommends that you vote "FOR" the election of each of
the nominees.

 
PROPOSAL 3: ISSUANCE OF ACQUIRING FUND COMMON SHARES
 

  In connection with the proposed Reorganization described under "Proposal 1:
Reorganization of the Target Fund," the Acquiring Fund will issue additional
Acquiring Fund Common Shares and list such shares on the NYSE and CHX. The
Acquiring Fund will acquire substantially all of the assets and assume
substantially all of the liabilities of the Target Fund in exchange for the
newly-issued Acquiring Fund Common Shares and newly-issued Acquiring Fund APS.
The Reorganization will result in no reduction of net asset value of the
Acquiring Fund Common Shares, other than the costs of the Reorganization. No
gain or loss will be recognized by the Acquiring Fund or its shareholders in
connection with the Reorganization. The Acquiring Fund Board, based upon its
evaluation of all relevant information, anticipates that the Reorganization will
benefit holders of Acquiring Fund Common Shares. In particular, the Acquiring
Fund Board believes, based on data presented by the Adviser, that the Acquiring
Fund will experience a reduced overall operating expense ratio as a result of
the Reorganization.

 

  The Acquiring Fund Board requests that shareholders of the Acquiring Fund
approve the issuance of additional Acquiring Fund Common Shares at the Special
Meeting to be held on June 22, 2005. Shareholder approval of the issuance of
additional Acquiring Fund Common Shares requires the affirmative vote of a
majority of the votes cast on the proposal, provided that the total votes cast
on the proposal represents more than 50% in interest of all securities entitled
to vote on the proposal. Subject to the requisite approval of the shareholders
of each Fund

                                        13

 
with regard to the Reorganization, it is expected that the Closing Date will be
after the close of business on or about June 30, 2005, but it may be at a
different time as described herein.
 

  The Acquiring Fund Board recommends that you vote "FOR" the issuance of
additional Acquiring Fund Common Shares in connection with the Reorganization.

 
 ------------------------------------------------------------------------------
                 PROPOSAL 1: REORGANIZATION OF THE TARGET FUND
 ------------------------------------------------------------------------------
 

  The Reorganization seeks to combine two similar Funds to achieve certain
economies of scale and other operational efficiencies. Each Fund is registered
as a diversified, closed-end management investment company under the 1940 Act.
Each Fund pursues a similar investment objective to provide a high level of
current income exempt from federal income taxes with safety of principal or
preservation of capital. Each Fund invests primarily in investment grade
municipal securities. The Funds are managed by the same investment advisory
personnel.

 

  In the Reorganization, the Acquiring Fund will acquire substantially all of
the assets and assume substantially all of the liabilities of the Target Fund in
exchange for an equal aggregate value of Acquiring Fund Common Shares and
Acquiring Fund APS. The Target Fund will distribute Acquiring Fund Common Shares
to holders of Target Fund Common Shares and Acquiring Fund APS to holders of
Target Fund RATES, and will then terminate its registration under the 1940 Act
and dissolve under applicable state law. The aggregate net asset value of
Acquiring Fund Common Shares received in the Reorganization will equal the
aggregate net asset value on the Target Fund Common Shares held immediately
prior to the Reorganization less the costs of the Reorganization (though common
shareholders may receive cash for fractional shares). The aggregate liquidation
preference of Acquiring Fund APS received in the Reorganization will equal the
aggregate liquidation preference Target Fund RATES held immediately prior to the
Reorganization. The Acquiring Fund will continue to operate as a registered
closed-end investment company with the investment objective and policies
described in this Joint Proxy Statement/Prospectus.

 
  The Target Fund Board, based upon its evaluation of all relevant information,
anticipates that the common shareholders of the Target Fund will benefit from
the Reorganization. In particular, the Target Fund Board believes, based on data
presented by the Adviser, that common shareholders of the Target Fund will
experience a reduced overall operating expense ratio as a result of the
Reorganization. The combined fund resulting from the Reorganizations will have a
larger asset base than either Fund has currently; certain fixed administrative
costs, such as costs of printing shareholder reports and proxy statements, legal
expenses, audit fees,
 
                                        14

 
mailing costs and other expenses, will be spread across this larger asset base,
thereby lowering the expense ratio for common shareholders of the combined fund.
 
                    RISK FACTORS AND SPECIAL CONSIDERATIONS
 
  Because each Fund, under normal market conditions, invests substantially all
of its assets in investment grade municipal securities, any risks inherent in
such investments are equally applicable to both Funds and will apply to the
combined fund after the Reorganization. The Reorganization itself is not
expected to adversely affect the rights of holders of Common Shares or Preferred
Shares of either Fund or to create additional risks.
 
MARKET RISK
 
  Market risk is the possibility that the market values of securities owned by
each Fund will decline. The prices of debt securities tend to fall as interest
rates rise, and such declines tend to be greater among debt securities with
longer maturities. Market risk is often greater among certain types of debt
securities, such as zero coupon bonds which do not make regular interest
payments but are instead bought at a discount to their face values and paid in
full upon maturity. As interest rates change, these securities often fluctuate
more in price than securities that make regular interest payments and therefore
subject the Funds to greater market risk than a fund that does not own these
types of securities. When-issued and delayed delivery transactions are subject
to changes in market conditions from the time of the commitment until
settlement. This may adversely affect the prices or yields of the securities
being purchased. The greater the Funds' outstanding commitments for these
securities, the greater the Funds' exposure to market price fluctuations.
 
INTEREST RATE RISK
 
  Interest rate risk is the risk that prices of municipal securities generally
increase when interest rates decline and decrease when interest rates increase.
Prices of longer-term securities generally change more in response to interest
rate changes than prices of shorter-term securities.
 
CREDIT RISK
 

  Credit risk refers to an issuer's ability to make timely payments of interest
and principal. The degree of credit risk depends on both the financial condition
of the issuer and the terms of the obligation. Each Fund invests substantially
all of its total assets in municipal securities rated investment grade at the
time of investment. However, to the extent that a Fund may hold securities rated
below investment grade, it may be subject to a higher level of credit risk than
a fund that holds solely investment grade securities. Securities rated BBB by
Standard & Poor's

 
                                        15

 

("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's") are in the lowest
of the four investment grades and are considered by the rating agencies to be
medium-grade obligations which possess speculative characteristics so that
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuer to make principal and interest payments than
in the case of higher-rated securities. The credit quality of non-investment
grade securities is considered speculative by recognized rating agencies with
respect to the issuer's continuing ability to pay interest and principal.
Lower-grade securities may have less liquidity and a higher incidence of default
than higher-grade securities. The Acquiring Fund may incur higher expenditures
to protect its interests in such securities. The credit risks and market prices
of lower-grade securities generally are more sensitive to negative issuer
developments, such as reduced revenues or increased expenditures, or adverse
economic conditions, such as a recession, than are higher-grade securities.

 
INCOME RISK
 
  The income shareholders receive from a Fund is based primarily on interest
rates, which can vary widely over the short- and long-term. If interest rates
drop, your income from such Fund may drop as well.
 
NONPAYMENT RISK
 

  Although substantially all of the municipal securities in which the Funds
invest are rated investment grade at the time of investment, municipal
securities, like other debt obligations, are subject to the risk of nonpayment.
The ability of issuers of municipal securities to make timely payments of
interest and principal may be adversely impacted in general economic downturns
and as relative governmental cost burdens are allocated and reallocated among
federal, state and local governmental units. Such nonpayment would result in a
reduction of income to a Fund and could result in a reduction in the value of
them municipal security experiencing nonpayment and a potential decrease in the
net asset value of a Fund.

 
CALL RISK
 

  If interest rates fall, it is possible that issuers of securities with high
interest rates will prepay or "call" their securities before their maturity
dates. In this event, the proceeds from the called securities would likely be
reinvested by the Funds in securities bearing the new, lower interest rates,
resulting in a possible decline in the Funds' income and distributions to
shareholders.

 
MUNICIPAL SECURITIES RISK
 
  Under normal market conditions, the Funds invest primarily in municipal
securities. The yields of municipal securities may move differently and
adversely
                                        16

 
compared to the yields of overall debt securities markets. Although the interest
received from municipal securities generally is exempt from federal income tax,
each Fund may invest in municipal securities subject to the federal alternative
minimum tax. The Acquiring Fund may invest all or a substantial portion of its
total assets in municipal securities subject to the federal alternative minimum
tax. In addition, there could be changes in applicable tax laws or tax
treatments that reduce or eliminate the current federal income tax exemption on
municipal securities or otherwise adversely affect the current federal or state
tax status of municipal securities.
 
RISKS OF USING STRATEGIC TRANSACTIONS
 
  Each Fund may engage in certain transactions ("Strategic Transactions")
designed to, among other things, reduce its exposure to interest rate movements.
For example, each Fund may purchase and sell exchange-listed and over-the-
counter put and call options on securities, financial futures and other
financial instruments, purchase and sell financial futures contracts and enter
into various interest rate transactions such as swaps, caps, floors or collars.
If a Fund incorrectly forecasts market values, interest rates or other factors,
that Fund's performance could suffer as a result of its Strategic Transactions.
Each Fund also may suffer a loss if the other party to the Strategic Transaction
fails to meet its obligations. The Funds are not required to use Strategic
Transactions and may choose not to do so.
 
MANAGER RISK
 
  As with any managed fund, the investment adviser to each Fund may not be
successful in selecting the best-performing securities or investment techniques,
and a Fund's performance may lag behind that of similar funds.
 
MARKET DISCOUNT RISK
 

  Whether investors will realize gains or losses upon the sale of shares of a
Fund will depend upon the market price of the shares at the time of original
purchase and subsequent sale, which may be less or more than such Fund's net
asset value per share. Since the market price of the shares will be affected by
such factors as the relative demand for and supply of the shares in the market,
general market and economic conditions and other factors beyond the control of
the Funds, the Funds cannot predict whether shares of the Funds will trade at,
below or above net asset value. Shares of closed-end funds often trade at a
discount to their net asset values, and the Funds' shares may trade at such a
discount.

 

  In order to reduce or eliminate a market value discount from net asset value,
the Board of Trustees of a Fund may, subject to the terms of its preferred
shares, authorize such Fund from time to time to repurchase its common shares in
the open market or to tender for its common shares at net asset value. The Board
of Trustees

                                        17

 

of a Fund, in consultation with the Adviser, will review on a quarterly basis
the possibility of open-market repurchases and/or tender offers for such Fund's
common shares. Subject to its borrowing restrictions, a Fund may incur debt to
finance such repurchases, which entails risks. The ability of a Fund to enter
into tender offers and the common share repurchases may be limited by the 1940
Act asset coverage requirements and any additional asset coverage requirements
which may be imposed by a rating agency in connection with any rating of the
preferred shares. No assurance can be given that the Board of Trustees of a Fund
will, in fact, authorize such Fund to undertake such repurchases and/or tender
offers or that, if undertaken, such actions would result in such Fund's common
shares trading at a price which is equal or close to net asset value.

 
LEVERAGE RISK
 

  Use of leverage, through the issuance of Preferred Shares, involves certain
risks to holders of Common Shares of the Funds. For example, each Fund's
issuance of Preferred Shares may result in higher volatility of the net asset
value of its Common Shares and potentially more volatility in the market value
of its Common Shares. In addition, changes in the short-term and medium-term
dividend rates on, and the amount of taxable income allocable to, the Preferred
Shares of a Fund will affect the yield to holders of Common Shares of such Fund.
In certain circumstances, when a Fund is required to allocate taxable income to
holders of its Preferred Shares, such Fund may be required to make an additional
distribution to such holders in an amount approximately equal to the tax
liability resulting from the allocation (an "Additional Dividend"). Leverage
will allow holders of each Fund's Common Shares to realize a higher current rate
of return than if a Fund were not leveraged as long as such Fund, while
accounting for its costs and operating expenses, is able to realize a higher net
return on its investment portfolio than the then-current dividend rate (and any
Additional Dividend) paid on its Preferred Shares. Similarly, since a pro rata
portion of each Fund's net realized capital gains is generally payable to
holders of a Fund's Common Shares, the use of leverage will increase the amount
of such gains distributed to holders of a Fund's Common Shares. However,
short-term, medium-term and long-term interest rates change from time to time as
do their relationships to each other (i.e., the slope of the yield curve)
depending upon such factors as supply and demand forces, monetary and tax
policies and investor expectations. Changes in any or all of such factors could
cause the relationship between short-term, medium-term and long-term rates to
change (i.e., to flatten or to invert the slope of the yield curve) so that
short-term and medium-term rates may substantially increase relative to the
long-term obligations in which each Fund may be invested. To the extent that the
current dividend rate (and any Additional Dividend) on a Fund's Preferred Shares
approaches the net return on such Fund's investment portfolio, the benefit of
leverage to holders of Common Shares of such Fund will be decreased. If the
current dividend rate (and

 
                                        18

 

any Additional Dividend) on the Preferred Shares of a Fund were to exceed the
net return on such Fund's portfolio, holders of Common Shares of such Fund would
receive a lower rate of return than if the Fund were not leveraged. Similarly,
since both the costs of issuing Preferred Shares and any decline in the value of
a Fund's investments (including investments purchased with the proceeds from any
Preferred Shares offering) will be borne entirely by holders of such Fund's
Common Shares, the effect of leverage in a declining market would result in a
greater decrease in net asset value to holders of Common Shares than if a Fund
were not leveraged. If a Fund is liquidated, holders of that Fund's Preferred
Shares will be entitled to receive liquidating distributions before any
distribution is made to holders of Common Shares of such Fund.

 

  In an extreme case, a decline in net asset value could affect a Fund's ability
to pay dividends on its Common Shares. Failure to make such dividend payments
could adversely affect a Fund's qualification as a regulated investment company
under the federal tax laws. However, each Fund intends to take all measures
necessary to make required Common Share dividend payments. If a Fund's current
investment income is ever insufficient to meet dividend payments on either its
Common Shares or its Preferred Shares, such Fund may have to liquidate certain
of its investments. In addition, each Fund has the authority to redeem its
Preferred Shares for any reason and may be required to redeem all or part of its
Preferred Shares in the following circumstances:

 

    - if the asset coverage for the Preferred Shares declines below 200%, either
      as a result of a decline in the value of a Fund's portfolio investments or
      as a result of the repurchase of Common Shares in tender offers or
      otherwise, or

 
    - in order to maintain the asset coverage guidelines established by Moody's
      and S&P in rating the Preferred Shares.
 

  In addition, in the case of Target Fund RATES, if on any dividend date, the
Target Fund fails to generate sufficient available net tax-exempt income to pay
accrued and unpaid dividends on the RATES out of solely tax exempt income at the
applicable dividend rate, the Target Fund will be required to redeem all or part
of its RATES.

 

  Redemption of the Preferred Shares or insufficient investment income to make
dividend payments, may reduce the net asset value of a Fund's Common Shares and
require a Fund to liquidate a portion of its investments at a time when it may
be disadvantageous to do so.

 
ANTI-TAKEOVER PROVISIONS
 
  The Declaration of Trust of each Fund (in each case, the "Declaration of
Trust") includes provisions that could limit the ability of other entities or
persons to acquire control of that Fund or to change the composition of its
Board of Trustees. Such
                                        19

 

provisions could limit the ability of common shareholders to sell their shares
at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of either Fund.

 
SPECIAL RISKS RELATED TO PREFERRED SHARES
 

  AUCTION RISK. The dividend rate for the Preferred Shares of each Fund normally
is set through an auction process. In the auction, holders of Preferred Shares
may indicate the dividend rate at which they would be willing to hold or sell
their shares or purchase additional shares. An auction fails if there are more
Preferred Shares offered for sale than there are buyers, in which case holders
of Preferred Shares may not be able to sell their shares. Also, if holders of
Preferred Shares place bids to retain shares at an auction only at a specified
dividend rate and that rate exceeds the rate set at the auction, they will not
retain their shares. Additionally, if holders of Preferred Shares buy shares or
elect to retain shares without specifying a dividend rate below which they would
not wish to buy or continue to hold those shares, they could receive a lower
rate of return on their shares than the market rate. Finally, the dividend
period for the Preferred Shares may be changed by a Fund, subject to certain
conditions, including notice to preferred shareholders, which could also affect
the liquidity of an investment in Preferred Shares.

 

  SECONDARY MARKET RISK. The Target Fund RATES have not been registered pursuant
to the Securities Act of 1933, as amended (the "1933 Act"). Acquiring Fund APS
are registered pursuant to the 1933 Act. Target Fund RATES may only be
transferred outside of auctions through transactions that are not required to be
registered under applicable federal and state securities laws. Broker-dealers
may maintain a secondary trading market in the Acquiring Fund APS outside of
auctions; however, they are not obligated to do so and there can be no assurance
that such a secondary market will develop or, if it does develop, that it will
provide holders of Acquiring Fund APS with a liquid trading market. It may not
be possible to sell Acquiring Fund APS between auctions, or it may only be
possible to sell them for a price less than their liquidation preference plus
any accumulated dividends. An increase in the level of interest rates likely
will have an adverse effect on the secondary market price of the Acquiring Fund
APS. Acquiring Fund APS may only be transferred outside of auctions to or
through broker-dealers or other persons as the Acquiring Fund permits.

 
  RATINGS AND ASSET COVERAGE RISKS. Although the Preferred Shares of each Fund
have been rated "Aaa" by Moody's and "AAA" by S&P, such ratings do not eliminate
or necessarily mitigate the risks of investing in Preferred Shares. Moody's or
S&P could downgrade its rating of the Preferred Shares or withdraw its rating at
any time, which may make the Preferred Shares less liquid at an auction or in
the secondary market. If a Fund fails to satisfy its asset coverage ratios, it
will be required to redeem a sufficient number of Preferred Shares in order to
return to
 
                                        20

 
compliance with the asset coverage ratios. A Fund may voluntarily redeem
preferred shares under certain circumstances in order to meet asset coverage
tests.
 
                            COMPARISON OF THE FUNDS
 
INVESTMENT OBJECTIVE AND POLICIES
 

  The Funds pursue a similar investment objective and have similar investment
policies. The Target Fund's investment objective is to provide a high level of
current income exempt from federal income taxes with safety of principal. The
Acquiring Fund's investment objective is to provide a high level of current
income exempt from federal income tax, consistent with preservation of capital.

 

  Each Fund invests primarily in municipal securities rated investment grade at
the time of investment. Under normal market conditions, each Fund invests at
least 80% of its assets in municipal securities. The foregoing policy is a
fundamental policy of each Fund and cannot be changed without shareholder
approval. The Target Fund may only invest in municipal securities that are rated
investment grade at the time of investment. The Acquiring Fund invests
substantially all of its total assets in municipal securities rated investment
grade at the time of investment; however, the Acquiring Fund may, consistent
with such policy, also invest a portion of its assets in municipal securities
rated below investment grade. Each Fund considers securities rated BBB or higher
by S&P or Baa or higher by Moody's and equivalent rated short-term obligations
to be investment grade.

 

  The foregoing policies with respect to credit quality of portfolio investments
apply only at the time of purchase of a security, and the Funds are not required
to dispose of a security in the event that S&P or Moody's (or any other
nationally recognized statistical rating organization) downgrades its assessment
of the credit characteristics of a particular issuer or. In determining whether
a Fund will retain or sell such a security, the Adviser may consider such
factors as the Adviser's assessment of the credit quality of the issuer of such
security, the price at which such security could be sold and the rating, if any,
assigned to such security by other nationally recognized statistical rating
organizations.

 
  Each Fund may invest in municipal securities subject to the alternative
minimum tax provisions of federal tax law. The Acquiring Fund has not
established any limit on the percentage of its portfolio that may be invested in
municipal securities that pay interest subject to the alternative minimum tax
provisions of federal tax law, and a substantial portion of the income produced
by the Acquiring Fund may be taxable under the alternative minimum tax. The
Target Fund may invest up to 20% of its total assets in municipal securities
that pay interest subject to the alternative minimum tax. The Funds may not be
suitable investments for investors who are already subject to the federal
alternative minimum tax or who would become
 
                                        21

 
subject to the federal alternative minimum tax as a result of an investment in
the Funds.
 
  Each Fund may engage in certain hedging transactions and may purchase and sell
put and call options on municipal securities and municipal securities indices.
Such transactions are not treated as investments in municipal securities for the
purpose of each Fund's policy of investing 80% of its total assets in municipal
securities.
 
  MUNICIPAL SECURITIES. Municipal securities are obligations issued by or on
behalf of states, certain territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which is, in the opinion of bond counsel or
other counsel to the issuer of such securities, at the time of issuance, not
includable in gross income for regular federal income tax purposes. Under normal
market conditions, at least 80% of each Fund's net assets are invested in
municipal securities. The Acquiring Fund not established any limit on the
percentage of their respective portfolios that may be invested in municipal
securities that pay interest subject to the alternative minimum tax provisions
of federal tax law, and a substantial portion of the income produced by the
Acquiring Fund may be taxable under the federal alternative minimum tax. The
Target Fund may invest up to 20% of its total assets in municipal securities
that pay interest subject to the alternative minimum tax.
 
  The two principal classifications of municipal securities are "general
obligation" securities and "revenue" securities. "General obligation" securities
are secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. "Revenue" securities are usually payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source. Industrial development bonds are usually revenue securities, the
credit quality of which is normally directly related to the credit standing of
the industrial user involved.
 
  Within these principal classifications of municipal securities, there are a
variety of categories of municipal securities, including fixed and variable rate
securities, municipal bonds, municipal notes, municipal leases, custodial
receipts, participation certificates and municipal securities the terms of which
include elements of, or are similar in effect to, certain Strategic Transactions
in which the Funds may engage. Variable rate securities bear rates of interest
that are adjusted periodically according to formulae intended to reflect market
rates of interest and include securities whose rates vary inversely with changes
in market rates of interest. Municipal notes include tax, revenue and bond
anticipation notes of short maturity, generally less than three years, which are
issued to obtain temporary funds for various public purposes. Municipal leases
are obligations issued by state and local governments or authorities to finance
the acquisition of equipment and facilities. Certain municipal lease obligations
may include "nonappropriation" clauses which provide that the
                                        22

 
municipality has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a yearly basis.
Custodial receipts are underwritten by securities dealers or banks and evidence
ownership of future interest payments, principal payments or both on certain
municipal securities. Participation certificates are obligations issued by state
and local governments or authorities to finance the acquisition of equipment and
facilities. They may represent participations in a lease, an installment
purchase contract, or a conditional sales contract. Municipal securities may not
be backed by the faith, credit and taxing power of the issuer. The Funds may
also invest in municipal securities backed by original issue insurance or
secondary market insurance (collectively, "insurance").
 
  The yields of municipal securities depend on, among other things, general
money market conditions, general conditions of the municipal securities market,
size of a particular offering, the maturity of the obligation and rating of the
issue. The ratings of S&P and Moody's represent their opinions of the quality of
the municipal securities they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal securities with the same maturity, coupon and rating may
have different yields while municipal securities of the same maturity and coupon
with different ratings may have the same yield.
 

  Municipal securities include long-term obligations, often called municipal
bonds, as well as short-term municipal notes, participation certificates,
municipal leases, and tax-exempt commercial paper. Under normal market
conditions, longer-term municipal securities generally provide a higher yield
than short-term municipal securities of similar credit quality and therefore
each Fund generally emphasizes investments in municipal securities with
long-term maturities. There is no limitation as to the maturity of municipal
securities in which each Fund may invest. The Adviser may adjust the average
maturity of each Fund's portfolio from time to time, depending on its assessment
of the relative yields available an securities of different maturities and its
expectations of future changes in interest rates.

 
  Each Fund may invest more than 25% of its total assets in a particular segment
of the municipal securities market if the Adviser determines that the yields
available from obligations in a particular segment justify the additional risks
of a larger investment in such segment.
 
  Neither Fund has a policy limiting its investments in municipal securities
whose issuers are located in the same state. However, it is not the present
intention of either Fund to invest more than 25% of the value of its total
assets in issuers located in the same state. If a Fund were to invest more than
25% of its total assets in issuers located in the same state, it would be more
susceptible to adverse economic, business or regulatory conditions in that
state.
 
                                        23

 

  Neither Fund will invest 25% or more of its total assets in any industry, nor
invest more than 5% of its total assets in the securities of any single issuer.
Governmental issuers of municipal securities are not considered part of any
"industry." However, municipal securities backed only by the assets and revenues
of non-governmental users may for this purpose be deemed to be issued by such
non-governmental users, and the 25% limitation would apply to such obligations.

 
  MUNICIPAL LEASES AND CERTIFICATES OF PARTICIPATION. Included within the
general category of municipal securities are participations in lease obligations
or installment purchase contract obligations (collectively called "lease
obligations") of municipal authorities or entities. Although lease obligations
do not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily backed
by the municipality's covenant to budget for, appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
non-appropriation lease obligations are often secured by the underlying
property, disposition of the property in the event of foreclosure might prove
difficult.
 
  The Target Fund may only invest 5% of its total assets in lease obligations
that contain non-appropriation clauses, and only invests in those
non-appropriation lease obligations where (1) the nature of the leased equipment
or property is such that its ownership or use is essential to a governmental
function of the municipality, (2) the lease payments will commence amortization
of principal at an early date resulting in an average life of seven years or
less for the lease obligation, (3) appropriate covenants will be obtained from
the municipal obligor prohibiting the substitution or purchase of similar
equipment if lease payments are not appropriated, (4) the lease obligor has
maintained good market acceptability in the past, (5) the investment is of a
size that will be attractive to institutional investors, and (6) the underlying
leased equipment has elements of portability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment was ever
required.
 
  There is no limitation on the percentage of the Acquiring Fund's assets that
may be invested in lease obligations that contain non-appropriation clauses. In
evaluating such lease obligations, the Adviser will consider such factors as it
deems appropriate, which may include (1) whether the lease can be cancelled, (2)
the ability of the lease obligee to direct the sale of the underlying assets,
(3) the general creditworthiness of the lease obligor, (4) the likelihood that
the municipality will discontinue appropriating funding for the leased property
in the event such property is no longer considered essential by the
municipality, (5) the legal recourse of the lease obligee in the event of such a
failure to appropriate funding and (6) any limitations which are imposed on the
lease obligor's ability to utilize substitute
 
                                        24

 
property or services than those covered by the lease obligation. The Acquiring
Fund invests in lease obligations which contain non-appropriation clauses only
if such obligations are rated investment grade at the time of investment.
 
  Participation certificates are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities. They may represent participations in a lease, an installment
purchase contract, or a conditional sales contract. Some municipal leases and
participation certificates may not be readily marketable.
 

  TEMPORARY DEFENSIVE STRATEGIES. At times, the Adviser may judge that
conditions in the markets for municipal securities make pursuing a Fund's basic
investment strategy inconsistent with the best interests of its shareholders. At
such times the Adviser may use alternative strategies, primarily designed to
reduce fluctuations in the value of such Fund's assets. In implementing these
"defensive" strategies, a Fund may invest to a substantial degree in other
investment grade municipal securities, including liquid, high-quality,
short-term municipal securities. If these other municipal securities are not
available or, in the Adviser's judgment, do not afford sufficient protection
against adverse market conditions, each Fund may invest in investment grade
taxable securities. To the extent that a Fund invests in taxable securities for
temporary defensive purposes, that Fund will not be invested in a manner
primarily designed to achieve its investment objective of seeking to provide
common shareholders with a high level of current income exempt from federal
income tax.

 

  To the extent that the use of certain of these strategies produces taxable
income to the Target Fund, this taxable income will be distributed exclusively
to the holders of Target Fund Common Shares. To the extent that the use of
certain of these strategies produces taxable income, to the Acquiring Fund, this
taxable income will be distributed on a pro rata basis among the Acquiring Fund
APS and the Acquiring Fund Common Shares. It is impossible to predict whether,
or for how long, a Fund will use any such defensive strategies. Further, the
yields on such securities may approach or be less than the then current dividend
rate payable to preferred shareholders. In such event, the benefit of leverage
to the common shareholders will diminish and such Fund's leveraged capital
structure may work to the disadvantage of the common shareholders.

 
OTHER INVESTMENT PRACTICES AND POLICIES
 
  In connection with the investment objective and policies described above, each
Fund may, but is not required to, utilize various other investment strategies as
described below to earn income, to facilitate portfolio management and to
mitigate risk. Such strategies are generally accepted by modern portfolio
managers and are regularly utilized by many investment companies and other
institutional investors. These investment practices entail risks. Although the
Adviser believes that these
                                        25

 
investment practices may further the Funds' respective investment objectives, no
assurance can be given that these investment practices will achieve this result.
 
  OPTIONS. Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In general, each Fund may purchase and sell (write)
options on up to 20% of its assets. In addition, many Strategic Transactions
involving options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."
 

  A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index or other instrument at the exercise price. For instance, a
Fund's purchase of a put option on a security might be designed to protect its
holdings in the underlying instrument (or, in some cases, a similar instrument)
against a substantial decline in the market value by giving that Fund the right
to sell such instrument at the option exercise price. A call option, upon
payment of a premium, gives the purchaser of the option the right to buy, and
the seller the obligation to sell, the underlying instrument at the exercise
price. A Fund's purchase of a call option on a security, financial future
contract, index or other instrument might be intended to protect that Fund
against an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. Each Fund
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as a paradigm, but is also applicable to other
financial intermediaries.

 
  With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
 
                                        26

 

  A Fund's ability to close out its position as a purchaser or seller of an OCC
or exchange listed put or call option is dependent, in part, upon the liquidity
of the option market. Among the possible reasons for the absence of a liquid
option market on an exchange are: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or series of options or underlying securities including reaching daily
price limits; (iv) interruption of the normal operations of the OCC or an
exchange; (v) inadequacy of the facilities of an exchange or OCC to handle
current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

 
  The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
 

  OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. Each
Fund will only enter into OTC options that have a buy-back provision permitting
that Fund to require the Counterparty to close the option at a formula price
within seven days. Each Fund expects generally to enter into OTC options that
have cash settlement provisions, although it is not required to do so.

 

  Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, or other instrument underlying an OTC option it
has entered into with a Fund or fails to make a cash settlement payment due in
accordance with the terms of that option, that Fund will lose any premium it
paid for the option as well as any anticipated benefit of the transaction.
Accordingly, the Adviser must assess the creditworthiness of each such
Counterparty or any guarantor or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be satisfied.
Each Fund will engage in OTC option transactions only with U.S. government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers", or broker-dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the

 
                                        27

 

obligation of which have received) a short-term credit rating of "A-1" from S&P
or "P-1" from Moody's or an equivalent rating from any other nationally
recognized statistical rating organization ("NRSRO"). The staff of the SEC
currently takes the position that, in general, OTC options on securities (other
than U.S. government securities) purchased by a Fund, and portfolio securities
"covering" the amount of a Fund's obligation pursuant to an OTC option sold by
it (the cost of the sell-back plus the in-the-money amount, if any) are
illiquid, and are subject to a Fund's limitation on illiquid securities
described herein.

 

  If a Fund sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase that Fund's income. The sale of put options can also provide income.

 

  Each Fund may purchase and sell call options on securities, including U.S.
Treasury and agency securities, municipal obligations, mortgage-backed
securities, corporate debt securities that are traded on securities exchanges
and in the OTC markets and related futures contracts. All calls sold by a Fund
must be "covered" (i.e., a Fund must own the securities or futures contract
subject to the call) or must meet the asset segregation requirements described
below as long as the call is outstanding. Even though the Fund will receive the
option premium to help protect it against loss, a call sold by a Fund exposes
that Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or
instrument and may require the Fund to hold a security or instrument which it
might otherwise have sold. In the event of exercise of a call option sold by a
Fund with respect to securities not owned by that Fund, such Fund may be
required to acquire the underlying security at a disadvantageous price to
satisfy its obligation with respect to the call option.

 

  Each Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, municipal obligations, mortgage-backed
securities and corporate debt securities (whether or not it holds the above
securities in its portfolio.) In selling put options, there is a risk that a
Fund may be required to buy the underlying security at a disadvantageous price
above the market price.

 
  FUTURES CONTRACTS. Each Fund may enter into financial futures contracts or
purchase or sell put and call options on futures contracts as a hedge against
anticipated interest rate or fixed-income market changes, for duration
management and for risk management purposes. Futures contracts generally are
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The purchase of a futures
contract creates a firm obligation by the Fund, as purchaser, to take delivery
from the seller of the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect to
index futures contracts and Eurodollar instruments, the net cash amount). The
sale of a futures contract creates a firm
                                        28

 
obligation by the Fund, as seller, to deliver to the buyer the specific type of
financial instrument called for in the contract at a specific future time for a
specified price (or, with respect to index futures and Eurodollar instruments,
the net cash amount). Options on futures contracts are similar to options on
securities except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in a futures contract
and obligates the seller to deliver such option.
 

  Each Fund's use of financial futures contracts and options on futures
contracts will in all cases be consistent with applicable regulatory
requirements and in particular the rules and regulations of the Commodity
Futures Trading Commission and will be entered into only for bona fide hedging,
risk management (including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option on a
futures contract requires a Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of
options on financial futures contracts involves payment of a premium for the
option without any further obligation on the part of the Fund. If a Fund
exercises an option on a futures contract it will be obligated to post initial
margin (and potential subsequent variation margin) for the resulting futures
contracts position just as it would for any position. Futures contracts and
options on futures contracts are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price nor that delivery will
occur.

 

  Each Fund will not enter into a futures contract or an option on a futures
contracts (except for closing transactions) for other than bona fide hedging
purposes if, immediately thereafter, the sum of the amount of its initial margin
and premiums on open futures contracts and options thereon would exceed 5% of a
Fund's total assets (taken at current value); however, in the case of an option
that is in-the-money at the time of the purchase, the in-the-money amount may be
excluded in calculating the 5% limitation. The segregation requirements with
respect to futures contracts and options thereon are described below.

 

  OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES. Each Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index

 
                                        29

 
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the index upon which the option is based exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option (except if, in the case of an OTC option, physical delivery is
specified). This amount of cash is equal to the excess of the closing price of
the index over the exercise price of the option, which also may be multiplied by
a formula value. The seller of the option is obligated, in return for the
premium received, to make delivery of this amount. The gain or loss on an option
on an index depends on price movements in the instruments making up the market,
market segment, industry or other composite on which the underlying index is
based, rather than price movements in individual securities, as is the case with
respect to options on securities.
 

  COMBINED TRANSACTIONS. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures contracts transactions
and multiple interest rate transactions and any combination of futures
contracts, options and interest rate transactions ("component" transactions),
instead of a single Strategic Transaction, as part of a single or combined
strategy when, in the opinion of the Adviser, it is in the best interests of a
Fund to do so. A combined transaction will usually contain elements of risk that
are present in each of its component transactions. Although combined
transactions are normally entered into based on the Adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the portfolio management
objective.

 

  SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into which
each Fund may enter are interest rate and index swaps and the purchase or sale
of related caps, floors and collars. Each Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, as a duration management technique or to protect
against any increase in the price of securities a Fund anticipates purchasing at
a later date. Each Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream a Fund
may be obligated to pay. Interest rate swaps involve the exchange by a Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. An index swap is an agreement to swap cash flows
on a notional amount based on changes in the values of the reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination

                                        30

 
of a cap and a floor that preserves a certain return within a predetermined
range of interest rates or values.
 

  USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions, in
addition to other requirements, require that the Funds segregate cash and/or
liquid securities to the extent a Fund's obligations are not otherwise "covered"
through ownership of the underlying security, financial instrument or currency.
In general, either the full amount of any obligation by a Fund to pay or deliver
securities or assets must be covered at all times by the securities, instruments
or currency required to be delivered, or, subject to any regulatory
restrictions, a Fund must segregate cash and/or liquid securities in an amount
at least equal to the current amount of the obligation. The segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate. For example, a call option
written by a Fund will require that Fund to hold the securities subject to the
call (or securities convertible into the needed securities without additional
consideration) or to segregate cash and/or liquid securities sufficient to
purchase and deliver the securities if the call is exercised. A call option sold
by a Fund on an index will require that Fund to own portfolio securities which
correlate with the index or to segregate cash and/or liquid securities equal to
the excess of the index value over the exercise price on a current basis. A put
option written by a Fund requires that Fund to segregate cash and/or liquid
securities equal to the exercise price.

 

  OTC options entered into by a Fund, including those on securities, financial
instruments or indices and OCC issued and exchange listed index options, will
generally provide for cash settlement. As a result, when a Fund sells these
instruments it will only segregate an amount of cash and/or liquid securities
equal to its accrued net obligations, as there is no requirement for payment or
delivery of amounts in excess of the net amount. These amounts will equal 100%
of the exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by a Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when a Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, that Fund will segregate, until the option
expires or is closed out, cash and/or liquid securities equal in value to such
excess. OCC issued and exchange listed options sold by a Fund other than those
above generally settle with physical delivery, and that Fund will segregate an
amount of cash and/or liquid securities equal to the full value of the option.
OTC options settling with physical delivery, or with an election of either
physical delivery or cash settlement, will be treated the same as other options
settling with physical delivery.

 

  In the case of a futures contract or an option on a futures contract, a Fund
must deposit initial margin and possible daily variation margin in addition to
segregating cash and/or liquid securities sufficient to meet its obligation to
purchase or provide

 
                                        31

 
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract.
 

  With respect to swaps, each Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash and/or liquid securities having
a value equal to the accrued excess. Caps, floors and collars require
segregation of cash and/or liquid securities with a value equal to a Fund's net
obligation, if any.

 

  Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. Each Fund also may enter into offsetting
transactions so that its combined position, coupled with any segregated cash
and/or liquid securities, equals its net outstanding obligation in related
options and Strategic Transactions. For example, a Fund could purchase a put
option if the strike price of that option is the same or higher than the strike
price of a put option sold by that Fund. Moreover, instead of segregating cash
and/or liquid securities if a Fund held a futures contract or forward contract,
it could purchase a put option on the same futures contract or forward contract
with a strike price as high or higher than the price of the contract held. Other
Strategic Transactions also may be offset in combinations. If the offsetting
transaction terminates at the time of or after the primary transaction no
segregation is required, but if it terminates prior to such time, cash and/or
liquid securities equal to any remaining obligation could need to be segregated.

 

  The Fund's activities involving Strategic Transactions may be limited by the
requirements of the Code for qualification as a regulated investment company.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized. Income earned or gains realized or deemed to
be earned or realized, if any, by a Fund from engaging in Strategic Transactions
generally will be taxable income of the Fund. Such income earned or realized by
the Target Fund is allocated to the Target Fund Common Shares. Such income
earned or realized by the Acquiring Fund is allocated to the Acquiring Fund
Common Shares and the Acquiring Fund APS on a pro rata basis.

 

  "WHEN-ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. Each Fund may also purchase
and sell municipal securities on a "when-issued" and "delayed delivery" basis.
No income accrues to a Fund on municipal securities in connection with such
transactions prior to the date such Fund actually takes delivery of such
securities. These transactions are subject to market fluctuation; the value of
the municipal securities at delivery may be more or less than their purchase
price, and yields generally available on municipal securities when delivery
occurs may be higher than yields on the municipal securities obtained pursuant
to such transactions. Because the Fund engaging in such transactions relies on
the buyer or seller, as the case may be, to consummate the transaction, failure
by the other party to complete the

                                        32

 

transaction may result in such Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. When a Fund is the buyer in such a
transaction, however, it will maintain, in a segregated account with its
custodian, cash or liquid portfolio securities having an aggregate value equal
to the amount of such purchase commitments until payment is made. A Fund will
make commitments to purchase municipal securities on such basis only with the
intention of actually acquiring these securities, but a Fund may sell such
securities prior to the settlement date if such sale is considered to be
advisable. To the extent a Fund engages in "when issued" and "delayed delivery"
transactions, it will do so for the purpose of acquiring securities for a Fund's
portfolio consistent with that Fund's investment objective and policies and not
for the purpose of investment leverage. No specific limitation exists as to the
percentage of a Fund's assets which may be used to acquire securities on a "when
issued" or "delayed delivery" basis.

 
INVESTMENT RESTRICTIONS
 

  Each Fund's investment objective, its investment policy with respect to
investing at least 80% of its total assets in municipal securities and the
following investment restrictions are fundamental and cannot be changed without
the approval of the holders of a majority of a Fund's outstanding voting
securities (defined in the 1940 Act as the lesser of (i) more than 50% of a
Fund's outstanding Common Shares and of its outstanding Preferred Shares, voting
by class, or (ii) 67% of such outstanding Common Shares and of its outstanding
Preferred Shares, voting by class, present at a meeting at which the holders of
more than 50% of the outstanding shares of each such class are present in person
or by proxy). All other investment policies or practices are considered by the
Funds not to be fundamental and accordingly may be changed without shareholder
approval. If a percentage restriction on investment or use of assets set forth
below is adhered to at the time a transaction is effected, later changes in
percentage resulting from changing market values will not be considered a
deviation from policy. With respect to the limitations on illiquid securities
and borrowings, the percentage limitations apply at the time of purchase and on
an ongoing basis. The investment restrictions of the Acquiring Fund are set
forth below. Except as noted herein the investment restrictions of the Target
Fund are similar. The Acquiring Fund may not:

 
   1. With respect to 75% of its total assets, purchase any securities (other
      than tax-exempt obligations guaranteed by the United States Government or
      by its agencies or instrumentalities), if as a result more than 5% of the
      Fund's total assets would then be invested in securities of a single
      issuer or if as a result the Fund would hold more than 10% of the
      outstanding voting securities of any single issuer, except that the Fund
      may purchase securities of other investment companies to the extent
      permitted by (i) the 1940 Act, as amended from time to time, (ii) the
      rules and regulations promulgated by the Securities and Exchange
      Commission under the 1940 Act, as amended
                                        33

 
      from time to time, or (iii) an exemption or other relief from the
      provisions of the 1940 Act.
 
   2. Invest more than 25% of its assets in a single industry; however, as
      described in the Fund's prospectus, the Fund may from time to time invest
      more than 25% of its assets in a particular segment of the municipal
      securities market.
 
   3. Issue senior securities, as defined in the 1940 Act, other than preferred
      shares of beneficial interest, except to the extent such issuance might be
      involved with borrowings described under subparagraph (4) below or with
      respect to hedging and risk management transactions or the writing of
      options within limits described in the Fund's Prospectus.
 
   4. Borrow money, except for temporary or emergency purposes from banks or for
      repurchase of the Fund's shares, and then only in an amount not exceeding
      one-third of the Fund's total assets, including the amount borrowed. The
      Fund will not mortgage, pledge or hypothecate any assets except in
      connection with a borrowing. The Fund will not purchase portfolio
      securities during any period that such borrowings exceed 5% of the total
      asset value of the Fund. Notwithstanding this investment restriction, the
      Fund may enter into "when issued" and "delayed delivery" transactions as
      described in the Fund's prospectus.
 
   5. Make loans of money or property to any person, except to the extent the
      securities in which the Fund may invest are considered to be loans and
      except that the Fund may lend money or property in connection with
      maintenance of the value of or the Fund's interest with respect to the
      securities owned by the Fund.
 
   6. Buy any securities "on margin." Neither the deposit of initial or
      variation margin in connection with hedging and risk management
      transactions nor short-term credits as may be necessary for the clearance
      of transactions is considered the purchase of a security on margin.
 
   7. Sell any securities "short," write, purchase or sell puts, calls or
      combinations thereof, or purchase or sell financial futures or options,
      except as described in the Fund's prospectus.
 
   8. Act as an underwriter of securities, except to the extent the Fund may be
      deemed to be an underwriter in connection with the sale of securities held
      in its portfolio.
 
   9. Make investments for the purpose of exercising control or participation in
      management, except to the extent that exercise by the Fund of its rights
      under agreements related to municipal securities would be deemed to
      constitute such control or participation, and except that the Fund may
      purchase securities of other investment companies to the extent permitted
      by
                                        34

 
      (i) the 1940 Act, as amended from time to time, (ii) the rules and
      regulations promulgated by the Securities and Exchange Commission under
      the 1940 Act, as amended from time to time, or (iii) an exemption or other
      relief from the provisions of the 1940 Act.
 

  10. Invest in securities issued by other investment companies except as part
      of a merger, reorganization or other acquisition and except to the extent
      permitted by (i) the 1940 Act, as amended from time to time, (ii) the
      rules and regulations promulgated by the Securities and Exchange
      Commission under the 1940 Act, as amended from time to time, or (iii) an
      exemption or other relief from the provisions of the 1940 Act.

 
  11. Invest in equity interests in oil, gas or other mineral exploration or
      development programs except pursuant to the exercise by the Fund of its
      rights under agreements relating to municipal securities.
 
  12. Purchase or sell real estate, commodities or commodity contracts, except
      to the extent the securities the Fund may invest in are considered to be
      interests in real estate, commodities or commodity contracts or to the
      extent the Fund exercises its rights under agreements relating to such
      municipal securities (in which case the Fund may liquidate real estate
      acquired as a result of a default on a mortgage), and except to the extent
      that financial futures and related options the Fund may invest in are
      considered to be commodities or commodities contracts.
 
In addition, the Target Fund may not:
 
  13. Invest in illiquid investments, including securities which are subject to
      legal or contractual restrictions on resale or for which there is no
      readily available market (e.g., trading in the securities is suspended or,
      in the case of unlisted securities, market makers do not exist or will not
      entertain bids or offers), if more than 25% of the Fund's assets (taken at
      market value) would be invested in such securities, except that the Fund
      may purchase securities of other investment companies to the extent
      permitted by (i) the 1940 Act, as amended from time to time, (ii) the
      rules and regulations promulgated by the Securities and Exchange
      Commission under the 1940 Act, as amended from time to time, or (iii) an
      exemption or other relief from the provisions of the 1940 Act.
 

  As a matter of operating policy, each Fund will not invest 25% or more of its
assets in a single industry; however, each Fund may from time to time invest 25%
or more of its assets in a particular segment of the municipal securities
market.

 
                                        35

 
MANAGEMENT OF THE FUNDS
 
  THE BOARDS. The Board of each Fund is responsible for the overall supervision
of the operations of its respective Fund and performs the various duties imposed
on trustees of investment companies by the 1940 Act and under applicable state
law.
 

  THE ADVISER. The investment adviser for each Fund is Van Kampen Asset
Management. The Adviser is a wholly owned subsidiary of Van Kampen Investments
Inc. ("Van Kampen Investments"). Van Kampen Investments is a diversified asset
management company that administers more than three million retail investor
accounts, has extensive capabilities for managing institutional portfolios and
has more than $98 billion under management or supervision as of March 31, 2005.
Van Kampen Investments is an indirect wholly owned subsidiary of Morgan Stanley,
a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses: securities, asset management
and credit services. 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. The principal business
address of the Adviser and Van Kampen Investments is 1221 Avenue of the
Americas, New York, New York 10020.

 

  Pursuant to separate investment advisory agreements between each Fund and the
Adviser, each Fund pays the Adviser a monthly fee at the annual rate of 0.55% of
such Fund's average daily net assets, including assets attributable to Preferred
Shares. Effective November 1, 2004, the investment advisory fee paid by each
Fund was reduced from .60% to .55%. Subsequent to the Reorganization, the
Adviser will continue to receive compensation at the rate of 0.55% of the
average daily net assets, including assets attributable to Preferred Shares, of
the combined fund. Because the fees paid to the Adviser are calculated on net
assets, including assets attributable to Preferred Shares, the fees earned by
the Adviser will be higher when preferred shares are outstanding.

 

  Under a separate accounting services and legal services agreement, the Adviser
(or its affiliates) provides accounting and legal services to each Fund. The
Adviser (or its affiliates) allocates the cost of such services to each Fund.

 

  PORTFOLIO MANAGEMENT. Each Fund's portfolio is managed by the Adviser's
Municipal Fixed Income team. The team is made up of established investment
professionals. Current members of the team include Thomas Byron, Vice President;
Robert Wimmel, Vice President; and John Reynoldson, Executive Director.

 

  Thomas Byron has worked for the Adviser since 1981 and began managing the
Acquiring Fund in 1997 and the Target Fund in 2000. Robert Wimmel has worked for
the Adviser since 1996 and began managing the Funds in 2001. John Reynoldson has
worked for the Adviser since 1987 and began managing the Funds in 2001.

 
                                        36

 

Prior to 2001, Messrs. Wimmel and Reynoldson worked in an investment management
for the Adviser.

 

  Mr. Byron is the lead portfolio manager of each Fund. Messrs. Wimmel and
Reynoldson are co-portfolio managers of each Fund. All team members are
responsible for the day-to-day management of each Fund and for the execution of
the overall strategy of each Fund.

 
  The Reorganization Statement of Additional Information provides additional
information about the portfolio managers' compensation, other accounts managed
by the portfolio managers and the portfolio managers' ownership of securities in
the Acquiring Fund.
 

  PORTFOLIO TRANSACTIONS WITH AFFILIATES. The Adviser may place portfolio
transactions, to the extent permitted by law, with brokerage firms affiliated
with the Funds and the Adviser if it reasonably believes that the quality of
execution and the commission are comparable to that available from other
qualified firms.

 

  LEGAL PROCEEDINGS INVOLVING THE ADVISER. The Adviser, certain affiliates of
the Adviser, and certain investment companies advised by the Adviser or its
affiliates were named as defendants in a number of similar class action
complaints which were consolidated. The consolidated amended complaint also
names as defendants certain individual trustees and directors of certain
investment companies advised by affiliates of the Adviser; the complaint does
not, however, name the individual trustees of any Van Kampen funds. The
complaint generally alleges that defendants violated their statutory disclosure
obligations and fiduciary duties by failing properly to disclose (i) that the
Adviser and certain affiliates of the Adviser allegedly offered economic
incentives to brokers and others to steer investors to the funds advised by the
Adviser or its affiliates rather than funds managed by other companies, and (ii)
that the funds advised by the Adviser or its affiliates allegedly paid excessive
commissions to brokers in return for their alleged efforts to steer investors to
these funds. The complaint seeks, among other things, unspecified compensatory
damages, rescissionary damages, fees and costs. The defendants' motion to
dismiss this action is pending. After defendants moved to dismiss, the
plaintiffs filed a motion for leave to amend the complaint, which is also
pending. The proposed amendment drops all claims against the named investment
companies, which are listed only as nominal defendants. The proposed amendment
raises similar claims against the Adviser and its affiliates with respect to the
investment companies advised by the Adviser or its affiliates, and, in addition,
alleges that affiliates of the Adviser received undisclosed compensation for
steering investors into thirteen non-affiliated fund families. The defendants
intend to continue to defend this action vigorously. While the defendants
believe that they have meritorious defenses, the ultimate outcome of this matter
is not presently determinable at this early stage of litigation.

 
                                        37

 

  The Adviser and certain affiliates of the Adviser are also named as defendants
in a derivative suit which additionally names as defendants individual trustees
of certain Van Kampen funds; the named investment companies are listed as
nominal defendants. The complaint alleges that defendants caused the Van Kampen
funds to pay economic incentives to a proprietary sales force to promote the
sale of Van Kampen funds. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley and its affiliates in connection
with the sales of the funds. The complaint seeks, among other things, the
removal of the current trustees of the funds, rescission of the management
contracts for the funds, disgorgement of profits by Morgan Stanley and its
affiliates and monetary damages. This complaint has been coordinated with the
action described in the preceding paragraph. The defendants have moved to
dismiss this action and otherwise intend to defend it vigorously. This action is
currently stayed until the later of (i) a ruling on the motion to dismiss the
action described in the preceding paragraph or (ii) a ruling on a motion to
dismiss the action described in the next paragraph. While the defendants believe
that they have meritorious defenses, the ultimate outcome of this matter is not
presently determinable at this early stage of litigation.

 

  The plaintiff in the action described in the preceding paragraph recently
filed a separate derivative action against the Adviser, certain affiliates of
the Adviser, the individual trustees of certain Van Kampen funds, and certain
unaffiliated entities. The named investment companies are listed as nominal
defendants. The complaint alleges that certain unaffiliated entities engaged in
or facilitated market timing and late trading in the Van Kampen funds, and that
the Adviser, certain affiliates of the Adviser, and the trustees failed to
prevent and/or detect such market timing and late trading. The complaint seeks,
among other things, the removal of the current trustees of the funds, rescission
of the management contracts and distribution plans for the funds, disgorgement
of fees and profits from the Adviser and its affiliates, and monetary damages.
The defendants' motion to dismiss this action is pending. While the defendants
believe that they have meritorious defenses, the ultimate outcome of this matter
is not presently determinable at this early stage of litigation.

 

  The Adviser and one of the investment companies advised by the Adviser are
named as defendants in a class action complaint generally alleging that the
defendants breached their duties of care to long-term shareholders of the
investment company by valuing portfolio securities at the closing prices of the
foreign exchanges on which they trade without accounting for significant market
information that became available after the close of the foreign exchanges but
before calculation of net asset value. As a result, the complaint alleges,
short-term traders were able to exploit stale pricing information to capture
arbitrage profits that diluted the value of shares held by long-term investors.
The complaint seeks unspecified compensatory damages, punitive damages, fees and
costs. Defendants appealed an order of the federal district court remanding this
case to state court. The federal

 
                                        38

 

appeals court recently reversed the federal district court's order remanding
this case to state court and directed entry of judgment in favor of defendants.

 

  The Adviser and the individual trustees of certain Van Kampen funds are named
as defendants in a recently filed class action complaint that alleges the
defendants breached various fiduciary and statutory duties to investors by
failing to ensure that the funds participated in securities class action
settlements involving securities held in the funds' portfolios. The complaint
seeks, among other things, compensatory and punitive damages. None of the funds
are named as defendants, and no claims are asserted against them. The defendants
expect to move to dismiss the complaint and believe that they have meritorious
defenses.

 

  The Adviser, one of the investment companies advised by the Adviser, and
certain officers and directors of the investment company are defendants in a
class action filed in 2001 alleging that the defendants issued a series of
prospectuses and registration statements that were materially false and
misleading. Among other things, the complaint alleges that the prospectuses and
registration statements contained misleading descriptions of the method
defendants used to value senior loan interests in the fund's portfolio, and that
defendants materially overstated the net asset value of the fund. The parties
recently mediated the dispute through a court-supervised settlement conference
and reached an agreement to settle the case. The parties presented a settlement
agreement for preliminary court approval in April 2005.

 
OTHER SERVICE PROVIDERS
 

  COMMUNICATION SUPPORT SERVICES PROVIDER. Van Kampen Funds Inc. (the "Support
Service Provider") serves as the communications support service provider to the
Target Fund. The principal business address of the Support Service Provider is
1221 Avenue of the Americas, New York, New York 10020. Communications support
services include telephonic and written correspondence with shareholders and
brokers. The Target Fund does not pay any fee to the Support Service Provider
but bears certain expenses incurred by the Support Service Provider.

 

  CUSTODIAN, TRANSFER AGENT, AUCTION AGENT AND DIVIDEND PAYING AGENT. State
Street Bank and Trust Company is the custodian for each Fund. Its principal
business address is P.O. Box 43071, Providence, Rhode Island, 02940-3071.
EquiServe Trust Company, N.A., 250 Royall Street, Canton, Massachusetts, 02021,
is the transfer agent, dividend disbursing agent and registrar for the Common
Shares of each Fund. The Bank of New York, 100 Church Street, New York, New York
10286, is the auction agent and dividend paying agent for the Target Fund RATES.
Deutsche Bank, 280 Park Avenue, New York, New York 10017, is the auction agent
and dividend paying agent for the Acquiring Fund APS.

 
                                        39

 
CAPITALIZATION
 
  The Board of Trustees of each Fund may authorize separate classes of shares
together with such designation of preferences, rights, voting powers,
restrictions, limitations, qualifications or terms as may be determined from
time to time by the trustees. The table below sets forth the capitalization of
the Target Fund and the Acquiring Fund as of October 31, 2004, and the pro forma
capitalization of the combined fund as if the Reorganization had occurred on
that date.
 
               CAPITALIZATION AS OF OCTOBER 31, 2004 (UNAUDITED)

                             (AMOUNTS IN THOUSANDS)

 


                                               ACTUAL            PRO FORMA
                                       -----------------------   ----------
                                                    VAN KAMPEN   VAN KAMPEN
                                       VAN KAMPEN   TRUST FOR    TRUST FOR
                                       MUNICIPAL    INVESTMENT   INVESTMENT
                                        INCOME        GRADE        GRADE
                                         TRUST      MUNICIPALS   MUNICIPALS
                                       ----------   ----------   ----------
                                                        
NET ASSETS CONSIST OF:
  Common Shares ($.01 par value)*....   $    287     $    270    $      444
  Paid in surplus....................    265,829      399,274       664,787
  Net unrealized appreciation........     33,745       66,944       100,689
  Accumulated undistributed net
    investment income................      2,046        2,903         4,949
  Accumulated net realized gain
    (loss)...........................        426       (1,056)         (630)
  NET ASSETS APPLICABLE TO
    COMMON SHARES....................    302,333      468,335       770,239**
  PREFERRED SHARES ($.01 par value,
    with liquidation preference of
    $25,000 and $500,000 for
    Acquiring Fund and Target Fund,
    respectively)*...................    165,000      265,000       430,000
  NET ASSETS INCLUDING PREFERRED
    SHARES...........................    467,333      733,335     1,200,239


 
---------------
 
 * Based on the number of outstanding shares listed in "Outstanding Securities
   of the Funds" table below.
 

** Reflects a non-recurring cost associated with these Reorganizations of
   approximately $491,000, with $241,866 to be borne by Acquiring Fund common
   shareholders, $187,334 to be borne by Target Fund common shareholders, and
   $61,800 to be borne by the Adviser, assuming the Reorganizations is approved
   and completed.

 
                                        40

 
           OUTSTANDING SECURITIES OF THE FUNDS AS OF OCTOBER 31, 2004
 



                                                                  AMOUNT OUTSTANDING
                                                 AMOUNT HELD      EXCLUSIVE OF AMOUNT
                                  AMOUNT       BY FUND FOR ITS         SHOWN IN
       TITLE OF CLASS           AUTHORIZED       OWN ACCOUNT        PREVIOUS COLUMN
       --------------           ----------     ---------------    -------------------
                                                         
Van Kampen Municipal Income
  Trust
  Common Shares.............      Unlimited           0               28,684,985
  Preferred Shares..........      1,000,000           0                      330
Van Kampen Trust for
  Investment Grade
  Municipals
  Common Shares.............      Unlimited           0               27,013,149
  Preferred Shares..........    100,000,000           0                   10,600


 
ADDITIONAL INFORMATION ABOUT COMMON SHARES OF THE FUNDS
 

  GENERAL. Common shareholders of a Fund are entitled to share equally in
dividends declared by the Fund's Board of Trustees payable to holders of the
common shares and in the net assets of the Fund available for distribution to
holders of the common shares after payment of the preferential amounts payable
to preferred shareholders. Common shareholders do not have preemptive or
conversion rights and a Fund's common shares are not redeemable. The outstanding
common shares of each Fund are fully paid and nonassessable (except as described
under "Governing Law" below). So long as any preferred shares of a Fund are
outstanding, holders of the Fund's common shares will not be entitled to receive
any dividends or other distributions from the Fund unless all accumulated
dividends on the Fund's outstanding preferred shares have been paid, and unless
asset coverage (as defined in the 1940 Act) with respect to such preferred
shares would be at least 200% after giving effect to such distributions.

 

  PURCHASE AND SALE. Purchase and sale procedures for the Common Shares of each
of the Funds are identical. Investors typically purchase and sell Common Shares
of the Funds through a registered broker-dealer on the NYSE or CHX, thereby
incurring a brokerage commission set by the broker-dealer. Alternatively,
investors may purchase or sell Common Shares of the Funds through privately
negotiated transactions with existing shareholders.

 
                                        41

 

  COMMON SHARE PRICE DATA The following table sets forth the high and low sales
prices for Common Shares of each Fund on the NYSE for each full quarterly period
within each Fund's two most recent fiscal years and for the first two fiscal
quarters of the current fiscal year of the Target Fund and the first fiscal
quarter of the current fiscal year of the Acquiring Fund, along with the net
asset value and discount or premium to net asset value for each quotation.

 



                                           TARGET FUND
                                      ----------------------
                                      NET ASSET    PREMIUM                 NET ASSET    PREMIUM
QUARTERLY PERIOD ENDING  HIGH PRICE     VALUE     (DISCOUNT)   LOW PRICE     VALUE     (DISCOUNT)
-----------------------  ----------   ---------   ----------   ---------   ---------   ----------
                                                                     
December 31, 2004.....     $ 9.56      $10.58        (9.64)%     $8.95      $10.28       (12.94)%
September 30, 2004....     $ 9.48      $10.58       (10.40)%     $8.85      $10.14       (12.72)%
June 30, 2004.........     $ 9.94      $10.59        (6.14)%     $8.41      $ 9.85       (14.62)%
March 31, 2004........     $10.09      $10.94        (7.77)%     $9.42      $10.49       (10.20)%
December 31, 2003.....     $ 9.50      $10.50        (9.52)%     $9.08      $10.24       (11.33)%
September 30, 2003....     $ 9.74      $10.74        (9.31)%     $8.87      $10.00       (11.30)%
June 30, 2003.........     $ 9.91      $11.07       (10.48)%     $9.11      $10.42       (12.57)%
March 31, 2003........     $ 9.25      $10.67       (13.31)%     $8.82      $10.32       (14.53)%
December 31, 2002.....     $ 9.56      $10.64       (10.15)%     $8.63      $10.07       (14.30)%
September 30, 2002....     $ 9.57      $10.66       (10.23)%     $8.90      $ 9.95       (10.55)%


 



                                          ACQUIRING FUND
                                      ----------------------
                                      NET ASSET    PREMIUM                 NET ASSET    PREMIUM
QUARTERLY PERIOD ENDING  HIGH PRICE     VALUE     (DISCOUNT)   LOW PRICE     VALUE     (DISCOUNT)
-----------------------  ----------   ---------   ----------   ---------   ---------   ----------
                                                                     
January 31, 2005......     $15.40      $17.30       (10.98)%    $14.74      $16.93       (12.94)%
October 31, 2004......     $15.52      $17.41       (10.86)%    $14.85      $16.77       (11.45)%
July 31, 2004.........     $14.85      $16.84       (11.82)%    $13.85      $16.36       (15.34)%
April 30, 2004........     $16.55      $18.00        (8.06)%    $14.37      $16.66       (13.75)%
January 31, 2004......     $16.18      $17.61        (8.12)%    $15.50      $17.35       (10.66)%
October 31, 2003......     $15.58      $17.15        (9.15)%    $14.86      $16.53       (10.10)%
July 31, 2003.........     $16.74      $18.00        (7.00)%    $15.10      $16.54        (8.71)%
April 30, 2003........     $16.16      $17.54        (7.87)%    $15.48      $17.16        (9.79)%
January 31, 2003......     $15.98      $17.60        (9.20)%    $15.16      $17.10       (11.35)%


 

  As of April 25, 2005, (i) the net asset value per share for Target Fund Common
Shares was $10.37 and the market price per share was $8.91, representing a
discount to net asset value of 14.08%, and (ii) the net asset value per share
for Acquiring Fund Common Shares was $17.09 and the market price per share was
$14.67, representing a discount to net asset value of 14.16%.

 

  Common Shares of the Funds have historically traded at a discount to net asset
value. In order to reduce or eliminate a market value discount from net asset
value, the Board of Trustees of each Fund may, subject to the terms and
conditions of its preferred shares, authorize that Fund from time to time to
repurchase the common shares in the open market or to tender for the common
shares at net asset value. The Board of Trustees of each Fund, in consultation
with the Adviser, will

 
                                        42

 
review on a quarterly basis the possibility of open market repurchases and/or
tender offers for the common shares. Subject to its borrowing restrictions, each
Fund may incur debt to finance such repurchases, which entails risks. The
ability of a Fund to enter into tender offers and the common share repurchases
may be limited by the 1940 Act asset coverage requirements and any additional
asset coverage requirements which may be imposed by a rating agency in
connection with any rating of the preferred shares. No assurance can be given
that the Board of Trustees of either Fund will, in fact, authorize the Fund to
undertake such repurchases and/or tender offers or that, if undertaken, such
actions would result in the common shares trading at a price which is equal or
close to net asset value.
 

  DIVIDENDS AND DISTRIBUTIONS. The Funds' current policies with respect to
dividends and distributions relating to their respective Common Shares are
similar. It is each Fund's present policy, which may be changed by its Board of
Trustees, to make monthly distributions to holders of its Common Shares of
substantially all of such Fund's net investment income remaining after the
payment of dividends on any outstanding Preferred Shares. Net income of each
Fund consists of all interest income accrued on portfolio assets less all
expenses of such Fund. Under current federal tax law, the Target Fund may
allocate net capital gains and other taxable income, if any, received by the
Target Fund to the Target Fund Common Shares, allowing the Target Fund to pay
dividends to the Target Fund RATES which qualify in their entirety as tax exempt
distributions. The Acquiring Fund, however, is required to allocate net capital
gains and other taxable income, if any, received by the Acquiring Fund among the
Acquiring Fund Common Shares and the Acquiring Fund APS on a pro rata basis in
the year for which such capital gains and other income is realized.

 

  Expenses of each Fund are accrued each day. Net realized capital gains, if
any, are expected to be distributed to shareholders at least once a year. While
there are any Preferred Shares of a Fund outstanding, such Fund may declare any
cash dividend or other distribution on its Common Shares, unless at the time of
such declaration, (1) all accrued Preferred Shares dividends have been paid and
(2) the value of the Fund's total assets (determined after deducting the amount
of such dividend or other distribution), less all liabilities and indebtedness
of the Fund, is at least 200% (as required by the 1940 Act) of the liquidation
value of the outstanding Preferred Shares (expected to equal the aggregate
original purchase price of the outstanding Preferred Shares plus any accrued and
unpaid dividends thereon, whether or not earned or declared on a cumulative
basis). In addition to the requirements of the 1940 Act, each Fund may be
required to comply with other asset coverage requirements as a condition of a
Fund obtaining a rating of its Preferred Shares from a nationally recognized
rating service. These requirements may include an asset coverage test more
stringent than under the 1940 Act. This limitation on a Fund's ability to make
distributions on its Common Shares could in certain circumstances impair the
ability of a Fund to maintain its qualification for

                                        43

 
taxation as a regulated investment company. Each Fund intends, however, to the
extent possible, to purchase or redeem Preferred Shares from time to time to
maintain compliance with such asset coverage requirements and may pay special
dividends to the holders of the Preferred Shares in certain circumstances in
connection with any such impairment of the Fund's status as a regulated
investment company.
 

  For information concerning the manner in which dividends and distributions to
holders of a Fund's Common Shares may be reinvested automatically in such Fund's
Common Shares, see "-- Dividend Reinvestment Plan" below.

 

  DIVIDEND REINVESTMENT PLAN.  Each Fund offers a Dividend Reinvestment Plan
(each a "Plan," and collectively the "Plans") pursuant to which holders of
Common Shares may elect to have all distributions of dividends and all capital
gains automatically reinvested in Common Shares pursuant to such Plan. The Plans
for the Target Fund and the Acquiring Fund are similar. Unless common
shareholders elect to participate in a Plan, all common shareholders will
receive distributions of dividends and capital gains in cash. EquiServe Trust
Company, N.A., as plan agent (the "Plan Agent"), serves as agent for the holders
of Common Shares of each Fund in administering the Plans.

 

  After the Reorganization, a holder of shares of a Fund who currently receives
dividends in cash will continue to receive dividends in cash; all holders who
elect to participate in the Plan of a Fund will have their dividends
automatically reinvested in shares of the combined fund. All correspondence
concerning the Plan should be directed to the Plan Agent at P.O. Box 43011,
Providence, Rhode Island 02940-3011. Telephone calls concerning the Plan may be
directed to the Plan Agent between the hours of 7:30 a.m. and 5:00 p.m. Central
Standard Time at (800) 341-2929.

 
ADDITIONAL INFORMATION ABOUT PREFERRED SHARES OF THE FUNDS
 

  GENERAL.  The Preferred Shares of each Fund have similar structures. Both
Target Fund RATES and Acquiring Fund APS are preferred shares of beneficial
interest which entitle their holders to receive dividends when, as and if
declared by the Board of Trustees of such Fund, out of funds legally available
therefor, at a rate per annum that may vary for the successive dividend periods.
While the Target Fund RATES and Acquiring Fund APS are similar in many respects,
there are several differences that shareholders should consider.

 

  The Acquiring Fund APS have a liquidation preference of $25,000 per share. The
Target Fund RATES have a liquidation preference of $500,000 per share. The net
asset value per share of each Fund's Preferred Shares equals its liquidation
preference plus accumulated but unpaid dividends per share. Neither Target Fund
RATES nor Acquiring Fund APS are traded on a stock exchange or

 
                                        44

 

over-the-counter. Holders of each Fund's preferred shares do not have preemptive
rights to purchase any shares of RATES or APS, respectively, or any other
preferred shares that might be issued.

 
  PURCHASE AND SALE. Both Target Fund RATES and Acquiring Fund APS are purchased
and sold at auctions conducted on a regular basis.
 

  Target Fund RATES generally are purchased and sold at auctions conducted on a
regular basis by Deutsche Bank (the "Auction Agent"). Each Auction requires the
participation of one or more auction placement agents, selected by the Fund
(each an "Auction Placement Agent"), who have entered into an agreements with
the Auction Agent, through whom existing or prospective holders may submit
orders to the Auction Agent in an auction. On each auction date, each holder may
submit orders through an Auction Placement Agent to buy, sell or hold RATES.
Each prospective purchaser of Target Fund RATES must sign and deliver to the
Fund a Master Purchaser's Letter, in which such prospective purchaser agrees,
among other things, that (a) shares of Target Fund RATES may be transferred only
(i) pursuant to a Bid or Sell Order placed in an auction or (ii) to or through
an Auction Placement Agent to qualifying eligible persons or to the Fund and (b)
ownership of shares of Target Fund RATES will be registered in the name of the
Securities Depository or its nominee and will be maintained in book entry form
only.

 

  Acquiring Fund APS generally are purchased and sold at auctions conducted on a
regular basis by the Auction Agent. Unless otherwise permitted by the Funds,
existing and potential holders of Acquiring Fund APS only may participate in
auctions through broker-dealers who have entered into agreements with the
Auction Agent ("Broker-Dealers"). Broker-Dealers submit orders to the Auction
Agent on behalf of their respective customers who are existing and potential
holders of Acquiring Fund APS. On or prior to each auction date for the
Acquiring Fund APS, each holder may submit orders to buy, sell or hold Acquiring
Fund APS to its Broker-Dealer. Outside of these auctions, shares of Acquiring
Fund APS may be purchased or sold through Broker-Dealers in a secondary trading
market maintained by the broker-dealers. However, there can be no assurance that
a secondary market will develop or if it does develop, that it will provide
holders with a liquid trading market for the Acquiring Fund APS. Each
prospective purchaser of Acquiring Fund APS or its Broker-Dealer is required to
sign a Master Purchaser's Letter, in which such purchaser agrees, among other
things that (a) shares of Acquiring Fund APS may be transferred only (i)
pursuant to a Bid or Sell Order placed in an auction or (ii) to or through a
Broker-Dealer and (b) ownership of shares of Acquiring Fund APS will be
registered in the name of the Securities Depository or its nominee and will be
maintained in book entry form only.

 

  Auctions are generally held every four weeks for Target Fund RATES, and every
28 days for Acquiring Fund APS. As a result of the Reorganization, the last

                                        45

 

dividend period for the Target Fund RATES prior to the Closing Date and the
initial dividend period for the Acquiring Fund APS issued in connection with the
Reorganization after the Closing Date may be shorter than the ordinary dividend
period for such shares.

 
  REGISTRATION. The Target Fund RATES have not been registered pursuant to the
1933 Act, but are offered pursuant to the private placement exemption contained
in Section 4 of the 1933 Act. Therefore, Target Fund RATES may be resold only at
auctions or through an Auction Placement Agent in a transaction that is not
required to be registered under applicable federal and state securities laws.
The Master Purchaser's Letter, which each potential purchaser of Target Fund
RATES must sign, places additional restrictions on the resale of Target Fund
RATES. Acquiring Fund APS are registered pursuant to the 1933 Act.
Broker-Dealers may maintain a secondary trading market in the Acquiring Fund APS
outside of auctions. They have no obligation to do so, however, and there can be
no assurance that a secondary market for the Acquiring Fund APS will develop or,
it does develop, that it will provide holders with liquidity of investment.
 

  DIVIDENDS AND DISTRIBUTIONS. The holders of Acquiring Fund APS are entitled to
receive, when, as and if declared by the Board of Trustees of the Acquiring
Fund, out of funds legally available therefor, cumulative cash dividends on
their shares. The holders of Target Fund RATES are entitled to receive, when and
if declared by the Board of Trustees of the Target Fund, out of funds legally
available therefor, cumulative cash dividends on their shares, not exceeding the
available net tax-exempt income. Target Fund RATES do not have any dividend
accumulation right with respect to any amount by which the Target Fund's
available net tax-exempt income limited the amount of any dividend that would
have otherwise been paid for any dividend period. In the event of such a
limitation of dividend accumulations, the Target Fund RATES would be subject to
mandatory redemption. Dividends on each Fund's Preferred Shares so declared and
payable shall be paid (i) in preference to and in priority over any dividends so
declared and payable on the Fund's Common Shares, and (ii) in the case of the
Target Fund RATES, to the extent permitted under the Internal Revenue Code and
to the extent of available net tax exempt income, out of net tax-exempt income
earned on the Target Fund investments.

 
  Prior to each dividend payment date, the relevant Fund is required to deposit
with the Auction Agent sufficient funds for the payment of such declared
dividends. Neither Fund intends to establish any reserves for the payment of
dividends, and no interest will be payable in respect of any dividend payment or
payment on a Fund's Preferred Shares which may be in arrears.
 

  Holders of Target Fund RATES generally receive dividends out of the Fund's
available net tax-exempt income, which qualify in their entirety as
distributions of tax-exempt interest income for federal income tax purposes
(subject to the possible

                                        46

 

application of the alternative minimum tax). The Acquiring Fund, however, is
required to allocate net capital gains and other taxable income, if any,
proportionately between its Common Shares and APS. The amount of taxable income
allocated to the APS depends upon the amount of such income realized by the
Fund, but is generally not expected to be significant.

 

  In normal circumstances, whenever the Acquiring Fund intends to include any
net capital gains or other taxable income in any dividend on APS, the Fund will
notify the Auction Agent of the amount to be so included prior to the Auction
establishing the Applicable Rate for such dividend. The Auction Agent will in
turn notify each Broker-Dealer who will notify existing and potential holders of
Acquiring Fund APS. As a result, auction participants may, in response to such
information, place bids which take account of the inclusion of net capital gains
or other taxable income in the dividend. If the Acquiring Fund retroactively
allocates any net capital gains or other taxable income to the APS without
having given notice to the Auction Agent, the Fund will pay an Additional
Dividend to offset substantially the tax effect thereof (an "Additional
Dividend"). In no other instances will the Fund be required to make payments to
holders of its Preferred Shares to offset the tax effect of any reallocation of
net capital gains or other taxable income. As a result of the notice and
Additional Dividend provisions, the after-tax return to a holders of Target Fund
RATES and Acquiring Fund APS is not expected to differ substantially.

 
  DIVIDEND RATES. The following table provides information about the dividend
rates for each Fund's Preferred Shares as of a recent auction.
 



 AUCTION DATE        PREFERRED SHARES       RATE
 ------------        ----------------       ----
                                      
                Target Fund RATES--Series
April 15, 2005              A               2.60%
                Target Fund RATES--Series
March 24, 2005              B               2.20%
                Target Fund RATES--Series
April 1, 2005               C               2.45%
                Acquiring Fund APS--Series
April 15, 2005              A               2.50%
                Acquiring Fund APS--Series
March 24, 2005              B               2.50%
                Acquiring Fund APS--Series
March 30, 2005              C               2.55%
                Acquiring Fund APS--Series
April 5, 2005               D               2.25%


 

  The dividend rates in effect at the closing of the Reorganization will be the
rates determined in the auction most recently proceeding such closing.

 

  RATINGS. The Target Fund RATES and the Acquiring Fund APS have each been
assigned a rating of "AAA" from S&P and "Aaa" from Moody's. Each Fund intends
that, so long as its Preferred Shares are outstanding, the composition of its
portfolio will reflect guidelines established by S&P and Moody's in connection
with each Fund's receipt of a rating for such shares of at least "AAA" from S&P
and "Aaa" from Moody's. S&P and Moody's, which are nationally recognized
statistical

 
                                        47

 
rating organizations, issue ratings for various securities reflecting the
perceived creditworthiness of such securities. The guidelines for rating such
preferred shares have been developed by S&P and Moody's in connection with
issuances of asset-backed and similar securities, including debt obligations and
variable rate preferred stock, generally on a case-by-case basis through
discussions with the issuers of these securities. The guidelines are designed to
ensure that assets underlying outstanding debt or preferred stock will be varied
sufficiently and will be of sufficient quality and amount to justify investment
grade ratings. The guidelines do not have the force of law but have been adopted
by each Fund in order to satisfy current requirements necessary for S&P and
Moody's to issue the above-described ratings for Preferred Shares, which ratings
generally are relied upon by institutional investors in purchasing such
securities. The guidelines provide a set of tests for portfolio composition and
asset coverage that supplement (and in some cases are more restrictive than) the
applicable requirements under the 1940 Act.
 
  Each Fund may, but is not required to, adopt any modifications to these
guidelines that hereafter may be established by S&P or Moody's. Failure to adopt
any such modifications, however, may result in a change in the ratings described
above or a withdrawal of the ratings altogether. In addition, any rating agency
providing a rating for a Fund's Preferred Shares, at any time, may change or
withdraw any such rating. As set forth in the Certificate of Vote of Trustees
Establishing Preferred Shares of each Fund (each a "Certificate of Vote"), the
Board of Trustees of each Fund, without shareholder approval, may modify certain
definitions or restrictions that have been adopted by the Fund pursuant to the
rating agency guidelines, provided the Board of Trustees has obtained written
confirmation from S&P and Moody's that any such change would not impair the
ratings then assigned by S&P and Moody's to the Preferred Shares. For so long as
any shares of the Target Fund RATES or Acquiring Fund APS are rated by S&P or
Moody's, as the case may be, a Fund's use of options and financial futures
contracts and options thereon will be subject to certain limitations mandated by
the rating agencies.
 

  REDEMPTIONS. The redemption provisions pertaining to each Fund's Preferred
Shares are similar. It is anticipated that shares of each Fund's Preferred
Shares will generally be redeemable at the option of the Fund at a price equal
to their liquidation preference plus accumulated but unpaid dividends (whether
or not earned or declared) to the date of redemption plus, in certain
circumstances, a redemption premium. Each Fund's Preferred Shares are also
subject to mandatory redemption at a price equal to their liquidation preference
plus accumulated but unpaid dividends (whether or not earned or declared) to the
date of redemption upon the occurrence of certain specified events, such as the
failure of a Fund to maintain asset coverage requirements for the Preferred
Shares specified by Moody's and S&P in connection with their issuance of ratings
on the Preferred Shares. Additionally, with respect to the Target Fund RATES,
the Target Fund is required to redeem RATES if on any dividend payment date the
Target Fund fails to

                                        48

 

generate sufficient available net tax-exempt income to pay accrued and unpaid
dividends on the Target Fund RATES out of solely tax exempt income at the
applicable dividend rate. The liquidation preference of Target Fund RATES is
$500,000 and the liquidation preference of Acquiring Fund APS is $25,000.

 
  LIQUIDATION RIGHTS. Upon any liquidation, dissolution or winding up of either
Fund, whether voluntary or involuntary, the holders of each Fund's Preferred
Shares will be entitled to receive, out of the assets of such Fund available for
distribution to shareholders, before any distribution or payment is made upon
any of the Fund's Common Shares or any other capital shares of the Fund ranking
junior in right of payment upon liquidation to the Preferred Shares, the
liquidation preference of such Preferred Shares, together with the amount of any
dividends accumulated but unpaid (whether or not earned or declared) thereon to
the date of distribution, and after such payment the holders of Preferred Shares
will be entitled to no other payments except for any Additional Dividends. The
liquidation preference per share of the Target Fund RATES is $500,000 and the
liquidation preference per share of the Acquiring Fund APS is $25,000. If the
assets of a Fund are insufficient to make the full liquidation payment on the
Preferred Shares of such Fund and liquidation payments on any other outstanding
class or series of preferred shares of such Fund ranking on a parity with the
Preferred Shares as to payment upon liquidation, then such assets will be
distributed among the holders of Preferred Shares and the holders of shares of
such other class or series ratably in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of
liquidation distribution to which they are entitled, the holders of a Fund's
Preferred Shares will not be entitled to any further participation in any
distribution of assets by the Fund except for any Additional Dividends. A
consolidation, merger or share exchange of a Fund with or into any other entity
or entities or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the Fund
shall not be deemed or construed to be a liquidation, dissolution or winding up
of the Fund for this purpose.
 

  SERIES.  Under the 1940 Act, each Fund is permitted to have outstanding more
than one series of preferred shares as long as no single series has priority
over another series as to the distribution of assets of the Fund or the payment
of dividends. The Target Fund currently has three series of RATES outstanding,
Series A RATES, Series B RATES and Series C RATES. Except as described in the
private placement memorandum offering the Target Fund RATES, the terms of each
series of Target Fund RATES are the same. The Acquiring Fund currently has four
series of APS outstanding, Series A APS, Series B APS, Series C APS and Series D
APS. Except as described in the Prospectus offering the Acquiring Fund APS, the
terms of each series of Acquiring Fund APS are the same. If the Reorganization
is approved and completed, the combined fund will have seven series of APS. The
Acquiring Fund will issue Series E APS, Series F APS and Series G APS in
exchange for Target Fund RATES. 20 shares of Acquiring Fund

                                        49

 

APS (liquidation preference $25,000 per share) will be issued for each share of
Target Fund RATES (liquidation preference $500,000 per share).

 

  ADDITIONAL INFORMATION. For additional information, Target Fund shareholders
should consult the Reorganization Statement of Additional Information, which
contains a more complete summary of the terms of the Acquiring Fund APS, and the
Certificate of Vote governing the Acquiring Fund APS, included as Appendix B to
the Reorganization Statement of Additional Information. Acquiring Fund APS
issued in connection with the Reorganization will be governed by the Certificate
of Vote of the Acquiring Fund, which, upon completion of the Reorganization,
will be amended to reflect the creation of new series and the issuance of
additional Acquiring Fund APS.

 
GOVERNING LAW
 
  Each Fund is organized as a business trust under the laws of The Commonwealth
of Massachusetts. The Target Fund was organized on July 6, 1987 and commenced
operations on August 19, 1988; the Acquiring Fund was organized on November 13,
1991 and commenced operations on January 24, 1992.
 
  Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust of each Fund contains an express disclaimer of
shareholder liability for acts or obligations of the Fund and provides for
indemnification and reimbursement of expenses out of the Fund's property for any
shareholder held personally liable for the obligations of that Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations. Given the nature of each Fund's assets and operations,
the possibility of a Fund being unable to meet its obligations is remote and, in
the opinion of counsel to the Funds, the risk to the Funds' respective
shareholders is remote.
 

  Each Fund is also subject to federal securities laws, including the 1940 Act
and the rules and regulations promulgated by SEC thereunder, and applicable
state securities laws. Each Fund is registered as a diversified, closed-end
management investment company under the 1940 Act.

 
CERTAIN PROVISIONS OF THE DECLARATIONS OF TRUST
 
  Each Fund's Declaration of Trust includes provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Trustees, and could
have the effect of depriving common shareholders of an opportunity to sell their
Common Shares at a premium over prevailing market prices by discouraging a third
party from seeking to obtain control of the Fund. The Board of Trustees of each
Fund is divided into three
 
                                        50

 

classes, with the term of one class expiring at the annual meeting of
shareholders. At each annual meeting, each class whose term is expiring will be
elected to a three-year term. This provision could delay for up to two years the
replacement of a majority of the Board of Trustees. A trustee may be removed
from office only for cause by a written instrument signed by at least two-thirds
of the remaining trustees or by a vote of the holders of at least two-thirds of
the class of shares of the Fund that elected such trustee and entitled to vote
on the matter.

 
  In addition, each Fund's Declaration of Trust requires the favorable vote of
the holders of at least 75% of the outstanding shares of each class of the Fund,
voting as a class, then entitled to vote to approve, adopt or authorize certain
transactions with 5%-or-greater holders of a class of shares and their
associates, unless the Board of Trustees shall by resolution have approved a
memorandum of understanding with such holders, in which case normal voting
requirements would be in effect. For purposes of these provisions, a
5%-or-greater holder of a class of shares (a "Principal Shareholder") refers to
any person who, whether directly or indirectly and whether alone or together
with its affiliates and associates, beneficially owns 5% or more of the
outstanding shares of any class of beneficial interest of the Fund. The
transactions subject to these special approval requirements are: (i) the merger
or consolidation of the Fund or any subsidiary of the Fund with or into any
Principal Shareholder; (ii) the issuance of any securities of the Fund to any
Principal Shareholder for cash (except pursuant to the Dividend Reinvestment
Plan); (iii) the sale, lease or exchange of all or any substantial part of the
assets of the Fund to any Principal Shareholder (except assets having an
aggregate fair market value of less than $1,000,000, aggregating for the purpose
of such computation all assets sold, leased or exchanged in any series of
similar transactions within a twelve-month period); or (iv) the sale, lease or
exchange to the Fund or any subsidiary thereof, in exchange for securities of
the Fund, of any assets of any Principal Shareholder (except assets having an
aggregate fair market value of less than $1,000,000, aggregating for purposes of
such computation all assets sold, leased or exchanged in any series of similar
transactions within a twelve-month period).
 
  The Board of Trustees of each Fund has determined that the 75% voting
requirements described above, which are greater than the minimum requirements
under Massachusetts law or the 1940 Act, are in the best interest of
shareholders of each respective Fund generally. Reference should be made to the
Declaration of Trust of each Fund on file with the SEC for the full text of
these provisions.
 
  The Declaration of Trust of each Fund further provides that no trustee,
officer, employee or agent of the Fund is liable to the Fund or to any
shareholder, nor is any trustee, officer, employee or agent liable to any third
persons in connection with the affairs of the Fund, except as such liability may
arise from his or her own bad faith, willful misfeasance, gross negligence, or
reckless disregard of their duties. It also provides that all third persons
shall look solely to the Fund property for satisfaction
 
                                        51

 
of claims arising in connection with the affairs of the Fund. With the
exceptions stated, the Declaration of Trust provides that a trustee or officer
is entitled to be indemnified against all liability in connection with the
affairs of the Fund.
 
CONVERSION TO OPEN-END FUND
 

  Each Fund may be converted to an open-end investment company at any time by an
amendment to its Declaration of Trust. Each Fund's Declaration of Trust provides
that such an amendment would require the approval of (a) a majority of the
Trustees, including the approval by a majority of the disinterested Trustees of
the Fund, and (b) the lesser of (i) more than 50% of the Fund's outstanding
common and preferred shares, each voting as a class or (ii) 67% of the common
and preferred shares, each voting as a class, present at a meeting at which
holders of more than 50% of the outstanding shares of each such class are
present in person or by proxy. If approved in the foregoing manner, conversion
of the Fund could not occur until 90 days after the shareholders' meeting at
which such conversion was approved and would also require at least 30 days prior
notice to all shareholders. Conversion of a Fund to an open-end investment
company would require the redemption of all outstanding preferred shares, which
would eliminate the leveraged capital structure of the Fund. In the event of
conversion, the Common Shares would cease to be listed on the NYSE, AMEX, CHX,
NASDAQ National Market System or other national securities exchange or national
market system. Shareholders of an open-end investment company may require the
company to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value, less such
redemption charge, if any, as might be in effect at the time of a redemption. If
a Fund were converted to an open-end fund, it is likely that new Common Shares
would be sold at net asset value plus a sales load. Following any such
conversion, it is also possible that certain of the Fund's investment policies
and strategies would have to be modified to assure sufficient portfolio
liquidity. In particular the Fund would be required to maintain its portfolio
such that not more than 15% of its assets would be invested in illiquid
securities. Such requirement could cause the Fund to dispose of portfolio
securities or other assets at a time when it is not advantageous to do so, and
could adversely affect the ability of the Fund to meet its investment objective.

 
VOTING RIGHTS
 
  Voting rights are identical for the holders of each Fund's Common Shares.
Holders of each Fund's Common Shares are entitled to one vote for each share
held. Except as set forth above under "Certain Provisions of the Declarations of
Trust" or "Conversion to Open-End Fund," or except as expressly required by
applicable law or expressly set forth in the designation of rights and
preferences with respect to a Fund's Preferred Shares, holders of Preferred
Shares have no
 
                                        52

 
voting rights. When holders of a Fund's Preferred Shares are entitled to vote,
they are also entitled to cast one vote per share held.
 

  Holders of Preferred Shares of Fund, voting as a class, are entitled to elect
two of each Fund's trustees. Under the 1940 Act, if at any time dividends on a
Fund's Preferred Shares are unpaid in an amount equal to two full years
dividends thereon, the holders of all outstanding Preferred Shares, voting as a
class, are entitled to elect a majority of the Fund's Trustees until all
dividends have been paid or declared and set apart for payment.

 

  In addition to any vote or consent of shareholders required by law, without
the affirmative consent of the holders of at least 66 2/3% of the shares of
Target Fund RATES at the time outstanding, given in person or by proxy, either
by written consent without a meeting or by vote at any meeting called for that
purpose, the Target Fund shall not:

 
  (1) institute any proceedings to be adjudicated bankrupt or insolvent, or
      consent to the institution of bankruptcy or insolvency proceedings against
      it, or file a petition seeking or consenting to reorganization or relief
      under any applicable Federal or state law relating to bankruptcy, or
      consent to the appointment of a receiver, liquidator, assignee, trustee,
      sequestrator (or other similar official) of the Company or a substantial
      part of its property, or make any assignment for the benefit of creditors,
      or, except as may be required by applicable law, admit in writing its
      inability to pay its debts generally as they become due, or take any
      corporate action in furtherance of any such action;
 
  (2) create, authorize or issue shares of any class or series of beneficial
      interest ranking senior to the RATES with respect to the payment of
      dividends or the distribution of assets, or any securities convertible
      into, or warrants, options or similar rights to purchase, acquire or
      receive, such shares of beneficial interest ranking senior to the RATES or
      reclassify any authorized shares of beneficial interest of the Company
      into any share ranking senior to the RATES;
 
  (3) create, authorize, issue, incur or suffer to exist any indebtedness for
      borrowed money or any direct or indirect guarantee of such indebtedness in
      excess of $10,000,000 outstanding at any one time provided, however, that
      transfers of assets by the Company subject to an obligation to repurchase
      shall not be deemed to be indebtedness for purposes of this provision to
      the extent that after any such transaction the Company meets the Minimum
      Asset Coverage and Required Liquid Asset Test as of the immediately
      preceding Valuation Date with Eligible Assets not subject to any reverse
      repurchase agreement; and provided further that (a) if the RATES is then
      rated by Standard & Poor's, the Company may not incur any indebtedness
      unless such indebtedness is rated "AAA" by Standard & Poor's or is would
 
                                        53

 
      not adversely affect the current rating by Standard & Poor's or unless the
      holders of such indebtedness at the time such indebtedness is incurred
      agree that they will not file a petition or any claim against the Company
      pursuant to the Federal Bankruptcy Code and the Company obtains an opinion
      of counsel to the effect that such agreement is enforceable, and (b) if
      the RATES is then rated by Moody's, the Company may not incur any
      indebtedness in an amount in excess of $10,000,000 without the approval of
      Moody's;
 
  (4) create, incur or suffer to exist, or agree to create, incur or suffer to
      exist, or consent to cause or permit in the future (upon the happening of
      a contingency or otherwise) the creation, incurrence or existence of any
      material lien, mortgage, pledge, charge, security interest, security
      agreement, conditional sale or trust receipt or other material encumbrance
      of any kind upon any of the Eligible Assets, except (a) liens the validity
      of which are being contested in good faith by appropriate proceedings, (b)
      liens for taxes that are not then due and payable or that can be paid
      thereafter without penalty, (c) liens, pledges, charges, security
      interests, security agreements or other encumbrances arising in connection
      with any indebtedness or reverse repurchase agreements permitted under
      clause (3) above, (d) liens to secure payment for services rendered by the
      Trust Company in connection with the RATES and (a) any hedging
      transactions as contemplated by the Prospectus;
 
  (5) amend, alter or repeal any of the rights of the holders of RATES so as to
      affect materially and adversely the preferences, rights or powers of the
      shares of RATES, or increase the number of shares of RATES authorized to
      be issued;
 
  (6) in addition to the voting rights set forth in Section 9.7 of the Amended
      and Restated Declaration of Trust, consolidate or merge with or into any
      other corporation (except to the extent that applicable law does not
      permit such a vote to be required in the Amended and Restated Declaration
      of Trust), or sell, lease or convey all or substantially all of the assets
      of the Company (other than with respect to sales, leases and conveyances
      of assets in the normal course of selling and investing in Eligible
      Assets); and
 
  (7) voluntarily dissolve the Company.
 

  The Certificate of Vote establishing the Acquiring Fund APS provides that the
Acquiring Fund shall not take certain actions relating to the preferences,
rights or powers of holders of Acquiring Fund APS without the affirmative vote
of the holders of a majority of the outstanding shares of Acquiring Fund APS.
Additionally, an affirmative vote of a majority of the outstanding shares of
each series of Acquiring Fund APS, each voting separately as a class, is
required with respect to

 
                                        54

 

any matter that materially affects the series in a manner different from that of
other series of Acquiring Fund APS. For additional information with respect to
the voting rights of holders of Acquiring Fund APS, Target Fund shareholders
should consult the Certificate of Vote governing the Acquiring Fund APS,
included as Appendix B to the Reorganization Statement of Additional
Information.

 
                                        55

 
FINANCIAL HIGHLIGHTS
 
  TARGET FUND. The following schedule presents financial highlights for one
Target Fund Common Share outstanding throughout the periods indicated.


                                                                        YEAR ENDED JUNE 30
                                        2004         2003       2002(E)        2001         2000         1999         1998
                                        ----         ----       -------        ----         ----         ----         ----
                                                                                              
NET ASSET VALUE, BEGINNING OF THE
 PERIOD............................  $    10.73   $     9.99   $     9.62   $     8.99   $     9.56   $    10.26   $    10.01
                                     ----------   ----------   ----------   ----------   ----------   ----------   ----------
 Net Investment Income.............         .65          .66          .70          .75          .81          .84          .89
 Net Realized and Unrealized
   Gain/Loss.......................        (.62)         .70          .31          .66         (.55)        (.70)         .26
Common Share Equivalent of
 Distributions Paid to Preferred
 Shareholders:
 Net Investment Income.............        (.06)        (.07)        (.11)        (.23)        (.22)        (.19)        (.21)
                                     ----------   ----------   ----------   ----------   ----------   ----------   ----------
Total from Investment Operations...        (.03)        1.29          .90         1.18          .04         (.05)         .94
Distributions Paid to Common
 Shareholders:
 Net Investment Income.............        (.60)        (.55)        (.53)        (.55)        (.61)        (.65)        (.69)
 Net Realized Gain.................        (.05)         -0-          -0-          -0-          -0-          -0-          -0-
                                     ----------   ----------   ----------   ----------   ----------   ----------   ----------
NET ASSET VALUE, END OF THE
 PERIOD............................  $    10.05   $    10.73   $     9.99   $     9.62   $     8.99   $     9.56   $    10.26
                                     ==========   ==========   ==========   ==========   ==========   ==========   ==========
Common Share Market Price at End of
 the Period........................  $     8.87   $     9.66   $     8.85   $     8.89   $   8.6875   $    9.625   $   10.875
Total Return(a)....................      -1.63%       15.76%        5.64%        8.88%       -3.08%       -5.68%        6.85%
Net Assets Applicable to Common
 Shares at End of the Period (In
 millions).........................  $    288.2   $    307.9   $    286.4   $    276.0   $    258.0   $    274.1   $    292.3
Ratio of Expenses to Average Net
 Assets Applicable to Common
 Shares(b).........................       1.23%        1.21%        1.25%        1.27%        1.32%        1.24%        1.23%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(b)..................       6.25%        6.35%        6.99%        7.94%        9.06%        8.23%        8.69%
Portfolio Turnover.................         22%          35%          41%          50%          54%          98%         103%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net
 Assets Including Preferred
 Shares(b).........................        .79%         .78%         .79%         .79%         .81%         .79%         .79%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(c)..................       5.72%        5.67%        5.92%        5.50%        6.59%        6.35%        6.64%
SENIOR SECURITIES:
Total Preferred Shares
 Outstanding.......................         330          330          330          330          330          330          330
Asset Coverage Per Preferred
 Share(d)..........................  $1,373,451   $1,433,101   $1,368,316   $1,336,403   $1,281,820   $1,330,642   $1,385,892
Involuntary Liquidating Preference
 Per Preferred Share...............  $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000
Average Market Value Per Preferred
 Share.............................  $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000
 

                                              YEAR ENDED JUNE 30
                                        1997         1996         1995
                                        ----         ----         ----
                                                      
NET ASSET VALUE, BEGINNING OF THE
 PERIOD............................  $     9.76   $     9.76   $     9.92
                                     ----------   ----------   ----------
 Net Investment Income.............         .92          .94          .96
 Net Realized and Unrealized
   Gain/Loss.......................         .26          .05         (.06)
Common Share Equivalent of
 Distributions Paid to Preferred
 Shareholders:
 Net Investment Income.............        (.21)        (.22)        (.22)
                                     ----------   ----------   ----------
Total from Investment Operations...         .97          .77          .68
Distributions Paid to Common
 Shareholders:
 Net Investment Income.............        (.72)        (.77)        (.84)
 Net Realized Gain.................         -0-          -0-          -0-
                                     ----------   ----------   ----------
NET ASSET VALUE, END OF THE
 PERIOD............................  $    10.01   $     9.76   $     9.76
                                     ==========   ==========   ==========
Common Share Market Price at End of
 the Period........................  $   10.875   $    9.875   $   11.125
Total Return(a)....................      18.32%       -4.27%        8.59%
Net Assets Applicable to Common
 Shares at End of the Period (In
 millions).........................  $    283.2   $    273.7   $    271.1
Ratio of Expenses to Average Net
 Assets Applicable to Common
 Shares(b).........................       1.28%        1.31%        1.33%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(b)..................       9.25%        9.47%        9.85%
Portfolio Turnover.................         53%          29%          38%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net
 Assets Including Preferred
 Shares(b).........................        .80%         .82%         .83%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(c)..................       7.18%        7.26%        7.56%
SENIOR SECURITIES:
Total Preferred Shares
 Outstanding.......................         330          330          330
Asset Coverage Per Preferred
 Share(d)..........................  $1,358,326   $1,329,390   $1,321,483
Involuntary Liquidating Preference
 Per Preferred Share...............  $  500,000   $  500,000   $  500,000
Average Market Value Per Preferred
 Share.............................  $  500,000   $  500,000   $  500,000

 
(a) 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.
 
(b) Ratios do not reflect the effect of distributions to preferred shareholders.
 
(c) Ratios reflect the effect of distributions to preferred shareholders.
 
(d) 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.
 
(e) As required, effective July 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 June 30, 2002 was to increase net investment
    income per share by $.01, decrease 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 .04%. Per shares,
    supplemental data for the period prior to June 30, 2002 have not been
    restated to reflect this change in presentation.
 
                                        56

 
 ACQUIRING FUND. The following schedule presents financial highlights for one
Acquiring Fund Common Share outstanding throughout the periods indicated.


                                                             YEAR ENDED OCTOBER 31,
                                      2004      2003     2002(A)    2001       2000       1999       1998
                                      ----      ----     -------    ----       ----       ----       ----
                                                                              
NET ASSET VALUE, BEGINNING OF THE
 PERIOD............................  $ 17.15   $ 17.46   $ 17.51   $ 16.22   $  15.63   $  17.64   $  17.29
                                     -------   -------   -------   -------   --------   --------   --------
 Net Investment Income.............     1.09      1.10      1.18      1.25       1.32       1.33       1.35
 Net Realized and Unrealized
   Gain/Loss.......................      .31       .09       .18      1.24        .64      (1.94)       .42
 Common Share Equivalent of
   Distributions Paid to Preferred
   Shareholders:
   Net Investment Income...........     (.10)     (.08)     (.10)     (.32)      (.40)      (.32)      (.34)
   Net Realized Gain...............     (.01)     (.03)     (.07)      -0-        -0-       (.02)      (.02)
                                     -------   -------   -------   -------   --------   --------   --------
Total from Investment Operations...     1.29      1.08      1.19      2.17       1.56       (.95)      1.41
Distributions Paid to Common
 Shareholders:
   Net Investment Income...........    (1.00)    (1.07)    (1.03)     (.88)      (.97)      (.99)     (1.00)
   Net Realized Gain...............     (.10)     (.32)     (.21)      -0-        -0-       (.07)      (.06)
                                     -------   -------   -------   -------   --------   --------   --------
NET ASSET VALUE, END OF THE
 PERIOD............................  $ 17.34   $ 17.15   $ 17.46   $ 17.51   $  16.22   $  15.63   $  17.64
                                     =======   =======   =======   =======   ========   ========   ========
Common Share Market Price at End of
 the Period........................  $ 15.34   $ 15.58   $ 15.80   $ 14.94   $13.5625   $13.6875   $  17.00
Total Return(b)....................    5.76%     7.60%    14.56%    16.85%      6.41%    -13.97%     12.40%
Net Assets Applicable to Common
 Shares at End of the Period (In
 millions).........................  $ 468.3   $ 463.3   $ 471.6   $ 473.0   $  438.1   $  422.2   $  476.6
Ratio of Expenses to Average Net
 Assets Applicable to Common
 Shares(c).........................    1.27%     1.28%     1.41%     1.55%      1.68%      1.61%      1.58%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(c)..................    6.43%     6.40%     6.89%     7.37%      8.44%      7.87%      7.73%
Portfolio Turnover.................      18%       23%       33%       29%        31%        33%        29%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net
 Assets Including Preferred
 Shares(c).........................     .80%      .82%      .89%      .98%      1.03%      1.02%      1.01%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(d)..................    5.82%     5.92%     6.30%     5.49%      5.86%      6.00%      5.80%
SENIOR SECURITIES:
Total Preferred Shares
 Outstanding.......................   10,600    10,600    10,600    10,600     10,600     10,600      5,300
Asset Coverage Per Preferred
 Share(e)..........................  $69,204   $68,721   $69,511   $69,623   $ 66,332   $ 64,827   $139,932
Involuntary Liquidating Preference
 Per Preferred Share...............  $25,000   $25,000   $25,000   $25,000   $ 25,000   $ 25,000   $ 50,000
Average Market Value Per Preferred
 Share.............................  $25,000   $25,000   $25,000   $25,000   $ 25,000   $ 25,000   $ 50,000
 

                                         YEAR ENDED OCTOBER 31,
                                       1997       1996       1995
                                       ----       ----       ----
                                                  
NET ASSET VALUE, BEGINNING OF THE
 PERIOD............................  $  16.58   $  16.58   $  15.03
                                     --------   --------   --------
 Net Investment Income.............      1.37       1.38       1.42
 Net Realized and Unrealized
   Gain/Loss.......................       .74        .11       1.65
 Common Share Equivalent of
   Distributions Paid to Preferred
   Shareholders:
   Net Investment Income...........      (.35)      (.35)      (.38)
   Net Realized Gain...............       -0-        -0-        -0-
                                     --------   --------   --------
Total from Investment Operations...      1.76       1.14       2.69
Distributions Paid to Common
 Shareholders:
   Net Investment Income...........     (1.05)     (1.14)     (1.14)
   Net Realized Gain...............       -0-        -0-        -0-
                                     --------   --------   --------
NET ASSET VALUE, END OF THE
 PERIOD............................  $  17.29   $  16.58   $  16.58
                                     ========   ========   ========
Common Share Market Price at End of
 the Period........................  $ 16.125   $ 15.813   $  15.75
Total Return(b)....................     8.92%      7.84%     21.15%
Net Assets Applicable to Common
 Shares at End of the Period (In
 millions).........................  $  467.0   $  447.8   $  447.9
Ratio of Expenses to Average Net
 Assets Applicable to Common
 Shares(c).........................     1.60%      1.62%      1.68%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(c)..................     8.16%      8.37%      8.96%
Portfolio Turnover.................       40%        30%        15%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net
 Assets Including Preferred
 Shares(c).........................     1.01%      1.02%      1.04%
Ratio of Net Investment Income to
 Average Net Assets Applicable to
 Common Shares(d)..................     6.06%      6.24%      6.55%
SENIOR SECURITIES:
Total Preferred Shares
 Outstanding.......................     5,300      5,300      5,300
Asset Coverage Per Preferred
 Share(e)..........................  $138,116   $134,491   $134,501
Involuntary Liquidating Preference
 Per Preferred Share...............  $ 50,000   $ 50,000   $ 50,000
Average Market Value Per Preferred
 Share.............................  $ 50,000   $ 50,000   $ 50,000

 
(a) As required effective November 1, 2001, the Trust has adopted the provisions
    of the AICPA Audit and Accounting Guide for Investment Companies and began
    accreting market discount on fixed income securities. The effect of this
    change for the year ended October 31, 2002 was to increase net investment
    income per share by $.01, decrease net realized and unrealized gains and
    losses per share by $.01 and increase the ratio of net investment income to
    average net assets applicable to common shares by .02%. Per share, ratios
    and supplemental data for periods prior to October 31, 2002 have not been
    restated to reflect this change in presentation.
 
(b) Total return assumes an investment at the common share market price at the
    beginning of the period indicated, reinvestment of all distributions for the
    period in accordance with the Trust's dividend reinvestment plan, and sale
    of all shares at the closing common share market price at the end of the
    period indicated.
 
(c) Ratios do not reflect the effect of dividend payments to preferred
    shareholders.
 
(d) Ratios reflect the effect of dividend payments to preferred shareholders.
 
(e) Calculated by subtracting the Trust's total liabilities (not including the
    preferred shares) from the Trust's total assets and dividing this by the
    number of preferred shares outstanding.
 
                                        57

 
                      INFORMATION ABOUT THE REORGANIZATION
 
GENERAL
 

  Under the Reorganization Agreement (a form of which is attached as Appendix A
to the Reorganization Statement of Additional Information), the Acquiring Fund
will acquire substantially all of the assets, and will assume substantially all
of the liabilities, of the Target Fund, in exchange for Acquiring Fund Common
Shares and Acquiring Fund APS to be issued by the Acquiring Fund. The Acquiring
Fund will issue and cause to be listed on the NYSE and the CHX additional
Acquiring Fund Common Shares. The Acquiring Fund Common Shares issued to the
Target Fund will have an aggregate net asset value equal to the aggregate net
asset value of the Target Fund Common Shares less the costs of the
Reorganization (though cash may be paid in lieu of any fractional shares). The
Acquiring Fund APS issued to the Target Fund will have an aggregate liquidation
preference equal to the aggregate liquidation preference of the Target Fund
RATES. Upon receipt by the Target Fund of such shares, the Target Fund will (i)
distribute the Acquiring Fund Common Shares to the holders of Target Fund Common
Shares and (ii) distribute the Acquiring Fund APS to the holders of Target Fund
RATES. As soon as practicable after the Closing Date for the Reorganization, the
Target Fund will deregister as an investment company under the 1940 Act and
dissolve under applicable state law.

 

  The Target Fund will distribute the Acquiring Fund Common Shares and the
Acquiring Fund APS received by it pro rata to its holders of record of Target
Fund Common Shares and Target Fund RATES, as applicable, in exchange for such
shareholders' shares in the Target Fund. Such distribution will be accomplished
by opening new accounts on the books of the Acquiring Fund in the names of the
common and preferred shareholders of the Target Fund and transferring to those
shareholder accounts the Acquiring Fund Common Shares and the Acquiring Fund APS
previously credited on those books to the accounts of the Target Fund. Each
newly-opened account on the books of the Acquiring Fund for the former common
shareholders of the Target Fund will represent the respective pro rata number of
Acquiring Fund Common Shares (rounded down, in the case of fractional shares
held in an account other than a Dividend Reinvestment Plan account, to the next
largest number of whole shares) due such shareholder. No fractional Acquiring
Fund Common Shares will be issued (except for shares held in a Dividend
Reinvestment Plan account). In the event of fractional shares held in an account
other than a Dividend Reinvestment Plan account, the Acquiring Fund's transfer
agent will aggregate all such fractional Acquiring Fund Common Shares and sell
the resulting whole shares on the NYSE for the account of all holders of such
fractional interests, and each such holder will be entitled to the pro rata
share of the proceeds from such sale upon surrender of the Target Fund Common
Share certificates. Similarly, each newly-opened account on the books of the
Acquiring

 
                                        58

 

Fund for the former preferred shareholders of Target Fund RATES would represent
the respective pro rata number of Acquiring Fund APS due such shareholder. See
"Terms of the Reorganization Agreement -- Surrender and Exchange of Share
Certificates" below for a description of the procedures to be followed by Target
Fund shareholders to obtain their Acquiring Fund Common Shares or Acquiring Fund
APS (and cash in lieu of fractional shares, if any).

 

  As a result of the Reorganization, every holder of Target Fund Common Shares
would own Acquiring Fund Common Shares that (except for cash payments received
in lieu of fractional shares) will have an aggregate net asset value immediately
after the Closing Date equal to the aggregate net asset value of that
shareholder's Target Fund Common Shares immediately prior to the Closing Date
less the costs of the Reorganization. Since the Acquiring Fund Common Shares
will be issued at net asset value in exchange for the net assets of the Target
Fund having a value equal to the aggregate net asset value of those Acquiring
Fund Common Shares, the net asset value per share of Acquiring Fund Common
Shares should remain virtually unchanged by the Reorganization except for its
share of the reorganization costs. Similarly, the aggregate liquidation
preference of the Acquiring Fund APS to be issued to the Target Fund will equal
the aggregate liquidation preference of the Target Fund RATES. Each holder of
Target Fund RATES would receive Acquiring Fund APS that would have an aggregate
liquidation preference immediately after the Closing Date equal to the aggregate
liquidation preference of that shareholder's Target Fund RATES immediately prior
to the Closing Date. The liquidation preference per share of the Acquiring Fund
APS will remain unchanged by the Reorganization. Thus, the Reorganization will
result in no dilution of net asset value of the Target Fund Common Shares or
Acquiring Fund Common Shares, other than to reflect the costs of the
Reorganization, and will result in no dilution of the value per share of
Acquiring Fund APS or Target Fund RATES. However, as a result of the
Reorganization, a shareholder of either Fund will hold a reduced percentage of
ownership in the larger combined entity than he or she did in either of the
separate Funds.

 

  No sales charge or fee of any kind will be charged to shareholders of the
Target Fund in connection with their receipt of Acquiring Fund Common Shares or
Acquiring Fund APS in the Reorganization. Holders of Target Fund RATES will find
that the auction dates and dividend payment dates for the Acquiring Fund APS
received in the Reorganization are ordinarily (i.e., except in the case of a
special dividend period) on a 28 day schedule, similar to the schedule of
dividend payment dates for Target Fund RATES. The auction procedures for the
Acquiring Fund APS and the Target Fund RATES are similar. As a result of the
Reorganization, the last dividend period for the Target Fund RATES prior to the
Closing Date and the initial dividend period for the Acquiring Fund APS issued
in connection with the Reorganization after the Closing Date may be shorter than
the ordinary dividend period for such shares.

                                        59

 
TERMS OF THE REORGANIZATION AGREEMENT
 
  The following is a summary of the significant terms of the Reorganization
Agreement. This summary is qualified in its entirety by reference to the
Reorganization Agreement, attached as Appendix A to the Reorganization Statement
of Additional Information.
 
  VALUATION OF ASSETS AND LIABILITIES. The respective assets of each of the
Funds will be valued on the business day prior to the Closing Date (the
"Valuation Date"). The valuation procedures are the same for each Fund: the net
asset value per Common Share of each Fund will be determined after the close of
business on the NYSE (generally, 4:00 p.m., Eastern time) on the Valuation Date.
For the purpose of determining the net asset value of a Common Share of each
Fund, the value of the securities held by the issuing Fund plus any cash or
other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of
the outstanding Preferred Shares of the issuing Fund is divided by the total
number of Common Shares of the issuing Fund outstanding at such time. Daily
expenses, including the fees payable to the Adviser, will accrue on the
Valuation Date.
 

  AMENDMENTS AND CONDITIONS. The Reorganization Agreement may be amended at any
time prior to the Closing Date with respect to any of the terms therein. The
obligations of each Fund pursuant to the Reorganization Agreement are subject to
various conditions, including a registration statement on Form N-14 being
declared effective by the SEC, approval by the shareholders of the Target Fund,
approval of the issuance of additional Acquiring Fund Common Shares by Common
Shareholders of the Acquiring Fund, receipt of an opinion of counsel as to tax
matters, receipt of an opinion of counsel as to corporate and securities matters
and the continuing accuracy of various representations and warranties of the
Funds being confirmed by the respective parties.

 
  POSTPONEMENT; TERMINATION. Under the Reorganization Agreement, the Board of
Trustees of either Fund may cause the Reorganization to be postponed or
abandoned in certain circumstances should such Board determine that it is in the
best interests of the shareholders of its respective Fund to do so.
 
  The Reorganization Agreement may be terminated, and the Reorganization
abandoned at any time (whether before or after adoption thereof by the
shareholders of either of the Funds) prior to the Closing Date, or the Closing
Date may be postponed: (i) by mutual consent of the Boards of Trustees of the
Funds and (ii) by the Board of Trustees of either Fund if any condition to that
Fund's obligations set forth in the Reorganization Agreement has not been
fulfilled or waived by such Board.
 
  SURRENDER AND EXCHANGE OF SHARE CERTIFICATES. After the Closing Date, each
holder of an outstanding certificate or certificates formerly representing
Target
                                        60

 

Fund Common Shares will be entitled to receive, upon surrender of his or her
certificate or certificates, a certificate or certificates representing the
number of Acquiring Fund Common Shares distributable with respect to such
holder's Target Fund Common Shares, together with cash in lieu of any fractional
Acquiring Fund Common Shares held in an account other than a Dividend
Reinvestment Plan account. Promptly after the Closing Date, the transfer agent
for the Acquiring Fund Common Shares will mail to each holder of certificates
formerly representing Target Fund Common Shares a letter of transmittal for use
in surrendering his or her certificates for certificates representing Acquiring
Fund Common Shares and cash in lieu of any fractional shares held in an account
other than a Dividend Reinvestment Plan account.

 
  Please do not send in any share certificates at this time. Upon consummation
of the Reorganization, holders of Target Fund Common Shares will be furnished
with instructions for exchanging their share certificates for Acquiring Fund
share certificates and, if applicable, cash in lieu of fractional shares.
 
  From and after the Closing Date, certificates formerly representing Target
Fund Common Shares will be deemed for all purposes to evidence ownership of the
number of full Acquiring Fund Common Shares distributable with respect to the
Target Fund Common Shares held before the Reorganization as described above and
as shown in the table above, provided that, until such share certificates have
been so surrendered, no dividends payable to the holders of record of Target
Fund Common Shares as of any date subsequent to the Closing Date will be
reinvested pursuant to the Acquiring Fund's Dividend Reinvestment Plan, but will
instead be paid in cash. Once such Target Fund share certificates have been
surrendered, participants in the Target Fund's Dividend Reinvestment Plan will
automatically be enrolled in the Dividend Reinvestment Plan of the Acquiring
Fund.
 
  From and after the Closing Date, there will be no transfers on the share
transfer books of the Target Fund. If, after the Closing Date, certificates
representing Target Fund Common Shares are presented to the Acquiring Fund, they
will be cancelled and exchanged for certificates representing Acquiring Fund
Common Shares, as applicable, and cash in lieu of fractional shares, if any,
distributable with respect to such Target Fund Common Shares in the
Reorganization.
 
  Preferred Shares are held in "street name" by the Depository Trust Company and
all transfers will be accomplished by book entry.
 

  EXPENSES OF THE REORGANIZATION.  In the event the Reorganization is approved
and completed, the expenses of the Reorganization will be shared by the Target
Fund and the Acquiring Fund in proportion to their projected declines in total
operating expenses as a result of the Reorganization. In the event the
Reorganization is not completed, the Adviser will bear the costs associated with
the Reorganization.

 
                                        61

 
  Expenses incurred in connection with the Reorganization include, but are not
limited to: all costs related to the preparation and distribution of materials
distributed to each Fund's Board; all expenses incurred in connection with the
preparation of the Reorganization Agreement and a registration statement on Form
N-14; SEC and state securities commission filing fees and legal and audit fees
in connection with the Reorganization; the costs of printing and distributing
this Joint Proxy Statement/Prospectus; legal fees incurred preparing materials
for the Board of each Fund, attending each Fund's Board meetings and preparing
the minutes; auditing fees associated with each Fund's financial statements;
portfolio transfer taxes (if any); and any similar expenses incurred in
connection with the Reorganization. Neither the Funds nor the Adviser will pay
any expenses of shareholders arising out of or in connection with the
Reorganization.
 
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
 
  The following is a general summary of the material anticipated U.S. federal
income tax consequences of the Reorganization. The discussion is based upon the
Internal Revenue Code, Treasury regulations, court decisions, published
positions of the Internal Revenue Service ("IRS") and other applicable
authorities, all as in effect on the date hereof and all of which are subject to
change or differing interpretations (possibly with retroactive effect). The
discussion is limited to U.S. persons who hold shares of the Target Fund as
capital assets for U.S. federal income tax purposes (generally, assets held for
investment). This summary does not address all of the U.S. federal income tax
consequences that may be relevant to a particular shareholder or to shareholders
who may be subject to special treatment under U.S. federal income tax laws. No
ruling has been or will be obtained from the IRS regarding any matter relating
to the Reorganization. No assurance can be given that the IRS would not assert,
or that a court would not sustain, a position contrary to any of the tax aspects
described below. Prospective investors must consult their own tax advisers as to
the federal income tax consequences of the Reorganization, as well as the
effects of state, local and non-U.S. tax laws.
 
  It is a condition to closing the Reorganization that each of the Target Fund
and the Acquiring Fund receives an opinion from Skadden, Arps, Slate, Meagher &
Flom LLP ("Skadden Arps"), dated as of the Closing Date, regarding the
characterization of the Reorganization as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code. As such a reorganization, the
federal income tax consequences of the Reorganization can be summarized as
follows:
 
    - No gain or loss will be recognized by the Target Fund or the Acquiring
      Fund upon the transfer to the Acquiring Fund of substantially all of the
      assets of the Target Fund in exchange solely for Acquiring Fund Common
      Shares and Acquiring Fund APS and the assumption by the Acquiring Fund of
 
                                        62

 
      substantially all of the liabilities of the Target Fund and the subsequent
      liquidation of the Target Fund.
 

    - No gain or loss will be recognized by a shareholder of the Target Fund who
      exchanges, as the case may be, all of his, her or its Target Fund Common
      Shares solely for Acquiring Fund Common Shares pursuant to the
      Reorganization (except with respect to cash received in lieu of a
      fractional share of the Acquiring Fund, as discussed below) or all of his,
      her or its Target Fund RATES solely for Acquiring Fund APS pursuant to the
      Reorganization.

 
    - The aggregate tax basis of the Acquiring Fund Common Shares or Acquiring
      Fund APS, as the case may be, received by a shareholder of the Target Fund
      pursuant to the Reorganization will be the same as the aggregate tax basis
      of the shares of the Target Fund surrendered in exchange therefor (reduced
      by any amount of tax basis allocable to a fractional shall for which cash
      is received).
 
    - The holding period of the Acquiring Fund Common Shares or Acquiring Fund
      APS, as the case may be, received by a shareholder of the Target Fund
      pursuant to the Reorganization will include the holding period of the
      shares of the Target Fund surrendered in exchange therefor.
 

    - A shareholder of the Target Fund that receives cash in lieu of a
      fractional share of the Acquiring Fund pursuant to the Reorganization will
      recognize capital gain or loss with respect to the fractional share in an
      amount equal to the difference between the amount of cash received for the
      fractional share and the portion of such shareholder's tax basis in its
      Target Fund shares that is allocable to the fractional share. The capital
      gain or loss will be long-term if the holding period for such Target Fund
      Common Shares is more than one year as of the date of the exchange.

 
    - The Acquiring Fund's tax basis in the Target Fund's assets received by the
      Acquiring Fund pursuant to the Reorganization will equal the tax basis of
      such assets in the hands of the Target Fund immediately prior to the
      Reorganization, and the Acquiring Fund's holding period of such assets
      will include the period during which the assets were held by the Target
      Fund.
 

  The Acquiring Fund intends to continue to be taxed under the rules applicable
to regulated investment companies as defined in Section 851 of the Internal
Revenue Code, which are the same rules currently applicable to the Target Fund
and its shareholders.

 
  The opinion of Skadden Arps will be based on federal income tax law in effect
on the Closing Date. In rendering its opinion, Skadden Arps will also rely upon
certain representations of the management of the Acquiring Fund and the Target
Fund and assume, among other things, that the Reorganization will be consummated
in
 
                                        63

 
accordance with the Reorganization Agreement and as described herein. An opinion
of counsel is not binding on the IRS or any court.
 

  Pursuant to the grandfather relief granted in Revenue Ruling 89-81, 1989-1
C.B. 226, the Target Fund is permitted to designate that dividends paid on the
Target Fund RATES consist of more than the Target Fund RATES's pro rata share of
tax-exempt income earned by the Target Fund. The Acquiring Fund, however, is not
eligible to make such disproportionate designations. Accordingly, designations
made by the Acquiring Fund with respect to dividends paid on the Acquiring Fund
APS will be treated as consisting of a pro rata portion of each type of income
so designated.

 
  For five years after the Closing Date, the combined fund will not be allowed
to offset certain pre-Reorganization built-in gains attributable to one Fund
with capital loss carryforwards (and certain built-in losses) attributable to
the other Fund.
 
SHAREHOLDER APPROVAL
 

  Under the Declaration of Trust of the Target Fund (as amended to date and
including the Certificate of Vote of the Target Fund), relevant Massachusetts
law and the rules of the NYSE and CHX, shareholder approval of the
Reorganization Agreement requires the affirmative vote of shareholders of the
Target Fund representing more than 50% of the outstanding Target Fund Common
Shares and 66 2/3% of the outstanding Target Fund RATES, each voting separately
as a class.

 

                  PROPOSAL 2: ELECTION OF TARGET FUND TRUSTEES

 

  NYSE and CHX rules call for listed companies to have a meeting to elect
trustees each fiscal year. Since the Target Fund's current fiscal year ends on
June 30, 2005, the Target Fund Board is asking shareholders of that Fund to
elect trustees at this time. The Special Meeting will serve as the annual
meeting of shareholders of the Target Fund. The Target Fund Board believes that
combining the proposals related to the proposed Reorganization with the proposal
to elect trustees of the Target Fund into one Joint Proxy Statement/Prospectus
is cost effective. The fiscal year end of the Acquiring Fund occurs later in the
year, and thus the Acquiring Fund Board will ask shareholders of the Acquiring
Fund to elect trustees at a separate meeting to take place later in the year.

 

  This Joint Proxy Statement/Prospectus asks shareholders of the Target Fund to
elect four Class I trustees at the Special Meeting, to serve until the later of
such Fund's Annual Meeting of Shareholders in 2008 or until successors have been
duly elected and qualified. Holders of Common Shares, voting as a separate
class, will vote with respect to four Class I trustees (David C. Arch, Jerry D.
Choate, Howard J Kerr and Suzanne H. Woolsey) designated to be elected by such
class of shares.

 
                                        64

 
  As in the past, only one class of trustees is being submitted to shareholders
of the Target Fund for election at the Special Meeting. The Declaration of Trust
of the Target Fund provides that the Target Fund Board shall consist of trustees
divided into three classes, the classes to be as nearly equal in number as
possible. The trustees of only one class are elected at each annual meeting so
that the regular term of only one class of trustees will expire annually and any
particular trustee stands for election only once in each three-year period. This
type of classification may prevent replacement of a majority of trustees of the
Target Fund for up to a two-year period. The foregoing is subject to the
provisions of the 1940 Act, applicable state law and the Target Fund's
Declaration of Trust and Bylaws.
 

  The Board of Trustees recommends a vote "FOR ALL" of the nominees.

 
                INFORMATION REGARDING TRUSTEES AND NOMINEES FOR
                              ELECTION AS TRUSTEE
 

  The tables below list the incumbent trustees and nominees for trustee, their
principal occupations during the last five years, other directorships held by
them and their affiliations, if any, with Van Kampen Investments, the Adviser,
Van Kampen Funds Inc., Van Kampen Advisors Inc., Van Kampen Exchange Corp. and
Van Kampen Investor Services, Inc. The term "Fund Complex" includes each of the
investment companies advised by the Adviser as of the date of this Joint Proxy
Statement/Prospectus. Trustees of the Funds generally serve three-year terms or
until their successors are duly elected and qualified. All nominees have
consented to being named in this Joint Proxy Statement/Prospectus and have
agreed to serve if elected.

 
                                        65

 
                              INDEPENDENT TRUSTEES



                                                                                              NUMBER OF
                                               TERM OF                                         FUNDS IN
                                              OFFICE AND                                         FUND
                                 POSITION(S)  LENGTH OF                                        COMPLEX
NAME, AGE AND ADDRESS             HELD WITH      TIME     PRINCIPAL OCCUPATION(S)              OVERSEEN
OF INDEPENDENT TRUSTEE              FUND        SERVED    DURING PAST 5 YEARS                 BY TRUSTEE
                                                                                  
David C. Arch (59)               Trustee      Trustee     Chairman and Chief Executive            82
Blistex Inc.                                  since 1991  Officer of Blistex Inc., a
1800 Swift Drive                                          consumer health care products
Oak Brook, IL 60523                                       manufacturer. Director of the
                                                          Heartland Alliance, a nonprofit
                                                          organization serving human needs
                                                          based in Chicago. Director of St.
                                                          Vincent de Paul Center, a Chicago
                                                          based day care facility serving
                                                          the children of low income
                                                          families. Board member of the
                                                          Illinois Manufacturers'
                                                          Association.

Jerry D. Choate (66)             Trustee      Trustee     Prior to January 1999, Chairman         80
33971 Selva Road                              since 2003  and Chief Executive Officer of the
Suite 130                                                 Allstate Corporation ("Allstate")
Dana Point, CA 92629                                      and Allstate Insurance Company.
                                                          Prior to January 1995, President
                                                          and Chief Executive Officer of
                                                          Allstate. Prior to August 1994,
                                                          various management positions at
                                                          Allstate.
 

 
NAME, AGE AND ADDRESS            OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           HELD BY TRUSTEE
                              
David C. Arch (59)               Trustee/Director/Managing
Blistex Inc.                     General Partner of funds in the
1800 Swift Drive                 Fund Complex.
Oak Brook, IL 60523

Jerry D. Choate (66)             Trustee/Director/Managing
33971 Selva Road                 General Partner of funds in the
Suite 130                        Fund Complex. Director of Amgen
Dana Point, CA 92629             Inc., a biotechnological
                                 company, and Director of Valero
                                 Energy Corporation, an
                                 independent refining company.


 
                                        66




                                                                                              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
OF INDEPENDENT TRUSTEE              FUND        SERVED    DURING PAST 5 YEARS                 BY TRUSTEE
                                                                                  
Rod Dammeyer+ (64)               Trustee      Trustee     President of CAC, L.L.C., a             82
CAC, L.L.C.                                   since 1991  private company offering capital
4350 LaJolla Village Drive                                investment and management advisory
Suite 980                                                 services. Prior to February 2001,
San Diego, CA 92122-6223                                  Vice Chairman and Director of
                                                          Anixter International, Inc., a
                                                          global distributor of wire, cable
                                                          and communications connectivity
                                                          products. Prior to July 2000,
                                                          Managing Partner of Equity Group
                                                          Corporate Investment (EGI), a
                                                          company that makes private
                                                          investments in other companies.
 

 
NAME, AGE AND ADDRESS            OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           HELD BY TRUSTEE
                              
Rod Dammeyer+ (64)               Trustee/Director/Managing
CAC, L.L.C.                      General Partner of funds in the
4350 LaJolla Village Drive       Fund Complex. Director of
Suite 980                        Stericycle, Inc., Ventana
San Diego, CA 92122-6223         Medical Systems, Inc., and GATX
                                 Corporation, and Trustee of The
                                 Scripps Research Institute.
                                 Prior to January 2005, Trustee
                                 of the University of Chicago
                                 Hospitals and Health Systems.
                                 Prior to April 2004, Director
                                 of TheraSense, Inc. Prior to
                                 January 2004, Director of
                                 TeleTech Holdings Inc. and
                                 Arris Group, Inc. Prior to May
                                 2002, Director of Peregrine
                                 Systems Inc. Prior to February
                                 2001, Director of 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).


 
                                        67




                                                                                              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
OF INDEPENDENT TRUSTEE              FUND        SERVED    DURING PAST 5 YEARS                 BY TRUSTEE
                                                                                  

Linda Hutton Heagy (56)          Trustee      Trustee     Managing Partner of Heidrick &          80
Heidrick & Struggles                          since 2003  Struggles, an executive search
233 South Wacker Drive                                    firm. Trustee on the University of
Suite 7000                                                Chicago Hospitals Board, Vice
Chicago, IL 60606                                         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.
 

 
NAME, AGE AND ADDRESS            OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           HELD BY TRUSTEE
                              

Linda Hutton Heagy (56)          Trustee/Director/Managing
Heidrick & Struggles             General Partner of funds in the
233 South Wacker Drive           Fund Complex.
Suite 7000
Chicago, IL 60606


 
                                        68




                                                                                              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
OF INDEPENDENT TRUSTEE              FUND        SERVED    DURING PAST 5 YEARS                 BY TRUSTEE
                                                                                  

R. Craig Kennedy (53)            Trustee      Trustee     Director and President of the           80
1744 R Street, NW                             since 2003  German Marshall Fund of the United
Washington, DC 20009                                      States, an 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 (69)               Trustee      Trustee     Prior to 1998, President and Chief      82
736 North Western Avenue                      since 1992  Executive Officer of Pocklington
P.O. Box 317                                              Corporation, Inc., an investment
Lake Forest, IL 60045                                     holding company. Director of the
                                                          Marrow Foundation.
 

 
NAME, AGE AND ADDRESS            OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           HELD BY TRUSTEE
                              

R. Craig Kennedy (53)            Trustee/Director/Managing
1744 R Street, NW                General Partner of funds in the
Washington, DC 20009             Fund Complex.

Howard J Kerr (69)               Trustee/Director/Managing
736 North Western Avenue         General Partner of funds in the
P.O. Box 317                     Fund Complex. Director of the
Lake Forest, IL 60045            Lake Forest Bank & Trust.


 
                                        69




                                                                                              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
OF INDEPENDENT TRUSTEE              FUND        SERVED    DURING PAST 5 YEARS                 BY TRUSTEE
                                                                                  

Jack E. Nelson (69)              Trustee      Trustee     President of Nelson Investment          80
423 Country Club Drive                        since 2003  Planning Services, Inc., a
Winter Park, FL 32789                                     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.

 

 
NAME, AGE AND ADDRESS            OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           HELD BY TRUSTEE
                              

Jack E. Nelson (69)              Trustee/Director/Managing
423 Country Club Drive           General Partner of funds in the
Winter Park, FL 32789            Fund Complex.



 
                                        70




                                                                                              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
OF INDEPENDENT TRUSTEE              FUND        SERVED    DURING PAST 5 YEARS                 BY TRUSTEE
                                                                                  
Hugo F. Sonnenschein+ (64)       Trustee      Trustee     President Emeritus and Honorary         82
1126 E. 59th Street                           since 1994  Trustee of the University of
Chicago, IL 60637                                         Chicago and the Adam Smith
                                                          Distinguished Service 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.
 

 
NAME, AGE AND ADDRESS            OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           HELD BY TRUSTEE
                              
Hugo F. Sonnenschein+ (64)       Trustee/Director/Managing
1126 E. 59th Street              General Partner of funds in the
Chicago, IL 60637                Fund Complex. Director of
                                 Winston Laboratories, Inc.


 
                                        71




                                                                                              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
OF INDEPENDENT TRUSTEE              FUND        SERVED    DURING PAST 5 YEARS                 BY TRUSTEE
                                                                                  

Suzanne H. Woolsey, Ph.D. (63)   Trustee      Trustee     Chief Communications Officer of         80
815 Cumberstone Road                          since 2003  the National Academy of Sciences/
Harwood, MD 20776                                         National Research Council, an
                                                          independent, federally chartered
                                                          policy institution, from 2001 to
                                                          November 2003 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, Director of the Rocky
                                                          Mountain Institute 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.
 

 
NAME, AGE AND ADDRESS            OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           HELD BY TRUSTEE
                              

Suzanne H. Woolsey, Ph.D. (63)   Trustee/Director/Managing
815 Cumberstone Road             General Partner of funds in the
Harwood, MD 20776                Fund Complex. Director of Fluor
                                 Corp., an engineering,
                                 procurement and construction
                                 organization, since January
                                 2004 and Director of Neurogen
                                 Corporation, a pharmaceutical
                                 company, since January 1998.


 
                                        72

 
                              INTERESTED TRUSTEES*



                                                                                                                     NUMBER OF
                                            TERM OF                                                                   FUNDS IN
                                           OFFICE AND                                                                   FUND
                              POSITION(S)  LENGTH OF                                                                  COMPLEX
NAME, AGE AND ADDRESS          HELD WITH      TIME     PRINCIPAL OCCUPATION(S)                                        OVERSEEN
OF INTERESTED TRUSTEE            FUND        SERVED    DURING PAST 5 YEARS                                           BY TRUSTEE
                                                                                                         
Mitchell M. Merin* (51)       Trustee,     Trustee     President and Chief Executive Officer of funds in the Fund        80
1221 Avenue of the Americas   President    since       Complex. Chairman, President, Chief Executive Officer and
New York, NY 10020            and Chief    2003;       Director of the Adviser and Van Kampen Advisors Inc. since
                              Executive    President   December 2002. Chairman, President and Chief Executive
                              Officer      and Chief   Officer of Van Kampen Investments since December 2002.
                                           Executive   Director of Van Kampen Investments since December 1999.
                                           Officer     Chairman and Director of Van Kampen Funds Inc. since
                                           since 2002  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.
 

 
NAME, AGE AND ADDRESS         OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE         HELD BY TRUSTEE
                           
Mitchell M. Merin* (51)       Trustee/Director/
1221 Avenue of the Americas   Managing General
New York, NY 10020            Partner of funds in
                              the Fund Complex.


 
                                        73




                                                                                                                     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
OF INTERESTED TRUSTEE            FUND        SERVED    DURING PAST 5 YEARS                                           BY TRUSTEE
                                                                                                         

Richard F. Powers, III* (59)  Trustee      Trustee     Advisory Director of Morgan Stanley. Prior to December 2002,      82
1221 Avenue of the Americas                since 1999  Chairman, Director, President, Chief Executive Officer and
New York, NY 10020                                     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* (65)         Trustee      Trustee     Partner in the law firm of Skadden, Arps, Slate, Meagher &        82
333 West Wacker Drive                      since 1991  Flom LLP, legal counsel to funds in the Fund Complex.
Chicago, IL 60606
 

 
NAME, AGE AND ADDRESS         OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE         HELD BY TRUSTEE
                           

Richard F. Powers, III* (59)  Trustee/Director/
1221 Avenue of the Americas   Managing General
New York, NY 10020            Partner of funds in
                              the Fund Complex.

Wayne W. Whalen* (65)         Trustee/Director/
333 West Wacker Drive         Managing General
Chicago, IL 60606             Partner of funds in
                              the Fund Complex.
                              Director of the
                              Abraham Lincoln
                              Presidential Library
                              Foundation.


 
------------------------------------
 
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
  of the 1940 Act). Messrs. Merin and Powers are interested persons of funds in
  the Fund Complex and the Adviser by reason of their current or former
  positions with Morgan Stanley or its affiliates. Mr. Whalen is an interested
  person of certain funds in the Fund Complex by reason of he and his firm
  currently providing legal services as legal counsel to such funds in the Fund
  Complex.
 
+ Designated as Preferred Shares Trustee.
 
                                        74

 
REMUNERATION OF TRUSTEES
 
  The compensation of trustees and executive officers that are affiliated
persons (as defined in 1940 Act) of the Adviser or Van Kampen Investments, Inc.
is paid by the respective entity. The funds in the Fund Complex, including the
Target Fund, pay the non-affiliated trustees an annual retainer and meeting
fees.
 
  Each fund in the Fund Complex (except the Van Kampen Exchange Fund) provides a
deferred compensation plan to its non-affiliated trustees that allows such
trustees to defer receipt of compensation and earn a return on such deferred
amounts based upon the return of the common shares of the funds in the Fund
Complex as selected by the respective non-affiliated trustees. Each fund in the
Fund Complex (except the Van Kampen Exchange Fund) also provides a retirement
plan to its non-affiliated trustees that provides non-affiliated trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.
 

  Each non-affiliated trustee generally can elect to defer receipt of all or a
portion of the compensation earned by such non-affiliated trustee until
retirement. Amounts deferred are retained by the respective fund and earn a rate
of return determined by reference to the return on the common shares of the
Target Fund or other funds in the Fund Complex as selected by the respective
non-affiliated trustee, with the same economic effect as if such non-affiliated
trustee had invested in one or more funds in the Fund Complex, including the
Target Fund. To the extent permitted by the 1940 Act, the Target Fund may invest
in securities of those funds selected by the non-affiliated trustees in order to
match the deferred compensation obligation. The deferred compensation plan is
not funded and obligations thereunder represent general unsecured claims against
the general assets of the Target Fund.

 

  The Target Fund has adopted a retirement plan. Under the retirement plan, a
non-affiliated trustee who is receiving trustee's compensation from the Target
Fund prior to such non-affiliated trustee's retirement, has at least 10 years of
service (including years of service prior to adoption of the retirement plan)
for the Target Fund and retires at or after attaining the age of 60, is eligible
to receive a retirement benefit each year for ten years following such trustee's
retirement from the Target Fund. Non-affiliated trustees retiring prior to the
age of 60 or with fewer than 10 years but more than 5 years of service may
receive reduced retirement benefits from a fund.

 
  Additional information regarding compensation and benefits for trustees is set
forth below. As indicated in the notes accompanying the table, the amounts
relate to either the Target Fund's most recently completed fiscal year end in
2004 or the Fund Complex's most recently completed calendar year ended December
31, 2004.
 
                                        75

 
                               COMPENSATION TABLE
 



                                                             FUND COMPLEX
                                         -----------------------------------------------------
                                                                AGGREGATE
                                         AGGREGATE PENSION      ESTIMATED           TOTAL
                           AGGREGATE       OR RETIREMENT         MAXIMUM        COMPENSATION
                          COMPENSATION   BENEFITS ACCRUED    ANNUAL BENEFITS   BEFORE DEFERRAL
                          FROM TARGET       PART OF AS       ACCRUED AS PART      FROM FUND
          NAME              FUND(2)         EXPENSES(3)      OF EXPENSES(4)      COMPLEX(5)
          ----            ------------   -----------------   ---------------   ---------------
                                                                   
INDEPENDENT TRUSTEES
David C. Arch...........     $4,328          $ 35,277           $147,500          $192,530
Jerry D. Choate.........      5,551            82,527            126,000           200,002
Rod Dammeyer............      4,128            63,782            147,500           208,000
Linda Hutton Heagy......      5,350            24,465            142,500           184,784
R. Craig Kennedy........      5,551            16,911            142,500           200,002
Howard J Kerr...........      4,328           140,743            146,250           208,000
Jack E. Nelson..........      5,551            97,294            109,500           200,002
Hugo F. Sonnenschein....      4,328            64,476            147,500           208,000
Suzanne H. Woolsey......      5,551            58,450            142,500           200,002
INTERESTED TRUSTEE
Wayne W. Whalen(1)......      4,328            72,001            147,500           208,000


 
---------------

(1)Trustees not eligible for compensation and retirement benefits are not
   included in the Compensation Table. Mr. Whalen is an "interested person"
   (within the meaning of Section 2(a)(19) of the 1940 Act) of the Target Fund
   and certain other funds in the Fund Complex. Theodore A. Myers retired from
   the Board of Trustees of the Target Fund and other funds in the Fund Complex
   as of December 31, 2003. J. Miles Branagan retired as a member of the Board
   of Trustees of the Target Fund and other funds in the Fund Complex as of
   December 31, 2004.

 

(2)The amounts shown in this column represent the aggregate compensation
   before deferral by the Trustees with respect to the Target Fund's fiscal year
   ended June 30, 2004. The following Trustees deferred compensation from the
   Target Fund during the fiscal year ended June 30, 2004: Mr. Choate, $5,551;
   Mr. Dammeyer, $4,128; Ms. Heagy, $5,350; Mr. Nelson, $5,551; Mr.
   Sonnenschein, $4,328; and Mr. Whalen, $4,328. The cumulative deferred
   compensation (including interest) accrued with respect to each trustee,
   including former trustees, from the Target Fund as of June 30, 2004 is as
   follows: Mr. Choate, $5,775; Mr. Dammeyer, $47,669; Ms. Heagy, $5,698; Mr.
   Kerr, $28,639; Mr. Nelson, $5,861; Mr. Sonnenschein, $49,070; and Mr. Whalen,
   $50,189. The deferred compensation plan is described above the table. Amounts
   deferred are retained by the Target Fund and earn a rate of return determined
   by reference to either the return on the Common Shares of the Target Fund or
   the common shares of other funds in the Fund Complex as selected by the
   respective Trustee. To the extent permitted by the 1940 Act, the Target Fund
   may invest in securities of these funds selected by the Trustees in order to
   match the deferred compensation obligation.

 
                                        76

 
(3)The amounts shown in this column represent the sum of the estimated pension
   or retirement benefit accruals expected to be accrued by the operating funds
   in the Fund Complex for their respective fiscal years ended in 2004.
 
(4)For each Trustee, the amounts shown in this column represent the sum of the
   estimated annual benefits upon retirement payable per year by the current
   operating funds in the Fund Complex for each year of the 10-year period
   commencing in the year of such person's anticipated retirement. The
   retirement plan is described above the compensation table.
 
(5)The amounts shown in this column are accumulated from the aggregate
   compensation of the operating investment companies in the Fund Complex for
   the calendar year ended December 31, 2004 before deferral by the Trustees
   under the deferred compensation plan. Because the funds in the Fund Complex
   have different fiscal year ends, the amounts shown in this column are
   presented on a calendar year basis.
 
BOARD COMMITTEES AND MEETINGS
 

  The Board of Trustees has three standing committees (an audit committee, a
brokerage and services committee and a governance committee). Each committee is
comprised solely of "Independent Trustees", which is defined for purposes herein
as trustees who: (1) are not "interested persons" of the Fund as defined by the
1940 Act and (2) are "independent" of the Fund as defined by the NYSE, American
Stock Exchange and CHX listing standards.

 

  The Board's audit committee consists of Jerry D. Choate, Rod Dammeyer and R.
Craig Kennedy. In addition to being Independent Trustees as defined above, each
of these trustees also meets the additional independence requirements for audit
committee members as defined by the NYSE, American Stock Exchange and CHX
listing standards. The audit committee makes recommendations to the Board of
Trustees concerning the selection of the Fund's independent registered public
accounting firm, reviews with such independent registered public accounting firm
the scope and results of the Target Fund's annual audit and considers any
comments which the independent registered public accounting firm may have
regarding the Target Fund's financial statements, books of account or internal
controls. The Board of Trustees has adopted a formal written charter for the
audit committee which sets forth the audit committee's responsibilities. The
audit committee has reviewed and discussed the financial statements of the
Target Fund with management as well as with the independent registered public
accounting firm of the Target Fund, and discussed with the independent
registered public accounting firm the matters required to be discussed under the
Statement of Auditing Standards No. 61. The audit committee has received the
written disclosures and the letter from the independent registered public
accounting firm required under Independence Standards Board Standard No. 1 and
has discussed with the independent registered public accounting firm its
independence. Based on this

 
                                        77

 

review, the audit committee recommended to the Board of Trustees of the Target
Fund that the Target Fund's audited financial statements be included in the
Target Fund's annual report to shareholders for the most recent fiscal year for
filing with the SEC.

 
  In accordance with proxy rules promulgated by the SEC, a fund's audit
committee charter is required to be filed at least once every three years as an
exhibit to a fund's proxy statement. The audit committee charter of the Target
Fund was attached as an exhibit to the Van Kampen Joint Closed-End Fund Proxy
Statement, filed with the SEC on May 19, 2004.
 

  The Board's brokerage and services committee consists of Linda Hutton Heagy,
Hugo F. Sonnenschein and Suzanne H. Woolsey. The brokerage and services
committee reviews the Target Fund's allocation of brokerage transactions and
soft-dollar practices and reviews the transfer agency and shareholder servicing
arrangements with Investor Services.

 

  The Board's governance committee consists of David C. Arch, Howard J Kerr and
Jack E. Nelson. In addition to being Independent Trustees as defined above, each
of these trustees also meets the additional independence requirements for
nominating committee members as defined by the NYSE, American Stock Exchange and
CHX listing standards. The governance committee identifies individuals qualified
to serve as Independent Trustees on the Board and on committees of the Board,
advises the Board with respect to Board composition, procedures and committees,
develops and recommends to the Board a set of corporate governance principles
applicable to the Target Fund, monitors corporate governance matters and makes
recommendations to the Board, and acts as the administrative committee with
respect to Board policies and procedures, committee policies and procedures and
codes of ethics. The Independent Trustees of the Target Fund select and nominate
any other nominee Independent Trustees for the Fund. While the Independent
Trustees of the Target Fund expect to be able to continue to identify from their
own resources an ample number of qualified candidates form the Board of Trustees
as they deem appropriate, they will consider nominations from shareholders to
the Board. Nominations from shareholders should be in writing and sent to the
Independent Trustees of the Target Fund at the Target Fund's offices at 1221
Avenue of the Americas, New York, New York 10020 or directly to the Independent
Trustees at the address specified for each trustee.

 
  In accordance with proxy rules promulgated by the SEC, a fund's nominating
committee charter is required to be filed at least once every three years as an
exhibit to a fund's proxy statement. The governance committee charter of the
Target Fund was attached as an exhibit to the Van Kampen Joint Closed-End Fund
Proxy Statement, filed with the SEC on May 19, 2004.
 
                                        78

 

  During the Target Fund's last fiscal year, the Board of Trustees held 13
meetings. During the Target Fund's last fiscal year, the audit committee of the
Board held 7 meetings, the brokerage and services committee of the Board held 4
meetings and the governance committee of the Board and held 5 meetings. During
the last fiscal year, each of the trustees of the Target Fund during such period
such trustee served as a trustee attended at least 75% of the meetings of the
Board of Trustees and all committee meetings thereof of which such trustee was a
member.

 
                               OTHER INFORMATION
 
EXECUTIVE OFFICERS OF THE FUNDS
 

  The following information relates to the executive officers of the Target Fund
who are not trustee nominees. Each officer also serves in the same capacity for
all or a number of the other investment companies advised by the Adviser or
affiliates of the Adviser. The officers of the Target Fund are appointed
annually by the trustees and serve for one year or until their respective
successors are chosen and qualified. The Target Funds' officers receive no
compensation from the funds in the Fund Complex but may also be officers of the
Adviser or officers of affiliates of the Adviser and receive compensation in
such capacities.

 
                                        79

 
                                    OFFICERS
 



                                                     TERM OF
                                                    OFFICE AND
                                   POSITION(S)      LENGTH OF
NAME, AGE AND                       HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                     FUND           SERVED    DURING PAST 5 YEARS
------------------                 -----------      ----------  -----------------------
                                                       

Stefanie V. Chang Yu (38)       Vice President      Officer     Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas     and Secretary       since 2003  Vice President and Secretary of funds in the Fund Complex.
New York, NY 10020

Amy R. Doberman (43)            Vice President      Officer     Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas                         since 2004  Management; Managing Director of Morgan Stanley Investment
New York, NY 10020                                              Management, Inc., Morgan Stanley Investment Advisers Inc.
                                                                and the Adviser. Vice President of the Morgan Stanley
                                                                Institutional and Retail Funds since July 2004 and Vice
                                                                President of funds in the Fund Complex as of August 2004.
                                                                Previously, Managing Director and General Counsel of
                                                                Americas, UBS Global Asset Management from July 2000 to July
                                                                2004 and General Counsel of Aeltus Investment Management,
                                                                Inc from January 1997 to July 2000.

James W. Garrett (36)           Chief Financial     Officer     Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas     Officer and         since 2005  Chief Financial Officer and Treasurer of Morgan Stanley
New York, NY 10020              Treasurer                       Institutional Funds since 2002 and of funds in the Fund
                                                                Complex since 2005.

Joseph J. McAlinden (62)        Executive Vice      Officer     Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas     President and       since 2002  Stanley Investment Advisors Inc., Morgan Stanley Investment
New York, NY 10020              Chief Investment                Management Inc. and Morgan Stanley Investments LP and
                                Officer                         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 Adviser and Van Kampen
                                                                Advisors Inc. since December 2002.


 
                                        80

 



                                                     TERM OF
                                                    OFFICE AND
                                   POSITION(S)      LENGTH OF
NAME, AGE AND                       HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                     FUND           SERVED    DURING PAST 5 YEARS
------------------                 -----------      ----------  -----------------------
                                                       

Ronald E. Robison (66)          Executive Vice      Officer     Executive Vice President and Principal Executive Officer of
1221 Avenue of the Americas     President and       since 2003  Funds in the Fund Complex since May 2003. Chief Executive
New York, NY 10020              Principal                       Officer and Chairman of Investor Services. Managing Director
                                Executive                       of Morgan Stanley. Chief Administrative Officer, Managing
                                Officer                         Director and Director of Morgan Stanley Investment Advisors
                                                                Inc., Morgan Stanley Services Company Inc. and Managing
                                                                Director and Director of Morgan Stanley Distributors Inc.
                                                                Chief Executive Officer and Director of Morgan Stanley
                                                                Trust. Executive Vice President and Principal Executive
                                                                Officer of the Institutional and Retail Morgan Stanley
                                                                Funds; Director of Morgan Stanley SICAV; previously Chief
                                                                Global Operations Officer and Managing Director of Morgan
                                                                Stanley Investment Management Inc.

John L. Sullivan (49)           Chief Compliance    Officer     Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza                Officer             since 1996  August 2004. Prior to August 2004, Director and Managing
Oakbrook Terrace, IL 60181                                      Director of Van Kampen Investments, the Adviser, Van Kampen
                                                                Advisors Inc. and certain other subsidiaries of Van Kampen
                                                                Investments, Vice President, Chief Financial Officer and
                                                                Treasurer of funds in the Fund Complex and head of Fund
                                                                Accounting for Morgan Stanley Investment Management. Prior
                                                                to December 2002, Executive Director of Van Kampen
                                                                Investments, the Adviser and Van Kampen Advisors Inc.


 
                                        81

 

SHAREHOLDER INFORMATION

 

  Excluding deferred compensation balances as described in the Compensation
Table above, as of April 25, 2005, each trustee beneficially owned equity
securities of the Target Fund and other funds in the Fund Complex overseen by
the trustees in the dollar range amounts as specified below.

 
                   TRUSTEE BENEFICIAL OWNERSHIP OF SECURITIES
 
INDEPENDENT TRUSTEES
 



                                                               TRUSTEE
                      -----------------------------------------------------------------------------------------
                        ARCH    CHOATE   DAMMEYER   HEAGY    KENNEDY    KERR    NELSON   SONNENSCHEIN  WOOLSEY
                        ----    ------   --------   -----    -------    ----    ------   ------------  -------
                                                                            
Dollar range of
 equity securities
 owned in the Target
 Fund...............    $1-      none      over      $1-       $1-      none     none        $1-         $1-
                      $10,000            $100,000  $10,000   $10,000                       $10,000     $10,000
Aggregate dollar
 range of equity
 securities owned in
 all registered
 investment
 companies overseen
 by trustee in Fund
 Complex............  $50,001-    $1-      over    $10,001-    over      $1-      $1-      $10,001-    $10,001-
                      $100,000  $10,000  $100,000  $50,000   $100,000  $10,000  $10,000    $50,000     $50,000


 
INTERESTED TRUSTEES
 



                                                               TRUSTEE
                                                   --------------------------------
                                                    MERIN       POWERS      WHALEN
                                                    -----       ------      ------
                                                                  
Dollar range of equity securities in the Target
  Fund.........................................      none        none        $1-
                                                                           $10,000
Aggregate dollar range of equity securities in
  all registered investment companies overseen
  by trustee in Fund Complex...................      over        over        over
                                                   $100,000    $100,000    $100,000


 
                                        82

 

  Including deferred compensation balances as described in the Compensation
Table, as of April 25, 2005, each trustee owned the dollar ranges of amounts of
the Target Fund and other funds in the Fund Complex as specified below.

 
             TRUSTEE BENEFICIAL OWNERSHIP AND DEFERRED COMPENSATION
 
INDEPENDENT TRUSTEES
 



                                                                TRUSTEE
                      --------------------------------------------------------------------------------------------
                        ARCH     CHOATE   DAMMEYER   HEAGY    KENNEDY     KERR     NELSON   SONNENSCHEIN  WOOLSEY
                        ----     ------   --------   -----    -------     ----     ------   ------------  -------
                                                                               
Dollar range of
 equity securities
 and deferred
 compensation in the
 Target Fund........    $1-       $1-       over      $1-       $1-       none      $1-         $1-         $1-
                      $10,000   $10,000   $100,000  $10,000   $10,000             $10,000     $10,000     $10,000
Aggregate dollar
 range of equity
 securities and
 deferred
 compensation in all
 registered
 investment
 companies overseen
 by trustee in Fund
 Complex............  $50,001-    over      over      over      over      over      over        over      $10,000-
                      $100,000  $100,000  $100,000  $100,000  $100,000  $100,000  $100,000    $100,000    $50,000


 
INTERESTED TRUSTEES
 



                                                               TRUSTEE
                                                   --------------------------------
                                                    MERIN       POWERS      WHALEN
                                                    -----       ------      ------
                                                                  
Dollar range of equity securities owned in the
  Target Fund..................................      none        none      $10,001-
                                                                           $50,000
Aggregate dollar range of equity securities
  owned in all registered investment companies
  overseen by trustee in Fund Complex..........      over        over        over
                                                   $100,000    $100,000    $100,000


 
                                        83

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

  The Board of Trustees of the Target Fund, including a majority of the Trustees
who are not "interested persons" of the Target Fund (as defined by the 1940
Act), has selected Deloitte & Touche LLP ("D&T") as the independent auditors to
examine the financial statements for the current fiscal year of the Target Fund.
The selection of D&T for the current fiscal year was recommended and approved by
the Target Fund's audit committee and approved by the Target Fund's Board. The
Target Fund knows of no direct or indirect financial interest of D&T in the
Target Fund. Representatives of D&T will attend the Special Meeting, will have
the opportunity to make a statement if they desire to do so and will be
available to answer appropriate questions.

 
AUDIT AND OTHER FEES
 

  Each Fund and certain "covered entities" were billed the amounts listed below
by D&T during the Target Fund's most recent two fiscal years.

 
FISCAL YEAR ENDED JUNE 30, 2004
 



                                                    NON-AUDIT FEES
                                    ----------------------------------------------
                                                                           TOTAL
       ENTITY          AUDIT FEES   AUDIT RELATED    TAX     ALL OTHER   NON-AUDIT    TOTAL
       ------          ----------   -------------    ---     ---------   ---------    -----
                                                                   
Target Fund..........   $29,480       $    400      $1,550      $0       $  1,950    $ 31,430
Covered Entities*....       N/A       $230,000      $    0      $0       $230,000    $230,000


 
FISCAL YEAR ENDED JUNE 30, 2003
 



                                                    NON-AUDIT FEES
                                    ----------------------------------------------
                                                                           TOTAL
ENTITY                 AUDIT FEES   AUDIT RELATED    TAX     ALL OTHER   NON-AUDIT    TOTAL
------                 ----------   -------------    ---     ---------   ---------    -----
                                                                   
Target Fund..........   $27,876        $ 3,000      $1,500      $0        $ 4,500    $32,176
Covered Entities*....       n/a        $95,000      $    0      $0        $95,000    $95,000


 
---------------
 
* Covered Entities include the Adviser and any entity controlling, controlled by
  or under common control with the Adviser that provides ongoing services to the
  Target Fund.
 

  The audit committee of each Board has considered whether the provision of non-
audit services performed by D&T to the Funds and "covered entities" is
compatible with maintaining D&T's independence in performing audit services.
Beginning with non-audit service contracts entered into on or after May 6, 2003,
the audit committee also is required to pre-approve services to "covered
entities" to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Funds. 100% of such services
were pre-approved by the

 
                                        84

 
audit committee pursuant to the audit committee's pre-approval policies and
procedures. The Board's pre-approval policies and procedures are included as
part of the Board's audit committee charter, which was attached to the Van
Kampen Joint Closed-End Fund Proxy Statement, filed with the SEC on May 19,
2004.
 

SHAREHOLDER APPROVAL

 

  An affirmative vote of a plurality of the Common Shares present at the Special
Meeting in person or by proxy is required to elect the respective nominees. It
is the intention of the persons named in the enclosed proxy to vote the shares
represented by them for the election of the respective nominees listed unless
the proxy is marked otherwise. For more information regarding voting
requirements, see "Other Information -- Voting Information and Requirements"
below.



 
                                        85

 
 ------------------------------------------------------------------------------

        PROPOSAL 3: ISSUANCE OF ADDITIONAL ACQUIRING FUND COMMON SHARES

 ------------------------------------------------------------------------------
 

  Pursuant to the Reorganization Agreement, which is described more fully under
"Proposal 1: Reorganization of the Target Fund" herein, the Acquiring Fund will
acquire substantially all of the assets and assume substantially all of the
liabilities of the Target Fund in exchange for Acquiring Fund Common Shares and
Acquiring Fund APS. The Target Fund will distribute Acquiring Fund Common Shares
to holders of Target Fund Common Shares and Acquiring Fund APS to holders of
Target Fund RATES, and will then terminate its registration under the 1940 Act
and dissolve under applicable state law. The Acquiring Fund Board, based upon
its evaluation of all relevant information, anticipates that the Reorganization
will benefit holders of Acquiring Fund Common Shares.

 

  The aggregate net asset value of Acquiring Fund Common Shares received in the
Reorganization will equal the aggregate net asset value on the Target Fund
Common Shares held immediately prior to the Reorganization, less the costs of
the Reorganization (though you may receive cash for fractional shares). The
aggregate liquidation preference of Acquiring Fund APS received in the
Reorganization will equal the aggregate liquidation preference Target Fund RATES
held immediately prior to the Reorganization. The Reorganization will result in
no dilution of net asset value of the Acquiring Fund Common Shares, other than
to reflect the costs of the Reorganization. No gain or loss will be recognized
by the Acquiring Fund or its shareholders in connection with the Reorganization.
The Acquiring Fund will continue to operate as a registered closed-end
investment company with the investment objective and policies described in this
Joint Proxy Statement/Prospectus.

 

  In connection with the Reorganization and as contemplated by the
Reorganization Agreement, the Acquiring Fund will issue additional Acquiring
Fund Common Shares and list such shares on the NYSE and the CHX. While
applicable state and federal law does not require the shareholders of the
Acquiring Fund to approve the Reorganization, applicable NYSE and CHX rules
require the common shareholders of the Acquiring Fund to approve the issuance of
additional Acquiring Fund Common Shares to be issued in connection with the
Reorganization.

 
SHAREHOLDER APPROVAL
 

  Shareholder approval of the issuance of additional Acquiring Fund Common
Shares requires the affirmative vote of a majority of the votes cast on the
proposal, provided that the total votes cast on the proposal represents more
than 50% in interest of all securities entitled to vote on the proposal. For
more information regarding voting requirements, see the section entitled "Other
Information--Voting Information and Requirements" below.

 
                                        86

 
------------------------------------------------------------------------------
                               OTHER INFORMATION
------------------------------------------------------------------------------
 
VOTING INFORMATION AND REQUIREMENTS
 

  GENERAL. A list of shareholders of the Target Fund entitled to be present and
vote at the Special Meeting will be available at the offices of the Target Fund,
1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, for inspection by any
shareholder during regular business hours for ten days prior to the date of the
Special Meeting.

 

  RECORD DATE. The Funds' Boards have fixed the close of business on April 25,
2005 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof. Shareholders on the Record Date will be entitled to one
vote for each share held, with no shares having cumulative voting rights. At the
Record Date, the Target Fund had outstanding 28,684,985 Target Fund Common
Shares and 330 Target Fund RATES and the Acquiring Fund had outstanding
27,013,149 Acquiring Fund Common Shares and 10,600 Acquiring Fund APS.

 

  PROXIES. Shareholders may vote by appearing in person at the Special Meeting,
by returning the enclosed proxy card or by casting their vote via telephone or
the internet using the instructions provided on the enclosed proxy card and more
fully described below. Shareholders of each Fund have the opportunity to submit
their voting instructions via the internet by utilizing a program provided by a
third-party vendor hired by the Funds, or by "touch-tone" telephone voting. The
giving of such a proxy will not affect your right to vote in person should you
decide to attend the Special Meeting. To use the internet, please access the
internet address found on your proxy card. To record your voting instructions by
automated telephone, please call the toll-free number listed on your proxy card.
The internet and automated telephone voting instructions are designed to
authenticate shareholder identities, to allow shareholders to give their voting
instructions, and to confirm that shareholders' instructions have been recorded
properly. Shareholders submitting their voting instructions via the internet
should understand that there may be costs associated with internet access, such
as usage charges from internet access providers and telephone companies, that
must be borne by the shareholders. Any person giving a proxy may revoke it at
any time prior to its exercise by giving written notice of the revocation to the
Secretary of the Fund at the address indicated above, by delivering a duly
executed proxy bearing a later date, by recording later-dated voting
instructions via the internet or automated telephone, or by attending the
Special Meeting and voting in person. The giving of a proxy will not affect your
right to vote in person if you attend the Special Meeting and wish to do so.

 
  All properly executed proxies received prior to the Special Meeting will be
voted in accordance with the instructions marked thereon or otherwise as
provided
 
                                        87

 
therein. Unless instructions to the contrary are marked, proxies will be voted
"FOR" the approval of each proposal. Abstentions and broker non-votes (i.e.,
where a nominee such as a broker, holding shares for beneficial owners,
indicates that instructions have not been received from the beneficial owners,
and the nominee does not exercise discretionary authority) are not treated as
votes "FOR" a proposal.
 

  With respect to Proposal 1, abstentions and broker non-votes have the same
effect as votes "AGAINST" the proposals since their approvals are based on the
affirmative vote of a majority of the total Target Fund Common Shares
outstanding and 66 2/3% of the Target Fund RATES outstanding, each voting as a
separate class. With respect to Proposal 2, abstentions and broker non-votes are
disregarded since only votes "FOR" are considered in a plurality voting
requirement. With respect to Proposal 3, abstentions will not be treated as
votes "FOR" the proposal but will be counted as votes cast on the proposal and
will therefore have the same effect as votes "AGAINST" the proposal. Broker
non-votes will not be treated as votes "FOR" the proposal and will not be
counted as votes cast on the proposal and will therefore have the effect of
reducing the aggregate number of shares voting on the proposal and reducing the
number of votes "FOR" required to approve the proposal.

 
  With respect to each proposal, a majority of the outstanding shares entitled
to vote on the proposal must be present in person or by proxy to have a quorum
to conduct business at the Special Meeting. Abstentions and broker non-votes
will be deemed present for quorum purposes.
 

  CERTAIN VOTING INFORMATION REGARDING TARGET FUND RATES. Pursuant to the rules
of the NYSE, Target Fund RATES held in "street name" may be voted under certain
conditions by broker-dealer firms and counted for purposes of establishing a
quorum of that Fund if no instructions are received one business day before the
Special Meeting or, if adjourned, one business day before the day to which the
Special Meeting is adjourned. These conditions include, among others, that (i)
at least 30% of the Target Fund's preferred shares outstanding have voted on the
Reorganization and (ii) less than 10% of the Target Fund's preferred shares
outstanding have voted against the Reorganization. In such instance, the broker-
dealer firm will vote such uninstructed Target Fund RATES on the Reorganization
in the same proportion as the votes cast by all holders of Target Fund RATES who
voted on the Reorganization. The Fund will include shares held of record by
broker-dealers as to which such authority has been granted in its tabulation of
the total number of shares present for purposes of determining whether the
necessary quorum of shareholders of the Fund exists.

 
                                        88

 
SHAREHOLDER INFORMATION
 

  As of April 25, 2005, to the knowledge of the Funds, no shareholder owned
beneficially more than 5% of the outstanding common shares of either Fund.

 

  The table below indicates the number of common shares of the Funds owned
beneficially by each trustee that owns shares of the Funds, as of April 25,
2005, and the percentage of such Trustee's Common Shares to the total Common
Shares outstanding for such Fund.

 



                                     TARGET FUND                         ACQUIRING FUND
                          ----------------------------------   ----------------------------------
                                         COMMON SHARES OWNED                  COMMON SHARES OWNED
                                         AS A PERCENTAGE OF                   AS A PERCENTAGE OF
                             COMMON         COMMON SHARES         COMMON         COMMON SHARES
                          SHARES OWNED       OUTSTANDING       SHARES OWNED       OUTSTANDING
                          ------------   -------------------   ------------   -------------------
                                                                  
Arch....................        577              < 1%                   300           < 1%
Dammeyer................     11,300              < 1%                     0             0%
Heagy...................        100              < 1%                     0             0%
Kennedy.................        100              < 1%                     0             0%
Sonnenscehin............        300              < 1%                     0             0%
Whalen..................        863              < 1%                   903           < 1%
Woolsey.................        565              < 1%                   355           < 1%


 

  To the knowledge of the Funds, no executive officers owned, directly or
beneficially, Common Shares of the Funds as of April 25, 2005 and no trustees or
executive officers owned Preferred Shares of the Funds as of that date.

 
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 

  Section 30(f) of the 1940 Act and Section 16(a) of the Securities Exchange Act
of 1934, as amended, require the Funds' trustees, officers, investment adviser,
affiliated persons of the investment adviser and persons who own more than 10%
of a registered class of the Fund's equity securities to file forms with the SEC
and the NYSE, as applicable, reporting their affiliation with the Fund and
reports of ownership and changes in ownership of Fund shares. These persons and
entities are required by SEC regulation to furnish the Fund with copies of all
such forms they file. Based on a review of these forms furnished to each Fund,
each Fund believes that during its last fiscal year, its trustees, officers,
investment adviser and affiliated persons of the investment adviser complied
with the applicable filing requirements except that, due to clerical errors,
Form 4 filings regarding a sales transaction of Target Fund Common Shares and
Acquiring Fund Common Shares by Mr. Whalen, were not filed in a timely manner.

 
SHAREHOLDER PROPOSALS
 

  To be considered for presentation at a shareholder's meeting, rules
promulgated by the SEC generally require that, among other things, a
shareholder's proposal must be received at the offices of the relevant Fund a
reasonable time before solicitation is made. Timely submission of a proposal
does not necessarily mean that

 
                                        89

 

such proposal will be included. Any shareholder who wishes to submit a proposal
for consideration at a meeting of such shareholder's Fund should send such
proposal to the relevant Fund at the principal executive offices of the Fund at
1221 Avenue of the Americas, New York, New York 10020.

 

  Shareholder proposals intended to be presented at the year 2006 Annual Meeting
of the Target Fund pursuant to Rule 14a-8 under the Exchange Act of 1934, as
amended (the "Exchange Act"), must be received by the Target Fund at the Target
Fund's principal executive offices by February 22, 2006. In order for proposals
made outside of Rule 14a-8 under the Exchange Act to be considered "timely"
within the meaning of Rule 14a-4(c) under the Exchange Act, such proposals must
be received by the Target Fund at the Target Fund's principal executive offices
not later than March 26, 2006. If the Reorganization is approved and completed,
the Target Fund will cease to exist and will not hold its 2006 Annual Meeting.
Information regarding the deadline for timely submission of proposals intended
to be presented at the year 2006 Annual Meeting of the Acquiring Fund will be
provided in the proxy statement relating to the 2005 Annual Meeting of the
Acquiring Fund, which is expected to take place later this year.

 

SOLICITATION OF PROXIES

 

  Solicitation of proxies on behalf of the Funds is being made primarily by the
mailing of this Notice and Joint Proxy Statement/Prospectus with its enclosures
on or about May 10, 2005. Shareholders whose shares are held by nominees such as
brokers can vote their proxies by contacting their respective nominee. In
addition to the solicitation of proxies by mail, employees of the Adviser and
its affiliates as well as dealers or their representatives may, without
additional compensation, solicit proxies in person or by mail, telephone,
telegraph, facsimile or oral communication. The Funds have retained
Computershare Fund Services ("CFS") to make telephone calls to shareholders of
the Funds to remind them to vote. CFS will be paid a project management fee as
well as fees charged on a per call basis and certain other expenses. Management
estimates that any such solicitation would cost approximately $39,800 for the
Target Fund and $41,700 for the Acquiring Fund. Proxy solicitation expenses are
an expense of the Reorganization which will be borne by the Target Fund and the
Acquiring Fund in proportion to their projected declines in total operating
expenses as a result of the Reorganization.

 

LEGAL MATTERS

 

  Certain legal matters concerning the federal income tax consequences of the
Reorganization and the issuance of Acquiring Fund Common Shares and Acquiring
Fund APS will be passed upon by Skadden Arps, which serves as counsel to the
Target Funds and the Acquiring Fund. Wayne W. Whalen, a partner of Skadden Arps,
is a trustee of both the Target Funds and the Acquiring Fund.

 
                                        90

 
OTHER MATTERS TO COME BEFORE THE MEETING
 
  The Board of Trustees of each Fund knows of no business other than that
described in this Joint Proxy Statement/Prospectus which will be presented for
consideration at the Special Meeting. If any other matters are properly
presented, it is the intention of the persons named on the enclosed proxy card
to vote proxies in accordance with their best judgment.
 

  Representatives of D&T will attend the Special Meeting, will have the
opportunity to make a statement if they desire to do so and will be available to
answer appropriate questions.

 

  In the event that a quorum is present at the Special Meeting but sufficient
votes to approve any of the proposals are not received, proxies (including
abstentions and broker non-votes) will be voted in favor of one or more
adjournments of the Special Meeting to permit further solicitation of proxies on
the such proposals, provided that the Board of Trustees of each Fund determines
that such an adjournment and additional solicitation is reasonable and in the
interest of shareholders based on a consideration of all relevant factors,
including the percentage of votes then cast, the percentage of negative votes
cast, the nature of the proposed solicitation activities and the nature of the
reasons for such further solicitation. Any such adjournment will require the
affirmative vote of the holders of a majority of the outstanding shares voted at
the session of the Special Meeting to be adjourned.

 

  If you cannot be present in person at the Special Meeting, please fill in,
sign and return the enclosed proxy card promptly or please record your voting
instructions by telephone or via the internet. No postage is necessary if the
enclosed proxy card is mailed in the United States.

 
                                       Lou Anne McInnis
                                       Assistant Secretary
                                       Van Kampen Municipal Income Trust
                                       Van Kampen Trust for Investment
                                         Grade Municipals

May 6, 2005

 

                                        91


 

                                   EXHIBIT I

 

                       DESCRIPTION OF SECURITIES RATINGS

 

  STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's
(S&P) rating symbols and their meanings (as published by S&P) follows:

 

  A S&P issue credit rating is a current opinion of the creditworthiness of an
obligor with respect to a specific financial obligation, a specific class of
financial obligations, or a specific financial program (including ratings on
medium-term note programs and commercial paper programs). It takes into
consideration the creditworthiness of guarantors, insurers, or other forms of
credit enhancement on the obligation and takes into account the currency in
which the obligation is denominated. The issue credit rating is not a
recommendation to purchase, sell, or hold a financial obligation, inasmuch as it
does not comment as to market price or suitability for a particular investor.
Issue credit ratings are based on current information furnished by the obligors
or obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any credit rating and may, on occasion, rely
on unaudited financial information. Credit ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances. Issue credit ratings can be either long-term or
short-term. Short-term ratings are generally assigned to those obligations
considered short term in the relevant market. In the U.S., for example, that
means obligations with an original maturity of no more than 365 days including
commercial paper. Short-term ratings are also used to indicate the
creditworthiness of an obligor with respect to put features on long-term
obligations. The result is a dual rating, in which the short-term ratings
address the put feature, in addition to the usual long-term rating. Medium-term
notes are assigned long-term ratings.

 

                         LONG-TERM ISSUE CREDIT RATINGS

 

  Issue credit ratings are based in varying degrees, on the following
considerations:

 

        1. Likelihood of payment -- capacity and willingness of the obligor to
    meet its financial commitment on an obligation in accordance with the terms
    of the obligation;

 

        2. Nature of and provisions of the obligation; and

 

        3. Protection afforded by, and relative position of, the obligation in
    the event of bankruptcy, reorganization, or other arrangement under the laws
    of bankruptcy and other laws affecting creditors' rights.

 

  The issue rating definitions are expressed in terms of default risk. As such,
they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above.

 
                                       I-1

 

(Such differentiation applies when an entity has both senior and subordinated
obligations, secured and unsecured obligations, or operating company and holding
company obligations.) Accordingly, in the case of junior debt, the rating may
not conform exactly with the category definition.

 

  AAA: An obligation rated "AAA" has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

 

  AA: An obligation rated "AA" differs from the highest-rated obligations only
in small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

 

  A: An obligation rated "A" is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher-
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

 

  BBB: An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

 

                               SPECULATIVE GRADE

 

  BB, B, CCC, CC, C: Obligations rated "BB", "B", "CCC", "CC" and "C" are
regarded as having significant speculative characteristics. "BB" indicates the
least degree of speculation and "C" the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.

 

  BB: An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

 

  B: An obligation rated "B" is more vulnerable to nonpayment than obligations
rated "BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

 

  CCC: An obligation rated "CCC" is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse

 
                                       I-2

 

business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

 

  CC: An obligation rated "CC" is currently highly vulnerable to nonpayment.

 

  C: A subordinated debt or preferred stock obligation rated "C" is CURRENTLY
HIGHLY VULNERABLE to nonpayment. The "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action taken, but payments
on this obligation are being continued. A "C" also will be assigned to a
preferred stock issue in arrears on dividends or sinking fund payments, but that
is currently paying.

 

  D: An obligation rated "D" is in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

 

  Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

 

  r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating.

 

  N.R.: This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular obligation as a matter of policy.

 

                        SHORT-TERM ISSUE CREDIT RATINGS

 

  A S&P short-term rating is a current assessment of the likelihood of timely
payment of debt considered short-term in the relevant market.

 

  Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

 

  A-1: A short-term obligation rated "A-1" is rated in the highest category by
S&P. The obligor's capacity to meet its financial commitment on the obligation
is strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.

 

  A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations

 
                                       I-3

 

in higher rating categories. However, the obligor's capacity to meet its
financial commitment on the obligation is satisfactory.

 

  A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

 

  B: A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.

 

  C: A short-term obligation rated "C" is currently vulnerable to nonpayment and
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

 

  D: A short-term obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.

 

  A short-term rating is not a recommendation to purchase, sell, or hold a
financial obligation, inasmuch as it does not comment as to market price or
suitability for a particular investor. Issue credit ratings are based on current
information furnished by the obligors or obtained by S&P from other sources it
considers reliable. S&P does not perform an audit in connection with any credit
rating and may, on occasion, rely on unaudited financial information. Credit
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances.

 

                                  DUAL RATINGS

 

  S&P assigns "dual" ratings to all debt issues that have a put option or demand
feature as part of their structure. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity and the commercial paper rating symbols for the
put option (for example, "AAA/A-1+"). With short-term demand debt, S&P note
rating symbols are used with the commercial paper rating symbols (for example,
"SP-1+/A-1+").

 
                                       I-4

 

  MOODY'S INVESTORS SERVICE INC. -- A brief description of the applicable
Moody's Investors Service, Inc. (Moody's) rating symbols and their meanings (as
published by Moody's) follows:

 

                          LONG-TERM OBLIGATION RATINGS

 

  Moody's long-term obligation ratings are opinions of the relative credit risk
of fixed-income obligations with an original maturity of one year or more. They
address the possibility that a financial obligation will not be honored as
promised. Such ratings reflect both the likelihood of default and any financial
loss suffered in the event of default.

 

                     MOODY'S LONG-TERM RATING DEFINITIONS:

 

  Aaa: Obligations rated Aaa are judged to be of the highest quality, with
minimal credit risk.

 

  Aa: Obligations rated Aa are judged to be of high quality and are subject to
very low credit risk.

 

  A: Obligations rated A are considered upper-medium grade and are subject to
low credit risk.

 

  Baa: Obligations rated Baa are subject to moderate credit risk. They are
considered medium-grade and as such may possess certain speculative
characteristics.

 

  Ba: Obligations rated Ba are judged to have speculative elements and are
subject to substantial credit risk.

 

  B: Obligations rated B are considered speculative and are subject to high
credit risk.

 

  Caa: Obligations rated Caa are judged to be of poor standing and are subject
to very high credit risk.

 

  Ca: Obligations rated Ca are highly speculative and are likely in, or very
near, default, with some prospect of recovery of principal and interest.

 

  C: Obligations rated C are the lowest rated class of bonds and are typically
in default, with little prospect for recovery of principal or interest.

 

  Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

 
                                       I-5

 

                            MEDIUM-TERM NOTE RATINGS

 

  Moody's assigns long-term ratings to individual debt securities issued from
medium-term note (MTN) programs, in addition to indicating ratings to MTN
programs themselves. Notes issued under MTN programs with such indicated ratings
are rated at issuance at the rating applicable to all pari passu notes issued
under the same program, at the program's relevant indicated rating, provided
such notes do not exhibit any of the characteristics listed below:

 

        1. Notes containing features that link interest or principal to the
    credit performance of any third party or parties

 

        2. Notes allowing for negative coupons, or negative principal

 

        3. Notes containing any provision that could obligate the investor to
    make any additional payments

 

        4. Notes containing provisions that subordinate the claim.

 

  For notes with any of these characteristics, the rating of the individual note
may differ from the indicated rating of the program.

 

  Market participants must determine whether any particular note is rated, and
if so, at what rating level. Moody's encourages market participants to contact
Moody's Ratings Desks or visit www.moodys.com directly if they have questions
regarding ratings for specific notes issued under a medium-term note program.
Unrated notes issued under an MTN program may be assigned an NR symbol.

 

                               SHORT-TERM RATINGS

 

  Moody's short-term ratings are opinions of the ability of issuers to honor
short-term financial obligations. Ratings may be assigned to issuers, short-term
programs or to individual short-term debt instruments. Such obligations
generally have an original maturity not exceeding thirteen months, unless
explicitly noted. Moody's employs the following designations to indicate the
relative repayment ability of rated issuers:

 

                                      P-1

 

  Issuers (or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations.

 

                                      P-2

 

  Issuers (or supporting institutions) rated Prime-2 have a strong ability to
repay short-term debt obligations.

 
                                       I-6

 

                                      P-3

 

  Issuers (or supporting institutions) rated Prime-3 have an acceptable ability
to repay short-term obligations.

 

                                       NP

 

  Issuers (or supporting institutions) rated Not Prime do not fall within any of
the Prime rating categories.

 

  NOTE: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced
by the senior-most long-term rating of the issuer, its guarantor or
support-provider.

 
                                       I-7

 
                         [VAN KAMPEN INVESTMENTS LOGO]

 
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
 

                    SUBJECT TO COMPLETION, DATED MAY 5, 2005

 
                      STATEMENT OF ADDITIONAL INFORMATION
 
          RELATING TO THE ACQUISITION OF THE ASSETS AND LIABILITIES OF
 
                       VAN KAMPEN MUNICIPAL INCOME TRUST
 
                        BY AND IN EXCHANGE FOR SHARES OF
 
                   VAN KAMPEN TRUST FOR INVESTMENT MUNICIPALS
 

                               DATED MAY 6, 2005

 

     This Statement of Additional Information is available to the shareholders
of Van Kampen Municipal Income Trust (the "Target Fund") in connection with a
proposed transaction (the "Reorganization") whereby Van Kampen Trust for
Investment Grade Municipals (the "Acquiring Fund") will acquire substantially
all of the assets and assume substantially all of the liabilities of the Target
Fund in exchange for an equal aggregate value of newly-issued common shares of
beneficial interest, par value $0.01 per share ("Acquiring Fund Common Shares"),
and newly-issued auction preferred shares with a par value of $0.01 per share
and a liquidation preference of $25,000 per share ("Acquiring Fund APS"). The
Target Fund will distribute Acquiring Fund Common Shares to holders of Target
Fund Common Shares and Acquiring Fund APS to holders of Target Fund RATES, and
will then terminate its registration under the Investment Company Act of 1940,
as amended (the "1940 Act"), and dissolve under applicable state law. A copy of
a form of the Agreement and Plan of Reorganization between the Target Fund and
the Acquiring Fund is attached hereto as Appendix A. Unless otherwise defined
herein, capitalized terms have the meanings given to them in the Proxy
Statement/Prospectus.

 

     This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Proxy Statement/Prospectus dated May 6, 2005
relating to the proposed Reorganization of the Target Fund into the Acquiring
Fund. A copy of the Proxy Statement/Prospectus may be obtained, without charge,
by writing to the Van Kampen Client Relations Department at 1 Parkview Plaza,
P.O. Box 5555, Oakbrook Terrace, Illinois 60181-5555 or by calling (800)
341-2929 (TDD users may call (800) 421-2833).

 

     The Acquiring Fund will provide, without charge, upon the written or oral
request of any person to whom this Statement of Additional Information is
delivered, a copy of any and all documents that have been incorporated by
reference in the registration statement of which this Statement of Additional
Information is a part.




 
                               TABLE OF CONTENTS
 


                                                           
Trustees and Officers.......................................   S-3
Investment Advisory Agreement...............................   S-6
Other Agreements............................................   S-8
Fund Management.............................................   S-9
Code of Ethics..............................................  S-11
Portfolio Transactions and Brokerage Allocation.............  S-12
Additional Information Relating to Auction Preferred Shares
  of the Acquiring Fund.....................................  S-14
Other Information...........................................  S-24
Financial Statements........................................  S-24
Pro Forma Financial Statements..............................  S-24
Appendix A--Agreement and Plan of Reorganization............   A-1
Appendix B--Certificate of Vote of Trustees Establishing
  Preferred Shares..........................................   B-1
Appendix C--Annual Report of the Acquiring Fund.............   C-1
Appendix D--Annual Report of the Target Fund................   D-1
Appendix E--Semiannual Report of the Target Fund............   E-1
Appendix F--Proxy Voting Policy and Procedures..............   F-1
Appendix G--Pro Forma Financial Statements..................   G-1


 
                                       S-2

 
                             TRUSTEES AND OFFICERS
 
GENERAL
 

     The business and affairs of each Fund are managed under the direction of
each Fund's Board of Trustees and each Fund's officers appointed by the Board of
Trustees. The Acquiring Fund and Target Fund share the same Board of Trustees
and executive officers. Information regarding the trustees and executive
officers of the Target Fund and the Acquiring Fund, including their principal
occupations during the last five years, other directorships held by trustees and
certain affiliates, can be found in the Joint Proxy Statement/Prospectus under
"Proposal 2: Election of Target Fund Trustees." The term "Fund Complex" includes
each of the investment companies advised by the Adviser as of the date of this
Statement of Additional Information.

 
COMPENSATION
 

     Each trustee/director/managing general partner (hereinafter referred to in
this section as "trustee") who is not an affiliated person (as defined in the
1940 Act) of Van Kampen Investments, the Adviser or Van Kampen Funds Inc. (each
a "Non-Affiliated Trustee") is compensated by an annual retainer and meeting
fees for services to funds in the Fund Complex. Each fund in the Fund Complex
(except Van Kampen Exchange Fund) provides a deferred compensation plan to its
Non-Affiliated Trustees that allows trustees to defer receipt of their
compensation until retirement and earn a return on such deferred amounts.
Amounts deferred are retained by the Funds and earn a rate of return determined
by reference to the return on the common shares of the Funds or other funds in
the Fund Complex as selected by the respective Non-Affiliated Trustee. To the
extent permitted by the 1940 Act, the Funds may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Funds. Deferring compensation has the same economic effect as if
the Non-Affiliated Trustee reinvested his or her compensation into the funds.
Each fund in the Fund Complex (except Van Kampen Exchange Fund) provides a
retirement plan to its Non-Affiliated Trustees that provides Non-Affiliated
Trustees with compensation after retirement, provided that certain eligibility
requirements are met. Under the retirement plan, a Non-Affiliated Trustee who is
receiving compensation from the Funds prior to such Non-Affiliated Trustee's
retirement, has at least 10 years of service (including years of service prior
to adoption of the retirement plan) and retires at or after attaining the age of
60, is eligible to receive a retirement benefit per year for each of the 10
years following such retirement from the Funds. Non-Affiliated Trustees retiring
prior to the age of 60 or with fewer than 10 years but more than 5 years of
service may receive reduced retirement benefits from the Funds.

 
                                       S-3

 

     Additional information regarding compensation and benefits for trustees of
the Target Fund is included in the Joint Proxy Statement/Prospectus under
"Proposal 2: Election of Target Fund Trustees."

 

     Additional information regarding compensation and benefits for trustees of
the Acquiring Fund set forth below for the periods described in the notes
accompanying the table.

 
                               COMPENSATION TABLE
 



                                                                  Fund Complex
                                         --------------------------------------------------------------
                         Aggregate       Aggregate Pension   Aggregate Estimated
                        Compensation       or Retirement       Maximum Annual
                          from the       Benefits Accrued     Benefits from the     Total Compensation
                         Acquiring          as Part of          Fund Complex       before Deferral from
       Name(1)            Fund(2)           Expenses(3)      Upon Retirement(4)      Fund Complex(5)
       -------        ----------------   -----------------   -------------------   --------------------
                                                                       
INDEPENDENT TRUSTEES
David C. Arch              $5,706            $ 35,277             $147,500               $192,530
Jerry D. Choate             7,974              82,527              126,000                200,002
Rod Dammeyer                5,712              63,782              147,500                208,000
Linda Hutton Heagy          7,773              24,465              142,500                184,784
R. Craig Kennedy            7,974              16,911              142,500                200,002
Howard J Kerr               5,912             140,743              146,250                208,000
Jack E. Nelson              7,794              97,294              109,500                200,002
Hugo F. Sonnenschein        5,912              64,476              147,500                208,000
Suzanne H. Woolsey          7,974              58,450              142,500                200,002

INTERESTED TRUSTEE
Wayne W. Whalen(1)          5,912              72,001              147,500                208,000


 
------------------------------------
 

(1) Trustees not eligible for compensation are not included in the Compensation
    Table. Mr. Whalen is an "interested person" (within the meaning of Section
    2(a)(19) of the 1940 Act) of the Fund and certain other funds in the Fund
    Complex. Theodore A. Myers retired from the Board of Trustees of the
    Acquiring Fund and other funds in the Fund Complex as of December 31, 2003.
    J. Miles Branagan retired as a member of the Board of Trustees of the
    Acquiring Fund and other funds in the Fund Complex on December 31, 2004.

 

(2) The amounts shown in this column represent the aggregate compensation before
    deferral with respect to the Acquiring Fund's fiscal year ended October 31,
    2004. The following Trustees deferred compensation from the Acquiring Fund
    during the fiscal year ended October 31, 2004: Mr. Choate, $7,974; Mr.
    Dammeyer, $5,712; Ms. Heagy, $7,773; Mr. Nelson, $7,974; Mr. Sonnenschein,
    $5,912; and Mr. Whalen, $5,912. The cumulative deferred compensation
    (including interest) accrued with respect to each trustee, including former
    trustees, from the Fund as of December 31, 2004 is as follows: Mr. Choate,
    $10,447; Mr. Dammeyer, $71,918; Ms. Heagy, $10,380; Mr. Kerr, $30,633; Mr.
    Sonnenschein, $62,616; and Mr. Whalen, $64,217. The deferred compensation
    plan is described above the Compensation Table.

 
(3) The amounts shown in this column represent the sum of the retirement
    benefits accrued by the operating funds in the Fund Complex for each of the
    trustees for the
 
                                       S-4

 
funds' respective fiscal years ended in 2004. The retirement plan is described
above the Compensation Table.
 
(4) For each trustee, this is the sum of the estimated maximum annual benefits
    payable by the funds in the Fund Complex for each year of the 10-year period
    commencing in the year of such person's anticipated retirement. The
    retirement plan is described above the Compensation Table.
 
(5) The amounts shown in this column represent the aggregate compensation paid
    by all of the funds in the Fund Complex as of December 31, 2004 before
    deferral by the trustees under the deferred compensation plan. Because the
    funds in the Fund Complex have different fiscal year ends, the amounts shown
    in this column are presented on a calendar year basis.
 
BOARD COMMITTEES
 

     The Board of Trustees of each Fund has the same standing committees.
Information regarding the standing committees, including the members and
responsibilities of each committee is included in the Joint Proxy
Statement/Prospectus under "Proposal 2: Election of Target Fund Trustees."

 

     During the last fiscal year of the Acquiring Fund, the Board of Trustees
held 16 meetings. During the last fiscal year of the Acquiring Fund, the audit
committee held 5 meetings, the brokerage and services committee held 4 meetings
and the governance committee held 5 meetings. The number of meetings held by the
Board of Trustees of the Target Fund and each committee thereof during the last
fiscal year of the Target Fund is included in the Joint Proxy
Statement/Prospectus under "Proposal 2: Election of Target Fund Trustees."

 
SHARE OWNERSHIP
 

     Excluding any deferred compensation balances as described in the
Compensation Table, as of December 31, 2004, the most recently completed
calendar year prior to the date of this Statement of Additional Information,
each trustee of the Acquiring Fund beneficially owned equity securities of the
Acquiring Fund and of all of the funds in the Fund Complex overseen by the
trustee in the dollar range amounts specified below.

 
                2004 TRUSTEE BENEFICIAL OWNERSHIP OF SECURITIES
 
INDEPENDENT TRUSTEES
 



                                                                              TRUSTEE
                                     -----------------------------------------------------------------------------------------
                                       ARCH    CHOATE   DAMMEYER   HEAGY    KENNEDY    KERR    NELSON   SONNENSCHEIN  WOOLSEY
                                     --------  -------  --------  --------  --------  -------  -------  ------------  --------
                                                                                           
Dollar range of equity securities
 in the Acquiring Fund.............    $1-      none      over      none      none     none     none        none        $1-
                                     $10,000            $100,000                                                      $10,000
Aggregate dollar range of equity
 securities in all registered
 investment companies overseen by
 trustee in the Fund Complex.......  $50,001-    $1-      over    $50,001-    over      $1-      $1-      $10,001-    $10,001-
                                     $100,000  $10,000  $100,000  $100,000  $100,000  $10,000  $10,000    $50,000     $50,000


 
                                       S-5

 
INTERESTED TRUSTEES
 



                                                                        TRUSTEE
                                                              ----------------------------
                                                               MERIN     POWERS    WHALEN
                                                              --------  --------  --------
                                                                         
Dollar range of equity securities in the Acquiring Fund.....    none      none    $10,001-
                                                                                  $50,000
Aggregate dollar range of equity securities in all
 registered investment companies overseen by trustee in the
 Fund Complex...............................................    over      over      over
                                                              $100,000  $100,000  $100,000


 

     Including deferred compensation balances (which are amounts deferred and
thus retained by the Fund as described in the Compensation Table), as of
December 31, 2004, the most recently completed calendar year prior to the date
of this Statement of Additional Information, each trustee of the Acquiring Fund
had in the aggregate, combining beneficially owned equity securities and
deferred compensation of the Acquiring Fund and of all of the funds in the Fund
Complex overseen by the trustee, the dollar range of amounts specified below.

 
          2004 TRUSTEE BENEFICIAL OWNERSHIP AND DEFERRED COMPENSATION
 
INDEPENDENT TRUSTEES
 



                                                                            TRUSTEE
                                  --------------------------------------------------------------------------------------------
                                    ARCH     CHOATE   DAMMEYER   HEAGY    KENNEDY     KERR     NELSON   SONNENSCHEIN  WOOLSEY
                                  --------  --------  --------  --------  --------  --------  --------  ------------  --------
                                                                                           
Dollar range of equity
 securities and deferred
 compensation in the Acquiring
 Fund...........................    $1-       $1-       over      $1-       none      none      $1-         $1-         $1-
                                  $10,000   $10,000   $100,000  $10,000                       $10,000     $10,000     $10,000
Aggregate dollar range of equity
 securities and deferred
 compensation in all registered
 investment companies overseen
 by trustee in Fund Complex.....  $50,001-    over      over      over      over      over      over        over      $10,001-
                                  $100,000  $100,000  $100,000  $100,000  $100,000  $100,000  $100,000    $100,000    $50,000


 
INTERESTED TRUSTEES
 



                                                      TRUSTEE
                                  -----------------------------------------------
                                      MERIN          POWERS           WHALEN
                                      -----          ------           ------
                                                         
Dollar range of equity
 securities and deferred
 compensation in the Acquiring
 Fund...........................      none            none           $10,001-
                                                                      $50,000
Aggregate dollar range of equity
 securities and deferred
 compensation in all registered
 investment companies overseen
 by trustee in the Fund
 Complex........................      over            over             over
                                    $100,000        $100,000         $100,000


 

     Share ownership and deferred compensation information for the trustees of
the Target Fund is included in the Joint Proxy Statement/Prospectus under
"Proposal 2: Election of Target Fund Trustees."

 

                         INVESTMENT ADVISORY AGREEMENT

 

     Each Fund and the Adviser are parties to an investment advisory agreement
(each an "Advisory Agreement"). Under an Advisory Agreement, a Fund retains the
Adviser to manage the investment of such Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate
strategy and implement such Fund's

 
                                       S-6

 

investment objective. The Adviser also furnishes offices, necessary facilities
and equipment, provides administrative services to such Fund, renders periodic
reports to such Fund's Board of Trustees and permits its officers and employees
to serve without compensation as trustees or officers of such Fund if elected to
such positions. A Fund, however, bears the costs of its day-to-day operations,
including auction agent fees, fees for broker-dealers participating in auctions
of such Fund's preferred shares, custodian fees, legal and independent
registered public accounting firm fees, the costs of reports and proxies to
shareholders, compensation of trustees of such Fund (other than those who are
affiliated persons of Van Kampen Investments, the Adviser or Van Kampen Funds
Inc.) and all other ordinary business expenses not specifically assumed by the
Adviser. The Advisory Agreement also provides that the Adviser shall not be
liable to a Fund for any actions or omissions in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its obligations and
duties under the Advisory Agreement.

 

     Each Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Board of Trustees or (ii) by a
vote of a majority of a Fund's outstanding voting securities and (b) by a vote
of a majority of the trustees who are not parties to the agreement or interested
persons of any such party by votes cast in person at a meeting called for such
purpose. Each Advisory Agreement provides that it shall terminate automatically
if assigned and that it may be terminated without penalty by either party on 60
days' written notice.

 

     In approving an Advisory Agreement, the Board of Trustees, including the
non-interested trustees, considered the nature, quality and scope of the
services provided by the Adviser, the performance, fees and expenses of a Fund
compared to other similar investment companies, the Adviser's expenses in
providing the services and the profitability of the Adviser and its affiliated
companies. The Board of Trustees also reviewed the benefit to the Adviser of
receiving research paid for by Fund assets and the propriety of such an
arrangement and evaluated other benefits the Adviser derives from its
relationship with the Fund. The Board of Trustees considered the extent to which
any economies of scale experienced by the Adviser are shared with a Fund's
shareholders, and the propriety of alternative breakpoints in a Fund's advisory
fee schedule. The Board of Trustees considered comparative advisory fees of a
Fund and other investment companies at different asset levels. The Board of
Trustees reviewed reports from third parties about the foregoing factors and
considered changes, if any, in such items since its previous approval. The Board
of Trustees discussed the financial strength of the Adviser and its affiliated
companies and the capability of the personnel of the Adviser. The Board of
Trustees reviewed the statutory and regulatory requirements for approval of
advisory agreements. The Board of Trustees, including the non-interested
trustees, evaluated all of the foregoing and determined, in the exercise of its
business judgment, that approval of each Advisory Agreement was in the best
interests of the respective Fund and its shareholders.

 
ADVISORY FEES
 

     The Adviser received the approximate advisory fees from each Fund as
follows:

 



                                                    FISCAL YEAR ENDED OCTOBER 31,
                                                 ------------------------------------
                                                    2004         2003         2002
                                                 ----------   ----------   ----------
                                                                  
Acquiring Fund.................................  $4,365,600   $4,365,300   $4,360,800


 
                                       S-7

 



                                                      FISCAL YEAR ENDED JUNE 30,
                                                 ------------------------------------
                                                    2004         2003         2002
                                                 ----------   ----------   ----------
                                                                  
Target Fund....................................  $2,777,232   $2,784,100   $2,683,234


 

                                OTHER AGREEMENTS

 

THE ADMINISTRATION AGREEMENT

 

     The administrative services provided by Van Kampen Funds Inc. (the
"Administrator") include record keeping and reporting responsibilities with
respect to the Acquiring Fund's portfolio and preferred shares and providing
certain services to shareholders. Prior to June 1, 2004, the Acquiring Fund paid
the Administrator a monthly administrative fee at the annual rate of 0.05% of
the average net assets of the Acquiring Fund. Effective June 1, 2004, the
administrative fee was reduced from 0.05% to 0.00%.

 

ADMINISTRATIVE FEES

 

     The Adviser received the approximate administrative fees from the Acquiring
Fund as follows:

 



                                                      FISCAL YEAR ENDED OCTOBER 31,
                                                      ------------------------------
                                                        2004       2003       2002
                                                      --------   --------   --------
                                                                   
Acquiring Fund......................................  $212,800   $366,300   $940,300


 

ACCOUNTING SERVICES AGREEMENT

 

     The Fund has entered into an accounting services agreement pursuant to
which the Adviser provides accounting services to the Fund supplementary to
those provided by the custodian. Such services are expected to enable the Fund
to more closely monitor and maintain its accounts and records. The Fund pays all
costs and expenses related to such services, including all salary and related
benefits of accounting personnel, as well as the overhead and expenses of office
space and the equipment necessary to render such services. The Fund shares
together with the other Van Kampen funds in the cost of providing such services
with 25% of such costs shared proportionately based on the respective number of
classes of securities issued per fund and the remaining 75% of such costs based
proportionately on the respective net assets per fund.

 

ACCOUNTING SERVICES FEES

 

     The Adviser received the approximate accounting services fees from each
Fund as follows:

 



                                                         FISCAL YEAR ENDED OCTOBER 31,
                                                         ------------------------------
                                                           2004       2003       2002
                                                         --------   --------   --------
                                                                      
Acquiring Fund.........................................  $36,100    $40,900    $42,300


 



                                                         FISCAL YEAR ENDED JUNE 30,
                                                         ---------------------------
                                                          2004      2003      2002
                                                         -------   -------   -------
                                                                    
Target Fund............................................  $25,665   $31,141   $30,475


 
                                       S-8

 

LEGAL SERVICES AGREEMENT

 

     The Fund and certain other Van Kampen funds have entered into legal
services agreements pursuant to which Van Kampen Investments provides legal
services, including without limitation; accurate maintenance of each fund's
minute books and records, preparation and oversight of each fund's regulatory
reports and other information provided to shareholders, as well as responding to
day-to-day legal issues on behalf of the funds. Payment by the funds for such
services is made on a cost basis for the salary and salary-related benefits,
including but not limited to bonuses, group insurance and other regular wages
for the employment of personnel. Other funds distributed by the Distributor also
receive legal services from Van Kampen Investments. Of the total costs for legal
services provided to the funds distributed by the Distributor, one half of such
costs are allocated equally to each fund and the remaining one half of such
costs are allocated to specific funds based on monthly time records.

 

LEGAL SERVICES FEES

 

     The Adviser received the approximate legal services fees from each Fund as
follows:

 



                                                         FISCAL YEAR ENDED OCTOBER 31,
                                                         ------------------------------
                                                           2004       2003       2002
                                                         --------   --------   --------
                                                                      
Acquiring Fund.........................................  $25,500    $22,400    $16,400


 



                                                         FISCAL YEAR ENDED JUNE 30,
                                                         ---------------------------
                                                          2004      2003      2002
                                                         -------   -------   -------
                                                                    
Target Fund............................................  $20,778   $15,832   $22,612


 

                                FUND MANAGEMENT

 
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
 

     As of December 31, 2004, Thomas Byron managed 6 registered investment
companies with a total of $2.48 billion in assets; 0 pooled investment vehicles
other than registered investment companies; and 0 other accounts.

 

     As of December 31, 2004, Robert Wimmel managed 39 registered investment
companies with a total of $11.35 billion in assets; 0 pooled investment vehicles
other than registered investment companies; and 0 other accounts.

 

     As of December 31, 2004, John Reynoldson managed 36 registered investment
companies with a total of $8.25 billion in assets; 0 pooled investment vehicles
other than registered investment companies; and 295 other accounts with a total
of $239 million in assets.

 

     Because the portfolio managers manage assets for other investment
companies, pooled investment vehicles, and/or other accounts (including
institutional clients, pension plans and certain high net worth individuals),
there may be an incentive to favor one client over another resulting in
conflicts of interest. For instance, the Adviser may receive fees from certain
accounts that are higher than the fee it receives from the Funds, or it may
receive

 
                                       S-9

 

a performance-based fee on certain accounts. In those instances, the portfolio
managers may have an incentive to favor the higher and/or performance-based fee
accounts over the Funds. The portfolio managers of the Funds do not currently
manage assets for other investment companies, pooled investment vehicles or
other accounts that charge a performance fee. The Adviser has adopted trade
allocation and other policies and procedures that it believes are reasonably
designed to address these and other conflicts of interest.

 

PORTFOLIO MANAGER COMPENSATION STRUCTURE

 

     Portfolio managers receive a combination of base compensation and
discretionary compensation, comprised of a cash bonus and several deferred
compensation programs described below. The methodology used to determine
portfolio manager compensation is applied across all accounts managed by the
portfolio manager.

 

     BASE SALARY COMPENSATION.  Generally, portfolio managers receive base
salary compensation based on the level of their position with the Adviser.

 

     DISCRETIONARY COMPENSATION.  In addition to base compensation, portfolio
managers may receive discretionary compensation.

 

     Discretionary compensation can include:

 

     - Cash Bonus;

 

     - Morgan Stanley's Equity Incentive Compensation Program (EICP) awards -- a
       mandatory program that defers a portion of discretionary year-end
       compensation into restricted stock units or other awards based on Morgan
       Stanley common stock that are subject to vesting and other conditions;

 

     - Investment Management Deferred Compensation Plan (IMDCP) awards -- a
       mandatory program that defers a portion of discretionary year-end
       compensation and notionally invests it in designated funds advised by the
       Adviser or its affiliates. The award is subject to vesting and other
       conditions. Portfolio managers must notionally invest a minimum of 25% to
       a maximum of 50% of the IMDCP deferral into a combination of the
       designated funds they manage that are included in the IMDCP fund menu;

 

     - Select Employees' Capital Accumulation Program (SECAP) awards -- a
       voluntary program that permits employees to elect to defer a portion of
       their discretionary year-end compensation and notionally invest the
       deferred amount across a range of designated investment funds, including
       funds advised by the Adviser or its affiliates, and

 

     - Voluntary Equity Incentive Compensation Program (VEICP) awards -- a
       voluntary program that permits employees to elect to defer a portion of
       their discretionary year-end compensation to invest in Morgan Stanley
       stock units.

 
                                       S-10

 

     Several factors determine discretionary compensation, which can vary by
portfolio management team and circumstances. In order of relative importance,
these factors include:

 

     - Investment performance. A portfolio manager's compensation is linked to
       the pre-tax investment performance of the accounts managed by the
       portfolio manager. Investment performance is calculated for one-, three-
       and five-year periods measured against a fund's primary benchmark (as set
       forth in the fund's prospectus), indices and/or peer groups. Generally,
       the greatest weight is placed on the three- and five-year periods.

 

     - Revenues generated by the investment companies, pooled investment
       vehicles and other accounts managed by the portfolio manager.

 

     - Contribution to the business objectives of the Adviser.

 

     - The dollar amount of assets managed by the portfolio manager.

 

     - Market compensation survey research by independent third parties.

 

     - Other qualitative factors, such as contributions to client objectives.

 

     - Performance of Morgan Stanley and Morgan Stanley Investment Management,
       and the overall performance of the Global Investor Group, a department
       within Morgan Stanley Investment Management that includes all investment
       professionals.

 

     Occasionally, to attract new hires or to retain key employees, the total
amount of compensation will be guaranteed in advance of the fiscal year end
based on current market levels. In limited circumstances, the guarantee may
continue for more than one year. The guaranteed compensation is based on the
same factors as those comprising overall compensation described above.

 

SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS

 

     As of each Fund's fiscal year end, none of the portfolio managers owned
equity securities of either Fund.

 

                                 CODE OF ETHICS

 

     The Funds and the Adviser have adopted a Code of Ethics (the "Code of
Ethics") that sets forth general and specific standards relating to the
securities trading activities of their employees. The Code of Ethics does not
prohibit employees from acquiring securities that may be purchased or held by
the Funds, but is intended to ensure that all employees conduct their personal
transactions in a manner that does not interfere with the portfolio transactions
of the Funds or other Van Kampen funds, or that such employees take unfair
advantage of their relationship with the Funds. Among other things, the Code of
Ethics prohibits certain types of transactions absent prior approval, imposes
various trading restrictions (such as time periods during which personal
transactions may or may not be made) and requires quarterly reporting of
securities transactions and other reporting matters. All reportable securities
transactions and other required reports are to be reviewed by appropriate
personnel for compliance with the Code of Ethics. Additional restrictions

 
                                       S-11

 

apply to portfolio managers, traders, research analysts and others who may have
access to nonpublic information about the trading activities of the Funds or
other Van Kampen funds or who otherwise are involved in the investment advisory
process. Exceptions to these and other provisions of the Code of Ethics may be
granted in particular circumstances after review by appropriate personnel.

 
                PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
 

     The Adviser is responsible for decisions to buy and sell securities for the
Funds, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of each Fund's
portfolio business, the policies and practices in this regard are subject to
review by each Fund's Board of Trustees.

 

     As most transactions made by a Fund are principal transactions at net
prices, a Fund generally incurs little or no brokerage costs. The portfolio
securities in which a Fund invests are normally purchased directly from the
issuer or in the over-the-counter market from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers include a spread or markup to the dealer
between the bid and asked price. Sales to dealers are effected at bid prices. A
Fund may also purchase certain money market instruments directly from an issuer,
in which case no commissions or discounts are paid, or may purchase and sell
listed securities on an exchange, which are effected through brokers who charge
a commission for their services.

 

     The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to each Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker-dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser and still must be analyzed and reviewed
by its staff, the receipt of research information is not expected to reduce its
expenses materially. The investment advisory fee is not reduced as a result of
the Adviser's receipt of such research services. Services provided may include
(a) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; (b) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and

                                       S-12

 

(c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement and custody). Research services furnished
by firms through which a Fund effects its securities transactions may be used by
the Adviser in servicing all of its advisory accounts; not all of such services
may be used by the Adviser in connection with a Fund.

 

     The Adviser also may place portfolio transactions, to the extent permitted
by law, with brokerage firms affiliated with a Fund and the Adviser if it
reasonably believes that the quality of execution and the commission are
comparable to that available from other qualified firms.

 

     The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for a Fund and another advisory account. In
some cases, this procedure could have an adverse effect on the price or the
amount of securities available to a Fund. In making such allocations among a
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of such Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.

 

     Certain broker-dealers, through which a Fund may effect securities
transactions, are affiliated persons (as defined in the 1940 Act) of a Fund or
affiliated persons of such affiliates, including Morgan Stanley or its
subsidiaries. Each Fund's Board of Trustees has adopted certain policies
incorporating the standards of Rule 17e-1 issued by the SEC under the 1940 Act
which require that the commissions paid to affiliates of the Fund must be
reasonable and fair compared to the commissions, fees or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time.
The rule and procedures also contain review requirements and require the Adviser
to furnish reports to the trustees and to maintain records in connection with
such reviews. After consideration of all factors deemed relevant, the trustees
will consider from time to time whether the advisory fee for each Fund will be
reduced by all or a portion of the brokerage commission paid to affiliated
brokers.

 
                                       S-13

 

     Unless otherwise disclosed below, a Fund paid no commissions to affiliated
brokers during the last three fiscal years. Each Fund paid the following
commissions to brokers during the fiscal years shown:

 



                                                           AFFILIATED BROKERS
                                           ALL BROKERS   MORGAN STANLEY DW INC.
                                           -----------   ----------------------
                                                   
COMMISSIONS PAID:
  Acquiring Fund
     Fiscal year ended October 31,
       2004..............................    $22,525               $0
     Fiscal year ended October 31,
       2003..............................    $28,760               $0
     Fiscal year ended October 31,
       2002..............................    $ 4,416               $0
  Target Fund
     Fiscal year ended June 30, 2004.....    $ 2,345               $0
     Fiscal year ended June 30, 2003.....    $ 6,687               $0
     Fiscal year ended June 30, 2002.....    $     0               $0
FISCAL YEAR 2004 PERCENTAGES:
  Acquiring Fund
     Commissions with affiliate to total
       commissions....................................              0%
     Value of brokerage transactions with affiliate to
       Total transactions.............................              0%
  Target Fund
     Commissions with affiliate to total
       commissions....................................              0%
     Value of brokerage transactions with affiliate to
       Total transactions.............................              0%


 

     During the last fiscal year of each Fund, no Fund paid brokerage
commissions to brokers selected primarily on the basis of research services
provided to the Adviser.

 
                             ADDITIONAL INFORMATION
           RELATING TO AUCTION PREFERRED SHARES OF THE ACQUIRING FUND
 

     The following is a brief description of the terms of the Acquiring Fund APS
prior to the completion of the Reorganization. Throughout this section, the
Acquiring Fund is referred to as the "Fund" and Acquiring Fund APS are referred
to as "APS." This description does not purport to be complete and is subject to
and qualified in its entirety by reference to the Acquiring Fund's Declaration
of Trust, including the Certificate of Vote establishing and fixing the rights
and preferences of the Acquiring Fund APS, attached hereto as Appendix B (the
"Certificate of Vote" and together, with the Acquiring Fund's Declaration of
Trust, the "APS Provisions"). For purposes of this section, capitalized terms
not otherwise defined herein have the meanings ascribed to them in the
Certificate of Vote. Acquiring Fund APS issued in connection with the
Reorganization will be governed by the Certificate of Vote of the Acquiring
Fund, which, upon completion of the Reorganization, will be amended to reflect
the creation of new series and the issuance of additional Acquiring Fund APS.

                                       S-14

 

GENERAL



 

     The Declaration of Trust currently authorizes the issuance of an unlimited
number of shares of Common Shares and 100,000,000 Preferred Shares of beneficial
interest, par value $.01 per share (which may be issued from time to time in
such series and with such designations, preferences and other rights,
qualifications, limitations and restrictions as are determined in a resolution
of the Board of Trustees of the Fund). Under the APS Provisions, the Fund is
currently authorized to issue up to 10,600 APS. All shares of each series of APS
will have a liquidation preference of $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared). The shares
of each series of APS will rank on a parity with shares of any other series of
Preferred Shares (including any other series of APS) as to the payment of
dividends and the distribution of assets upon liquidation. So long as either
Moody's or S&P is rating the shares of any series of APS, the Fund may, without
the vote of the holders of APS, issue additional series of Preferred Shares,
including APS, subject to applicable provisions of the 1940 Act and to
continuing compliance with the 1940 Act APS Asset Coverage and the APS Basic
Maintenance Amount, provided that (1) any such additional series ranks on a
parity with the then Outstanding APS as to the payment of dividends and the
distribution of assets upon liquidation and (2) the Fund obtains written
confirmation from Moody's or S&P, or both, as the case may be, that the issuance
of any such additional series would not impair the rating then assigned by such
rating agency to the APS.

 

DIVIDENDS AND DIVIDEND PERIODS

 

     Dividends on shares of each series of APS will accumulate at the Applicable
Rate per annum will be payable, when, as and if declared by the Board of
Trustees of the Fund out of funds legally available therefor. Dividend Periods
shall be 28 days for each series of APS. The Fund, subject to certain
conditions, may designate any Dividend Period as a Special Dividend Period,
which shall be such number of consecutive days or whole years as the Board of
Trustees shall specify, subject to certain exceptions.

 
     Dividends will be paid through the Securities Depository on each Dividend
Payment Date in accordance with its normal procedures, which now provide for it
to distribute dividends in next-day funds to Agent Members, who in turn are
expected to distribute such dividend payments to the persons for whom they are
acting as agents. Each of the initial Broker Dealers, however, has indicated to
the Fund that such Broker-Dealer or one of its affiliates will make such
dividend payments available in same-day funds on each Dividend Payment Date to
customers that use such Broker-Dealer or such affiliate as Agent Member.
 
     For each Dividend Period, the dividend rate for shares of each series of
APS will be the Applicable Rate per annum that the Auction Agent advises the
Fund results from an Auction, except as provided below. The dividend rate that
results from an Auction for a series of APS will not be greater than the Maximum
Rate, which is:
 
          (i) in the case of any Auction Date which is not the Auction Date
     immediately prior to the first day of any proposed Special Dividend Period,
     the product of (1) the "AA" Composite Commercial Paper Rate on such Auction
     Date for the next Rate Period of such series and (2) the Applicable
     Percentage on such Auction Date, unless such series of APS has or had a
     Special Dividend Period (other than a Special
 
                                       S-15

 
     Dividend Period of 28 days or less) and an Auction at which Sufficient
     Clearing Bids existed has not yet occurred for a Minimum Dividend Period
     for such series (28 days for each series of APS) after such Special
     Dividend Period, in which case the higher of:
 
             (A) the dividend rate on shares of such series of APS for the
        then-ending Rate Period, and
 
             (B) the product of (x) the higher of (I) the "AA" Composite
        Commercial Paper Rate on such Auction Date for the then-ending Rate
        Period of such series, if such Rate Period is less than one year, or the
        Treasury Rate on such Auction Date for such Rate Period, if such Rate
        Period is one year or longer, and (II) the "AA" Composite Commercial
        Paper Rate on such Auction Date for such Special Dividend Period of such
        series, if such Special Dividend Period is less than one year, or the
        Treasury Rate on such Auction Date for such Special Dividend Period, if
        such Special Dividend Period is one year or longer and (y) the
        Applicable Percentage on such Auction Date; or
 
          (ii) in the case of any Auction Date which is the Auction Date
     immediately prior to the first day of any proposed Special Dividend Period
     of more than 28 days, the product of (1) the highest of (x) the "AA"
     Composite Commercial Paper Rate on such Auction Date for the then-ending
     Rate Period of such series, if such Rate Period is less than one year, or
     the Treasury Rate on such Auction Date for such Rate Period, if such Rate
     Period is one year or longer, (y) the "AA" Composite Commercial Paper Rate
     on such Auction Date for the Special Dividend Period of such series for
     which the Auction is being held if such Special Dividend Period is less
     than one year or the Treasury Rate on such Auction Date for the Special
     Dividend Period for which the Auction is being held if such Special
     Dividend Period is one year or longer, and (z) the "AA" Composite
     Commercial Paper Rate on such Auction Date for a Minimum Dividend Period
     and (2) the Applicable Percentage on such Auction Date.
 
     The applicable "AA" Composite Commercial Paper Rates and Treasury Rates
will be the rates announced on such Auction Date for the Business Day
immediately prior to such Auction Date.
 
     The "Applicable Percentage" will be a percentage, determined as set forth
below, based on the prevailing rating of the APS in effect at the close of
business on the Business Day next preceding such Auction Date:
 


                                                             APPLICABLE
PREVAILING RATING                                            PERCENTAGE
-----------------                                            ----------
                                                          
"aa3"/AA- or higher.......................................      110%
"a3"/A-...................................................      125%
"baa3"/BBB-...............................................      150%
"ba3"/BB-.................................................      200%
Below "ba3"/BB-...........................................      250%

 
                                       S-16

 
provided, however, that in the event the Fund has notified the Auction Agent of
its intent to allocate income that is taxable for federal income tax purposes to
the APS prior to any Auction, for purposes of determining the Maximum Rate with
respect to such Auction the Applicable Percentage in the foregoing table shall
be divided by the quantity 1 minus the maximum marginal regular federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular federal corporate income tax rate, whichever is greater; provided,
however, that the Applicable Percentage shall be divided in the foregoing manner
only to the extent that the portion of the dividend on the APS for such Rate
Period that represents the allocation of taxable income to the APS. If the APS
are rated by only one rating agency, such rating will be the prevailing rating.
If the ratings for the APS are split between two of the foregoing categories,
the lower rating will determine the prevailing rating.
 
     If an Auction for any Dividend Period of any series of APS is not held for
any reason or if the Fund fails to pay in a timely manner to the Auction Agent
the full amount of any dividend on, or Redemption Price of, shares of any series
of APS and such failure has not been cured as set forth below prior to any
succeeding Dividend Period thereof, then, subject to the next paragraph, the
dividend rate on the shares of such series for any such Dividend Period will be
the Maximum Rate for such series on the Auction Date for such Dividend Period.
 
     If the Fund fails to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the Redemption Price of, any shares of any series
of APS during any Rate Period thereof (other than any Special Dividend Period
consisting of four or more Dividend Periods or any Rate Period succeeding any
Special Dividend Period consisting of four or more Dividend Periods during which
such a failure occurred that has not been cured), and, prior to 12:00 Noon on
the third Business Day next succeeding the date on which such failure occurred,
such failure shall not have been cured or the Fund shall not have paid a late
charge, then Auctions for such series will be suspended until such failure is so
cured and the dividend rate for such shares of APS for each Dividend Period
thereof commencing after such failure to and including the Dividend Period, if
any, during which such failure is so cured shall be a rate per annum equal to
the Maximum Rate on the Auction Date for each such Dividend Period (but with the
prevailing rating for such shares, for purposes of determining such Maximum
Rate, being deemed to be "Below "ba3"/BB-"). If the Fund fails to pay in a
timely manner to the Auction Agent the full amount of any dividend on, or the
Redemption Price of, any shares of any series of APS during a Special Dividend
Period thereof consisting of four or more Dividend Periods, or during any
Dividend Period thereof succeeding any Special Dividend Period consisting of
four or more Dividend Periods during which such a failure occurred that has not
been cured, and such failure shall not have been cured, then Auctions for such
series will be suspended until such failure is so cured and the dividend rate
for such shares of APS for each Dividend Period thereof commencing after such
failure to and including the Dividend Period, if any, during which such failure
is so cured shall be a rate per annum equal to the Maximum Rate on the Auction
Date for each such Dividend Period (but with the prevailing rating for such
shares, for purposes of determining such Maximum Rate, being deemed to be "Below
"ba3"/BB-").
 
                                       S-17

 

DESIGNATION OF SPECIAL DIVIDEND PERIODS

 
     The Fund, at its option, may designate any succeeding Dividend Period of
any series of APS as a Special Dividend Period which shall consist of such
number of days or whole years as the Board of Trustees shall specify; provided,
however, that such designation shall be effective only if (i) notice thereof
shall have been given as provided in the APS Provisions, (ii) any failure to pay
in a timely manner to the Auction Agent the full amount of any dividend on, or
the Redemption Price of, shares of such series of APS shall have been cured
(iii) Sufficient Clearing Bids for such series shall have existed in an Auction
held on the Auction Date immediately preceding the first day of such proposed
Special Dividend Period, (iv) if the Fund shall have mailed a notice of
redemption with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent, and (v)
in the event the Fund wishes to designate any succeeding Dividend Period for
such series as a Special Dividend Period consisting of more than 28 days, the
Fund has received written confirmation from S&P (if S&P is then rating the APS)
and Moody's (if Moody's is then rating the APS) that such designation would not
affect the rating then assigned by S&P to such series.
 

ADDITIONAL DIVIDENDS

 
     If the Fund retroactively allocates any net capital gains or other income
taxable for federal income tax purposes to the APS without having given advance
notice thereof to the Auction Agent as described in the APS Provisions by reason
of the fact that such allocation is made as a result of (i) the realization of
net capital gains or other income taxable for federal income tax purposes, (ii)
the redemption of all or a portion of the outstanding APS or (iii) the
liquidation of the Fund (such allocation is referred to herein as a "Retroactive
Taxable Allocation"), the Fund will simultaneously, if practicable, with such
allocation but in no event later than 270 days after the end of the Fund's
taxable year in which a Retroactive Taxable Allocation is made, provide notice
thereof to the Auction Agent and to each holder of APS (initially Cede & Co. as
nominee of DTC) during such taxable year at such holder's address as the same
appears or last appeared on the share books of the Fund. The Fund will, within
30 days after such notice is given to the Auction Agent, pay to the Auction
Agent (who will then distribute to such holders of shares of APS), out of funds
legally available therefor, an amount equal to the aggregate Additional
Dividends (as defined below) with respect to all Retroactive Taxable Allocations
made to such holders during the taxable year in question.
 
     "Additional Dividends" means payment to a Holder of APS of an amount which,
when taken together with the aggregate amount of Retroactive Taxable Allocations
made to such Holder with respect to the taxable year in question, would cause
such Holder's dividends in dollars (after federal income tax consequences as
described below) from the aggregate of both the Retroactive Taxable Allocations
and the Additional Dividends to be equal to the dollar amount of the dividends
which would have been received by such Holder if the amount of the aggregate
Retroactive Taxable Allocations would have been excludable from the gross income
of such Holder. State taxes imposed on the Additional Dividends, however, may
reduce the amount of after tax cash a holder would have had if there were no
Retroactive Taxable Allocation. Such Additional Dividends shall be calculated
(i) without consideration being given to the time value of money; (ii) assuming
that no holder of APS is subject to the federal alternative minimum tax with
respect to
 
                                       S-18

 
dividends received from the Fund; and (iii) assuming that each Retroactive
Taxable Allocation would be taxable in the hands of each holder of APS at the
maximum marginal regular federal individual income tax rate applicable to
ordinary income or net capital gains, as applicable, or the maximum marginal
regular federal corporate income tax rate, whichever is greater, in effect
during the taxable year in question.
 

AUCTION PROCEDURES

 

     On each Auction Date for each series of APS (the Business Day prior to the
beginning of each Rate Period for such series), each Existing Holder may submit
Orders through a Broker-Dealer to the Auction Agent as follows:

 

           
Hold Order:   indicating its desire to hold without regard to the
              Applicable Rate for the next Rate Period.
Bid:          indicating its desire to sell if the Applicable Rate for
              the next Rate Period is less than the rate specified in
              such Bid.
Sell Order:   indicating its desire to sell without regard to the
              Applicable Rate for the next Rate Period.

 
     An Existing Holder may submit different types of Orders in an Auction with
respect to shares of APS then held by such Existing Holder. An Existing Holder
that offers to purchase additional shares of APS is, for purposes of such offer,
treated as a Potential Holder as described below. Bids of Existing Holders with
rates higher than the Maximum Rate on the Auction Date will be treated as Sell
Orders. A Hold Order will be deemed to have been submitted on behalf of an
Existing Holder if an Order is not submitted on behalf of such Existing Holder
for any reason, including the failure of a Broker-Dealer to submit such Existing
Holder's Order to the Auction Agent.
 
     Potential Holders of shares of any series of APS may submit Bids in which
they will offer to purchase shares of such series of APS if the Applicable Rate
for the next Rate Period is not less than the rate specified in such Bid. A Bid
by a Potential Holder specifying a rate higher than the Maximum Rate will not be
accepted.
 
     In normal circumstances, whenever the Fund intends to include any net
capital gains or other income that is taxable for federal income tax purposes in
any dividend on shares of any series of APS, the Fund will notify the Auction
Agent of the amount to be so included 15 days prior to the Auction Date on which
the Applicable Rate for such dividend is to be established. Whenever the Auction
Agent receives such notice from the Fund, it will in turn notify each
Broker-Dealer, who, on or prior to such Auction Date, in accordance with its
Broker Dealer Agreement, will notify its Existing Holders and Potential Holders
believed by it to be interested in submitting an Order in the Auction to be held
on such Auction Date.
 
     If Sufficient Clearing Bids exist (that is, the number of shares of a
particular series of APS subject to Bids by Potential Holders with rates equal
to or lower than the Maximum Rate is at least equal to the number of shares of
such series of APS subject to Sell Orders by Existing Holders), the Applicable
Rate for such series will be the lowest rate specified in the Submitted Bids
which, taking into account such rate and all lower rates bid by Existing Holders
and Potential Holders, would result in Existing Holders and Potential Holders
owning all the shares of such series of APS available for purchase in the
Auction.
 
                                       S-19

 
If Sufficient Clearing Bids do not exist, the Applicable Rate will be the
Maximum Rate on the Auction Date, and, in such event, Existing Holders that have
submitted Sell Orders may not be able to sell in such Auction all shares of such
series of APS subject to such Sell Orders. If all Existing Holders of shares of
such series of APS submit or are deemed to have submitted Hold Orders, the
Applicable Rate will be the product of (i) (I) the "AA" Composite Commercial
Paper Rate on such Auction Date for the Rate Period for which the Auction is
held, if such Rate Period is less than one year or (2) the Treasury Rate on such
Auction Date for such Rate Period, if such Rate Period is one year or longer and
(ii) 1 minus the maximum marginal regular federal individual income tax rate
applicable to ordinary income or the maximum marginal regular federal corporate
income tax rate, whichever is greater; provided, however, that if the Fund has
notified the Auction Agent of its intent to allocate to the APS in such Rate
Period any net capital gains or other income that is taxable for federal income
tax purposes, the Applicable Rate in respect of that portion of the dividend on
the APS for such Rate Period that represents the allocation of net capital gains
or other income taxable for Federal income tax purposes will be the rate
described in the preceding clause (i) (1) or (2), as applicable, without being
multiplied by the factor set forth in the preceding clause (ii).
 
     The Auction Procedures include a pro rata allocation of shares for purchase
and sale, which may result in an Existing Holder continuing to hold or selling,
or a Potential Holder purchasing, a number of shares of APS that is fewer than
the number of shares of APS specified in its Order.
 
     A Bid placed by an Existing Holder specifying a rate greater than the
Applicable Rate determined in the Auction or a Sell Order shall constitute an
irrevocable offer to sell the shares of such series of APS subject thereto, in
each case at a price per share equal to $25,000. A Bid placed by a Potential
Holder shall constitute an irrevocable offer to purchase the shares of such
series of APS subject thereto at a price per share equal to $25,000 if the rate
specified in such Bid is less than or equal to the Applicable Rate determined in
the Auction. Settlement of purchases and sales will be made on the next Business
Day (also a Dividend Payment Date) after the Auction Date through the Securities
Depository. Purchasers will make payment through their Agent Members in same-day
funds to the Securities Depository against delivery to their respective Agent
Members. The Securities Depository will make payment to the sellers' Agent
Members in accordance with the Securities Depository's normal procedures, which
now provide for payment against delivery by their Agent Members in same-day
funds.
 

ASSET MAINTENANCE

 

     Under the APS Provisions, the Fund must maintain (i) assets having in the
aggregate a Discounted Value at least equal to the APS Basic Maintenance Amount,
and (ii) 1940 Act APS Asset Coverage of at least 200%. The Discount Factors and
guidelines for calculating the Discounted Value of the Fund's portfolio for
purposes of determining whether the APS Basic Maintenance Amount has been
satisfied have been established by Moody's and S&P in connection with the Fund's
receipt of ratings on the shares of each series of APS on their Date of Original
Issue of "aaa" from Moody's and AAA from S&P. So long as any of the APS are
Outstanding and S&P is rating the APS, the Fund will be required under the APS
Provisions to maintain as of each Valuation Date certain Dividend

 
                                       S-20

 
Coverage Assets with a value not less than the Dividend Coverage Amount (the
"Minimum Liquidity Level").
 

MANDATORY REDEMPTION

 

     If the APS Basic Maintenance Amount or the 1940 Act APS Asset Coverage is
not maintained or restored as specified, the APS will be subject to mandatory
redemption on a date specified by the Board of Trustees, out of funds legally
available therefor, at the redemption price of $25,000 per share plus an amount
equal to accumulated but unpaid dividends thereon (whether or not earned or
declared) to the date fixed for redemption. Any such redemption will be limited
to the number of APS necessary to restore the APS Basic Maintenance Amount or
the 1940 Act APS Asset Coverage, as the case may be.

 

OPTIONAL REDEMPTION

 

     Except as described in the APS Provisions, shares of each series of APS are
redeemable, in whole or in part, at the option of the Fund, on the next
succeeding scheduled Dividend Payment Date applicable to the shares of such
series of APS called for redemption, out of funds legally available therefor, at
the Optional Redemption Price of $25,000 per share plus (in the case of a
Special Dividend Period only) a premium, if any, resulting from the designation
of a Premium Call Period, plus an amount equal to dividends thereon (whether or
not earned or declared) accumulated but unpaid to the date fixed for redemption;
provided that during a Special Dividend Period of 365 days or more no share of
such series of APS will be subject to optional redemption during any Non-Call
Period to which such series of APS may be subject.

 

LIQUIDATION PREFERENCE

 

     The liquidation preference of the shares of each series of APS is $25,000
per share plus accumulated but unpaid dividends, if any, thereon (whether or not
earned or declared).

 

VOTING RIGHTS

 

     The 1940 Act requires that the holders of APS, voting as a separate class,
have the right to elect at least two Trustees at all times and to elect a
majority of the Trustees at any time that two years' dividends on the APS are
unpaid. The holders of APS will vote as a separate class or classes on certain
other matters as required under the APS Provisions, the 1940 Act and
Massachusetts law. In addition, each series of APS may vote as a separate series
under certain circumstances.

 

MASTER PURCHASER'S LETTER

 

     Each prospective purchaser of shares of any series of APS or its
Broker-Dealer will be required to sign and deliver a Master Purchaser's Letter
to the Auction Agent in which such prospective purchaser or its Broker-Dealer
will agree, among other things, that (i) dispositions of shares of such series
of APS may be made only pursuant to a Bid or a Sell Order placed in an Auction,
or to or through a Broker-Dealer or to a person that has delivered a signed
Master Purchaser's Letter to the Auction Agent, provided that in the

 
                                       S-21

 
case of all transfers other than those pursuant to Auctions, the Existing Holder
of the shares so transferred, its Agent Member or its Broker-Dealer advises the
Auction Agent of such transfer, and (ii) ownership of shares of such series of
APS will be maintained in book entry form by the Securities Depository for the
account of such prospective purchaser's Agent Member, which in turn will
maintain records of such prospective purchaser's beneficial ownership.
 
     Each prospective purchaser should ask its Broker-Dealer whether such
prospective purchaser should sign a Master Purchaser's Letter. If the
Broker-Dealer submits Orders for such prospective purchaser listing the
Broker-Dealer as the Existing Holder or the Potential Holder, a Master
Purchaser's Letter signed by such prospective purchaser may not be required.
 
     Execution by a prospective purchaser or its Broker-Dealer of a Master
Purchaser's Letter is not a commitment to purchase shares of APS in the offering
being made by this Prospectus or in any Auction, but is a condition precedent to
such purchaser's purchasing shares of APS. In addition, acceptance of a Master
Purchaser's Letter is not a guarantee that shares of APS will be available for
purchase.
 
     The Broker-Dealers may maintain a secondary trading market in the APS
outside of Auctions. They have no obligation to do so, however, and there can be
no assurance that a secondary market for the APS will develop or, if it does
develop, that it will provide holders with liquidity of investment. The APS will
not be registered on any stock exchange or on the National Association of
Securities Dealers Automated Quotations system.
 

RATING AGENCY GUIDELINES

 

     The Fund intends that, so long as shares of any series of APS are
Outstanding, the composition of its portfolio will reflect guidelines
established by Moody's and S&P in connection with the Fund's receipt on the Date
of Original Issue of the shares of each series of APS of ratings of "aaa" from
Moody's and AAA from S&P. Moody's and S&P, nationally recognized independent
rating agencies, issue ratings for various securities reflecting their perceived
creditworthiness of such securities. The Fund will pay certain fees to Moody's
and S&P for rating shares of the APS. The guidelines have been developed by
Moody's and S&P in connection with other issuances of asset-backed and similar
securities, including debt obligations and adjustable rate preferred stock,
generally on a case-by-case basis through discussions with the issuers of these
securities. The guidelines are designed to ensure that assets underlying
outstanding debt or preferred stock will be sufficiently varied and will be of
sufficient quality and amount to justify investment grade ratings. The
guidelines do not have the force of law, but have been adopted by the Fund in
order to satisfy current requirements necessary for Moody's and S&P to issue the
above-described ratings for shares of each series of APS, which ratings are
generally relied upon by institutional investors in purchasing such securities.
In the context of a closed-end investment company such as the Fund, therefore,
the guidelines provide a set of tests for portfolio composition and asset
coverage that supplement (and in some cases are more restrictive than) the
applicable requirements under the 1940 Act. A rating agency's guidelines will
apply to shares of any series of APS only so long as such rating agency is
rating such shares.

 
     The Fund intends to maintain a Discounted Value for its portfolio at least
equal to the APS Basic Maintenance Amount and, in addition, so long as S&P is
rating the shares
 
                                       S-22

 
of any series of APS, the Fund intends to maintain a Minimum Liquidity Level.
Moody's and S&P have each established separate guidelines for determining
Discounted Value. To the extent any particular portfolio holding does not
satisfy the applicable rating agency's guidelines, all or a portion of such
holding's value will not be included in the calculation of Discounted Value (as
defined by such rating agency). The Moody's and S&P guidelines do not impose any
limitations on the percentage of Fund assets that may be invested in holdings
not eligible for inclusion in the calculation of the Discounted Value of the
Fund's portfolio. The amount of such assets included in the portfolio at any
time may vary depending upon the rating, diversification and other
characteristics of the Eligible Assets included in the portfolio, although it is
not anticipated that in the normal course of business the value of such assets
would exceed 20% of the Fund's total assets.
 
     In managing the Fund's portfolio, the Adviser will not alter the
composition of the Fund's portfolio if, in the reasonable belief of the Adviser,
the effect of any such alteration would be to cause the Fund to have Eligible
Assets with an aggregate Discounted Value, as of the immediately preceding
Valuation Date, less than the APS Basic Maintenance Amount as of such Valuation
Date; provided, however, that in the event that, as of the immediately preceding
Valuation Date, the aggregate Discounted Value of the Fund's Eligible Assets
exceeded the APS Basic Maintenance Amount by five percent or less, the Adviser
will not alter the composition of the Fund's portfolio in a manner reasonably
expected to reduce the aggregate Discounted Value of the Fund's Eligible Assets
unless the Fund shall have confirmed that, after giving effect to such
alteration, the aggregate Discounted Value of the Fund's Eligible Assets would
exceed the APS Basic Maintenance Amount.
 
     Upon any failure to maintain the required Discounted Value, the Fund will
seek to alter the composition of its portfolio to reattain the APS Basic
Maintenance Amount on or prior to the APS Basic Maintenance Cure Date, thereby
incurring additional transaction costs and possible losses and/or gains on
dispositions of portfolio securities. To the extent any such failure is not
cured in a timely manner, shares of each series of APS will be subject to
redemption if either Moody's or S&P is rating such shares.
 
     The Fund may, but is not required to, adopt any modifications to these
guidelines that may hereafter be established by Moody's and S&P. Failure to
adopt any such modifications, however, may result in a change in the ratings
described above or a withdrawal of ratings altogether. In addition, any rating
agency providing a rating for the shares of any series of APS may, at any time,
change or withdraw any such rating. As set forth in the APS Provisions, the
Board of Trustees may, without Shareholder approval, modify certain definitions
or policies which have been adopted by the Fund pursuant to the rating agency
guidelines, provided the Board of Trustees has obtained written confirmation
from Moody's and S&P, as appropriate, that any such change would not impair the
ratings then assigned by Moody's and S&P to any series of APS. A rating agency's
guidelines will apply to shares of any series of APS only so long as such rating
agency is rating such shares.
 
     The ratings on any series of the APS are not recommendations to purchase,
hold or sell shares of any series of APS, inasmuch as the ratings do not comment
as to market price or suitability for a particular investor nor do the rating
agency guidelines described above address the likelihood that a holder of shares
of any series of APS will be able to sell such shares in an Auction. The ratings
are based on current information furnished to
 
                                       S-23

 
Moody's and S&P by the Fund and the Adviser, and information obtained from other
sources. The ratings may be changed, suspended or withdrawn as a result of
changes in, or the unavailability of, such information. The Fund's Common Shares
have not been rated by a nationally recognized statistical rating organization.
 
                               OTHER INFORMATION
 
CUSTODY OF ASSETS
 

     All securities owned by the Funds and all cash, including proceeds from the
sale of securities in each Fund's investment portfolio, are held by State Street
Bank and Trust Company, 225 West Franklin Street, Boston, Massachusetts 02110,
as custodian. The custodian also provides accounting services to the Funds.

 
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
 

     The Funds' Proxy Voting Policy and Procedures are included as Appendix E to
this Statement of Additional Information. Information on how each Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30 is available without charge, upon request, by calling (800)
341-2929 or by visiting our web site at www.vankampen.com. This information is
also available on the SEC's web site at http://www.sec.gov.

 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

     An independent registered public accounting firm for the Funds performs an
annual audit of each Fund's financial statements. Each Fund's Board of Trustees
has engaged Deloitte & Touche LLP, located at 180 North Stetson Avenue, Chicago,
Illinois 60601, to be the Fund's independent registered public accounting firm.

 
                              FINANCIAL STATEMENTS
 

     Incorporated herein by reference and included in their respective
entireties are (i) the audited financial statements of the Acquiring Fund for
the fiscal year ended October 31, 2004, as included in Appendix C hereto, (ii)
the audited financial statements of the Target Fund for fiscal year ended June
30, 2004, as included in Appendix D hereto, and (iii) the unaudited semi-annual
financial statements of the Target Fund for the period ended December 31, 2004,
as included in Appendix E hereto.

 
                         PRO FORMA FINANCIAL STATEMENTS
 
     Set forth in Appendix G hereto are unaudited pro forma financial statements
of the Acquiring Fund giving effect to the Reorganization which include: (i) Pro
Forma Condensed Statements of Assets and Liabilities at October 31, 2004, (ii)
Pro Forma Condensed Statement of Operations for the one year period ended
October 31, 2004 and (iii) Pro Forma Portfolio of Investments at October 31,
2004.
 
                                       S-24





                                   APPENDIX A

                      AGREEMENT AND PLAN OF REORGANIZATION



























                                   APPENDIX A

                                    FORM OF
                      AGREEMENT AND PLAN OF REORGANIZATION

         In order to consummate the Reorganization and in consideration of the
promises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, Van Kampen XXXXXX, a registered closed-end investment
company, File No. 811-XXXX (the "Target Fund") and Van Kampen XXXXXX (the
"Acquiring Fund"), a registered closed-end investment company, File No.
811-XXXX, each hereby agree as follows:

1.       Representations and Warranties of the Acquiring Fund.

         The Acquiring Fund represents and warrants to, and agrees with, the
Target Fund that:

         (a)      The Acquiring Fund is a trust, with transferable shares, duly
                  organized, validly existing and in good standing in conformity
                  with the laws of its jurisdiction of organization, and has the
                  power to own all of its assets and to carry out this
                  Agreement. The Acquiring Fund has all necessary federal, state
                  and local authorizations to carry on its business as it is now
                  being conducted and to carry out this Agreement.


         (b)      The Acquiring Fund is duly registered under the Investment
                  Company Act of 1940, as amended (the "1940 Act") as a
                  [non-]diversified, closed-end management investment company
                  and such registration has not been revoked or rescinded and is
                  in full force and effect. The Acquiring Fund has elected and
                  qualified for the special tax treatment afforded regulated
                  investment companies ("RICs") under Section 851 of the
                  Internal Revenue Code (the "Code") at all times since its
                  inception and intends to continue to so qualify until
                  consummation of the reorganization contemplated hereby (the
                  "Reorganization") and thereafter.



         (c)      The Target Fund has been furnished with the Acquiring Fund's
                  Annual Report to Shareholders for the fiscal year ended XXXX,
                  2004, and the audited financial statements appearing therein,
                  having been audited by Deloitte & Touche LLP, independent
                  registered public accounting firm, fairly present the
                  financial position of the Acquiring Fund as of the respective
                  dates indicated, in conformity with accounting principles
                  generally accepted in the United States applied on a
                  consistent basis.



         (d)      An unaudited statement of assets, liabilities and capital of
                  the Acquiring Fund and an unaudited schedule of investments of
                  the Acquiring Fund, each as of the Valuation Time (as defined
                  in Section 5(d) of this Agreement), will be furnished to the
                  Target Fund, at or prior to the Closing Date (as defined in
                  Section 7(a) herein), for the purpose of determining the
                  number of Acquiring Fund Common Shares and Acquiring Fund APS
                  to be issued pursuant to Section 6 of this Agreement; each
                  will fairly present the financial position of the Acquiring
                  Fund as of the Valuation Time in conformity with generally
                  accepted accounting principles applied on a consistent basis.


         (e)      The Acquiring Fund has full power and authority to enter into
                  and perform its obligations under this Agreement. The
                  execution, delivery and performance of this Agreement has been
                  duly authorized by all necessary action of its Board of
                  Trustees, and this Agreement constitutes a valid and binding
                  contract enforceable in accordance with its terms, subject to
                  the effects of bankruptcy, insolvency, moratorium, fraudulent
                  conveyance and similar



                                      A-1




                  laws relating to or affecting creditors' rights generally and 
                  court decisions with respect thereto.

         (f)      There are no material legal, administrative or other
                  proceedings pending or, to the knowledge of the Acquiring
                  Fund, threatened against it which assert liability on the part
                  of the Acquiring Fund or which materially affect its financial
                  condition or its ability to consummate the Reorganization. The
                  Acquiring Fund is not charged with or, to the best of its
                  knowledge, threatened with any violation or investigation of
                  any possible violation of any provisions of any federal, state
                  or local law or regulation or administrative ruling relating
                  to any aspect of its business.


         (g)      The Acquiring Fund is not obligated under any provision of its
                  Declaration of Trust, as amended, or its by-laws, as amended,
                  and is not a party to any contract or other commitment or
                  obligation, and is not subject to any order or decree which
                  would be violated by its execution of or performance under
                  this Agreement, except insofar as the Funds have mutually
                  agreed to amend such contract or other commitment or
                  obligation to cure any potential violation as a condition
                  precedent to the Reorganization.



         (h)      There are no material contracts outstanding to which the
                  Acquiring Fund is a party that have not been disclosed in the
                  N-14 Registration Statement (as defined in subsection (k)
                  below) or that will not otherwise be disclosed to the Target
                  Fund prior to the Valuation Time.



         (i)      The Acquiring Fund has no known liabilities of a material
                  amount, contingent or otherwise, other than those shown on its
                  statements of assets, liabilities and capital referred to in
                  subsection (c) above, those incurred in the ordinary course of
                  its business as an investment company, and those incurred in
                  connection with the Reorganization. As of the Valuation Time,
                  the Acquiring Fund will advise the Target Fund in writing of
                  all known liabilities, contingent or otherwise, whether or not
                  incurred in the ordinary course of business, existing or
                  accrued as of such time, except to the extent disclosed in the
                  financial statements referred to in subsection (c) above.


         (j)      No consent, approval, authorization or order of any court or
                  government authority is required for the consummation by the
                  Acquiring Fund of the Reorganization, except such as may be
                  required under the Securities Act of 1933, as amended (the
                  "1933 Act"), the Securities Exchange Act of 1934, as amended
                  (the "1934 Act") and the 1940 Act or state securities laws
                  (which term as used herein shall include the laws of the
                  District of Columbia and Puerto Rico).


         (k)      The registration statement filed by the Acquiring Fund on Form
                  N-14, which includes the proxy statement of the Target Fund
                  and the Acquiring Fund with respect to the transactions
                  contemplated herein (the "Joint Proxy Statement/Prospectus"),
                  and any supplement or amendment thereto or to the documents
                  therein (as amended or supplemented, the "N-14 Registration
                  Statement"), on its effective date, at the time of the
                  shareholders' meetings referred to in Section 8(a) of this
                  Agreement and at the Closing Date, insofar as it relates to
                  the Acquiring Fund, (i) complied or will comply in all
                  material respects with the provisions of the 1933 Act, the
                  1934 Act and the 1940 Act and the rules and regulations
                  thereunder and (ii) did not or will not contain any



                                      A-2



                  untrue statement of a material fact or omit to state any
                  material fact required to be stated therein or necessary to
                  make the statements therein not misleading; and the Joint
                  Proxy Statement/Prospectus included therein did not or will
                  not contain any untrue statement of a material fact or omit to
                  state any material fact necessary to make the statements
                  therein, in the light of the circumstances under which they
                  were made, not misleading; provided, however, that the
                  representations and warranties in this subsection only shall
                  apply to statements in or omissions from the N-14 Registration
                  Statement made in reliance upon and in conformity with
                  information furnished by the Acquiring Fund for use in the
                  N-14 Registration Statement.


         (l)      The Acquiring Fund is authorized to issue an unlimited number


                  of common shares of beneficial interest, par value $.01 per
                  share (the "Acquiring Fund Common Shares"), and XXXX preferred
                  shares of beneficial interest, par value $.01 per share. The
                  Board of Trustees of the Acquiring Fund has designated XXXX
                  preferred shares as Auction Preferred Shares ("Acquiring Fund
                  APS"). Each outstanding Acquiring Fund Common Share and each
                  Acquiring Fund APS of the Acquiring Fund is fully paid and,
                  except as provided in Section 5.1 of the Acquiring Fund's
                  Declaration of Trust, nonassessable, and has full voting
                  rights.



         (m)      The Acquiring Fund Common Shares and the Acquiring Fund APS to
                  be issued to the Target Fund pursuant to this Agreement will
                  have been duly authorized and, when issued and delivered
                  pursuant to this Agreement, will be legally and validly issued
                  and will be fully paid and, except as provided in Section 5.1
                  of the Acquiring Fund's Declaration of Trust, nonassessable
                  and will have full voting rights, and no shareholder of the
                  Acquiring Fund will have any preemptive right of subscription
                  or purchase in respect thereof.


         (n)      At or prior to the Closing Date, the Acquiring Fund Common
                  Shares to be transferred to the Target Fund for distribution
                  to the shareholders of the Target Fund on the Closing Date
                  will be duly qualified for offering to the public in all
                  states of the United States in which the sale of shares of the
                  Funds presently are qualified, and there will be a sufficient
                  number of such shares registered under the 1933 Act and, as
                  may be necessary, with each pertinent state securities
                  commission to permit the transfers contemplated by this
                  Agreement to be consummated.

         (o)      At or prior to the Closing Date, the Acquiring Fund APS to be
                  transferred to the Target Fund on the Closing Date will be
                  duly qualified for offering to the public in all states of the
                  United States in which the sale of APS of the Target Fund
                  presently are qualified, and there are a sufficient number of
                  Acquiring Fund APS registered under the 1933 Act and with each
                  pertinent state securities commission to permit the transfers
                  contemplated by this Agreement to be consummated.


         (p)      At or prior to the Closing Date, the Acquiring Fund will have
                  obtained any and all regulatory, trustee and shareholder
                  approvals necessary to issue the Acquiring Fund Common Shares
                  and the Acquiring Fund APS to the Target Fund.



         (q)      The Acquiring Fund has filed, or intends to file, or has
                  obtained extensions to file, all federal, state and local tax
                  returns which are required to be filed by it, and has paid or
                  has obtained extensions to pay, all federal, state and local
                  taxes shown on said returns to be due and owing and all
                  assessments received by it, up to and including the taxable
                  year in which the Closing Date occurs. All tax liabilities of
                  the Acquiring Fund have been adequately provided for on its
                  books, and no tax deficiency or liability of the Acquiring
                  Fund has been asserted and no question with respect thereto
                  has been raised by the Internal Revenue Service or by any
                  state or local tax authority for taxes in excess of those
                  already paid, up to and including the taxable year in which
                  the Closing Date occurs.


         (r)      The Acquiring Fund has elected to qualify and has qualified as
                  a RIC as of and since its inception; has been a RIC under the
                  Code at all times since the end of its first taxable year when
                  it so qualified; qualifies and will continue to qualify as a
                  RIC under the Code; and has satisfied the distribution
                  requirements imposed by the Code for each of its taxable
                  years.


2.       Representations and Warranties of the Target Fund.

         The Target Fund represents and warrants to, and agrees with, the
Acquiring Fund that:

         (a)      The Target Fund is a trust, with transferable shares, duly
                  organized, validly existing and in good standing in conformity
                  with the laws of the jurisdiction of its organization, and has
                  the power to own all of its assets and to carry out this
                  Agreement. The Target Fund has all necessary federal, state
                  and local authorizations to carry on its business as it is now
                  being conducted and to carry out this Agreement.

                                      A-3





         (b)      The Target Fund is duly registered under the 1940 Act as a
                  [non-]diversified, closed-end management investment company,
                  and such registration has not been revoked or rescinded and is
                  in full force and effect. The Target Fund has elected and
                  qualified for the special tax treatment afforded RICs under
                  Section 851 of the Code at all times since its inception, and
                  intends to continue to so qualify through its taxable year
                  ending upon liquidation.


         (c)      As used in this Agreement, the term "Target Fund Investments"
                  shall mean (i) the investments of the Target Fund shown on the
                  schedule of its investments as of the Valuation Time furnished
                  to the Acquiring Fund; and (ii) all other assets owned by the
                  Target Fund or liabilities incurred as of the Valuation Time.

         (d)      The Target Fund has full power and authority to enter into and
                  perform its obligations under this Agreement. The execution,
                  delivery and performance of this Agreement has been duly
                  authorized by all necessary action of its Board of Trustees
                  and this Agreement constitutes a valid and binding contract
                  enforceable in accordance with its terms, subject to the
                  effects of bankruptcy, insolvency, moratorium, fraudulent
                  conveyance and similar laws relating to or affecting
                  creditors' rights generally and court decisions with respect
                  thereto.


         (e)      The Acquiring Fund has been furnished with the Target Fund's
                  Annual Report to Shareholders for the fiscal year ended XXXX,
                  2004, and the audited financial statements appearing therein,
                  having been audited by Deloitte & Touche LLP, independent
                  registered public accounting firm, fairly present the
                  financial position of the Target Fund as of the respective
                  dates indicated, in conformity with accounting principles
                  generally accepted in the United States applied on a
                  consistent basis.


         (f)      An unaudited statement of assets, liabilities and capital of
                  the Target Fund and an unaudited schedule of investments of
                  the Target Fund, each as of the Valuation Time, will be
                  furnished to the Acquiring Fund at or prior to the Closing
                  Date for the purpose of determining the number of shares of
                  Acquiring Fund Common Shares and Acquiring Fund APS to be
                  issued to the Target Fund pursuant to Section 3 of this
                  Agreement; each will fairly present the financial position of
                  the Target Fund as of the Valuation Time in conformity with
                  generally accepted accounting principles applied on a
                  consistent basis.

         (g)      There are no material legal, administrative or other
                  proceedings pending or, to the knowledge of the Target Fund,
                  threatened against it which assert liability on the part of
                  the Target Fund or which materially affect its financial
                  condition or its ability to consummate the Reorganization. The
                  Target Fund is not charged with or, to the best of its
                  knowledge, threatened with any violation or investigation of
                  any possible violation of any provisions of any federal, state
                  or local law or regulation or administrative ruling relating
                  to any aspect of its business.

         (h)      There are no material contracts outstanding to which the
                  Target Fund is a party that have not been disclosed in the
                  N-14 Registration Statement or will not otherwise be disclosed
                  to the Acquiring Fund prior to the Valuation Time.

         (i)      The Target Fund is not obligated under any provision of its
                  Declaration of Trust, as amended, or its by-laws, as amended,
                  or a party to any contract or other commitment or obligation,
                  and is not subject to any order or decree which would be
                  violated by its execution of or performance under this
                  Agreement, except insofar as the Funds have

   

                                       A-4



                  mutually agreed to amend such contract or other commitment or
                  obligation to cure any potential violation as a condition
                  precedent to the Reorganization.


         (j)      The Target Fund has no known liabilities of a material amount,
                  contingent or otherwise, other than those shown on its
                  statements of assets, liabilities and capital referred to
                  above, those incurred in the ordinary course of its business
                  as an investment company and those incurred in connection with
                  the Reorganization. As of the Valuation Time, the Target Fund
                  will advise the Acquiring Fund in writing of all known
                  liabilities, contingent or otherwise, whether or not incurred
                  in the ordinary course of business, existing or accrued as of
                  such time.


         (k)      The Target Fund has filed, or intends to file, or has obtained
                  extensions to file, all federal, state and local tax returns
                  which are required to be filed by it, and has paid or has
                  obtained extensions to pay, all federal, state and local taxes
                  shown on said returns to be due and owing and all assessments
                  received by it, up to and including the taxable year in which
                  the Closing Date occurs. All tax liabilities of the Target
                  Fund have been adequately provided for on its books, and no
                  tax deficiency or liability of the Target Fund has been
                  asserted and no question with respect thereto has been raised
                  by the Internal Revenue Service or by any state or local tax
                  authority for taxes in excess of those already paid, up to and
                  including the taxable year in which the Closing Date occurs.

         (l)      At both the Valuation Time and the Closing Date, the Target
                  Fund will have full right, power and authority to sell,
                  assign, transfer and deliver the Target Fund Investments. At
                  the Closing Date, subject only to the obligation to deliver
                  the Target Fund Investments as contemplated by this Agreement,
                  the Target Fund will have good and marketable title to all of
                  the Target Fund Investments, and the Acquiring Fund will
                  acquire all of the Target Fund Investments free and clear of
                  any encumbrances, liens or security interests and without any
                  restrictions upon the transfer thereof (except those imposed
                  by the federal or state securities laws and those
                  imperfections of title or encumbrances as do not materially
                  detract from the value or use of the Target Fund Investments
                  or materially affect title thereto).

         (m)      No consent, approval, authorization or order of any court or
                  governmental authority is required for the consummation by the
                  Target Fund of the Reorganization, except such as may be
                  required under the 1933 Act, the 1934 Act, the 1940 Act or
                  state securities laws.


         (n)      The N-14 Registration Statement, on its effective date, at the
                  time of the shareholders' meetings called to vote on this
                  Agreement and on the Closing Date, insofar as it relates to
                  the Target Fund (i) complied or will comply in all material
                  respects with the provisions of the 1933 Act, the 1934 Act and
                  the 1940 Act and the rules and regulations thereunder, and
                  (ii) did not or will not contain any untrue statement of a
                  material fact or omit to state any material fact required to
                  be stated therein or necessary to make the statements therein
                  not misleading; and the Joint Proxy Statement/Prospectus
                  included therein did not or will not contain any untrue
                  statement of a material fact or omit to state any material
                  fact necessary to make the statements therein, in the light of
                  the circumstances under which they were made, not misleading;
                  provided, however, that the representations and warranties in
                  this subsection shall apply only to statements in or omissions
                  from the N-14 Registration Statement made in reliance upon and
                  in conformity with information furnished by the Target Fund
                  for use in the N-14 Registration Statement.


                                      A-5





         (o)      The Target Fund is authorized to issue an unlimited number of
                  common shares of beneficial interest, par value $.01 per share
                  (the "Target Fund Common Shares"), and XXXX preferred shares
                  of beneficial interest, par value $.01 per share. The Board of
                  Trustees of the Acquiring Fund has designated XXXX preferred
                  shares as Target Fund Preferred Shares (the "Target Fund
                  Preferred Shares"). Each outstanding Target Fund Common Share
                  and each of the outstanding Target Fund Preferred Shares is
                  fully paid and, except as provided in Section 5.1 of the
                  Target Fund's Declaration of Trust, nonassessable, and has
                  full voting rights.



         (p)      All of the issued and outstanding Target Fund Common Shares
                  and Target Fund Preferred Shares were offered for sale and
                  sold in conformity with all applicable federal and state
                  securities laws.


         (q)      The books and records of the Target Fund made available to the
                  Acquiring Fund and/or its counsel are substantially true and
                  correct and contain no material misstatements or omissions
                  with respect to the operations of the Target Fund.

         (r)      The Target Fund will not sell or otherwise dispose of any of
                  the Acquiring Fund Common Shares or Acquiring Fund APS to be
                  received in the Reorganization, except in distribution to the
                  shareholders of the Target Fund, as provided in Section 3 of
                  this Agreement.


         (s)      The Target Fund has elected to qualify and has qualified as a
                  "RIC" under the Code as of and since its inception; has been a
                  RIC under the Code at all times since the end of its first
                  taxable year when it so qualified; qualifies and will continue
                  to qualify as a RIC under the Code for its taxable year ending
                  upon its liquidation; and has satisfied the distribution
                  requirements imposed by the Code for each of its taxable
                  years.


3.       The Reorganization.


         (a)      Subject to receiving the requisite approvals of the
                  shareholders of the Target Fund, and to the other terms and
                  conditions contained herein, (i) the Target Fund agrees to
                  convey, transfer and deliver to the Acquiring Fund and the
                  Acquiring Fund agrees to acquire from the Target Fund, on the
                  Closing Date, all of the Target Fund Investments (including
                  interest accrued as of the Valuation Time on debt
                  instruments), and assume substantially all of the liabilities
                  of the Target Fund, in exchange for that number of Target Fund
                  Common Shares and Target Fund Preferred Shares provided in
                  Section 4 of this Agreement. Pursuant to this Agreement, as
                  soon as practicable after the Closing Date, the Target Fund
                  will distribute all Acquiring Fund Common Shares and Acquiring
                  Fund APS received by it to its shareholders in exchange for
                  their Target Fund Common Shares and Target Fund Preferred
                  Shares. Such distributions shall be accomplished by the
                  opening of shareholder accounts on the share ledger records of
                  the Acquiring Fund in the amounts due the shareholders of the
                  Target Fund based on their respective holdings in the Target
                  Fund as of the Valuation Time.



         (b)      If it is determined that the portfolios of the Target Fund and
                  the Acquiring Fund, when aggregated, would contain investments
                  exceeding certain percentage limitations imposed upon the
                  Acquiring Fund with respect to such investments, the Target
                  Fund, if requested by the Acquiring Fund, will dispose of a
                  sufficient amount of such investments as may be necessary to
                  avoid violating such limitations as of the Closing Date.
                  Notwithstanding the foregoing, (a) nothing herein will require
                  the Target Fund to dispose of any portfolios, securities or
                  other investments, if, in the reasonable judgment of the
                  Target Fund's trustees or investment adviser, such disposition
                  would adversely affect the tax-free nature of the
                  Reorganization for federal income tax purposes or would
                  otherwise not be in the best interests of the Target Fund, and
                  (b) nothing will permit the Target Fund to dispose of any
                  portfolio securities or other investments if, in the
                  reasonable judgment of the Acquiring Fund's trustees or
                  investment adviser, such disposition would adversely affect
                  the tax-free nature of the Reorganization for federal income
                  tax purposes or would otherwise not be in the best interests
                  of the Acquiring Fund.



         (c)      Prior to the Closing Date, the Target Fund shall declare a
                  dividend or dividends which, together with all such previous
                  dividends, shall have the effect of distributing to their
                  respective shareholders all of their respective net investment
                  company taxable income to and including the Closing Date, if
                  any (computed without regard to any deduction for dividends
                  paid), and all of its net capital gain, if any, realized to
                  and including the Closing Date. In this regard and in
                  connection with the Reorganization, the last dividend period
                  for the Target Fund Preferred Shares prior to the Closing Date
                  may be shorter than the dividend period for such Target Fund
                  Preferred Shares determined as set forth in the applicable
                  Certificate of Vote pertaining to such Target Fund Preferred
                  Shares.


         (d)      The Target Fund will pay or cause to be paid to the Acquiring
                  Fund any interest the Target Fund receives on or after the
                  Closing Date with respect to any of the Target Fund
                  Investments transferred to the Acquiring Fund hereunder.


                                      A-6




         (e)      The Valuation Time shall be 4:00 p.m., Eastern time, on XXXX,
                  2005, or such earlier or later day and time as may be mutually
                  agreed upon in writing (the "Valuation Time").


         (f)      Recourse for liabilities assumed from the Target Fund by the
                  Acquiring Fund in the Reorganization will be limited to the
                  net assets acquired by the Acquiring Fund. The known
                  liabilities of the Target Fund, as of the Valuation Time,
                  shall be confirmed to the Acquiring Fund pursuant to Section
                  2(j) of this Agreement.

         (g)      The Target Fund will be terminated following the Closing Date
                  by terminating its registration under the 1940 Act and its
                  organization under Massachusetts law and will withdraw its
                  authority to do business in any state where it is required to
                  do so.

         (h)      The Acquiring Fund will file with the Secretary of State of
                  The Commonwealth of Massachusetts, as required, any amendment
                  to its Certificate of Vote establishing the powers, rights and
                  preferences of the Acquiring Fund APS prior to the closing of
                  the Reorganization.

4.       Issuance and Valuation of Acquiring Fund Common Shares and Acquiring 
Fund APS in the Reorganization.


Acquiring Fund Common Shares and Acquiring Fund APS of an aggregate net asset
value or aggregate liquidation preference, as the case may be, equal to the
value of the assets of the Target Fund acquired in the Reorganization determined
as hereinafter provided, reduced by the amount of liabilities of the Target Fund
assumed by the Acquiring Fund in the Reorganization, shall be issued by the
Acquiring Fund to the Target Fund in exchange for such assets of the Target
Fund. The Acquiring Fund will issue to the Target Fund (i) a number of Acquiring
Fund Common Shares, the aggregate net asset value of which will equal the
aggregate net asset value of the Target Fund Common Shares, determined as set
forth below, and (ii) a number of Acquiring Fund APS, the aggregate liquidation
preference and value of which will equal the aggregate liquidation preference
and value of the Target Fund Preferred Shares, determined as set forth below.



The net asset value of each of the Funds and the liquidation preference and
value of each of the Target Fund Preferred Shares and the Acquiring Fund APS
shall be determined as of the Valuation Time in accordance with the regular
procedures of the investment adviser, and no formula will be used to adjust the
net asset value so determined of any Fund to take into account differences in
realized and unrealized gains and losses. Values in all cases shall be
determined as of the Valuation Time. The value of the Target Fund Investments to
be transferred to the Acquiring Fund shall be determined pursuant to the regular
procedures of the investment adviser.



Such valuation and determination shall be made by the Acquiring Fund in
cooperation with the Target Fund and shall be confirmed in writing by the
Acquiring Fund to the Target Fund. The net asset value per share of the
Acquiring Fund Common Shares and the liquidation preference and value per share
of the Acquiring Fund APS shall be determined in accordance with such procedures
and the Acquiring Fund shall certify the computations involved. For purposes of
determining the net asset value of each of a Target Fund Common Share and an
Acquiring Fund Common Share, the value of the securities held by the applicable
Fund plus any cash or other assets (including interest accrued but not yet
received) minus all liabilities (including accrued expenses) and the aggregate
liquidation value of the outstanding shares of Target Fund Preferred Shares or
Acquiring Fund APS, as the case may be, is divided by the total number of Target
Fund Common Shares or Acquiring Fund Common Shares, as the case may be,
outstanding at such time.



                                      A-7




 The Acquiring Fund shall issue to the Target Fund separate certificates or
share deposit receipts for the Acquiring Fund Common Shares and the Acquiring
Fund APS, each registered in the name of the Target Fund. The Target Fund shall
then distribute the Acquiring Fund Common Shares and the Acquiring Fund APS to
the holders of Target Fund Common Shares and Target Fund Preferred Shares by
redelivering the certificates or share deposit receipts evidencing ownership of
(i) the Acquiring Fund Common Shares to EquiServe Trust Company, N.A., as the
transfer agent and registrar for the Acquiring Fund Common Shares, for
distribution to the holders of Target Fund Common Shares on the basis of such
holder's proportionate interest in the aggregate net asset value of the Target
Fund Common Shares and (ii) the Acquiring Fund APS to Deutsche Bank Trust
Company Americas, as the transfer agent and registrar for the Acquiring Fund
APS, for distribution to the holders of Target Fund Preferred Shares on the
basis of such holder's proportionate interest in the aggregate liquidation
preference and value of the Target Fund Preferred Shares. With respect to any
Target Fund shareholder holding certificates evidencing ownership of Target Fund
Common Shares as of the Closing Date, and subject to the Acquiring Fund being
informed thereof in writing by the Target Fund, the Acquiring Fund will not
permit such shareholder to receive new certificates evidencing ownership of the
Acquiring Fund Common Shares or Acquiring Fund APS, exchange Acquiring Fund
Common Shares or Acquiring Fund APS credited to such shareholder's account for
shares of other investment companies managed by the Adviser or any of its
affiliates, or pledge or redeem such Acquiring Fund Common Shares or Acquiring
Fund APS, in any case, until notified by the Target Fund or its agent that such
shareholder has surrendered his or her outstanding certificates evidencing
ownership of Target Fund Common Shares or Target Fund Preferred Shares or, in
the event of lost certificates, posted adequate bond. The Target Fund, at its
own expense, will request its shareholders to surrender their outstanding
certificates evidencing ownership of Target Fund Common Shares or Target Fund
Preferred Shares, as the case may be, or post adequate bond therefor.



         No fractional shares of Acquiring Fund Common Shares will be issued to
holders of Target Fund Common Shares unless such shares are held in a Dividend
Reinvestment Plan account. In lieu thereof, the Acquiring Fund's transfer agent,
EquiServe Trust Company, N.A., will aggregate all fractional Acquiring Fund
Common Shares to be issued in connection with the Reorganization (other than
those issued to a Dividend Reinvestment Plan account) and sell the resulting
full shares on the New York Stock Exchange at the current market price for
Acquiring Fund Common Shares for the account of all holders of such fractional
interests, and each such holder will receive such holder's pro rata share of the
proceeds of such sale upon surrender of such holder's certificates representing
Acquiring Fund Common Shares.



5.      Payment of Expenses.



         (a)      With respect to expenses incurred in connection with the
                  Reorganization, the Target Fund and the Acquiring Fund will
                  share, in proportion to their respective projected declines in
                  total operating expenses, all expenses incurred in connection
                  with the Reorganization, including, but not limited to, all
                  costs related to the preparation and distribution of materials
                  distributed to each Fund's Board of Trustees; expenses
                  incurred in connection with the preparation of the Agreement
                  and Plan of Reorganization and a registration statement on
                  Form N-14; SEC and state securities commission filing fees and
                  legal and audit fees in connection with the Reorganization;
                  costs of printing and distributing the Joint Proxy Statement/
                  Prospectus; legal fees incurred preparing each Fund's board
                  materials, attending each Fund's board meetings and preparing
                  the minutes; auditing fees associated with each Fund's
                  financial statements; stock exchange fees, rating agency fees,
                  portfolio transfer taxes (if any) and any similar expenses
                  incurred in connection with the Reorganization.



         (b)      If for any reason the Reorganization is not consummated, no
                  party shall be liable to any other party for any damages
                  resulting therefrom, including, without limitation,
                  consequential damages, and the investment adviser shall pay
                  all expenses incurred by each Fund in connection with the
                  Reorganization.


                                      A-8





6.      Covenants of the Funds.


         (a)      Each Fund covenants to operate its business as presently
                  conducted between the date hereof and the Closing Date.

         (b)      The Target Fund agrees that following the consummation of the
                  Reorganization, it will terminate in accordance with the laws
                  of The Commonwealth of Massachusetts and any other applicable
                  law, it will not make any distributions of any Acquiring Fund
                  Common Shares or Acquiring Fund APS other than to its
                  respective shareholders and without first paying or adequately
                  providing for the payment of all of its respective liabilities
                  not assumed by the Acquiring Fund, if any, and on and after
                  the Closing Date it shall not conduct any business except in
                  connection with its termination.

         (c)      The Target Fund undertakes that if the Reorganization is
                  consummated, it will file an application pursuant to Section
                  8(f) of the 1940 Act for an order declaring that the Target
                  Fund has ceased to be a registered investment company.

         (d)      The Acquiring Fund will file the N-14 Registration Statement
                  with the Securities and Exchange Commission (the "Commission")
                  and will use its best efforts to provide that the N-14
                  Registration Statement becomes effective as promptly as
                  practicable. Each Fund agrees to cooperate fully with the
                  other, and each will furnish to the other the information
                  relating to itself to be set forth in the N-14 Registration
                  Statement as required by the 1933 Act, the 1934 Act the 1940
                  Act, and the rules and regulations thereunder and the state
                  securities laws.

         (e)      The Acquiring Fund has no plan or intention to sell or
                  otherwise dispose of the Target Fund Investments, except for
                  dispositions made in the ordinary course of business.

         (f)      Each of the Funds agrees that by the Closing Date all of its
                  federal and other tax returns and reports required to be filed
                  on or before such date shall have been filed and all taxes
                  shown as due on said returns either have been paid or adequate
                  liability reserves have been provided for the payment of such
                  taxes.


                           The intention of the parties is that the transaction
                  contemplated by this Agreement will qualify as a
                  reorganization within the meaning of Section 368(a) of the
                  Internal Revenue Code. Neither the Acquiring Fund nor the
                  Target Fund shall take any action or cause any action to be
                  taken (including, without limitation, the filing of any tax
                  return) that is inconsistent with such treatment or results in
                  the failure of the transaction to qualify as a reorganization
                  within the meaning of Section 368(a) of the Internal Revenue
                  Code. At or prior to the Closing Date, the Acquiring Fund and
                  the Target Fund will take such action, or cause such action to
                  be taken, as is reasonably necessary to enable Skadden, Arps,
                  Slate, Meagher & Flom LLP ("Skadden"), special counsel to the
                  Funds, to render the tax opinion required herein (including,
                  without limitation, each party's execution of representations
                  reasonably requested by and addressed to Skadden.


                           In connection with this covenant, the Funds agree to
                  cooperate with each other in filing any tax return, amended
                  return or claim for refund, determining a liability for taxes
                  or a right to a refund of taxes or participating in or
                  conducting any audit or other proceeding in respect of taxes.
                  The Acquiring Fund agrees to retain for a period of ten (10)
                  years following the Closing Date all returns, schedules and
                  work papers and all material records or other documents
                  relating to tax matters of the Target Fund for each of such
                  Fund's taxable period first ending after the Closing Date and
                  for all prior taxable periods.


                           After the Closing Date, the Target Fund shall
                  prepare, or cause its agents to prepare, any federal, state or
                  local tax returns required to be filed by such fund with
                  respect to its final taxable year ending with its complete
                  liquidation and for any prior periods or taxable years and
                  further shall cause such tax returns to be duly filed with the
                  appropriate taxing authorities. Notwithstanding the
                  aforementioned provisions of this subsection, any expenses
                  incurred by the Target Fund (other than for payment of taxes)
                  in connection with the preparation and filing of said tax
                  returns after the Closing Date shall be borne by such Fund to
                  the extent such expenses have been accrued by such Fund in the
                  ordinary course without regard to the Reorganization; any
                  excess expenses shall be borne by the investment adviser or an
                  affiliate thereof.


                                      A-9



         (g)      The Target Fund agrees to mail to its shareholders of record
                  entitled to vote at the special meeting of shareholders at
                  which action is to be considered regarding this Agreement, in
                  sufficient time to comply with requirements as to notice
                  thereof, a combined proxy statement and prospectus which
                  complies in all material respects with the applicable
                  provisions of Section 14(a) of the 1934 Act and Section 20(a)
                  of the 1940 Act, and the rules and regulations, respectively,
                  thereunder. 



         (h)      Following the consummation of the Reorganization, the
                  Acquiring Fund will continue its business as a diversified,
                  closed-end management investment company registered under the
                  1940 Act.



7.      Closing Date.


         (a)      Delivery of the assets of the Target Fund to be transferred,
                  together with any other Target Fund Investments, and the
                  Acquiring Fund Common Shares and Acquiring Fund APS to be
                  issued as provided in this Agreement, shall be made at such
                  place and time as the Funds shall mutually agree on the next
                  full business day following the Valuation Time, or at such
                  other time and date agreed to by the Funds, the date and time
                  upon which such delivery is to take place being referred to
                  herein as the "Closing Date." To the extent that any Target
                  Fund Investments, for any reason, are not transferable on the
                  Closing Date, the Target Fund shall cause such Target Fund
                  Investments to be transferred to the Acquiring Fund's account
                  with its custodian at the earliest practicable date
                  thereafter.


         (b)      The Target Fund will deliver to the Acquiring Fund on the
                  Closing Date confirmation or other adequate evidence as to the
                  tax basis of the Target Fund Investments delivered to the
                  Acquiring Fund hereunder.



         (c)      As soon as practicable after the close of business on the
                  Closing Date, the Target Fund shall deliver to the Acquiring
                  Fund a list of the names and addresses of all of the
                  shareholders of record of the Target Fund on the Closing Date
                  and the number of Target Fund Common Shares and Target Fund
                  Preferred Shares owned by each such shareholder, certified to
                  the best of its knowledge and belief by the transfer agent for
                  the Target Fund or by its President.



8.    Conditions of the Target Fund.


         The obligations of the Target Fund hereunder shall be subject to the
following conditions:


         (a)      That this Agreement shall have been adopted, and the
                  Reorganization shall have been approved, by the Board of
                  Trustees of the Target Fund and by the affirmative vote of the
                  holders of a majority of each of the outstanding Target Fund
                  Common Shares and Target Fund Preferred Shares, each voting
                  separately as a class; and that the Acquiring Fund shall have
                  delivered to the Target Fund a copy of the resolution
                  approving this Agreement adopted by the Board of Trustees of
                  the Acquiring Fund, and a certificate setting forth the vote
                  of holders of Acquiring Fund Common Shares approving the
                  issuance of additional Acquiring Fund Common Shares, each
                  certified by its Secretary.



         (b)      That the Target Fund shall have received from the Acquiring
                  Fund a statement of assets, liabilities and capital, with
                  values determined as provided in Section 4 of this Agreement,
                  together with a schedule of such Fund's investments, all as of
                  the Valuation Time, certified on the Target Fund's behalf by
                  its President (or any Vice President) or its Treasurer, and a
                  certificate signed by the Fund's President (or any Vice
                  President) and its Treasurer, dated as of the Closing Date,
                  certifying that as of the Valuation Time and as of the Closing
                  Date there has been no material adverse change in the
                  financial position of the Target Fund since the date of such
                  Fund's most recent Annual or Semi-Annual Report,


                                      A-10


                  as applicable, other than changes in its portfolio securities
                  since that date or changes in the market value of its
                  portfolio securities.


         (c)      That the Acquiring Fund shall have furnished to the Target
                  Fund a certificate signed by the Acquiring Fund's President
                  (or any Vice President) or its Treasurer, dated as of the
                  Closing Date, certifying that, as of the Valuation Time and as
                  of the Closing Date, all representations and warranties of the
                  Acquiring Fund made in this Agreement are true and correct in
                  all material respects with the same effect as if made at and
                  as of such dates, and that the Acquiring Fund has complied
                  with all of the agreements and satisfied all of the conditions
                  on its part to be performed or satisfied at or prior to each
                  of such dates.


         (d)      That there shall not be any material litigation pending with
                  respect to the matters contemplated by this Agreement.


         (e)      The Target Fund shall have received the opinion(s) of Skadden,
                  counsel for the Acquiring Fund, dated as of the Closing Date,
                  addressed to the Target Fund substantially in the form and to
                  the effect that:


                  (i)      the Acquiring Fund is duly formed and validly
                           existing under the laws of its state of organization;

                  (ii)     the Acquiring Fund is registered as a closed-end,
                           management investment company under the 1940 Act;


                  (iii)    this Agreement and the Reorganization provided for
                           herein and the execution of this Agreement have been
                           duly authorized and approved by all requisite action
                           of the Acquiring Fund, and this Agreement has been
                           duly executed and delivered by the Acquiring Fund and
                           (assuming this Agreement is a valid and binding
                           obligation of the other party hereto) is a valid and
                           binding obligation of the Acquiring Fund;



                  (iv)     neither the execution or delivery by the Acquiring
                           Fund of this Agreement nor the consummation by the
                           Acquiring Fund of the transactions contemplated
                           hereby violate any provision of any statute or any
                           published regulation or any judgment or order
                           disclosed to counsel by the Acquiring Fund as being
                           applicable to the Acquiring Fund;



                  (v)      the Acquiring Fund Common Shares and Acquiring Fund
                           APS have each been duly authorized and, upon issuance
                           thereof in accordance with this Agreement, each will
                           be validly issued, fully paid and, except as provided
                           in Section 5.1 of the Acquiring Fund's Declaration of
                           Trust, nonassessable; and



                  (vi)     to their knowledge and subject to the qualifications
                           set forth below, the execution and delivery by the
                           Acquiring Fund of this Agreement and the consummation
                           of the transactions herein contemplated do not
                           require, under the laws of its state of organization
                           or any state in which the Acquiring Fund is qualified
                           to do business or the federal laws of the United
                           States, the consent, approval, authorization,
                           registration, qualification or order of, or filing
                           with, any court or governmental agency or body
                           (except such as have been obtained). Counsel need
                           express no opinion, however, as to any such consent,
                           approval, authorization, registration, qualification,
                           order or filing which may be required as a result of
                           the involvement of other parties to this Agreement in
                           the transactions herein contemplated because of their
                           legal or regulatory status or because of any other
                           facts specifically pertaining to them;



                                      A-11








         (f)      The Target Fund shall have obtained an opinion from Skadden,
                  Arps, dated as of the Closing Date, addressed to the Target
                  Fund, that the consummation of the transactions set forth in
                  this Agreement comply with the requirements of a
                  reorganization as described in Section 368(a) of the Internal
                  Revenue Code.



         (g)      That all proceedings taken by each of the Funds and its
                  counsel in connection with the Reorganization and all
                  documents incidental thereto shall be satisfactory in form and
                  substance to the others.



         (h)      That the N-14 Registration Statement shall have become
                  effective under the 1933 Act, and no stop order suspending
                  such effectiveness shall have been instituted or, to the
                  knowledge of the Acquiring Fund, be contemplated by the SEC.


9.       Acquiring Fund Conditions.

         The obligations of the Acquiring Fund hereunder shall be subject to the
following conditions:


         (a)      That this Agreement shall have been adopted, and the
                  Reorganization shall have been approved, by the Board of
                  Trustees of the Acquiring Fund and that the issuance of
                  additional Acquiring Fund Common Shares shall have been
                  approved by the affirmative vote of a majority of votes cast,
                  where total votes cast represented over 50% of all securities
                  entitled to vote; and the Target Fund shall have delivered to
                  the Acquiring Fund a copy of the resolution approving this
                  Agreement adopted by the Target Fund's Board of Trustees, and
                  a certificate setting forth the vote of the holders of Target
                  Fund Common Shares and Target Fund Preferred Shares obtained,
                  each certified by its Secretary.



         (b)      That the Target Fund shall have furnished to the Acquiring
                  Fund a statement of its assets, liabilities and capital, with
                  values determined as provided in Section 4 of this Agreement,
                  together with a schedule of investments with their respective
                  dates of acquisition and tax costs, all as of the Valuation
                  Time, certified on such Fund's behalf by its President (or any
                  Vice President) or its Treasurer, and a certificate signed by
                  such Fund's President


                                      A-12




                  (or any Vice President) or its Treasurer, dated as of the
                  Closing Date, certifying that as of the Valuation Time and as
                  of the Closing Date there has been no material adverse change
                  in the financial position of the Target Fund since the date of
                  such Fund's most recent Annual Report or Semi-Annual Report,
                  as applicable, other than changes in the Target Fund
                  Investments since that date or changes in the market value of
                  the Target Fund Investments.



         (c)      That the Target Fund shall have furnished to the Acquiring
                  Fund a certificate signed by such Fund's President (or any
                  Vice President) or its Treasurer, dated the Closing Date,
                  certifying that as of the Valuation Time and as of the Closing
                  Date all representations and warranties of the Target Fund
                  made in this Agreement are true and correct in all material
                  respects with the same effect as if made at and as of such
                  dates and the Target Fund has complied with all of the
                  agreements and satisfied all of the conditions on its part to
                  be performed or satisfied at or prior to such dates.


         (d)      That there shall not be any material litigation pending with
                  respect to the matters contemplated by this Agreement.


         (e)      That the Acquiring Fund shall have received the opinion of
                  Skadden, counsel for the Target Fund, dated as of the Closing
                  Date, addressed to the Acquiring Fund, substantially in the
                  form and to the effect that:


                  (i)       the Target Fund is duly formed and validly existing
                            under the laws of its state of organization;

                  (ii)      the Target Fund is registered as a closed-end,
                            management investment company under the 1940 Act;


                  (iii)     this Agreement and the Reorganization provided for
                            herein and the execution of this Agreement have been
                            duly authorized by all requisite action of the
                            Target Fund, and this Agreement has been duly
                            executed and delivered by the Target Fund and
                            (assuming this Agreement is a valid and binding
                            obligation of the other party hereto) is a valid and
                            binding obligation of the Target Fund;



                  (iv)      neither the execution or delivery by the Target Fund
                            of this Agreement nor the consummation by the Target
                            Fund of the transactions contemplated hereby violate
                            any provision of any statute, or any published
                            regulation or any judgment or order disclosed to
                            them by the Target Fund as being applicable to the
                            Target Fund; and



                  (v)       to their knowledge and subject to the qualifications
                            set forth below, the execution and delivery by the
                            Target Fund of the Agreement and the consummation of
                            the transactions herein contemplated do not require,
                            under the laws of its state of organization or any
                            state in which the Target Fund is qualified to do
                            business, or the federal laws of the United States,
                            the consent, approval, authorization, registration,
                            qualification or order of, or filing with, any court
                            or governmental agency or body (except such as have
                            been obtained under the 1933 Act, 1934 Act, the 1940
                            Act or the rules and regulations thereunder).
                            Counsel need express no opinion, however, as to any
                            such consent, approval, authorization, registration,
                            qualification, order or filing


                                      A-13




                           which may be required as a result of the involvement
                           of other parties to this Agreement in the
                           transactions herein contemplated because of their
                           legal or regulatory status or because of any other
                           facts specifically pertaining to them;






         (f)      That the Acquiring Fund shall have obtained an opinion from
                  Skadden, counsel for the Target Fund, dated as of the Closing
                  Date, addressed to the Acquiring Fund, that the consummation
                  of the transactions set forth in this Agreement comply with
                  the requirements of a reorganization as described in Section
                  368(a) of the Code.



         (g)      That the N-14 Registration Statement shall have become
                  effective under the 1933 Act and no stop order suspending such
                  effectiveness shall have been instituted or, to the knowledge
                  of the Target Fund, be contemplated by the SEC.



         (h)      That all proceedings taken by the Target Fund and its counsel
                  in connection with the Reorganization and all documents
                  incidental thereto shall be satisfactory in form and substance
                  to the Acquiring Fund.



         (i)      That prior to the Closing Date the Target Fund shall have
                  declared a dividend or dividends which, together with all such
                  previous dividends, shall have the effect of distributing to
                  its shareholders all of its net investment company taxable
                  income for the period to and including the Closing Date, if
                  any (computed without regard to any deduction for dividends
                  paid), and all of its net capital gain, if any, realized to
                  and including the Closing Date. In this regard, the last
                  dividend period for the Target Fund Preferred Shares may be
                  shorter than the dividend period for such APS determined as
                  set forth in the applicable Certificate of Vote.


10.      Termination, Postponement and Waivers.

         (a)      Notwithstanding anything contained in this Agreement to the
                  contrary, this Agreement may be terminated and the
                  Reorganization abandoned at any time (whether before or after
                  adoption thereof by the shareholders of the Funds) prior to
                  the Closing Date, or the Closing Date may be postponed, (i) by
                  mutual consent of the Boards of Trustees of the 

                                      A-14




                  Funds, (ii) by the Board of Trustees of the Target Fund if any
                  condition of the Target Fund's obligations set forth in
                  Section 8 of this Agreement has not been fulfilled or waived
                  by such Board; or (iii) by the Board of Trustees of the
                  Acquiring Fund if any condition of the Acquiring Fund's
                  obligations set forth in Section 9 of this Agreement have not
                  been fulfilled or waived by such Board.



         (b)      If the transactions contemplated by this Agreement have not
                  been consummated by December 31, 2005, this Agreement
                  automatically shall terminate on that date, unless a later
                  date is mutually agreed to by the Boards of Trustees of the
                  Funds.


         (c)      In the event of termination of this Agreement pursuant to the
                  provisions hereof, the same shall become void and have no
                  further effect, and there shall not be any liability on the
                  part of any Fund or persons who are their directors, trustees,
                  officers, agents or shareholders in respect of this Agreement.


         (d)      At any time prior to the Closing Date, any of the terms or
                  conditions of this Agreement may be waived by the Board of
                  Trustees of any Fund (whichever is entitled to the benefit
                  thereof), if, in the judgment of such Board after consultation
                  with its counsel, such action or waiver will not have a
                  material adverse effect on the benefits intended under this
                  Agreement to the shareholders of their respective fund, on
                  behalf of which such action is taken.


         (e)      The respective representations and warranties contained in
                  Sections 1 and 2 of this Agreement shall expire with, and be
                  terminated by, the consummation of the Reorganization, and
                  neither Fund nor any of its officers, trustees, agents or
                  shareholders shall have any liability with respect to such
                  representations or warranties after the Closing Date. This
                  provision shall not protect any officer, trustee, agent or
                  shareholder of either Fund against any liability to the entity
                  for which that officer, trustee, agent or shareholder so acts
                  or to its shareholders, to which that officer, trustee, agent
                  or shareholder otherwise would be subject by reason of willful
                  misfeasance, bad faith, gross negligence, or reckless
                  disregard of the duties in the conduct of such office.

         (f)      If any order or orders of the Commission with respect to this
                  Agreement shall be issued prior to the Closing Date and shall
                  impose any terms or conditions which are determined by action
                  of the Boards of Trustees of the Funds to be acceptable, such
                  terms and conditions shall be binding as if a part of this
                  Agreement without further vote or approval of the shareholders
                  of the Funds unless such terms and conditions shall result in
                  a change in the method of computing the number of Acquiring
                  Fund Common Shares or Acquiring Fund APS to be issued to the
                  Acquired Funds, as applicable, in which event, unless such
                  terms and conditions shall have been included in the proxy
                  solicitation materials furnished to the shareholders of the
                  Funds prior to the meetings at which the Reorganization shall
                  have been approved, this Agreement shall not be consummated
                  and shall terminate unless the Funds promptly shall call a
                  special meeting of shareholders at which such conditions so
                  imposed shall be submitted for approval.

11.      Indemnification.

         (a)      Each party (an "Indemnitor") shall indemnify and hold the
                  other and its officers, trustees, agents and persons
                  controlled by or controlling any of them (each an "Indemnified

    
                                      A-15


                  Party") harmless from and against any and all losses, damages,
                  liabilities, claims, demands, judgments, settlements,
                  deficiencies, taxes, assessments, charges, costs and expenses
                  of any nature whatsoever (including reasonable attorneys'
                  fees) including amounts paid in satisfaction of judgments, in
                  compromise or as fines and penalties, and counsel fees
                  reasonably incurred by such Indemnified Party in connection
                  with the defense or disposition of any claim, action, suit or
                  other proceeding, whether civil or criminal, before any court
                  or administrative or investigative body in which such
                  Indemnified Party may be or may have been involved as a party
                  or otherwise or with which such Indemnified Party may be or
                  may have been threatened (collectively, the "Losses") arising
                  out of or related to any claim of a breach of any
                  representation, warranty or covenant made herein by the
                  Indemnitor, provided, however, that no Indemnified Party shall
                  be indemnified hereunder against any Losses arising directly
                  from such Indemnified Party's (i) willful misfeasance, (ii)
                  bad faith, (iii) gross negligence or (iv) reckless disregard
                  of the duties involved in the conduct of such Indemnified
                  Party's position.

         (b)      The Indemnified Party shall use its best efforts to minimize
                  any liabilities, damages, deficiencies, claims, judgments,
                  assessments, costs and expenses in respect of which indemnity
                  may be sought hereunder. The Indemnified Party shall give
                  written notice to Indemnitor within the earlier of ten (10)
                  days of receipt of written notice to Indemnified Party or
                  thirty (30) days from discovery by Indemnified Party of any
                  matters which may give rise to a claim for indemnification or
                  reimbursement under this Agreement. The failure to give such
                  notice shall not affect the right of Indemnified Party to
                  indemnity hereunder unless such failure has materially and
                  adversely affected the rights of the Indemnitor; provided that
                  in any event such notice shall have been given prior to the
                  expiration of the Survival Period. At any time after ten (10)
                  days from the giving of such notice, Indemnified Party may, at
                  its option, resist, settle or otherwise compromise, or pay
                  such claim unless it shall have received notice from
                  Indemnitor that Indemnitor intends, at Indemnitor's sole cost
                  and expense, to assume the defense of any such matter, in
                  which case Indemnified Party shall have the right, at no cost
                  or expense to Indemnitor, to participate in such defense. If
                  Indemnitor does not assume the defense of such matter, and in
                  any event until Indemnitor states in writing that it will
                  assume the defense, Indemnitor shall pay all costs of
                  Indemnified Party arising out of the defense until the defense
                  is assumed; provided, however, that Indemnified Party shall
                  consult with Indemnitor and obtain indemnitor's prior written
                  consent to any payment or settlement of any such claim.
                  Indemnitor shall keep Indemnified Party fully apprised at all
                  times as to the status of the defense. If Indemnitor does not
                  assume the defense, Indemnified Party shall keep Indemnitor
                  apprised at all times as to the status of the defense.
                  Following indemnification as provided for hereunder,
                  Indemnitor shall be subrogated to all rights of Indemnified
                  Party with respect to all third parties, firms or corporations
                  relating to the matter for which indemnification has been
                  made.

12.      Other Matters.






                                      A-16








         (a)      All covenants, agreements, representations and warranties made
                  under this Agreement and any certificates delivered pursuant
                  to this Agreement shall be deemed to have been material and
                  relied upon by each of the parties, notwithstanding any
                  investigation made by them or on their behalf.



         (b)      All notices hereunder shall be sufficiently given for all
                  purposes hereunder if in writing and delivered personally or
                  sent by registered mail or certified mail, postage prepaid.
                  Notice to the Target Fund shall be addressed to the Target
                  Fund c/o Van Kampen Asset Management, 1221 Avenue of the
                  Americas, New York, New York 10020, Attention: General
                  Counsel, or at such other address as the Target Fund may
                  designate by written notice to the Acquiring Fund. Notice to
                  the Acquiring Fund shall be addressed to the Acquiring Fund
                  c/o Van Kampen Asset Management, 1221 Avenue of the Americas,
                  New York, New York 10020, Attention: General Counsel, or at
                  such other address and to the attention of such other person
                  as the Acquiring Fund may designate by written notice to the
                  Target Fund. Any notice shall be deemed to have been served or
                  given as of the date such notice is delivered personally or
                  mailed.



         (c)      This Agreement supersedes all previous correspondence and oral
                  communications between the parties regarding the
                  Reorganization, constitutes the only understanding with
                  respect to the Reorganization, may not be changed except by a
                  letter of agreement signed by each party and shall be governed
                  by and construed in accordance with the laws of the State of
                  Illinois applicable to agreements made and to be performed in
                  said state.



         (d)      It is expressly agreed that the obligations of the Funds
                  hereunder shall not be binding upon any of their respective
                  trustees, shareholders, nominees, officers, agents, or
                  employees personally, but shall bind only the trust property
                  of the respective Fund as provided in such Fund's Declaration
                  of Trust. The execution and delivery of this Agreement has
                  been authorized by the trustees of each Fund and signed by
                  authorized officers of each Fund, acting as such, and neither
                  such authorization by such trustees, nor such execution and
                  delivery by such officers shall be deemed to have been made by
                  any of them individually or to impose any liability on any of
                  them personally, but shall bind only the trust property of
                  each Fund as provided in such Funds' Declaration of Trust.


         This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but all
such counterparts together shall constitute but one instrument.

         IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to
be executed and delivered by their duly authorized officers as of the day and
year first written above.


                                      A-17



                                       VAN KAMPEN XXXXXXXXXXXXX  
                                       XXXXXXXXXXXXXXXXXXXXXX



                                       -----------------------------------------
                                       [Name]
                                       [Title]
Attest: [Name]
[Title]

                                       VAN KAMPEN XXXXXXXXXXXXX
                                       XXXXXXXXXXXXXXXXXXXX      



                                       -----------------------------------------
                                       [Name]
                                       [Title]
Attest: [Name]
[Title]





                                      A-18


                                   APPENDIX B

                                                      Federal Identification

                                                      No. 36-3797841


                        THE COMMONWEALTH OF MASSACHUSETTS


                 Office of the Massachusetts Secretary of State
                         Michael J. Connolly, Secretary
                    One Ashburton Place, Boston, Mass. 02108

                  CERTIFICATE OF VOTE OF TRUSTEES ESTABLISHING
                         FOUR SERIES OF PREFERRED SHARES


                  I, Ronald A. Nyberg, Secretary, of Van Kampen Merritt Trust
For Investment Grade Municipals (the "Fund") located at One Parkview Plaza,
Oakbrook Terrace, IL 60181, do hereby certify that at a meeting of the trustees
of the Fund held on February 20, 1992, the following vote establishing and
designating four series of preferred shares of beneficial interest and
determining the relative rights and preferences thereof was duly adopted:

         First: Pursuant to authority expressly vested in the Board of Trustees
of the Fund by Article VI of its Declaration of Trust (which, as amended or
restated from time to time is, together with this Certificate of Vote, herein
called the "Declaration of Trust"), the Board of Trustees hereby authorizes the
issuance of four series of 5,300 shares of its authorized preferred shares of
beneficial interest, par value $.01 per share ("Preferred Shares"), liquidation
preference of $50,000 per share, designated, respectively, Auction Preferred
Shares, Series A ("APS Series A"), Auction Preferred Shares, Series B ("APS
Series B"), Auction Preferred Shares, Series C ("APS Series C") and Auction
Preferred Shares, Series D ("APS Series D") (collectively the APS Series A, APS
Series B, APS Series C and APS Series D are referred to herein as "APS").

         Second: The preferences, voting powers, qualifications, and special or
relative rights or privileges of each such series of preferred shares of
beneficial interest are as follows:

                                   DESIGNATION

         APS SERIES A: A series of 1,500 preferred shares of beneficial
interest, $.01 par value, liquidation preference $50,000 per share, is hereby
designated "Auction Preferred Shares, Series A" (hereinafter, "APS Series A").
Each share of APS Series A shall be issued on March 10, 1992; have an Applicable
Rate for its Initial Dividend Period equal to 3.30% per annum; have an Initial
Dividend Payment Date of Monday, April 6, 1992; and have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Declaration of Trust applicable to preferred
shares of beneficial interest of the Fund, as are set forth in Part I and Part
II of this Certificate of 




Vote. The APS Series A shall constitute a separate series of Preferred Shares of
beneficial interest of the Fund, and each share of APS Series A shall be
identical except as provided in Section 3 of Part I of this Certificate of Vote.

         APS SERIES B: A series of 1,500 preferred shares of beneficial
interest, par value $.01 per share, liquidation preference $50,000 per share, is
hereby designated "Auction Preferred Shares, Series B" (hereinafter, "APS Series
B"). Each share of APS Series B shall be issued on March 10, 1992; have an
Applicable Rate for its Initial Dividend Period equal to 3.30% per annum; have
an Initial Dividend Payment Date of Monday, April 13, 1992; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Declaration of Trust applicable
to preferred shares of beneficial interest of the Fund, as are set forth in Part
I and Part II of this Certificate of Vote. The APS Series B shall constitute a
separate series of Preferred Shares of the Fund, and each share of APS Series B
shall be identical except as provided in Section 3 of Part I of this Certificate
of Vote.

         APS SERIES C: A series of 1,500 preferred shares of beneficial
interest, par value $.01 per share, liquidation preference $50,000 per share, is
hereby designated "Auction Preferred Shares, Series C" (hereinafter, "APS Series
C"). Each share of APS Series C shall be issued March 10, 1992; have an
Applicable Rate for its Initial Dividend Period equal to 3.40% per annum; have
an Initial Dividend Payment Date of Monday, July 6, 1992; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Declaration of Trust applicable
to preferred shares of beneficial interest of the Fund, as are set forth in Part
I and Part II of this Certificate of Vote. The APS Series C shall constitute a
separate series of Preferred Shares of the Fund, and each share of APS Series C
shall be identical except as provided in Section 3 of Part I of this Certificate
of Vote.

         APS SERIES D: A series of 800 preferred shares of beneficial interest,
par value $.01 per share, liquidation preference $50,000 per share, is hereby
designated "Auction Preferred Shares, Series D." Each share of APS Series D
shall be issued on March 10, 1992; have an Applicable Rate for its Initial
Dividend Period equal to 3.40% per annum; have an Initial Dividend Payment Date
of Monday, July 6, 1992; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Declaration of Trust applicable to preferred shares of beneficial
interest of the Fund, as are set forth in Part I and Part II of this Certificate
of Vote. The APS Series D shall constitute a separate series of Preferred Shares
of the Fund, and each share of APS Series D shall be identical except as
provided in Section 3 of Part I of this Certificate of Vote.

         No holder of any series of APS shall have, solely by reason of being
such a holder of any series of APS, any right to acquire, purchase or subscribe
for any APS, common shares of beneficial interest, par value $.01 per share, of
the Fund or other securities of the Fund which it may hereafter issue or sell
(whether out of the number of shares authorized by the Declaration of Trust, or
out of any shares acquired by the Fund after the issuance thereof, or
otherwise).

                                     PART I

                  1. Number of Shares; Ranking. (a) No fractional APS shall be
issued.

                           (b) Any APS which at any time have been redeemed or
purchased by the Fund shall, after such redemption or purchase, have the status
of authorized but unissued Preferred Shares, without designation as to series.

                           (c) The shares of each series of APS shall rank on a
parity with shares of any other series of Preferred Shares (including any other
series of APS) as to the payment of 



                                      B-2


dividends and the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Fund.

                  2. Dividends. (a) The Holder of shares of any series of APS
shall be entitled to receive, when, as and if declared by the Board of Trustees,
out of funds legally available therefor, cumulative cash dividends at the
Applicable Rate per annum thereof, determined as set forth in paragraph (c) of
this Section 2, and no more (except to the extent set forth in Section 12 of
this Part I), payable on the respective dates (each a "Dividend Payment Date")
determined as set forth in paragraph (b) of this Section 2. Dividends on shares
of any series of APS shall accumulate at the Applicable Rate per annum from the
Date of Original Issue thereof.

                           (b) (i) Dividends shall be payable subject to
subparagraph (b) (ii) of this Section 2, on shares of:

                                            (A) APS Series A, on Monday, April
         6, 1992, and on each fourth Monday thereafter,

                                            (B) APS Series B, on Monday, April
         13, 1992, and on each fourth Monday thereafter,

                                            (C) APS Series C, on Monday, July 6,
         1992 and the first Business Day of each calendar month thereafter,
         provided that in any calendar month in which an Auction Date for such
         series is scheduled to occur, dividends shall be payable on the first
         Business Day next succeeding such Auction Date, and

                                            (D) APS Series D, on Monday, July 6,
         1992, and the first Business Day of each calendar month thereafter,
         provided that in any calendar month in which an Auction Date for such
         series is scheduled to occur, dividends shall be payable on the first
         Business Day next succeeding such Auction Date,

provided that if the Fund, subject to the conditions set forth in Section 4 of
this Part I, designates any Subsequent Dividend Period as a Special Dividend
Period, dividends will be payable: (1) with respect to a Special Dividend Period
of less than 181 days, the day after the last day thereof, (2) with respect to a
Special Dividend Period of 181 days or more and fewer than 365 days, the 92nd
day thereof, the 183rd day thereof, if any, the 247th day thereof, if any, and
the day after the last day, thereof and (3) with respect to a Special Dividend
Period of 365 or more days, on such date in each quarterly period after the
commencement thereof as is determined by the Board of Trustees.

After any Special Dividend Period, dividends on shares of such series of APS
shall be payable, subject to subparagraph (b)(ii) of this Section 2, on each
fourth succeeding Monday if such series is APS Series A, each fourth succeeding
Monday if such series is APS Series B, and the first Business Day of each
calendar month thereafter, provided that in any calendar month in which an
Auction Date for such series is scheduled to occur, dividends shall be payable
on the first Business Day next succeeding such Auction Date if such series is
APS Series C, and the first Business Day of each calendar month thereafter,
provided that in any calendar month in which an Auction Date for such series is
scheduled to occur, dividends shall be payable on the first Business Day next
succeeding such Auction Date if such series is 



                                      B-3


APS Series D, subject in each case to the options of the Fund to further
designate from time to time any Subsequent Dividend Period thereof as a Special
Dividend Period.

                                        (ii) In the case of dividends that would
         otherwise be payable on a Sunday, Monday, Tuesday, Wednesday, Thursday,
         Friday or Saturday as determined by subparagraph (b) (i) of this
         Section 2, including clause (1), (2) or (3) of the proviso thereto, if
         (i) the Sunday, Monday or Tuesday that would otherwise be the Dividend
         Payment Date is not a Business Day, then dividends shall be payable on
         the first Business Day that falls after such Sunday, Monday or Tuesday,
         or (ii) the Wednesday, Thursday, Friday or Saturday that would
         otherwise be the Dividend Payment Date is not a Business Day, then
         dividends shall be payable on the first Business Day that falls prior
         to such Wednesday, Thursday, Friday or Saturday.

                                        (iii) The Fund shall pay to the Auction
         Agent not later than 12:00 Noon, New York City time, on the Business
         Day next preceding each Dividend Payment Date for shares of such
         series, an aggregate amount of funds available on the next Business Day
         in The City of New York, New York, equal to the dividends to be paid to
         all Holders of shares of such series on such Dividend Payment Date.

                                        (iv) All moneys paid to the Auction
         Agent for the payment of dividends (or for the payment of any late
         charges pursuant to subparagraph (c)(i) of this Section 2) shall be
         held in trust for the payment of such dividends (and any such late
         charge) by the Auction Agent for the benefit of the Holders specified
         in subparagraph (b)(v) of this Section 2. Any moneys paid to the
         Auction Agent in accordance with the foregoing but not applied by the
         Auction Agent to the payment of dividends (and any late charge) will,
         to the extent permitted by law, be repaid to the Fund at the end of 90
         days from the date on which such moneys were so to have been applied.

                                        (v) Each dividend on the APS shall be
         paid on the Dividend Payment Date therefor to the Holders as their
         names appear on the share books of the Fund on the Business Day next
         preceding such Dividend Payment Date. Dividends in arrears for any past
         Dividend Period may be declared and paid at any time, without reference
         to any regular Dividend Payment Date, to the Holders as their names
         appear on the share books of the Fund on such date, not exceeding 15
         days preceding the payment date thereof, as may be fixed by the Board
         of Trustees.

                           (c) (i) The dividend rate on shares of any series of
APS during the period from and after the Date of Original Issue thereof to and
including the last day of the Initial Dividend Period therefor shall be equal to
the rate per annum set forth with respect to such series under "Designation,"
above. For each Subsequent Dividend Period of any series of APS outstanding
thereafter, the dividend rate on shares of such series shall be equal to the
rate per annum that results from an Auction for such series on the Auction Date
next preceding such Subsequent Dividend Period; provided, however, that if an
Auction for any Subsequent Dividend 



                                      B-4


Period of any series of APS is not held for any reason or if a Failure to
Deposit occurs and such failure has not been cured as set forth below prior to
any succeeding Subsequent Dividend Period thereof, then, subject to the next
succeeding provision, the dividend rate on the shares of such series for any
such Subsequent Dividend Period shall be the Maximum Rate (as defined herein)
for such series on the Auction Date for such Subsequent Dividend Period;
provided, further, however, that if (A) any Failure to Deposit shall have
occurred with respect to shares of any series of APS during any Rate Period
thereof (other than any Special Dividend Period consisting of four or more
Dividend Periods or any Rate Period succeeding any Special Dividend Period
consisting of four or more Dividend Periods during which a Failure to Deposit
occurred that has not been cured), and prior to 12:00 noon, New York City time,
on the third Business Day next succeeding the date on which such Failure to
Deposit occurred, such Failure to Deposit shall not have been cured in
accordance with the next succeeding sentence or the Fund shall not have paid to
the Auction Agent a late charge equal to the sum of (1) if such Failure to
Deposit consisted of the failure timely to pay to the Auction Agent the full
amount of dividends with respect to any Dividend Period on the shares of such
series, an amount computed by multiplying (x) 200% of the "AA" Composite
Commercial Paper Rate for the Rate Period during which such Failure to Deposit
occurs on the Dividend Payment Date for such Dividend Period by (y) a fraction,
the numerator of which shall be the number of days for which such Failure to
Deposit has not been cured in accordance with the next succeeding sentence
(including the day such Failure to Deposit occurs and excluding the day such
Failure to Deposit is cured) and the denominator of which shall be 365, and
applying the rate obtained against the aggregate liquidation preference of the
outstanding shares of such series of APS and (2) if such Failure to Deposit
consisted of the failure timely to pay to the Auction Agent the Redemption Price
of the shares of such series of APS, if any, for which Notice of Redemption has
been given by the Fund pursuant to paragraph (b) of Section 3 of this Part I, an
amount computed by multiplying (x) 200% of the "AA" Composite Commercial Paper
Rate for the Rate Period during which such Failure to Deposit occurs on the
redemption date by (y) a fraction, the numerator of which shall be the number of
days for which such Failure to Deposit is not cured in accordance with the next
succeeding sentence (including the day such Failure to Deposit occurs and
excluding the day such Failure to Deposit is cured) and the denominator of which
shall be 365, and applying the rate obtained against the aggregate liquidation
preference of the outstanding shares of APS to be redeemed, or (B) any Failure
to Deposit shall have occurred with respect to shares of any series of APS
during a Special Dividend Period thereof consisting of four or more Dividend
Periods, or during any Rate Period thereof succeeding any Special Dividend
Period consisting of four or more Dividend Periods during which a Failure to
Deposit occurred that has not been cured, and such Failure to Deposit shall not
have been cured in accordance with the next succeeding sentence during such
Special Dividend Period or such other Rate Period, then the dividend rate for
shares of such series of APS for each Subsequent Dividend Period thereof
commencing after such failure to and including the Subsequent Dividend Period,
if any, during which such Failure to Deposit is so cured shall be a rate per
annum equal to the Maximum Rate on the Auction Date for such Subsequent Dividend
Period (but with the prevailing rating for such shares, for purposes of
determining such Maximum Rate, being deemed to be "Below "ba3"/BB-") (the rate
per annum at which dividends are payable on the APS for any Rate Period for such
shares being herein referred to as the "Applicable Rate" for such shares). A
Failure to Deposit with respect to shares of any series of APS shall have been
cured (if such Failure to Deposit is not solely due to the willful failure of
the Fund to make the required payment to the Auction Agent) with respect to 



                                      B-5


any Rate Period if, not later than 12:00 Noon, New York City time, on the fourth
Business Day preceding the Auction Date for the Rate Period subsequent to such
Rate Period the Fund shall have paid to the Auction Agent (A) all accumulated
and unpaid dividends on the shares of such series of APS and (B) without
duplication, the Redemption Price for the APS, if any, for which Notice of
Redemption has been given by the Fund pursuant to paragraph (b) of Section 3 of
this Part I.

                                        (ii) The amount of dividends per share
         payable on shares of any series of APS on any date on which dividends
         shall be payable on shares of such series shall be computed by
         multiplying the respective Applicable Rate for such series in effect
         for such Dividend Period or Dividend Periods or part thereof for which
         dividends have not been paid by a fraction, the numerator of which
         shall be the number of days in such Dividend Period or Dividend Periods
         or part thereof and the denominator of which shall be 365 if such
         Dividend Period is a Rate Period, or is contained in a Rate Period, of
         less than one year and 360 for all other Dividend Periods, and applying
         the rate obtained against $50,000.

                           (d) Any dividend payment made on the APS shall first
be credited against the earliest accumulated but unpaid dividends due with
respect to such APS.

                           (e) Except as set forth in the next sentence, no
dividends shall be declared or paid or set apart for payment on the shares of
any class or series of shares ranking, as to the payment of dividends, on a
parity with the APS for any period unless full cumulative dividends have been or
contemporaneously are declared and paid on the shares of each series of APS
through the most recent Dividend Payment Date for each such series. When
dividends are not paid in full upon the APS through their most recent respective
Dividend Payment Dates or upon the shares of any other class or series of shares
ranking on a parity as to the payment of dividends with the APS through their
most recent respective dividend payment dates, all dividends declared upon the
APS and any other such class or series of shares ranking on a parity as to the
payment of dividends with the APS shall be declared pro rata so that the amount
of dividends declared per share on the APS and such other class or series of
shares shall in all cases bear to each other the same ratio that accumulated
dividends per share on the APS and such other class or series of shares bear to
each other (for purposes of this sentence, the amount of dividends declared per
share shall be based on the Applicable Rate for such shares for the Dividend
Periods during which dividends were not paid in full). Holders of the APS shall
not be entitled to any dividend, whether payable in cash, property or shares, in
excess of full cumulative dividends, as herein provided, on the APS. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the APS which may be in arrears, and, except
to the extent set forth in subsection (c)(i) of this Section 2, no additional
sum of money shall be payable in respect of any such arrearage.

                           (f) Dividends on the APS shall be designated as
exempt-interest dividends up to the amount of tax-exempt income of the Fund, to
the extent permitted by, and for purposes of, Section 852 of the Internal
Revenue Code of 1986, as amended from time to time.

                           (g) The Board of Trustees shall not declare any
dividend (except a dividend payable in Common Shares), or declare any other
distribution, upon the Common 



                                      B-6


Shares, or purchase Common Shares, unless in every such case the APS have, at
the time of any such declaration or purchase, an asset coverage (as defined in
and determined pursuant to the 1940 Act) of at least 200% (or such other asset
coverage as may in the future be specified in or under the 1940 Act as the
minimum asset coverage for senior securities which are stock of a closed-end
investment company as a condition of declaring dividends on its common stock)
after deducting the amount of such dividend, distribution or purchase price, as
the case may be.

                  3. Redemption. (a)(i) Upon giving a Notice of Redemption, as
provided below, the Fund at its option may redeem shares of any series of APS,
in whole or in part, on the Second Business Day next preceding any Dividend
Payment Date applicable to those shares of APS called for redemption, out of
funds legally available therefor, at the Optional Redemption Price; provided
that during a Special Dividend Period of 365 days or more no share of APS will
be subject to optional redemption during any Non-Call Period; provided, that
shares of any series of APS may not be redeemed in part if after such partial
redemption fewer than 250 shares of such series remain outstanding.

                                        (ii) If fewer than all of the
         outstanding shares of any series of APS are to be redeemed pursuant to
         subparagraph (a)(i) of this Section 3, the number of shares of such
         series to be redeemed shall be determined by the Board of Trustees, and
         such shares shall be redeemed pro rata from the Holders of such series
         in proportion to the number of such shares held by such Holders.

                                        (iii) No APS shall be redeemed pursuant
         to subparagraphs (a)(i) or (a)(ii) of this Section 3 unless, on the
         date on which the Fund intends to give notice of such redemption
         pursuant to paragraph (b) of this Section 3, (a) the Fund has available
         Deposit Securities with maturity or tender dates not later than the day
         preceding the applicable redemption date and having a value not less
         than the amount (including the applicable premium, if any) due to
         Holders of the APS by reason of the redemption of such shares on such
         redemption date and (b) Moody's Eligible Assets (if Moody's is then
         rating the APS) and S&P Eligible Assets (if S&P is then rating the APS)
         each at least equal the APS Basic Maintenance Amount, and would at
         least equal the APS Basic Maintenance Amount immediately subsequent to
         such redemption, if such redemption were to occur on such date, and on
         the date of redemption.

                                        (iv) The Fund shall redeem, at the
         Mandatory Redemption Price, certain of the APS to the extent permitted
         under the 1940 Act and Massachusetts law, if the Fund fails to maintain
         the APS Basic Maintenance Amount or 1940 Act APS Asset Coverage in
         accordance with the requirements of the rating agency or agencies then
         rating the APS and such failure is not cured on or before the APS Basic
         Maintenance Cure Date or the 1940 Act Cure Date, as the case may be.
         The number of APS to be redeemed shall be equal to the lesser of (i)
         the minimum number of APS the redemption of which, if deemed to have
         occurred immediately prior to the opening of business on the Cure Date,
         together with all other Preferred Shares subject to redemption or
         retirement, would result in the satisfaction of the APS Basic
         Maintenance Amount or the 1940 Act APS Asset Coverage, as the case may
         be, on such Cure Date (provided that, if there is 



                                      B-7


         no such minimum number of APS and other Preferred Shares the redemption
         of which would have such result, all the APS and Preferred Shares then
         outstanding shall be redeemed), and (ii) the maximum number of APS,
         together with all other Preferred Shares subject to redemption or
         retirement, that can be redeemed out of funds expected to be legally
         available therefor. In determining the APS required to be redeemed in
         accordance with the foregoing, the Fund shall allocate the number
         required to be redeemed to satisfy the APS Basic Maintenance Amount or
         the 1940 Act APS Asset Coverage, as the case may be, pro rata among
         each series of APS and other Preferred Shares subject to redemption
         provisions similar to those contained in this subparagraph (a)(iv) of
         this Section 3. The Fund shall effect such redemption not earlier than
         20 days and not later than 40 days after such Cure Date, except that if
         the Fund does not have funds legally available for the redemption of
         all of the required number of APS and other Preferred Shares which are
         subject to redemption provisions similar to those contained in this
         subparagraph (a)(iv) of this Section 3 or the Fund otherwise is unable
         to effect such redemption on or prior to 40 days after such Cure Date,
         the Fund shall redeem those APS and other Preferred Shares which it was
         unable to redeem on the earliest practicable date on which it is able
         to effect such redemption. If fewer than all of the outstanding shares
         of any series of APS are to be redeemed pursuant to this Section
         3(a)(iv), the number of shares of such series to be redeemed shall be
         redeemed pro rata from the Holders of such shares in proportion to the
         number of shares held by such Holders.

                           (b) The Fund is required to give 30 days Notice of
Redemption. In the event the Fund obtains appropriate exemptive or no-action
relief from the Securities and Exchange Commission, the number of days' notice
required for a mandatory redemption may be reduced by the Board of Trustees of
the Fund to as few as two Business Days if Moody's and S&P each has agreed in
writing that the revised notice provision would not adversely affect its
then-current ratings of the APS. The Auction Agent will use its reasonable
efforts to provide telephonic notice to each holder of APS called for redemption
not later than the close of business on the Business Day on which the Auction
Agent determines the shares to be redeemed (as described above) (or, during the
occurrence of a Failure to Deposit with respect to such shares, not later than
the close of business on the Business Day immediately following the day on which
the Auction Agent receives Notice of Redemption from the Fund). Such telephonic
notice will be confirmed promptly in writing not later than the close of
business on the third Business Day preceding the redemption date by notice sent
by the Auction Agent to each holder of record of APS called for redemption, the
Broker-Dealers and the Securities Depository. Every Notice of Redemption and
other redemption notice with respect to APS will state: (1) the redemption date,
(2) the number of APS to be redeemed, (3) the redemption price, (4) that
dividends on the APS to be redeemed will cease to accumulate as of such
redemption date and (5) the provision of the APS Provisions pursuant to which
such shares are being redeemed. No defect in the Notice of Redemption or other
redemption notice or in the transmittal or the mailing thereof will affect the
validity of the redemption proceedings, except as required by applicable law. If
fewer than all shares of any series held by any Holder are to be redeemed, the
Notice of Redemption mailed to such Holder shall also specify the number of
shares of such series to be redeemed from such Holder.



                                      B-8


                           (c) Notwithstanding the provisions of paragraph (a)
of this Section 3, if any dividends on shares of any series of APS are in
arrears, no shares of such series of APS shall be redeemed unless all
outstanding shares of such series of APS are simultaneously redeemed, and the
Fund shall not purchase or otherwise acquire any shares of such series of APS;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of all outstanding shares of such series of APS pursuant to the
successful completion of an otherwise lawful purchase or exchange offer made on
the same terms to, and accepted by, Holders of all outstanding shares of such
series of APS.

                           (d) Upon the deposit of funds sufficient to redeem
the APS with the Auction Agent and the giving of Notice of Redemption under
Paragraph (b) of this Section 3, dividends on such shares shall cease to
accumulate and such shares shall no longer be deemed to be outstanding for any
purpose, and all rights of the Holders of the shares so called for redemption
shall cease and terminate, except the right of such Holders to receive the
Optional Redemption Price or Mandatory Redemption Price, as the case may be, but
without any interest or other additional amount, except as provided in Section
2(c)(i) and in Section 12. Upon surrender in accordance with the Notice of
Redemption of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Trustees shall so require and the Notice
of Redemption shall so state), the Optional Redemption Price or Mandatory
Redemption Price, as the case may be, shall be paid by the Auction Agent to the
Holders of the APS subject to redemption. In the case that fewer than all of the
shares represented by any such certificate are redeemed, a new certificate shall
be issued, representing the unredeemed shares, without cost to the Holder
thereof. The Fund shall be entitled to receive from the Auction Agent, promptly
after the date fixed for redemption, any cash deposited with the Auction Agent
in excess of (i) the aggregate Optional Redemption Price of the APS called for
redemption on such date and (ii) all other amounts to which Holders of the APS
called for redemption may be entitled. Any funds so deposited that are unclaimed
at the end of 90 days from such redemption date shall, to the extent permitted
by law, be repaid to the Fund, after which time the Holders of the APS so called
for redemption may look only to the Fund for payment of the Optional Redemption
Price or Mandatory Redemption Price, as the case may be, and all other amounts
to which they may be entitled. The Fund shall be entitled to receive, from time
to time after the date fixed for redemption, any interest on the funds so
deposited.

                           (e) To the extent that any redemption for which
Notice of Redemption has been given is not made by reason of the absence of
legally available funds therefor, such redemption shall be made as soon as
practicable to the extent such funds become available. Failure to redeem the APS
shall be deemed to exist at any time after the date specified for redemption in
a Notice of Redemption when the Fund shall have failed, for any reason
whatsoever, to deposit in trust with the Auction Agent the Redemption Price with
respect to any shares for which such Notice of Redemption has been given.
Notwithstanding the fact that the Fund may not have redeemed the APS for which a
Notice of Redemption has been given, dividends may be declared and paid on the
APS and shall include those APS for which a Notice of Redemption has been given.

                           (f) All moneys paid to the Auction Agent for payment
of the Optional Redemption Price or Mandatory Redemption Price, as the case may
be, of the APS called for 



                                      B-9


redemption shall be held in trust by the Auction Agent for the benefit of
Holders of shares so to be redeemed.

                           (g) In effecting any redemption pursuant to this
Section 3, the Fund shall use its best efforts to comply with all applicable
procedural conditions precedent to effecting such redemption under the 1940 Act
and Massachusetts law, but shall effect no redemption except in accordance with
the 1940 Act and Massachusetts law.

                           (h) In the case of any redemption pursuant to this
Section 3, only whole APS shall be redeemed, and in the event that any provision
of the Declaration of Trust would require redemption of a fractional share, the
Auction Agent shall be authorized to round up so that only whole shares are
redeemed.

                  4. Designation of Special Dividend Periods. (a) The Fund, at
its option, may designate any succeeding Subsequent Dividend Period of any
series of APS as a Special Dividend Period; provided, however, that such
designation shall be effective only if (A) notice thereof shall have been given
in accordance with paragraph (b) and clause (i) of paragraph (c) of this Section
4, (B) any Failure to Deposit that shall have occurred with respect to shares of
such series during any Dividend Period shall have been cured in accordance with
the provisions of the third sentence of paragraph (c)(i) of Section 2 of this
Part I, (C) Sufficient Clearing Bids (as defined in Section 1 of Part II hereof)
for such series shall have existed in an Auction held on the Auction Date
immediately preceding the first day of such proposed Special Dividend Period,
(D) if any Notice of Redemption shall have been mailed by the Fund pursuant to
paragraph (b) of Section 3 of this Part I with respect to any shares of such
series of APS, the Redemption Price with respect to such shares shall have been
deposited with the Auction Agent and (E) in the event the Fund wishes to
designate any succeeding Subsequent Dividend Period for such series as a Special
Dividend Period consisting of more than 28 Rate Period Days, the Fund has
received written confirmation from S&P (if S&P is then rating the APS) and
Moody's (if Moody's is then rating the APS) that such designation would not
affect the rating then assigned by S&P and Moody's to such series.

                           (b) If the Fund proposes to designate any succeeding
Subsequent Dividend Period of any series of APS as a Special Dividend Period of
more than 28 Rate Period Days pursuant to paragraph (a) of this Section 4, not
less than 20 nor more than 30 days prior to the date the Fund proposes to
designate as the first day of such Special Dividend Period (which shall be such
day that would otherwise be the first day of a Minimum Dividend Period), notice
shall be (i) published or caused to be published by the Fund in a newspaper of
general circulation to the financial community in The City of New York, New
York, which carries financial news, and (ii) communicated by the Fund by
telephonic or other means to the Auction Agent and confirmed in writing promptly
thereafter. Each such notice shall state (A) that the Fund may exercise its
option to designate a succeeding Subsequent Dividend Period of such series of
APS as a Special Dividend Period, specifying the first day thereof and (B) that
the Fund will by 11:00 A.M., New York City time, on the second Business Day next
preceding such date notify the Auction Agent of either (x) its determination,
subject to certain conditions, to exercise such option, in which case the Fund
shall specify the Special Dividend Period designated and the terms of the
Specific Redemption Provisions, if any, or (y) its determination not to exercise
such option.



                                      B-10


                           (c) No later than 11:00 A.M., New York City time, on
the second Business Day next preceding the first day of any proposed Special
Dividend Period the Fund shall deliver to the Auction Agent either:

                                        (i) a notice stating (A) that the Fund
         has determined to designate the next succeeding Dividend Period of such
         series as a Special Dividend Period, specifying the same and the first
         day thereof, (B) the Auction Date immediately prior to the first day of
         such Special Dividend Period, (C) the terms of the Specific Redemption
         Provisions, if any, for such series, (D) that such Special Dividend
         Period shall not commence if (1) on such Auction Date Sufficient
         Clearing Bids for such series shall not exist (in which case the
         succeeding Rate Period shall be a Minimum Dividend Period) or (2) a
         Failure to Deposit shall have occurred prior to the first day of such
         Special Dividend Period with respect to shares of such series and (E)
         the scheduled Dividend Payment Dates for such series of APS during such
         Special Dividend Period; provided that, if such Special Dividend Period
         consists of more than 28 Rate Period Days, such notice will be
         accompanied by an APS Basic Maintenance Report showing that, as of the
         third Business Day next preceding such proposed Special Dividend
         Period, (1) Moody's Eligible Assets, assuming for the purposes
         calculating Moody's Eligible Assets, in connection with an APS Basic
         Maintenance Report required to be prepared pursuant to this Section
         4(c)(i), a Moody's Exposure Period of "eight weeks or less but greater
         than seven weeks" (if Moody's is then rating such series) and (2) S&P
         Eligible Assets (if S&P is then rating such series) each at least equal
         the APS Basic Maintenance Amount as of such Business Day (assuming for
         purposes of the foregoing calculation that the Maximum Rate is the
         Maximum Rate on such Business Day as if such Business Day were the
         Auction Date for the proposed Special Dividend Period); or

                                        (ii) a notice stating that the Fund has
         determined not to exercise its option to designate a Special Dividend
         Period for such series of APS and that the next succeeding Dividend
         Period of such series shall be a Minimum Dividend Period.

If the Fund fails to deliver either such notice with respect to any designation
of any proposed Special Dividend Period to the Auction Agent by 11:00 A.M., New
York City time, on the second Business Day next preceding the first day of such
proposed Special Dividend Period, the Fund shall be deemed to have delivered a
notice to the Auction Agent with respect to such Special Dividend Period to the
effect set forth in clause (ii) of the preceding sentence.

                  5. Voting Rights. (a) Except as otherwise provided in the
Declaration of Trust or as otherwise required by law, (i) each Holder of APS
shall be entitled to one vote for each of the APS held on each matter submitted
to a vote of shareholders of the Fund, and (ii) the holders of outstanding
Preferred Shares, including APS, and of Common Shares shall vote together as a
single class; provided that, at a meeting of the shareholders of the Fund held
for the election of the trustees, the holders of outstanding Preferred Shares,
including APS, represented in person or by proxy at said meeting, shall elect
two trustees of the Fund, each Preferred Share, including



                                      B-11


each of the APS, entitling the holder thereof to one vote. Subject to paragraph
(b) of this Section 5, the holders of outstanding Common Shares shall elect the
balance of the trustees.

                           (b) During any period in which any one or more of the
conditions described below shall exist (such period being referred to herein as
a "Voting Period"), the number of trustees constituting the Board of Trustees
shall be automatically increased by the smallest number that, when added to the
two trustees elected exclusively by the holders of Preferred Shares, including
APS, would constitute a majority of the Board of Trustees as so increased by
such smallest number, and the holders of Preferred Shares, including APS, shall
be entitled, voting as a class on a one-vote-per-share basis (to the exclusion
of the holders of all other securities and class of capital shares of the Fund),
to elect such smallest number of additional trustees, together with the two
trustees that such holders are in any event entitled to elect. A Voting Period
shall commence:

                                        (i) if at the close of business on any
         Dividend Payment Date accumulated dividends (whether or not earned or
         declared) on any outstanding APS equal to at least two full years'
         dividends shall be due and unpaid and sufficient cash or specified
         securities shall not have been deposited with the Auction Agent for the
         payment of such accumulated dividends; or

                                        (ii) if at any time holders of any other
         Preferred Shares are entitled under the 1940 Act to elect a majority of
         the trustees of the Fund.

Upon the termination of a Voting Period, the voting rights described in this
paragraph (b) of Section 5 shall cease, subject always, however, to the
revesting of such voting rights in the Holders upon the further occurrence of
any of the events described in this paragraph (b) of Section 5.

                           (c) (i) As soon as practicable after the accrual of
any right of the holders of Preferred Shares to elect additional trustees as
described in paragraph (b) of this Section 5, the Fund shall notify the Auction
Agent and the Auction Agent shall call a special meeting of such holders, by
mailing a notice of such special meeting to such holders, such meeting to be
held not less than 10 nor more than 20 days after the date of mailing of such
notice. If the Fund fails to send such notice to the Auction Agent or if the
Auction Agent does not call such a special meeting, it may be called by any such
holder on like notice. The record date for determining the holders entitled to
notice of and to vote at such special meeting shall be the close of business on
the fifth Business Day preceding the day on which such notice is mailed. At any
such special meeting and at each meeting of holders of Preferred Shares held
during a Voting Period at which trustees are to be elected, such holders, voting
together as a class (to the exclusion of the holders of all other securities and
classes of capital shares of the Fund), shall be entitled to elect the number of
trustees prescribed in paragraph (b) of this Section 5 on a one-vote-per-share
basis.

                                        (ii) For purposes of determining any
         rights of the Holders to vote on any matter, whether such right is
         created by this Certificate of Vote, by the other provisions of the
         Declaration of Trust, by statute or otherwise, no Holder shall be
         entitled to vote and no APS shall be deemed to be "outstanding" for the
         purpose of voting or determining the number of shares 



                                      B-12


         required to constitute a quorum if, prior to or concurrently with the
         time of determination of shares entitled to vote or shares deemed
         outstanding for quorum purposes, as the case may be, the Redemption
         Price for the redemption of such shares has been deposited in trust
         with the Auction Agent for that purpose and the requisite Notice of
         Redemption with respect to such shares shall have been given as
         provided in Section 3 of this Part I. None of the APS held by the Fund
         or any affiliate of the Fund shall have any voting rights or be deemed
         to be outstanding for voting or other purposes.

                                        (iii) The terms of office of all persons
         who are Trustees of the Fund at the time of a special meeting of
         Holders and holders of other Preferred Shares to elect trustees shall
         continue, notwithstanding the election at such meeting by the Holders
         and such other holders of the number of trustees that they are entitled
         to elect, and the persons so elected by the Holders and such other
         holders, together with the two incumbent trustees elected by the
         Holders and such other holders of Preferred Shares and the remaining
         incumbent trustees elected by the holders of the Common Shares, shall
         constitute the duly elected trustees of the Fund.

                                        (iv) Simultaneously with the termination
         of a Voting Period, the terms of office of the additional trustees
         elected by the Holders and holders of other Preferred Shares pursuant
         to paragraph (b) of this Section 5 shall terminate, the remaining
         trustees shall constitute the trustees of the Fund and the voting
         rights of the Holders and such other holders to elect additional
         trustees pursuant to paragraph (b) of this Section 5 shall cease,
         subject to the provisions of the last sentence of paragraph (b) of this
         Section 5.

                           (d) (i) So long as any of the APS are outstanding,
the Fund shall not, without the affirmative vote of the Holders of the
Outstanding APS determined with reference to a "majority of outstanding voting
securities" as that term is defined in Section 2(a)(42) of the 1940 Act (voting
separately as one class): (a) authorize, create or issue any class or series of
shares of beneficial interest ranking prior to or on a parity with the APS with
respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund, or increase
the authorized amount of any series of APS (except that, notwithstanding the
foregoing, but subject to the provisions of Section 13, the Board of Trustees,
without the vote or consent of the Holders of APS, may from time to time
authorize and create, and the Fund may from time to time issue, classes or
series of Preferred Shares, including APS, ranking on a parity with the APS with
respect to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund, subject to
continuing compliance by the Fund with 1940 Act APS Asset Coverage and APS Basic
Maintenance Amount requirements, provided that the Fund obtains written
confirmation from Moody's (if Moody's is then rating APS) and S&P (if S&P is
then rating APS) that the issuance of such class or series would not impair the
rating then assigned by such rating agency to the APS, (b) amend, alter or
repeal the provisions of the Declaration of Trust, including this Certificate of
Vote, whether by merger, consolidation or otherwise, so as to affect any
preference, right or power of such APS or the Holders thereof; provided that (i)
none of the actions permitted by the exception to (a) above will be deemed to
affect such preferences, rights 



                                      B-13


or powers and (ii) the authorization, creation and issuance of classes or series
of shares ranking junior to the APS with respect to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund, will be deemed to affect such preferences, rights or powers
only if Moody's or S&P is then rating the APS and such issuance would, at the
time thereof, cause the Fund not to satisfy the 1940 Act APS Asset Coverage or
the APS Basic Maintenance Amount, or (c) file a voluntary application for relief
under Federal bankruptcy law or any similar application under state law for so
long as the Fund is solvent and does not foresee becoming insolvent.

                                        (ii) The Board of Trustees, without the
         vote or consent of the Holders of APS, may from time to time amend,
         alter or repeal any or all of the definitions of the terms listed
         below, and any such amendment, alteration or repeal will not be deemed
         to affect the preferences, rights or powers of the APS or the Holders
         thereof, provided the Board of Trustees receives written confirmation
         from Moody's (such confirmation being required to be obtained only in
         the event Moody's is rating the APS and in no event being required to
         be obtained in the case of the definitions of Deposit Securities,
         Discounted Value and Receivables for Municipal Securities Sold as such
         terms apply to S&P Eligible Assets, Dividend Coverage Amount, Dividend
         Coverage Assets, Minimum Liquidity Level, S&P Discount Factor, S&P
         Eligible Assets, S&P Exposure Period and Valuation Date as such term
         applies to the definitions of Dividend Coverage Amount, Dividend
         Coverage Assets and Minimum Liquidity Level) and S&P (such confirmation
         being required to be obtained only in the event S&P is rating the APS
         and in no event being required to be obtained in the case of the
         definitions of Discounted Value and Receivables for Municipal
         Securities Sold as such terms apply to Moody's Eligible Assets, Moody's
         Discount Factor, Moody's Eligible Asset and Moody's Exposure Period)
         that any such amendment, alteration or repeal would not impair the
         ratings then assigned by Moody's or S&P, as the case may be, to the
         APS:





                                      B-14



                    APS Basic
                      Maintenance Amount
                    APS Basic
                      Maintenance Cure Date
                    APS Basic
                      Maintenance Report
                    Deposit Securities
                    Discounted Value
                    Dividend Coverage Amount
                    Dividend Coverage Assets
                    Market Value
                    Maximum Potential
                      Gross-up
                      Payment Liability
                    Minimum Liquidity Level
                    Moody's Discount Factor
                    Moody's Eligible Asset
                    Moody's Exposure Period
                    1940 Act Cure Date
                    1940 Act APS
                      Asset Coverage
                    Quarterly Valuation Date
                    Receivables for Municipal
                      Securities Sold
                    S&P Discount Factor
                    S&P Eligible Asset
                    S&P Exposure Period
                    Valuation Date

                           (e) Unless otherwise required by law, the Holders of
the APS shall not have any relative rights or preferences or other special
rights other than those specifically set forth herein. The Holders of the APS
shall have no preemptive rights or rights to cumulative voting. In the event
that the Fund fails to pay any dividends on the APS, the exclusive remedy of the
Holders shall be the right to vote for trustees pursuant to the provisions of
this Section 5.

                           (f) Unless a higher percentage is provided for in the
Declaration of Trust, the affirmative vote of the Holders of a majority of the
outstanding APS, voting as a separate class, shall be required to approve any
plan of reorganization (as such term is used in the 1940 Act) adversely
affecting such shares or any action requiring a vote of security holders of the
Fund under Section 13(a) of the 1940 Act. In the event a vote of Holders of APS
is required pursuant to the provisions of Section 13(a) of the 1940 Act, the
Fund shall, not later than ten Business Days prior to the date on which such
vote is to be taken, notify Moody's (if Moody's is then rating the APS) and S&P
(if S&P is then rating the APS) that such vote is to be taken and the nature of
the action with respect to which such vote is to be taken. In addition, the Fund
shall notify Moody's (if Moody's is then rating the APS) and S&P (if S&P is then
rating the APS) of the results of any vote described in the proceeding sentence.



                                      B-15


                           (g) Right to Vote with Respect to Certain Other
Matters. The affirmative vote of the holders of a majority (unless a higher
percentage vote is required under the Declaration of Trust or under this
Certificate of Vote) of the outstanding shares of each series of APS, each
voting as a separate class, is required with respect to any matter that
materially affects the series in a manner different from that of other series of
classes of the Fund's shares, including without limitation any proposal to do
the following: (1) increase or decrease the aggregate number of authorized
shares of the series; (2) effect an exchange, reclassification, or cancellation
of all or part of the shares of the series; (3) effect an exchange, or create a
right of exchange, of all or any part of the shares of the series; (4) change
the rights or preferences of the shares of the series; (5) change the shares of
the series, whether with or without par value, into the same or a different
number of shares, either with or without par value, of the same or another class
or series; (6) create a new class or series of shares having rights and
preferences prior and superior to the shares of the series, or increase the
rights and preferences or the number of authorized shares of a series having
rights and preferences prior or superior to the shares of the series; or (7)
cancel or otherwise affect distributions on the shares of the series that have
accrued but have not been declared. To the extent that the interests of a series
of APS affected by a matter are substantially identical to the interests of
another series of APS affected by such matter (e.g., a vote of shareholders
required under Section 13(a) of the 1940 Act), each such series shall vote
together collectively as one class. The vote of holders of APS described above
will in each case be in addition to a separate vote of the requisite percentage
of Common Shares and APS necessary to authorize the action in question.

                  6. Liquidation Rights. (a) Upon the dissolution, liquidation
or winding up of the affairs of the Fund, whether voluntary or involuntary, the
Holders of the APS then outstanding shall be entitled to receive and to be paid
out of the assets of the Fund available for distribution to its shareholders,
before any payment or distribution shall be made on the Common Shares or on any
other class of shares of the Fund ranking junior to the APS upon dissolution,
liquidation or winding up, an amount equal to the liquidation preference with
respect to such shares. The liquidation preference for the APS shall be $50,000
per share, plus an amount equal to all dividends thereon (whether or not earned
or declared) accumulated but unpaid to the date of final distribution in
same-day funds, together with any payments required to be made pursuant to
Section 12 in connection with the liquidation of the Fund.

                           (b) Neither the sale of all or substantially all the
property or business of the Fund, nor the merger or consolidation of the Fund
into or with any other corporation nor the merger or consolidation of any other
corporation into or with the Fund shall be a dissolution, liquidation or winding
up, whether voluntary or involuntary, for the purposes of this Section 6.

                           (c) After the payment to the Holders of the APS of
the full preferential amounts provided for in this Section 6, the Holders of the
APS as such shall have no right or claim to any of the remaining assets of the
Fund.

                           (d) In the event the assets of the Fund available for
distribution to the Holders of the APS upon any dissolution, liquidation or
winding up of the affairs of the Fund, whether voluntary or involuntary, shall
be insufficient to pay in full all amounts to which such Holders are entitled
pursuant to paragraph (a) of this Section 6, no such distribution shall be made
on account of any shares of any other class or series of Preferred Shares
ranking on a parity 



                                      B-16


with the APS with respect to the distribution of assets upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the APS, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.

                           (e) Subject to the rights of the holders of shares of
any series or class or classes of shares ranking on a parity with the APS with
respect to the distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Fund, after payment shall have been made in full to the
Holders of the APS as provided in paragraph (a) of this Section 6, but not prior
thereto, any other series or class or classes of shares ranking junior to the
APS with respect to the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Fund shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the Holders of the APS shall not be
entitled to share therein.

                  7. Auction Agent. For so long as any of the APS is
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Fund and its affiliates (which, however, may engage or have
engaged in business transactions with the Fund or its affiliates) and at no time
shall the Fund or any of its affiliates act as the Auction Agent in connection
with the Auction Procedures. If the Auction Agent resigns or for any reason its
appointment is terminated during any period that any of the APS is outstanding,
the Board of Trustees shall use its best efforts promptly thereafter to appoint
another qualified commercial bank, trust company or financial institution to act
as the Auction Agent.

                  8. 1940 Act APS Asset Coverage. The Fund shall maintain, as of
the last Business Day of each month in which any of the APS is outstanding, the
1940 Act APS Asset Coverage.

                  9. APS Basic Maintenance Amount. (a) So long as APS are
Outstanding, the Fund shall maintain, on each Valuation Date, and shall verify
to its satisfaction that it is maintaining on such Valuation Date, (i) S&P
Eligible Assets having an aggregate Discounted Value equal to or greater than
the APS Basic Maintenance Amount (if S&P is then rating the APS) and (ii)
Moody's Eligible Assets having an aggregate Discounted Value equal to or greater
than the APS Basic Maintenance Amount (if Moody's is then rating the APS).

                           (b) On or before 5:00 P.M., New York City time, on
the third Business Day after a Valuation Date on which the Fund fails to satisfy
the APS Basic Maintenance Amount, and on the third Business Day after the APS
Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall
complete and deliver to S&P (if S&P is then rating the APS), Moody's (if Moody's
is then rating the APS) and the Auction Agent (if either S&P or Moody's is then
rating the APS) an APS Basic Maintenance Report as of the date of such failure
or such APS Basic Maintenance Cure Date, as the case may be, which will be
deemed to have been delivered to the Auction Agent if the Auction Agent receives
a copy or telecopy, telex or other electronic transcription thereof and on the
same day the Fund mails to the Auction Agent for delivery on the next Business
Day the full APS Basic Maintenance Report. The Fund shall also deliver an APS
Basic Maintenance Report to S&P (if S&P is then rating the APS), and the 



                                      B-17


Auction Agent (if S&P is then rating the APS) as of (i) the fifteenth day of
each month (or, if such day is not a Business Day, the next succeeding Business
Day) and (ii) the last Business Day of each month, in each case on or before the
third Business Day after such day. The Fund will also deliver an APS Basic
Maintenance Report to Moody's on any Valuation Date that (i) the Discounted
Value of Moody's Eligible Assets is greater than the APS Basic Maintenance
Amount by 5% or less or (ii) on any date which the Fund redeems Common Shares. A
failure by the Fund to deliver an APS Basic Maintenance Report under
subparagraph (b) of this Section 9 shall be deemed to be delivery of an APS
Basic Maintenance Report indicating the Discounted Value for all assets of the
Fund is less than the APS Basic Maintenance Amount, as of the relevant Valuation
Date.

                           (c) Within ten Business Days after the date of
delivery of an APS Basic Maintenance Report in accordance with paragraph (b) of
this Section 9 relating to a Quarterly Valuation Date, the Fund shall cause the
Independent Accountant to confirm in writing to S&P (if S&P is then rating the
APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if
either S&P or Moody's is then rating the APS) (i) the mathematical accuracy of
the calculations reflected in such Report (and in any other APS Basic
Maintenance Report, randomly selected by the Independent Accountant, that was
delivered by the Fund during the quarter ending on such Quarterly Valuation
Date) and (ii) that, in such Report (and in such randomly selected Report), the
Fund determined in accordance with this Certificate of Vote whether the Fund
had, at such Quarterly Valuation Date (and at the Valuation Date addressed in
such randomly-selected Report), S&P Eligible Assets (if S&P is then rating the
APS) of an aggregate Discounted Value at least equal to the APS Basic
Maintenance Amount and Moody's Eligible Assets (if Moody's is then rating the
APS) of an aggregate Discounted Value at least equal to the APS Basic
Maintenance Amount (such confirmation being herein called the "Accountant's
Confirmation").

                           (d) Within ten Business Days after the date of
delivery of an APS Basic Maintenance Report in accordance with paragraph (b) of
this Section 9 relating to any Valuation Date on which the Fund failed to
satisfy the APS Basic Maintenance Amount, and relating to the APS Basic
Maintenance Cure Date with respect to such failure to satisfy the APS Basic
Maintenance Amount, the Fund shall cause the Independent Accountant to provide
to S&P (if S&P is then rating the APS), Moody's (if Moody's is then rating the
APS) and the Auction Agent (if either S&P or Moody's is then rating the APS) an
Accountant's Confirmation as to such APS Basic Maintenance Report.

                           (e) If any Accountant's Confirmation delivered
pursuant to subparagraph (c) or (d) of this Section 9 shows that an error was
made in the APS Basic Maintenance Report for a particular Valuation Date for
which such Accountant's Confirmation was required to be delivered, or shows that
a lower aggregate Discounted Value for the aggregate of all S&P Eligible Assets
(if S&P is then rating the APS) or Moody's Eligible Assets (if Moody's is then
rating the APS), as the case may be, of the Fund was determined by the
Independent Accountant, the calculation or determination made by such
Independent Accountant shall be final and conclusive and shall be binding on the
Fund, and the Fund shall accordingly amend and deliver the APS Basic Maintenance
Report to S&P (if S&P is then rating the APS), Moody's (if Moody's is then
rating the APS) and the Auction Agent (if either S&P or Moody's is then rating
the APS) promptly following receipt by the Fund of such Accountant's
Confirmation.



                                      B-18


                           (f) On or before 5:00 p.m., New York City time, on
the first Business Day after the Date of Original Issue of the APS, the Fund
shall complete and deliver to S&P (if S&P is then rating the APS) and to Moody's
(if Moody's is then rating the APS), an APS Basic Maintenance Report as of the
close of business on such Date of Original Issue. Within five Business Days of
such Date of Original Issue, the Fund shall cause the Independent Accountant to
confirm in writing to S&P (if S&P is then rating the APS) and to Moody's (if
Moody's is then rating the APS) (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the amount of S&P Eligible
Assets reflected thereon equals or exceeds the APS Basic Maintenance Amount
reflected thereon.

                  10. Minimum Liquidity Level. So long as S&P is rating the APS,
the Fund shall have, as of each Valuation Date, Dividend Coverage Assets, with
respect to each then Outstanding share of each series of APS, having a value not
less than the Dividend Coverage Amount with respect to such share (the "Minimum
Liquidity Level"). If, as of each Valuation Date, the Fund does not have the
required Dividend Coverage Assets, the Fund shall, as soon as practicable,
adjust its portfolio in order to meet the Minimum Liquidity Level, but only so
long as S&P is rating the APS. So long as S&P is rating the APS, the Fund shall
notify S&P on any Valuation Date which the Fund does not have the required
Dividend Coverage Assets and does not adjust its portfolio as described in the
immediately preceding sentence.

                  11. Restrictions on Certain Distributions. For so long as any
of the APS is Outstanding, and except as set forth in Sections 2(e) and 6(d) of
this Part I, (A) the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or options, warrants or rights to subscribe for or purchase, Common
Shares or other shares, if any, ranking junior to the APS as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of the Common Shares or any other shares of the Fund
ranking junior to or on a parity with the APS as to the payment of dividends or
the distribution of assets upon dissolution, liquidation or winding up, or call
for redemption, redeem, purchase or otherwise acquire for consideration any
Common Shares or any other such junior shares (except by conversion into or
exchange for shares of the Fund ranking junior to the APS as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), or any such parity shares (except by conversion into or exchange
for shares of the Fund ranking junior to or on a parity with APS as to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up), unless (i) full cumulative dividends on shares of
each series of APS through its most recently ended Dividend Period shall have
been paid or shall have been declared and sufficient funds for the payment
thereof deposited with the Auction Agent and (ii) the Fund has redeemed the full
number of shares of each series of APS required to be redeemed by any provision
for mandatory redemption pertaining thereto, and (B) if either Moody's or S&P is
rating the APS, the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or options, warrants or rights to subscribe for or purchase, Common
Shares or other shares, if any, ranking junior to the APS as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of Common Shares or any other shares of the Fund ranking
junior to the APS as to the payment of dividends or the distribution of assets
upon dissolution, liquidation or winding up, or call for redemption, redeem,
purchase or otherwise acquire for consideration any shares of Common Shares or
any other such junior shares (except by conversion into or exchange for shares
of the Fund ranking 



                                      B-19

junior to the APS as to the payment of dividends and the distribution of assets
upon dissolution, liquidation or winding up), unless immediately after such
transaction the Discounted Value of Moody's Eligible Assets and S&P Eligible
Assets would each at least equal the APS Basic Maintenance Amount.

                  12. Additional Dividends. If the Fund retroactively allocates
any net capital gains or other income taxable for federal income tax purposes to
the APS without having given advance notice thereof to the Auction Agent as
provided in Section 6 of Part II by reason of the fact that such allocation is
made as a result of (i) the realization of net capital gains or other income
taxable for federal income tax purposes, (ii) the redemption of all or a portion
of the outstanding APS or (iii) the liquidation of the Fund (such allocation
being referred to herein as a "Retroactive Taxable Allocation"), the Fund will
simultaneously, if practicable, with such allocation but in no event later than
270 days after the end of the Fund's taxable year in which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
Holder of such shares during such taxable year at such Holder's address as the
same appears or last appeared on the share books of the Fund. Such Holders of
such shares shall be entitled to receive, when, as and if declared by the Board
of Trustees, out of funds legally available therefor, dividends in an amount
equal to the aggregate Additional Dividends with respect to all Retroactive
Taxable Allocations made to such shares during the taxable year in question,
such dividends to be payable by the Fund to the Auction Agent, for distribution
to such Holders, within 30 days after the notice described above is given to the
Auction Agent.

                  13. Certain Other Restrictions. (a) For so long as any of the
APS is outstanding and Moody's is then rating such shares, the Fund will not,
unless it has received written confirmation from Moody's that any such action
would not impair the ratings then assigned by Moody's to the APS, engage in any
one or more of the following transactions:

                                        (i) transactions in options on
         securities, futures contracts or options on futures contracts except
         that in connection with Moody's Hedging Transactions: (A) the Fund may
         buy call or put option contracts on securities; (B) the Fund may write
         covered call options on securities; (C) the Fund may write put options
         on securities; (D) the Fund may enter into positions in futures
         contracts based on the Municipal Index provided that the Fund shall not
         engage in any such transaction which would cause the Fund at the time
         of such transaction to own or have sold (1) outstanding futures
         contracts based on the Municipal Index exceeding in number 10% of the
         rolling average number of daily traded futures contracts based on the
         Municipal Index in the 30 calendar days prior to the time of effecting
         such transaction as reported by The Wall Street Journal or (2)
         outstanding futures contracts based on the Municipal Index and options
         on such futures contracts having an aggregate fair market value (taking
         into account the fair market value of futures contracts based on
         Treasury Bonds) exceeding the fair market value of Moody's Eligible
         Assets owned by the Fund; (E) the Fund may enter into futures contracts
         on Treasury Bonds provided that the Fund shall not engage in any such
         transaction which would cause the Fund at the time of such transaction
         to own or have sold (1) outstanding futures contracts based on Treasury
         Bonds and options on such futures contracts having an aggregate fair
         market value (taking into account the fair market value of futures



                                      B-20



         contracts based on the Municipal Index) exceeding 40% of the aggregate
         fair market value of Moody's Eligible Assets owned by the Fund and
         rated Aa by Moody's (or, if not rated by Moody's but rated by S&P,
         rated AAA by S&P) or (2) outstanding futures contracts based on
         Treasury Bonds and options on such futures contracts having an
         aggregate fair market value (taking into account the fair market value
         of futures contracts based on the Municipal Index) exceeding 80% of the
         aggregate fair market value of Moody's Eligible Assets owned by the
         Fund and rated Baa or A by Moody's (or, if not rated by Moody's but
         rated by S&P, rated A or AA by S&P); for purposes of the foregoing
         clauses (D) and (E), the Fund shall be deemed to own the number of
         futures contracts that underlie any outstanding option written by the
         Fund; and (F) the Fund may buy call or put options on futures contracts
         on the Municipal Index or Treasury Bonds, may write put options on such
         futures contracts (provided, that if the contract would require
         delivery of a security, that security must be held by the Fund) and may
         write call options on such futures if it owns the futures contract
         subject to the option. For so long as the APS are rated by Moody's, the
         Fund will engage in Closing Transactions to close out any outstanding
         futures contract based on the Municipal Index if the open interest with
         respect to such futures contracts based on the Municipal Index as
         reported by The Wall Street Journal is less than 5,000. For so long as
         the APS are rated by Moody's, the Fund will engage in a Closing
         Transaction to close out any outstanding futures contract by no later
         than the fifth Business Day of the month in which such contract expires
         and will engage in a Closing Transaction to close out any outstanding
         option on a futures contract by no later than the first Business Day of
         the month in which such option expires. For so long as the APS are
         rated by Moody's, the Fund will engage in transactions with respect to
         futures contracts or options thereon having only the next settlement
         date or the settlement date immediately thereafter. For purposes of
         valuation of Moody's Eligible Assets: (A) if the Fund writes a call
         option, the underlying asset will be valued as follows: (1) if the
         option is exchange-traded and may be offset readily or if the option
         expires before the earliest possible redemption of the APS, at the
         Discounted Value of the underlying security of the option or (2)
         otherwise, it has no value; (B) if the Fund writes a put option, the
         underlying asset will be valued as follows: the lessor of (1) exercise
         price and (2) the Discounted Value of the underlying security; (C) if
         the Fund is a seller under a futures contract, the underlying security
         will be valued at the lower of (1) settlement price and (2) the
         Discounted Value of the underlying security; if a contract matures
         within the Moody's Exposure Period, the security may be valued at the
         settlement price; (D) if the Fund is the buyer under a futures
         contract, the underlying security will be valued at the lower of (1)
         the settlement price and (2) the Discounted Value of the underlying
         security; if the contract matures within the Moody's Exposure Period,
         the security may be valued at its Discounted Value and (E) call or put
         option contracts which the Fund buys have no value. For so long as APS
         are rated by Moody's: (A) the Fund will not engage in options and
         futures transactions for leveraging or speculative purposes; (B) the
         Fund will not write or sell any anticipatory contracts pursuant to
         which the Fund hedges the anticipated purchase of an asset prior to
         completion of such purchase; (C) the Fund will not 



                                      B-21


         enter into an option or futures transaction unless, after giving effect
         thereto, the Fund would continue to have Moody's Eligible Assets with
         an aggregate Discounted Value equal to or greater than the APS Basic
         Maintenance Amount; (D) the Fund will not enter into an option or
         futures transaction unless after giving effect to such transaction the
         Fund would continue to be in compliance with the provisions relating to
         the APS Basic Maintenance Amount; (E) for purposes of the APS Basic
         Maintenance Amount (1) assets in margin accounts are not Moody's
         Eligible Assets, (2) 10% of the settlement price of assets sold under a
         futures contract, the settlement price of assets purchased under a
         futures contract, the settlement price of an underlying futures
         contract if the Fund writes put options on futures contracts will
         constitute liabilities of the Fund and (3) if the Fund writes call
         options on futures contracts and does not own the underlying futures
         contract, 105% of the Market Value of the underlying futures contract
         will constitute a liability of the Fund; (F) the Fund shall enter into
         only exchange-traded futures and shall write only exchange-traded
         options on exchanges approved by Moody's; (G) where delivery may be
         made to the Fund with any of a class of securities, the Fund shall
         assume for purposes of the APS Basic Maintenance Amount that it takes
         delivery of that security which yields it the least value; (H) the Fund
         will not engage in forward contracts; (I) the Fund will enter into
         futures contracts as seller only if it owns the underlying security;
         and (J) there shall be a quarterly audit made of the Fund's futures and
         options transactions by the Fund's independent accountants to confirm
         that the Fund is in compliance with these standards; or

                                        (ii) incur any indebtedness, without
         prior written approval of Moody's that such indebtedness would not
         adversely affect the then current rating by Moody's of the APS except
         that the Fund may, without obtaining the written confirmation described
         above, incur indebtedness for the purpose of clearing securities
         transactions if the APS Basic Maintenance Amount would continue to be
         satisfied after giving effect to such indebtedness; or

                                        (iii) issue any class or series of
         shares ranking prior to or on a parity with the APS with respect to the
         payment of dividends or the distribution of assets upon dissolution,
         liquidation or winding up of the Fund, or reissue any APS previously
         purchased or redeemed by the Fund; or

                           (b) For so long as any of the APS is Outstanding and
S&P is rating such shares, the Fund will not, unless the Fund has received
written confirmation from S&P that any such action would not impair the rating
then assigned by such rating agency to the APS, engage in any one or more of the
following transactions:

                                        (i) transactions in any reverse
         repurchase agreements; or

                                        (ii) lend portfolio securities; or



                                      B-22


                                        (iii) borrow money, except that the Fund
         may, without obtaining the written confirmation described above, borrow
         money for the purposes of clearing securities transactions if the APS
         Basic Maintenance Amount would continue to be satisfied after giving
         effect to such borrowing; or

                                        (iv) issue any class or series of shares
         ranking prior to or on a parity with the APS with respect to the
         payment of dividends or the distribution of assets upon dissolution,
         liquidation or winding up of the Fund, or reissue any APS previously
         purchased or redeemed by the Fund, or merge or consolidate with any
         corporation; or

                                        (v) engage in repurchase agreement
         transactions in which the term of such repurchase obligation is longer
         than 90 days, in which the underlying security is a security other than
         United States treasury securities (not inclusive of zero-coupon
         securities), demand deposits, certificates of deposits or bankers
         acceptance in which the counter-party or its affiliates have securities
         rated A1+ by S&P with respect to such underlying security; or

                                        (vi) engage in short sale transactions;
         or

                                        (vii) purchase or sell futures contracts
         or options thereon or write uncovered put or uncovered call options on
         portfolio securities except that (A) the Fund may engage in any S&P
         Hedging Transactions based on the Municipal Index, provided that the
         Fund shall not engage in any S&P Hedging Transaction based on the
         Municipal Index (other than Closing Transactions) which would cause the
         Fund at the time of such transaction to own or have sold the least of
         (1) more than 1,000 outstanding futures contracts based on the
         Municipal Index, (2) outstanding futures contracts based on the
         Municipal Index and on the Treasury Bonds exceeding in number 25% of
         the quotient of the fair market value of the Fund's total assets
         divided by 100,000 or (3) outstanding futures contract based on the
         Municipal Index exceeding in number 10% of the average number of daily
         traded futures contracts based on the Municipal Index in the month
         prior to the time of effecting such transaction as reported by The Wall
         Street Journal and (B) the Fund may engage in S&P Hedging Transactions
         based on Treasury Bonds, provided that the Fund shall not engage in any
         S&P Hedging Transaction based on Treasury Bonds (other than Closing
         Transactions) which would cause the Fund at the time of such
         transaction to own or have sold the lesser of (1) outstanding futures
         contracts based on Treasury Bonds and on the Municipal Index exceeding
         in number 25% of the quotient of the fair market value of the Fund's
         total assets divided by 100,000 or (2) outstanding futures contracts
         based on Treasury Bonds exceeding in number 10% of the average number
         of daily traded futures contracts based on Treasury Bonds in the month
         prior to the time of effecting such transaction as reported by The Wall
         Street Journal. For so long as the APS are rated by S&P, the Fund will
         engage in Closing Transactions to close out any outstanding futures
         contracts which the Fund owns or has sold or any outstanding option
         thereon owned by the Fund in the event (A) the Fund does not have S&P
         Eligible Assets with an aggregate 



                                      B-23


         Discounted Value equal to or greater than the APS Basic Maintenance
         Amount on two consecutive Valuation Dates and (B) the Fund is required
         to pay Variation Margin on the second such Valuation Date. For so long
         as the APS are rated by S&P, the Fund will engage in a Closing
         Transaction to close out any outstanding futures contract or option
         thereon in the month prior to the delivery month under the terms of
         such futures contract or option thereon unless the Fund holds
         securities deliverable under such terms. For purposes of determining
         S&P Eligible Assets to determine compliance with the APS Basic
         Maintenance Amount, no amounts on deposit with the Fund's custodian or
         broker representing Initial Margin or Variation Margin shall constitute
         S&P Eligible Assets. For so long as the APS are rated by S&P, when the
         Fund writes a futures contract or option thereon, it will maintain an
         amount of cash, cash equivalents or short-term, money market securities
         in a segregated account with the Fund's custodian, so that the amount
         so segregated plus the amount of Initial Margin and Variation Margin
         held in the account of the Fund's broker equals the fair market value
         of the futures contract, except that in the event the Fund writes a
         futures contract or option thereon which requires delivery of an
         underlying security, the Fund shall hold such underlying security.

                  14. Notice. All notices or communications, unless otherwise
specified in the By-Laws of the Fund or this Certificate of Vote, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

                  15. Definitions. As used in Parts I and II hereof, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:

         "'AA' Composite Commercial Paper Rate," on any date for any Rate
Period, shall mean (i) (A) in the case of any Minimum Dividend Period or any
Rate Period between 7 and 28 Rate Period Days, the interest equivalent of the
30-day rate; provided, however, in the case of any Minimum Dividend Period of 7
days or any Rate Period with 7 Rate Period Days and the "AA" Composite
Commercial Paper Rate is being used to determine the Applicable Rate when all of
the Outstanding APS are subject to Submitted Hold Orders, then the interest
equivalent of the 7-day rate, and (B) in the case of any Rate Period with more
than 28 Rate Period Days, the interest equivalent of the 180-day rate, on
commercial paper placed on behalf of issuers whose corporate bonds are rated
"AA" by S&P or the equivalent of such rating by S&P or another rating agency, as
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York for the Business Day immediately preceding such date; or (ii) in the
event that the Federal Reserve Bank of New York does not make available any such
rate, then the arithmetic average of such rates, as quoted on a discount basis
or otherwise, by the Commercial Paper Dealers to the Auction Agent for the close
of business on the Business Day next preceding such date. If any Commercial
Paper Dealer does not quote a rate required to determine the "AA" Composite
Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be
determined on the basis of the quotation or quotations furnished by the
remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the
Fund to provide such rate or rates not being supplied by any Commercial Paper
Dealer or Commercial Paper Dealers, as the case may be, or, if the Fund does not
select any such Substitute Commercial Paper Dealer or Substitute Commercial
Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper
Dealers. For purposes of this definition, the "interest equivalent" of a rate
stated on a discount basis (a "discount 



                                      B-24


rate") for commercial paper of a given days' maturity shall be equal to the
quotient (rounded upwards to the next higher one-thousandth (.001) of 1%) of (A)
the discount rate divided by (B) the difference between (x) 1.00 and (y) a
fraction the numerator of which shall be the product of the discount rate times
the number of days in which such commercial paper matures and the denominator of
which shall be 360.

         "Accountant's Confirmation" shall have the meaning set forth in
paragraph (c) of Section 9 of this Part I.

         "Additional Dividends" means payment to a Holder of APS of an amount
which, when taken together with the aggregate amount of Retroactive Taxable
Allocations made to such Holder with respect to the taxable year in question,
would cause such Holder's dividends in dollars (after federal income tax
consequences) from the aggregate of both the Retroactive Taxable Allocations and
the Additional Dividends to be equal to the dollar amount of the dividends which
would have been received by such Holder if the amount of the aggregate
Retroactive Taxable Allocations would have been excludable from the gross income
of such Holder. Such Additional Dividends shall be calculated (i) without
consideration being given to the time value of money; (ii) assuming that no
Holder of APS is subject to the federal alternative minimum tax with respect to
dividends received from the Fund; and (iii) assuming that each Retroactive
Taxable Allocation would be taxable in the hands of each Holder of APS at the
maximum marginal regular federal individual income tax rate applicable to
ordinary income or net capital gains, as applicable, or the maximum marginal
regular federal corporate income tax rate, whichever is greater, in effect
during the taxable year in question.

         "Anticipation Notes" means the following municipal securities: tax
anticipation notes, revenue anticipation notes and tax and revenue anticipation
notes.

         "Applicable Rate" shall have the meaning specified in subparagraph
(c)(i) of Section 2 of this Part I.

         "APS Basic Maintenance Amount," as of any Valuation Date, shall mean
the dollar amount equal to the sum of (i)(A) the product of the number of APS
Outstanding on such date multiplied by $50,000; (B) the aggregate amount of
dividends that will have accumulated at the Applicable Rate (whether or not
earned or declared) to (but not including) the first respective Dividend Payment
Dates for each of the APS Outstanding that follow such Valuation Date; (C) the
amount equal to the Projected Dividend Amount (based on the number of APS
Outstanding on such date); (D) the amount of anticipated expenses of the Fund
for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's
Maximum Potential Additional Dividend Liability as of such Valuation Date; (F)
the amount of any premium payable pursuant to a Premium Call Period; and (G) any
current liabilities as of such Valuation Date to the extent not reflected in any
of (i)(A) through (i)(F) (including, without limitation, any amounts described
in Section 13 of Part I as required to be treated as liabilities in connection
with the Fund's transactions in futures and options and including any payables
for municipal securities purchased as of such Valuation Date) less (ii) either
(A) the face value of any of the Fund's assets irrevocably deposited by the Fund
for the payment of any of (i)(A) through (i)(G) if such assets mature within the
Moody's Exposure Period and are either securities issued or guaranteed by the
United States Government or have a rating assigned by Moody's of P-1, VMIG-1 or
MIG-1 (or, with respect to S&P, SP-1+ or A-1+) or (B) the Discounted Value of
such assets. For purposes of the APS Basic Maintenance Amount in connection with
S&P's ratings of the APS, with respect to any transactions by the Fund in
futures contracts, the Fund shall include as liabilities (i) 30% of the
aggregate settlement value, as marked to market, of any outstanding futures
contracts based on the Municipal Index which are owned by the Fund plus (ii) 25%
of the aggregate settlement value, as marked to market, of any outstanding
futures contracts based on Treasury Bonds which contracts are owned by the Fund.
For purposes of the APS Basic Maintenance Amount in connection with Moody's
rating of the APS, with respect to any transactions by the Fund in 



                                      B-25



securities options, the Fund shall include as liabilities (i) 10% of the
exercise price of a call option written by the Fund and (ii) the exercise price
of any written put option.

         "APS Basic Maintenance Cure Date," with respect to the failure by the
Fund to satisfy the APS Basic Maintenance Amount (as required by paragraph (a)
of Section 9 of this Part I) as of a given Valuation Date, shall mean the third
Business Day following such Valuation Date.

         "APS Basic Maintenance Report" shall mean a report signed by the
President, Treasurer or any Senior Vice President or Vice President of the Fund
which sets forth, as of the related Valuation Date, the assets of the Fund, the
Market Value and the Discounted Value thereof (seriatim and in aggregate), and
the APS Basic Maintenance Amount.

         "Auction" shall mean each periodic implementation of the Auction
Procedures.

         "Auction Agency Agreement" shall mean the agreement between the Fund
and the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for each series of APS so long as the Applicable Rate for such series is to
be based on the results of an Auction.

         "Auction Agent" shall mean the entity appointed as such by a resolution
of the Board of Trustees in accordance with Section 7 of this Part I.

         "Auction Date," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.

         "Auction Procedures" shall mean the procedures for conducting Auctions
set forth in Part II hereof.

         "Board of Trustees" shall mean the Board of Trustees of the Fund or any
duly authorized committee thereof.

         "Business Day" shall mean a day on which the New York Stock Exchange is
open for trading and which is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York, are authorized by law to close.

         "Closing Transactions" means the termination of a futures contract or
option position by taking an equal position opposite thereto in the same
delivery month as such initial position being terminated.

         "Commercial Paper Dealers" shall mean Goldman, Sachs Money Markets,
L.P., Lehman Commercial Paper Incorporated, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Smith Barney, Harris Upham & Co. or, in lieu of any
thereof, their respective affiliates or successors, if such entity is a
commercial paper dealer.

         "Common Shares" shall mean the common shares of beneficial interest,
par value $.01 per share, of the Fund.

         "Cure Date" shall mean the APS Basic Maintenance Cure Date or the 1940
Act Cure Date, as the case may be.

         "Date of Original Issue," with respect to any series of APS, shall mean
the date on which the Fund initially issued shares of such series of APS.



                                      B-26


         "Deposit Securities" shall mean cash and municipal securities rated at
least A-1+ or SP-1+ by S&P, except that, for purposes of Section 3(a)(iii) of
this Part I, such municipal securities shall be considered "Deposit Securities"
only if they are also rated P-1, MIG-1 or VMIG-1 by Moody's.

         "Discounted Value" shall mean (i) with respect to an S&P Eligible
Asset, the quotient of the Market Value thereof divided by the applicable S&P
Discount Factor and (ii) with respect to a Moody's Eligible Asset, the quotient
of the Market Value thereof divided by the applicable Moody's Discount Factor,
provided that with respect to a Moody's Eligible Asset, Discounted Value shall
not exceed the par value of such Asset at any time.

         "Dividend Coverage Amount," as of any Valuation Date, shall mean, with
respect to each of the APS, (i) the aggregate amount of dividends that will
accumulate on such APS to (but not including) the first Dividend Payment Date
for such share that follows such Valuation Date plus any liabilities that will
become payable prior to or on such payment date, less (ii) the combined value of
Deposit Securities irrevocably deposited for the payment of dividends on such
APS and Receivables for Municipal Securities Sold which become due prior to the
Dividend Payment Date and interest with respect to municipal securities which is
payable to the Fund prior to the Dividend Payment Date.

         "Dividend Coverage Assets," as of any Valuation Date, shall mean, with
respect to each of the APS, Deposit Securities with maturity or tender dates not
later than the day preceding the first Dividend Payment Date for such share that
follows such Valuation Date and having a value not less than the Dividend
Coverage Amount with respect to such share.

         "Dividend Payment Date," with respect to any series of APS, shall mean
any date on which dividends on shares of such series of APS are payable pursuant
to the provisions of paragraph (b) of Section 2 of this Part I.

         "Dividend Period," with respect to any series of APS, shall mean the
period from and including the Date of Original Issue of such series to but
excluding the initial Dividend Payment Date for such series and any period
thereafter from and including one Dividend Payment Date for such series to but
excluding the next succeeding Dividend Payment Date for such series.

         "Fund" shall mean Van Kampen Merritt Trust For Investment Grade
Municipals, a Massachusetts business trust, which is the issuer of the APS.

         "Failure to Deposit," with respect to any series of APS, shall mean a
failure by the Fund to pay to the Auction Agent, not later than 12:00 noon, New
York City time, (A) on the Business Day next preceding any Dividend Payment Date
for such series, in funds available on such Dividend Payment Date in The City of
New York, New York, the full amount of any dividend (whether or not earned or
declared) to be paid on such Dividend Payment Date on any share of such series
or (B) on the Business Day next preceding any redemption date in funds available
on such redemption date for such series in The City of New York, New York, the
Redemption Price to be paid on such redemption date for any share of such series
after notice of redemption is given pursuant to paragraph (b) of Section 3 of
this Part I.

         "Holder," with respect to any series of APS, shall mean the registered
holder of shares of such series of APS as the same appears on the share books of
the Fund.

         "Independent Accountant" shall mean a nationally recognized accountant,
or firm of accountants, that is with respect to the Fund an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended from time to time.



                                      B-27


         "Initial Dividend Period," with respect to any series of APS, shall
mean the period from and including the Date of Original Issue thereof to but
excluding the initial Dividend Payment Date therefor.

         "Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.

         "Initial Margin" means the amount of cash or securities deposited with
a custodian for the benefit of a futures commission merchant as a good-faith
deposit at the time of the initiation of a purchase or sale position with
respect to a futures contract or a sale position with respect to an option
position thereon.

         "Market Value" of any asset of the Fund shall mean the market value
thereof determined by the Pricing Service designated from time to time by the
Board of Trustees. Market Value of any asset shall include any interest accrued
thereon. The Pricing Service values portfolio securities at the mean between the
quoted bid and asked price or the yield equivalent when quotations are readily
available. Securities for which quotations are not readily available are valued
at fair value as determined by the pricing service using methods which include
consideration of yields or prices of municipal bonds of comparable quality, type
of issue, coupon, maturity and rating; indications as to value from dealers; and
general market conditions. The pricing service may employ electronic data
processing techniques and/or a matrix system to determine valuations.

         "Mandatory Redemption Price" means $50,000 per share of APS plus an
amount equal to accumulated but unpaid dividends thereon to the date fixed for
redemption (whether or not earned or declared).

         "Master Purchaser's Letter" has the meaning specified in Section 1 of
Part II hereof.

         "Maximum Potential Additional Dividends Liability," as of any Valuation
Date, shall mean the aggregate amount of Additional Dividends that would be due
if the Fund were to make Retroactive Taxable Allocations, with respect to any
fiscal year, estimated based upon dividends paid and the amount of undistributed
realized net capital gains and other taxable income earned by the Fund, as of
the end of the calendar month immediately preceding such Valuation Date, and
assuming such Additional Dividends are fully taxable.

         "Minimum Liquidity Level" shall have meaning set forth in Section 10 of
this Part I.

         "Minimum Dividend Period" shall mean with respect to APS Series A, APS
Series B, APS Series C and APS Series D, any Rate Period consisting of 28 Rate
Period Days.

         "Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.

         "Moody's Discount Factor" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set forth
opposite such rating that is the same length as or is longer than the Moody's
Exposure Period, in accordance with the table set forth below:




                                      B-28



                                 RATING CATEGORY



                                                                    RATING CATEGORY
                                     -------------------------------------------------------------------------------------
EXPOSURE PERIOD 1+ (3),(4)           Aaa(1)     AA(1)   A(1)       BAA(1)     OTHER(2)  (V) MIG-1 (1),(3),(4) SP-1+(3),(4)
--------------------------           ------     -----   ----       ------     --------  ----------------------------------
                                                                                             
7      Weeks......................   151%       159%    168%       202%       229%      136%                  148%   
8      weeks or less but greater     154        164     173        205        235       137                   149  
       than seven weeks...........                                                                                 
9      weeks or less but greater     158        169     179        209        242       138                   150  
       than eight weeks...........                                                                                 


-----------------

(1) Moody's rating.
(2) California municipal securities not rated by Moody's but rated BBB-, BBB or
BBB+ by S&P.
(3) California municipal securities rated MIG-1 or VMIG-1 or, if not
rated by Moody's, rated SP-1+ by S&P which do not mature or have a demand
feature at par exercisable within the Moody's Exposure Period and which do not
have a long-term rating.
(4) For the purposes of the definition of Moody's Eligible Assets, these
securities will have an assumed rating of "A" by Moody's.

         Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term municipal securities will be 115%, so long as such municipal
securities are rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have
a demand feature at par exercisable within the Moody's Exposure Period or 125%
as long as such municipal securities are rated at least A-1-/AA or SP-1+/AA by
S&P and mature or have a demand feature at par exercisable within the Moody's
Exposure Period and (ii) no Moody's Discount Factor will be applied to cash or
to Receivables for Municipal Securities Sold.

         "Moody's Eligible Asset" shall mean cash, Receivables for Municipal
Securities Sold or a municipal security that (i) pays interest in cash, (ii) is
publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated by
S&P, is rated at least BBB by S&P (provided that, for purposes of determining
the Moody's Discount Factor applicable to any such S&P-rated municipal security,
such municipal security (excluding any short-term municipal security) shall be
deemed to have a Moody's rating which is one full rating category lower than its
S&P rating), (iii) does not have its Moody's rating suspended by Moody's; and
(iv) is part of an issue of municipal securities of at least $10,000,000.
Municipal securities issued by any one issuer and rated BBB by S&P may comprise
no more than 4% of total Moody's Eligible Assets; such BBB-rated municipal
securities, if any, together with any municipal securities issued by the same
issuer and rated Baa by Moody's or A by S&P, may comprise no more than 6% of
total Moody's Eligible Assets; such BBB, Baa and A-rated municipal securities,
if any, together with any municipal securities issued by the same issuer and
rated A by Moody's or AA by S&P, may comprise no more than 10% of total Moody's
Eligible Assets; and such BBB, Baa, A and AA-rated municipal securities, if any,
together with any municipal securities issued by the same issuer and rated Aa by
Moody's or AAA by S&P, may comprise no more than 20% of total Moody's Eligible
Assets. For purposes of the foregoing sentence, any municipal security backed by
the guaranty, letter of credit or insurance issued by a third party shall be
deemed to be issued by such third party if the issuance of such third party
credit is the sole determinant of the rating on such municipal security.
Municipal securities issued by issuers located within a single state or
territory and rated BBB by S&P may comprise no more than 12% of total Moody's
Eligible Assets; such BBB-rated municipal securities, if any, together with any
municipal securities issued by issuers located within the same state or
territory and rated Baa by Moody's or A by S&P may comprise no more than 20% of
total Moody's Eligible Assets; such BBB, Baa and A-rated municipal securities,
if any, together with any municipal securities issued by issuers located within
the same state or territory and rated A by Moody's or AA by S&P, may comprise no
more than 40% of total Moody's Eligible Assets; and such BBB, Baa, A and
AA-rated municipal securities, if any, together



                                      B-29



with any municipal securities issued by issuers located within the same state or
territory and rated Aa by Moody's or AAA by S&P, may comprise no more than 60%
of total Moody's Eligible Assets. For purposes of applying the foregoing
requirements, a municipal security shall be deemed to be rated BBB by S&P if
rated BBB or BBB+ by S&P. For purposes of Minimum Issue Size, Maximum Underlying
Obligor and Maximum State or Territory Concentration, Moody's Eligible Assets
shall be calculated without including cash and municipal securities rated MIG-1
or VMIG-1 or, if not rated by Moody's, rated SP-1+ by S&P, which either mature
or have a demand feature at par exercisable within the Moody's Exposure Period.
Where the Fund sells an asset and agrees to repurchase such asset in the future,
the Discounted Value of such asset will constitute a Moody's Eligible Asset and
the amount the Fund is required to pay upon repurchase of such asset will count
as a liability for the purposes of the APS Basic Maintenance Amount. Where the
Fund purchases an asset and agrees to sell it to a third party in the future,
cash receivable by the Fund thereby will constitute a Moody's Eligible Asset if
the long-term debt of such other party is rated at least A2 by Moody's and such
agreement has a term of 30 days or less; otherwise the Discounted Value of such
asset will constitute a Moody's Eligible Asset. For the purposes of calculation
of Moody's Eligible Assets, municipal securities which have been called for
redemption by the issuer thereof shall be valued at the lower of Market Value or
the call price of such municipal securities.

         Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset to the extent that is has been deposited for the payment
of (i)(A) through (i)(G) under the definition of APS Basic Maintenance Amount or
it is subject to any material lien, mortgage, pledge, security interest or
security agreement of any kind (collectively, "Liens"), except for (a) Liens
which are being contested in good faith by appropriate proceedings and which
Moody's has indicated to the Fund will not affect the status of such asset as a
Moody's Eligible Asset, (b) Liens for taxes that are not then due and payable or
that can be paid thereafter without penalty, (c) Liens to secure payment for
services rendered or cash advanced to the Fund by Van Kampen Merritt Investment
Advisory Corp., the Administrator, State Street Bank and Trust Company or the
Auction Agent and (d) Liens by virtue of any repurchase agreement.

         "Moody's Exposure Period" shall mean the period commencing on a given
Valuation Date and ending 46 days thereafter.

         "Moody's Hedging Transactions" shall mean transactions in options on
securities, futures contracts based on the Municipal Index or Treasury Bonds and
options on such futures contracts.

         "Municipal Index" shall mean The Bond Buyer Municipal Bond Index.

         "1940 Act" shall mean the Investment Company Act of 1940, as amended
from time to time.

         "1940 Act APS Asset Coverage" shall mean asset coverage, as defined in
Section 18(h) of the 1940 Act, of at least 200% with respect to all outstanding
senior securities of the Fund which are stock, including all outstanding APS (or
such other asset coverage as may in the future be specified in or under the 1940
Act as the minimum asset coverage for senior securities which are stock of a
closed-end investment company as a condition of declaring dividends on its
common stock).

         "1940 Act Cure Date," with respect to the failure by the Fund to
maintain the 1940 Act APS Asset Coverage (as required by Section 8 of this Part
I) as of the last Business Day of each month, shall mean the last Business Day
of the following month.

         "Non-call Period" shall have the meaning set forth below under
"Specific Redemption Provisions."



                                      B-30


         "Notice of Redemption" shall mean any notice with respect to the
redemption of the APS pursuant to Section 3 of this Part I.

         "Optional Redemption Price" shall mean (i) $50,000 per share of APS in
the case of a 28-day, a three-month or a six-month Dividend Period or a Special
Dividend Period of less than 365 days or (ii) with respect to a Special Dividend
Period of 365 days or more the Optional Redemption Price set forth in the
Specific Redemption Provisions in connection therewith; in each case plus an
amount equal to accumulated but unpaid dividends thereon to the date of
redemption (whether or not earned or declared). "Preferred Shares" shall mean
the authorized preferred shares of beneficial interest, par value $.01 per
share, of the Fund, and includes the APS.

         "Premium Call Period" shall have the meaning set forth below under
"Specific Redemption Provisions."

         "Pricing Service" means Van Kampen Merritt Investment Advisory Corp.,
acting pursuant to a Fund Pricing Agreement between the Fund and Van Kampen
Merritt Investment Advisory Corp. and any successor pricing service approved in
writing by Moody's (if Moody's is then rating the APS) and S&P (if S&P is then
rating the APS).

         "Projected Dividend Amount" means, with respect to the shares of any
series of APS, on any Valuation Date in the event the then current Dividend
Period will end within 47 calendar days of such date, from and after the last
day of such Dividend Period until 47 calendar days less the number of days
remaining in the current Dividend Period at an Applicable Rate equal to the
Maximum Rate for such Dividend Period multiplied by the larger of the factors
(currently 304%) that the Fund has been informed by Moody's and S&P is
applicable to the Projected Dividend Amount and designed to take into account
increases in dividend rates over such period.

         "Quarterly Valuation Date" shall mean the last Business Day of each
fiscal quarter of the Fund in each fiscal year of the Fund, commencing April 30,
1992.

         "Rate Period," with respect to any series of APS, shall mean the
Initial Dividend Period thereof and any Subsequent Dividend Period, including
any Special Dividend Period, for such series.

         "Rate Period Days," for any Rate Period consisting of less than four
Dividend Periods, shall mean the number of days (without giving effect to
subparagraph (b)(ii) of Section 2 of this Part I) in such Rate Period.

         "Receivables for Municipal Securities Sold" shall mean (A) for purposes
of calculation of Moody's Eligible Assets as of any Valuation Date, no more than
the aggregate of the following: (i) the book value of receivables for municipal
securities sold as of or prior to such Valuation Date if such receivables are
due within five business days of such Valuation Date, and if the trades which
generated such receivables are (x) settled through clearing house firms with
respect to which the Fund has received prior written authorization from Moody's
or (y) with counterparties having a Moody's long-term debt rating of at least
Baa3; and (ii) the Moody's Discounted Value of municipal securities sold as of
or prior to such Valuation Date which generated receivables, if such receivables
are due within the Moody's Exposure Period but do not comply with either of the
conditions specified in (i) above, and (B) for purposes of calculation of S&P
Eligible Assets as of any Valuation Date, the book value of receivables for
municipal securities sold as of or prior to such Valuation Date if such
receivables are due within five business days of such Valuation Date.



                                      B-31


         "Redemption Price" shall mean the Optional Redemption Price or the
Mandatory Redemption Price, as applicable.

         "Retroactive Taxable Allocation" shall have the meaning set forth in
Section 12 hereof.

         "S&P" shall mean Standard & Poor's Fund, a New York corporation, and
its successors.

         "S&P Discount Factor" shall mean, for purposes of determining the
Discounted Value of any S&P Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set forth
opposite such rating that is the same length as or is longer than the S&P
Exposure Period, in accordance with the table set forth below:



                                                                 Rating Category
                                      -----------------------------------------------------------------------
Exposure Period                       AAA*              AA*               A*                BBB*
-------------------------------------------------------------------------------------------------------------
                                                                            
40      Business Days                 190%              195%              210%              250%
22      Business Days                 170               175               190               230
10      Business Days                 155               160               175               215
7       Business Days                 150               155               170               210
3       Business Days                 130               135               150               190


--------------------
*        S&P rating.

         Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term municipal securities will be 115%, so long as such municipal
securities are rated A-1+ or SP-1+ by S&P and mature or have a demand feature
exercisable within 30 days or less, or 125% if such municipal securities are not
rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however,
that any such Moody's rated short-term municipal securities which have demand
features exercisable within 30 days or less must be backed by a letter of
credit, liquidity facility or guarantee from a bank or other financial
institution with a short-term rating of at least A-1+ from S&P; and further
provided that such Moody's-rated short-term municipal securities may comprise no
more than 50% of short-term municipal securities that qualify as S&P Eligible
Assets and (ii) no S&P Discount Factor will be applied to cash or to Receivables
for Municipal Securities Sold. For purposes of the foregoing, Anticipation Notes
rated SP-1+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do
not mature or have a demand feature at par exercisable in 30 days and which do
not have a long-term rating, shall be considered to be short-term municipal
securities.

         "S&P Eligible Asset" shall mean cash (excluding any cash irrevocably
deposited by the Fund for the payment of any liabilities within the mean of APS
Basic Maintenance Amount), Receivables for Municipal Securities Sold or a
municipal security owned by the Fund that (i) is interest bearing and pays
interest at least semi-annually; (ii) is payable with respect to principal and
interest in U.S. Dollars; (iii) is publicly rated BBB or higher by S&P or, if
not rated by S&P but rated by Moody's, is rated at least A by Moody's (provided
that such Moody's-rated municipal securities will be included in S&P Eligible
Assets only to the extent the Market Value of such municipal securities does not
exceed 50% of the aggregate Market Value of S&P Eligible Assets; and further
provided that, for purposes of determining the S&P Discount Factor applicable to
any such Moody's-rated municipal security, such municipal security will be
deemed to have an S&P rating which is one full rating category lower than its
Moody's rating); (iv) is not part of a private placement of municipal
securities; and (v) is part of an issue of municipal securities with an original
issue size of at least $20 million or, if an issue with an original issue size
below $20 million (but in no event below $10 million), is issued by an issuer
with a total of at least $50 million of securities outstanding. Solely for
purposes of this definition, the term "municipal securities" means any
obligation 



                                      B-32


the interest on which is exempt from regular Federal income taxation and which
issued by any of the fifty United States, the District of Columbia or any of the
territories of the United States, their subdivisions, counties, cities, towns,
villages, school districts and agencies (including authorities and special
districts created by the states), and federally sponsored agencies such as local
housing authorities. Notwithstanding the foregoing limitations:

                  16. Municipal securities of any one issuer or guarantor
(excluding bond insurers) shall be considered S&P Eligible Assets only to the
extent the Market Value of such municipal securities does not exceed 10% of the
aggregate Market Value of S&P Eligible Assets provided that 2% is added to the
applicable S&P Discount Factor for every 1% by which the Market Value of such
municipal securities exceeds 5% of the aggregate Market Value of S&P Eligible
Assets;

                  17. Municipal securities guaranteed or insured by any one bond
insurer shall be considered S&P Eligible Assets only to the extent the Market
Value of such municipal securities does not exceed 25% of the aggregate Market
Value of S&P Eligible Assets; and

                  18. Long-term municipal securities issued by issuers in any
one state or territory shall be considered S&P Eligible Assets only to the
extent the Market Value of such municipal securities does not exceed 20% of the
aggregate Market Value of S&P Eligible Assets.

         "S&P Exposure Period" shall mean the maximum period of time following a
Valuation Date that the Fund has under this Certificate of Vote to cure any
failure to maintain, as of such Valuation Date, the Discounted Value for its
portfolio at least equal to the APS Basic Maintenance Amount (as described in
paragraph (a) of Section 9 of this Part I).

         "S&P Hedging Transactions" means futures contracts based on the
Municipal Index or Treasury Bonds, put and call options on such contracts
purchased by the Fund and covered call options and secured put options on
portfolio securities written by the Fund.

         "Special Dividend Period," with respect to any series of APS, shall
mean any Subsequent Dividend Period commencing on the date designated by the
Fund in accordance with Section 4 of this Part I and ending on the last day of
the last Dividend Period thereof, with such number of consecutive days or whole
years as the Board of Trustees shall specify, including the terms of any
Specific Redemption Provisions, if any.

         "Specific Redemption Provisions" means, with respect to any Special
Dividend Period of 365 or more days, either, or any combination of, (i) period
(a "Non-Call Period") determined by the Board of Trustees, after consultation
with the Broker-Dealers, during which the shares subject to such Special
Dividend Period are not subject to redemption at the option of the Fund and (ii)
a period (a "Premium Call Period"), consisting of a number of whole years and
determined by the Board of Trustees, after consultation with the Broker-Dealers,
during each year of which the shares subject to such Special Dividend Period
shall be redeemable at the Fund's option at a price per share equal to $50,000
plus accumulated but unpaid dividends plus a premium expressed as a percentage
of $50,000 as determined by the Board of Trustees after consultation with the
Broker-Dealers; provided, that during any Special Dividend Period of 365 or more
days if on the date of determination of the Applicable Rate for such series,
such Applicable Rate equaled or exceeded the Treasury Rate, the Fund may redeem
APS without regard to any Non-Call Period or Premium Call Period at the
Mandatory Redemption Price.

         "Subsequent Dividend Period," with respect to any series of APS, shall
mean the period from and including the first day following the Initial Rate
Period thereof to but excluding the next Dividend 



                                      B-33


Payment Date which follows a scheduled Auction for such series and any period
thereafter from and including one Dividend Payment Date which follows a
scheduled Auction for such series to but excluding the next succeeding Dividend
Payment Date which follows a scheduled Auction for such series; provided,
however, that if any Subsequent Dividend Period is also a Special Dividend
Period, such term shall mean the period commencing on the first day of such
Special Dividend Period and ending on the last day of the last Dividend Period
thereof.

         "Substitute Commercial Paper Dealer" shall mean The First Boston
Company or Morgan Stanley & Co. Incorporated or their respective affiliates or
successors, if such entity is a Commercial Paper Dealer; provided that none of
such entities shall be a Commercial Paper Dealer.

         "Substitute U.S. Government Securities Dealer" shall mean The First
Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their
respective affiliates or successors, if such entity is a U.S. Government
securities dealer; provided that none of such entities shall be a U.S.
Government Securities Dealer.

         "Treasury Bonds" shall mean United States Treasury Bonds backed by the
full faith and credit of the United States government with remaining maturities
of 10 years or more.

         "Treasury Rate," on any date for any Rate Period, shall mean (i) the
yield on the most recently auctioned non-callable direct obligations of the U.S.
Government (excluding "flower" bonds) with a remaining maturity within three
months of the duration of such Rate Period, as quoted in The Wall Street Journal
on such date for the Business Day next preceding such date; or (ii) in the event
that any such rate is not published by The Wall Street Journal, then the
arithmetic average of the yields (expressed as an interest equivalent in the
case of a Rate Period consisting of four Dividend Periods and express as a bond
equivalent in the case of any longer Rate Period) on the most recently auctioned
non-callable direct obligations of the U.S. Government (excluding "flower"
bonds) with a remaining maturity within three months of the duration of such
Rate Period as quoted on a discount basis or otherwise by the U.S. Government
Securities Dealers to the Auction Agent for the close of business on the
Business Day immediately preceding such date. If any U.S. Government Securities
Dealer does not quote a rate required to determine the Treasury Rate, the
Treasury Rate shall be determined on the basis of the quotation or quotations
furnished by the remaining U.S. Government Securities Dealer or U.S. Government
Securities Dealers and any Substitute U.S. Government Securities Dealers
selected by the Fund to provide such rate or rates not being supplied by any
U.S. Government Securities Dealer or U.S. Government Securities Dealers, as the
case may be, or, if the Fund does not select any such Substitute U.S. Government
Securities Dealer or Substitute U.S. Government Securities Dealers, by the
remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.

         "U.S. Government Securities Dealer" shall mean Goldman, Sachs & Co.,
Lehman Government Securities Incorporated, Smith Barney, Harris Upham & Co. and
Morgan Guaranty Trust Company of New York or their respective affiliates or
successors, if such entity is a U.S. Government securities dealer.

         "Valuation Date" shall mean, for purposes of determining whether the
Fund is maintaining the APS Basic Maintenance Amount and the Minimum Liquidity
Level, each Business Day.

         "Variation Margin" shall mean, in connection with outstanding purchase
or sale positions in futures contracts and outstanding sales positions with
respect to options thereon, the amount of cash and securities paid to and
received from a futures commission merchant (subsequent to the Initial Margin
payment) from time to time as the value of such position fluctuates.

         "Voting Period" shall have the meaning set forth in paragraph (b) of
Section 5 of this Part I.



                                      B-34


                                     PART II

                  1. Certain Definitions. Capitalized terms not defined in
Section 1 of this Part II shall have the respective meaning specified in Part I
hereof. As used in this Part II, the following terms shall have the following
meanings, unless the context otherwise requires:

         "Affiliate" shall mean any Person known to the Auction Agent to be
controlled by, in control of or under common control with the Fund; provided
that no Broker-Dealer controlled by, in control of or under common control with
the Fund shall be deemed to be an Affiliate nor shall any fund or any Person
controlled by, in control of or under common control with such fund one of the
trustees or executive officers of which is also a trustee of the Fund be deemed
to be an Affiliate solely because such trustee or executive officer is also a
trustee of the Fund.

         "Agent Member" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder and is identified as such in such
Bidder's Master Purchaser's Letter.

         "Applicable Percentage" for any series of APS on any Auction Date shall
mean the percentage, determined as set forth below, based on the prevailing
rating of such series in effect at the close of business on the Business Day
next preceding such Auction Date.



              Prevailing Rating                                                   Percentage
              -----------------                                                   ----------
                                                                              
              "aa3"/AA- or higher.....................................               110%
              "a3"/A-.................................................               125%
              "baa3"/BBB-.............................................               150%
              "ba3"/BB-...............................................               200%
              Below "ba3"/BB-.........................................               250%


provided, however, that in the event the Fund has notified the Auction Agent of
its intent to allocate income taxable for federal income tax purposes to the APS
prior to the Auction establishing the Applicable Rate for such shares the
applicable percentage in the foregoing table shall be divided by the quantity 1
minus the maximum marginal regular federal individual income tax rate applicable
to ordinary income or the maximum marginal regular federal corporate income tax
rate, whichever is greater, provided further, however, that the Applicable
Percentage shall be divided in the foregoing manner only to the extent of the
portion of the dividend on the APS for such Rate Period that represents the
allocation of taxable income to the APS.

         For purposes of this definition, the "prevailing rating" of shares of a
series of APS shall be (i) "aa3"/AA- or higher if shares of such series of APS
have a rating of "aa3" or better by Moody's and AA- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (ii) if not "aa3"/AA- or
higher, then "a3"/A- if the shares of such series of APS have a rating of "a3"
or better by Moody's and A- or better by S&P or the equivalent of such ratings
by such agencies or a substitute rating agency or substitute rating agencies
selected as provided below, (iii) if not "aa3"/AA- or higher or "a3"/A-, then
"baa3"/BBB- if the shares of such series of APS have a rating of "baa3" or
better by Moody's and BBB- or better by S&P or the equivalent of such ratings by
such agencies or a substitute rating agency or substitute rating agencies
selected as provided below, (iv) if not "aa3"/AA- or higher, "a3"/A- or
"baa3"/BBB-, then "ba3"/BB- if the shares of such series of APS have a rating of
"ba3" or better by Moody's and BB- or better by S&P or the equivalent of such
ratings by such agencies or substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "aa3"/AA- or higher,
"a3"/A-, "baa3"/BBB- or "ba3"/BB-, then 



                                      B-35


below "ba3"/BB-, provided, however, that if the APS are rated by only one rating
agency, the prevailing rating will be determined without reference to the rating
of any other rating agency. The Fund shall take all reasonable action necessary
to enable either S&P or Moody's to provide a rating for each series of APS. If
neither S&P nor Moody's shall make such a rating available, Goldman, Sachs & Co.
or Smith Barney, Harris Upham & Co. Incorporated or their successors as
Broker-Dealers shall select a nationally recognized statistical rating
organization (as that term is used in the rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended from time to time) to act as a substitute rating agency in respect of
the APS and the Fund shall take all reasonable action to enable such rating
agency or agencies to provide a rating for shares of such series.

         "Available APS" shall have the meaning specified in paragraph (a) of
Section 4 of this Part II.

         "Bid" and "Bids" shall have the respective meanings specified in
paragraph (a) of Section 2 of this Part II.

         "Bidder" and "Bidders" shall have the respective meanings specified in
paragraph (a) of Section 2 of this Part II.

         "Broker-Dealer" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
this Part II, that is a member of, or a participant in, the Securities
Depository or is an affiliate of such member or participant, has been selected
by the Fund and has entered into a Broker-Dealer Agreement that remains
effective.

         "Broker-Dealer Agreement" shall mean an agreement between the Auction
Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow
the procedures specified in this Part II.

         "Existing Holder," when used with respect to shares of any series of
APS, shall mean a Person who has signed a Master Purchaser's Letter and is
listed as the beneficial owner of such APS in the records of the Auction Agent.

         "Hold Order" and "Hold Orders" shall have the respective meanings
specified in paragraph (a) of Section 2 of this Part II.

         "Master Purchaser's Letter" shall mean a letter, addressed to the Fund,
the Auction Agent, a Broker-Dealer and an Agent Member in which a Person agrees,
among other things, to offer to purchase, to purchase, to offer to sell and/or
to sell APS as set forth in this Part II.

         "Maximum Rate," for any series of APS on any Auction Date, shall mean:

                                        (i) in the case of any Auction Date
         which is not the Auction Date immediately prior to the first day of any
         proposed Special Dividend Period designated by the Fund pursuant to
         Section 4 of Part I of the Certificate of Vote, the product of (A) the
         "AA" Composite Commercial Paper Rate on such Auction Date for the next
         Rate Period of such series and (B) the Applicable Percentage on such
         Auction Date, unless such series has or had a Special Dividend Period
         (other than a Special Dividend Period of 28 Rate Period Days or less)
         and an Auction at which Sufficient Clearing Bids existed has not yet
         occurred for a Minimum Dividend Period of such series after such
         Special Dividend Period, in which case the higher of:



                                      B-36


                                            (A) the dividend rate on shares of
         such series for the then-ending Rate Period, and

                                            (B) the product of (1) the higher of
         (x) the "AA" Composite Commercial Paper Rate on such Auction Date for
         the then-ending Rate Period of such series, if such Rate Period
         consists of less than four Dividend Periods, or the Treasury Rate on
         such Auction Date for such Rate Period, if such Rate Period consists of
         four or more Dividend Periods, and (y) the "AA" Composite Commercial
         Paper Rate on such Auction Date for such Special Dividend Period of
         such series, if such Special Dividend Period consists of less than four
         Dividend Periods, or the Treasury Rate on such Auction Date for such
         Special Dividend Period, if such Special Dividend Period consists of
         four or more Dividend Periods and (2) the Applicable Percentage on such
         Auction Date; or

                                        (ii) in the case of any Auction Date
         which is the Auction Date immediately prior to the first day of any
         proposed Special Dividend Period of more than 28 Rate Period Days
         designated by the Fund pursuant to Section 4 of Part I of the
         Certificate of Vote, the product of (A) the highest of (1) the "AA"
         Composite Commercial Paper Rate on such Auction Date for the
         then-ending Rate Period of such series, if such Rate Period consists of
         less than four Dividend Periods, or the Treasury Rate on such Auction
         Date for such Rate Period, if such Rate Period consists of four or more
         Dividend Periods, (2) the "AA" Composite Commercial Paper Rate on such
         Auction Date for the Special Dividend Period for which the Auction is
         being held if such Special Dividend Period consists of less than four
         Dividend Periods or the Treasury Rate on such Auction Date for the
         Special Dividend Period for which the Auction is being held if such
         Special Dividend Period consists of four or more Dividend Periods, and
         (3) the "AA" Composite Commercial Paper Rate on such Auction Date for
         Minimum Dividend Periods and (B) the Applicable Percentage on such
         Auction Date.

         "Order" and "Orders" shall have the respective meanings specified in
paragraph (a) of Section 2 of this Part II.

         "Outstanding" shall mean, as of any Auction Date with respect to shares
of any series of APS, the number of shares of such series theretofore issued by
the Fund except, without duplication, (i) any shares of such series of APS
theretofore cancelled or delivered to the Auction Agent for cancellation or
redeemed by the Fund or as to which a notice of redemption shall have been given
by the Fund, (ii) any shares of such series of APS as to which the Fund or any
Affiliate thereof shall be an Existing Holder and (iii) any shares of such
series of APS represented by any certificate in lieu of which a new certificate
has been executed and delivered by the Fund.

         "Person" shall mean and include an individual, a partnership, a fund, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.

         "Potential Holder," when used with respect to shares of any series of
APS, shall mean any Person, including any Existing Holder of shares of such
series of APS, (i) who shall have executed a Master 



                                      B-37


Purchaser's Letter and (ii) who may be interested in acquiring shares of such
series of APS (or, in the case of an Existing Holder of shares of such series of
APS, additional shares of such series of APS).

         "Securities Depository" shall mean The Depository Trust Company and its
successors and assigns or any other securities depository selected by the Fund
which agrees to follow the procedures required to be followed by such securities
depository in connection with the APS.

         "Sell Order" and "Sell Orders" shall have the respective meanings
specified in paragraph (a) of Section 2 of this Part II.

         "Submission Deadline" shall mean 1:30 p.m., New York City time, on any
Auction Date or such other time on any Auction Date by which Brokers-Dealers are
required to submit Orders to the Auction Agent as specified by the Auction Agent
from time to time.

         "Submitted Bid" and "Submitted Bids" shall have the respective meanings
specified in paragraph (a) of Section 4 of this Part II.

         "Submitted Hold Order" and "Submitted Hold Orders" shall have the
respective meanings specified in paragraph (a) of Section 4 of this Part II.

         "Submitted Order" and "Submitted Orders" shall have the respective
meanings specified in paragraph (a) of Section 4 of this Part II.

         "Submitted Sell Order" and "Submitted Sell Orders" shall have the
respective meanings specified in paragraph (a) of Section 4 of this Part II.

         "Sufficient Clearing Bids" shall have the meaning specified in
paragraph (a) of Section 4 of this Part II.

         "Winning Bid Rate" shall have the meaning specified in paragraph (a) of
Section 4 of this Part II.

                  2. Orders by Existing Holders and Potential Holders. (a) Prior
to the Submission Deadline on each Auction Date:

                                        (i) each Existing Holder of shares of
         any series of APS subject to an Auction on such Auction Date may submit
         to a Broker-Dealer by telephone or otherwise information as to:

                                            (A) the number of Outstanding
         shares, if any, of such series of APS held by such Existing Holder
         which such Existing Holder desires to continue to hold without regard
         to the Applicable Rate for such series for the next succeeding Rate
         Period of such series;

                                            (B) the number of Outstanding
         shares, if any, of such series of APS which such Existing Holder offers
         to sell if the Applicable Rate for such series for the next succeeding
         Rate Period of such series shall be less than the rate per annum
         specified by such Existing Holder; and/or

                                            (C) the number of Outstanding
         shares, if any, of such series of APS held by such Existing Holder
         which such Existing Holder 



                                      B-38


         offers to sell without regard to the Applicable Rate for such series
         for the next succeeding Rate Period of such series;

and

                                        (ii) one or more Broker-Dealers, using
         lists of Potential Holders, shall in good faith for the purpose of
         conducting a competitive Auction in a commercially reasonable manner,
         contact Potential Holders (by telephone or otherwise), including
         Persons that are not Existing Holders, on such lists to determine the
         number of shares, if any, of such series of APS which each such
         Potential Holder offers to purchase if the Applicable Rate for such
         series for the next succeeding Rate Period of such series shall not be
         less than the rate per annum specified by such Potential Holder.

For the purposes hereof, the communication to a Broker-Dealer of information
referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is
hereinafter referred to as an "Order" and collectively as "Orders" and each
Existing Holder and each Potential Holder placing an Order is hereinafter
referred to as a "Bidder" and collectively as "Bidders"; an Order containing the
information referred to in clause (i)(A) of this paragraph (a) is hereinafter
referred to as a "Hold Order" and collectively as "Hold Orders"; an Order
containing the information referred to in clause (i)(B) or (ii) of this
paragraph (a) is hereinafter referred to as a "Bid" and collectively as "Bids";
and an Order containing the information referred to in clause (i)(C) of this
paragraph (a) is hereinafter referred to as a "Sell Order" and collectively as
"Sell Orders."

                           (b) (i) A bid by an Existing Holder of shares of any
series of APS subject to an Auction on any Auction Date shall constitute an
irrevocable offer to sell:

                                            (A) the number of Outstanding shares
         of such series of APS specified in such Bid if the Applicable Rate for
         such series determined on such Auction Date shall be less than the rate
         specified therein:

                                            (B) such number or a lesser number
         of Outstanding shares of such series of APS to be determined as set
         forth in clause (iv) of paragraph (a) of Section 5 of this Part II if
         the Applicable Rate for such series determined on such Auction Date
         shall be equal to the rate specified therein; or

                                            (C) the number of Outstanding shares
         of such series of APS specified in such Bid if the rate specified
         therein shall be higher than the Maximum Rate for such series, or such
         number or a lesser number of Outstanding shares of such series of APS
         to be determined as set forth in clause (iii) of paragraph (b) of
         Section 5 of this Part II if the rate specified therein shall be higher
         than the Maximum Rate for such series and Sufficient Clearing Bids for
         such series do not exist.

                                        (ii) A Sell Order by an Existing Holder
         of shares of any series of APS subject to an Auction on any Auction
         Date shall constitute an irrevocable offer to sell:



                                      B-39


                                            (A) the number of Outstanding shares
         of such series of APS specified in such Sell Order; or

                                            (B) such number or a lesser number
         of Outstanding shares of such series of APS as set forth in clause
         (iii) of paragraph (b) of Section 5 of this Part II if Sufficient
         Clearing Bids for such series do not exist.

                                        (iii) A Bid by a Potential Holder of
         shares of any series of APS subject to an Auction on any Auction Date
         shall constitute an irrevocable offer to purchase:

                                            (A) the number of Outstanding shares
         of such series of APS specified in such Bid if the Applicable Rate for
         such series determined on such Auction Date shall be higher than the
         rate specified therein; or

                                            (B) such number or a lesser number
         of Outstanding shares of such series of APS as set forth in clause (v)
         of paragraph (a) of Section 5 of this Part II if the Applicable Rate
         for such series determined on such Auction Date shall be equal to the
         rate specified therein.

                           (c) No Order for any number of shares of any series
of APS other than whole shares shall be valid.

                  3. Submission of Orders by Broker-Dealers to Auction Agent.
(a) Each Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders for shares of any series of
APS subject to an Auction on such Auction Date obtained by such Broker-Dealer
and shall specify with respect to each Order for such shares:

                                        (i) the name of the Bidder placing such
         Order;

                                        (ii) the aggregate number of shares of
         such series of APS that are the subject of such Order;

                                        (iii) to the extent that such Bidder is
         an Existing Holder of shares of such series of APS:

                                            (A) the number of shares, if any, of
         such series of APS subject to any Hold Order placed by such Existing
         Holder;

                                            (B) the number of shares, if any, of
         such series of APS subject to any Bid placed by such Existing Holder
         and the rate specified in such Bid; and

                                            (C) the number of shares, if any, of
         such series of APS subject to any Sell Order placed by such Existing
         Holder; and



                                      B-40


                                        (iv) to the extent such Bidder is a
         Potential Holder of shares of such series of APS, the rate and number
         of shares of such series of APS specified in such Potential Holder's
         Bid.

                           (b) If any rate specified in any Bid contains more
than three figures to the right of the decimal point, the Auction Agent shall
round such rate up to the next highest one thousandth (.001) of 1%.

                           (c) If an Order or Orders covering all of the
Outstanding shares of any series of APS held by any Existing Holder is not
submitted to the Auction Agent prior to the Submission Deadline, the Auction
Agent shall deem a Hold Order to have been submitted on behalf of such Existing
Holder covering the number of Outstanding shares of such series of APS held by
such Existing Holder and not subject to Orders submitted to the Auction Agent.

                           (d) If any Existing Holder submits through a
Broker-Dealer to the Auction Agent one or more Orders covering in the aggregate
more than the number of Outstanding shares of any series of APS subject to an
Auction held by such Existing Holder, such Orders shall be considered valid in
the following order of priority:

                                        (i) all Hold Orders for shares of such
         series of APS shall be considered valid, but only up to and including
         in the aggregate the number of Outstanding shares of such series of APS
         held by such Existing Holder, and if the number of shares of such
         series of APS subject to such Hold Orders exceeds the number of
         Outstanding shares of such series of APS held by such Existing Holder,
         the number of shares subject to each such Hold Order shall be reduced
         pro rata to cover the number of Outstanding shares of such series of
         APS held by such Existing Holder;

                                        (ii) (A) any Bid for shares of such
         series of APS shall be considered valid up to and including the excess
         of the number of Outstanding shares of such series of APS held by such
         Existing Holder over the number of shares of such series of APS subject
         to any Hold Orders referred to in clause (i) above;

                                            (B) subject to subclause (A), if
         more than one Bid for shares of such series of APS with the same rate
         is submitted on behalf of such Existing Holder and the number of
         Outstanding shares of such series of APS subject to such Bids is
         greater than such excess, such Bids shall be considered valid up to and
         including the amount of such excess, and the number of shares of such
         series of APS subject to each Bid with the same rate shall be reduced
         pro rata to cover the number of shares of such series of APS equal to
         such excess;

                                            (C) subject to subclauses (A) and
         (B), if more than one Bid for shares of such series of APS with
         different rates is submitted on behalf of such Existing Holder, such
         Bids shall be considered valid in the ascending order of their
         respective rates up to and including the amount of such excess; and



                                      B-41


                                            (D) in any such event, the number,
         if any, of such Outstanding shares of such series of APS subject to any
         portion of Bids considered not valid in whole or in part under the
         clause (ii) shall be treated as the subject of a Bid for shares of such
         series of APS by a Potential Holder at the rate therein specified; and

                                        (iii) all Sell Orders for shares of such
         series of APS shall be considered valid up to and including the excess
         of the number of Outstanding shares of such series of APS held by such
         Existing Holder over the sum of the APS subject to valid Hold Orders
         referred to in clause (i) above and valid Bids by such Existing Holder
         referred to in clause (ii) above.

                           (e) If more than one Bid for one or more shares of
any series of APS is submitted on behalf of any Potential Holder, each such Bid
submitted shall be a separate Bid with the rate and number of shares therein
specified.

                           (f) An Order submitted by a Broker-Dealer to the
Auction Agent prior to the Submission Deadline on any Auction Date shall be
irrevocable.

                  4. Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate. (a) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all valid Orders submitted or
deemed submitted to it by the Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to individually
as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as
the case may be, or as a "Submitted Order" and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders" and shall for each series of APS for which an Auction is
being held determine:

                                        (i) the excess of the number of
         Outstanding shares of such series of APS over the number of Outstanding
         shares of such series of APS subject to Submitted Hold Orders (such
         excess being hereinafter referred to as the "Available APS" of such
         series);

                                        (ii) from the Submitted Orders for such
         series whether:

                                            (A) the number of Outstanding shares
         of such series of APS subject to Submitted Bids by Potential Holders
         specifying one or more rates equal to or lower than the Maximum Rate
         for such series

exceeds or is equal to the sum of

                                            (B) the number of Outstanding shares
         of such series of APS subject to Submitted Bids by Existing Holders
         specifying one or more rates higher than the Maximum Rate for such
         series; and

                                            (C) the number of Outstanding shares
         of such series of APS subject to Submitted Sell Orders



                                      B-42


(in the event such excess or such equality exists (other than because the number
of shares of such series of APS in subclauses (B) and (C) above is zero because
all of the Outstanding shares of such series of APS are subject to Submitted
Hold Orders), such Submitted Bids in subclause (A) above being hereinafter
referred to collectively as "Sufficient Clearing Bids" for such series); and

                                        (iii) if Sufficient Clearing Bids for
         such series exist, the lowest rate specified in such Submitted Bids
         (the "Winning Bid Rate" for such series) which if:

                                            (A) (I) each such Submitted Bid from
         Existing Holders specifying such lowest rate and (II) all other such
         Submitted Bids from Existing Holders specifying lower rates were
         rejected, thus entitling such Existing Holders to continue to hold the
         shares of such series of APS that are subject to such Submitted Bids;
         and

                                            (B) (I) each such Submitted Bid from
         Potential Holders specifying such lowest rate and (II) all other such
         Submitted Bids from Potential Holders specifying lower rates were
         accepted;

would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series of
APS which, when added to the number of Outstanding shares of such series of APS
to be purchased by such Potential Holders described in subclause (B) above,
would equal not less than the Available APS of such series.

                           (b) Promptly after the Auction Agent has made the
determinations pursuant to paragraph (a) of this Section 4, the Auction Agent
shall advise the Fund of the Maximum Rate for each series of APS for which an
Auction is being held on the Auction Date and, based on such determination, the
Applicable Rate for each such series for the next succeeding Rate Period thereof
as follows:

                                        (i) if Sufficient Clearing Bids for such
         series exist, that the Applicable Rate for such series for the next
         succeeding Rate Period thereof shall be equal to the Winning Bid Rate
         for such series to determined;

                                        (ii) if Sufficient Clearing Bids for
         such series do not exist (other than because all of the Outstanding
         shares of such series of APS are subject to Submitted Hold Orders),
         that the Applicable Rate for such series for the next succeeding Rate
         Period, which shall be a Minimum Dividend Period, thereof shall be
         equal to the Maximum Rate for such series; or

                                        (iii) if all of the Outstanding shares
         of such series of APS are subject to Submitted Hold Orders, that the
         Applicable Rate for such series for the next succeeding Rate Period
         thereof shall be equal to the product of (A) (I) the "AA" Composite
         Commercial Paper Rate on such Auction Date for such Rate Period, if
         such Rate Period consists of less than four Dividend Periods or (II)
         the Treasury Rate on such Auction Date for such Rate Period, if such
         Rate Period consists of four or more Dividend Periods and (B) 1 minus
         the maximum marginal regular federal individual income tax rate
         applicable to ordinary income 



                                      B-43


         or the maximum marginal regular federal corporate income tax rate,
         whichever is greater; provided, however, that if the Fund has notified
         the Auction Agent of its intent to allocate to the APS in such Rate
         Period any net capital gains or other income taxable for Federal income
         tax purposes, the Applicable Rate in respect of that portion of the
         dividend on the APS for such Rate Period that represents the allocation
         of net capital gains or other income taxable for Federal income tax
         purposes shall be the rate described in the preceding clause (A)(I) or
         (II), as applicable, without being multiplied by the factor set forth
         in the preceding clause (B).

                  5. Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares. Existing Holders shall continue to hold
the APS that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to paragraph (a) of Section 4 of this Part II, the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:

                           (a) If Sufficient Clearing Bids for any series of APS
have been made, all Submitted Sell Orders shall be accepted and, subject to the
provisions of paragraphs (d) and (e) of this Section 5, Submitted Bids shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids for such series shall be rejected:

                                        (i) Existing Holders' Submitted Bids for
         shares of such series of APS specifying any rate that is higher than
         the Winning Bid Rate for such series shall be accepted, thus requiring
         each such Existing Holder to sell the APS subject to such Submitted
         Bids;

                                        (ii) Existing Holders' Submitted Bids
         for shares of such series of APS specifying any rate that is lower than
         the Winning Bid Rate for such series shall be rejected, thus entitling
         each such Existing Holder to continue to hold the APS subject to such
         Submitted Bids;

                                        (iii) Potential Holders' Submitted Bids
         for shares of such series of APS specifying any rate that is lower than
         the Winning Bid Rate shall be accepted;

                                        (iv) each Existing Holder's Submitted
         Bid for shares of such series of APS specifying a rate that is equal to
         the Winning Bid Rate for such series shall be rejected, thus entitling
         such Existing Holder to continue to hold the APS subject to such
         Submitted Bid, unless the number of Outstanding shares of such series
         of APS subject to all such Submitted Bids shall be greater than the
         number of shares of such series of APS ("remaining shares") in the
         excess of the Available APS of such series over the number of the APS
         subject to Submitted Bids described in clauses (ii) and (iii) of this
         paragraph (a), in which event such Submitted Bid of such Existing
         Holder shall be rejected in part, and such Existing Holder shall be
         entitled to continue to hold the APS subject to such Submitted Bid, but
         only in an amount equal to the number of shares of such series of APS
         obtained by multiplying the number of remaining shares by a fraction,
         the numerator of which shall be the number of Outstanding shares of
         such series of APS held by such Existing Holder subject to such
         Submitted Bid and the denominator of which shall be the aggregate
         number of Outstanding shares of such series of APS subject to such
         Submitted Bids made by all such Existing Holders that specified a rate
         equal to the Winning Bid Rate for such series; and

                                        (v) each Potential Holder's Submitted
         Bid for shares of such series of APS specifying a rate that is equal to
         the Winning Bid Rate for such series shall be accepted but only in an
         amount equal to the number of shares of such series of APS obtained by
         multiplying the number of shares in the excess of the Available APS of
         such series over the number of the APS subject to Submitted Bids
         described in clauses (ii) through (iv) of this paragraph (a) by a
         fraction, the



                                      B-44


         numerator of which shall be the number of Outstanding shares of such
         series of APS subject to such Submitted Bid and the denominator of
         which shall be the aggregate number of Outstanding shares of such
         series of APS subject to such Submitted Bids made by all such Potential
         Holders that specified a rate equal to the Winning Bid Rate for such
         series; and

                           (b) If Sufficient Clearing Bids for any series of APS
have not been made (other than because all of the Outstanding shares of such
series of APS are subject to Submitted Hold Orders), subject to the provisions
of paragraph (d) of this Section 5, Submitted Orders for such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids for such series shall be rejected:

                                        (i) Existing Holders' Submitted Bids for
         shares of such series of APS specifying any rate that is equal to or
         lower than the Maximum Rate for such series shall be rejected, thus
         entitling such Existing Holders to continue to hold the APS subject to
         such Submitted Bids;

                                        (ii) Potential Holders' Submitted Bids
         for shares of such series of APS specifying any rate that is equal to
         or lower than the Maximum Rate for such series shall be accepted; and

                                        (iii) Each Existing Holder's Submitted
         Bid for shares of such series of APS specifying any rate that is higher
         than the Maximum Rate of such series and the Submitted Sell Orders for
         shares of such series of APS of each Existing Holder shall be accepted,
         thus entitling each Existing Holder that submitted any such Submitted
         Bid or Submitted Sell Order to sell the shares of such series of APS
         subject to such Submitted Bid or Submitted Sell Order, but in both
         cases only in an amount equal to the number of shares of such series of
         APS obtained by multiplying the number of shares of such series of APS
         subject to Submitted Bids described in clause (ii) of this paragraph
         (b) by a fraction, the numerator of which shall be the number of
         Outstanding shares of such series of APS held by such Existing Holder
         subject to such Submitted Bid or Submitted Sell Order and the
         denominator of which shall be the aggregate number of Outstanding
         shares of such series of APS subject to all such Submitted Bids and
         Submitted Sell Orders.



                                      B-45


                           (c) If all of the Outstanding shares of any series of
APS are subject to Submitted Hold Orders, all Submitted Bids for such series
shall be rejected.

                           (d) If, as a result of the procedures described in
clause (iv) or (v) of paragraph (a) or clause (iii) of paragraph (b) of this
Section 5, any Existing Holder would be entitled or required to sell, or any
Potential Holder would be entitled or required to purchase, a fraction of a
share of APS of any series on any Auction Date, the Auction Agent shall, in such
manner as it shall determine in its sole discretion, round up or down the number
of shares of such series of APS to be purchased or sold by any Existing Holder
or Potential Holder on such Auction Date as a result of such procedures so that
the number of shares of such series so purchased or sold by each Existing Holder
or Potential Holder on such Auction Date shall be whole shares of APS.

                           (e) If, as a result of the procedures described in
clause (v) of paragraph (a) of this Section 5, any Potential Holder would be
entitled or required to purchase less than a whole share of any series of APS on
any Auction Date, the Auction Agent shall, in such manner as it shall determine
in its sole discretion, allocate shares of such series of APS for purchase among
Potential Holders so that only whole shares of such series of APS are purchased
on such Auction Date as a result of such procedures by any Potential Holder,
even if such allocation results in one or more Potential Holders not purchasing
the APS on such Auction Date.

                           (f) Based on the results of each Auction for a series
of APS, the Auction Agent shall determine the aggregate number of shares of such
series of APS to be purchased and the aggregate number of shares of such series
of APS to be sold by Potential Holders and Existing Holders on whose behalf each
Broker-Dealer submitted Bids or Sell Orders and, with respect to each
Broker-Dealer, to the extent that such aggregate number of shares to be
purchased and such aggregate number of shares to be sold differ, determine to
which other Broker-Dealer or Broker-Dealers acting for one or more purchasers of
shares of such series of APS such Broker-Dealer shall deliver, or from which
other Broker-Dealer or Broker-Dealers acting for one or more sellers of shares
of such series of APS such Broker-Dealer shall receive, as the case may be,
shares of such series of APS.

                  6. Notification of Allocations. In normal circumstances,
whenever the Fund intends to include any net capital gains or other income
taxable for Federal income tax purposes in any dividend on the APS, the Fund
will notify the Auction Agent of the amount to be so included 15 days prior to
the Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from the Fund, it
will in turn notify each Broker-Dealer, who, on or prior to such Auction Date,
in accordance with its Broker-Dealer Agreement, will notify its Existing Holders
and Potential Holders believed by it to be interested in submitting an Order in
the Auction to be held on such Auction Date.

                  7. Miscellaneous. (a) To the extent permitted by applicable
law, the Board of Trustees may interpret or adjust the provisions of this
Certificate of Vote to resolve any inconsistency or ambiguity or to remedy any
formal defect, and may amend this Certificate of Vote with respect to any series
of APS prior to the issuance of such series.



                                      B-46


                           (b) An Existing Holder may sell, transfer or
otherwise dispose of the APS only in whole shares and only pursuant to a Bid or
Sell Order in accordance with the procedures described in this Part II or to or
through a Broker-Dealer or to a Person that has delivered a signed copy of a
Master Purchaser's Letter to the Auction Agent; provided, that in the case of
all transfers other than pursuant to Auctions, such Existing Holder, its
Broker-Dealer or its Agent Member advises the Auction Agent of such transfer.

                           (c) All of the shares of each series of APS
outstanding from time to time shall be represented by one global certificate
registered in the name of the Securities Depository or its nominee.

                           (d) Neither the Fund nor any affiliate thereof may
submit an Order in any Auction, except that any Broker-Dealer that is an
affiliate of the Fund may submit Orders in an Auction, but only if such Orders
are not for its own account.

         IN WITNESS WHEREOF, the undersigned has caused this Certificate of Vote
to be executed as of March   , 1992.



                                              ---------------------------
                                              Ronald A. Nyberg
                                              Secretary



State of                   )
                           )   ss
County of                  )

         Then personally appeared before me Ronald A. Nyberg, who acknowledged
the foregoing instrument to be his free act and deed and the free act and deed
in his capacity as Secretary of Van Kampen Merritt Trust For Investment Grade
California Municipals.


                                              Before me,


                                              ---------------------------
                                              Notary Public

                       My commission expires: 
                                              ---------------------------

                                                              

                                      B-47

                            ARTICLES OF AMENDMENT TO
                       THE CERTIFICATE OF VOTE OF TRUSTEES
                 ESTABLISHING FOUR SERIES OF PREFERRED SHARES OF
                VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS

                  Van Kampen Trust for Investment Grade Municipals, a
Massachusetts business trust (the "Fund"), certifies to the Secretary of State
of the Commonwealth of Massachusetts as follows:

                  FIRST: On October 8, 1998, the Board of Trustees, pursuant to
the provisions of Article VI of the Amended and Restated Declaration of Trust
(the "Declaration of Trust") of the Fund and Section 5 of Part I and Section 7
of Part II of the Certificate of Vote of Trustees Establishing Four Series of
Preferred Shares (the "Certificate of Vote") of the Fund, authorized and
declared a 2-for-1 split of the preferred shares of beneficial interest of the
Fund, par value $.01 per share, liquidation preference $50,000 per share,
designated respectively, Auction Preferred Shares, Series A ("APS Series A"),
Auction Preferred Shares, Series B ("APS Series B"), Auction Preferred Shares,
Series C ("APS Series C") and Auction Preferred Shares, Series D ("APS Series
D") (collectively, the APS Series A, APS Series B, APS Series C and APS Series D
are referred to as "APS"). The stock split is to be effected by means of a
division of each outstanding share of APS into two preferred shares of
beneficial interest, par value $.01 per share, liquidation preference $25,000
per share.

                  SECOND: Pursuant to the provisions of Article VI of the
Declaration of Trust and Section 5 of Part I and Section 7 of Part II of the
Certificate of Vote, the following amendments to the Certificate of Vote have
been duly adopted and approved by a majority of the Trustees of the Fund.

         a.       The first paragraph of the vote establishing a class of
                  preferred shares of beneficial interest is hereby amended by
                  replacing such paragraph with the following:

                  First: Pursuant to authority expressly vested in the Board of
                  Trustees of the Fund by Article VI of its Declaration of Trust
                  (which, as amended or restated from time to time is, together
                  with this Certificate of Vote, herein called the "Declaration
                  of Trust"), the Board of Trustees hereby authorizes the
                  issuance of four series of 10,600 shares of its authorized
                  preferred shares of beneficial interest, par value $.01 per
                  share ("Preferred Shares"), liquidation preference of $25,000
                  per share, designated, respectively, Auction Preferred Shares,
                  Series A ("APS Series A"), Auction Preferred Shares, Series B
                  ("APS Series B"), Auction Preferred Shares, Series C ("APS
                  Series C") and Auction Preferred Shares, Series D ("APS Series
                  D") (collectively, the APS Series A, APS Series B, APS Series
                  C and APS Series D are referred to as "APS").



                                      B-48


         The first four paragraphs under the heading "DESIGNATION" of the
                  Certificate of Vote are hereby amended by replacing such
                  paragraphs with the following:

                  APS Series A: A series of 3,000 preferred shares of beneficial
                  interest, $.01 par value, liquidation preference $25,000 per
                  share, is hereby designated "Auction Preferred Shares, Series
                  A" (hereinafter, "APS Series A"). Each share of APS Series A
                  shall be issued on March 10, 1992; have an Applicable Rate for
                  its Initial Dividend Period equal to 3.30% per annum, have an
                  Initial Dividend Payment Date of Monday, April 6, 1992; and
                  have such other preferences, limitations and relative voting
                  rights, in addition to those required by applicable law or set
                  forth in the Declaration of Trust applicable to preferred
                  shares of beneficial interest of the Fund, as are set forth in
                  Part I and Part II of this Certificate of Vote. The APS Series
                  A shall constitute a separate series of Preferred Shares of
                  beneficial interest of the Fund, and each share of APS Series
                  A shall be identical except as provided in Section 3 of Part I
                  of this Certificate of Vote.

                  APS Series B: A series of 3,000 preferred shares of beneficial
                  interest, $.01 par value, liquidation preference $25,000 per
                  share, is hereby designated "Auction Preferred Shares, Series
                  B" (hereinafter, "APS Series B"). Each share of APS Series B
                  shall be issued on March 10, 1992; have an Applicable Rate for
                  its Initial Dividend Period equal to 3.30% per annum, have an
                  Initial Dividend Payment Date of Monday, April 13, 1992; and
                  have such other preferences, limitations and relative voting
                  rights, in addition to those required by applicable law or set
                  forth in the Declaration of Trust applicable to preferred
                  shares of beneficial interest of the Fund, as are set forth in
                  Part I and Part II of this Certificate of Vote. The APS Series
                  B shall constitute a separate series of Preferred Shares of
                  beneficial interest of the Fund, and each share of APS Series
                  B shall be identical except as provided in Section 3 of Part I
                  of this Certificate of Vote.

                  APS Series C: A series of 3,000 preferred shares of beneficial
                  interest, $.01 par value, liquidation preference $25,000 per
                  share, is hereby designated "Auction Preferred Shares, Series
                  C" (hereinafter, "APS Series C"). Each share of APS Series C
                  shall be issued on March 10, 1992; have an Applicable Rate for
                  its Initial Dividend Period equal to 3.40% per annum, have an
                  Initial Dividend Payment Date of Monday, July 6, 1992; and
                  have such other preferences, limitations and relative voting
                  rights, in addition to those required by applicable law or set
                  forth in the Declaration of Trust applicable to preferred
                  shares of beneficial interest of the Fund, as are set forth in
                  Part I and Part II of this Certificate of Vote. The APS Series
                  C shall constitute a separate series of Preferred Shares of
                  beneficial interest of the Fund, and each share of APS Series
                  C shall be identical except as provided in Section 3 of Part I
                  of this Certificate of Vote.


                                      B-49



                  APS Series D: A series of 1,600 preferred shares of beneficial
                  interest, $.01 par value, liquidation preference $25,000 per
                  share, is hereby designated "Auction Preferred Shares, Series
                  D" (hereinafter, "APS Series D"). Each share of APS Series D
                  shall be issued on March 10, 1992; have an Applicable Rate for
                  its Initial Dividend Period equal to 3.40% per annum, have an
                  Initial Dividend Payment Date of Monday, July 6, 1992; and
                  have such other preferences, limitations and relative voting
                  rights, in addition to those required by applicable law or set
                  forth in the Declaration of Trust applicable to preferred
                  shares of beneficial interest of the Fund, as are set forth in
                  Part I and Part II of this Certificate of Vote. The APS Series
                  D shall constitute a separate series of Preferred Shares of
                  beneficial interest of the Fund, and each share of APS Series
                  D shall be identical except as provided in Section 3 of Part I
                  of this Certificate of Vote.

          Section 2 (c)(ii) of Part I of the Certificate of Vote is hereby
                  amended to replace such section with the following:

                  The amount of dividends per share payable on shares of any
                  series of APS on any date on which dividends shall be payable
                  on shares of such series shall be computed by multiplying the
                  respective Applicable Rate in effect for such series in effect
                  for such Dividend Period or Dividend Periods or part thereof
                  for which dividends have not been paid by a fraction, the
                  numerator of which shall be the number of days in such
                  Dividend Period of Dividend Periods or part thereof and the
                  denominator of which shall be 365 if such Dividend Period is a
                  Rate Period, or is contained in a Rate Period, of less than
                  one year and 360 for all other Dividend periods, and applying
                  the rate obtained against $25,000.

          Section 3 (a)(i) of Part I of the Certificate of Vote is hereby
                  amended to replace such section with the following:

                  After the Initial Dividend Period with respect to any series
                  of APS and upon giving a Notice of Redemption, as provided
                  below, the Fund at its option may redeem shares of any series
                  of APS, in whole or in part, on the second Business Day next
                  preceding any Dividend Payment Date applicable to those shares
                  of APS called for redemption, out of funds legally available
                  therefor, at the Optional Redemption Price; provided that
                  during a Special Dividend Period of 365 days or more no share
                  of APS will be subject to optional redemption during any
                  Non-Call Period; provided, that shares of any series of APS
                  may not be redeemed in part of any such partial redemption
                  fewer than 500 shares of such series remain outstanding.

          Section 5 (g) of Part I of the Certificate of Vote is hereby amended
                  to replace such section with the following:



                                      B-50


                  Right to Vote with Respect to Certain Other Matters. If the
                  Fund has more than one series of APS outstanding, the
                  affirmative vote of the holders of a majority (unless a higher
                  percentage vote is required under the Declaration of Trust or
                  under this Certificate of Vote) of the outstanding shares of
                  each series of APS, each voting as a separate class, is
                  required with respect to any matter that materially affects
                  the series in a manner different from that of other series of
                  classes of the Fund's shares, including without limitation any
                  proposal to do the following: (1) increase or decrease the
                  aggregate number of authorized shares of the series; (2)
                  effect any exchange, reclassification, or cancellation of all
                  or part of the shares of the series; (3) effect an exchange,
                  or create a right of exchange, of all or any part of the
                  shares of the series; (4) change the rights or preferences of
                  the shares of the series; (5) change the shares of the series,
                  whether with or without par value, of the same or another
                  class or series; (6) create a new class or series of shares
                  having rights and preferences prior and superior to the shares
                  of the series, or increase the rights and preferences or the
                  number of authorized shares of a series having rights and
                  preferences prior or superior to the shares of the series; or
                  (7) cancel or otherwise affect distributions on the shares of
                  the series that have accrued but have not been declared. To
                  the extent that the interest of a series of APS affected by a
                  matter are substantially identical to the interests of another
                  series of APS affected by such matter (e.g., a vote of
                  shareholders required under Section 13(a) of the 1940 Act),
                  each such series shall vote together collectively as one
                  class. The vote of holders of each series of APS described
                  above will in each case be in addition to a separate vote of
                  the requisite percentage of Common Shares and APS necessary to
                  authorize the action in question.

          Section 6 (a) of Part I of the Certificate of Vote is hereby amended
                  to replace such section with the following:

                  Upon the dissolution, liquidation or winding up of the affairs
                  of the Fund, whether voluntary or involuntary, the Holders of
                  the APS then outstanding shall be entitled to receive and to
                  be paid out of the assets of the Fund available for
                  distribution to its shareholders, before any payment or
                  distribution shall be made on the Common Shares or on any
                  other class of shares of the Fund ranking junior to the APS
                  upon dissolution, liquidation or winding up, an amount equal
                  to the liquidation preference with respect to such shares. The
                  liquidation preference for the APS shall be $25,000 per share,
                  plus an amount equal to all dividends thereon (whether or not
                  earned or declared) accumulated but unpaid to the date of
                  final distribution in same-day funds, together with any
                  payments required to be made pursuant to Section 12 in
                  connection with the liquidation of the Fund.

          Section 15(f) of Part I of the Certificate of Vote is hereby amended
                  to replace such section with the following:



                                      B-51


                  "APS Basic Maintenance Amount," as of any Valuation Date,
                  shall mean the dollar amount equal to the sum of (i)(A) the
                  product of the number of APS Outstanding on such date
                  multiplied by $25,000; (B) the aggregate amount of dividends
                  that will have accumulated at the Applicable Rate (whether or
                  not earned or declared) to (but not including) the first
                  respective Dividend Payment Dates for each of the APS
                  Outstanding that follow such Valuation Date; (C) the amount
                  equal to the Projected Dividend Amount (based on the number of
                  APS Outstanding on such date); (D) the amount of anticipated
                  expenses of the Fund for the 90 days subsequent to such
                  Valuation Date; (E) the amount of the Fund's Maximum Potential
                  Additional Dividend Liability as of such Valuation Date; (F)
                  the amount of any premium payable pursuant to a Premium Call
                  Period; and (G) any current liabilities as of such Valuation
                  Date to the extent not reflected in any of (i)(A) through
                  (i)(F) (including, without limitation, any amounts described
                  in Section 13 of Part I as required to be treated as
                  liabilities in connection with the Fund's transactions in
                  futures and options and including any payables for municipal
                  securities purchased as of such Valuation Date) less (ii)
                  either (A) the face value of any of the Fund's assets
                  irrevocably deposited by the Fund for the payment of any of
                  (i)(A) thorough (i)(G) if such assets mature within the
                  Moody's Exposure Period and are either securities issued or
                  guaranteed by the United States Government or have a rating
                  assigned by Moody's of P-1, VMIG-1 or MIG-1 (or, with respect
                  to S&P, SP-1+ or A-1+) or (B) the Discounted Value of such
                  assets. For purposes of the APS Basic Maintenance Amount in
                  connection with S&P's ratings of the APS, with respect to any
                  transactions by the Fund in futures contracts, the Fund shall
                  include as liabilities (i) 30% of the aggregate settlement
                  value, as marked to market, of any outstanding futures
                  contracts based on the Municipal Index which are owned by the
                  Fund plus (ii) 25% of the aggregate settlement value, as
                  marked to market, of any outstanding futures contracts based
                  on Treasury Bonds which contracts are owned by the Fund. For
                  purposes of the APS Basic Maintenance Amount in connection
                  with Moody's rating of the APS, with respect to any
                  transactions by the Fund in securities options, the Fund shall
                  include as liabilities (i) 10% of the exercise price of a call
                  option written by the Fund and (ii) the exercise price of any
                  written put option.

          Section 15 (ii) of Part I of the Certificate of Vote is hereby amended
                  to replace such section with the following:

                  "Mandatory Redemption Price" means $25,000 per share of APS
                  plus an amount equal to accumulated but unpaid dividends
                  thereon to the date fixed for redemption (whether or not
                  earned or declared).

          Section 15 (yy) of Part I of the Certificate of Vote is hereby amended
                  to replace such section with the following:



                                      B-52



                  "Optional Redemption Price" shall mean (i) $25,000 per share
                  of APS in the case of a 28-day, three-month or a six month
                  Dividend Period or a Special Dividend Period of less than 365
                  days or (ii) with respect to a Special Dividend Period of 365
                  days or more the Optional Redemption Price set forth in the
                  Specific Redemption Provisions in connection therewith; in
                  each case plus an amount equal to accumulated but unpaid
                  dividends thereon to the date of redemption (whether or not
                  earned or declared).

          Section 15 (ppp) of Part I of the Certificate of Vote is hereby
                  amended to replace such section with the following:

                  "Specific Redemption Provisions" means, with respect to any
                  Special Dividend Period of 365 or more days, either, or any
                  combination of, (i) a period (a "Non-Call Period") determined
                  by the Board of Trustees, after consultation with the
                  Broker-Dealers, during which the shares subject to such
                  Special Dividend Period are not subject to redemption at the
                  option of the Fund, and (ii) a period (a "Premium Call
                  Period"), consisting of a number of whole years and determined
                  by the Board of Trustees, after consultation with the
                  Broker-Dealers, during each year of which the shares subject
                  to such Special Dividend Period shall be redeemable at the
                  Fund's option at a price per share equal to $25,000 plus
                  accumulated but unpaid dividends plus a premium expressed as a
                  percentage of $25,000 as determined by the Board of Trustees
                  after consultation with the Broker-Dealers; provided, that
                  during any Special Dividend Period of 365 or more days if, on
                  the date of determination of the Applicable Rate for such
                  Series, such Applicable Rate equaled or exceeded the Treasury
                  Rate, the Fund may redeem APS without regard to any Non-Call
                  Period or Premium Call Period at the Mandatory Redemption
                  Price.


                                      B-53



                            ARTICLES OF AMENDMENT TO
                       THE CERTIFICATE OF VOTE OF TRUSTEES
                CHANGING THE TIMING OF CERTAIN REPORTS TO RATING
                                    AGENCIES


                  Van Kampen Trust for Investment Grade Municipals, a
Massachusetts business trust (the "Fund"), certifies to the Secretary of State
of the Commonwealth of Massachusetts as follows:

         FIRST: On September 25, 2003, the Board of Trustees of the Fund,
pursuant to the provisions of Article VI of the Amended and Restated Declaration
of Trust (the "Declaration of Trust") of the Fund and Section 5 of Part I of the
Certificate of Vote of Trustees Establishing a Class of Preferred Shares (the
"Certificate of Vote") of the Fund, authorized an amendment to the Certificate
of Vote to change the timing of filing certain reports with rating agencies from
quarterly to annually and to make conforming changes to the Certificate of Vote.

         SECOND: Pursuant to the provisions of Article VI of the Declaration of
Trust and Section 5 of Part I of the Certificate of Vote of the Fund, the
following amendments to the Certificate of Vote have been duly adopted and
approved by a majority of the Trustees of the Fund.

         a. Section 5 (d) (ii) of Part I of the Certificate of Vote is hereby
amended to replace the term "Quarterly Valuation Date" with the term "Annual
Valuation Date."

         b. The second and third sentences of Section 9(b) of Part I of the
Certificate of Vote are hereby amended to replace such sentences with the
following:

                  The Fund shall also deliver to S&P (if S&P is then rating the
APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if
either S&P or Moody's is then rating the APS) an APS Basic Maintenance Report as
of the last Valuation Date of each month on or before the third Business Day
after such day. The Fund shall also deliver to S&P (if S&P is then rating the
APS) and Moody's (if Moody's is then rating the APS) an APS Basic Maintenance
Report whenever (i) the Fund shall have redeemed APS or Common Shares, (ii) the
Fund shall fail to have S&P Eligible Assets or Moody's Eligible Assets with an
aggregate Discounted Value at least equal to 105% of the APS Basic Maintenance
Amount, or (iii) whenever requested by Moody's or S&P, in each case on or before
the third Business Day after such day.

         c. Section 9 (c) of Part I of the Certificate of Vote is hereby amended
to replace such section with the following:

                  Within ten Business Days after the date of delivery of an APS
Basic Maintenance Report in accordance with paragraph (b) of this Section 9
relating to an Annual Valuation Date, the Fund shall cause the Independent
Accountant to confirm in



                                      B-54


writing to S&P (if S&P is then rating the APS), Moody's (if Moody's is then
rating the APS) and the Auction Agent (if either S&P or Moody's is then rating
the APS) (i) the mathematical accuracy of the calculations reflected in such
Report and (ii) that, in such Report, the Fund determined in accordance with
this Certificate of Vote whether the Fund had, at such Annual Valuation Date,
S&P Eligible Assets (if S&P is then rating the APS) of an aggregate Discounted
Value at least equal to the APS Basic Maintenance Amount and Moody's Eligible
Assets (if Moody's is then rating the APS) of an aggregate Discounted Value at
least equal to the APS Basic Maintenance Amount (such confirmation being herein
called the "Accountant's Confirmation").

         d. The final clause of Section 13 (a) (i) of Part I of the Certificate
of Vote, which read "there shall be a quarterly audit made of the Fund's futures
and options transactions by the Fund's independent accountants to confirm that
the Fund is in compliance with these standards; or" is hereby amended to replace
such clause with the following:

                  there shall be an annual audit made of the Fund's futures and
options transactions by the Fund's independent accountants to confirm that the
Fund is in compliance with these standards; or

         e. Section 15 (h) of Part I of the Certificate of Vote is hereby
amended to replace such section with the following:

                  "APS Basic Maintenance Report" shall mean a report signed by
any of the President, Treasurer, any Senior Vice President or any Vice President
of the Fund which sets forth, as of the related Valuation Date, the assets of
the Fund, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), the APS Basic Maintenance Amount, the net asset value and market
trading price per Common Share, and the total return percentage for the relevant
valuation period.

         f. Section 15 (ddd) of Part I of the Certificate of Vote is hereby
amended to replace such section with the following:

                  "Annual Valuation Date" shall mean the last Business Day of
each fiscal year of the Fund.

                  IN WITNESS WHEREOF, the undersigned has caused this
Certificate of Vote to be executed as of March 8, 2004.


                                            -----------------------------
                                            A. Thomas Smith III
                                            Vice President and Secretary

State of New York          )
                           )    ss




                                      B-55


County of New York         )


                           Then personally appeared before me A. Thomas Smith
III, who acknowledged the foregoing instrument to be his free act and deed and
the free act and deed in his capacity as Vice President and Secretary of Van
Kampen Trust for Investment Grade Municipals.


                                            Before me,


                                            -----------------------------
                                            Notary Public


My commission expires:
                       ------------------------






                                      B-56

 

                                   APPENDIX C

               ACQUIRING FUND ANNUAL REPORT DATED OCTOBER 31, 2004









                                      C-1


 
Item 1. Report to Shareholders

The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
 
       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, 2004.
 
       MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
       PASS. THERE IS NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT
       OBJECTIVE. TRUSTS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
       THAT THE MARKET VALUES OF SECURITIES OWNED BY THE TRUST WILL DECLINE AND
       THAT THE VALUE OF TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID
       FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST.
 
       INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM
       TAX (AMT).
 


                                                                    
         ---------------------------------------------------------------------------------------
            NOT FDIC INSURED             OFFER NO BANK GUARANTEE              MAY LOSE VALUE
         ---------------------------------------------------------------------------------------
                   NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY               NOT A DEPOSIT
         ---------------------------------------------------------------------------------------



                                      C-2

 
Performance Summary as of 10/31/04
 


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%          7.46%
 
10-year                           8.91           8.35
 
5-year                            9.92          10.14
 
1-year                            8.60           5.76
---------------------------------------------------------

 
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, 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.
 
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 does not include any expenses, fees or sales
charges, which would lower performance. The index is unmanaged and should not be
considered an investment. It is not possible to invest directly in an index.
 
                                      C-3


Trust Report
 
FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2004
 
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 interest-rate environment of the 12 months ended October 31, 2004 was marked
by two periods of steadily declining yields, with a significant sell-off in the
middle. Yields fell steadily through the first half of the period, approaching
the historical lows of 2003. This trend persisted until March, at which point
yields reversed direction and began an upward march as prices fell. These losses
were steepest in April, as a surprisingly strong employment report and signals
from members of the Federal Open Market Committee (the "Fed") caused investors
to expect a near-term rate increase. Rates went on to decline from May through
the end of the period as the market digested the Fed's newly hawkish rate
stance. Investors were further comforted when, after the Fed raised rates at its
June 30, 2004 meeting, its members indicated that the path of future rate
increases would be measured.
 
Unusually, longer-maturity securities largely outperformed in this period of Fed
tightening. Historically, the typical pattern in periods of tightening policy
has seen yields rise across all maturities. During the review period, however,
yields of shorter maturity bonds rose while those of bonds with longer
maturities declined slightly.
 
Lower-quality municipal bonds also performed strongly in this environment, as
the difference in yields (known as the "yield spread") between AAA and BBB rated
bonds decreased by roughly 20 basis points for 20-year bonds. As a result,
sectors with heavy exposure to lower-rated debt, such as hospitals and
industrial-revenue bonds, posted higher total returns than sectors dominated by
higher-rated debt.
 
Issuance for the first ten months of 2004 (the final ten months of the review
period) was roughly six percent lower than in the same period in 2003. That
said, 2003 was a record year, and at the current pace of issuance, 2004 could
well be one of the largest years in recent memory. The strong supply met with
faltering demand from mutual funds, as fund investors withdrew over $15 billion
in net cash during the period. This faltering demand was largely offset by
increased participation in the market by insurance companies and individual
investors.
 
(1)Team members may change without notice at any time.


                                      C-4

 
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, as they did during the reporting period. On an
NAV basis, the trust outperformed its benchmark index, the Lehman Brothers
Municipal Bond Index. (See table below.)
 
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. The Fed's policy of
raising interest rates in the final months of the period made the trust's
borrowing activity more expensive. These expenses, however, were more than
offset by the strong performance of the bonds we invested in, leading to the
trust's outperformance versus its benchmark, which is unleveraged.
 
The historically low level of interest rates led us to maintain the trust's
overall interest-rate sensitivity at a level below that of its benchmark. This
strategy helped shield the trust from negative returns during those times when
yields rose. That said, yields overall declined over the period, and the
strategy exerted a drag on performance.
 
The fund experienced some call activity during the period, as issuers sought to
lower their interest costs by refinancing their bonds at lower market rates. We
reinvested the proceeds into bonds that we believed had more favorable prospects
for total return. Many of these securities were in the 15- to 20-year segment of
the market, which our analysis indicated offered the most appealing combination
of value and total-return potential.
 
In keeping with our long-term approach, we bought and sold bonds at the long end
of the market as they came into and out of fair value. This strategy entails
purchasing bonds with attractive total-return prospects and selling them once
they have reached our performance targets. Many of our purchases in this
strategy
 
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2004
 


---------------------------------------------------------------
      BASED ON     BASED ON     LEHMAN BROTHERS MUNICIPAL
        NAV      MARKET PRICE          BOND INDEX
                                              
 
       8.60%        5.76%                 6.03%
---------------------------------------------------------------

 
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. 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
AND INDEX DEFINITION.



                                      C-5
                                                                               

 
involved health-care bonds, which offered attractive valuations for much of the
period.
 
We remained focused on controlling the trust's risk profile range through
attention to credit quality and diversification. By the end of the 12-month
period, nearly 89 percent of the trust's total investments were invested in
bonds rated AAA and AA; these represent the two highest tiers of credit ratings.
The portfolio was also well diversified across the major sectors of the
municipal bond market. Its three largest sector exposures were general purpose,
public education, and higher education.
 
While it is impossible to predict the exact turning point when interest rates
will move decisively higher, we believe the trust remains well positioned for
the near future. We will continue to search the municipal bond markets for
interesting opportunities.
 
There is no guarantee that any securities mentioned will continue to perform
well or be held by the trust in the future.
 

                                      C-6
 

 


RATINGS ALLOCATION AS OF 10/31/04
                                                               
AAA/Aaa                                                            82.0%
AA/Aa                                                               6.8
A/A                                                                 8.6
BBB/Baa                                                             1.6
BB/Ba                                                               0.3
B/B                                                                 0.2
Non-Rated                                                           0.5

TOP 5 SECTORS AS OF 10/31/04
                                                               
General Purpose                                                    21.7%
Public Education                                                   10.9
Higher Education                                                    9.6
Transportation                                                      8.5
Public Building                                                     8.3

SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 10/31/04
                                                               
New York                                                           14.2%
Illinois                                                            9.3
New Jersey                                                          8.9
California                                                          8.4
Texas                                                               8.2
Florida                                                             6.6
Michigan                                                            3.8
Washington                                                          3.6
North Carolina                                                      3.3
South Carolina                                                      2.7
Georgia                                                             2.7
Pennsylvania                                                        2.7
Indiana                                                             2.1
Arizona                                                             2.0
Oregon                                                              1.9
Colorado                                                            1.7
Massachusetts                                                       1.4
Ohio                                                                1.3
Nevada                                                              1.3
Kentucky                                                            1.1
Tennessee                                                           1.1
Minnesota                                                           1.1
Mississippi                                                         0.9
Oklahoma                                                            0.8
Wisconsin                                                           0.7
Connecticut                                                         0.7
Missouri                                                            0.7
Maryland                                                            0.7
Puerto Rico                                                         0.7
District of Columbia                                                0.6
Utah                                                                0.6
Iowa                                                                0.5
Nebraska                                                            0.5
South Dakota                                                        0.5
Guam                                                                0.4

 

                                                               
                                               (continued on next page)

 
                                      C-7
                                                                             

 


SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 10/31/04
                                         (continued from previous page)
                                                               
Alabama                                                             0.4%
Virginia                                                            0.3
Kansas                                                              0.3
New Hampshire                                                       0.3
Rhode Island                                                        0.2
Louisiana                                                           0.2
Hawaii                                                              0.2
New Mexico                                                          0.2
North Dakota                                                        0.2
                                                                  -----
Total Investments                                                 100.0%

 
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. Ratings allocation and summary of
investments by state classification are as a percentage of total investments.
Sectors are as a percentage of long-term investments. Securities are classified
by sectors that represent broad groupings of related industries. Van Kampen is a
wholly owned subsidiary of a global securities firm which is engaged in a wide
range of financial services including, for example, securities trading and
brokerage activities, investment banking, research and analysis, financing and
financial advisory services. Rating allocations based upon ratings as issued by
Standard and Poor's and Moody's, respectively.

                                      C-8


 
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
 
Each Van Kampen trust provides a complete schedule of portfolio holdings in its
semiannual and annual reports within 60 days of the end of the trust's second
and fourth fiscal quarters by filing the schedule electronically with the
Securities and Exchange Commission (SEC). The semiannual reports are filed on
Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also
delivers the semiannual and annual reports to trust shareholders, and makes
these reports available on its public web site, www.vankampen.com. In addition
to the semiannual and annual reports that Van Kampen delivers to shareholders
and makes available through the Van Kampen public web site, each trust files a
complete schedule of portfolio holdings with the SEC for the trust's first and
third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for
the first and third fiscal quarters to shareholders, nor are the reports posted
to the Van Kampen public web site. You may, however, obtain the Form N-Q filings
(as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the SEC's
Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. You
can also request copies of these materials, upon payment of a duplicating fee,
by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by
writing the Public Reference section of the SEC, Washington, DC 20549-0102.
 
In addition to filing a complete schedule of portfolio holdings with the SEC
each fiscal quarter, each Van Kampen trust makes portfolio holdings information
available by periodically providing the information on its public web site,
www.vankampen.com. Each Van Kampen trust provides a complete schedule of
portfolio holdings on the public web site on a calendar-quarter basis
approximately 30 days after the close of the calendar quarter. Van Kampen
closed-end funds do not presently provide partial lists of their portfolio
holdings on a monthly basis, but may do so in the future.
 
You may obtain copies of a trust's fiscal quarter filings, or its monthly or
calendar-quarter web site postings, by contacting Van Kampen Client Relations at
1-800-847-2424.
 
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
 
The trust's policies and procedures with respect to the voting of proxies
relating to the trust's portfolio securities and information on how the trust
voted proxies relating to portfolio securities during the most recent
twelve-month period ended June 30 is available without charge, upon request, by
calling 1-800-847-2424 or by visiting our web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's web
site at http://www.sec.gov.
 
                                      C-9

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          MUNICIPAL BONDS  154.2%
          ALABAMA  0.6%
$  750    Birmingham Baptist Med Ctr AL Baptist Hlth
          Sys Ser A.................................         5.875%   11/15/24  $     781,710
 1,565    Jefferson Cnty, AL Swr Rev Impt Wts Ser A
          (Prerefunded @ 02/01/11) (FGIC Insd)......         5.000    02/01/41      1,745,554
   435    Jefferson Cnty, AL Swr Rev Impt Wts Ser A
          (Prerefunded @ 02/01/11) (FGIC Insd)......         5.000    02/01/41        487,296
                                                                                -------------
                                                                                    3,014,560
                                                                                -------------
          ARIZONA  3.0%
 3,095    Arizona Sch Fac Brd Ctfs Ser B (FSA
          Insd).....................................         5.250    09/01/19      3,429,539
 4,225    Arizona Tourism & Sports Auth Multipurpose
          Stadium Fac Ser A (MBIA Insd).............         5.375    07/01/23      4,606,517
 2,800    Phoenix, AZ Civic Impt Corp Arpt Rev Jr
          Lien (AMT) (FGIC Insd)....................         5.375    07/01/29      2,847,796
 3,125    Salt River Proj AZ Agric Impt Salt River
          Proj Ser A Rfdg...........................         5.250    01/01/06      3,248,125
                                                                                -------------
                                                                                   14,131,977
                                                                                -------------
          CALIFORNIA  13.0%
 2,895    ABC CA Uni Sch Dist Cap Apprec Ser B (FGIC
          Insd).....................................          *       08/01/20      1,389,195
 1,300    Anaheim, CA Pub Fin Auth Lease Rev Pub
          Impt Proj Ser C (FSA Insd)................         6.000    09/01/16      1,580,137
 3,000    California St (AMBAC Insd)................         5.125    10/01/27      3,127,710
 1,000    California St Dept Wtr Res Pwr Ser A......         6.000    05/01/15      1,170,680
 4,000    California St Dept Wtr Res Pwr Ser A
          (AMBAC Insd)..............................         5.375    05/01/18      4,436,800
 1,320    California St Dept Wtr Res Pwr Ser A (MBIA
          Insd).....................................         5.125    05/01/19      1,430,180
 1,000    California St Pub Wks Brd UCLA Replacement
          Hosp Ser A (FSA Insd).....................         5.375    10/01/20      1,097,880
 2,000    El Dorado, CA Irr Dist Ctfs Ser A (FGIC
          Insd).....................................         5.000    03/01/21      2,126,660
 2,000    Florin, CA Res Consv Dist Cap Impt Elk
          Grove Wtr Svc Ser A (MBIA Insd)...........         5.000    09/01/33      2,051,040
 3,000    Florin, CA Res Consv Dist Cap Impt Elk
          Grove Wtr Svc Ser B (MBIA Insd)...........         5.000    03/01/33      3,073,620
 2,000    Foothill/Eastern Corridor Agy CA Toll Rd
          Rev Cap Apprec Rfdg (MBIA Insd)...........          *       01/15/17      1,091,480
20,750    Foothill/Eastern Corridor Agy CA Toll Rd
          Rev Sr Lien Ser A (Escrowed to
          Maturity).................................          *       01/01/23      8,817,920

 
                                            See Notes to Financial Statements

                                      C-10

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          CALIFORNIA (CONTINUED)
$3,000    Fremont, CA Uni Sch Dist Ser A (FGIC
          Insd).....................................         5.000%   08/01/25  $   3,139,410
 2,500    Los Angeles, CA Uni Sch Dist Ser A (FSA
          Insd).....................................         5.250    07/01/20      2,743,275
 4,020    Oakland, CA Uni Sch Dist (FGIC Insd)
          (e).......................................         5.250    08/01/18      4,472,049
 1,750    Palm Springs, CA Fin Auth Lease Rev
          Convention Ctr Proj Ser A (MBIA Insd).....         5.500    11/01/35      1,927,835
 3,000    Port Oakland, CA Ser M (FGIC Insd)........         5.250    11/01/18      3,342,060
 2,000    Salinas, CA Uni High Sch Dist Ser A (MBIA
          Insd).....................................         5.000    06/01/27      2,072,680
 3,000    San Francisco, CA City & Cnty Second Ser
          Issue 29 B Rfdg (FGIC Insd)...............         5.125    05/01/20      3,237,930
 1,210    Santa Clara, CA Elec Rev Sub Ser A (MBIA
          Insd).....................................         5.250    07/01/19      1,332,428
 3,745    Santa Clarita, CA Cmnty College (FGIC
          Insd).....................................         5.000    08/01/23      3,941,575
 3,000    Temecula, CA Redev Agy Tax Temecula Redev
          Proj No 1 (MBIA Insd).....................         5.250    08/01/36      3,136,740
                                                                                -------------
                                                                                   60,739,284
                                                                                -------------
          COLORADO  2.6%
 4,000    Adams & Arapahoe Cntys CO Sch Dist 28 Ser
          A (FSA Insd)..............................         5.250    12/01/20      4,401,720
 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      1,072,310
 2,000    Aurora, CO Ctfs Part (AMBAC Insd).........         5.500    12/01/30      2,174,700
 1,000    Colorado Hlth Fac Auth Rev Catholic Hlth
          Initiatives Ser A (Escrowed to
          Maturity).................................         5.500    03/01/32      1,050,690
 1,125    Colorado Hlth Fac Auth Rev Hosp Portercare
          Adventist Hlth............................         6.500    11/15/31      1,236,645
    61    Colorado Hsg Fin Auth Single Family Pgm Sr
          Ser B1 (AMT)..............................         7.650    11/01/26         61,310
 1,805    Lakewood, CO Ctfs Part (AMBAC Insd) (e)...         5.300    12/01/16      2,011,131
                                                                                -------------
                                                                                   12,008,506
                                                                                -------------
          CONNECTICUT  1.1%
 2,750    Bridgeport, CT Ser A Rfdg (FGIC Insd).....         5.375    08/15/14      3,120,012
 1,830    Connecticut St Spl Oblig Pkg Rev Bradley
          Intl Arpt Ser A (AMT) (ACA Insd)..........         6.600    07/01/24      1,983,336
                                                                                -------------
                                                                                    5,103,348
                                                                                -------------

 
See Notes to Financial Statements       

                                      C-11

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          DISTRICT OF COLUMBIA  0.9%
$2,000    District of Columbia Rev Friendship Pub
          Charter Sch Inc (ACA Insd)................         5.750%   06/01/18  $   2,202,700
     5    District of Columbia Ser E (FSA Insd).....         6.000    06/01/13          5,066
 2,000    Metropolitan Washington DC Arpt Auth Sys
          Ser A (AMT) (FGIC Insd)...................         5.250    10/01/32      2,066,380
                                                                                -------------
                                                                                    4,274,146
                                                                                -------------
          FLORIDA  10.0%
 6,635    Dade Cnty, FL Spl Oblig Cap Apprec Ser B
          Rfdg (Prerefunded @ 10/01/08) (AMBAC
          Insd).....................................          *       10/01/26      2,005,495
 3,000    Escambia Cnty, FL Hlth Fac Auth Hlth Fac
          Rev FL Hlthcare Fac Ln (AMBAC Insd).......         5.950    07/01/20      3,081,780
 2,500    Florida St Brd Ed Cap Outlay Pub Ed Ser C
          (FGIC Insd)...............................         5.750    06/01/29      2,800,550
 1,000    Florida St Brd Ed Lottery Rev Ser A (FGIC
          Insd).....................................         6.000    07/01/14      1,159,550
 1,400    Florida St Dept Corrections Ctf Part
          Okeechobee Correctional (AMBAC Insd)......         6.250    03/01/15      1,448,174
   605    Gulf Breeze, FL Rev Loc Govt Ln Ser E
          (FGIC Insd) (a)...........................         5.050    12/01/20        656,812
 1,900    Gulf Breeze, FL Rev Loc Govt Ln Ser E
          (FGIC Insd) (a)...........................         5.150    12/01/20      2,104,326
 1,000    Highlands Cnty, FL Hlth Fac Auth Rev Hosp
          Adventist Hlth Sys Ser D..................         5.375    11/15/35      1,035,450
 4,550    Hillsborough Cnty, FL Sch Dist (AMBAC
          Insd).....................................         5.375    10/01/17      5,088,083
 2,000    Jacksonville, FL Sales Tax Rev Better
          Jacksonville (MBIA Insd)..................         5.250    10/01/19      2,215,420
 1,000    Jea, FL Elec Sys Rev Ser 3 Ser A..........         5.500    10/01/41      1,067,250
 2,000    Miami-Dade Cnty, FL Aviation Miami Intl
          Arpt (AMT) (FGIC Insd)....................         5.375    10/01/27      2,093,480
 2,000    Miami-Dade Cnty, FL Aviation Ser A (AMT)
          (FSA Insd)................................         5.125    10/01/35      2,037,320
 2,000    Miami-Dade Cnty, FL Hlth Fac Miami
          Children Hosp Ser A Rfdg (AMBAC Insd).....         5.000    08/15/20      2,111,420
 1,980    Miami-Dade, FL Sch Brd Ser C (Prerefunded
          @ 10/01/11) (FSA Insd) (e)................         5.500    10/01/13      2,279,950
 2,000    Palm Beach Cnty, FL Sch Brd Ctf Ser E Rfdg
          (AMBAC Insd)..............................         5.250    08/01/11      2,259,780

 
                                           See Notes to Financial Statements

                                      C-12

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          FLORIDA (CONTINUED)
$1,655    Reedy Creek Impt Dist FL Ser A Rfdg (AMBAC
          Insd).....................................         5.500%   06/01/11  $   1,894,048
 3,465    Reedy Creek Impt Dist FL Ser C (AMBAC
          Insd).....................................         4.750    06/01/15      3,540,225
 1,210    Saint Lucie Cnty, FL Sch Brd Ctf Ser A
          (FSA Insd) (e)............................         5.500    07/01/14      1,381,360
 1,000    Tallahassee, FL Lease Rev FL St Univ Proj
          Ser A (MBIA Insd) (e).....................         5.500    08/01/17      1,121,350
 1,250    Tampa, FL Hosp Rev Cap Impt H Lee Moffitt
          Ser A.....................................         5.750    07/01/19      1,319,562
 2,880    Tampa, FL Occupational License Ser A Rfdg
          (FGIC Insd)...............................         5.375    10/01/15      3,257,107
 1,000    Village Ctr Cmnty Dev Dist FL Recreational
          Rev Ser A (MBIA Insd).....................         5.125    11/01/36      1,042,130
                                                                                -------------
                                                                                   47,000,622
                                                                                -------------
          GEORGIA  4.1%
 2,000    Atlanta, GA Arpt Passenger Fac Charge Rev
          Gen Sub Lien Ser C (FSA Insd).............         5.000    01/01/33      2,064,140
 3,715    Atlanta, GA Wtr & Wastewtr Rev (FSA
          Insd).....................................         5.000    11/01/22      3,976,127
 1,500    George L Smith II GA World Congress Cent
          Auth Rev Domed Stadium Proj Rfdg (AMT)
          (MBIA Insd)...............................         5.500    07/01/20      1,636,230
 5,660    Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA
          Insd).....................................         6.500    01/01/17      6,990,440
   240    Georgia Muni Elec Auth Pwr Rev Ser Y
          (Escrowed to Maturity) (MBIA Insd)........         6.500    01/01/17        296,887
 4,000    Municipal Elec Auth GA Combustion Turbine
          Proj Ser A (MBIA Insd)....................         5.250    11/01/16      4,491,280
                                                                                -------------
                                                                                   19,455,104
                                                                                -------------
          HAWAII  0.3%
 1,285    Honolulu, HI City & Cnty Ser B (FGIC
          Insd).....................................         5.500    10/01/11      1,474,049
                                                                                -------------
 
          ILLINOIS  14.3%
 2,000    Bedford Park, IL Ser A Rfdg (FSA Insd)....         5.250    12/15/20      2,205,540
 2,000    Chicago, IL Brd of Ed (Prerefunded @
          12/01/10) (FGIC Insd).....................         5.500    12/01/31      2,284,800
 2,000    Chicago, IL Brd of Ed Chicago Sch Reform
          (Prerefunded @ 12/01/07) (AMBAC Insd).....         5.750    12/01/20      2,251,520
 4,865    Chicago, IL Cap Apprec (Prerefunded @
          07/01/05) (AMBAC Insd)....................          *       07/01/16      2,393,288
 1,500    Chicago, IL Lakefront Millennium Pk Facs
          (MBIA Insd)...............................         5.125    01/01/28      1,547,745

 
See Notes to Financial Statements                                             

                                      C-13

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          ILLINOIS (CONTINUED)
$7,000    Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
          Second Lien Ser A Rfdg (MBIA Insd)........         6.375%   01/01/12  $   7,189,560
 1,500    Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
          Third Lien C-2 Rfdg (AMT) (XLCA Insd).....         5.250    01/01/34      1,548,945
 2,000    Chicago, IL O'Hare Intl Arpt Rev Second
          Lien Passenger Fac Ser B (AMBAC Insd).....         5.500    01/01/17      2,232,820
 3,500    Chicago, IL Proj Ser A Rfdg (MBIA Insd)
          (b).......................................         5.000    01/01/31      3,572,695
 2,000    Chicago, IL Wastewtr Transmission Rev
          Second Lien (Prerefunded @ 01/01/10) (MBIA
          Insd).....................................         5.750    01/01/25      2,300,020
 1,000    Chicago, IL Wastewtr Transmission Rev
          Second Lien (Prerefunded @ 01/01/10) (MBIA
          Insd).....................................         6.000    01/01/30      1,161,970
 3,500    Du Page Cnty, IL Fst Presv Dist...........          *       11/01/10      2,862,370
 2,545    Du Page Cnty, IL Trans Rev (FSA Insd).....         5.750    01/01/15      2,905,728
   805    East Peoria, IL Ser C Rfdg................         7.000    05/01/17        836,548
 1,310    Elgin, IL Ser B Rfdg......................         5.750    12/15/13      1,538,320
 1,600    Grundy, Kendall, & Will Cntys (AMBAC Insd)
          (e).......................................         5.500    05/01/15      1,786,704
 1,250    Illinois Dev Fin Auth Rev Bradley Univ
          Proj (Prerefunded @ 08/01/09) (AMBAC
          Insd).....................................         5.375    08/01/24      1,414,150
 1,475    Illinois Dev Fin Auth Rev Loc Govt Pgm
          Geneva Cmnty 304 Ser B (FSA Insd) (e).....         5.750    01/01/15      1,689,848
 1,145    Illinois Dev Fin Auth Rev Loc Govt Pgm
          Geneva Cmnty 304 Ser B (FSA Insd) (e).....         5.750    01/01/17      1,307,876
 3,285    Illinois Dev Fin Auth Rev Presbyterian
          Home Lake Proj Ser B (FSA Insd)...........         6.300    09/01/22      3,592,575
 2,000    Illinois Ed Fac Auth Rev Lewis Univ.......         6.100    10/01/16      2,010,580
 1,250    Illinois Hlth Fac Auth Rev Evangelical
          Hosp Ser C (FSA Insd).....................         6.750    04/15/17      1,549,062
   700    Illinois Hlth Fac Auth Rev Highland Park
          Hosp Proj Ser A (Prerefunded @ 10/01/07)
          (MBIA Insd)...............................         5.750    10/01/17        784,252
 2,275    Illinois Hlth Fac Auth Rev South Suburban
          Hosp (Escrowed to Maturity)...............         7.000    02/15/18      2,852,509
 1,000    Illinois St (FGIC Insd)...................         5.250    12/01/20      1,047,910
 2,000    Illinois St First Ser (FGIC Insd).........         5.375    11/01/14      2,261,680
 2,000    Illinois St Sales Tax Rev Build
          Illinois..................................         5.000    06/15/19      2,164,240
   250    Metropolitan Pier & Expo Auth IL Dedicated
          St Tax Rev McCormick Pl Expn Proj (FGIC
          Insd).....................................         5.375    12/15/18        278,710

 
                                            See Notes to Financial Statements

                                      C-14

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          ILLINOIS (CONTINUED)
$8,845    Metropolitan Pier & Expo Auth IL Dedicated
          St Tax Rev McCormick Pl Expn Ser A (FGIC
          Insd).....................................          *       06/15/16  $   5,374,930
 1,005    Naperville, IL Ser A......................         5.000%   12/01/10      1,118,615
 1,105    Saint Clair Cnty, IL Pub Bldg Comm Bldg
          Rev Cap Apprec Ser B (FGIC Insd)..........          *       12/01/15        694,062
 1,000    Southern IL Univ Rev Cap Apprec Hsg & Aux
          (MBIA Insd)...............................          *       04/01/29        277,010
                                                                                -------------
                                                                                   67,036,582
                                                                                -------------
          INDIANA  3.2%
 2,560    East Washington, IN Multi Sch Bldg Corp
          First Mtg (FGIC Insd).....................         5.375    07/15/28      2,725,171
 2,000    Indiana Transn Fin Auth Toll Rd Lease Rev
          Rfdg (AMBAC Insd).........................         5.375    07/01/09      2,141,680
 1,935    Logansport, IN Sch Bldg Corp First Mtg
          (FGIC Insd)...............................         5.500    07/15/13      2,197,638
 1,000    Marion Cnty, IN Convention & Rec Fac Auth
          Excise Tax Rev (MBIA Insd)................          *       06/01/14        676,980
 1,200    North Adams, IN Cmnty Schs Renovation Bldg
          Corp Cap Apprec First Mtg (FSA Insd)
          (e).......................................          *       07/15/15        766,416
 1,280    North Adams, IN Cmnty Schs Renovation Bldg
          Corp Cap Apprec First Mtg (FSA Insd)
          (e).......................................          *       01/15/19        667,533
 1,500    Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt
          (AMT).....................................         5.950    12/01/29      1,515,630
 1,605    Richland Beanblossom, IN Sch First Mtg
          (Prerefunded @ 07/15/11) (FGIC Insd)
          (e).......................................         5.500    07/15/12      1,840,149
 2,530    Vigo Cnty, IN Sch Bldg Corp First Mtg Impt
          & Rfdg (FSA Insd).........................         5.250    07/10/24      2,695,310
                                                                                -------------
                                                                                   15,226,507
                                                                                -------------
          IOWA  0.8%
 1,685    Des Moines, IA Pub Pkg Sys Ser A (FGIC
          Insd) (e).................................         5.750    06/01/15      1,915,710
 1,785    Des Moines, IA Pub Pkg Sys Ser A (FGIC
          Insd) (e).................................         5.750    06/01/16      2,026,457
                                                                                -------------
                                                                                    3,942,167
                                                                                -------------
          KANSAS  0.5%
 1,975    Sedgwick Cnty, KS Uni Sch Dist No 259
          Wichita (MBIA Insd).......................         6.000    09/01/09      2,268,801
                                                                                -------------

 
See Notes to Financial Statements                                             

                                      C-15


 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          KENTUCKY  1.8%
$1,000    Kenton Cnty, KY Arpt Brd Rev Cincinnati/
          Northn KY Intl Arpt Ser A Rfdg (AMT) (MBIA
          Insd).....................................         6.200%   03/01/08  $   1,109,160
 1,500    Kenton Cnty, KY Arpt Brd Rev Cincinnati/
          Northn KY Intl Arpt Ser A Rfdg (AMT) (MBIA
          Insd).....................................         6.250    03/01/09      1,677,765
 1,500    Kentucky St Ppty & Bldg Proj No 69 Ser
          A.........................................         5.000    08/01/05      1,535,955
 1,000    Kentucky St Tpk Auth Econ Dev
          Revitalization Proj Rfgd (Prerefunded @
          01/01/11) (FSA Insd)......................         5.625    07/01/14      1,145,950
 2,450    Louisville & Jefferson Cnty, KY Swr Ser A
          (MBIA Insd) (e)...........................         5.500    05/15/16      2,780,921
                                                                                -------------
                                                                                    8,249,751
                                                                                -------------
          LOUISIANA  0.3%
 1,500    Louisiana Hsg Fin Agy Rev Azalea Estates
          Rfdg Ser A (AMT) (GNMA Collateralized)....         5.375    10/20/39      1,523,820
                                                                                -------------
 
          MARYLAND  1.1%
 2,250    Maryland St Trans Auth Arpt Baltimore/Wash
          Intl Arpt B (AMT) (AMBAC Insd)............         5.125    03/01/24      2,355,322
 2,350    Northeast, MD Waste Disp Auth Rfdg (AMT)
          (AMBAC Insd)..............................         5.500    04/01/16      2,586,621
                                                                                -------------
                                                                                    4,941,943
                                                                                -------------
          MASSACHUSETTS  2.1%
 1,500    Massachusetts St Fed Hwy Grant Antic Nt
          Ser A.....................................         5.750    06/15/14      1,699,830
   500    Massachusetts St Hlth & Ed Fac Auth Rev
          Hlthcare Sys Covenant Hlth................         6.000    07/01/31        527,880
 1,000    Massachusetts St Hlth & Ed Fac Auth Rev
          Partn Hlthcare Sys Ser C..................         5.750    07/01/32      1,093,230
 1,000    Massachusetts St Indl Fin Agy Rev
          Wentworth Institute Tech..................         5.650    10/01/18      1,063,270
 2,805    Massachusetts St Port Auth Rev Ser A (MBIA
          Insd).....................................         5.000    07/01/22      2,978,068
 2,500    Massachusetts St Spl Oblig Dedicated Tax
          Rev (FGIC Insd)...........................         5.000    01/01/34      2,574,925
                                                                                -------------
                                                                                    9,937,203
                                                                                -------------

                                           See Notes to Financial Statements

                                      C-16

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          MICHIGAN  5.9%
$3,015    Detroit, MI Downtown Dev Auth Tax
          Increment Rev Ser C1......................          *       07/01/17  $   1,648,783
 3,050    Detroit, MI Downtown Dev Auth Tax
          Increment Rev Ser C1 (e)..................          *       07/01/18      1,575,569
 3,050    Detroit, MI Downtown Dev Auth Tax
          Increment Rev Ser C1 (e)..................          *       07/01/19      1,486,295
 3,050    Detroit, MI Downtown Dev Auth Tax
          Increment Rev Ser C1 (e)..................          *       07/01/22      1,222,684
 3,050    Detroit, MI Downtown Dev Auth Tax
          Increment Rev Ser C1 (e)..................          *       07/01/23      1,142,194
 3,050    Detroit, MI Downtown Dev Auth Tax
          Increment Rev Ser C1 (e)..................          *       07/01/24      1,061,064
 2,965    Detroit, MI Wtr Supply Sys Ser C (MBIA
          Insd) (e).................................         5.250%   07/01/20      3,233,036
 3,500    Grand Rapids, MI Downtown Dev Cap Apprec
          (MBIA Insd)...............................          *       06/01/15      2,272,620
 2,765    Grand Rapids, MI Downtown Dev Cap Apprec
          (MBIA Insd)...............................          *       06/01/16      1,704,180
 1,000    Grand Rapids, MI Wtr Supply Sys Rfdg (FGIC
          Insd).....................................         5.750    01/01/13      1,140,850
 2,000    Michigan Muni Bd Auth Rev Clean Wtr Rev
          Fd........................................         5.250    10/01/18      2,231,480
 2,850    Michigan St Hosp Fin Auth Rev Ascension
          Hlth Cr Ser A (Prerefunded @ 11/15/09)
          (MBIA Insd)...............................         5.750    11/15/18      3,274,935
 1,500    Michigan St Strategic Fd Detroit Edison Co
          Proj C Rfdg (AMT) (XLCA Insd).............         5.450    12/15/32      1,570,650
 2,500    Michigan St Strategic Fd Detroit Edison Co
          Proj Ser A (AMT) (XLCA Insd)..............         5.500    06/01/30      2,647,400
 1,355    Zeeland, MI Pub Schs Sch Bldg & Site (MBIA
          Insd) (e).................................         5.250    05/01/21      1,485,026
                                                                                -------------
                                                                                   27,696,766
                                                                                -------------
          MINNESOTA  1.8%
 5,000    Minneapolis & Saint Paul, MN Metro Arpts
          Comm Arpt Rev Ser A (FGIC Insd)...........         5.125    01/01/31      5,152,700
 2,800    Minnesota Agriculture & Econ Dev Brd Rev
          Hlthcare Sys Fairview Hosp Ser A (MBIA
          Insd).....................................         5.750    11/15/26      3,075,520
                                                                                -------------
                                                                                    8,228,220
                                                                                -------------

 
See Notes to Financial Statements                                             

                                      C-17


 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          MISSISSIPPI  1.3%
$3,000    Medical Cent Ed Bldg Corp MS Rev Univ MS
          Med Cent Proj (Prerefunded @ 12/01/04)
          (MBIA Insd)...............................         5.900%   12/01/23  $   3,070,890
 3,250    Mississippi Business Fin Corp MS Pollutn
          Ctl Rev Sys Energy Res Inc Proj...........         5.875    04/01/22      3,261,375
                                                                                -------------
                                                                                    6,332,265
                                                                                -------------
          MISSOURI  1.1%
 1,500    Cape Girardeau Cnty, MO Indl Dev Auth
          Hlthcare Fac Rev Southeast MO Hosp Assoc..         5.625    06/01/27      1,529,205
 1,625    Jefferson Cnty, MO Reorg Sch Dist No R-6
          (FGIC Insd)...............................         5.625    03/01/20      1,834,349
 1,500    Kansas City, MO Met Cmnty Impt Leasehold
          Jr College Rfdg (FGIC Insd)...............         5.500    07/01/17      1,683,705
                                                                                -------------
                                                                                    5,047,259
                                                                                -------------
          NEBRASKA  0.8%
 1,190    Dodge Cnty, NE Sch Dist No 001 Fremont
          (Prerefunded @ 12/15/10) (FSA Insd).......         5.750    12/15/13      1,376,509
 2,260    University NE Univ Rev Lincoln Student
          Fees & Fac Ser B..........................         5.000    07/01/23      2,378,605
                                                                                -------------
                                                                                    3,755,114
                                                                                -------------
          NEVADA  2.0%
 4,000    Clark Cnty, NV Arpt Rev Sub Lien Ser A-2
          (FGIC Insd)...............................         5.000    07/01/36      4,075,320
 3,500    Clark Cnty, NV Indl Dev Rev Southwest Gas
          Corp Proj Ser D (AMT) (FGIC Insd).........         5.250    03/01/38      3,579,660
 1,500    Reno, NV Sr Lien Retrac Reno Trans Proj
          (AMBAC Insd)..............................         5.125    06/01/32      1,549,320
                                                                                -------------
                                                                                    9,204,300
                                                                                -------------
          NEW HAMPSHIRE  0.4%
 1,000    New Hampshire Hlth & Ed Fac Auth Rev
          Derryfield Sch............................         7.000    07/01/30      1,001,330
 1,000    New Hampshire St Bus Fin Auth Wtr Fac Rev
          Pennichuck Wtrwks Inc (AMT) (AMBAC Insd)..         6.300    05/01/22      1,103,160
                                                                                -------------
                                                                                    2,104,490
                                                                                -------------
          NEW JERSEY  13.7%
 4,000    Essex Cnty, NJ Impt Auth Rev Proj
          Consolidation Rfdg (MBIA Insd)............         5.125    10/01/21      4,339,840
 5,650    Garden St Preservation Tr NJ Ser A (FSA
          Insd).....................................         5.250    11/01/19      6,261,217

 
                                              See Notes to Financial Statements

                                      C-18

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          NEW JERSEY (CONTINUED)
$1,500    New Jersey Econ Dev Auth Cigarette Tax....         5.750%   06/15/34  $   1,541,400
 1,500    New Jersey Econ Dev Auth Mtr Veh Surp Rev
          Ser A (MBIA Insd).........................         5.000    07/01/23      1,591,425
 1,500    New Jersey Econ Dev Auth Rev Trans Proj
          Sublease Ser A (Prerefunded @ 05/01/09)
          (FSA Insd)................................         5.250    05/01/17      1,669,665
25,000    New Jersey Econ Dev Auth St Contract Econ
          Recovery (MBIA Insd)......................         5.900    03/15/21     30,338,250
 2,000    New Jersey Hlthcare Fac Fin Auth Rev Gen
          Hosp Ctr Passaic (Escrowed to Maturity)
          (FSA Insd)................................         6.000    07/01/06      2,088,000
 3,000    New Jersey St Ed Fac Auth Higher Ed Cap
          Impt Ser A (AMBAC Insd)...................         5.250    09/01/19      3,321,270
   710    New Jersey St Tpk Auth Tpk Rev Ser A (MBIA
          Insd).....................................         6.000    01/01/11        826,341
   290    New Jersey St Tpk Auth Tpk Rev Ser A
          (Escrowed to Maturity) (MBIA Insd)........         6.000    01/01/11        338,584
 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      2,707,357
 4,500    New Jersey St Trans Tr Fd Auth Trans Sys
          Ser A (FGIC Insd).........................         5.000    06/15/20      4,850,865
 4,000    New Jersey St Trans Tr Fd Auth Trans Sys
          Ser C (FSA Insd)..........................         5.500    06/15/20      4,444,760
                                                                                -------------
                                                                                   64,318,974
                                                                                -------------
          NEW MEXICO  0.3%
 1,250    Jicarilla, NM Apache Nation Rev Ser A
          (Acquired 10/23/2003, Cost $1,274,428)
          (c).......................................         5.500    09/01/23      1,335,587
                                                                                -------------
 
          NEW YORK  22.0%
 3,000    Metropolitan Trans Auth NY Commuter Fac
          Rev Ser A (Prerefunded @ 01/01/08) (MBIA
          Insd).....................................         5.625    07/01/27      3,362,430
 2,000    Metropolitan Trans Auth NY Trans Fac Rev
          Svc Contract Ser R (Prerefunded @
          07/01/15).................................         5.500    07/01/17      2,358,460
 2,000    Nassau Cnty, NY Interim Fin Auth Sales Tax
          Secured Ser A (Prerefunded @ 11/15/10)....         5.750    11/15/13      2,319,920
 2,500    New York City Ser A Rfdg..................         7.000    08/01/05      2,593,000
 3,000    New York City Ser A Rfdg..................         7.000    08/01/06      3,248,400
 1,305    New York City Ser G.......................         5.875    10/15/14      1,434,352
   545    New York City Ser G (Prerefunded @
          10/15/07).................................         5.875    10/15/14        610,171

 
See Notes to Financial Statements                                             

                                      C-19

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          NEW YORK (CONTINUED)
$1,000    New York City Ser H.......................         5.750%   03/15/13  $   1,132,340
 3,055    New York City Ser I.......................         6.000    04/15/12      3,330,408
 2,500    New York City Ser I (MBIA Insd)...........         5.000    08/01/17      2,752,150
 1,945    New York City Ser I (Prerefunded @
          4/15/07)..................................         6.000    04/15/12      2,151,909
10,000    New York City Trans Auth Trans Fac
          Livingston Plaza Proj Rfdg (Escrowed to
          Maturity) (FSA Insd)......................         5.400    01/01/18     11,486,300
 3,000    New York City Transitional Future Tax Secd
          Ser A Rfdg (d)............................  5.500/14.000    11/01/26      3,396,060
 5,305    New York City Transitional Future Tax Secd
          Ser C (AMBAC Insd)........................         5.250    08/01/20      5,774,439
 2,000    New York City Transitional Future Tax Secd
          Ser C (AMBAC Insd)........................         5.250    08/01/22      2,160,320
 4,545    New York City Transitional Future Tax Secd
          Ser D (MBIA Insd).........................         5.250    02/01/21      4,952,505
 2,500    New York St Dorm Auth Lease Rev Muni Hlth
          Fac Impt Pgm Ser A (FSA Insd).............         5.500    05/15/25      2,696,600
 1,250    New York St Dorm Auth Lease Rev St Univ
          Dorm Fac Ser C (Prerefunded @ 07/01/09)
          (MBIA Insd)...............................         5.500    07/01/29      1,425,175
13,500    New York St Dorm Auth Rev City Univ Sys
          Ser C.....................................         7.500    07/01/10     15,542,145
 3,000    New York St Dorm Auth Rev St Univ Ed Fac
          (Prerefunded @ 05/15/10) (FGIC Insd)......         5.750    05/15/24      3,482,280
 2,000    New York St Dorm Auth Rev St Univ Ed Fac
          1989 Res (MBIA Insd)......................         6.000    05/15/16      2,317,400
 1,880    New York St Dorm Auth Rev St Univ Ed Fac
          Ser B.....................................         5.250    05/15/10      2,092,628
 1,500    New York St Environmental Fac Revolving
          Fds Ser C.................................         5.000    07/15/21      1,601,160
 2,840    New York St Loc Govt Assistance Corp Ser E
          Rfdg......................................         6.000    04/01/14      3,373,721
 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      3,103,740
 5,875    New York St Med Care Fac Fin Agy Rev Saint
          Peter's Hosp Proj Ser A (AMBAC Insd)......         5.375    11/01/20      5,946,616
 1,500    New York St Urban Dev Corp Rev Proj Cent
          for Indl Innovation Rfdg..................         5.500    01/01/13      1,709,835

 
                                               See Notes to Financial Statements


                                      C-20

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          NEW YORK (CONTINUED)
$3,000    Port Auth NY & NJ Spl Oblig Rev Spl Proj
          JFK Intl Arpt Terminal 6 (AMT) (MBIA
          Insd).....................................         5.750%   12/01/22  $   3,269,700
 3,000    Port Auth NY & NJ Spl Oblig Rev Spl Proj
          JFK Intl Arpt Terminal 6 (AMT) (MBIA
          Insd).....................................         5.750    12/01/25      3,210,870
                                                                                -------------
                                                                                  102,835,034
                                                                                -------------
          NORTH CAROLINA  5.1%
 2,000    Johnston Cnty, NC (FGIC Insd).............         5.900    03/01/19      2,310,120
 1,000    North Carolina Eastern Muni Pwr Agy Pwr
          Sys Rev Ser D.............................         6.750    01/01/26      1,114,820
15,000    North Carolina Muni Pwr Agy No 1 Catawba
          Elec Rev Rfdg (MBIA Insd).................         6.000    01/01/12     17,614,050
 2,500    North Carolina Muni Pwr Agy Ser A (MBIA
          Insd).....................................         5.250    01/01/19      2,729,525
                                                                                -------------
                                                                                   23,768,515
                                                                                -------------
          NORTH DAKOTA  0.3%
 1,225    North Dakota St Hsg Fin Agy Rev Hsg Fin
          Pgm Home Mtg Fin Ser B (AMT) (MBIA
          Insd).....................................         5.500    07/01/29      1,258,785
                                                                                -------------
 
          OHIO  2.0%
 1,400    Bowling Green St Univ OH Gen Rcpt (FGIC
          Insd).....................................         5.750    06/01/12      1,605,450
 1,000    Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc
          Proj......................................         7.500    01/01/30      1,108,460
 1,000    Delaware Cnty, OH Cap Fac (Prerefunded @
          12/01/10).................................         6.000    12/01/25      1,178,470
 1,000    Hamilton, OH One Renaissance Ctr Ser A
          (AMBAC Insd)..............................         5.500    11/01/16      1,135,820
 1,000    Mahoning Cnty, OH Hosp Fac Forum Hlth
          Oblig Group Ser A.........................         6.000    11/15/32      1,059,030
 1,000    Ohio St Air Quality Dev Auth Rev JMG Fdg
          Ltd Part Proj Rfdg (AMT) (AMBAC Insd).....         6.375    04/01/29      1,023,300
 1,840    Pickerington, OH Loc Sch Dist Cap Apprec
          Sch Fac Contr (FGIC Insd).................          *       12/01/12      1,367,819
 1,000    University Cincinnati OH Gen Ser A (FGIC
          Insd).....................................         5.500    06/01/09      1,123,780
                                                                                -------------
                                                                                    9,602,129
                                                                                -------------
          OKLAHOMA  1.3%
 1,500    Jenks, OK Aquarium Auth Rev First Mtg
          (Prerefunded @ 07/01/10) (MBIA Insd)......         6.100    07/01/30      1,765,935
 1,575    Oklahoma City, OK Arpt Tr Jr Lien 27th Ser
          B (AMT) (FSA Insd)........................         5.750    07/01/16      1,726,925
 2,250    Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev
          (AMBAC Insd)..............................         6.250    11/01/22      2,628,945
                                                                                -------------
                                                                                    6,121,805
                                                                                -------------

 
See Notes to Financial Statements                                               

                                      C-21

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          OREGON  2.9%
$4,000    Oregon Hlth Sciences Univ Insd Ser A (MBIA
          Insd).....................................         5.250%   07/01/22  $   4,323,680
 3,000    Oregon St Dept Admin Ser C Rfdg (MBIA
          Insd).....................................         5.250    11/01/17      3,339,720
 1,075    Oregon St Veterans Welfare Ser 76A........         6.050    10/01/28      1,089,384
 1,190    Portland, OR Cmnty College Dist Ser B.....         5.250    06/01/12      1,335,954
 1,985    Portland, OR Urban Renewal & Redev
          Downtown Wtrfront Ser A (AMBAC Insd)......         5.750    06/15/16      2,263,615
 1,000    Washington Multnomah & Yamhill (MBIA
          Insd).....................................         5.000    06/01/13      1,102,890
                                                                                -------------
                                                                                   13,455,243
                                                                                -------------
          PENNSYLVANIA  4.1%
 1,250    Allegheny Cnty, PA San Auth Swr Rev (MBIA
          Insd).....................................         5.750    12/01/16      1,443,225
 4,680    Erie, PA Sch Dist Cap Apprec Rfdg (FSA
          Insd).....................................          *       09/01/19      2,397,049
 3,535    Falls Twp, PA Hosp Auth Hosp Rev DE Vly
          Med Rfdg (FHA Gtd)........................         7.000    08/01/22      3,665,088
 2,000    Harrisburg, PA Auth Res Gtd Sub Ser D-2
          (Variable Rate Coupon) (FSA Insd).........         5.000    12/01/33      2,194,220
 1,905    Harrisburg, PA Cap Apprec Ser D Rfdg
          (AMBAC Insd) (e)..........................          *       09/15/16      1,149,306
 1,710    Harrisburg, PA Cap Apprec Ser D Rfdg
          (AMBAC Insd)..............................          *       03/15/19        894,245
 1,385    Harrisburg, PA Cap Apprec Ser F Rfdg
          (AMBAC Insd)..............................          *       09/15/19        708,151
 1,500    Penn Cambria Sch Dist PA Cap Apprec (FGIC
          Insd) (e).................................          *       08/15/20        725,730
    60    Penn Hills, PA (Prerefunded @ 12/01/07)
          (FGIC Insd)...............................         5.900    12/01/17         66,747
 1,000    Pennsylvania St Higher Ed Fac Auth College
          & Univ Rev Bryn Mawr College (MBIA
          Insd).....................................         5.625    12/01/27      1,085,210
 1,000    Philadelphia, PA Auth Indl Dev
          Philadelphia Arpt Sys Proj Ser A (AMT)
          (FGIC Insd)...............................         5.125    07/01/19      1,059,740
 1,400    Philadelphia, PA Sch Dist Ser A
          (Prerefunded @ 02/01/11) (FSA Insd).......         5.750    02/01/12      1,617,000
 1,500    Pittsburgh, PA Ser A (Prerefunded @
          09/01/09) (FGIC Insd).....................         5.750    09/01/23      1,698,735
 1,005    Southeast Delco Sch Dist PA Cap Apprec
          (MBIA Insd)...............................          *       02/01/17        590,247
                                                                                -------------
                                                                                   19,294,693
                                                                                -------------

 
                                               See Notes to Financial Statements

                                      C-22


 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          RHODE ISLAND  0.4%
$1,490    Providence, RI Redev Agy Rev Pub Safety &
          Muni Bldgs Ser A (AMBAC Insd).............         5.500%   04/01/14  $   1,682,970
                                                                                -------------
 
          SOUTH CAROLINA  4.2%
 2,275    Beaufort Cnty, SC Tax Increment New River
          Redev Proj Area (MBIA Insd) (e)...........         5.500    06/01/19      2,577,120
 2,375    Berkeley Cnty, SC Sch Dist Ctfs Part
          Berkeley Sch Facs Grp Inc (Escrowed to
          Maturity) (MBIA Insd).....................         5.250    02/01/16      2,490,164
 2,700    Charleston Cnty, SC Solid Waste
          (Prerefunded @ 01/01/05) (MBIA Insd)......         6.000    01/01/14      2,773,602
 1,840    Myrtle Beach, SC Hospitality Fee Rev Ser A
          (FGIC Insd) (e)...........................         5.375    06/01/21      2,032,832
 1,935    Myrtle Beach, SC Hospitality Fee Rev Ser A
          (FGIC Insd) (e)...........................         5.375    06/01/22      2,126,488
 3,500    South Carolina Jobs Econ Dev Auth Indl Rev
          Elec & Gas Co Proj Ser A (AMBAC Insd).....         5.200    11/01/27      3,683,575
 3,750    South Carolina Jobs Econ Dev Auth Indl Rev
          Elec & Gas Co Proj Ser B (AMT) (AMBAC
          Insd).....................................         5.450    11/01/32      3,942,975
                                                                                -------------
                                                                                   19,626,756
                                                                                -------------
          SOUTH DAKOTA  0.8%
 1,375    Deadwood, SD Ctf Part (ACA Insd)..........         6.375    11/01/20      1,484,285
 1,000    South Dakota St Hlth & Ed Fac Auth Rev
          Childrens Care Hosp Rfdg..................         6.125    11/01/29      1,063,240
   990    South Dakota St Hlth & Ed Fac Auth
          Vocational Ed Pgm Ser A (AMBAC Insd)......         5.400    08/01/13      1,089,465
                                                                                -------------
                                                                                    3,636,990
                                                                                -------------
          TENNESSEE  1.8%
 1,500    Johnson City, TN Hlth & Ed Fac Brd Hosp
          Rev First Mtg Mtn States Rfdg (MBIA
          Insd).....................................         7.500    07/01/25      1,892,460
   410    Montgomery Cnty, TN Pub Impt Rfdg (FGIC
          Insd) (e).................................         5.500    05/01/16        464,583
 5,090    Montgomery Cnty, TN Pub Impt Rfdg
          (Prerefunded @ 05/01/12) (FGIC Insd)
          (e).......................................         5.500    05/01/16      5,873,707
                                                                                -------------
                                                                                    8,230,750
                                                                                -------------
          TEXAS  12.6%
 2,685    Beaumont, TX Wtrwks & Swr Sys (FGIC Insd)
          (e).......................................         6.250    09/01/15      3,129,529
 1,275    Cameron Cnty, TX Ctf Oblig (AMBAC Insd)
          (e).......................................         5.750    02/15/13      1,437,282

 
See Notes to Financial Statements                                             

                                      C-24

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          TEXAS (CONTINUED)
$3,000    Dallas Cnty, TX Util & Reclamation Dist
          Ser B Rfdg (AMBAC Insd)...................         5.875%   02/15/29  $   3,032,340
 2,000    Dallas, TX Wtrwks & Swr Sys Rev Rfdg......         5.750    10/01/17      2,273,680
 4,000    Dallas-Fort Worth, TX Intl Arpt Rev Impt
          Jt Ser A Rfdg (AMT) (FGIC Insd)...........         5.500    11/01/31      4,185,480
 4,000    Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser
          A (AMT) (FGIC Insd).......................         5.750    11/01/30      4,268,920
 1,000    Houston, TX Arpt Sys Rev Sub Lien Ser A
          (AMT) (FSA Insd)..........................         5.625    07/01/30      1,062,540
 3,000    Houston, TX Hotel Occupancy Tax & Spl Rev
          Convention & Entmt Ser B (AMBAC Insd).....         5.750    09/01/15      3,430,740
   130    Houston, TX Pub Impt Rfdg (FSA Insd)......         5.750    03/01/15        148,227
 1,370    Houston, TX Pub Impt Rfdg (Prerefunded
          09/01/10) (FSA Insd)......................         5.750    03/01/15      1,566,253
 6,000    Houston, TX Util Sys Rev First Lien Ser A
          Rfdg (FSA Insd)...........................         5.250    05/15/21      6,562,680
 6,000    Houston, TX Util Sys Rev First Lien Ser A
          Rfdg (FGIC Insd)..........................         5.250    05/15/23      6,488,640
 1,925    Houston, TX Wtr & Swr Sys Rev Jr Lien Ser
          C (Prerefunded @ 12/01/07) (FGIC Insd)....         5.375    12/01/27      2,124,565
 1,500    Metropolitan Hlth Fac Dev Corp TX Wilson N
          Jones Mem Hosp Proj.......................         7.250    01/01/31      1,450,065
 1,500    North Cent TX Hlth Fac Dev Hosp Baylor
          Hlthcare Sys Proj Ser A...................         5.125    05/15/29      1,524,540
 4,000    North Cent TX Hlth Fac Dev Hosp Childrens
          Med Ctr Dallas (AMBAC Insd)...............         5.250    08/15/32      4,177,200
 3,000    San Antonio, TX Elec & Gas Sys Rfdg.......         5.375    02/01/16      3,355,470
 2,750    Texas St Vets Housing Assistance Pgm Vet
          Ser B (AMT) (FHA Gtd).....................         6.100    06/01/31      2,939,365
 3,000    University of TX Univ Rev Fin Sys Ser A...         5.250    08/15/20      3,281,370
 2,300    University of TX Univ Rev Fin Sys Ser C
          (Prerefunded @ 08/15/11)..................         5.375    08/15/19      2,622,782
                                                                                -------------
                                                                                   59,061,668
                                                                                -------------
          UTAH  0.9%
   105    Utah St Hsg Fin Agy Single Family Mtg
          Mezzanine Issue H1 (AMBAC Insd)...........         6.000    07/01/12        109,318
 3,625    Utah St Ser A.............................         5.000    07/01/07      3,902,095
                                                                                -------------
                                                                                    4,011,413
                                                                                -------------

 
                                               See Notes to Financial Statements

                                      C-23

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          VIRGINIA  0.5%
$1,320    Fairfax Cnty, VA Ctf Part.................         5.300%   04/15/23  $   1,417,654
 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      1,059,810
                                                                                -------------
                                                                                    2,477,464
                                                                                -------------
          WASHINGTON  5.5%
 2,500    Energy Northwest WA Elec Rev Proj No 3 Ser
          A Rfdg (FSA Insd).........................         5.500    07/01/18      2,810,175
 5,360    Energy Northwest WA Elec Rev Proj No 3 Ser
          B Rfdg (FSA Insd).........................         6.000    07/01/16      6,262,356
 1,485    Pierce Cnty, WA (AMBAC Insd) (e)..........         5.750    08/01/14      1,690,910
 1,000    Port Seattle, WA Rev Ser B (AMT) (MBIA
          Insd).....................................         5.625    02/01/24      1,085,740
 1,435    Radford Ct Pptys WA Student Hsg Rev (MBIA
          Insd) (e).................................         6.000    06/01/15      1,651,900
 1,585    Radford Ct Pptys WA Student Hsg Rev (MBIA
          Insd) (e).................................         6.000    06/01/16      1,824,573
 1,150    Seattle, WA Muni Lt & Pwr Rev.............         5.250    12/01/08      1,265,633
 1,315    Seattle, WA Muni Lt & Pwr Rev.............         5.500    12/01/09      1,475,706
 1,000    Seattle, WA Muni Lt & Pwr Rev.............         5.625    12/01/18      1,086,730
 3,000    Spokane, WA Pub Fac Dist Hotel Motel &
          Sales Use Tax (MBIA Insd).................         5.250    09/01/33      3,160,470
 1,350    Tacoma, WA Elec Sys Rev Ser A Rfdg (FSA
          Insd).....................................         5.750    01/01/15      1,537,799
 1,650    Tacoma, WA Elec Sys Rev Ser B Rfdg (FSA
          Insd).....................................         5.500    01/01/12      1,884,036
                                                                                -------------
                                                                                   25,736,028
                                                                                -------------
          WISCONSIN  1.1%
 1,225    De Pere, WI Unit Sch Dist Rfdg (FGIC
          Insd).....................................         5.000    10/01/13      1,350,281
 1,340    Oconto Falls, WI Pub Sch Dist Ser A Rfdg
          (Prerefunded @ 03/01/11) (FSA Insd) (e)...         5.750    03/01/15      1,548,879
 2,000    Southeast WI Professional Baseball Pk Dist
          Sales Tax Rev Ser A Rfdg (MBIA Insd)......         5.500    12/15/20      2,352,620
                                                                                -------------
                                                                                    5,251,780
                                                                                -------------
          GUAM  0.7%
 3,000    Guam Pwr Auth Rev Ser A (AMBAC Insd)......         5.250    10/01/34      3,171,480
                                                                                -------------

 
See Notes to Financial Statements                                            

                                      C-25

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY      VALUE
---------------------------------------------------------------------------------------------
                                                                    
          PUERTO RICO  1.0%
$1,110    Puerto Rico Comwlth Aqueduct & Swr Auth
          Rev Rfdg (Comwlth Gtd)....................         5.000%   07/01/15  $   1,146,963
 3,500    Puerto Rico Pub Bldgs Auth Rev Gtd Govt
          Facs Ser I (Comwlth Gtd)..................         5.250    07/01/33      3,667,405
                                                                                -------------
                                                                                    4,814,368
                                                                                -------------
TOTAL LONG-TERM INVESTMENTS  154.2%
  (Cost $655,054,667).........................................................    722,389,216
SHORT-TERM INVESTMENTS  0.3%
  (Cost $1,300,000)...........................................................      1,300,000
                                                                                -------------
 
TOTAL INVESTMENTS  154.5%
  (Cost $656,354,667).........................................................    723,689,216
OTHER ASSETS IN EXCESS OF LIABILITIES  2.1%...................................      9,867,943
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS)  (56.6%)...................   (265,222,637)
                                                                                -------------
 
NET ASSETS APPLICABLE TO COMMON SHARES  100.0%................................  $ 468,334,522
                                                                                =============

 
    Percentages are calculated as a percentage of net assets applicable to
    common shares.
 
*   Zero coupon bond
 
(a) 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.
 
(b) All or a portion of these securities have been physically segregated in
    connection with open futures contracts.
 
(c) These securities are restricted and may be resold only in transactions
    exempt from registration which are normally those transactions with
    qualified institutional buyers. Restricted securities comprise 0.3% of net
    assets applicable to common shares.
 
(d) Security is a "step-up" bond where the coupon increases or steps up at a
    predetermined date.
 
(e) The Trust owns 100% of the bond issuance.
 
ACA--American Capital Access
 
AMBAC--AMBAC Indemnity Corp.
 
AMT--Alternative Minimum Tax
 
Comwth Gtd--Commonwealth of Puerto Rico
 
FGIC--Financial Guaranty Insurance Co.
 
FHA--Federal Housing Administration
 
FSA--Financial Security Assurance Inc.
 
GNMA--Government National Mortgage Association
 
MBIA--Municipal Bond Investors Assurance Corp.
 
XLCA--XL Capital Assurance Inc.
 
                                               See Notes to Financial Statements

                                      C-26

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
October 31, 2004
 

                                                           
ASSETS:
Total Investments (Cost $656,354,667).......................  $723,689,216
Cash........................................................        19,955
Receivables:
  Interest..................................................    10,506,742
  Investments Sold..........................................       455,884
Other.......................................................        12,636
                                                              ------------
    Total Assets............................................   734,684,433
                                                              ------------
LIABILITIES:
Payables:
  Investment Advisory Fee...................................       371,531
  Variation Margin on Futures...............................       133,719
  Income Distributions--Common Shares.......................       103,004
  Other Affiliates..........................................        33,759
Trustees' Deferred Compensation and Retirement Plans........       333,398
Accrued Expenses............................................       151,863
                                                              ------------
    Total Liabilities.......................................     1,127,274
Preferred Shares (including accrued distributions)..........   265,222,637
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $468,334,522
                                                              ============
NET ASSET VALUE PER COMMON SHARE ($468,334,522 divided by
  27,013,149 shares outstanding)............................  $      17.34
                                                              ============
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.............................................   399,273,758
Net Unrealized Appreciation.................................    66,943,615
Accumulated Undistributed Net Investment Income.............     2,902,640
Accumulated Net Realized Loss...............................    (1,055,622)
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $468,334,522
                                                              ============
PREFERRED SHARES ($.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.......................  $733,334,522
                                                              ============

 
See Notes to Financial Statements                                             

                                      C-27

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
FINANCIAL STATEMENTS continued
 
Statement of Operations
For the Year Ended October 31, 2004
 

                                                           
INVESTMENT INCOME:
Interest....................................................  $ 35,601,951
                                                              ------------
EXPENSES:
Investment Advisory Fee.....................................     4,365,648
Preferred Share Maintenance.................................       716,043
Administrative Fee..........................................       212,809
Trustees' Fees and Related Expenses.........................       134,200
Legal.......................................................        79,127
Custody.....................................................        40,634
Other.......................................................       306,591
                                                              ------------
    Total Expenses..........................................     5,855,052
                                                              ------------
NET INVESTMENT INCOME.......................................  $ 29,746,899
                                                              ============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
  Investments...............................................  $  2,203,000
  Futures...................................................    (5,328,821)
                                                              ------------
Net Realized Loss...........................................    (3,125,821)
                                                              ------------
Unrealized Appreciation/Depreciation:
  Beginning of the Period...................................    55,619,347
                                                              ------------
  End of the Period:
    Investments.............................................    67,334,549
    Futures.................................................      (390,934)
                                                              ------------
                                                                66,943,615
                                                              ------------
Net Unrealized Appreciation During the Period...............    11,324,268
                                                              ------------
NET REALIZED AND UNREALIZED GAIN............................  $  8,198,447
                                                              ============
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS.....................  $ (3,047,521)
                                                              ============
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
  OPERATIONS................................................  $ 34,897,825
                                                              ============

 
                                               See Notes to Financial Statements

                                      C-28

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
FINANCIAL STATEMENTS continued
 
Statements of Changes in Net Assets
 


                                                                FOR THE            FOR THE
                                                               YEAR ENDED         YEAR ENDED
                                                            OCTOBER 31, 2004   OCTOBER 31, 2003
                                                            -----------------------------------
                                                                         
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.....................................    $ 29,746,899       $ 29,908,581
Net Realized Gain/Loss....................................      (3,125,821)         5,112,551
Net Unrealized Appreciation/Depreciation During the
  Period..................................................      11,324,268         (2,721,390)
Distributions to Preferred Shareholders:
Net Investment Income.....................................      (2,822,650)        (2,221,342)
Net Realized Gain.........................................        (224,871)          (786,321)
                                                              ------------       ------------
Change in Net Assets Applicable to Common Shares from
  Operations..............................................      34,897,825         29,292,079
 
Distributions to Common Shareholders:
  Net Investment Income...................................     (27,082,100)       (28,875,489)
  Net Realized Gain.......................................      (2,811,836)        (8,705,889)
                                                              ------------       ------------
 
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
  INVESTMENT ACTIVITIES...................................       5,003,889         (8,289,299)
 
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period...................................     463,330,633        471,619,932
                                                              ------------       ------------
End of the Period (Including accumulated undistributed net
  investment income of $2,902,640 and $3,058,250,
  respectively)...........................................    $468,334,522       $463,330,633
                                                              ============       ============

 
See Notes to Financial Statements                                             

                                      C-29

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
FINANCIAL HIGHLIGHTS
 
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
 


                                                              ------------------------------
                                                               2004       2003      2002 (a)
                                                              ------------------------------
                                                                           
NET ASSET VALUE, BEGINNING OF THE PERIOD....................  $ 17.15    $ 17.46    $ 17.51
                                                              -------    -------    -------
  Net Investment Income.....................................     1.09       1.10       1.18
  Net Realized and Unrealized Gain/Loss.....................      .31        .09        .18
  Common Share Equivalent of Distributions Paid to Preferred
    Shareholders:
    Net Investment Income...................................     (.10)      (.08)      (.10)
    Net Realized Gain.......................................     (.01)      (.03)      (.07)
                                                              -------    -------    -------
Total from Investment Operations............................     1.29       1.08       1.19
Distributions Paid to Common Shareholders:
    Net Investment Income...................................    (1.00)     (1.07)     (1.03)
    Net Realized Gain.......................................     (.10)      (.32)      (.21)
                                                              -------    -------    -------
NET ASSET VALUE, END OF THE PERIOD..........................  $ 17.34    $ 17.15    $ 17.46
                                                              =======    =======    =======
 
Common Share Market Price at End of the Period..............  $ 15.34    $ 15.58    $ 15.80
Total Return (b)............................................    5.76%      7.60%     14.56%
Net Assets Applicable to Common Shares at End of the Period
  (In millions).............................................  $ 468.3    $ 463.3    $ 471.6
Ratio of Expenses to Average Net Assets Applicable to Common
  Shares (c)................................................    1.27%      1.28%      1.41%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (c)...........................    6.43%      6.40%      6.89%
Portfolio Turnover..........................................      18%        23%        33%
 
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including Preferred
  Shares (c)................................................     .80%       .82%       .89%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (d)...........................    5.82%      5.92%      6.30%
 
SENIOR SECURITIES:
Total Preferred Shares Outstanding..........................   10,600     10,600     10,600
Asset Coverage Per Preferred Share (e)......................  $69,204    $68,721    $69,511
Involuntary Liquidating Preference Per Preferred Share......  $25,000    $25,000    $25,000
Average Market Value Per Preferred Share....................  $25,000    $25,000    $25,000

 
(a)As required effective November 1, 2001, the Trust has adopted the provisions
   of the AICPA Audit and Accounting Guide for Investment Companies and began
   accreting market discount on fixed income securities. The effect of this
   change for the year ended October 31, 2002 was to increase net investment
   income per share by $.01, decrease net realized and unrealized gains and
   losses per share by $.01 and increase the ratio of net investment income to
   average net assets applicable to common shares by .02%. Per share, ratios and
   supplemental data for periods prior to October 31, 2002 have not been
   restated to reflect this change in presentation.
 
(b)Total return assumes an investment at the common share market price at the
   beginning of the period indicated, reinvestment of all distributions for the
   period in accordance with the Trust's dividend reinvestment plan, and sale of
   all shares at the closing common share market price at the end of the period
   indicated.
 
(c)Ratios do not reflect the effect of dividend payments to preferred
   shareholders.
 
(d)Ratios reflect the effect of dividend payments to preferred shareholders.
 
(e)Calculated by subtracting the Trust's total liabilities (not including the
   preferred shares) from the Trust's total assets and dividing this by the
   number of preferred shares outstanding.
 

                                      C-30

 


YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
      2001       2000       1999       1998       1997       1996       1995
------------------------------------------------------------------------------
                                                 
     $ 16.22   $  15.63   $  17.64   $  17.29   $  16.58   $  16.58   $  15.03
     -------   --------   --------   --------   --------   --------   --------
        1.25       1.32       1.33       1.35       1.37       1.38       1.42
        1.24        .64      (1.94)       .42        .74        .11       1.65
        (.32)      (.40)      (.32)      (.34)      (.35)      (.35)      (.38)
         -0-        -0-       (.02)      (.02)       -0-        -0-        -0-
     -------   --------   --------   --------   --------   --------   --------
        2.17       1.56       (.95)      1.41       1.76       1.14       2.69
        (.88)      (.97)      (.99)     (1.00)     (1.05)     (1.14)     (1.14)
         -0-        -0-       (.07)      (.06)       -0-        -0-        -0-
     -------   --------   --------   --------   --------   --------   --------
     $ 17.51   $  16.22   $  15.63   $  17.64   $  17.29   $  16.58   $  16.58
     =======   ========   ========   ========   ========   ========   ========
 
     $ 14.94   $13.5625   $13.6875   $  17.00   $ 16.125   $ 15.813   $  15.75
      16.85%      6.41%    -13.97%     12.40%      8.92%      7.84%     21.15%
     $ 473.0   $  438.1   $  422.2   $  476.6   $  467.0   $  447.8   $  447.9
       1.55%      1.68%      1.61%      1.58%      1.60%      1.62%      1.68%
       7.37%      8.44%      7.87%      7.73%      8.16%      8.37%      8.96%
         29%        31%        33%        29%        40%        30%        15%
 
        .98%      1.03%      1.02%      1.01%      1.01%      1.02%      1.04%
       5.49%      5.86%      6.00%      5.80%      6.06%      6.24%      6.55%
 
      10,600     10,600     10,600      5,300      5,300      5,300      5,300
     $69,623   $ 66,332   $ 64,827   $139,932   $138,116   $134,491   $134,501
     $25,000   $ 25,000   $ 25,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000
     $25,000   $ 25,000   $ 25,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000

 
See Notes to Financial Statements                                            

                                      C-31

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004
 
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 (the "1940 Act"), 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. Effective November 30, 2003, the Trust's investment adviser, Van
Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset
Management (the "Adviser").
 
    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, 2004, the Trust had no when issued or 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.
 
    The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 2004, the Trust had an
 
 
                                      C-32

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued
 
accumulated capital loss carryforward for tax purposes of $1,444,681 which will
expire on October 31, 2012.
 
    At October 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
 

                                                           
Cost of investments for tax purposes........................  $655,586,757
                                                              ============
Gross tax unrealized appreciation...........................  $ 68,169,969
Gross tax unrealized depreciation...........................       (67,510)
                                                              ------------
Net tax unrealized appreciation on investments..............  $ 68,102,459
                                                              ============

 
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,
2004 and 2003 was as follows:
 


                                                                 2004          2003
                                                                      
Distributions paid from:
  Ordinary income...........................................  $  142,534    $1,160,043
  Long-term capital gain....................................   3,036,707     8,535,890
                                                              ----------    ----------
                                                              $3,179,241    $9,695,933
                                                              ==========    ==========

 
    Due to inherent differences in the recognition of income, expenses, and
realized gains/ losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. A permanent book and
tax difference relating to excise taxes paid which are not deductible for tax
purposes totaling $4,093 was reclassified from accumulated undistributed net
investment income to paid in surplus. Additionally, a permanent difference
relating to book to tax accretion differences totaling $1,852 was reclassified
from accumulated undistributed net investment income to accumulated net realized
loss.
 
    As of October 31, 2004, the component of distributable earnings on a tax
basis was as follows:
 

                                                             
Undistributed ordinary income...............................    $65,384

 
    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 at October 31, 2004.
 
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
 
Under the terms of the Trust's Investment Advisory Agreement, the Adviser
provides investment advice and facilities to the Trust for an annual fee payable
monthly of .60% of the
 
                                          
                                      C-33

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued
 
average daily net assets of the Trust. Effective November 1, 2004, the
investment advisory fee was reduced from .60% to .55%. In addition, the Trust
paid a monthly administrative fee to Van Kampen Investments Inc. or its
affiliates (collectively "Van Kampen"), the Trust's Administrator, at an annual
rate of .05% of the average daily net assets of the Trust. Effective June 1,
2004, the administrative fee was reduced from .05% to .00%.
 
    For the year ended October 31, 2004, the Trust recognized expenses of
approximately $53,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust
is a partner who provides legal services to the Trust, and is therefore 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, 2004, the Trust recognized expenses of approximately $61,600 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
also 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 $127,618,157 and $137,198,013,
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
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

                                      C-34

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued
 
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 for the year ended October 31, 2004, were
as follows:
 


                                                              CONTRACTS
                                                           
Outstanding at October 31, 2003.............................      856
Futures Opened..............................................    2,529
Futures Closed..............................................   (2,843)
                                                               ------
Outstanding at October 31, 2004.............................      542
                                                               ======

 
    The futures contracts outstanding as of October 31, 2004, and the
description and unrealized appreciation/depreciation were as follows:
 


                                                                            UNREALIZED
                                                                           APPRECIATION/
                                                              CONTRACTS    DEPRECIATION
                                                                     
SHORT CONTRACTS:
  U.S. Treasury Notes 10-Year Futures December 2004 (Current
    Notional Value of $113,563 per contract)................      97         $(111,029)
  U.S. Treasury Notes 5-Year Futures December 2004 (Current
    Notional Value of $111,375 per contract)................     445          (279,905)
                                                                 ---         ---------
                                                                 542         $(390,934)
                                                                 ===         =========

 
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, 2004 was 1.506%. During the
year ended October 31, 2004, the rates ranged from 0.780% to 1.600%.
 
    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.

                                      C-35

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued
 
6. INDEMNIFICATIONS
 
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
 

                                      C-36

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
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, 2004, 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 five 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 6, 1999, expressed an unqualified opinion on those
financial highlights.
 
    We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, by correspondence with the Trust's
custodian. 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, 2004, the results
of its operations for the year then ended, 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 10, 2004
 

                                      C-37

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
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
 

                                      C-38


VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
DIVIDEND REINVESTMENT PLAN continued
 
of the Trust's Common Shares, resulting in the acquisition of fewer Common
Shares than if the dividend or distribution had been paid in Common Shares
issued by the Trust. All reinvestments are in full and fractional Common Shares
and are carried to three decimal places.
 
    Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
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
    

                                      C-39

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
 
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*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
 
INVESTMENT ADVISER
 
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
 
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 LLP
333 West Wacker Drive
Chicago, Illinois 60606
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
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, 2004. The Trust designated 99.5% of the income distributions as a
 tax-exempt income distribution. The Trust designated and paid $3,036,707 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.

                                      C-40

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
RESULTS OF SHAREHOLDER VOTES
 
The Annual Meeting of the Shareholders of the Trust was held on June 23, 2004,
where shareholders voted on the election of trustees.
 
With regard to the election of the following trustees by the common shareholders
of the Trust:
 


                                                                     # OF SHARES
                                                            ------------------------------
                                                             IN FAVOR             WITHHELD
------------------------------------------------------------------------------------------
                                                                            
R. Craig Kennedy..........................................  24,046,655            401,437
Jack E. Nelson............................................  24,045,234            402,858
Richard F. Powers, III....................................  24,031,051            417,041

 
The other trustees of the Trust whose terms did not expire in 2004 are David C.
Arch, J. Miles Branagan, Jerry D. Choate, Rod Dammeyer, Linda Hutton Heagy,
Howard J. Kerr, Mitchell M. Merin, Hugo F. Sonnenschein, Wayne W. Whalen and
Suzanne H. Woolsey.
 

                                      C-41

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
TRUSTEE AND OFFICER INFORMATION
 
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 Asset Management (the "Adviser"),
Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen
Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The
term "Fund Complex" includes each of the investment companies advised by the
Adviser or its affiliates as of the date of this Statement of Additional
Information. Trustees serve until reaching their retirement age or until their
successors are duly elected and qualified. Officers are annually elected by the
trustees.
 
INDEPENDENT TRUSTEES:
 


                                                                                  NUMBER OF
                                            TERM OF                                FUNDS IN
                                           OFFICE AND                                FUND
                              POSITION(S)  LENGTH OF                               COMPLEX
NAME, AGE AND ADDRESS          HELD WITH      TIME     PRINCIPAL OCCUPATION(S)     OVERSEEN    OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE           TRUST       SERVED    DURING PAST 5 YEARS        BY TRUSTEE   HELD BY TRUSTEE
                                                                                
David C. Arch (59)            Trustee      Trustee     Chairman and Chief             85       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. Director of
                                                       the Heartland Alliance, a
                                                       nonprofit organization
                                                       serving human needs based
                                                       in Chicago. Director of
                                                       St. Vincent de Paul
                                                       Center, a Chicago based
                                                       day care facility serving
                                                       the children of low
                                                       income families. Board
                                                       member of the Illinois
                                                       Manufacturers'
                                                       Association.

J. Miles Branagan (72)        Trustee      Trustee     Private investor.              83       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.

 

                                      C-42

 


VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TRUSTEE AND OFFICER INFORMATION continued
                                                                                  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 (66)          Trustee      Trustee     Prior to January 1999,         83       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.

 

                                      C-43

 


VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TRUSTEE AND OFFICER INFORMATION continued
                                                                                  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
                                                                                

Rod Dammeyer (64)             Trustee      Trustee     President of CAC, L.L.C.,      85       Trustee/Director/Managing
CAC, L.L.C.                                since 1991  a private company                       General Partner of funds
4350 LaJolla Village Drive                             offering capital                        in the Fund Complex.
Suite 980                                              investment and management               Director of Stericycle,
San Diego, CA 92122-6223                               advisory services. Prior                Inc., Ventana Medical
                                                       to February 2001, Vice                  Systems, Inc., and GATX
                                                       Chairman and Director of                Corporation, and Trustee
                                                       Anixter International,                  of The Scripps Research
                                                       Inc., a global                          Institute and the
                                                       distributor of wire,                    University of Chicago
                                                       cable and communications                Hospitals and Health
                                                       connectivity products.                  Systems. Prior to January
                                                       Prior to July 2000,                     2004, Director of
                                                       Managing Partner of                     TeleTech Holdings Inc.
                                                       Equity Group Corporate                  and Arris Group, Inc.
                                                       Investment (EGI), a                     Prior to May 2002,
                                                       company that makes                      Director of Peregrine
                                                       private investments in                  Systems Inc. Prior to
                                                       other companies.                        February 2001, Director
                                                                                               of 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).


                                      C-44
 


 


VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TRUSTEE AND OFFICER INFORMATION continued
                                                                                  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 (56)       Trustee      Trustee     Managing Partner of            83       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 (52)         Trustee      Trustee     Director and President of      83       Trustee/Director/Managing
1744 R Street, NW                          since 2003  the German Marshall Fund                General Partner of funds
Washington, DC 20009                                   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 (69)            Trustee      Trustee     Prior to 1998, President       85       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.

 

                                      C-45

 


VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TRUSTEE AND OFFICER INFORMATION continued
                                                                                  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
                                                                                

Jack E. Nelson (68)           Trustee      Trustee     President of Nelson            83       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 (64)     Trustee      Trustee     President Emeritus and         85       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.

Suzanne H. Woolsey, Ph.D.     Trustee      Trustee     Chief Communications           83       Trustee/Director/Managing
(62)                                       since 2003  Officer of the National                 General Partner of funds
815 Cumberstone Road                                   Academy of                              in the Fund Complex.
Harwood, MD 20776                                      Sciences/National                       Director of Fluor Corp.,
                                                       Research Council, an                    an engineering,
                                                       independent, federally                  procurement and
                                                       chartered policy                        construction
                                                       institution, from 2001 to               organization, since
                                                       November 2003 and Chief                 January 2004 and Director
                                                       Operating Officer from                  of Neurogen Corporation,
                                                       1993 to 2001. Director of               a pharmaceutical company,
                                                       the Institute for Defense               since January 1998.
                                                       Analyses, a federally
                                                       funded research and
                                                       development center,
                                                       Director of the German
                                                       Marshall Fund of the
                                                       United States, Director
                                                       of the Rocky Mountain
                                                       Institute 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.

 

                                      C-46

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
TRUSTEE AND OFFICER INFORMATION continued
 
INTERESTED TRUSTEES:*
 


                                                                                  NUMBER OF
                                            TERM OF                                FUNDS IN
                                           OFFICE AND                                FUND
                              POSITION(S)  LENGTH OF                               COMPLEX
NAME, AGE AND ADDRESS          HELD WITH      TIME     PRINCIPAL OCCUPATION(S)     OVERSEEN    OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE            TRUST       SERVED    DURING PAST 5 YEARS        BY TRUSTEE   HELD BY TRUSTEE
                                                                                
Mitchell M. Merin* (51)       Trustee,     Trustee     President and Chief            83       Trustee/Director/Managing
1221 Avenue of the Americas   President    since       Executive Officer of                    General Partner of funds
New York, NY 10020            and Chief    2003;       funds in the Fund                       in the Fund Complex.
                              Executive    President   Complex. Chairman,
                              Officer      and Chief   President, Chief
                                           Executive   Executive Officer and
                                           Officer     Director of the Adviser
                                           since 2002  and Van Kampen 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.

 

                                      C-47

 


VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TRUSTEE AND OFFICER INFORMATION continued
                                                                                  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* (58)  Trustee      Trustee     Advisory Director of           85       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* (65)         Trustee      Trustee     Partner in the law firm        85       Trustee/Director/Managing
333 West Wacker Drive                      since 1991  of Skadden, Arps, Slate,                General Partner of funds
Chicago, IL 60606                                      Meagher & Flom LLP, legal               in the Fund Complex.
                                                       counsel to funds in the
                                                       Fund Complex.

 
*   Such Trustee is an "interested person" (within the meaning of Section
    2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain
    funds in the Fund Complex by reason of his firm currently acting as legal
    counsel to such funds in the Fund Complex. Messrs. Merin and Powers are
    interested persons of funds in the Fund Complex and the Adviser by reason of
    their current or former positions with Morgan Stanley or its affiliates.
 

                                      C-48

 
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
 
TRUSTEE AND OFFICER INFORMATION continued
 
OFFICERS:
 


                                                     TERM OF
                                                    OFFICE AND
                                   POSITION(S)      LENGTH OF
NAME, AGE AND                       HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                    TRUST           SERVED    DURING PAST 5 YEARS
                                                       
Stefanie V. Chang (38)          Vice President      Officer     Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas     and Secretary       since 2003  Vice President of funds in the Fund Complex.
New York, NY 10020

Amy R. Doberman (42)            Vice President      Officer     Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas                         since 2004  Management; Managing Director of Morgan Stanley Investment
New York, NY 10020                                              Management, Inc., Morgan Stanley Investment Advisers Inc.
                                                                and the Adviser. Vice President of the Morgan Stanley
                                                                Institutional and Retail Funds since July 2004 and Vice
                                                                President of funds in the Fund Complex as of August 2004.
                                                                Previously, Managing Director and General Counsel of
                                                                Americas, UBS Global Asset Management from July 2000 to July
                                                                2004 and General Counsel of Aeitus Investment Management,
                                                                Inc. from January 1997 to July 2000.

James M. Dykas (38)             Chief Financial     Officer     Executive Director of Van Kampen Asset Management and Morgan
1 Parkview Plaza                Officer and         since 1999  Stanley Investment Management. Chief Financial Officer and
Oakbrook Terrace, IL 60181      Treasurer                       Treasurer of funds in the Fund Complex. Prior to August
                                                                2004, Assistant Treasurer of funds in the Fund Complex.

Joseph J. McAlinden (61)        Executive Vice      Officer     Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas     President and       since 2002  Stanley Investment Advisors Inc., and Morgan Stanley
New York, NY 10020              Chief Investment                Investment Management Inc. and Director of Morgan Stanley
                                Officer                         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 Adviser and Van Kampen Advisors Inc. since
                                                                December 2002.

Ronald E. Robison (65)          Executive Vice      Officer     Principal Executive Officer of the Funds since May 2003.
1221 Avenue of the Americas     President and       since 2003  Chief Executive Officer and Chairman of Investor Services.
New York, NY 10020              Principal                       Executive Vice President and Principal Executive Officer of
                                Executive                       funds in the Fund Complex. Managing Director of Morgan
                                Officer                         Stanley. Chief Administrative Officer, Managing Director and
                                                                Director of Morgan Stanley Investment Advisors Inc., Morgan
                                                                Stanley Services Company Inc. and Managing Director and
                                                                Director of Morgan Stanley Distributors Inc. Chief Executive
                                                                Officer and Director of Morgan Stanley Trust. Executive Vice
                                                                President and Principal Executive Officer of the
                                                                Institutional and Retail Morgan Stanley Funds; Director of
                                                                Morgan Stanley SICAV; previously Chief Global Operations
                                                                Officer and Managing Director of Morgan Stanley Investment
                                                                Management Inc.

 
                                      C-49

 


VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
TRUSTEE AND OFFICER INFORMATION continued
                                                     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 (49)           Chief Compliance    Officer     Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza                Officer             since 1998  August 2004. Director and Managing Director of Van Kampen
Oakbrook Terrace, IL 60181                                      Investments, the Adviser, Van Kampen Advisors Inc. and
                                                                certain other subsidiaries of Van Kampen Investments. Prior
                                                                August 2004, Vice President, Chief Financial Officer and
                                                                Treasurer of funds in the Fund Complex and head of Fund
                                                                Accounting for Morgan Stanley Investment Management. Prior
                                                                to December 2002, Executive Director of Van Kampen
                                                                Investments, the Adviser and Van Kampen Advisors Inc.

 

                                      C-50

 
VAN KAMPEN
 
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
 
    We are required by federal law to provide you with a copy of our Privacy
Policy annually.
 
    The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
 
    This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
 
    Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
 
WE RESPECT YOUR PRIVACY
 
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
 
    We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
 
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
 
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
 
    For example:
 
     --  We may collect information such as your name, address, e-mail address,
         telephone/fax numbers, assets, income and investment objectives through
         applications and other forms you submit to us.
 
     --  We may obtain information about account balances, your use of
         account(s) and the types of products and services you prefer to receive
         from us through your dealings and transactions with us and other
         sources.
 
     --  We may obtain information about your creditworthiness and credit
         history from consumer reporting agencies.
 
     --  We may collect background information from and through third-party
         vendors to verify representations you have made and to comply with
         various regulatory requirements.
 
     --  If you interact with us through our public and private Web sites, we
         may collect information that you provide directly through online
         communications (such as an e-mail address). We may also collect
         information about your Internet service provider, your domain name,
         your computer's operating system and Web browser, your use of our Web
         sites and your product and service preferences, through the use of
         "cookies." "Cookies" recognize your computer each time you return to
         one of our
 
                                                             (continued on back)

                                      C-51



VAN KAMPEN
 
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
 
      sites, and help to improve our sites' content and personalize your
      experience on our sites by, for example, suggesting offerings that may
      interest you. Please consult the Terms of Use of these sites for more
      details on our use of cookies.
 
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
 
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
 
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
 
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
 
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
 
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
 
                                                 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)2004 Van Kampen
                                                 Funds Inc. All rights reserved.
                                                 Member NASD/SIPC.
                                                 VGM ANR 12/04
                                                 RN04-02831P-Y10/04

                                      C-52



                                   APPENDIX D

                  TARGET FUND ANNUAL REPORT DATED JUNE 30, 2004


                        
   




                                      D-1



 
Item 1. Report to Shareholders.

The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
 
       Welcome, Shareholder
 
       In this report, you'll learn about how your investment in Van Kampen
       Municipal Income Trust performed during the annual period. The portfolio
       management team will provide an overview of the market conditions and
       discuss some of the factors that affected investment performance during
       the reporting period. In addition, this report includes the trust's
       financial statements and a list of trust investments as of June 30, 2004.
 
       Market forecasts provided in this report may not necessarily come to
       pass. There is no assurance that the trust will achieve its investment
       objective. Trusts are subject to market risk, which is the possibility
       that the market values of securities owned by the trust will decline and
       that the value of trust shares may therefore be less than what you paid
       for them. Accordingly, you can lose money investing in this trust.
 
       Income may subject certain individuals to the federal Alternative Minimum
       Tax (AMT).
 


                                                                    
         ---------------------------------------------------------------------------------------
            NOT FDIC INSURED             OFFER NO BANK GUARANTEE              MAY LOSE VALUE
         ---------------------------------------------------------------------------------------
                   NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY               NOT A DEPOSIT
         ---------------------------------------------------------------------------------------


                                      D-2

 
Performance Summary as of 6/30/04
 


MUNICIPAL INCOME TRUST
SYMBOL: VMT
---------------------------------------------------------
                                                 BASED ON
AVERAGE ANNUAL                       BASED ON     MARKET
TOTAL RETURNS                          NAV        PRICE
                                           
 
Since Inception (08/26/88)            7.91%        6.57%
 
10-year                               7.17         4.64
 
5-year                                7.69         4.89
 
1-year                                0.34        -1.63
---------------------------------------------------------

 
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, 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.
 
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 broad-based statistical composite of
municipal bonds. The index does not include any expenses, fees or sales charges,
which would lower performance. The index is unmanaged and should not be
considered an investment. It is not possible to invest directly in an index.
Source for index performance: Lipper Inc.
 
      
                                      D-3


 
Fund Report
 
FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2004
 
Van Kampen Municipal Income Trust is managed by the Adviser's Municipal Fixed
Income team. Current members include Thomas Byron and Robert Wimmel, Vice
Presidents of the Adviser; and John Reynoldson, Executive Director of the
Adviser.(1)
 
MARKET CONDITIONS
 
The municipal-bond market continued to be volatile during the review period,
driven by investors' widely varying expectations for the state of the economy.
The period began with yields rising rapidly in the third quarter of 2003 on
fears that the long-term period of low interest rates was likely to come to an
end. Those fears abated somewhat in the fourth quarter of 2003 when it became
apparent that employment growth remained anemic, thus easing the inflationary
pressures that might otherwise induce the Federal Reserve Bank's Federal Open
Market Committee (the Fed) to raise the target federal funds rate.
 
Yields remained low through the first quarter of 2004 until April, when a
surprisingly strong employment report for March spooked investors. This report,
coupled with sustained high commodity (especially oil) prices, led the market to
factor in a far more rapid rate hike by the Fed than had previously been
expected. Yields continued to rise in May, when it became clear that most
investors expected the Fed to act at its June 30, 2004 meeting. It did so,
raising the federal funds rate by 25 basis points--the first rate hike since
2000.
 
Supply of new municipal bonds in calendar 2003 hit record levels as
municipalities moved to take advantage of historically low interest rates. Many
cities and states moved to reduce expenditures by refinancing existing debt and
replacing it with lower-yielding bonds. In other cases, municipalities attempted
to meet current and future funding needs by issuing new debt. This activity
slowed in 2004, though California continued to lead the nation in issuance
thanks to its $11 billion deficit financing.
 
The low interest rates that prevailed over much of the period also had an impact
on the demand for municipal bonds. Retail and institutional investor activity
slowed as holders of municipal bonds saw little reason to sell bonds purchased
at higher yield levels and reinvest at historically low yields. However, the
period was marked by rising activity among non-traditional investors, such as
hedge funds and insurance companies seeking to take advantage of the
attractiveness of municipal bonds relative to taxable securities. Additionally,
investors' search for yield led to significant outperformance by lower-rated
bonds with greater credit risk. Sectors such as health care, with a
preponderance of lower-rated issues, performed particularly well.
 
(1)Team members may change without notice at any time.

                                      D-4

 
PERFORMANCE ANALYSIS
 
Closed-end fund returns can be calculated 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 an NAV basis and a market-price basis,
the trust underperformed its benchmark, the Lehman Brothers Municipal Bond
Index. (See table below.)
 
The trust often 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 typically reinvested in longer-term securities, taking
advantage of the difference between short- and longer-term rates. With short-
term rates at historic lows for much of the period, the difference between short
and longer-term rates was relatively high. This made using leverage a beneficial
approach during the period, and added to the trust's returns. As yields rose
toward the end of the period, the prices of bonds declined. The trust's use of
leverage magnified this negative price movement, which contributed to the
portfolio's underperformance versus the benchmark, which is not leveraged.
 
One of our primary strategies in managing the trust was to keep its duration (a
measure of interest-rate sensitivity) below that of the benchmark. This posture
was driven by a combination of our analysis of the macroeconomic environment as
well as the level of interest rates, which for most of the period hovered at or
near multi-decade lows. The combination of an improving economy and low interest
rates led us to anticipate that the next significant shift in rates would likely
be upward, and as a result would be more damaging for longer-duration paper. The
portfolio's below-market interest-rate sensitivity hampered the trust's
performance for most of the period as interest rates edged downward more often
than they rose. That said, the approach was more beneficial in the final months
of the period as interest rates rose in anticipation of the Fed's June 30(th)
meeting, and the trust ended the period well-positioned for widely anticipated
further rate increases.
 
The trust's performance was also modestly hampered by its relatively high
quality bias. Municipal-bond investors during the period responded to the
improving economy by reducing the yield spreads between higher- and
 
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2004
 


---------------------------------------------------------------
      BASED ON     BASED ON     LEHMAN BROTHERS MUNICIPAL
        NAV      MARKET PRICE          BOND INDEX
                                              
 
       0.34%        -1.63%                0.76%
---------------------------------------------------------------

 
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 and index definition.
 

                                      D-5


 
lower-rated bonds (yield spreads reflect the premium demanded by investors to
buy lower-rated bonds). As a result, lower-quality bonds outperformed, and the
trust's high-quality bias held back returns somewhat. At the end of the period,
the portfolio had 91 percent exposure to bonds rated AA or higher, two
percentage points higher than at the beginning of the trust's fiscal year.
 
The portfolio's trading activity during the period was well below traditional
norms given our desire to avoid having to reinvest into securities with low
yields. However, we were able to make selective relative-value trades among
securities and sectors as they moved into and out of fair value. Many of these
acquisitions were funded by the proceeds of bonds that were called away by their
issuers during the period as a result of the low interest-rate environment. In
other cases we sold bonds that met our performance objectives during the period.
We reinvested this cash into securities that we believed had more promising
total-return characteristics, especially those in the intermediate portion of
the yield curve. Many of the intermediate securities we identified offered
premium coupons. We also selectively added to the portfolio's holdings of
longer-maturity paper that we believed would meet with strong retail demand in
the near future.
 
The trust's portfolio remained well diversified during the period, with its
holdings spread across all major municipal bond sectors. This longstanding
strategy can help to minimize the risk of over-concentration in any single
sector, while also giving the portfolio exposure to many potential sources of
return. The three largest sector exposures at the end of the period were general
purpose at 20 percent of long-term investments, public building at 13 percent,
and transportation at 11 percent.
 
As mentioned above, the portfolio's below-market duration served it well when
interest rates rose sharply in the final weeks of the period. While it is
impossible to forecast with certainty how far interest rates are likely to rise,
we do believe that the coming months are likely to offer significantly more
opportunities to invest in securities with more attractive yield
characteristics.
 

                                         
TOP 5 SECTORS AS OF 6/30/04                 RATING ALLOCATIONS AS OF 6/30/04
General Purpose               20.2%         AAA/Aaa                        83.1%
Public Building               13.1          AA/Aa                           7.7
Transportation                11.2          A/A                             3.7
Water & Sewer                 10.0          BBB/Baa                         3.2
Public Education               9.6          Non-Rated                       2.3

 
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.
Ratings allocation based upon ratings as issued by Standard and Poor's and
Moody's, respectively. Van Kampen is a wholly owned subsidiary of a global
securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.

                                      D-6

 
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
 
       Each Van Kampen trust provides a complete schedule of portfolio holdings
       in its semiannual and annual reports within 60 days of the end of the
       trust's second and fourth fiscal quarters by filing the schedule
       electronically with the Securities and Exchange Commission (SEC). The
       semiannual reports are filed on Form N-CSRS and the annual reports are
       filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
       reports to trust shareholders, and makes these reports available on its
       public web site, www.vankampen.com. In addition to the semiannual and
       annual reports that Van Kampen delivers to shareholders and makes
       available through the Van Kampen public web site, each fund files a
       complete schedule of portfolio holdings with the SEC for the trust's
       first and third fiscal quarters on Form N-Q. Van Kampen does not deliver
       the reports for the first and third fiscal quarters to shareholders, nor
       are the reports posted to the Van Kampen public web site. You may,
       however, obtain the Form N-Q filings (as well as the Form N-CSR and
       N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You
       may also review and copy them at the SEC's Public Reference Room in
       Washington, DC. Information on the operation of the SEC's Public
       Reference Room may be obtained by calling the SEC at 1-202-942-8090. You
       can also request copies of these materials, upon payment of a duplicating
       fee, by electronic request at the SEC's e-mail address
       (publicinfo@sec.gov) or by writing the Public Reference section of the
       SEC, Washington, DC 20549-0102.
 
       In addition to filing a complete schedule of portfolio holdings with the
       SEC each fiscal quarter, each Van Kampen trust makes portfolio holdings
       information available by periodically providing the information on its
       public web site, www.vankampen.com. Each Van Kampen trust provides a
       complete schedule of portfolio holdings on the public web site on a
       calendar-quarter basis approximately 30 days after the close of the
       calendar quarter. Furthermore, each Van Kampen trust provides partial
       lists of its portfolio holdings (such as top 10 or top 15 trust holdings)
       to the public web site each with a delay of approximately 15 days.
 
       You may obtain copies of a trust's fiscal quarter filings, or its monthly
       or calendar-quarter web site postings, by contacting Van Kampen Client
       Relations at 1-800-847-2424.
 
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
 
       The trust's policies and procedures with respect to the voting of proxies
       relating to the trust's portfolio securities and information on how the
       trust voted proxies relating to portfolio securities during the most
       recent twelve-month period ended June 30 is available without charge,
       upon request, by calling 1-800-847-2424 or by visiting our web site at
       www.vankampen.com. This information is also available on the Securities
       and Exchange Commission's web site at http://www.sec.gov.
 
   

                                      D-7

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          MUNICIPAL BONDS  155.4%
          ALABAMA  2.0%
$3,660    Alabama St Brd Ed Rev & Impt Southn Univ
          St Cmnty Rfdg (MBIA Insd).................         5.250%   07/01/20   $   3,845,562
 1,865    Alabama St Univ Rev Gen Tuit & Fee Ser B
          (MBIA Insd)...............................         5.250    03/01/33       1,892,453
                                                                                 -------------
                                                                                     5,738,015
                                                                                 -------------
          ALASKA  1.9%
 3,650    Alaska St Intl Arpt Rev Ser B (AMBAC
          Insd).....................................         5.250    10/01/27       3,684,492
 1,575    Matanuska-Susitna Boro, AK Ctf Part Pub
          Safety Bldg Lease (FSA Insd)..............         5.750    03/01/16       1,724,767
                                                                                 -------------
                                                                                     5,409,259
                                                                                 -------------
          ARIZONA  1.4%
 1,000    Arizona Hlth Fac Auth Hosp John C Lincoln
          Hlth Network..............................         6.375    12/01/37       1,021,930
 3,000    Arizona St Trans Brd Excise Tax Maricopa
          Cnty Regl Area Rd Fd......................         5.500    07/01/04       3,000,360
                                                                                 -------------
                                                                                     4,022,290
                                                                                 -------------
          CALIFORNIA  10.7%
 4,500    California St (AMBAC Insd)................         5.125    10/01/27       4,506,435
 1,000    California St Dept Wtr Res Ctr Wtr Sys Ser
          X (FGIC Insd).............................         5.000    12/01/29         992,140
 1,000    California St Dept Wtr Res Pwr Ser A......         6.000    05/01/15       1,108,050
 1,000    California St Dept Wtr Res Pwr Ser A
          (AMBAC Insd)..............................         5.500    05/01/16       1,087,960
 2,500    California St Dept Wtr Res Pwr Ser A
          (AMBAC Insd) (a)..........................         5.375    05/01/18       2,668,200
 5,000    California St Univ Rev & Co Systemwide Ser
          A (AMBAC Insd)............................         5.000    11/01/33       4,920,250
 5,000    Contra Costa, CA Home Mtg Fin Auth Home
          Mtg Rev (Escrowed to Maturity) (MBIA
          Insd).....................................           *      09/01/17       2,551,950
 4,000    Los Angeles, CA Dept Wtr & Pwr Ser A (FGIC
          Insd).....................................         5.125    07/01/40       3,973,320
 2,500    Los Angeles, CA Uni Sch Dist Ser A (FSA
          Insd).....................................         5.250    07/01/20       2,627,150
 2,000    Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser
          B (FSA Insd)..............................         5.000    07/01/28       1,982,060
 1,500    Metropolitan Wtr Dist Southn CA Auth Ser B
          1 (FGIC Insd).............................         5.000    10/01/33       1,480,575
 1,750    Palm Springs, CA Fin Auth Lease Rev
          Convention Ctr Proj Ser A (MBIA Insd).....         5.500    11/01/35       1,835,470
 1,000    Santa Clara Cnty, CA Brd Ed Rfdg (MBIA
          Insd).....................................         5.000    04/01/25         999,030
                                                                                 -------------
                                                                                    30,732,590
                                                                                 -------------

 
                                               See Notes to Financial Statements

                                      D-8

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          COLORADO  3.1%
$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   $   1,090,210
 1,500    Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev
          E-470 Proj Ser B (Prerefunded @
          08/31/05).................................         7.000    08/31/26       1,636,170
 3,405    Colorado Ed & Cultural Fac Impt Charter
          Sch Rfdg (XLCA Insd)......................         5.250    12/01/23       3,495,198
   550    Colorado Hlth Fac Auth Rev Catholic Hlth
          Initiatives...............................         5.250    09/01/21         557,991
 1,000    Colorado Hlth Fac Auth Rev Catholic Hlth
          Initiatives Ser A.........................         5.500    03/01/32       1,017,750
 1,000    El Paso Cnty, CO Ctf Part Detention Fac
          Proj Ser B (AMBAC Insd)...................         5.375    12/01/18       1,069,400
                                                                                 -------------
                                                                                     8,866,719
                                                                                 -------------
          CONNECTICUT  1.0%
 1,750    Connecticut St Spl Oblig Pkg Rev Bradley
          Intl Arpt Ser A (ACA Insd) (AMT)..........         6.600    07/01/24       1,837,430
 1,000    Hartford, CT Pkg Sys Rev Ser A............         6.500    07/01/25       1,024,890
                                                                                 -------------
                                                                                     2,862,320
                                                                                 -------------
          DISTRICT OF COLUMBIA  1.0%
 2,775    District of Columbia Hosp Rev Medlantic
          Hlthcare Ser A Rfdg (Escrowed to Maturity)
          (MBIA Insd)...............................         5.250    08/15/12       2,979,906
                                                                                 -------------
 
          FLORIDA  9.0%
 2,000    Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
          Insd).....................................         5.950    07/01/20       2,079,800
 1,000    Florida St Brd Ed Lottery Rev Ser A (FGIC
          Insd).....................................         5.750    07/01/11       1,123,210
 2,000    Florida St Dept Environmental Prot
          Preservtn Rev Ser A (FGIC Insd)...........         5.750    07/01/10       2,253,840
 1,745    Hillsborough Cnty, FL Port Dist Tampa Port
          Auth Proj Ser A (MBIA Insd)...............         5.375    06/01/27       1,773,356
 1,000    Jea, FL Elec Sys Rev Ser 3 Ser A..........         5.500    10/01/41       1,018,090
 1,000    Marion Cnty, FL Sch Brd Ctf (FSA Insd)....         5.250    06/01/18       1,061,730
 1,500    Miami Beach, FL Stormwtr Rev (FGIC
          Insd).....................................         5.250    09/01/25       1,531,770
 1,720    Miami-Dade Cnty, FL Aviation Rev Miami
          Intl Arpt (FGIC Insd).....................         5.375    10/01/32       1,733,536
 3,000    Orange Cnty, FL Sch Brd Ctf Part Ser A
          (AMBAC Insd)..............................         5.250    08/01/14       3,267,510
 4,000    Orange Cnty, FL Tourist Dev Tax Rev (AMBAC
          Insd).....................................         5.625    10/01/14       4,401,360
 2,000    Orange Cnty, FL Tourist Dev Tax Rev (AMBAC
          Insd).....................................         5.500    10/01/31       2,067,820
 1,090    Plantation, FL Impt Proj Rfdg (FSA
          Insd).....................................         5.000    08/15/20       1,122,547

 
See Notes to Financial Statements                                            

                                      D-9

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          FLORIDA (CONTINUED)
$1,190    Polk Cnty FL Util Sys Rev (FGIC Insd).....         5.250%   10/01/20   $   1,256,390
 1,115    Tallahassee, FL Lease Rev FL St Univ Proj
          Ser A (MBIA Insd).........................         5.500    08/01/19       1,204,613
                                                                                 -------------
                                                                                    25,895,572
                                                                                 -------------
          GEORGIA  7.4%
 4,023    Fulton Cnty, GA Lease Rev (Acquired
          12/23/94, Cost $4,023,144) (b)............         7.250    06/15/10       4,240,675
 2,635    Georgia Muni Elec Auth Pwr Rev Ser A (MBIA
          Insd).....................................         6.500    01/01/20       3,197,125
 3,000    Georgia Muni Elec Auth Pwr Rev Ser B Rfdg
          (FGIC Insd)...............................         6.250    01/01/17       3,537,270
 2,500    Georgia St Ser D..........................         6.000    10/01/05       2,630,850
 2,335    Georgia St Ser D..........................         6.000    10/01/06       2,527,007
 2,000    Municipal Elec Auth GA Combustion Turbine
          Proj Ser A (MBIA Insd)....................         5.250    11/01/22       2,075,720
   800    Royston, GA Hosp Auth Hosp Rev Ctf
          Hlthcare Sys Inc..........................         6.700    07/01/16         806,120
 2,500    Royston, GA Hosp Auth Hosp Rev Ctf
          Hlthcare Sys Inc..........................         6.500    07/01/27       2,427,500
                                                                                 -------------
                                                                                    21,442,267
                                                                                 -------------
          ILLINOIS  17.4%
 4,000    Chicago, IL Brd Ed Chicago Sch Reform Ser
          A (AMBAC Insd)............................         5.250    12/01/27       4,039,600
 1,400    Chicago, IL Brd Ed Ser A (MBIA Insd)......         5.500    12/01/28       1,452,276
 2,250    Chicago, IL Neighborhoods Alive 21 Ser A
          (FGIC Insd)...............................         5.500    01/01/13       2,470,860
 1,500    Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
          Third Lien C-2 Rfdg (FSA Insd) (AMT)......         5.250    01/01/30       1,490,610
 1,500    Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
          Third Lien C-2 Rfdg (XLCA Insd) (AMT).....         5.250    01/01/34       1,487,760
 1,000    Chicago, IL O'Hare Intl Arpt Rev Second
          Lien Passenger Fac Ser B (AMBAC Insd).....         5.500    01/01/16       1,076,500
 1,000    Chicago, IL Proj Ser C Rfdg (FGIC Insd)...         5.750    01/01/14       1,111,940
 1,000    Chicago, IL Proj Ser C Rfdg (FGIC Insd)...         5.750    01/01/15       1,108,070
 4,895    Chicago, IL Pub Bldg Comm Bldg Rev Ser A
          (Escrowed to Maturity) (MBIA Insd)........           *      01/01/07       4,568,210
 1,000    Chicago, IL Ser B Rfdg (AMBAC Insd).......         5.125    01/01/15       1,069,400
 2,000    Chicago, IL Wastewtr Transmission Rev
          Second Lien (MBIA Insd)...................         5.750    01/01/25       2,131,900
 1,960    Cook Cnty, IL Cmnty Cons Sch Dist (FSA
          Insd).....................................         5.500    12/01/13       2,185,851
 1,000    Cook Cnty, IL Ser A (FGIC Insd)...........         5.500    11/15/31       1,036,080
 3,230    Cook Cnty, IL Ser A Rfdg (MBIA Insd)......         5.625    11/15/16       3,507,166
 2,310    Illinois Dev Fin Auth Rev Adventist Hlth
          Ser A (MBIA Insd).........................         5.500    11/15/13       2,544,396

 
                                              See Notes to Financial Statements

                                      D-10

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          ILLINOIS (CONTINUED)
$2,500    Illinois Dev Fin Auth Rev Adventist Hlth
          Ser A (MBIA Insd).........................         5.500%   11/15/15   $   2,728,675
 1,335    Illinois Dev Fin Auth Rev Bradley Univ
          Proj (Prerefunded @ 08/01/09) (AMBAC
          Insd).....................................         5.375    08/01/24       1,481,476
 2,000    Illinois Ed Fac Auth Rev Lewis Univ.......         6.125    10/01/26       1,902,020
 1,500    Illinois St First Ser (FGIC Insd).........         5.375    11/01/14       1,633,215
 1,900    Kendall, Kane & Will Cntys, IL Cmnty Unit
          Sch Dist No. 308 Ser B (FGIC Insd)........         5.250    10/01/21       1,975,278
 2,500    Metropolitan Pier & Expo Auth IL Dedicated
          St Tax Rev McCormick Pl Expn Ser A (MBIA
          Insd).....................................         5.250    06/15/42       2,506,125
 1,250    Sangamon Cnty, IL Ctf Part................        10.000    12/01/06       1,460,675
 7,455    Will Cnty, IL Fst Presv Dist Ser B (FGIC
          Insd).....................................           *      12/01/12       5,207,988
                                                                                 -------------
                                                                                    50,176,071
                                                                                 -------------
          INDIANA  3.4%
 2,420    Brownsburg, IN Sch Bldg Corp First Mtg
          Brownsburg Cmnty Sch (MBIA Insd)..........         5.550    02/01/24       2,532,603
 1,000    Clark Pleasant, IN Cmnty Sch First Mtg
          (AMBAC Insd)..............................         5.500    07/15/18       1,082,870
 4,000    Indiana Hlth Fac Fin Auth Rev Deaconess
          Hosp Ser A (AMBAC Insd)...................         5.375    03/01/34       4,060,880
 2,000    Indiana Trans Fin Auth Toll Rfdg (AMBAC
          Insd).....................................         5.375    07/01/09       2,148,260
                                                                                 -------------
                                                                                     9,824,613
                                                                                 -------------
          KANSAS  2.7%
 3,810    Kansas St Dev Fin Auth Rev KS Proj Ser N
          (AMBAC Insd)..............................         5.250    10/01/22       3,939,845
 1,250    Kansas St Dev Fin Auth Rev KS St Proj
          (AMBAC Insd)..............................         5.500    03/01/16       1,358,737
 2,235    Sedgwick Cnty, KA Uni Sch Dist No. 259
          Wichita (MBIA Insd).......................         5.500    09/01/11       2,468,334
                                                                                 -------------
                                                                                     7,766,916
                                                                                 -------------
          KENTUCKY  3.5%
 2,190    Kenton Cnty, KY Arpt Brd Rev
          Cincinnati/Northn KY Intl Arpt Ser A Rfdg
          (MBIA Insd) (AMT).........................         6.250    03/01/09       2,422,841
 5,000    Kentucky St Ppty & Bldgs Commn Proj No. 74
          Rfdg (Prerefunded 02/01/12) (FSA Insd)....         5.375    02/01/16       5,541,700
 2,000    Kentucky St Tpk Auth Econ Dev
          Revitalization Proj Rfdg (FSA Insd).......         5.500    07/01/07       2,165,600
                                                                                 -------------
                                                                                    10,130,141
                                                                                 -------------

 
See Notes to Financial Statements                                

                                      D-11

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          LOUISIANA  3.2%
$4,395    Ernest N Morial New Orleans LA Sr Sub Ser
          A (AMBAC Insd)............................         5.250%   07/15/22   $   4,566,361
 3,000    Lafayette, LA Util Rev (MBIA Insd) (c)....         5.250    11/01/21       3,122,610
 1,500    Louisiana St Ser A (FGIC Insd)............         5.500    11/15/08       1,649,400
                                                                                 -------------
                                                                                     9,338,371
                                                                                 -------------
          MARYLAND  0.9%
 2,180    Baltimore, MD Cap Apprec Ser A (FGIC
          Insd).....................................           *      10/15/09       1,669,945
 1,000    Maryland St Hlth & Higher Ed Fac Auth Rev
          Medstar Hlth Rfdg.........................         5.500    08/15/33         950,580
                                                                                 -------------
                                                                                     2,620,525
                                                                                 -------------
          MASSACHUSETTS  4.3%
 2,305    Massachusetts St College Bldg Auth Proj
          Rev Ser A (MBIA Insd).....................         5.000    05/01/20       2,372,560
 4,000    Massachusetts St Cons Ln Ser B
          (Prerefunded @ 03/01/12) (FSA Insd).......         5.500    03/01/17       4,418,280
 1,500    Massachusetts St Fed Hwy Gnt Antic Nt Ser
          A.........................................         5.750    06/15/15       1,679,025
 1,000    Massachusetts St Indl Fin Agy Rev Higher
          Ed Hampshire College Proj (Prerefunded @
          10/01/07).................................         5.625    10/01/12       1,042,300
 2,000    Massachusetts St Spl Oblig Dedicated Tax
          Rev (FGIC Insd)...........................         5.000    01/01/34       1,971,160
 1,000    Massachusetts St Wtr Res Auth Gen Ser A
          (MBIA Insd)...............................         5.000    08/01/28         989,600
                                                                                 -------------
                                                                                    12,472,925
                                                                                 -------------
          MICHIGAN  2.8%
 1,000    Grand Rapids, MI Wtr Supply Sys Rfdg (FGIC
          Insd).....................................         5.750    01/01/13       1,114,770
 1,180    Hillsdale, MI Hosp Fin Auth Hosp Rev
          Hillsdale Cmnty Hlth Ctr..................         5.750    05/15/18       1,173,781
 1,000    Michigan Muni Bd Auth Rev Clean Wtr Rev
          Fd........................................         5.250    10/01/18       1,065,490
 1,000    Michigan St Strategic Fd Detroit Edison Co
          Proj C Rfdg (XLCA Insd) (AMT).............         5.450    12/15/32       1,013,490
 2,500    Michigan St Strategic Fd Detroit Edison
          Conv Rfdg (Variable Rate Coupon) (AMBAC
          Insd).....................................         4.850    09/01/30       2,617,700
 1,000    Michigan St Strategic Fd Detroit Edison
          Pollutn Ctl Ser B Rfdg (AMT)..............         5.650    09/01/29       1,003,010
                                                                                 -------------
                                                                                     7,988,241
                                                                                 -------------
          MISSISSIPPI  0.5%
 1,500    Mississippi Hosp Equip & Fac MS Baptist
          Med Ctr Rfdg (MBIA Insd)..................         6.000    05/01/13       1,579,470
                                                                                 -------------

 
                                               See Notes to Financial Statements


                                      D-12


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          MISSOURI  2.7%
$2,530    Bi-State Dev Agy MO IL Met Metrolink Cross
          Cnty Proj B (FSA Insd)....................         5.250%   10/01/18   $   2,696,778
 3,400    Missouri St Hwys & Trans Commn Rd Rev Ser
          A.........................................         5.500    02/01/08       3,704,742
 1,250    Saint Charles, MO Ctf Part Ser B..........         5.500    05/01/18       1,291,850
                                                                                 -------------
                                                                                     7,693,370
                                                                                 -------------
          NEVADA  1.5%
 3,965    Clark Cnty, NV Bd Bk (FGIC Insd)..........         5.500    06/01/09       4,368,399
                                                                                 -------------
 
          NEW JERSEY  2.6%
 1,835    New Jersey St Ed Fac Auth Higher Ed Cap
          Impt Ser A (AMBAC Insd)...................         5.250    09/01/21       1,917,245
 1,000    New Jersey St Trans Corp Cap Grant Antic
          Nt Ser B (AMBAC Insd).....................         5.500    02/01/08       1,086,430
 2,000    New Jersey St Trans Corp Ctf Fed Trans
          Admin Grants Ser A (AMBAC Insd)...........         5.500    09/15/13       2,230,360
 2,095    New Jersey St Trans Tr Fd Auth Trans Sys
          Ser A.....................................         5.750    06/15/17       2,351,072
                                                                                 -------------
                                                                                     7,585,107
                                                                                 -------------
          NEW MEXICO  1.5%
 4,000    Santa Fe, NM Gross Rcpt Tax Impt (AMBAC
          Insd).....................................         5.250    06/01/13       4,357,080
                                                                                 -------------
 
          NEW YORK  18.2%
 3,000    Metropolitan Trans Auth NY Ser A Rfdg
          (AMBAC Insd)..............................         5.500    11/15/18       3,252,990
 2,500    Metropolitan Trans Auth NY Ser A Rfdg
          (FGIC Insd)...............................         5.250    11/15/31       2,537,925
 2,500    Nassau Cnty, NY Interim Fin Auth Sales Tax
          Secd Ser A (Prerefunded @ 11/15/10).......         5.750    11/15/13       2,836,375
 3,000    New York City Muni Fin Auth Wtr & Sew Sys
          Rev Ser A (AMBAC Insd)....................         5.000    06/15/35       2,956,680
 5,700    New York City Muni Wtr Fin Auth Ser A (FSA
          Insd).....................................         5.375    06/15/17       6,115,131
 5,900    New York City Ser A.......................         7.000    08/01/04       5,927,789
 4,500    New York City Ser B (AMBAC Insd)..........         7.250    08/15/07       5,091,840
   445    New York City Ser C.......................         7.000    08/15/08         446,820
 1,000    New York City Ser H.......................         5.750    03/15/13       1,093,800
 6,930    New York City Trans Auth Trans Fac
          Livingston Plaza Proj Rfdg (Escrowed to
          Maturity) (FSA Insd)......................         5.400    01/01/18       7,558,204
 3,000    New York City Transitional Fin Auth Rev
          Future Tax Secd Ser A Rfdg (d)............  5.500/14.000    11/01/26       3,301,470
 3,000    New York St Dorm Auth Rev Hosp (MBIA
          Insd).....................................         5.000    08/01/33       2,947,950

 
See Notes to Financial Statements                         

                                      D-13

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          NEW YORK (CONTINUED)
$2,000    New York St Dorm Auth Rev Sch Dist Fin Pgm
          Ser D (MBIA Insd).........................         5.500%   10/01/17   $   2,175,680
 3,000    New York St Urban Dev Corp Rev Personal
          Income Tax Ser C (FGIC Insd)..............         5.500    03/15/18       3,260,130
 2,680    Port Auth NY & NJ Cons 119th Ser (FGIC
          Insd) (AMT)...............................         5.500    09/15/17       2,834,368
                                                                                 -------------
                                                                                    52,337,152
                                                                                 -------------
          NORTH CAROLINA  5.9%
 2,000    Charlotte, NC Ctf Part Convention Fac Proj
          Ser A Rfdg................................         5.500    08/01/19       2,169,640
 3,000    North Carolina Eastn Muni Pwr Agy Pwr Sys
          Rev Ser D.................................         6.750    01/01/26       3,270,450
10,000    North Carolina Muni Pwr Agy No 1 Catawba
          Elec Rev Rfdg (MBIA Insd).................         6.000    01/01/12      11,442,000
                                                                                 -------------
                                                                                    16,882,090
                                                                                 -------------
          OHIO  7.7%
 1,000    Cleveland, OH Muni Sch Dist (FSA Insd)
          (c).......................................         5.250    12/01/23       1,037,940
 3,000    Columbus, OH City Sch Dist Sch Fac Constr
          & Impt (FSA Insd) (c).....................         5.250    12/01/22       3,143,400
 1,000    Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc
          Proj......................................         7.500    01/01/30       1,093,570
 3,000    Franklin Cnty, OH Convention Fac Auth Tax
          & Lease Rev Antic Bds Rfdg (AMBAC Insd)...         5.250    12/01/19       3,166,890
 2,660    Licking Heights, OH Loc Sch Dist (FGIC
          Insd).....................................         5.250    12/01/23       2,767,331
 1,000    Lorain Cnty, OH Hosp Rev Catholic
          Hlthcare..................................         5.375    10/01/30         995,730
 2,000    Lorain, OH City Sch Dist Classroom Fac
          Impt (MBIA Insd)..........................         5.250    12/01/20       2,118,560
 1,925    Ohio Muni Elec Generation Agy Jt Venture
          Ctf Ben Int Rfdg (AMBAC Insd).............         5.000    02/15/22       1,950,583
 1,000    Ohio St Air Quality Dev Auth Rev JMG Fdg
          Ltd Part Proj Rfdg (AMBAC Insd) (AMT).....         6.375    04/01/29       1,029,650
 1,500    Ohio St Bldg Auth St Fac Admin Bldg Fd
          Proj A (FSA Insd).........................         5.500    04/01/15       1,635,465
 3,000    University Cincinnati OH Gen Ser A (FGIC
          Insd).....................................         5.500    06/01/09       3,315,270
                                                                                 -------------
                                                                                    22,254,389
                                                                                 -------------
          OKLAHOMA  0.4%
 1,000    Central, OK Trans & Pkg Auth Pkg Sys
          (AMBAC Insd)..............................         5.000    07/01/18       1,034,060
                                                                                 -------------
 
          OREGON  2.5%
 1,000    Clackamas Cnty, OR Sch Dist...............         5.500    06/01/10       1,113,700
 1,350    Oregon Hlth Sciences Univ Insd Ser A (MBIA
          Insd).....................................         5.250    07/01/22       1,403,946

 
                                               See Notes to Financial Statements

                                      D-14

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          OREGON (CONTINUED)
$2,060    Oregon St Dept Admin Ser C Rfdg (MBIA
          Insd).....................................         5.250%   11/01/17   $   2,192,994
 1,250    Portland, OR Cmnty College Dist Ser B.....         5.250    06/01/12       1,360,925
 1,135    Portland, OR Swr Sys Rev Second Lien Ser A
          Rfdg (FSA Insd)...........................         5.250    06/01/19       1,200,773
                                                                                 -------------
                                                                                     7,272,338
                                                                                 -------------
          PENNSYLVANIA  8.0%
 1,500    Allegheny Cnty, PA San Auth Swr (MBIA
          Insd).....................................         5.500    12/01/30       1,563,780
 1,000    Allegheny Cnty, PA Ser C-53 Rfdg (FGIC
          Insd).....................................         5.500    11/01/14       1,099,050
 1,000    Greensburg Salem, PA Sch Dist Rfdg (FGIC
          Insd).....................................         5.375    09/15/15       1,084,130
 2,000    Harrisburg, PA Auth Res Gtd Sub Ser D-2
          (Variable Rate Coupon) (FSA Insd).........         5.000    12/01/33       2,112,500
 1,200    Harrisburg, PA Cap Apprec Nt Ser F Rfdg
          (AMBAC Insd)..............................           *      09/15/14         757,332
 4,000    Pennsylvania St Commn Tpk Rev Ser A (AMBAC
          Insd).....................................         5.000    12/01/34       3,952,360
 2,600    Philadelphia, PA Auth Indl Ser B (FSA
          Insd).....................................         5.500    10/01/16       2,838,394
 2,400    Philadelphia, PA Gas Wks Rev 1998 Gen
          Ordinance Fourth Ser (FSA Insd)...........         5.250    08/01/22       2,483,136
 4,570    Pittsburgh, PA Ser A (AMBAC Insd).........         5.500    09/01/16       4,881,674
 2,000    Ridley Park, PA Hosp Auth Rev Taylor Hosp
          Ser A (Escrowed to Maturity)..............         6.000    12/01/13       2,241,560
                                                                                 -------------
                                                                                    23,013,916
                                                                                 -------------
          SOUTH CAROLINA  0.7%
 1,000    Chesterfield Cnty, SC Sch Dist (FSA
          Insd).....................................         5.375    03/01/18       1,068,800
 1,000    South Carolina Jobs Econ Dev Auth Indl Rev
          Elec & Gas Co Proj Ser A (AMBAC Insd).....         5.200    11/01/27       1,012,410
                                                                                 -------------
                                                                                     2,081,210
                                                                                 -------------
          SOUTH DAKOTA  0.3%
   875    Deadwood, SD Ctf Part (ACA Insd)..........         6.375    11/01/20         917,735
                                                                                 -------------
 
          TENNESSEE  1.8%
 2,000    Johnson City, TN Hlth & Ed Fac Brd Hosp
          Rev First Mtg Mtn St Hlth Ser A Rfdg (MBIA
          Insd).....................................         7.500    07/01/25       2,433,920
 2,500    Memphis, TN (Prerefunded @ 10/01/06)......         5.250    10/01/14       2,689,550
                                                                                 -------------
                                                                                     5,123,470
                                                                                 -------------
          TEXAS  15.0%
 2,050    Austin, TX Wtr & Wastewtr Rfdg (MBIA
          Insd).....................................         5.750    05/15/12       2,278,329
 1,000    Austin, TX Wtr & Wastewtr Rfdg (MBIA
          Insd).....................................         5.250    11/15/19       1,053,200

 
See Notes to Financial Statements               

                                      D-15

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          TEXAS (CONTINUED)
$  750    Brazos Cnty, TX Hlth Fac Dev Oblig Grp....         5.375%   01/01/32   $     727,995
 1,430    Cameron Cnty, TX Ctf Oblig (AMBAC Insd)...         5.750    02/15/15       1,563,519
 1,500    Corpus Christi, TX Util Sys Rev Impt Rfdg
          (FSA Insd)................................         5.250    07/15/19       1,573,725
 2,000    Fort Worth, TX Wtr & Swr Rev Impt Rfdg....         5.500    02/15/05       2,049,980
 1,000    Harris Cnty, TX Hlth Fac Dev Mem Hermann
          Hlthcare Ser A............................         6.375    06/01/29       1,082,990
 2,000    Harris Cnty, TX Perm Impt & Rfdg..........         5.000    10/01/11       2,127,780
 4,820    Harris Cnty, TX Toll Rd (Prerefunded @
          08/15/09) (AMBAC Insd)....................           *      08/15/18       2,166,156
 1,000    Harris Cnty, TX Toll Rd (Prerefunded @
          08/15/09) (AMBAC Insd)....................           *      08/15/21         365,590
 2,105    Houston, TX Hotel Occupancy Tax & Spl Rev
          Convention & Entmt Ser B (AMBAC Insd).....         5.750    09/01/15       2,322,868
    95    Houston, TX Pub Impt Rfdg (FSA Insd)......         5.750    03/01/15         104,631
   905    Houston, TX Pub Impt Rfdg (Prerefunded
          09/01/10) (FSA Insd)......................         5.750    03/01/15       1,018,768
 2,000    Houston, TX Wtr & Swr Sys Rev Jr Lien Ser
          B Rfdg (Escrowed to Maturity) (FGIC
          Insd).....................................         6.250    12/01/05       2,122,920
 1,500    Mesquite, TX Hlth Fac Dev Retirement Fac
          Christian A...............................         7.500    02/15/18       1,589,460
 1,100    Metropolitan Hlth Fac Dev Corp TX Wilson N
          Jones Mem Hosp Proj.......................         7.200    01/01/21       1,067,033
 1,000    North Cent TX Hlth Fac Dev Hosp Baylor
          Hlthcare Sys Proj Ser A...................         5.125    05/15/29         969,190
 1,750    North Cent TX Hlth Fac Dev Hosp Childrens
          Med Ctr Dallas (AMBAC Insd)...............         5.250    08/15/32       1,756,178
 2,805    Tarrant Regl Wtr Dist TX Wtr Impt Rfdg
          (FSA Insd)................................         5.250    03/01/19       2,951,365
 3,297    Texas Mun Pwr Agy Rev (AMBAC Insd)........           *      09/01/07       2,999,710
   228    Texas Mun Pwr Agy Rev (Escrowed to
          Maturity) (AMBAC Insd)....................           *      09/01/07         208,285
 3,070    Texas St Pub Ppty Fin Corp Rev Mental Hlth
          & Retardation Rfdg (FSA Insd).............         5.500    09/01/13       3,119,396
 1,565    Texas St Univ Sys Fin Rev Rfdg (FSA
          Insd).....................................         5.000    03/15/20       1,596,472
 1,000    Texas Tech Univ Rev Fin Sys Seventh Ser
          (MBIA Insd)...............................         5.000    08/15/25         995,420
 1,500    Texas Wtr Dev Brd Rev St Revolving Fd Sr
          Lien Ser B................................         5.250    07/15/17       1,586,160
 1,000    Trinity River Auth TX Rev Tarrant Cnty Wtr
          Proj Impt & Rfdg (MBIA Insd)..............         5.500    02/01/21       1,065,030
 2,500    University TX Rev Fin Sys Ser B...........         5.250    08/15/20       2,630,325
                                                                                 -------------
                                                                                    43,092,475
                                                                                 -------------

 
                                               See Notes to Financial Statements

                                      D-16

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          UTAH  0.4%
$1,000    Salt Lake Cnty, UT College Rev Westminster
          College Proj..............................         5.750%   10/01/27   $   1,003,070
   135    Utah St Hsg Fin Agy Single Family Mtg Ser
          B Class 2 (FHA/VA Insd) (AMT).............         6.250    07/01/14         135,140
                                                                                 -------------
                                                                                     1,138,210
                                                                                 -------------
          WASHINGTON  6.6%
 3,270    Central, WA Univ Sys Rev (FGIC Insd)......         5.000    05/01/28       3,215,228
 3,410    Clark Cnty, WA Pub Util Dist Rfdg (FSA
          Insd).....................................         5.500    01/01/08       3,696,781
 2,595    Clark Cnty, WA Pub Util Dist Rfdg (FSA
          Insd).....................................         5.500    01/01/09       2,842,874
 1,300    Energy Northwest WA Elec Rev Proj No 3 Ser
          A Rfdg (FSA Insd).........................         5.500    07/01/17       1,396,993
 4,400    King Cnty, WA Ser B Rfdg (MBIA Insd)......         5.250    01/01/34       4,436,564
 1,000    Spokane, WA Pub Fac Dist Hotel (MBIA
          Insd).....................................         5.750    12/01/20       1,102,740
 2,100    Spokane, WA Pub Fac Dist Hotel (MBIA
          Insd).....................................         5.750    12/01/21       2,303,868
                                                                                 -------------
                                                                                    18,995,048
                                                                                 -------------
          WISCONSIN  2.1%
 2,345    Appleton, WI Wtrwks Rev Rfdg (FGIC
          Insd).....................................         5.375    01/01/19       2,492,829
 3,500    Milwaukee, WI Redev Auth Rev Milwaukee Pub
          Schs (AMBAC Insd).........................         5.125    08/01/22       3,574,550
                                                                                 -------------
                                                                                     6,067,379
                                                                                 -------------
          GUAM  1.0%
 2,800    Guam Pwr Auth Rev Ser A (AMBAC Insd)......         5.250    10/01/34       2,832,172
                                                                                 -------------
 
          PUERTO RICO  0.3%
 1,000    Puerto Rico Indl Tourist Ed Med &
          Environmental Ctl Fac Fin Auth Higher Ed
          Rev.......................................         5.375    02/01/19       1,013,780
                                                                                 -------------
 
TOTAL LONG-TERM INVESTMENTS  155.4%
  (Cost $428,587,805).........................................................     447,905,591
SHORT-TERM INVESTMENTS  2.3%
  (Cost $6,600,000)...........................................................       6,600,000
                                                                                 -------------
TOTAL INVESTMENTS  157.7%
  (Cost $435,187,805).........................................................     454,505,591

 
See Notes to Financial Statements            


                                      D-17

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
 


PAR
AMOUNT
(000)                                                                                VALUE
----------------------------------------------------------------------------------------------
                                                                     
LIABILITIES IN EXCESS OF OTHER ASSETS  (0.4%).................................   $  (1,266,830)
 
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS)  (57.3%)...................    (165,055,109)
                                                                                 -------------
 
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%.................................   $ 288,183,652
                                                                                 =============

 
    Percentages are calculated as a percentage of net assets applicable to
    common shares.
 
*   Zero coupon bond
 
(a) All or a portion of these securities have been physically segregated in
    connection with open futures contracts.
 
(b) These securities are restricted and may be resold only in transactions
    exempt from registration which are normally those transactions with
    qualified institutional buyers. Restricted Securities comprise 1.47% of net
    assets applicable to common shares.
 
(c) Security purchased on a when-issued or delayed delivery basis.
 
(d) Security is a "step-up" bond where the coupon increases or steps up at a
    predetermined date.
 
ACA--American Capital Access
 
AMBAC--AMBAC Indemnity Corp.
 
AMT--Alternative Minimum Tax
 
FGIC--Financial Guaranty Insurance Co.
 
FHA/VA--Federal Housing Administration/Department of Veterans Affairs
 
FSA--Financial Security Assurance Inc.
 
MBIA--Municipal Bond Investors Assurance Corp.
 
XLCA--XL Capital Assurance Inc.
 
                                               See Notes to Financial Statements

                                      D-18

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
June 30, 2004
 

                                                           
ASSETS:
Total Investments (Cost $435,187,805).......................  $454,505,591
Cash........................................................        15,510
Receivables:
  Interest..................................................     6,460,247
  Investments Sold..........................................       288,037
Other.......................................................        16,363
                                                              ------------
    Total Assets............................................   461,285,748
                                                              ------------
LIABILITIES:
Payables:
  Investments Purchased.....................................     7,278,020
  Investment Advisory Fee...................................       221,883
  Income Distributions--Common Shares.......................       106,168
  Variation Margin on Futures...............................        42,937
  Other Affiliates..........................................        15,989
Trustees' Deferred Compensation and Retirement Plans........       262,364
Accrued Expenses............................................       119,626
                                                              ------------
    Total Liabilities.......................................     8,046,987
Preferred Shares (including accrued distributions)..........   165,055,109
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $288,183,652
                                                              ============
NET ASSET VALUE PER COMMON SHARE ($288,183,652 divided by
  28,684,985 shares outstanding)............................  $      10.05
                                                              ============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
  shares authorized, 28,684,985 shares issued and
  outstanding)..............................................  $    286,850
Paid in Surplus.............................................   265,829,515
Net Unrealized Appreciation.................................    19,234,329
Accumulated Undistributed Net Investment Income.............     2,505,440
Accumulated Net Realized Gain...............................       327,518
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $288,183,652
                                                              ============
PREFERRED SHARES ($.01 par value, authorized 1,000,000
  shares, 330 issued with liquidation preference of $500,000
  per share)................................................  $165,000,000
                                                              ============
NET ASSETS INCLUDING PREFERRED SHARES.......................  $453,183,652
                                                              ============

 
See Notes to Financial Statements               

                                      D-19

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL STATEMENTS continued
 
Statement of Operations
For the Year Ended June 30, 2004
 

                                                           
INVESTMENT INCOME:
Interest....................................................  $ 22,270,447
                                                              ------------
EXPENSES:
Investment Advisory Fee.....................................     2,777,232
Preferred Share Maintenance.................................       437,806
Trustees' Fees and Related Expenses.........................        86,857
Legal.......................................................        50,595
Custody.....................................................        27,954
Other.......................................................       281,608
                                                              ------------
    Total Expenses..........................................     3,662,052
                                                              ------------
NET INVESTMENT INCOME.......................................  $ 18,608,395
                                                              ============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
  Investments...............................................  $  1,540,592
  Futures...................................................       (50,998)
                                                              ------------
Net Realized Gain...........................................     1,489,594
                                                              ------------
Unrealized Appreciation/Depreciation:
  Beginning of the Period...................................    38,927,157
                                                              ------------
  End of the Period:
    Investments.............................................    19,317,786
    Futures.................................................       (83,457)
                                                              ------------
                                                                19,234,329
                                                              ------------
Net Unrealized Depreciation During the Period...............   (19,692,828)
                                                              ------------
NET REALIZED AND UNREALIZED LOSS............................  $(18,203,234)
                                                              ============
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS.....................  $ (1,580,017)
                                                              ============
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
  OPERATIONS................................................  $ (1,174,856)
                                                              ============

 
                                               See Notes to Financial Statements

                                      D-20

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL STATEMENTS continued
 
Statements of Changes in Net Assets
 


                                                                FOR THE          FOR THE
                                                              YEAR ENDED       YEAR ENDED
                                                             JUNE 30, 2004    JUNE 30, 2003
                                                             ------------------------------
                                                                        
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income......................................  $ 18,608,395     $ 18,981,992
Net Realized Gain..........................................     1,489,594        3,743,147
Net Unrealized Appreciation/Depreciation During the
  Period...................................................   (19,692,828)      16,417,441
Distributions to Preferred Shareholders:
  Net Investment Income....................................    (1,580,017)      (2,032,221)
                                                             ------------     ------------
Change in Net Assets Applicable to Common Shares from
  Operations...............................................    (1,174,856)      37,110,359
Distributions to Common Shareholders:
  Net Investment Income....................................   (17,210,089)     (15,661,138)
  Net Realized Gain........................................    (1,325,170)             -0-
                                                             ------------     ------------
 
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
  INVESTMENT ACTIVITIES....................................   (19,710,115)      21,449,221
 
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period....................................   307,893,767      286,444,546
                                                             ------------     ------------
End of the Period (Including accumulated undistributed net
  investment income of $2,505,440 and $2,784,043,
  respectively)............................................  $288,183,652     $307,893,767
                                                             ============     ============

 
See Notes to Financial Statements     

                                      D-21

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL HIGHLIGHTS
 
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
 


                                                      --------------------------------------
                                                         2004          2003        2002 (e)
                                                      --------------------------------------
                                                                         
NET ASSET VALUE, BEGINNING OF THE PERIOD............  $    10.73    $     9.99    $     9.62
                                                      ----------    ----------    ----------
  Net Investment Income.............................         .65           .66           .70
  Net Realized and Unrealized Gain/Loss.............        (.62)          .70           .31
Common Share Equivalent of Distributions Paid to
  Preferred Shareholders:
  Net Investment Income.............................        (.06)         (.07)         (.11)
                                                      ----------    ----------    ----------
Total from Investment Operations....................        (.03)         1.29           .90
Distributions Paid to Common Shareholders:
  Net Investment Income.............................        (.60)         (.55)         (.53)
  Net Realized Gain.................................        (.05)          -0-           -0-
                                                      ----------    ----------    ----------
NET ASSET VALUE, END OF THE PERIOD..................  $    10.05    $    10.73    $     9.99
                                                      ==========    ==========    ==========
 
Common Share Market Price at End of the Period......  $     8.87    $     9.66    $     8.85
Total Return (a)....................................      -1.63%        15.76%         5.64%
Net Assets Applicable to Common Shares at End of the
  Period (In millions)..............................  $    288.2    $    307.9    $    286.4
Ratio of Expenses to Average Net Assets Applicable
  to Common Shares (b)..............................       1.23%         1.21%         1.25%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (b)...................       6.25%         6.35%         6.99%
Portfolio Turnover..................................         22%           35%           41%
 
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
  Preferred Shares (b)..............................        .79%          .78%          .79%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (c)...................       5.72%         5.67%         5.92%
 
SENIOR SECURITIES:
Total Preferred Shares Outstanding..................         330           330           330
Asset Coverage Per Preferred Share (d)..............  $1,373,451    $1,433,101    $1,368,316
Involuntary Liquidating Preference Per Preferred
  Share.............................................  $  500,000    $  500,000    $  500,000
Average Market Value Per Preferred Share............  $  500,000    $  500,000    $  500,000

 
(a) 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.
 
(b) Ratios do not reflect the effect of distributions to preferred shareholders.
 
(c) Ratios reflect the effect of distributions to preferred shareholders.
 
(d) 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.
 
(e) As required, effective July 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 June 30, 2002 was to increase net investment
    income per share by $.01, decrease 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 .04%. Per shares,
    supplemental data for the period prior to June 30, 2002 have not been
    restated to reflect this change in presentation.
 

                                      D-22

 


YEAR ENDED JUNE 30,
---------------------------------------------------------------------------------------------
        2001         2000         1999         1998         1997         1996         1995
---------------------------------------------------------------------------------------------
                                                              
     $     8.99   $     9.56   $    10.26   $    10.01   $     9.76   $     9.76   $     9.92
     ----------   ----------   ----------   ----------   ----------   ----------   ----------
            .75          .81          .84          .89          .92          .94          .96
            .66         (.55)        (.70)         .26          .26          .05         (.06)
           (.23)        (.22)        (.19)        (.21)        (.21)        (.22)        (.22)
     ----------   ----------   ----------   ----------   ----------   ----------   ----------
           1.18          .04         (.05)         .94          .97          .77          .68
           (.55)        (.61)        (.65)        (.69)        (.72)        (.77)        (.84)
            -0-          -0-          -0-          -0-          -0-          -0-          -0-
     ----------   ----------   ----------   ----------   ----------   ----------   ----------
     $     9.62   $     8.99   $     9.56   $    10.26   $    10.01   $     9.76   $     9.76
     ==========   ==========   ==========   ==========   ==========   ==========   ==========
 
     $     8.89   $   8.6875   $    9.625   $   10.875   $   10.875   $    9.875   $   11.125
          8.88%       -3.08%       -5.68%        6.85%       18.32%       -4.27%        8.59%
     $    276.0   $    258.0   $    274.1   $    292.3   $    283.2   $    273.7   $    271.1
          1.27%        1.32%        1.24%        1.23%        1.28%        1.31%        1.33%
          7.94%        9.06%        8.23%        8.69%        9.25%        9.47%        9.85%
            50%          54%          98%         103%          53%          29%          38%
 
           .79%         .81%         .79%         .79%         .80%         .82%         .83%
          5.50%        6.59%        6.35%        6.64%        7.18%        7.26%        7.56%
 
            330          330          330          330          330          330          330
     $1,336,403   $1,281,820   $1,330,642   $1,385,892   $1,358,326   $1,329,390   $1,321,483
     $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000
     $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000

 
See Notes to Financial Statements               

                                      D-23

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004
 
1. SIGNIFICANT ACCOUNTING POLICIES
 
Van Kampen Municipal Income Trust (the "Trust") is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Trust's investment objective is to provide a high level of
current income exempt from federal income tax, consistent with preservation of
capital. The Trust commenced investment operations on August 26, 1988. Effective
November 30, 2003, the Trust's investment adviser, Van Kampen Investment
Advisory Corp. merged into its affiliate, Van Kampen Asset Management (the
"Adviser").
 
    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 is considered
to approximate 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 June 30, 2004, the Trust had $7,278,020 of when-issued or
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.
 

                                      D-24

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004 continued
 
    At June 30, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
 

                                                           
Cost of investments for tax purposes........................  $434,904,101
                                                              ============
Gross tax unrealized appreciation...........................  $ 20,613,819
Gross tax unrealized depreciation...........................    (1,012,329)
                                                              ------------
Net tax unrealized appreciation on investments..............  $ 19,601,490
                                                              ============

 
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 to common shareholders. Distributions from net
realized gains for book purposes may include short-term capital gains and gains
on future transactions. All short-term capital gains and a portion of futures
gains are included as ordinary income for tax purposes.
 
    The tax character of distributions paid during the years ended June 30, 2004
and 2003 was as follows:
 


                                                                 2004        2003
                                                                      
Distributions paid from:
  Ordinary income...........................................  $  145,772    $18,900
  Long-term capital gain....................................   1,305,092        -0-
                                                              ----------    -------
                                                              $1,450,864    $18,900
                                                              ==========    =======

 
    Due to inherent differences in the recognition of income, expenses, and
realized gain/losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. A permanent difference
relating to book to tax accretion differences totaling $96,892 was reclassified
from accumulated undistributed net investment income to accumulated net realized
gain.
 
    As of June 30, 2004, the component of distributable earnings on a tax basis
were as follows:
 

                                                           
Undistributed ordinary income...............................  $ 27,509
Undistributed long-term capital gain........................   177,940

 
    Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of gains or losses recognized for tax purposes on
open futures contracts on June 30, 2004.
 
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
 
Under the terms of the Trust's Investment Advisory Agreement, the Adviser
provides investment advice and facilities to the Trust for an annual fee payable
monthly of .60% of the average daily net assets of the Trust.
 
                                                            
                                      D-25


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004 continued
 
    For the year ended June 30, 2004, the Trust recognized expenses of
approximately $29,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, 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 June 30,
2004, the Trust recognized expenses of approximately $46,400 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") 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 $102,409,833 and $103,256,563,
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
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 or agreements.
 
    During the period, the Trust invested in futures contracts, a type of
derivative. A futures contract is an arrangement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Trust
generally invests in exchange traded futures on U.S. Treasury Bonds and Notes
and typically closes the contract prior to the delivery date. 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 futures
commission merchant pursuant to the 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).
 
                                      D-26

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004 continued
 
The risk of loss associated with a futures contract is in excess of the
variation margin reflected on the Statement of Assets and Liabilities.
 
    Transactions in futures contracts for the year ended June 30, 2004, were as
follows:
 


                                                              CONTRACTS
                                                           
Outstanding at June 30, 2003................................      70
Futures Opened..............................................     277
Futures Closed..............................................    (276)
                                                                ----
Outstanding at June 30, 2004................................      71
                                                                ====

 
    The futures contracts outstanding as of June 30, 2004, and the description
and unrealized appreciation/depreciation are as follows:
 


                                                                            UNREALIZED
                                                                           APPRECIATION/
                                                              CONTRACTS    DEPRECIATION
                                                                     
SHORT CONTRACTS:
10-Year U.S. Treasury Note--September 2004
  (Current Notional Value of $109,328 per contract).........     34          $(49,800)
5-Year U.S. Treasury Note--September 2004
  (Current Notional Value of $108,688 per contract).........     37           (33,657)
                                                                 --          --------
                                                                 71          $(83,457)
                                                                 ==          ========

 
5. PREFERRED SHARES
 
The Trust has outstanding 330 shares of Rate Adjusted Tax-Exempt Shares
("Rates") in three series of 110 shares each. Dividends are cumulative and the
dividend rate is currently reset every 28 days through an auction process. The
average rate in effect on June 30, 2004 was 1.255%. During the year ended June
30, 2004, the rates ranged from 0.700% to 1.310%.
 
    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 Rates are redeemable at the option of the Trust in whole or in part at a
price of $500,000 per share plus accumulated and unpaid dividends. The Trust is
subject to certain asset coverage tests, and the Rates are subject to mandatory
redemption if the tests are not met.
 
6. INDEMNIFICATIONS
 
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
 

                                      D-27

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Trustees and Shareholders of Van Kampen Municipal Income Trust:
 
We have audited the accompanying statement of assets and liabilities of Van
Kampen Municipal Income Trust (the "Trust"), including the portfolio of
investments, as of June 30, 2004, 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
five 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 June 30, 2000, were audited by other auditors whose report, dated
August 5, 1999, expressed an unqualified opinion on those financial highlights.
 
    We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 June 30, 2004, by correspondence with the Trust's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
    In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Municipal Income Trust as of June 30, 2004, the results of its operations
for the year then ended, 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
August 9, 2004
 

                                      D-28


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
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
                                              

                                      D-29


VAN KAMPEN MUNICIPAL INCOME TRUST
 
DIVIDEND REINVESTMENT PLAN continued
 
of the Trust's Common Shares, resulting in the acquisition of fewer Common
Shares than if the dividend or distribution had been paid in Common Shares
issued by the Trust. All reinvestments are in full and fractional Common shares
and are carried to three decimal places.
 
    Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
 
COSTS OF THE PLAN
 
    The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
 
TAX IMPLICATIONS
 
    You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
 
RIGHT TO WITHDRAW
 
    Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
 
                              Van Kampen Funds Inc.
                              Attn: Closed-End Funds
                                2800 Post Oak Blvd.
                                 Houston, TX 77056
 

                                      D-30

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
 
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*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
 
INVESTMENT ADVISER
 
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
 
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 LLP
333 West Wacker Drive
Chicago, Illinois 60606
 
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
 
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
 June 30, 2004. The Trust designated 99.3% of the income distributions as a
 tax-exempt income distribution. The Trust designated and paid $1,305,092 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.
   
                                      D-31

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
RESULTS OF SHAREHOLDER VOTES
 
An Annual Meeting of Shareholders of the Trust was held on June 23, 2004, where
shareholders voted on the election of trustees.
 
1) With regard to the election of the following trustees by common shareholders
of the Trust:
 


                                                                     # OF SHARES
                                                            ------------------------------
                                                             IN FAVOR             WITHHELD
------------------------------------------------------------------------------------------
                                                                            
R. Craig Kennedy..........................................  23,677,081            786,946
Jack E. Nelson............................................  23,678,718            785,309
Richard F. Powers, III....................................  23,689,661            774,366

 
2) With regard to the election of the following trustee by preferred
shareholders of the Trust:
 


                                                                      # OF SHARES
                                                              ----------------------------
                                                              IN FAVOR            WITHHELD
------------------------------------------------------------------------------------------
                                                                            
Hugo F. Sonnenschein........................................    223                     --

 
The other trustees whose term did not expire in 2004 were: David C. Arch, J.
Miles Branagan, Jerry D. Choate, Rod Dammeyer, Linda Hutton Heagy, Howard J
Kerr, Mitchell M. Merin, Wayne W. Whalen, and Suzanne H. Woolsey.
 

                                      D-32

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
TRUSTEE AND OFFICER INFORMATION
 
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 Asset Management ("Asset Management"
or the "Adviser"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen
Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc.
("Investor Services"). The term "Fund Complex" includes each of the investment
companies advised by the Adviser or its affiliates as of the date of this
Statement of Additional Information. Trustees serve until reaching their
retirement age or until their successors are duly elected and qualified.
Officers are annually elected by the trustees.
 
INDEPENDENT TRUSTEES
 


                                                                                     NUMBER OF
                                               TERM OF                                FUNDS IN
                                              OFFICE AND                                FUND
                                 POSITION(S)  LENGTH OF                               COMPLEX
NAME, AGE AND ADDRESS             HELD WITH      TIME     PRINCIPAL OCCUPATION(S)     OVERSEEN    OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE              TRUST       SERVED    DURING PAST 5 YEARS        BY TRUSTEE   HELD BY TRUSTEE
                                                                                   
David C. Arch (59)               Trustee      Trustee     Chairman and Chief             88       Trustee/Director/Managing
Blistex Inc.                                  since 1998  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. Director of
                                                          the Heartland Alliance, a
                                                          nonprofit organization
                                                          serving human needs based
                                                          in Chicago. Director of
                                                          St. Vincent de Paul
                                                          Center, a Chicago based
                                                          day care facility serving
                                                          the children of low
                                                          income families. Board
                                                          member of the Illinois
                                                          Manufacturers'
                                                          Association.

J. Miles Branagan (72)           Trustee      Trustee     Private investor.              86       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.

 

                                      D-33

 


VAN KAMPEN MUNICIPAL INCOME TRUST
TRUSTEE AND OFFICER INFORMATION continued
                                                                                     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,         86       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.

 

                                      D-34


 


VAN KAMPEN MUNICIPAL INCOME TRUST
TRUSTEE AND OFFICER INFORMATION continued
                                                                                     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
                                                                                   

Rod Dammeyer (63)                Trustee      Trustee     President of CAC, L.L.C.,      88       Trustee/Director/Managing
CAC, L.L.C.                                   since 1998  a private company                       General Partner of funds
4350 LaJolla Village Drive                                offering capital                        in the Fund Complex.
Suite 980                                                 investment and management               Director of Stericycle,
San Diego, CA 92122-6223                                  advisory services. Prior                Inc., Ventana Medical
                                                          to February 2001, Vice                  Systems, Inc., GATX
                                                          Chairman and Director of                Corporation and Trustee
                                                          Anixter International,                  of The Scripps Research
                                                          Inc., a global                          Institute and the
                                                          distributor of wire,                    University of Chicago
                                                          cable and communications                Hospitals and Health
                                                          connectivity products,                  Systems. Prior to April
                                                          and IMC Global Inc., an                 2004, Director of
                                                          international company                   TheraSense, Inc. Prior to
                                                          that mines, manufactures                January 2004, Director of
                                                          and sells essential crop                TeleTech Holdings Inc.
                                                          nutrients and feed                      and Arris Group, Inc.
                                                          ingredients to farmers.                 Prior to May 2002,
                                                          Prior to July 2000,                     Director of Peregrine
                                                          Managing Partner of                     Systems Inc. Prior to
                                                          Equity Group Corporate                  February 2001, Vice
                                                          Investment (EGI), a                     Chairman and Director of
                                                          company that makes                      Anixter International,
                                                          private investments in                  Inc. and IMC Global Inc.
                                                          other companies.                        Prior to July 2000,
                                                                                                  Director of Allied Riser
                                                                                                  Communications Corp.,
                                                                                                  Matria Healthcare Inc.,
                                                                                                  Transmedia Networks,
                                                                                                  Inc., CNA Surety, Corp.
                                                                                                  and Grupo Azcarero Mexico
                                                                                                  (GAM).

 

                                      D-35

 


VAN KAMPEN MUNICIPAL INCOME TRUST
TRUSTEE AND OFFICER INFORMATION continued
                                                                                     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 (56)          Trustee      Trustee     Managing Partner of            86       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 (52)            Trustee      Trustee     Director and President of      86       Trustee/Director/Managing
1744 R Street, NW                             since 2003  the German Marshall Fund                General Partner of funds
Washington, D.C. 20009                                    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       88       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.

 

                                      D-36

 


VAN KAMPEN MUNICIPAL INCOME TRUST
TRUSTEE AND OFFICER INFORMATION continued
                                                                                     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
                                                                                   

Jack E. Nelson (68)              Trustee      Trustee     President of Nelson            86       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         88       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.

Suzanne H. Woolsey, P.h.D. (62)  Trustee      Trustee     Previously Chief               86       Trustee/Director/Managing
815 Cumberstone Road                          since 2003  Communications Officer of               General Partner of funds
Harwood, MD 20776                                         the National Academy of                 in the Fund Complex.
                                                          Sciences/National                       Director of Fluor Corp.,
                                                          Research Council, an                    an engineering,
                                                          independent, federally                  procurement and
                                                          chartered policy                        construction
                                                          institution, from 2001 to               organization, since
                                                          November 2003 and Chief                 January 2004 and Director
                                                          Operating Officer from                  of Neurogen Corporation,
                                                          1993 to 2001. Director of               a pharmaceutical company,
                                                          the Institute for Defense               since January 1998.
                                                          Analyses, a federally
                                                          funded research and
                                                          development center,
                                                          Director of the German
                                                          Marshall Fund of the
                                                          United States, Director
                                                          of the Rocky Mountain
                                                          Institute 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.

 

                                      D-37

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
TRUSTEE AND OFFICER INFORMATION continued
 
INTERESTED TRUSTEES*
 


                                                                                     NUMBER OF
                                               TERM OF                                FUNDS IN
                                              OFFICE AND                                FUND
                                 POSITION(S)  LENGTH OF                               COMPLEX
NAME, AGE AND ADDRESS             HELD WITH      TIME     PRINCIPAL OCCUPATION(S)     OVERSEEN    OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE               TRUST       SERVED    DURING PAST 5 YEARS        BY TRUSTEE   HELD BY TRUSTEE
                                                                                   
Mitchell M. Merin* (50)          Trustee,     Trustee     President and Chief            86       Trustee/Director/Managing
1221 Avenue of the Americas      President    since       Executive Officer of                    General Partner of funds
New York, NY 10020               and Chief    2003;       funds in the Fund                       in the Fund Complex.
                                 Executive    President   Complex. Chairman,
                                 Officer      and Chief   President, Chief
                                              Executive   Executive Officer and
                                              Officer     Director of the Adviser
                                              since 2002  and Van Kampen 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.

 

                                      D-38

 


VAN KAMPEN MUNICIPAL INCOME TRUST
TRUSTEE AND OFFICER INFORMATION continued
                                                                                     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* (58)     Trustee      Trustee     Advisory Director of           88       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        88       Trustee/Director/Managing
333 West Wacker Drive                         since 1988  of Skadden, Arps, Slate,                General Partner of funds
Chicago, IL 60606                                         Meagher & Flom LLP, legal               in the Fund Complex.
                                                          counsel to funds in the
                                                          Fund Complex.

 
*   Such trustee is an "interested person" (within the meaning of Section
    2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain
    funds in the Fund Complex by reason of his firm currently acting as legal
    counsel to such funds in the Fund Complex. Messrs. Merin and Powers are
    interested persons of funds in the Fund Complex and the Adviser by reason of
    their current or former positions with Morgan Stanley or its affiliates.
 

                                      D-39

 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
TRUSTEE AND OFFICER INFORMATION continued
 
OFFICERS
 


                                                  TERM OF
                                                 OFFICE AND
                                POSITION(S)      LENGTH OF
NAME, AGE AND                    HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                 TRUST           SERVED    DURING PAST 5 YEARS
                                                    
Stefanie V. Chang (37)       Vice President and  Officer     Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas  Secretary           since 2003  Vice President of funds in the Fund Complex.
New York, NY 10020

Joseph J. McAlinden (61)     Executive Vice      Officer     Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas  President and       since 2002  Stanley Investment Advisors Inc., Morgan Stanley Investment
New York, NY 10020           Chief Investment                Management Inc. and Morgan Stanley Investments LP and
                             Officer                         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 Adviser and Van Kampen
                                                             Advisors Inc. since December 2002.

Ronald E. Robison (65)       Executive Vice      Officer     Chief Executive Officer and Chairman of Investor Services.
1221 Avenue of the Americas  President and       since 2003  Executive Vice President and Principal Executive Officer of
New York, NY 10020           Principal                       funds in the Fund Complex. Chief Administrative Officer and
                             Executive Officer               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. Executive Vice
                                                             President and Principal Executive Officer of the Morgan
                                                             Stanley Funds. Director of Morgan Stanley SICAV. Previously,
                                                             Chief Global Operations Officer and Managing Director of
                                                             Morgan Stanley Investment Management Inc.

John L. Sullivan (48)        Vice President,     Officer     Director and Managing Director of Van Kampen Investments,
1 Parkview Plaza             Chief Financial     since 1998  the Adviser, Van Kampen Advisors Inc. and certain other
P.O. Box 5555                Officer and                     subsidiaries of Van Kampen Investments. Vice President,
Oakbrook Terrace, IL 60181   Treasurer                       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 Adviser and Van
                                                             Kampen Advisors Inc.

 

                                      D-40

 
Van Kampen
Privacy Notice

 
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you 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 Asset Management, Van
    Kampen Advisors 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)2004 Van Kampen
                                                 Funds Inc. All rights reserved.
                                                 Member NASD/SIPC. 920, 919, 107
                                                 VMT ANR 8/04 RN04-01589P-Y06/04

                                      D-41



                                   APPENDIX E

             TARGET FUND SEMI-ANNUAL REPORT DATED DECEMBER 31, 2004





                                      E-1




 

Item 1. Report to Shareholders.

The Trust's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
 
       Welcome, Shareholder
 
       In this report, you'll learn about how your investment in Van Kampen
       Municipal Income Trust performed during the semiannual 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 December 31, 2004.
 
       MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
       PASS. THERE IS NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT
       OBJECTIVE. TRUSTS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
       THAT THE MARKET VALUES OF SECURITIES OWNED BY THE TRUST WILL DECLINE AND
       THAT THE VALUE OF TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID
       FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST.
 
       INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM
       TAX (AMT).
 


                                                                    
         ---------------------------------------------------------------------------------------
            NOT FDIC INSURED             OFFER NO BANK GUARANTEE              MAY LOSE VALUE
         ---------------------------------------------------------------------------------------
                   NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY               NOT A DEPOSIT
         ---------------------------------------------------------------------------------------




                                      E-2

 

Performance Summary as of 12/31/04
 


MUNICIPAL INCOME TRUST
SYMBOL: VMT
------------------------------------------------------------
AVERAGE ANNUAL                      BASED ON      BASED ON
TOTAL RETURNS                         NAV       MARKET PRICE
                                          
 
Since Inception (8/26/88)             8.15%         6.70%
 
10-year                               8.18          6.13
 
5-year                               10.36         10.26
 
1-year                                6.00          1.76
 
6-month                               7.79          5.35
------------------------------------------------------------

 
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, 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.
 
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 does not include any expenses, fees or sales
charges, which would lower performance. The index is unmanaged and should not be
considered an investment. It is not possible to invest directly in an index.
Source for index performance: Lipper Inc.
 
                                      E-3


 
Fund Report
 
FOR THE 6-MONTH PERIOD ENDED DECEMBER 31, 2004
 
Van Kampen Municipal Income Trust is managed by the Adviser's Municipal Fixed
Income team. Current members include Thomas Byron and Robert Wimmel, Vice
Presidents of the Adviser; and John Reynoldson, Executive Director of the
Adviser.(1)
 
MARKET CONDITIONS
 
The fixed income markets during the six months ended December 31, 2004 were
focused on the ongoing actions of the Federal Reserve Open Market Committee (the
"Fed"). In keeping with Chairman Alan Greenspan's comments in the spring of
2004, the Fed reversed its stance and began to tighten interest rates at its
June 30, 2004 meeting. The Fed went on to raise rates at its four subsequent
meetings through the end of the year. By the end of the review period, the
federal funds rate stood at 2.25%, its highest level since 2002, and the fixed
income market appeared to anticipate further increases in 2005.
 
These shifts helped boost yields on shorter-maturity securities in the municipal
market. In the past, this stage of the economic cycle has typically been marked
by rising yields for intermediate and longer-maturity bonds. That was not the
case during the six-month period, however. During this time, these yields
actually fell, which led to a general "flattening" of the yield curve.
Lower-quality bonds also outperformed their higher-quality peers during the
period.
 
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 may differ significantly, as they did during the reporting period when
the fund showed a
 
(1)Team members may change at any time without notice.


                                      E-4



7.79 percent gain on an NAV basis and a 5.35 percent gain on a market-price
basis. The fund's return at NAV outperformed its benchmark, the Lehman Brothers
Municipal Bond Index. (See table below.)
 
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2004
 


---------------------------------------------------------------
      BASED ON     BASED ON     LEHMAN BROTHERS MUNICIPAL
        NAV      MARKET PRICE          BOND INDEX
                                              
 
       7.79%        5.35%                -0.68%
---------------------------------------------------------------

 
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. 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
AND INDEX DEFINITION.
 
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.
 
While the trust's strategy of using leverage boosted returns, its performance
was hampered by our general interest rate strategy. The trust entered the period
with its duration (a measure of interest rate sensitivity) below that of the
Lehman Brothers Municipal Bond Index. This strategy limited the trust's
participation in the rally of the longer-maturity portion of the yield curve.
The trust's performance was also hindered by its emphasis on maintaining a
relatively high average credit quality. At the end of the period, roughly 94
percent of the portfolio's holdings were rated A or better.
 
During the period, the trust's portfolio remained well diversified across the
major sectors of the municipal market. The three largest sector exposures at the
end of December were general purpose, public building and public education.
Additions to the portfolio tended to be in the 20 to 25-year segment of the
market, where we favored well-structured securities with reduced interest-rate
sensitivity. These securities gained strongly during the period, and were a
contributor to the trust's positive returns.
 
Should interest rates continue to rise, we anticipate finding more securities
with attractive yields than have been available for quite some time. The coming
six months promise to be an interesting time for the municipal bond market --
and for the Fed.
 
There is no guarantee that any securities will continue to perform well or be
held by the trust in the future.



                                      E-5





RATINGS ALLOCATION AS OF 12/31/04
                                                             
AAA/Aaa                                                          84.3%
AA/Aa                                                             7.0%
A/A                                                               2.7%
BBB/Baa                                                           3.0%
BB/Ba                                                             0.4%
Non-Rated                                                         2.6%

 


 
                                                             


TOP 5 SECTORS AS OF 12/31/04
                                                             
General Purpose                                                  21.2%
Public Building                                                  12.0%
Public Education                                                 10.5%
Wholesale Electric                                                9.3%
Health Care                                                       9.2%


SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 12/31/04
                                                             
New York                                                         11.4%
Illinois                                                          9.6%
Texas                                                             9.4%
California                                                        7.4%
Florida                                                           6.3%
Georgia                                                           4.9%
Pennsylvania                                                      4.5%
Ohio                                                              3.8%
North Carolina                                                    3.7%
Washington                                                        3.5%
Louisiana                                                         2.9%
New Jersey                                                        2.8%
Nevada                                                            2.5%
Kentucky                                                          2.2%
Indiana                                                           2.2%
Massachusetts                                                     2.0%
Kansas                                                            2.0%
Missouri                                                          2.0%
Colorado                                                          1.8%
Oregon                                                            1.6%
Michigan                                                          1.5%
Alabama                                                           1.4%
Wisconsin                                                         1.4%
Alaska                                                            1.2%
Tennessee                                                         1.1%
South Carolina                                                    1.0%

 

                                                             
                                             (continued on next page)

 
                                      E-6






SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 12/31/04
                                       (continued from previous page)
                                                             
New Mexico                                                        1.0%
West Virginia                                                     0.8%
Guam                                                              0.6%
District of Columbia                                              0.6%
Connecticut                                                       0.6%
Rhode Island                                                      0.5%
Maryland                                                          0.4%
Mississippi                                                       0.3%
Utah                                                              0.2%
Oklahoma                                                          0.2%
Arizona                                                           0.2%
Puerto Rico                                                       0.2%
South Dakota                                                      0.2%
                                                                -----
Total Investments                                               100.0%

 
Subject to change daily. Ratings allocations and summary of investments by state
classifications are as a percentage of total investments. Sectors 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. Ratings allocation based upon ratings as issued by
Standard and Poor's and Moody's, respectively. Van Kampen is a wholly owned
subsidiary of a global securities firm which is engaged in a wide range of
financial services including, for example, securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
 

                                      E-7



FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
 
       Each Van Kampen trust provides a complete schedule of portfolio holdings
       in its semiannual and annual reports within 60 days of the end of the
       trust's second and fourth fiscal quarters by filing the schedule
       electronically with the Securities and Exchange Commission (SEC). The
       semiannual reports are filed on Form N-CSRS and the annual reports are
       filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
       reports to trust shareholders, and makes these reports available on its
       public web site, www.vankampen.com. In addition to the semiannual and
       annual reports that Van Kampen delivers to shareholders and makes
       available through the Van Kampen public web site, each trust files a
       complete schedule of portfolio holdings with the SEC for the trust's
       first and third fiscal quarters on Form N-Q. Van Kampen does not deliver
       the reports for the first and third fiscal quarters to shareholders, nor
       are the reports posted to the Van Kampen public web site. You may,
       however, obtain the Form N-Q filings (as well as the Form N-CSR and
       N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You
       may also review and copy them at the SEC's Public Reference Room in
       Washington, DC. Information on the operation of the SEC's Public
       Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
       can also request copies of these materials, upon payment of a duplicating
       fee, by electronic request at the SEC's e-mail address
       (publicinfo@sec.gov) or by writing the Public Reference section of the
       SEC, Washington, DC 20549-0102.
 
       In addition to filing a complete schedule of portfolio holdings with the
       SEC each fiscal quarter, each Van Kampen trust makes portfolio holdings
       information available by periodically providing the information on its
       public web site, www.vankampen.com. Each Van Kampen trust provides a
       complete schedule of portfolio holdings on the public web site on a
       calendar-quarter basis approximately 30 days after the close of the
       calendar quarter. Van Kampen closed-end funds do not presently provide
       partial lists of their portfolio holdings on a monthly basis, but may do
       so in the future.
 
       You may obtain copies of a trust's fiscal quarter filings, or its monthly
       or calendar-quarter web site postings, by contacting Van Kampen Client
       Relations at 1-800-847-2424.
 
                                      E-8


 
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
 
       The trust's policies and procedures with respect to the voting of proxies
       relating to the trust's portfolio securities and information on how the
       trust voted proxies relating to portfolio securities during the most
       recent twelve-month period ended June 30 is available without charge,
       upon request, by calling 1-800-847-2424 or by visiting our web site at
       www.vankampen.com. This information is also available on the Securities
       and Exchange Commission's web site at http://www.sec.gov.
 
                                                                               
                                      E-9


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED)
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          MUNICIPAL BONDS  154.7%
          ALABAMA  2.2%
$3,660    Alabama St Brd Ed Rev & Impt Southn Univ St
          Cmnty Rfdg (MBIA Insd).....................        5.250%   07/01/20   $   4,012,055
 1,320    Alabama St Univ Rev Tuit Ser B (Prerefunded
          @ 01/01/12) (MBIA Insd)....................        5.250    03/01/33       1,501,302
 1,000    Jefferson Cnty, AL Ltd Oblig Sch Wt Ser
          A..........................................        5.000    01/01/24       1,019,970
                                                                                 -------------
                                                                                     6,533,327
                                                                                 -------------
 
          ALASKA  1.9%
 3,650    Alaska St Intl Arpt Rev Ser B (AMBAC
          Insd)......................................        5.250    10/01/27       3,872,540
 1,575    Matanuska-Susitna Boro, AK Ctf Part Pub
          Safety Bldg Lease (FSA Insd)...............        5.750    03/01/16       1,755,652
                                                                                 -------------
                                                                                     5,628,192
                                                                                 -------------
          ARIZONA  0.4%
 1,000    Arizona Hlth Fac Auth Hosp John C Lincoln
          Hlth Network...............................        6.375    12/01/37       1,068,590
                                                                                 -------------
 
          CALIFORNIA  11.5%
 2,500    California St (AMBAC Insd).................        5.000    04/01/21       2,640,525
 4,500    California St (AMBAC Insd).................        5.125    10/01/27       4,722,300
 1,000    California St Dept Wtr Res Ctr Wtr Sys Ser
          X (FGIC Insd)..............................        5.000    12/01/29       1,030,600
 1,000    California St Dept Wtr Res Pwr Ser A.......        6.000    05/01/15       1,154,610
 1,000    California St Dept Wtr Res Pwr Ser A (AMBAC
          Insd)......................................        5.500    05/01/16       1,127,220
 2,500    California St Dept Wtr Res Pwr Ser A (AMBAC
          Insd) (a)..................................        5.375    05/01/18       2,766,250
 5,000    California St Univ Rev & Co Systemwide Ser
          A (AMBAC Insd).............................        5.000    11/01/33       5,125,050
 5,000    Contra Costa, CA Home Mtg Fin Auth Home Mtg
          Rev (Escrowed to Maturity) (MBIA Insd).....      *          09/01/17       2,688,700
 4,000    Los Angeles, CA Dept Wtr & Pwr Ser A (FGIC
          Insd)......................................        5.125    07/01/40       4,100,080
 2,500    Los Angeles, CA Uni Sch Dist Ser A
          (FSA Insd).................................        5.250    07/01/20       2,740,675
 2,000    Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B
          (FSA Insd).................................        5.000    07/01/28       2,069,280
 1,500    Metropolitan Wtr Dist Southn CA Auth Ser B
          1 (FGIC Insd)..............................        5.000    10/01/33       1,543,260
 1,750    Palm Springs, CA Fin Auth Lease Rev
          Convention Ctr Proj Ser A (MBIA Insd)......        5.500    11/01/35       1,923,687
 1,000    Santa Clara Cnty, CA Brd Ed Rfdg
          (MBIA Insd)................................        5.000    04/01/25       1,043,390
                                                                                 -------------
                                                                                    34,675,627
                                                                                 -------------

 
                                               See Notes to Financial Statements

                                      E-10



VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          COLORADO  2.8%
$1,500    Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev
          E-470 Proj (Prerefunded @ 08/31/05)........        7.000%   08/31/26   $   1,593,720
 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       1,062,150
 3,405    Colorado Ed & Cultural Fac Impt Charter Sch
          Rfdg (XLCA Insd)...........................        5.250    12/01/23       3,664,563
 1,000    Colorado Hlth Fac Auth Rev Catholic Hlth
          Initiatives Ser A (Escrowed to Maturity)...        5.500    03/01/32       1,107,490
 1,000    El Paso Cnty, CO Ctf Part Detention Fac
          Proj Ser B (AMBAC Insd)....................        5.375    12/01/18       1,110,890
                                                                                 -------------
                                                                                     8,538,813
                                                                                 -------------
          CONNECTICUT  1.0%
 1,750    Connecticut St Spl Oblig Pkg Rev Bradley
          Intl Arpt Ser A (AMT) (ACA Insd)...........        6.600    07/01/24       1,897,770
 1,000    Hartford, CT Pkg Sys Rev Ser A.............        6.500    07/01/25       1,036,180
                                                                                 -------------
                                                                                     2,933,950
                                                                                 -------------
          DISTRICT OF COLUMBIA  1.0%
 2,775    District of Columbia Hosp Rev Medlantic
          Hlthcare Ser A Rfdg (Escrowed to Maturity)
          (MBIA Insd)................................        5.250    08/15/12       2,949,714
                                                                                 -------------
 
          FLORIDA  9.7%
 2,500    Brevard Cnty, FL Sch Brd Ctf Ser B Rfdg
          (FGIC Insd)................................        5.000    07/01/21       2,675,650
 2,000    Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
          Insd)......................................        5.950    07/01/20       2,041,500
 1,000    Florida St Brd Ed Lottery Rev Ser A (FGIC
          Insd)......................................        5.750    07/01/11       1,142,050
 2,000    Florida St Dept Environmental Prot
          Preservtn Rev Ser A (FGIC Insd)............        5.750    07/01/10       2,282,940
 2,295    Florida St Dept Trans Tpk Rev Ser A (b)....        5.000    07/01/29       2,375,600
 1,745    Hillsborough Cnty, FL Port Dist Tampa Port
          Auth Proj Ser A (AMT) (MBIA Insd)..........        5.375    06/01/27       1,839,753
 1,000    Jea, FL Elec Sys Rev Ser 3 Ser A...........        5.500    10/01/41       1,061,390
 1,000    Marion Cnty, FL Sch Brd Ctf (FSA Insd).....        5.250    06/01/18       1,094,310
 1,500    Miami Beach, FL Stormwtr Rev (FGIC Insd)...        5.250    09/01/25       1,618,005
 1,720    Miami-Dade Cnty, FL Aviation Rev Miami Intl
          Arpt (AMT) (FGIC Insd).....................        5.375    10/01/32       1,790,812
 3,000    Orange Cnty, FL Sch Brd Ctf Part Ser A
          (AMBAC Insd)...............................        5.250    08/01/14       3,347,250
 4,000    Orange Cnty, FL Tourist Dev Tax Rev (AMBAC
          Insd)......................................        5.625    10/01/14       4,462,360

 
See Notes to Financial Statements


                                      E-11


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          FLORIDA (CONTINUED)
$2,000    Orange Cnty, FL Tourist Dev Tax Rev (AMBAC
          Insd)......................................        5.500%   10/01/31   $   2,165,340
 1,115    Tallahassee, FL Lease Rev FL St Univ Proj
          Ser A (MBIA Insd)..........................        5.500    08/01/19       1,245,868
                                                                                 -------------
                                                                                    29,142,828
                                                                                 -------------
          GEORGIA  7.6%
 1,000    Columbus, GA Wtr & Sew Rev Rfdg (MBIA Insd)
          (b)........................................        5.000    05/01/25       1,052,110
 4,023    Fulton Cnty, GA Lease Rev (Acquired
          12/23/94, Cost $4,023,144) (c).............        7.250    06/15/10       4,209,898
 2,635    Georgia Muni Elec Auth Pwr Rev Ser A (MBIA
          Insd)......................................        6.500    01/01/20       3,340,047
 3,000    Georgia Muni Elec Auth Pwr Rev Ser B Rfdg
          (FGIC Insd)................................        6.250    01/01/17       3,668,880
 2,500    Georgia St Ser D...........................        6.000    10/01/05       2,574,450
 2,335    Georgia St Ser D...........................        6.000    10/01/06       2,486,215
 2,000    Municipal Elec Auth GA Combustion Turbine
          Proj Ser A (MBIA Insd).....................        5.250    11/01/22       2,177,540
   800    Royston, GA Hosp Auth Hosp Rev Ctf Hlthcare
          Sys Inc....................................        6.700    07/01/16         819,760
 2,500    Royston, GA Hosp Auth Hosp Rev Ctf Hlthcare
          Sys Inc....................................        6.500    07/01/27       2,499,425
                                                                                 -------------
                                                                                    22,828,325
                                                                                 -------------
          ILLINOIS  14.9%
 4,000    Chicago, IL Brd Ed Chicago Sch Reform Ser A
          (AMBAC Insd)...............................        5.250    12/01/27       4,233,440
 1,400    Chicago, IL Brd Ed Ser A (MBIA Insd).......        5.500    12/01/28       1,529,724
 2,250    Chicago, IL Neighborhoods Alive 21 Ser A
          (FGIC Insd)................................        5.500    01/01/13       2,511,630
 1,500    Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
          Third Lien C 2 Rfdg (AMT) (FSA Insd).......        5.250    01/01/30       1,550,520
 1,500    Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
          Third Lien C-2 Rfdg (AMT) (XLCA Insd)......        5.250    01/01/34       1,548,315
 1,000    Chicago, IL O'Hare Intl Arpt Rev Second
          Lien Passenger Fac Ser B (AMBAC Insd)......        5.500    01/01/16       1,110,580
 1,000    Chicago, IL Proj Ser C Rfdg (FGIC Insd)....        5.750    01/01/14       1,136,610
 1,000    Chicago, IL Proj Ser C Rfdg (FGIC Insd)....        5.750    01/01/15       1,131,470
 4,895    Chicago, IL Pub Bldg Comm Bldg Rev Ser A
          (Escrowed to Maturity) (MBIA Insd).........      *          01/01/07       4,666,942
 1,000    Chicago, IL Ser B Rfdg (AMBAC Insd)........        5.125    01/01/15       1,105,090
 2,000    Chicago, IL Wastewtr Transmission Rev
          Second Lien (Prerefunded @ 01/01/10) (MBIA
          Insd)......................................        5.750    01/01/25       2,293,420
 1,960    Cook Cnty, IL Cmnty Cons Sch Dist
          (FSA Insd).................................        5.500    12/01/13       2,245,356
 1,000    Cook Cnty, IL Ser A (FGIC Insd)............        5.500    11/15/31       1,083,940

 
                                               See Notes to Financial Statements



                                      E-12


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          ILLINOIS (CONTINUED)
$3,230    Cook Cnty, IL Ser A Rfdg (MBIA Insd).......        5.625%   11/15/16   $   3,530,971
 2,310    Illinois Dev Fin Auth Rev Adventist Hlth
          Ser A (MBIA Insd)..........................        5.500    11/15/13       2,616,883
 2,500    Illinois Dev Fin Auth Rev Adventist Hlth
          Ser A (MBIA Insd)..........................        5.500    11/15/15       2,830,950
 1,335    Illinois Dev Fin Auth Rev Bradley Univ Proj
          (Prerefunded @ 08/01/09) (AMBAC Insd)......        5.375    08/01/24       1,501,728
 2,000    Illinois Ed Fac Auth Rev Lewis Univ........        6.125    10/01/26       1,936,800
 1,500    Illinois St First Ser (LOC: Bank of
          America) (FGIC Insd).......................        5.375    11/01/14       1,678,050
 1,900    Kendall, Kane & Will Cntys, IL Cmnty Unit
          Sch Dist No. 308 Ser B (FGIC Insd).........        5.250    10/01/21       2,066,573
 1,250    Sangamon Cnty, IL Ctf Part.................       10.000    12/01/06       1,420,612
 1,000    Schaumburg, IL Ser B (FGIC Insd)...........        5.000    12/01/41       1,015,200
                                                                                 -------------
                                                                                    44,744,804
                                                                                 -------------
          INDIANA  3.4%
 2,420    Brownsburg, IN Sch Bldg Corp First Mtg
          Brownsburg Cmnty Sch (MBIA Insd)...........        5.550    02/01/24       2,672,963
 1,000    Clark Pleasant, IN Cmnty Sch First Mtg
          (AMBAC Insd)...............................        5.500    07/15/18       1,115,620
 4,000    Indiana Hlth Fac Fin Auth Rev Deaconess
          Hosp Ser A (AMBAC Insd)....................        5.375    03/01/34       4,241,160
 2,000    Indiana Trans Fin Auth Toll Rfdg
          (AMBAC Insd)...............................        5.375    07/01/09       2,123,740
                                                                                 -------------
                                                                                    10,153,483
                                                                                 -------------
          KANSAS  2.7%
 3,810    Kansas St Dev Fin Auth Rev KS Proj Ser N
          (AMBAC Insd)...............................        5.250    10/01/22       4,103,637
 1,250    Kansas St Dev Fin Auth Rev KS St Proj
          (AMBAC Insd)...............................        5.500    03/01/16       1,392,650
 2,235    Sedgwick Cnty, KA Uni Sch Dist No. 259
          Wichita (Prerefunded @ 09/01/10)
          (MBIA Insd)................................        5.500    09/01/11       2,531,316
                                                                                 -------------
                                                                                     8,027,603
                                                                                 -------------
          KENTUCKY  3.4%
 2,190    Kenton Cnty, KY Arpt Brd Rev Cincinnati/
          Northn KY Intl Arpt Ser A Rfdg (AMT) (MBIA
          Insd)......................................        6.250    03/01/09       2,440,821
 5,000    Kentucky St Ppty & Bldgs Commn Proj No. 74
          Rfdg (Prerefunded 02/01/12) (FSA Insd).....        5.375    02/01/16       5,680,150
 2,000    Kentucky St Tpk Auth Econ Dev
          Revitalization Proj Rfdg (FSA Insd)........        5.500    07/01/07       2,154,380
                                                                                 -------------
                                                                                    10,275,351
                                                                                 -------------

 
See Notes to Financial Statements                                             11



                                      E-13


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          LOUISIANA  4.5%
$4,395    Ernest N Morial New Orleans LA Sr Sub Ser A
          (AMBAC Insd)...............................        5.250%   07/15/22   $   4,793,011
 3,000    Lafayette, LA Util Rev (MBIA Insd).........        5.250    11/01/21       3,298,410
 1,000    Louisiana Hsg Fin Agy Rev Azalea Estates
          Ser A Rfdg (AMT) (GNMA Collateralized).....        5.375    10/20/39       1,010,070
 2,580    Louisiana Loc Govt Environmental Rev
          Southeastn LA Student Hsg A (MBIA Insd)....        5.250    08/01/21       2,820,585
 1,500    Louisiana St Ser A (FGIC Insd).............        5.500    11/15/08       1,665,645
                                                                                 -------------
                                                                                    13,587,721
                                                                                 -------------
          MARYLAND  0.6%
 2,180    Baltimore, MD Cap Apprec Ser A (FGIC
          Insd)......................................      *          10/15/09       1,682,742
                                                                                 -------------
 
          MASSACHUSETTS  3.1%
 4,000    Massachusetts St Cons Ln Ser B (Prerefunded
          @ 03/01/12) (FSA Insd).....................        5.500    03/01/17       4,527,920
 1,500    Massachusetts St Fed Hwy Gnt Antic Nt
          Ser A......................................        5.750    06/15/15       1,698,510
 1,000    Massachusetts St Indl Fin Agy Rev Higher Ed
          Hampshire College Proj (Prerefunded @
          10/01/07)..................................        5.625    10/01/12       1,100,200
 2,000    Massachusetts St Spl Oblig Dedicated Tax
          Rev (FGIC Insd)............................        5.000    01/01/34       2,057,680
                                                                                 -------------
                                                                                     9,384,310
                                                                                 -------------
          MICHIGAN  2.4%
 1,000    Grand Rapids, MI Wtr Supply Sys Rfdg (FGIC
          Insd)......................................        5.750    01/01/13       1,130,340
 1,180    Hillsdale, MI Hosp Fin Auth Hosp Rev
          Hillsdale Cmnty Hlth Ctr...................        5.750    05/15/18       1,229,289
 1,000    Michigan St Strategic Fd Detroit Edison Co
          Proj C Rfdg (AMT) (XLCA Insd)..............        5.450    12/15/32       1,046,980
 2,500    Michigan St Strategic Fd Detroit Edison
          Conv Rfdg (AMBAC Insd).....................        4.850    09/01/30       2,689,000
 1,000    Michigan St Strategic Fd Detroit Edison
          Pollutn Ctl Ser B Rfdg (AMT)...............        5.650    09/01/29       1,039,200
                                                                                 -------------
                                                                                     7,134,809
                                                                                 -------------
          MISSISSIPPI  0.5%
 1,500    Mississippi Hosp Equip & Fac MS Baptist Med
          Ctr Rfdg (MBIA Insd).......................        6.000    05/01/13       1,547,820
                                                                                 -------------
 
          MISSOURI  3.1%
 1,250    Cole Cnty, MO Indl Dev Auth Sr Living Fac
          Rev Lutheran Sr Svcs Heisinger Proj........        5.500    02/01/35       1,294,200
 3,400    Missouri St Hwys & Trans Commn Rd Rev Ser
          A..........................................        5.500    02/01/08       3,713,616

 
                                               See Notes to Financial Statements


                                      E-14


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          MISSOURI (CONTINUED)
$2,720    Platte Cnty, MO Neighborhood Impt Parkville
          B (MBIA Insd) (b)..........................        5.000%   02/01/22   $   2,865,248
 1,250    Saint Charles, MO Ctf Part Ser B...........        5.500    05/01/18       1,338,225
                                                                                 -------------
                                                                                     9,211,289
                                                                                 -------------
          NEVADA  3.9%
 4,000    Clark Cnty, NV Arpt Rev Sub Lien Ser A-2
          (FGIC Insd)................................        5.000    07/01/36       4,054,360
 3,965    Clark Cnty, NV Bd Bk (FGIC Insd)...........        5.500    06/01/09       4,416,891
 3,000    Clark Cnty, NV Indl Dev Rev Southwest Gas
          Corp Proj Ser A (AMT) (AMBAC Insd).........        5.250    07/01/34       3,099,720
                                                                                 -------------
                                                                                    11,570,971
                                                                                 -------------
          NEW JERSEY  4.3%
 3,000    Casino Reinv Dev Auth NJ Hotel Room Fee Rev
          (AMBAC Insd)...............................        5.250    01/01/22       3,311,550
 1,200    New Jersey Econ Dev Auth Rev Cigarette
          Tax........................................        5.750    06/15/29       1,259,280
 1,500    New Jersey Econ Dev Auth Rev Motor Vehicle
          Sur Rev Ser A (MBIA Insd)..................        5.000    07/01/23       1,588,995
 1,835    New Jersey St Ed Fac Auth Higher Ed Cap
          Impt Ser A (AMBAC Insd)....................        5.250    09/01/21       1,999,856
 2,000    New Jersey St Trans Corp Ctf Fed Trans
          Admin Gnts Ser A (AMBAC Insd)..............        5.500    09/15/13       2,276,580
 2,095    New Jersey St Trans Tr Fd Auth Trans Sys
          Ser A......................................        5.750    06/15/17       2,452,973
                                                                                 -------------
                                                                                    12,889,234
                                                                                 -------------
          NEW MEXICO  1.5%
 4,000    Santa Fe, NM Gross Rcpt Tax Impt (AMBAC
          Insd)......................................        5.250    06/01/13       4,452,000
                                                                                 -------------
 
          NEW YORK  17.6%
 3,000    Metropolitan Trans Auth NY Ser A Rfdg
          (AMBAC Insd)...............................        5.500    11/15/18       3,372,930
 2,500    Metropolitan Trans Auth NY Ser A Rfdg (FGIC
          Insd)......................................        5.250    11/15/31       2,652,600
 2,500    Nassau Cnty, NY Interim Fin Auth Sales Tax
          Secd Ser A (Prerefunded @ 11/15/10)........        5.750    11/15/13       2,887,175
 5,700    New York City Muni Wtr Fin Auth Ser A (FSA
          Insd)......................................        5.375    06/15/17       6,360,288
 4,500    New York City Ser B (AMBAC Insd)...........        7.250    08/15/07       5,046,165
   445    New York City Ser C........................        7.000    08/15/08         446,664
 2,500    New York City Ser E (FSA Insd).............        5.000    11/01/20       2,679,400
 1,000    New York City Ser H........................        5.750    03/15/13       1,116,100
 6,930    New York City Trans Auth Trans Fac
          Livingston Plaza Proj Rfdg (Escrowed to
          Maturity) (FSA Insd).......................        5.400    01/01/18       7,893,963

 
See Notes to Financial Statements



                                      E-15


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          NEW YORK (CONTINUED)
$3,000    New York City Transitional Fin Auth Rev
          Future Tax Secd Ser A Rfdg (d)............. 5.500/14.000%   11/01/26   $   3,373,530
 3,000    New York St Dorm Auth Rev Hosp
          (MBIA Insd)................................        5.000    08/01/33       3,088,530
 2,000    New York St Dorm Auth Rev Sch Dist Fin Pgm
          Ser D (MBIA Insd)..........................        5.500    10/01/17       2,246,960
 3,000    New York St Urban Dev Corp Rev Personal
          Income Tax Ser C (Prerefunded @ 03/15/13)
          (FGIC Insd)................................        5.500    03/15/18       3,466,470
 3,000    New York, NY City Muni Wtr Fin Auth Wtr &
          Sew Sys Rev Ser A (AMBAC Insd).............        5.000    06/15/35       3,076,860
 2,680    Port Auth NY & NJ Cons 119th Ser (AMT)
          (FGIC Insd)................................        5.500    09/15/17       2,807,916
 2,500    Sales Tax Asset Receivable Corp Ser A (MBIA
          Insd)......................................        5.000    10/15/23       2,664,200
                                                                                 -------------
                                                                                    53,179,751
                                                                                 -------------
          NORTH CAROLINA  5.7%
 2,000    Charlotte, NC Ctf Part Convention Fac Proj
          Ser A Rfdg.................................        5.500    08/01/19       2,238,820
 3,000    North Carolina Eastern Muni Pwr Agy Pwr Sys
          Rev Ser D..................................        6.750    01/01/26       3,336,780
10,000    North Carolina Muni Pwr Agy No 1 Catawba
          Elec Rev Rfdg (MBIA Insd)..................        6.000    01/01/12      11,658,300
                                                                                 -------------
                                                                                    17,233,900
                                                                                 -------------
          OHIO  5.9%
 1,000    Cleveland, OH Muni Sch Dist (FSA Insd).....        5.250    12/01/23       1,090,280
 3,000    Columbus, OH City Sch Dist Sch Fac Constr &
          Impt (FSA Insd)............................        5.250    12/01/22       3,297,960
 1,000    Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc
          Proj.......................................        7.500    01/01/30       1,129,120
 2,660    Licking Heights, OH Loc Sch Dist (FGIC
          Insd)......................................        5.250    12/01/23       2,906,662
 1,000    Lorain Cnty, OH Hosp Rev Catholic
          Hlthcare...................................        5.375    10/01/30       1,030,570
 2,000    Lorain, OH City Sch Dist Classroom Fac Impt
          (MBIA Insd)................................        5.250    12/01/20       2,191,040
 1,000    Ohio St Air Quality Dev Auth Rev JMG Fdg
          Ltd Part Proj Rfdg (AMT) (AMBAC Insd)......        6.375    04/01/29       1,023,100
 1,500    Ohio St Bldg Auth St Fac Admin Bldg Fd Proj
          A (FSA Insd)...............................        5.500    04/01/15       1,679,850
 3,000    University Cincinnati OH Gen Ser A
          (FGIC Insd)................................        5.500    06/01/09       3,348,510
                                                                                 -------------
                                                                                    17,697,092
                                                                                 -------------
          OKLAHOMA  0.4%
 1,000    Central, OK Trans & Pkg Auth Pkg Sys (AMBAC
          Insd)......................................        5.000    07/01/18       1,071,090
                                                                                 -------------

 
                                               See Notes to Financial Statements


                                      E-16


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          OREGON  2.5%
$1,000    Clackamas Cnty, OR Sch Dist................        5.500%   06/01/10   $   1,129,810
 1,350    Oregon Hlth Sciences Univ Insd Ser A (MBIA
          Insd)......................................        5.250    07/01/22       1,471,986
 2,060    Oregon St Dept Admin Ser C Rfdg
          (MBIA Insd)................................        5.250    11/01/17       2,266,948
 1,250    Portland, OR Cmnty College Dist Ser B......        5.250    06/01/12       1,387,063
 1,135    Portland, OR Swr Sys Rev Second Lien Ser A
          Rfdg (FSA Insd)............................        5.250    06/01/19       1,246,480
                                                                                 -------------
                                                                                     7,502,287
                                                                                 -------------
          PENNSYLVANIA  7.0%
 1,500    Allegheny Cnty, PA San Auth Swr
          (MBIA Insd)................................        5.500    12/01/30       1,637,520
 1,000    Allegheny Cnty, PA Ser C-53 Rfdg
          (FGIC Insd)................................        5.500    11/01/14       1,120,460
 1,000    Greensburg Salem, PA Sch Dist Rfdg (FGIC
          Insd)......................................        5.375    09/15/15       1,122,750
 2,000    Harrisburg, PA Auth Res Gtd Sub Ser D-2
          (FSA Insd).................................        5.000    12/01/33       2,181,600
 1,200    Harrisburg, PA Cap Apprec Nt Ser F Rfdg
          (AMBAC Insd)...............................      *          09/15/14         799,968
 2,600    Philadelphia, PA Auth Indl Ser B (FSA
          Insd)......................................        5.500    10/01/16       2,907,684
 2,400    Philadelphia, PA Gas Wks Rev 1998 Gen
          Ordinance Fourth Ser (FSA Insd)............        5.250    08/01/22       2,593,416
 1,290    Philadelphia, PA Gas Wks Rev Eighteenth Ser
          (AGC Insd).................................        5.250    08/01/19       1,399,624
 4,570    Pittsburgh, PA Ser A (AMBAC Insd)..........        5.500    09/01/16       5,023,070
 2,000    Ridley Park, PA Hosp Auth Rev Taylor Hosp
          Ser A (Escrowed to Maturity)...............        6.000    12/01/13       2,278,300
                                                                                 -------------
                                                                                    21,064,392
                                                                                 -------------
          RHODE ISLAND  0.7%
 2,000    Rhode Island Clean Wtr Fin Revolving Fd
          Pooled Ln Assn Ser A.......................        5.000    10/01/21       2,144,180
                                                                                 -------------
 
          SOUTH CAROLINA  1.5%
 1,000    Chesterfield Cnty, SC Sch Dist (FSA
          Insd)......................................        5.375    03/01/18       1,110,590
 2,300    Medical Univ SC Hosp Auth Facs FHA Insd Mtg
          Ser A Rfdg (MBIA Insd).....................        5.250    08/15/25       2,457,481
 1,000    South Carolina Jobs Econ Dev Auth Indl Rev
          Elec & Gas Co Proj Ser A (AMBAC Insd)......        5.200    11/01/27       1,049,560
                                                                                 -------------
                                                                                     4,617,631
                                                                                 -------------
          SOUTH DAKOTA  0.3%
   875    Deadwood, SD Ctf Partn (ACA Insd)..........        6.375    11/01/20         941,946
                                                                                 -------------

 
See Notes to Financial Statements


                                      E-17



 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          TENNESSEE  1.7%
$2,000    Johnson City, TN Hlth & Ed Fac Brd Hosp Rev
          First Mtg Mtn St Hlth Ser A Rfdg
          (MBIA Insd)................................        7.500%   07/01/25   $   2,520,480
 2,500    Memphis, TN (Prerefunded @ 10/01/06).......        5.250    10/01/14       2,654,850
                                                                                 -------------
                                                                                     5,175,330
                                                                                 -------------
          TEXAS  14.5%
 2,050    Austin, TX Wtr & Wastewtr Rfdg (MBIA
          Insd)......................................        5.750    05/15/12       2,302,724
 1,000    Austin, TX Wtr & Wastewtr Rfdg (MBIA
          Insd)......................................        5.250    11/15/19       1,092,380
   300    Brazos Cnty, TX Hlth Fac Dev Oblig Grp.....        5.375    01/01/32         306,765
 1,430    Cameron Cnty, TX Ctf Oblig (AMBAC Insd)....        5.750    02/15/15       1,592,033
 1,500    Corpus Christi,TX Util Sys Rev Impt Rfdg
          (Prerefunded @ 07/15/12) (FSA Insd)........        5.250    07/15/19       1,629,510
 2,000    Fort Worth, TX Wtr & Swr Rev Impt Rfdg.....        5.500    02/15/05       2,008,600
 1,000    Harris Cnty, TX Hlth Fac Dev Mem Hermann
          Hlthcare Ser A.............................        6.375    06/01/29       1,100,400
 2,000    Harris Cnty, TX Perm Impt & Rfdg...........        5.000    10/01/11       2,129,540
 4,820    Harris Cnty, TX Toll Rd (Prerefunded @
          08/15/09) (AMBAC Insd).....................      *          08/15/18       2,263,279
 1,000    Harris Cnty, TX Toll Rd (Prerefunded @
          08/15/09) (AMBAC Insd).....................      *          08/15/21         381,980
 2,105    Houston, TX Hotel Occupancy Tax & Spl Rev
          Convention & Entmt Ser B (AMBAC Insd)......        5.750    09/01/15       2,400,458
    95    Houston, TX Pub Impt Rfdg (FSA Insd).......        5.750    03/01/15         106,805
   905    Houston, TX Pub Impt Rfdg (Prerefunded
          09/01/10) (FSA Insd).......................        5.750    03/01/15       1,026,098
 2,000    Houston, TX Wtr & Swr Sys Rev Jr Lien Ser B
          Rfdg (Escrowed to Maturity) (FGIC Insd)....        6.250    12/01/05       2,076,080
 2,750    Lower CO Riv Auth TX Svc Corp Proj Rfdg
          (FGIC Insd)................................        5.000    05/15/33       2,794,083
 1,500    Mesquite, TX Hlth Fac Dev Retirement Fac
          Christian A................................        7.500    02/15/18       1,606,845
 1,100    Metropolitan Hlth Fac Dev Corp TX Wilson N
          Jones Mem Hosp Proj........................        7.200    01/01/21       1,109,031
 1,000    North Cent TX Hlth Fac Dev Hosp Baylor
          Hlthcare Sys Proj Ser A....................        5.125    05/15/29       1,017,050
 1,750    North Cent TX Hlth Fac Dev Hosp Childrens
          Med Ctr Dallas (AMBAC Insd)................        5.250    08/15/32       1,829,363
 2,805    Tarrant Regl Wtr Dist TX Wtr Impt Rfdg (FSA
          Insd)......................................        5.250    03/01/19       3,071,840
 3,297    Texas Mun Pwr Agy Rev (AMBAC Insd).........      *          09/01/07       3,076,464
   228    Texas Mun Pwr Agy Rev (Escrowed to
          Maturity) (AMBAC Insd).....................      *          09/01/07         213,816
 1,995    Texas St Pub Ppty Fin Corp Rev Mental Hlth
          & Retardation Rfdg (FSA Insd)..............        5.500    09/01/13       2,025,344
 1,000    Texas Tech Univ Rev Fin Sys Seventh (MBIA
          Insd)......................................        5.000    08/15/25       1,036,610

 
                                               See Notes to Financial Statements



                                      E-18


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          TEXAS (CONTINUED)
$1,500    Texas Wtr Dev Brd Rev St Revolving Fd Sr
          Lien Ser B.................................        5.250%   07/15/17   $   1,624,245
 1,000    Trinity River Auth TX Rev Tarrant Cnty Wtr
          Proj Impt & Rfdg (MBIA Insd)...............        5.500    02/01/21       1,112,620
 2,500    University TX Rev Fin Sys Ser B............        5.250    08/15/20       2,724,175
                                                                                 -------------
                                                                                    43,658,138
                                                                                 -------------
          UTAH  0.4%
 1,000    Salt Lake Cnty, UT College Rev Westminster
          College Proj...............................        5.750    10/01/27       1,018,260
   105    Utah St Hsg Fin Agy Single Family Mtg Ser B
          Class 2 (AMT) (FHA/VA Gtd).................        6.250    07/01/14         105,541
                                                                                 -------------
                                                                                     1,123,801
                                                                                 -------------
          WASHINGTON  5.4%
 3,410    Clark Cnty, WA Pub Util Dist Rfdg (FSA
          Insd)......................................        5.500    01/01/08       3,710,626
 2,595    Clark Cnty, WA Pub Util Dist Rfdg (FSA
          Insd)......................................        5.500    01/01/09       2,873,418
 1,300    Energy Northwest WA Elec Rev Proj No 3 Ser
          A Rfdg (FSA Insd)..........................        5.500    07/01/17       1,447,368
 4,400    King Cnty, WA Ser B Rfdg (MBIA Insd).......        5.250    01/01/34       4,611,552
 1,000    Spokane, WA Pub Fac Dist Hotel (MBIA
          Insd)......................................        5.750    12/01/20       1,153,720
 2,100    Spokane, WA Pub Fac Dist Hotel (MBIA
          Insd)......................................        5.750    12/01/21       2,417,310
                                                                                 -------------
                                                                                    16,213,994
                                                                                 -------------
          WEST VIRGINIA  1.3%
 3,750    West Virginia Univ Rev Impt Ser C
          (FGIC Insd)................................        5.000    10/01/34       3,854,063
                                                                                 -------------
 
          WISCONSIN  2.1%
 2,345    Appleton, WI Wtrwks Rev Rfdg (FGIC Insd)...        5.375    01/01/19       2,587,731
 3,500    Milwaukee, WI Redev Auth Rev Milwaukee Pub
          Schs (AMBAC Insd)..........................        5.125    08/01/22       3,723,125
                                                                                 -------------
                                                                                     6,310,856
                                                                                 -------------
          GUAM  1.0%
 2,800    Guam Pwr Auth Rev Ser A (AMBAC Insd).......        5.250    10/01/34       2,963,968
                                                                                 -------------

 
See Notes to Financial Statements



                                      E-19



 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 


PAR
AMOUNT
(000)     DESCRIPTION                                    COUPON       MATURITY       VALUE
----------------------------------------------------------------------------------------------
                                                                     
          PUERTO RICO  0.3%
$1,000    Puerto Rico Indl Tourist Ed Med &
          Environmental Ctl Fac Fin Auth Higher
          Ed Rev.....................................        5.375%   02/01/19   $   1,043,650
                                                                                 -------------
 
TOTAL LONG-TERM INVESTMENTS  154.7%
  (Cost $433,097,519).........................................................     464,757,572
 
SHORT-TERM INVESTMENT  0.4%
  (Cost $1,200,000)...........................................................       1,200,000
                                                                                 -------------
 
TOTAL INVESTMENTS  155.1%
  (Cost $434,297,519).........................................................     465,957,572
LIABILITIES IN EXCESS OF OTHER ASSETS  (0.1%).................................        (374,602)
 
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS)  (55.0%)...................    (165,106,969)
                                                                                 -------------
 
NET ASSETS APPLICABLE TO COMMON SHARES  100.0%................................   $ 300,476,001
                                                                                 =============

 
Percentages are calculated as a percentage of net assets applicable to common
shares.
 
*   Zero coupon bond
 
(a) All or a portion of these securities have been physically segregated in
    connection with open futures contracts.
 
(b) Securities purchased on a when-issued or delayed delivery basis.
 
(c) These securities are restricted and may be resold only in transactions
    exempt from registration which are normally those transactions with
    qualified institutional buyers. Restricted securities comprise 0.9% of net
    assets applicable to common shares.
 
(d) Security is a "step-up" bond where the coupon increases or steps up at a
    predetermined date.
 
ACA--American Capital Access
 
AGC--AGC Insured Custody Certificates
 
AMBAC--AMBAC Indemnity Corp.
 
AMT--Alternative Minimum Tax
 
FGIC--Financial Guaranty Insurance Co.
 
FHA/VA--Federal Housing Administration/Department of Veterans Affairs
 
FSA--Financial Security Assurance Inc.
 
GNMA--Government National Mortgage Association
 
LOC--Letter of Credit
 
MBIA--Municipal Bond Investors Assurance Corp.
 
XLCA--XL Capital Assurance Inc.
 
                                               See Notes to Financial Statements

                                      E-20



 

VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
December 31, 2004 (Unaudited)
 

                                                           
ASSETS:
Total Investments (Cost $434,297,519).......................  $465,957,572
Cash........................................................        64,316
Receivables:
  Interest..................................................     6,541,992
  Investments Sold..........................................        30,000
Other.......................................................         7,869
                                                              ------------
    Total Assets............................................   472,601,749
                                                              ------------
LIABILITIES:
Payables:
  Investments Purchased.....................................     6,237,589
  Investment Advisory Fee...................................       216,805
  Income Distributions--Common Shares.......................        95,096
  Variation Margin on Futures...............................        25,313
  Capital Gain Distributions................................        15,290
  Other Affiliates..........................................        10,689
Trustees' Deferred Compensation and Retirement Plans........       296,176
Accrued Expenses............................................       121,821
                                                              ------------
    Total Liabilities.......................................     7,018,779
Preferred Shares (including accrued distributions)..........   165,106,969
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $300,476,001
                                                              ============
NET ASSET VALUE PER COMMON SHARE ($300,476,001 divided by
  28,684,985 shares outstanding)............................  $      10.48
                                                              ============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
  shares authorized, 28,684,985 shares issued and
  outstanding)..............................................  $    286,850
Paid in Surplus.............................................   265,829,515
Net Unrealized Appreciation.................................    31,543,905
Accumulated Undistributed Net Investment Income.............     1,902,825
Accumulated Net Realized Gain...............................       912,906
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $300,476,001
                                                              ============
PREFERRED SHARES ($.01 par value, authorized 1,000,000
  shares, 330 issued with liquidation preference of $500,000
  per share)................................................  $165,000,000
                                                              ============
NET ASSETS INCLUDING PREFERRED SHARES.......................  $465,476,001
                                                              ============

 
See Notes to Financial Statements



                                      E-21



VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL STATEMENTS continued
 
Statement of Operations
For the Six Months Ended December 31, 2004 (Unaudited)
 

                                                           
INVESTMENT INCOME:
Interest....................................................  $11,045,779
                                                              -----------
EXPENSES:
Investment Advisory Fee.....................................    1,361,361
Preferred Share Maintenance.................................      216,797
Trustees' Fees and Related Expenses.........................       49,037
Shareholder Services........................................       36,739
Legal.......................................................       25,485
Custody.....................................................       13,671
Other.......................................................      108,715
                                                              -----------
    Total Expenses..........................................    1,811,805
                                                              -----------
NET INVESTMENT INCOME.......................................  $ 9,233,974
                                                              ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
  Investments...............................................  $ 1,075,706
  Futures...................................................     (257,970)
                                                              -----------
Net Realized Gain...........................................      817,736
                                                              -----------
Unrealized Appreciation/Depreciation:
  Beginning of the Period...................................   19,234,329
  End of the Period:
    Investments.............................................   31,660,053
    Futures.................................................     (116,148)
                                                              -----------
                                                               31,543,905
                                                              -----------
Net Unrealized Appreciation During the Period...............   12,309,576
                                                              -----------
NET REALIZED AND UNREALIZED GAIN............................  $13,127,312
                                                              ===========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS.....................  $(1,231,587)
                                                              ===========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
  OPERATIONS................................................  $21,129,699
                                                              ===========

 
                                               See Notes to Financial Statements

                                      E-22


 
VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL STATEMENTS continued
 
Statements of Changes in Net Assets (Unaudited)
 


                                                               FOR THE            FOR THE
                                                          SIX MONTHS ENDED      YEAR ENDED
                                                          DECEMBER 31, 2004    JUNE 30, 2004
                                                          ----------------------------------
                                                                         
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................................    $  9,233,974       $ 18,608,395
Net Realized Gain.......................................         817,736          1,489,594
Net Unrealized Appreciation/Depreciation During the
  Period................................................      12,309,576        (19,692,828)
Distributions to Preferred Shareholders:
Net Investment Income...................................      (1,231,587)        (1,580,017)
                                                            ------------       ------------
Change in Net Assets Applicable to Common Shares from
  Operations............................................      21,129,699         (1,174,856)
Distributions to Common Shareholders:
  Net Investment Income.................................      (8,605,002)       (17,210,089)
  Net Realized Gain.....................................        (232,348)        (1,325,170)
                                                            ------------       ------------
 
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
  FROM INVESTMENT ACTIVITIES............................      12,292,349        (19,710,115)
                                                            ------------       ------------
 
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period.................................     288,183,652        307,893,767
                                                            ------------       ------------
End of the Period (Including accumulated undistributed
  net investment income of $1,902,825 and $2,505,440,
  respectively).........................................    $300,476,001       $288,183,652
                                                            ============       ============

 
See Notes to Financial Statements

                                      E-23


VAN KAMPEN MUNICIPAL INCOME TRUST
 
FINANCIAL HIGHLIGHTS (UNAUDITED)
 
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
 


                                                      SIX MONTHS
                                                        ENDED
                                                     DECEMBER 31,    ------------------------
                                                         2004           2004          2003
                                                     ----------------------------------------
                                                                          
NET ASSET VALUE, BEGINNING OF THE PERIOD............  $    10.05     $    10.73    $     9.99
                                                      ----------     ----------    ----------
  Net Investment Income.............................         .32            .65           .66
  Net Realized and Unrealized Gain/Loss.............         .46           (.62)          .70
Common Share Equivalent of Distributions Paid to
  Preferred Shareholders:
  Net Investment Income.............................        (.04)          (.06)         (.07)
                                                      ----------     ----------    ----------
Total from Investment Operations....................         .74           (.03)         1.29
Distributions Paid to Common Shareholders:
  Net Investment Income.............................        (.30)          (.60)         (.55)
  Net Realized Gain.................................        (.01)          (.05)          -0-
                                                      ----------     ----------    ----------
NET ASSET VALUE, END OF THE PERIOD..................  $    10.48     $    10.05    $    10.73
                                                      ==========     ==========    ==========
 
Common Share Market Price at End of the Period......  $     9.04     $     8.87    $     9.66
Total Return (a)....................................       5.35%*        -1.63%        15.76%
Net Assets Applicable to Common Shares at End of the
  Period (In millions)..............................  $    300.5     $    288.2    $    307.9
Ratio of Expenses to Average Net Assets Applicable
  to Common Shares (b)..............................       1.21%          1.23%         1.21%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (b)...................       6.15%          6.25%         6.35%
Portfolio Turnover..................................         11%*           22%           35%
 
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
  Preferred Shares (b)..............................        .78%           .79%          .78%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (c)...................       5.33%          5.72%         5.67%
 
SENIOR SECURITIES:
Total Preferred Shares Outstanding..................         330            330           330
Asset Coverage Per Preferred Share (d)..............  $1,410,857     $1,373,451    $1,433,101
Involuntary Liquidating Preference Per Preferred
  Share.............................................  $  500,000     $  500,000    $  500,000
Average Market Value Per Preferred Share............  $  500,000     $  500,000    $  500,000

 
*  Non-Annualized
 
(a)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.
 
(b)Ratios do not reflect the effect of dividend payments to preferred
   shareholders.
 
(c)Ratios reflect the effect of dividend payments to preferred shareholders.
 
(d)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.
 
(e)As required, effective July 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 June 30, 2002 was to increase net investment income
   per share by $.01, decrease 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 .04%. Per shares, supplemental data for
   the period prior to June 30, 2002 have not been restated to reflect this
   change in presentation.
 



                                      E-24





 
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------------------------
      2002(e)        2001         2000         1999         1998         1997         1996         1995
----------------------------------------------------------------------------------------------------------
                                                                        
     $     9.62   $     8.99   $     9.56   $    10.26   $    10.01   $     9.76   $     9.76   $     9.92
     ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
            .70          .75          .81          .84          .89          .92          .94          .96
            .31          .66         (.55)        (.70)         .26          .26          .05         (.06)
           (.11)        (.23)        (.22)        (.19)        (.21)        (.21)        (.22)        (.22)
     ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
            .90         1.18          .04         (.05)         .94          .97          .77          .68
           (.53)        (.55)        (.61)        (.65)        (.69)        (.72)        (.77)        (.84)
            -0-          -0-          -0-          -0-          -0-          -0-          -0-          -0-
     ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
     $     9.99   $     9.62   $     8.99   $     9.56   $    10.26   $    10.01   $     9.76   $     9.76
     ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========
 
     $     8.85   $     8.89   $   8.6875   $    9.625   $   10.875   $   10.875   $    9.875   $   11.125
          5.64%        8.88%       -3.08%       -5.68%        6.85%       18.32%       -4.27%        8.59%
     $    286.4   $    276.0   $    258.0   $    274.1   $    292.3   $    283.2   $    273.7   $    271.1
          1.25%        1.27%        1.32%        1.24%        1.23%        1.28%        1.31%        1.33%
          6.99%        7.94%        9.06%        8.23%        8.69%        9.25%        9.47%        9.85%
            41%          50%          54%          98%         103%          53%          29%          38%
 
           .79%         .79%         .81%         .79%         .79%         .80%         .82%         .83%
          5.92%        5.50%        6.59%        6.35%        6.64%        7.18%        7.26%        7.56%
 
            330          330          330          330          330          330          330          330
     $1,368,316   $1,336,403   $1,281,820   $1,330,642   $1,385,892   $1,358,326   $1,329,390   $1,321,483
     $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000
     $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000   $  500,000

 
See Notes to Financial Statements




                                      E-25



VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2004 (UNAUDITED)
 
1. SIGNIFICANT ACCOUNTING POLICIES
 
Van Kampen Municipal Income Trust (the "Trust") is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Trust's investment objective is to provide a high level of
current income exempt from federal income tax, consistent with preservation of
capital. The Trust commenced investment operations on August 26, 1988.
 
    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 is considered
to approximate 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 December 31, 2004, the Trust had $6,237,589 of when-issued
or 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 Subchapter M 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.
 

                                      E-26



VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 
    At December 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
 

                                                             
Cost of investments for tax purposes........................    $434,025,211
                                                                ------------
Gross tax unrealized appreciation...........................    $ 31,954,085
Gross tax unrealized depreciation...........................         (21,724)
                                                                ------------
Net tax unrealized appreciation on investments..............    $ 31,932,361
                                                                ============

 
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 to common shareholders. Distributions from net
realized gains for book purposes may include short-term capital gains and gains
on future transactions. All short-term capital gains and a portion of futures
gains are included as ordinary income for tax purposes.
 
    The tax character of distributions paid during the year ended June 30, 2004
was as follows:
 


                                                                   2004
                                                             
Distributions paid from:
  Ordinary income...........................................    $  145,772
  Long-term capital gain....................................     1,305,092
                                                                ----------
                                                                $1,450,864
                                                                ==========

 
    As of June 30, 2004, the components of distributable earnings on a tax basis
were as follows:
 

                                                             
Undistributed ordinary income...............................    $ 27,509
Undistributed long-term capital gain........................     177,940

 
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
 
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") provides investment advice and facilities to the
Trust for an annual fee payable monthly of .55% of the average daily net assets
of the Trust. Effective November 1, 2004, the investment advisory fee was
reduced from .60% to .55%.
 
    For the six months ended December 31, 2004, the Trust recognized expenses of
approximately $13,500 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Trust is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Trust.
 
    Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each trust. For the six months ended
December 31, 2004, the Trust recognized expenses of approximately $24,500
representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van
Kampen") 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.
 

                                      E-27



VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 
    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
also 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 $52,502,188 and $49,008,240,
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
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 or agreements.
 
    During the period, the Trust invested in futures contracts, a type of
derivative. A futures contract is an arrangement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Trust
generally invests in exchange traded futures on U.S. Treasury Bonds and Notes
and typically closes the contract prior to the delivery date. 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 futures
commission merchant pursuant to the 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 an 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.
 


                                      E-28



VAN KAMPEN MUNICIPAL INCOME TRUST
 
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2004 (UNAUDITED) continued
 
    Transactions in futures contracts for the six months ended December 31,
2004, were as follows:
 


                                                                CONTRACTS
                                                             
Outstanding at June 30, 2004................................        71
Futures Opened..............................................       234
Futures Closed..............................................      (149)
                                                                  ----
Outstanding at December 31, 2004............................       156
                                                                  ====

 
    The futures contracts outstanding as of December 31, 2004, and the
description and unrealized appreciation/depreciation are as follows:
 


                                                                            UNREALIZED
                                                              CONTRACTS    DEPRECIATION
                                                                     
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures March 2005 (Current
  Notional Value of $111,938 per contract)..................      27        $ (27,952)
U.S. Treasury Notes 5-Year Futures March 2005 (Current
  Notional Value of $109,531 per contract)..................     129          (88,196)
                                                                 ---        ---------
                                                                 156        $(116,148)
                                                                 ---        ---------

 
5. PREFERRED SHARES
 
The Trust has outstanding 330 shares of Rate Adjusted Tax-Exempt Shares
("Rates") in three series of 110 shares each. Dividends are cumulative and the
dividend rate is currently reset every 28 days through an auction process. The
average rate in effect on December 31, 2004 was 1.550%. During the six months
ended December 31, 2004, the rates ranged from 1.156% to 1.900%.
 
    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 Rates are redeemable at the option of the Trust in whole or in part at a
price of $500,000 per share plus accumulated and unpaid dividends. The Trust is
subject to certain asset coverage tests, and the Rates are subject to mandatory
redemption if the tests are not met.
 
6. INDEMNIFICATIONS
 
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
 


                                      E-29



VAN KAMPEN MUNICIPAL INCOME TRUST
 
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
 
BOARD OF TRUSTEES
 
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
 
INVESTMENT ADVISER
 
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
 
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 LLP
333 West Wacker Drive
Chicago, Illinois 60606
 
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
 
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
 
*   "Interested persons" of the Trust, as defined in the Investment Company Act
    of 1940, as amended.



                                      E-30



VAN KAMPEN
 
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
 
    We are required by federal law to provide you with a copy of our Privacy
Policy annually.
 
    The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
 
    This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
 
    Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
 
WE RESPECT YOUR PRIVACY
 
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
 
    We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
 
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
 
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
 
    For example:
 
     --  We may collect information such as your name, address, e-mail address,
         telephone/fax numbers, assets, income and investment objectives through
         applications and other forms you submit to us.
 
     --  We may obtain information about account balances, your use of
         account(s) and the types of products and services you prefer to receive
         from us through your dealings and transactions with us and other
         sources.
 
     --  We may obtain information about your creditworthiness and credit
         history from consumer reporting agencies.
 
     --  We may collect background information from and through third-party
         vendors to verify representations you have made and to comply with
         various regulatory requirements.
 
     --  If you interact with us through our public and private Web sites, we
         may collect information that you provide directly through online
         communications (such as an e-mail address). We may also collect
         information about your Internet service provider, your domain name,
         your computer's operating system and Web browser,
 
                                                             (continued on back)

                                      E-31



VAN KAMPEN
 
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
 
         your use of our Web sites and your product and service preferences,
         through the use of "cookies." "Cookies" recognize your computer each
         time you return to one of our sites, and help to improve our sites'
         content and personalize your experience on our sites by, for example,
         suggesting offerings that may interest you. Please consult the Terms of
         Use of these sites for more details on our use of cookies.
 
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
 
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
 
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
 
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
 
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
 
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
 
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
 
Copyright (C)2004 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC. 920, 919, 107
VMT SAR 3/05 RN04-01589P-Y012/04
                                                   (VAN KAMPEN INVESTMENTS LOGO)


                                      E-32





                                   APPENDIX F
                      MORGAN STANLEY INVESTMENT MANAGEMENT
                       PROXY VOTING POLICY AND PROCEDURES

IV.      POLICY STATEMENT

         Introduction -- Morgan Stanley Investment Management's ("MSIM") policy
and procedures for voting proxies ("Proxy Voting Policy and Procedures") with
respect to securities held in the accounts of clients apply to those MSIM
entities that provide discretionary investment management services and for which
a MSIM entity has authority to vote proxies. The policies and procedures and
general guidelines in this section will be reviewed and updated, as necessary,
to address new or revised proxy voting issues. The MSIM entities covered by
these policies and procedures currently include the following: Morgan Stanley
Investment Advisors Inc., Morgan Stanley AIP GP LP, Morgan Stanley Investment
Management Inc., Morgan Stanley Investment Management Limited, Morgan Stanley
Investment Management Company, Morgan Stanley Asset & Investment Trust
Management Co., Limited, Morgan Stanley Investment Management Private Limited,
Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP,
Van Kampen Asset Management, and Van Kampen Advisors Inc. (each a "MSIM
Affiliate" and collectively referred to as the "MSIM Affiliates").

         Each MSIM Affiliate will use its best efforts to vote proxies as part
of its authority to manage, acquire and dispose of account assets. With respect
to the MSIM registered management investment companies (Van Kampen,
Institutional and Advisor Funds) (collectively referred to as the "MSIM Funds"),
each MSIM Affiliate will vote proxies pursuant to authority granted under its
applicable investment advisory agreement or, in the absence of such authority,
as authorized by the Boards of Directors or Trustees of the MSIM Funds. A MSIM
Affiliate will not vote proxies if the "named fiduciary" for an ERISA account
has reserved the authority for itself, or in the case of an account not governed
by ERISA, the Investment Management or Investment Advisory Agreement does not
authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in a prudent
and diligent manner, vote proxies in the best interests of clients, including
beneficiaries of and participants in a client's benefit plan(s) for which the
MSIM Affiliates manage assets, consistent with the objective of maximizing
long-term investment returns ("Client Proxy Standard"). In certain situations, a
client or its fiduciary may provide a MSIM Affiliate with a proxy voting policy.
In these situations, the MSIM Affiliate will comply with the client's policy
unless to do so would be inconsistent with applicable laws or regulations or the
MSIM Affiliate's fiduciary responsibility.

         Proxy Research Services -- To assist the MSIM Affiliates in their
responsibility for voting proxies and the overall global proxy voting process,
Institutional Shareholder Services ("ISS") and the Investor Responsibility
Research Center ("IRRC") have been retained as experts in the proxy voting and
corporate governance area. ISS and IRRC are independent advisers that specialize
in providing a variety of fiduciary-level proxy-related services to
institutional investment managers, plan sponsors, custodians, consultants, and
other institutional investors. The services provided to MSIM Affiliates include
in-depth research, global issuer analysis, and voting recommendations. While the
MSIM Affiliates may review and utilize the ISS and IRRC recommendations in
making proxy voting decisions, they are in no way obligated to follow the ISS
and IRRC recommendations. In addition to research, ISS provides vote execution,
reporting, and recordkeeping. MSIM's Proxy Review Committee (see Section IV.A.
below) will carefully monitor and supervise the services provided by the proxy
research services.



                                      F-1




         Voting Proxies for Certain Non-US Companies -- While the proxy voting
process is well established in the United States and other developed markets
with a number of tools and services available to assist an investment manager,
voting proxies of non-US companies located in certain jurisdictions,
particularly emerging markets, may involve a number of problems that may
restrict or prevent a MSIM Affiliate's ability to vote such proxies. These
problems include, but are not limited to: (i) proxy statements and ballots being
written in a language other than English; (ii) untimely and/or inadequate notice
of shareholder meetings; (iii) restrictions on the ability of holders outside
the issuer's jurisdiction of organization to exercise votes; (iv) requirements
to vote proxies in person, (v) the imposition of restrictions on the sale of the
securities for a period of time in proximity to the shareholder meeting; and
(vi) requirements to provide local agents with power of attorney to facilitate
the MSIM Affiliate's voting instructions. As a result, clients' non-U.S. proxies
will be voted on a best efforts basis only, after weighing the costs and
benefits of voting such proxies, consistent with the Client Proxy Standard. ISS
has been retained to provide assistance to the MSIM Affiliates in connection
with voting their clients' non-US proxies.

III.     GENERAL PROXY VOTING GUIDELINES

         To ensure consistency in voting proxies on behalf of its clients, MSIM
Affiliates will follow (subject to any exception set forth herein) these Proxy
Voting Policies and Procedures, including the guidelines set forth below. These
guidelines address a broad range of issues, including board size and
composition, executive compensation, anti-takeover proposals, capital structure
proposals and social responsibility issues and are meant to be general voting
parameters on issues that arise most frequently. The MSIM Affiliates, however,
may, pursuant to the procedures set forth in Section IV. below, vote in a manner
that is not in accordance with the following general guidelines, provided the
vote is approved by the Proxy Review Committee and is consistent with the Client
Proxy Standard.

VI.      GUIDELINES

         A.   MANAGEMENT PROPOSALS

              1.  When voting on routine ballot items, unless otherwise
                  determined by the Proxy Review Committee, the following
                  proposals will be voted in support of management.

                  o     Selection or ratification of auditors.

                  o     Approval of financial statements, director and auditor
                        reports.

                  o     General updating/corrective amendments to the chatter.

                  o     Approval of the payment of a dividend.

                  o     Proposals to limit Directors' liability and/or broaden
                        indemnification of Directors.

                  o     Proposals requiring that a certain percentage (up to
                        66%) of the company's Board members be independent
                        Directors.

                  o     Proposals requiring that members of the company's
                        compensation, nominating and audit committees be
                        comprised of independent or unaffiliated Directors.


                                       F-2



                  o     Proposals recommending set retirement ages or requiring
                        specific levels of stock ownership by Directors.

                  o     Proposals to eliminate cumulative voting.

                  o     Proposals to eliminate preemptive rights.

                  o     Proposals for confidential voting and independent
                        tabulation of voting results.

                  o     Proposals related to the conduct of the annual meeting
                        except those proposals that relate to the "transaction
                        of such other business which may come before the
                        meeting."

              2.  Election of Directors. In situations where no conflict exists,
                  and where no specific governance deficiency has been noted,
                  unless otherwise determined by the Proxy Review Committee,
                  will be voted in support of nominees of management.

                        Unless otherwise determined by the Proxy Review
                  Committee, a withhold vote will be made where:

                        (i)     A nominee has, or any time during the previous
                                three years had, a relationship with the issuer
                                (e.g., investment banker, counsel or other
                                professional service provider, or familial
                                relationship with a senior officer of the
                                issuer) that may impair his or her independence;

                        (ii)    A direct conflict exists between the interests
                                of the nominee and the public shareholders; or

                        (iii)   Where the nominees standing for election have
                                not taken action to implement generally accepted
                                governance practices for which there is a
                                "bright line" test. These would include
                                elimination of dead hand or slow hand poison
                                pills, requiring Audit, Compensation or
                                Nominating Committees to be composed of
                                independent directors and requiring a majority
                                independent board.

              3.  The following non-routine proposals, which potentially may
                  have a substantive financial or best interest impact on a
                  shareholder, unless otherwise determined by the Proxy Review
                  Committee, will be voted in support of management.

                  CAPITALIZATION CHANGES

                  o     Proposals relating to capitalization changes that
                        eliminate other classes of stock and voting rights.

                  o     Proposals to increase the authorization of existing
                        classes of common stock (or securities convertible into
                        common stock) if. (i) a clear and legitimate business
                        purpose is stated; (ii) the number of shares requested




                                       F-3



                        is reasonable in relation to the purpose for which
                        authorization is requested; and (iii) the authorization
                        does not exceed 100% of shares currently authorized and
                        at least 30% of the new authorization will be
                        outstanding.

                  o     Proposals to create a new class of preferred stock or
                        for issuances of preferred stock up to 50% of issued
                        capital.

                  o     Proposals for share repurchase plans.

                  o     Proposals to reduce the number of authorized shares of
                        common or preferred stock, or to eliminate classes of
                        preferred stock.

                  o     Proposals to effect stock splits.

                  o     Proposals to effect reverse stock splits if management
                        proportionately reduces the authorized share amount set
                        forth in the corporate charter. Reverse stock splits
                        that do not adjust proportionately to the authorized
                        share amount will generally be approved if the resulting
                        increase in authorized shares coincides with the proxy
                        guidelines set forth above for common stock increases.

                  COMPENSATION

                  o     Proposals relating to Director fees, provided the
                        amounts are not excessive relative to outer companies in
                        the country or industry.

                  o     Proposals for employee stock purchase plans that permit
                        discounts up to 15%, but only for grants that are part
                        of a broad based employee plan, including all
                        non-executive employees.

                  o     Proposals for the establishment of Employee Stock Option
                        Plans and other employee ownership plans.

                  ANTI-TAKEOVER MATTERS

                  o     Proposals to modify or rescind existing supermajority
                        vote requirements to amend the charters or bylaws.

                  o     Proposals relating to the adoption of anti-greenmail
                        provisions provided that the proposal: (i) defines
                        greenmail; (ii) prohibits buyback offers to large block
                        holders not made to all shareholders or not approved by
                        disinterested shareholders; and (iii) contains no
                        anti-takeover measures or other provisions restricting
                        the rights of shareholders.

              4.  The following non-routine proposals, which potentially may
                  have a substantive financial or best interest impact on the
                  shareholder, unless otherwise determined by the Proxy Review
                  Committee, will be voted against (notwithstanding management
                  support).



                                       F-4


                  o     Proposals to establish cumulative voting rights in the
                        election of directors.

                  o     Proposals relating to capitalization changes that add
                        classes of stock which substantially dilute the voting
                        interests of existing shareholders.

                  o     Proposals to increase the authorized number of shares of
                        existing classes of stock that carry preemptive rights
                        or super-voting rights.

                  o     Proposals to create "blank check" preferred stock.

                  o     Proposals relating to changes in capitalization by 100%
                        or more.

                  o     Compensation proposals that allow for discounted stock
                        options that have not been offered to employees in
                        general.

                  o     Proposals to amend bylaws to require a supermajority
                        shareholder vote to pass or repeal certain provisions.

                  o     Proposals to indemnify auditors.

              5.  The following types of non-routine proposals, which
                  potentially may have a substantive financial or best interest
                  impact on an issuer, will be voted as determined by the Proxy
                  Review Committee.

                  CORPORATE TRANSACTIONS

                  o     Proposals relating to mergers, acquisitions and other
                        special corporate transactions (i.e., takeovers,
                        spin-offs, sales of assets, reorganizations,
                        restructurings and recapitalizations) will be examined
                        on a case-by-case basis. In all cases, ISS and IRRC
                        research and analysis will be used along with MSIM
                        Affiliates' research and analysis, including, among
                        other things, MSM internal company-specific knowledge.

                  o     Proposals relating to change-in-control provisions in
                        non-salary compensation plans, employment contracts, and
                        severance agreements that benefit management and would
                        be costly to shareholders if triggered.

                  o     Proposals relating to shareholders rights plans that
                        allow appropriate offers to shareholders to be blocked
                        by the board or trigger provisions that prevent
                        legitimate offers from proceeding. 

                  o     Proposals relating to Executive/ Director stock option
                        plans. Generally, stock option plans should meet the
                        following criteria:

                        (i)     Whether the stock option plan is incentive
                                based;

                        (ii)    For mature companies, should be no more than 5%
                                of the issued capital at the time of approval;




                                       F-5



                        (iii)   For growth companies, should be no more than 10%
                                of the issued capital at the time of approval.

                  ANTI-TAKEOVER PROVISIONS

                  o     Proposals requiring shareholder ratification of poison
                        pills.

                  o     Proposals relating to anti-takeover and related
                        provisions that serve to prevent the majority of
                        shareholders from exercising their rights or effectively
                        deter the appropriate tender offers and other offers.

         B.   SHAREHOLDER PROPOSALS

              1.  The following shareholder proposals will be supported, unless
                  otherwise determined by the Proxy Review Committee:

                  o     Proposals requiring auditors to attend the annual
                        meeting of shareholders.

                  o     Proposals requiring non-U.S. companies to have a
                        separate Chairman and CEO.

                  o     Proposals requiring that members of the company's
                        compensation, nominating and audit committees be
                        comprised of independent or unaffiliated Directors.

                  o     Proposals requiring that a certain percentage of the
                        company's members be comprised of independent and
                        unaffiliated Directors.

                  o     Proposals requiring confidential voting.

                  o     Proposals to reduce or eliminate of supermajority voting
                        requirements.

                  o     Proposals requiring shareholder approval for shareholder
                        rights plan or poison pill.

                  o     Proposals to require the company to expense stock
                        options.

              2.  The following shareholder proposals will be voted as
                  determined by the Proxy Review Committee.

                  o     Proposals that limit tenure of directors.

                  o     Proposals to limit golden parachutes.

                  o     Proposals requiring directors to own large amounts of
                        stock to be eligible for election.

                  o     Proposals that request or require disclosure of
                        executive compensation in addition to the disclosure
                        required by the Securities and Exchange Commission
                        ("SEC") regulations.



                                       F-6



                  o     Proposals that limit retirement benefits or executive
                        compensation.

                  o     Proposals requiring shareholder approval for bylaw or
                        charter amendments.

                  o     Proposals requiring shareholder approval of executive
                        compensation.

                  o     Proposals requiring shareholder approval of golden
                        parachutes.

                  o     Proposals to eliminate certain anti-takeover related
                        provisions.

                  o     Proposals to prohibit payment of greenmail.

              3.  The following shareholder proposals will not be supported,
                  unless otherwise determined by the Proxy Review Committee.

                  o     Proposals to declassify the Board of Directors (if
                        management supports a classified board).

                  o     Proposals requiring a U.S. company to have a separate
                        Chairman and CEO.

                  o     Proposals requiring that the company prepare reports
                        that are costly to provide or that would require
                        duplicative efforts or expenditures that are of a
                        non-business nature or would provide no pertinent
                        information from the perspective of institutional
                        shareholders.

                  o     Proposals to add restrictions related to social,
                        political or special interest issues that impact the
                        ability of the company to do business or be competitive
                        and that have a significant financial or best interest
                        impact to the shareholders.

                  o     Proposals that require inappropriate endorsements or
                        corporate actions.

VII.     ADMINISTRATION OF PROXY POLICIES AND PROCEDURES

         A.   PROXY REVIEW COMMITTEE

              1.  The MSIM Proxy Review Committee ("Committee") is responsible
                  for creating and implementing MSIM's Proxy Voting Policy and
                  Procedures and, in this regard, has expressly adopted them.

                  (a)   The Committee, which is appointed by MSIM's Chief
                        Investment Officer ("CIO"), consists of senior
                        investment professionals who represent the different
                        investment disciplines and geographic locations of the
                        firm. The Committee is responsible for establishing
                        MSIM's proxy voting policy and guidelines and
                        determining how MSIM will vote proxies on an ongoing
                        basis.




                                       F-7






                  (b)   The Committee will periodically review and have the
                        authority to amend, as necessary, these Proxy Voting
                        Policy and Procedures and establish and direct voting
                        positions consistent with the Client Proxy Standard.

                  (c)   The Committee will meet at least monthly to (among other
                        matters): (1) address any outstanding issues relating to
                        MSIM's Proxy Voting Policy and Procedures; and (2)
                        review proposals at upcoming shareholder meetings of
                        MSIM portfolio companies in accordance with this Policy
                        including, as appropriate, the voting results of prior
                        shareholder meetings of the same issuer where a similar
                        proposal was presented to shareholders. The Committee,
                        or its designee, will timely communicate to ISS MSIM's
                        Proxy Voting Policy and Procedures (and any amendments
                        to them and/or any additional guidelines or procedures
                        it may adopt).

                  (d)   The Committee will meet on an ad hoc basis to (among
                        other matters): (1) authorize "split voting" (i.e.,
                        allowing certain shares of the same issuer that are the
                        subject of the same proxy solicitation and held by one
                        or more MSIM portfolios to be voted differently than
                        other shares) and/or "override voting" (i.e., voting all
                        MSIM portfolio shares in a manner contrary to the Proxy
                        Voting Policy and Procedures); (2) review and approve
                        upcoming votes, as appropriate, for matters for which
                        specific direction has been provided in these Policy and
                        Procedures; and (3) determine how to vote matters for
                        which specific direction has not been provided in these
                        Policy and Procedures. Split votes will generally not be
                        approved within a single Global Investor Group team. The
                        Committee may take into account ISS and IRRC
                        recommendations and the research as well as any other
                        relevant information they may request or receive.

                  (e)   In addition to the procedures discussed above, if the
                        Committee determines that an issue raises a potential
                        material conflict of interest, or gives rise to the
                        appearance of a potential material conflict of interest,
                        the Committee will request a special committee to
                        review, and recommend a course of action with respect
                        to, the conflict(s) in question ("Special Committee").
                        The Special Committee shall be comprised of the Chairman
                        of the Proxy Review Committee, the Compliance Director
                        for the area of the firm involved or his/her designee, a
                        senior portfolio manager (if practicable, one who is a
                        member of the Proxy Review Committee) designated by the
                        Proxy Review Committee and MSIM's Chief Investment
                        Officer or his/her designee. The Special Committee may
                        request the assistance of MSIM's General Counsel or
                        his/her designee and will have sole discretion to cast a
                        vote. In addition to the research provided by ISS and
                        IRRC, the Special Committee may request analysis from
                        MSIM Affiliate investment professionals and outside
                        sources to the extent it deems appropriate.

                  (f)   The Committee and the Special Committee, or their
                        designee(s), will document in writing all of their
                        decisions and actions, which documentation will be
                        maintained by the Committee and the Special Committee,
                        or their designee(s), for a period of at least 6 years.
                        To the


                                       F-8



                        extent these decisions relate to a security held by a
                        MSIM U.S. registered investment company, the Committee
                        and Special Committee, or their designee(s), will report
                        their decisions to each applicable Board of Trustees/
                        Directors of those investment companies at each Board's
                        next regularly scheduled Board meeting. The report will
                        contain information concerning decisions made by the
                        Committee and Special Committee during the most recently
                        ended calendar quarter immediately preceding the Board
                        meeting.

                  (g)   The Committee and Special Committee, or their
                        designee(s), will timely communicate to applicable
                        portfolio managers, the Compliance Departments and, as
                        necessary, ISS, decisions of the Committee and Special
                        Committee so that, among other things, ISS will vote
                        proxies consistent with their decisions.

         B.   IDENTIFICATION OF MATERIAL CONFLICTS OF INTEREST

              1.  If there is a possibility that a vote may involve a material
                  conflict of interest, the vote must be decided by the Special
                  Committee in consultation with MSIM's General Counsel or
                  his/her designee.

              2.  A material conflict of interest could exist in the following
                  situations, among others:

                  (a)   The issuer soliciting the vote is a client of MSIM or an
                        affiliate of MSIM and the vote is on a material matter
                        affecting the issuer;

                  (b)   The proxy relates to Morgan Stanley common stock or any
                        other security issued by Morgan Stanley or its
                        affiliates; or

                  (c)   Morgan Stanley has a material pecuniary interest in the
                        matter submitted for a vote (e.g., acting as a financial
                        advisor to a merger or acquisition for which Morgan
                        Stanley will be paid a success fee if completed).

         C.  PROXY VOTING REPORTS

              1.  MSIM will promptly provide a copy of these Policy and
                  Procedures to any client requesting it. MSIM will also, upon
                  client request, promptly provide a report indicating how each
                  proxy was voted with respect to securities held in that
                  client's account.

              2.  MSIM's legal department is responsible for filing an annual
                  Form N-PX on behalf of each registered management investment
                  company for which such filing is required, indicating how all
                  proxies were voted with respect to such investment company's
                  holdings.





                                       F-9





                                   APPENDIX G
                         PRO FORMA FINANCIAL STATEMENTS

The following presents the pro forma financial statements for the combination of
Van Kampen Municipal Income Trust and Van Kampen Trust for Investment Grade
Municipals. The statements are presented as of October 31, 2004, the most recent
interim period for which financial information is currently available.


The unaudited Pro Forma Portfolio of Investments and Pro Forma Statement of
Assets and Liabilities reflect the financial position as if the transaction
occurred on October 31, 2004. The Pro Forma Statement of Operations reflects the
expenses for the twelve months ended October 31, 2004. The pro forma statements
give effect to the proposed exchange of Van Kampen Trust for Investment Grade
Municipals shares for the assets and liabilities of the Van Kampen Municipal
Income Trust, with Van Kampen Trust for Investment Grade Municipals being the
surviving entity. The proposed transaction will be accounted for as a tax-free
reorganization in accordance with accounting principles generally accepted in
the United States. The historical cost basis of the investments is carried over
to the surviving entity. It is not anticipated that Van Kampen Trust for
Investment Grade Municipals will sell any securities of Van Kampen Municipal
Income Trust acquired in the reorganization other than in the ordinary course of
business.


   
                                      G-1




                        VAN KAMPEN MUNICIPAL INCOME TRUST
                VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
                        PROFORMA PORTFOLIO OF INVESTMENTS
                                October 31, 2004
                                   (Unaudited)




MUNICIPAL   TRUST FOR 
  INCOME   INVESTMENT                                                                                      TRUST FOR
  TRUST       GRADE    PROFORMA                                                                            INVESTMENT
   PAR      MUNICIPAL     PAR                                                                MUNICIPAL       GRADE
  AMOUNT   PAR AMOUNT   AMOUNT                                                              INCOME TRUST   MUNICIPAL      PROFORMA
  (000)       (000)      (000)    DESCRIPTION                             COUPON  MATURITY  MARKET VALUE  MARKET VALUE  MARKET VALUE
---------  ----------  --------   -----------                             ------  --------  ------------  ------------  ------------
                                                                                                
                                  MUNICIPAL BONDS    153.6%
                                  ALABAMA    1.1%
  $3,660        $ -     $ 3,660   Alabama St Brd Ed Rev & Impt Southn
                                  Univ St Cmnty Rfdg (MBIA Insd) (a)      5.250%  07/01/20  $  3,988,009  $         -   $  3,988,009
   1,320          -       1,320   Alabama St Univ Rev Tuit Ser B
                                  (Prerefunded @ 01/01/12) (MBIA Insd)    5.250   03/01/33     1,507,664            -      1,507,664
       -        750         750   Birmingham Baptist Med Ctr AL Baptist
                                  Hlth Sys Ser A                          5.875   11/15/24             -      781,710        781,710
       -      1,565       1,565   Jefferson Cnty, AL Swr Rev Impt Wts 
                                  Ser A (Prerefunded @ 02/01/11) 
                                  (FGIC Insd)                             5.000   02/01/41             -    1,745,554      1,745,554
       -        435         435   Jefferson Cnty, AL Swr Rev Impt Wts 
                                  Ser A (Prerefunded @ 02/01/11) 
                                  (FGIC Insd)                             5.000   02/01/41             -      487,296        487,296
                                                                                            -------------------------   ------------
                                                                                               5,495,673    3,014,560      8,510,233
                                                                                            -------------------------   ------------

                                  ALASKA    0.7%
   3,650          -       3,650   Alaska St Intl Arpt Rev Ser B 
                                  (AMBAC Insd)                            5.250   10/01/27     3,858,999            -      3,858,999
   1,575          -       1,575   Matanuska-Susitna Boro, AK Ctf Part 
                                  Pub Safety Bldg Lease (FSA Insd)        5.750   03/01/16     1,775,954            -      1,775,954
                                                                                            -------------------------   ------------
                                                                                               5,634,953            -      5,634,953
                                                                                            -------------------------   ------------

                                  ARIZONA    2.0%
   1,000          -       1,000   Arizona Hlth Fac Auth Hosp John C
                                  Lincoln Hlth Network                    6.375   12/01/37     1,061,500            -      1,061,500
       -      3,095       3,095   Arizona Sch Fac Brd Ctfs Ser B 
                                  (FSA Insd)                              5.250   09/01/19             -    3,429,539      3,429,539
       -      4,225       4,225   Arizona Tourism & Sports Auth 
                                  Multipurpose Stadium Fac Ser A 
                                  (MBIA Insd)                             5.375   07/01/23             -    4,606,517      4,606,517
       -      2,800       2,800   Phoenix, AZ Civic Impt Corp Arpt Rev 
                                  Jr Lien (AMT) (FGIC Insd)               5.375   07/01/29             -    2,847,796      2,847,796
       -      3,125       3,125   Salt River Proj AZ Agric Impt Salt 
                                  River Proj Ser A Rfdg                   5.250   01/01/06             -    3,248,125      3,248,125
                                                                                            -------------------------   ------------
                                                                                               1,061,500   14,131,977     15,193,477
                                                                                            -------------------------   ------------

                                  CALIFORNIA    12.4%
      -       2,895       2,895   ABC CA Uni Sch Dist Cap Apprec 
                                  Ser B (FGIC Insd)                         *     08/01/20             -    1,389,195      1,389,195
      -       1,300       1,300   Anaheim, CA Pub Fin Auth Lease Rev  
                                  Pub Impt Proj Ser C (FSA Insd)          6.000   09/01/16             -    1,580,137      1,580,137
   2,500          -       2,500   California St (AMBAC Insd)              5.000   04/01/21     2,645,100            -      2,645,100
   4,500      3,000       7,500   California St (AMBAC Insd)              5.125   10/01/27     4,691,565    3,127,710      7,819,275
   1,000          -       1,000   California St Dept Wtr Res Ctr Wtr  
                                  Sys Ser X (FGIC Insd)                   5.000   12/01/29     1,030,470            -      1,030,470
   1,000      1,000       2,000   California St Dept Wtr Res Pwr Ser A    6.000   05/01/15     1,170,680    1,170,680      2,341,360
   1,000          -       1,000   California St Dept Wtr Res Pwr Ser A
                                  (AMBAC Insd)                            5.500   05/01/16     1,142,280            -      1,142,280
   2,500      4,000       6,500   California St Dept Wtr Res Pwr Ser A
                                  (AMBAC Insd) (b)                        5.375   05/01/18     2,773,000    4,436,800      7,209,800
       -      1,320       1,320   California St Dept Wtr Res Pwr Ser A
                                  (MBIA Insd)                             5.125   05/01/19             -    1,430,180      1,430,180
       -      1,000       1,000   California St Pub Wks Brd UCLA 
                                  Replacement Hosp Ser A (FSA Insd)       5.375   10/01/20             -    1,097,880      1,097,880
   5,000          -       5,000   California St Univ Rev & Co 
                                  Systemwide Ser A (AMBAC Insd)           5.000   11/01/33     5,124,250            -      5,124,250
   5,000          -       5,000   Contra Costa, CA Home Mtg Fin Auth 
                                  Home Mtg Rev (Escrowed to Maturity) 
                                  (MBIA Insd)                               *     09/01/17     2,735,750            -      2,735,750
       -      2,000       2,000   El Dorado, CA Irr Dist Ctfs Ser A 
                                  (FGIC Insd)                             5.000   03/01/21             -    2,126,660      2,126,660
       -      2,000       2,000   Florin, CA Res Consv Dist Cap Impt 
                                  Elk Grove Wtr Svc Ser A (MBIA Insd)     5.000   09/01/33             -    2,051,040      2,051,040
       -      3,000       3,000   Florin, CA Res Consv Dist Cap Impt 
                                  Elk Grove Wtr Svc Ser B (MBIA Insd)     5.000   03/01/33             -    3,073,620      3,073,620
       -      2,000       2,000   Foothill/Eastern Corridor Agy CA Toll  
                                  Rd Rev Cap Apprec Rfdg (MBIA Insd)        *     01/15/17             -    1,091,480      1,091,480
       -     20,750      20,750   Foothill/Eastern Corridor Agy CA Toll  
                                  Rd Rev Sr Lien Ser A (Escrowed to 
                                  Maturity)                                 *     01/01/23             -    8,817,920      8,817,920
       -      3,000       3,000   Fremont, CA Uni Sch Dist Ser A 
                                  (FGIC Insd)                             5.000   08/01/25             -    3,139,410      3,139,410
   4,000          -       4,000   Los Angeles, CA Dept Wtr & Pwr Ser A
                                  (FGIC Insd)                             5.125   07/01/40     4,104,280            -      4,104,280
   2,500      2,500       5,000   Los Angeles, CA Uni Sch Dist Ser A 
                                  (FSA Insd)                              5.250   07/01/20     2,743,275    2,743,275      5,486,550
   2,000          -       2,000   Los Angeles, CA Wtr & Pwr Rev Pwr Sys
                                  Ser B (FSA Insd)                        5.000   07/01/28     2,068,840            -      2,068,840
   1,500          -       1,500   Metropolitan Wtr Dist Southn CA Auth
                                  Ser B 1 (FGIC Insd)                     5.000   10/01/33     1,542,900            -      1,542,900
       -      4,020       4,020   Oakland, CA Uni Sch Dist 
                                  (FGIC Insd) (a)                         5.250   08/01/18             -    4,472,049      4,472,049
   1,750      1,750       3,500   Palm Springs, CA Fin Auth Lease Rev
                                  Convention Ctr Proj Ser A (MBIA Insd)   5.500   11/01/35     1,927,835    1,927,835      3,855,670
       -      3,000       3,000   Port Oakland, CA Ser M (FGIC Insd)      5.250   11/01/18             -    3,342,060      3,342,060
       -      2,000       2,000   Salinas, CA Uni High Sch Dist Ser A 
                                  (MBIA Insd)                             5.000   06/01/27             -    2,072,680      2,072,680


                                      G-3


                                                                                                     
      -   3,000  3,000   San Francisco, CA City & Cnty Second Ser
                         Issue 29 B Rfdg (FGIC Insd)                  5.125  05/01/20              -     3,237,930        3,237,930
      -   1,210  1,210   Santa Clara, CA Elec Rev Sub Ser A (MBIA
                         Insd)                                        5.250  07/01/19              -     1,332,428        1,332,428
  1,000       -  1,000   Santa Clara Cnty, CA Brd Ed Rfdg (MBIA
                         Insd)                                        5.000  04/01/25      1,041,460             -        1,041,460
      -   3,745  3,745   Santa Clarita, CA Cmnty College (FGIC                                                        
                         Insd)                                        5.000  08/01/23              -     3,941,575        3,941,575
      -   3,000  3,000   Temecula, CA Redev Agy Tax Temecula Redev                                                    
                         Proj No 1 (MBIA Insd)                        5.250  08/01/36              -     3,136,740        3,136,740
                                                                                       ---------------------------    -------------
                                                                                          34,741,685    60,739,284       95,480,969
                                                                                       ---------------------------    -------------
                                                                                                                      
                         COLORADO    2.7%                                                                             
      -   4,000  4,000   Adams & Arapahoe Cntys CO Sch Dist 28 Ser                                                    
                         A (FSA Insd)                                 5.250  12/01/20              -     4,401,720        4,401,720
  1,500       -  1,500   Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev                                                     
                         E-470 Proj (Prerefunded @ 08/31/05)          7.000  08/31/26      1,609,095                      1,609,095
  1,000   1,000  2,000   Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev                                                     
                         E-470 Proj Ser B (Prerefunded @ 08/31/05)    6.950  08/31/20      1,072,310     1,072,310        2,144,620
      -   2,000  2,000   Aurora, CO Ctfs Part (AMBAC Insd)            5.500  12/01/30              -     2,174,700        2,174,700
  3,405       -  3,405   Colorado Ed & Cultural Fac Impt Charter                                                      
                         Sch Rfdg (XLCA Insd)                         5.250  12/01/23      3,642,124             -        3,642,124
  1,000   1,000  2,000   Colorado Hlth Fac Auth Rev Catholic Hlth                                                     
                         Initiatives Ser A (Escrowed to Maturity)     5.500  03/01/32      1,050,690     1,050,690        2,101,380
      -   1,125  1,125   Colorado Hlth Fac Auth Rev Hosp                                                              
                         Portercare Adventist Hlth                    6.500  11/15/31              -     1,236,645        1,236,645
      -      61     61   Colorado Hsg Fin Auth Single Family Pgm                                                      
                         Sr Ser B1 (AMT)                              7.650  11/01/26              -        61,310           61,310
  1,000       -  1,000   El Paso Cnty, CO Ctf Part Detention Fac                                                      
                         Proj Ser B (AMBAC Insd)                      5.375  12/01/18      1,123,200             -        1,123,200
      -   1,805  1,805   Lakewood, CO Ctfs Part (AMBAC Insd) (a)      5.300  12/01/16              -     2,011,131        2,011,131
                                                                                       ---------------------------    -------------
                                                                                           8,497,419    12,008,506       20,505,925
                                                                                       ---------------------------    -------------
                                                                                                                      
                         CONNECTICUT    1.0%                                                                          
      -   2,750  2,750   Bridgeport, CT Ser A Rfdg (FGIC Insd)        5.375  08/15/14              -     3,120,012        3,120,012
  1,750   1,830  3,580   Connecticut St Spl Oblig Pkg Rev Bradley                                                     
                         Intl Arpt Ser A (AMT) (ACA Insd)             6.600  07/01/24      1,896,633     1,983,336        3,879,969
  1,000       -  1,000   Hartford, CT Pkg Sys Rev Ser A               6.500  07/01/25      1,035,080             -        1,035,080
                                                                                       ---------------------------    -------------
                                                                                           2,931,713     5,103,348        8,035,061
                                                                                       ---------------------------    -------------
                                                                                                                      
                         DISTRICT OF COLUMBIA    0.9%                                                                 
  2,775       -  2,775   District of Columbia Hosp Rev Medlantic                                                      
                         Hlthcare Ser A Rfdg (Escrowed to                                                             
                         Maturity) (MBIA Insd)                        5.250  08/15/12      2,972,469             -        2,972,469
          2,000  2,000   District of Columbia Rev Friendship Pub                                                      
                         Charter Sch Inc (ACA Insd)                   5.750  06/01/18              -     2,202,700        2,202,700
              5      5   District of Columbia Ser E (FSA Insd)        6.000  06/01/13              -         5,066            5,066
          2,000  2,000   Metropolitan Washington DC Arpt Auth Sys                                                     
                         Ser A (AMT) (FGIC Insd)                      5.250  10/01/32              -     2,066,380        2,066,380
                                                                                       -------------  ------------    -------------
                                                                                           2,972,469     4,274,146        7,246,615
                                                                                       -------------  ------------    -------------
                          
                         FLORIDA    9.4%
      -   6,635  6,635   Dade Cnty, FL Spl Oblig Cap Apprec Ser B
                         Rfdg (Prerefunded @ 10/01/08) (AMBAC Insd)     *    10/01/26              -     2,005,495        2,005,495
  2,000   3,000  5,000   Escambia Cnty, FL Hlth Fac Auth Hlth Fac
                         Rev FL Hlthcare Fac Ln (AMBAC Insd)          5.950  07/01/20      2,054,520     3,081,780        5,136,300
      -   2,500  2,500   Florida St Brd Ed Cap Outlay Pub Ed Ser C
                         (FGIC Insd)                                  5.750  06/01/29              -     2,800,550        2,800,550
  1,000       -  1,000   Florida St Brd Ed Lottery Rev Ser A (FGIC
                         Insd)                                        5.750  07/01/11      1,151,140             -        1,151,140
      -   1,000  1,000   Florida St Brd Ed Lottery Rev Ser A (FGIC
                         Insd)                                        6.000  07/01/14              -     1,159,550        1,159,550
      -   1,400  1,400   Florida St Dept Corrections Ctf Part
                         Okeechobee Correctional (AMBAC Insd)         6.250  03/01/15              -     1,448,174        1,448,174
  2,000       -  2,000   Florida St Dept Environmental Prot
                         Preservtn Rev Ser A (FGIC Insd)              5.750  07/01/10      2,296,620             -        2,296,620
      -     605    605   Gulf Breeze, FL Rev Loc Govt Ln Ser E
                         (FGIC Insd) (c)                              5.050  12/01/20              -       656,812          656,812
      -   1,900  1,900   Gulf Breeze, FL Rev Loc Govt Ln Ser E
                         (FGIC Insd) (c)                              5.150  12/01/20              -     2,104,326        2,104,326
      -   1,000  1,000   Highlands Cnty, FL Hlth Fac Auth Rev Hosp
                         Adventist Hlth Sys Ser D                     5.375  11/15/35              -     1,035,450        1,035,450
  1,745       -  1,745   Hillsborough Cnty, FL Port Dist Tampa
                         Port Auth Proj Ser A (AMT) (MBIA Insd)       5.375  06/01/27      1,841,935             -        1,841,935
      -   4,550  4,550   Hillsborough Cnty, FL Sch Dist (AMBAC
                         Insd)                                        5.375  10/01/17              -     5,088,083        5,088,083
      -   2,000  2,000   Jacksonville, FL Sales Tax Rev Better
                         Jacksonville (MBIA Insd)                     5.250  10/01/19              -     2,215,420        2,215,420
  1,000   1,000  2,000   Jea, FL Elec Sys Rev Ser 3 Ser A
                         (Prerefunded @10/01/07)                      5.500  10/01/41      1,067,250     1,067,250        2,134,500
  1,000       -  1,000   Marion Cnty, FL Sch Brd Ctf (FSA Insd)       5.250  06/01/18      1,104,990             -        1,104,990
  1,500       -  1,500   Miami Beach, FL Stormwtr Rev (FGIC Insd)     5.250  09/01/25      1,606,245             -        1,606,245
      -   2,000  2,000   Miami-Dade Cnty, FL Aviation Miami Rev
                         Intl Arpt (AMT) (FGIC Insd)                  5.375  10/01/27              -     2,093,480        2,093,480
  1,720       -  1,720   Miami-Dade Cnty, FL Aviation Miami Rev
                         Intl Arpt (AMT) (FGIC Insd)                  5.375  10/01/32      1,788,834             -        1,788,834
      -   2,000  2,000   Miami-Dade Cnty, FL Aviation Ser A (AMT)
                         (FSA Insd)                                   5.125  10/01/35              -     2,037,320        2,037,320
      -   2,000  2,000   Miami-Dade Cnty, FL Hlth Fac Miami
                         Children Hosp Ser A Rfdg (AMBAC Insd)        5.000  08/15/20              -     2,111,420        2,111,420
      -   1,980  1,980   Miami-Dade, FL Sch Brd Ser C (Prerefunded
                         @10/01/11) (FSA Insd) (a)                    5.500  10/01/13              -     2,279,950        2,279,950
  3,000       -  3,000   Orange Cnty, FL Sch Brd Ctf Part Ser A
                         (AMBAC Insd)                                 5.250  08/01/14      3,376,440             -        3,376,440
  4,000       -  4,000   Orange Cnty, FL Tourist Dev Tax Rev
                         (AMBAC Insd)                                 5.625  10/01/14      4,497,520             -        4,497,520
  2,000       -  2,000   Orange Cnty, FL Tourist Dev Tax Rev
                         (AMBAC Insd)                                 5.500  10/01/31      2,174,000             -        2,174,000



                                      G-4



                                                                                             
      -     2,000     2,000  Palm Beach Cnty, FL Sch Brd
                             Ctf Ser E Rfdg (AMBAC Insd)         5.250    08/01/11             -        2,259,780      2,259,780
  1,190         -     1,190  Polk Cnty FL Util Sys Rev
                             (FGIC Insd)                         5.250    10/01/20     1,309,666                -      1,309,666
      -     1,655     1,655  Reedy Creek Impt Dist FL Ser A
                             Rfdg (AMBAC Insd)                   5.500    06/01/11             -        1,894,048      1,894,048
      -     3,465     3,465  Reedy Creek Impt Dist FL Ser C
                             (AMBAC Insd)                        4.750    06/01/15             -        3,540,225      3,540,225
      -     1,210     1,210  Saint Lucie Cnty, FL Sch Brd
                             Ctf Ser A (FSA Insd) (a)            5.500    07/01/14             -        1,381,360      1,381,360
      -     1,000     1,000  Tallahassee, FL Lease Rev FL
                             St Univ Proj Ser A (MBIA Insd)
                             (a)                                 5.500    08/01/17             -        1,121,350      1,121,350
  1,115         -     1,115  Tallahassee, FL Lease Rev FL
                             St Univ Proj Ser A (MBIA Insd)
                             (a)                                 5.500    08/01/19     1,250,305                -      1,250,305
      -     1,250     1,250  Tampa, FL Hosp Rev Cap Impt H
                             Lee Moffitt Ser A                   5.750    07/01/19             -        1,319,562      1,319,562
      -     2,880     2,880  Tampa, FL Occupational License
                             Ser A Rfdg (FGIC Insd)              5.375    10/01/15             -        3,257,107      3,257,107
      -     1,000     1,000  Village Ctr Cmnty Dev Dist FL
                             Recreational Rev Ser A (MBIA
                             Insd)                               5.125    11/01/36             -        1,042,130      1,042,130
                                                                                     -----------------------------   ------------
                                                                                      25,519,465       47,000,622     72,520,087
                                                                                     -----------------------------   ------------

                             GEORGIA    5.4%
      -     2,000     2,000  Atlanta, GA Arpt Passenger Fac
                             Charge Rev Gen Sub Lien Ser C
                             (FSA Insd)                          5.000    01/01/33             -        2,064,140      2,064,140
      -     3,715     3,715  Atlanta, GA Wtr & Wastewtr Rev
                             (FSA Insd)                          5.000    11/01/22             -        3,976,127      3,976,127
  4,023         -     4,023  Fulton Cnty, GA Lease Rev
                             (Acquired 12/23/94, Cost
                             $4,023,144) (d)                     7.250    06/15/10     4,169,707                -      4,169,707
      -     1,500     1,500  George L Smith II GA World
                             Congress Cent Auth Rev Domed
                             Stadium Proj Rfdg (AMT) (MBIA
                             Insd)                               5.500    07/01/20             -        1,636,230      1,636,230
  2,635         -     2,635  Georgia Muni Elec Auth Pwr Rev
                             Ser A (MBIA Insd)                   6.500    01/01/20     3,369,954                -      3,369,954
  3,000         -     3,000  Georgia Muni Elec Auth Pwr Rev
                             Ser A Rfdg (FGIC Insd) (a)          6.250    01/01/17     3,712,440                -      3,712,440
      -     5,660     5,660  Georgia Muni Elec Auth Pwr Rev
                             Ser Y (MBIA Insd)                   6.500    01/01/17             -        6,990,440      6,990,440
      -       240       240  Georgia Muni Elec Auth Pwr Rev
                             Ser Y (Escrowed to Maturity)
                             (MBIA Insd)                         6.500    01/01/17             -          296,887        296,887
  2,500         -     2,500  Georgia St Ser D                    6.000    10/01/05     2,595,450                -      2,595,450
  2,335         -     2,335  Georgia St Ser D                    6.000    10/01/06     2,512,297                -      2,512,297
      -     4,000     4,000  Municipal Elec Auth GA
                             Combustion Turbine Proj Ser A
                             (MBIA Insd)                         5.250    11/01/16             -        4,491,280      4,491,280
  2,000         -     2,000  Municipal Elec Auth GA
                             Combustion Turbine Proj Ser A
                             (MBIA Insd)                         5.250    11/01/22     2,157,740                -      2,157,740
    800         -       800  Royston, GA Hosp Auth Hosp Rev
                             Ctf Hlthcare Sys Inc                6.700    07/01/16       820,096                -        820,096
  2,500         -     2,500  Royston, GA Hosp Auth Hosp Rev
                             Ctf Hlthcare Sys Inc                6.500    07/01/27     2,493,250                -      2,493,250
                                                                                     -----------------------------   ------------
                                                                                      21,830,934       19,455,104     41,286,038
                                                                                     -----------------------------   ------------

                             HAWAII    0.2%
      -     1,285     1,285  Honolulu, HI City & Cnty Ser B
                             (FGIC Insd)                         5.500    10/01/11             -        1,474,049      1,474,049
                                                                                     -----------------------------   ------------

                             ILLINOIS    15.2%
      -     2,000     2,000  Bedford Park, IL Ser A Rfdg
                             (FSA Insd)                          5.250    12/15/20             -        2,205,540      2,205,540
      -     2,000     2,000  Chicago, IL Brd of Ed
                             (Prerefunded @ 12/01/10) (FGIC
                             Insd)                               5.500    12/01/31             -        2,284,800      2,284,800
  4,000         -     4,000  Chicago, IL Brd Ed Chicago Sch
                             Reform Ser A (AMBAC Insd)           5.250    12/01/27     4,190,120                -      4,190,120
      -     2,000     2,000  Chicago, IL Brd of Ed Chicago
                             Sch Reform (Prerefunded @
                             12/01/07) (AMBAC Insd)              5.750    12/01/20             -        2,251,520      2,251,520
  1,400         -     1,400  Chicago, IL Brd Ed Ser A (MBIA
                             Insd)                               5.500    12/01/28     1,521,800                -      1,521,800
      -     4,865     4,865  Chicago, IL Cap Apprec
                             (Prerefunded @ 07/01/05)
                             (AMBAC Insd)                          *      07/01/16             -        2,393,288      2,393,288
      -     1,500     1,500  Chicago, IL Lakefront
                             Millennium Pk Facs (MBIA Insd)      5.125    01/01/28             -        1,547,745      1,547,745
  2,250         -     2,250  Chicago, IL Neighborhoods
                             Alive 21 Ser A (FGIC Insd)          5.500    01/01/13     2,538,338                -      2,538,338
      -     7,000     7,000  Chicago, IL O'Hare Intl Arpt
                             Rev Gen Arpt Second Lien Ser A
                             Rfdg (MBIA Insd)                    6.375    01/01/12             -        7,189,560      7,189,560
  1,500         -     1,500  Chicago, IL O'Hare Intl Arpt
                             Rev Gen Arpt Third Lien C-2
                             Rfdg (AMT) (FSA Insd)               5.250    01/01/30     1,551,195                -      1,551,195
  1,500     1,500     3,000  Chicago, IL O'Hare Intl Arpt
                             Rev Gen Arpt Third Lien C-2
                             Rfdg (AMT) (XLCA Insd)              5.250    01/01/34     1,548,945        1,548,945      3,097,890
  1,000         -     1,000  Chicago, IL O'Hare Intl Arpt
                             Rev Second Lien Passenger Fac
                             Ser B (AMBAC Insd)                  5.500    01/01/16     1,116,410                -      1,116,410
      -     2,000     2,000  Chicago, IL O'Hare Intl Arpt
                             Rev Second Lien Passenger Fac
                             Ser B (AMBAC Insd)                  5.500    01/01/17             -        2,232,820      2,232,820
      -     3,500     3,500  Chicago, IL Proj Ser A Rfdg
                             (MBIA Insd) (b)                     5.000    01/01/31             -        3,572,695      3,572,695
  1,000         -     1,000  Chicago, IL Proj Ser C Rfdg
                             (FGIC Insd)                         5.750    01/01/14     1,144,940                -      1,144,940
  1,000         -     1,000  Chicago, IL Proj Ser C Rfdg
                             (FGIC Insd)                         5.750    01/01/15     1,141,860                -      1,141,860
  4,895         -     4,895  Chicago, IL Pub Bldg Comm Bldg
                             Rev Ser A (Escrowed to
                             Maturity) (MBIA Insd)                 *      01/01/07     4,654,753                -      4,654,753
  1,000         -     1,000  Chicago, IL Ser B Rfdg (AMBAC
                             Insd)                               5.125    01/01/15     1,117,590                -      1,117,590
  2,000     2,000     4,000  Chicago, IL Wastewtr
                             Transmission Rev Second Lien
                             (Prerefunded @ 01/01/10) (MBIA
                             Insd)                               5.750    01/01/25     2,300,020        2,300,020      4,600,040
      -     1,000     1,000  Chicago, IL Wastewtr
                             Transmission Rev Second Lien
                             (Prerefunded @ 01/01/10) (MBIA
                             Insd)                               6.000    01/01/30             -        1,161,970      1,161,970
  1,960         -     1,960  Cook Cnty, IL Cmnty Cons Sch
                             Dist (FSA Insd) (a)                 5.500    12/01/13     2,263,192                -      2,263,192
  1,000         -     1,000  Cook Cnty, IL Ser A (FGIC Insd)     5.500    11/15/31     1,082,670                -      1,082,670
  3,230         -     3,230  Cook Cnty, IL Ser A Rfdg (MBIA
                             Insd)                               5.625    11/15/16     3,570,604                -      3,570,604
      -     3,500     3,500  Du Page Cnty, IL Fst Presv Dist       *      11/01/10             -        2,862,370      2,862,370
      -     2,545     2,545  Du Page Cnty, IL Trans Rev
                             (FSA Insd)                          5.750    01/01/15             -        2,905,728      2,905,728






                                      G-5



                                                                                            

      -        805      805  East Peoria, IL Ser C Rfdg          7.000   05/01/17            -          836,548          836,548
      -      1,310    1,310  Elgin, IL Ser B Rfdg                5.750   12/15/13            -        1,538,320        1,538,320
      -      1,600    1,600  Grundy, Kendall, & Will
                             Cntys (AMBAC Insd) (a)              5.500   05/01/15            -        1,786,704        1,786,704
  2,310          -    2,310  Illinois Dev Fin Auth Rev
                             Adventist Hlth Ser A (MBIA
                             Insd)                               5.500   11/15/13    2,632,823                -        2,632,823
  2,500          -    2,500  Illinois Dev Fin Auth Rev
                             Adventist Hlth Ser A (MBIA
                             Insd)                               5.500   11/15/15    2,862,150                -        2,862,150
  1,335      1,250    2,585  Illinois Dev Fin Auth Rev
                             Bradley Univ Proj
                             (Prerefunded @ 08/01/09)
                             (AMBAC Insd)                        5.375   08/01/24    1,510,312        1,414,150        2,924,462
      -      1,475    1,475  Illinois Dev Fin Auth Rev
                             Loc Govt Pgm Geneva Cmnty
                             304 Ser B (FSA Insd) (a)            5.750   01/01/15            -        1,689,848        1,689,848
      -      1,145    1,145  Illinois Dev Fin Auth Rev
                             Loc Govt Pgm Geneva Cmnty
                             304 Ser B (FSA Insd) (a)            5.750   01/01/17            -        1,307,876        1,307,876
      -      3,285    3,285  Illinois Dev Fin Auth Rev
                             Presbyterian Home Lake
                             Proj Ser B (FSA Insd)               6.300   09/01/22            -        3,592,575        3,592,575
      -      2,000    2,000  Illinois Ed Fac Auth Rev
                             Lewis Univ                          6.100   10/01/16            -        2,010,580        2,010,580
  2,000          -    2,000  Illinois Ed Fac Auth Rev
                             Lewis Univ                          6.125   10/01/26    1,936,680                -        1,936,680
      -      1,250    1,250  Illinois Hlth Fac Auth Rev
                             Evangelical Hosp Ser C
                             (FSA Insd)                          6.750   04/15/17            -        1,549,062        1,549,062
      -        700      700  Illinois Hlth Fac Auth Rev
                             Highland Park Hosp Proj
                             Ser A (Prerefunded @
                             10/01/07) (MBIA Insd)               5.750   10/01/17            -          784,252          784,252
      -      2,275    2,275  Illinois Hlth Fac Auth Rev
                             South Suburban Hosp
                             (Escrowed to Maturity)              7.000   02/15/18            -        2,852,509        2,852,509
      -      1,000    1,000  Illinois St (FGIC Insd)             5.250   12/01/20            -        1,047,910        1,047,910
  1,500      2,000    3,500  Illinois St First Ser
                             (LOC: Bank of America)
                             (FGIC Insd)                         5.375   11/01/14    1,696,260        2,261,680        3,957,940
      -      2,000    2,000  Illinois St Sales Tax Rev
                             Build Illinois                      5.000   06/15/19            -        2,164,240        2,164,240
  1,900          -    1,900  Kendall, Kane & Will
                             Cntys, IL Cmnty Unit Sch
                             Dist No. 308 Ser B (FGIC
                             Insd)                               5.250   10/01/21    2,049,796                -        2,049,796
      -        250      250  Metropolitan Pier & Expo
                             Auth IL Dedicated St Tax
                             Rev McCormick Pl Expn Proj
                             (FGIC Insd)                         5.375   12/15/18            -          278,710          278,710
      -      8,845    8,845  Metropolitan Pier & Expo
                             Auth IL Dedicated St Tax
                             Rev McCormick Pl Expn Ser
                             A (FGIC Insd)                         *     06/15/16            -        5,374,930        5,374,930
      -      1,005    1,005  Naperville, IL Ser A                5.000   12/01/10            -        1,118,615        1,118,615
      -      1,105    1,105  Saint Clair Cnty, IL Pub
                             Bldg Comm Bldg Rev Cap
                             Apprec Ser B (FGIC Insd)              *     12/01/15            -          694,062          694,062
  1,250          -    1,250  Sangamon Cnty, IL Ctf Part         10.000   12/01/06    1,441,900                -        1,441,900
  1,000          -    1,000  Schaumburg, IL Ser B (FGIC
                             Insd)                               5.000   12/01/41    1,013,810                -        1,013,810
      -      1,000    1,000  Southern IL Univ Rev Cap
                             Apprec Hsg & Aux (MBIA
                             Insd)                                 *     04/01/29            -          277,010          277,010
  7,455          -    7,455  Will Cnty, IL Fst Presv
                             Dist Ser B (FGIC Insd)                *     12/01/12    5,485,836                -        5,485,836
                                                                                    ----------------------------    -------------
                                                                                    50,372,004       67,036,582      117,408,586
                                                                                    ----------------------------    -------------

                             INDIANA    3.3%
  2,420          -    2,420  Brownsburg, IN Sch Bldg
                             Corp First Mtg Brownsburg
                             Cmnty Sch (MBIA Insd)               5.550   02/01/24    2,680,973                -        2,680,973
  1,000          -    1,000  Clark Pleasant, IN Cmnty
                             Sch First Mtg (AMBAC Insd)          5.500   07/15/18    1,126,430                -        1,126,430
      -      2,560    2,560  East Washington, IN Multi
                             Sch Bldg Corp First Mtg
                             (FGIC Insd)                         5.375   07/15/28            -        2,725,171        2,725,171
  4,000          -    4,000  Indiana Hlth Fac Fin Auth
                             Rev Deaconess Hosp Ser A
                             (AMBAC Insd)                        5.375   03/01/34    4,247,920                -        4,247,920
  2,000      2,000    4,000  Indiana Transn Fin Auth
                             Toll Rd Lease Rev Rfdg
                             (AMBAC Insd)                        5.375   07/01/09    2,141,680        2,141,680        4,283,360
      -      1,935    1,935  Logansport, IN Sch Bldg
                             Corp First Mtg (FGIC Insd)          5.500   07/15/13            -        2,197,638        2,197,638
      -      1,000    1,000  Marion Cnty, IN Convention
                             & Rec Fac Auth Excise Tax
                             Rev (MBIA Insd)                       *     06/01/14            -          676,980          676,980
      -      1,200    1,200  North Adams, IN Cmnty Schs
                             Renovation Bldg Corp Cap
                             Apprec First Mtg (FSA
                             Insd) (a)                             *     07/15/15            -          766,416          766,416
      -      1,280    1,280  North Adams, IN Cmnty Schs
                             Renovation Bldg Corp Cap
                             Apprec First Mtg (FSA
                             Insd) (a)                             *     01/15/19            -          667,533          667,533
      -      1,500    1,500  Petersburg, IN Pollutn Ctl
                             Rev IN Pwr & Lt (AMT)               5.950   12/01/29            -        1,515,630        1,515,630
      -      1,605    1,605  Richland Beanblossom, IN
                             Sch First Mtg (Prerefunded
                             @ 07/15/11) (FGIC Insd) (a)         5.500   07/15/12            -        1,840,149        1,840,149
      -      2,530    2,530  Vigo Cnty, IN Sch Bldg
                             Corp First Mtg Impt & Rfdg
                             (FSA Insd)                          5.250   07/10/24            -        2,695,310        2,695,310
                                                                                    ----------------------------    -------------
                                                                                    10,197,003       15,226,507       25,423,510
                                                                                    ----------------------------    -------------

                             IOWA    0.5%
      -      1,685    1,685  Des Moines, IA Pub Pkg Sys
                             Ser A (FGIC Insd) (a)               5.750   06/01/15            -        1,915,710        1,915,710
      -      1,785    1,785  Des Moines, IA Pub Pkg Sys
                             Ser A (FGIC Insd) (a)               5.750   06/01/16            -        2,026,457        2,026,457
                                                                                    ----------------------------    -------------
                                                                                                      3,942,167        3,942,167
                                                                                    ----------------------------    -------------

                             KANSAS    1.3%
  3,810          -    3,810  Kansas St Dev Fin Auth Rev
                             KS Proj Ser N (AMBAC Insd)
                             (a)                                 5.250   10/01/22    4,105,580                -        4,105,580
  1,250          -    1,250  Kansas St Dev Fin Auth Rev
                             KS St Proj (AMBAC Insd)             5.500   03/01/16    1,397,738                -        1,397,738
  2,235          -    2,235  Sedgwick Cnty, KA Uni Sch
                             Dist No. 259 Wichita
                             (Prerefunded @ 09/01/10)
                             (MBIA Insd)                         5.500   09/01/11    2,527,673                -        2,527,673
      -      1,975    1,975  Sedgwick Cnty, KS Uni Sch
                             Dist No 259 Wichita (MBIA
                             Insd)                               6.000   09/01/09            -        2,268,801        2,268,801
                                                                                    ----------------------------    -------------
                                                                                     8,030,991        2,268,801       10,299,792
                                                                                    ----------------------------    -------------

                             KENTUCKY    2.4%
      -      1,000    1,000  Kenton Cnty, KY Arpt Brd
                             Rev Cincinnati/Northn KY
                             Intl Arpt Ser A Rfdg (AMT)
                             (MBIA Insd)                         6.200   03/01/08            -        1,109,160        1,109,160
  2,190      1,500    3,690  Kenton Cnty, KY Arpt Brd
                             Rev Cincinnati/Northn KY
                             Intl Arpt Ser A Rfdg (AMT)
                             (MBIA Insd)                         6.250   03/01/09    2,449,537        1,677,765        4,127,302





                                      G-6



                                                                                                      
                 
        -   1,500   1,500   Kentucky St Ppty & Bldg Proj No 69 Ser A     5.000  08/01/05              -    1,535,955    1,535,955
                            Kentucky St Ppty & Bldgs Commn Proj No.
                            74 Rfdg (Prerefunded 02/01/12) (FSA
    5,000       -   5,000   Insd)                                        5.375  02/01/16      5,712,150            -    5,712,150
                            Kentucky St Tpk Auth Econ Dev
    2,000       -   2,000   Revitalization Proj Rfdg (FSA Insd)          5.500  07/01/07      2,176,560            -    2,176,560
                            Kentucky St Tpk Auth Econ Dev
                            Revitalization Proj Rfgd (Prerefunded @
        -   1,000   1,000   01/01/11) (FSA Insd)                         5.625  07/01/14              -    1,145,950    1,145,950
                            Louisville & Jefferson Cnty, KY Swr Ser
        -   2,450   2,450   A (MBIA Insd) (a)                            5.500  05/15/16              -    2,780,921    2,780,921
                                                                                        ----------------------------    ---------
                                                                                             10,338,247  8,249,751     18,587,998
                                                                                        ----------------------------    ---------
                             
                            LOUISIANA    2.0%
                            Ernest N Morial New Orleans LA Sr Sub
    4,395       -   4,395   Ser A (AMBAC Insd)                           5.250  07/15/22      4,760,137            -    4,760,137
    3,000       -   3,000   Lafayette, LA Util Rev (MBIA Insd)           5.250  11/01/21      3,302,820            -    3,302,820
                            Louisiana Hsg Fin Agy Rev Azalea
                            Estates Rfdg Ser A (AMT) (GNMA
    1,000   1,500   2,500   Collateralized)                              5.375  10/20/39      1,015,880    1,523,820    2,539,700
                            Louisiana Loc Govt Environmental Rev
    2,580       -   2,580   Southeastn LA Student Hsg A (MBIA Insd)      5.250  08/01/21      2,824,042            -    2,824,042
    1,500       -   1,500   Louisiana St Ser A (FGIC Insd)               5.500  11/15/08      1,676,355            -    1,676,355
                                                                                        ----------------------------    ---------
                                                                                             13,579,234   1,523,820    15,103,054
                                                                                        ----------------------------    ---------
                             
                            MARYLAND    0.9%
                            Baltimore, MD Cap Apprec Ser A (FGIC
    2,180       -   2,180   Insd)                                            *  10/15/09      1,680,061            -    1,680,061
                            Maryland St Trans Auth Arpt
                            Baltimore/Wash Intl Arpt B (AMT) (AMBAC
        -   2,250   2,250   Insd)                                        5.125  03/01/24              -    2,355,322    2,355,322
                            Northeast, MD Waste Disp Auth Rfdg
        -   2,350   2,350   (AMT) (AMBAC Insd)                           5.500  04/01/16              -    2,586,621    2,586,621
                                                                                        ----------------------------    ---------
                                                                                              1,680,061  4,941,943      6,622,004
                                                                                        ----------------------------    ---------
                             
                            MASSACHUSETTS    2.8%
                            Massachusetts St College Bldg Auth Proj
    2,305       -   2,305   Rev Ser A (MBIA Insd)                        5.000  05/01/20      2,488,616            -    2,488,616
                            Massachusetts St Cons Ln Ser B                                                          
    4,000       -   4,000   (Prerefunded @ 03/01/12) (FSA Insd)          5.500  03/01/17      4,564,200            -    4,564,200
                            Massachusetts St Fed Hwy Grant Antic Nt                                                
        -   1,500   1,500   Ser A                                        5.750  06/15/14              -    1,699,830    1,699,830
                            Massachusetts St Fed Hwy Grant Antic Nt
    1,500       -   1,500   Ser A                                        5.750  06/15/15      1,699,830            -    1,699,830
                            Massachusetts St Hlth & Ed Fac Auth Rev
        -     500     500   Hlthcare Sys Covenant Hlth                   6.000  07/01/31              -      527,880    527,880
                            Massachusetts St Hlth & Ed Fac Auth Rev
        -   1,000   1,000   Partn Hlthcare Sys Ser C                     5.750  07/01/32              -    1,093,230    1,093,230
                            Massachusetts St Indl Fin Agy Rev
                            Higher Ed Hampshire College Proj
    1,000       -   1,000   (Prerefunded @ 10/01/07) (a)                 5.625  10/01/12      1,105,960            -    1,105,960
                            Massachusetts St Indl Fin Agy Rev
        -   1,000   1,000   Wentworth Institute Tech                     5.650  10/01/18              -    1,063,270    1,063,270
                            Massachusetts St Port Auth Rev Ser A
        -   2,805   2,805   (MBIA Insd)                                  5.000  07/01/22              -    2,978,068    2,978,068
                            Massachusetts St Spl Oblig Dedicated
    2,000   2,500   4,500   Tax Rev (FGIC Insd)                          5.000  01/01/34      2,059,940    2,574,925    4,634,865
                                                                                        ----------------------------    ---------
                                                                                             11,918,546  9,937,203     21,855,749
                                                                                        ----------------------------    ---------
                             
                            MICHIGAN    4.7%
                            Detroit, MI Downtown Dev Auth Tax
        -   3,015   3,015   Increment Rev Ser C1                             *  07/01/17              -    1,648,783    1,648,783
                            Detroit, MI Downtown Dev Auth Tax
        -   3,050   3,050   Increment Rev Ser C1 (a)                         *  07/01/18              -    1,575,569    1,575,569
                            Detroit, MI Downtown Dev Auth Tax
        -   3,050   3,050   Increment Rev Ser C1 (a)                         *  07/01/19              -    1,486,295    1,486,295
                            Detroit, MI Downtown Dev Auth Tax
        -   3,050   3,050   Increment Rev Ser C1 (a)                         *  07/01/22              -    1,222,684    1,222,684
                            Detroit, MI Downtown Dev Auth Tax
        -   3,050   3,050   Increment Rev Ser C1 (a)                         *  07/01/23              -    1,142,194    1,142,194
                            Detroit, MI Downtown Dev Auth Tax
        -   3,050   3,050   Increment Rev Ser C1 (a)                         *  07/01/24              -    1,061,064    1,061,064
                            Detroit, MI Wtr Supply Sys Ser C (MBIA
        -   2,965   2,965   Insd) (a)                                    5.250  07/01/20              -    3,233,036    3,233,036
                            Grand Rapids, MI Downtown Dev Cap
        -   3,500   3,500   Apprec (MBIA Insd)                               *  06/01/15              -    2,272,620    2,272,620
                            Grand Rapids, MI Downtown Dev Cap
        -   2,765   2,765   Apprec (MBIA Insd)                               *  06/01/16              -    1,704,180    1,704,180
                            Grand Rapids, MI Wtr Supply Sys Rfdg
    1,000   1,000   2,000   (FGIC Insd)                                  5.750  01/01/13      1,140,850    1,140,850    2,281,700
                            Hillsdale, MI Hosp Fin Auth Hosp Rev
    1,180       -   1,180   Hillsdale Cmnty Hlth Ctr                     5.750  05/15/18      1,221,005            -    1,221,005
                            Michigan Muni Bd Auth Rev Clean Wtr Rev
    1,000   2,000   3,000   Fd                                           5.250  10/01/18      1,115,740    2,231,480    3,347,220
                            Michigan St Hosp Fin Auth Rev Ascension
                            Hlth Cr Ser A (Prerefunded @ 11/15/09)
        -   2,850   2,850   (MBIA Insd)                                  5.750  11/15/18              -    3,274,935    3,274,935
                            Michigan St Strategic Fd Detroit Edison
    1,000   1,500   2,500   Co Proj C Rfdg (AMT) (XLCA Insd)             5.450  12/15/32      1,047,100    1,570,650    2,617,750
                            Michigan St Strategic Fd Detroit Edison
        -   2,500   2,500   Co Proj Ser A (AMT) (XLCA Insd)              5.500  06/01/30              -    2,647,400    2,647,400
                            Michigan St Strategic Fd Detroit Edison
                            Conv Rfdg (Variable Rate Coupon) (AMBAC
    2,500       -   2,500   Insd)                                        4.850  09/01/30      2,713,875            -    2,713,875
                            Michigan St Strategic Fd Detroit Edison
    1,000       -   1,000   Pollutn Ctl Ser B Rfdg (AMT)                 5.650  09/01/29      1,037,180            -    1,037,180
                            Zeeland, MI Pub Schs Sch Bldg & Site
        -   1,355   1,355   (MBIA Insd) (a)                              5.250  05/01/21              -    1,485,026    1,485,026
                                                                                        ----------------------------    ---------
                                                                                              8,275,750   27,696,766   35,972,516
                                                                                        ----------------------------    ---------
                             
                            MINNESOTA    1.1%
                            Minneapolis & Saint Paul, MN Metro
        -   5,000   5,000   Arpts Comm Arpt Rev Ser A (FGIC Insd)        5.125  01/01/31              -    5,152,700    5,152,700




                                      G-7



                                                                                                      
                            Minnesota Agriculture & Econ Dev Brd
                            Rev Hlthcare Sys Fairview Hosp Ser A                            
        -   2,800   2,800   (MBIA Insd)                                  5.750  11/15/26               -   3,075,520    3,075,520
                                                                                            -------------------------------------
                                                                                                       -   8,228,220    8,228,220
                                                                                            -------------------------------------
                                                                                            
                            MISSISSIPPI    1.0%                                             
                            Medical Cent Ed Bldg Corp MS Rev Univ                           
                            MS Med Cent Proj (Prerefunded @
        -   3,000   3,000   12/01/04) (MBIA Insd)                        5.900  12/01/23               -   3,070,890    3,070,890
                            Mississippi Business Fin Corp MS
        -   3,250   3,250   Pollutn Ctl Rev Sys Energy Res Inc Proj      5.875  04/01/22               -   3,261,375    3,261,375
                            Mississippi Hosp Equip & Fac MS Baptist
    1,500       -   1,500   Med Ctr Rfdg (MBIA Insd)                     6.000  05/01/13       1,558,935           -    1,558,935
                                                                                            -------------------------------------
                                                                                               1,558,935   6,332,265    7,891,200
                                                                                            -------------------------------------
                                                                                            
                            MISSOURI    1.8%                                                
                            Bi-State Dev Agy MO IL Met Metrolink
    2,530       -   2,530   Cross Cnty Proj B (FSA Insd)                 5.250  10/01/18       2,790,211                2,790,211
                            Cape Girardeau Cnty, MO Indl Dev Auth
        -    1,500  1,500   Hlthcare Fac Rev Southeast MO Hosp Assoc     5.625  06/01/27               -   1,529,205    1,529,205
                            Cole Cnty, MO Indl Dev Auth Sr Living
    1,250       -   1,250   Fac Rev Lutheran Sr Svcs Heisinger Proj      5.500  02/01/35       1,285,950           -    1,285,950
                            Jefferson Cnty, MO Reorg Sch Dist No
        -   1,625   1,625   R-6 (FGIC Insd)                              5.625  03/01/20               -   1,834,349    1,834,349
                            Kansas City, MO Met Cmnty Impt
        -   1,500   1,500   Leasehold Jr College Rfdg (FGIC Insd)        5.500  07/01/17               -   1,683,705    1,683,705
                            Missouri St Hwys & Trans Commn Rd Rev
    3,400       -   3,400   Ser A                                        5.500  02/01/08       3,745,780           -    3,745,780
    1,250       -   1,250   Saint Charles, MO Ctf Part Ser B
                                                                         5.500  05/01/18       1,345,300           -    1,345,300
                                                                                            -------------------------------------
                                                                                               9,167,241   5,047,259   14,214,500
                                                                                            -------------------------------------
                                                                                            
                            NEBRASKA    0.5%                                               
                            Dodge Cnty, NE Sch Dist No 001 Fremont                          
        -   1,190   1,190   (Prerefunded @12/15/10) (FSA Insd)           5.750  12/15/13               -   1,376,509    1,376,509
                            University NE Univ Rev Lincoln Student
        -   2,260   2,260   Fees & Fac Ser B                             5.000  07/01/23               -   2,378,605    2,378,605
                                                                                            -------------------------------------
                                                                                                       -   3,755,114    3,755,114
                                                                                            -------------------------------------
                                                                                            
                            NEVADA    2.7%                                                  
                            Clark Cnty, NV Arpt Rev Sub Lien Ser
    4,000   4,000   8,000   A-2 (FGIC Insd)                              5.000  07/01/36       4,075,320   4,075,320    8,150,640
    3,965       -   3,965   Clark Cnty, NV Bd Bk (FGIC Insd)             5.500  06/01/09       4,444,844           -    4,444,844
                            Clark Cnty, NV Indl Dev Rev Southwest
    3,000       -   3,000   Gas Corp Proj Ser A (AMT) (AMBAC Insd)       5.250  07/01/34       3,096,000           -    3,096,000
                            Clark Cnty, NV Indl Dev Rev Southwest
        -   3,500   3,500   Gas Corp Proj Ser D (AMT) (FGIC Insd)        5.250  03/01/38               -   3,579,660    3,579,660
                            Reno, NV Sr Lien Retrac Reno Trans Proj
        -   1,500   1,500   (AMBAC Insd)                                 5.125  06/01/32               -   1,549,320    1,549,320
                                                                                            -------------------------------------
                                                                                              11,616,164   9,204,300   20,820,464
                                                                                            -------------------------------------
                                                                                            
                            NEW HAMPSHIRE    0.3%                                           
                            New Hampshire Hlth & Ed Fac Auth Rev                            
        -   1,000   1,000   Derryfield Sch                               7.000  07/01/30               -   1,001,330    1,001,330
                            New Hampshire St Bus Fin Auth Wtr Fac
                            Rev Pennichuck Wtrwks Inc (AMT) (AMBAC
        -   1,000   1,000   Insd)                                        6.300  05/01/22               -   1,103,160    1,103,160
                                                                                            -------------------------------------
                                                                                                       -   2,104,490    2,104,490
                                                                                            -------------------------------------
                                                                                      
                            NEW JERSEY    10.2%                                             
                            Casino Reinv Dev Auth NJ Hotel Room Fee
    3,000       -   3,000   Rev (AMBAC Insd)                             5.250  01/01/22       3,312,210           -     3,312,21
                            Essex Cnty, NJ Impt Auth Rev Proj
        -   4,000   4,000   Consolidation Rfdg (MBIA Insd)               5.125  10/01/21               -   4,339,840    4,339,840
                            Garden St Preservation Tr NJ Ser A (FSA
        -   5,650   5,650   Insd)                                        5.250  11/01/19               -   6,261,217    6,261,217
    1,200       -   1,200   New Jersey Econ Dev Auth Cigarette Tax       5.750  06/15/29       1,231,944           -    1,231,944
        -   1,500   1,500   New Jersey Econ Dev Auth Cigarette Tax       5.750  06/15/34               -   1,541,400    1,541,400
                            New Jersey Econ Dev Auth Mtr Veh Surp
    1,500   1,500   3,000   Rev Ser A (MBIA Insd)                        5.000  07/01/23       1,591,425   1,591,425    3,182,850
                            New Jersey Econ Dev Auth Rev Trans Proj
                            Sublease Ser A (Prerefunded @ 05/01/09)
        -   1,500   1,500   (FSA Insd)                                   5.250  05/01/17               -   1,669,665    1,669,665
                            New Jersey Econ Dev Auth St Contract
        -  25,000  25,000   Econ Recovery (MBIA Insd)                    5.900  03/15/21               -  30,338,250   30,338,250
                            New Jersey Hlthcare Fac Fin Auth Rev
                            Gen Hosp Ctr Passaic (Escrowed to
        -   2,000   2,000   Maturity) (FSA Insd)                         6.000  07/01/06               -   2,088,000    2,088,000
                            New Jersey St Ed Fac Auth Higher Ed Cap
        -   3,000   3,000   Impt Ser A (AMBAC Insd)                      5.250  09/01/19               -   3,321,270    3,321,270
                            New Jersey St Ed Fac Auth Higher Ed Cap
    1,835       -   1,835   Impt Ser A (AMBAC Insd)                      5.250  09/01/21       2,007,839           -    2,007,839
                            New Jersey St Tpk Auth Tpk Rev Ser A
        -     710     710   (MBIA Insd)                                  6.000  01/01/11               -     826,341      826,341
                            New Jersey St Tpk Auth Tpk Rev Ser A                            
        -     290     290   (Escrowed to Maturity) (MBIA Insd)           6.000  01/01/11               -     338,584      338,584
                            New Jersey St Trans Corp Cap Grant                              
    1,000       -   1,000   Antic Nt Ser B (AMBAC Insd)                  5.500  02/01/08       1,099,060           -    1,099,060
                            New Jersey St Trans Corp Ctf Fed Trans
    2,000       -   2,000   Admin Gnts Ser A (AMBAC Insd)                5.500  09/15/13       2,294,340           -    2,294,340
                            New Jersey St Trans Corp Ctfs Fed Trans
                            Admin Gnts Ser A (Prerefunded @
        -   2,385   2,385   09/15/09) (AMBAC Insd)                       5.750  09/15/11               -   2,707,357    2,707,357
                            New Jersey St Trans Tr Fd Auth Trans
        -   4,500   4,500   Sys Ser A (FGIC Insd)                        5.000  06/15/20               -   4,850,865    4,850,865
                            New Jersey St Trans Tr Fd Auth Trans
    2,095       -   2,095   Sys Ser A                                    5.750  06/15/17       2,477,338           -    2,477,338
                            New Jersey St Trans Tr Fd Auth Trans
        -   4,000   4,000   Sys Ser C (FSA Insd)                         5.500  06/15/20               -   4,444,760    4,444,760
                                                                                            -------------------------------------
                                                                                              14,014,156  64,318,974   78,333,130
                                                                                            -------------------------------------




                                      G-8



                                                                                             
                             NEW MEXICO    0.8%
      -     1,250     1,250  Jicarilla, NM Apache Nation
                             Rev Ser A (Acquired
                             10/23/2003, Cost
                             $1,274,428) (d)                     5.500    09/01/23            -        1,335,587         1,335,587
  4,000         -     4,000  Santa Fe, NM Gross Rcpt Tax
                             Impt (AMBAC Insd)                   5.250    06/01/13    4,506,000                -         4,506,000
                                                                                     ----------------------------    --------------
                                                                                      4,506,000        1,335,587         5,841,587
                                                                                     ----------------------------    --------------

                             NEW YORK    19.9%
      -     3,000     3,000  Metropolitan Trans Auth NY
                             Commuter Fac Rev Ser A
                             (Prerefunded @ 01/01/08)
                             (MBIA Insd)                         5.625    07/01/27            -        3,362,430         3,362,430
      -     2,000     2,000  Metropolitan Trans Auth NY
                             Trans Fac Rev Svc Contract
                             Ser R (Prerefunded @
                             07/01/15)                           5.500    07/01/17            -        2,358,460         2,358,460
  3,000         -     3,000  Metropolitan Trans Auth NY
                             Ser A Rfdg (AMBAC Insd)             5.500    11/15/18    3,428,760                -         3,428,760
  2,500         -     2,500  Metropolitan Trans Auth NY
                             Ser A Rfdg (FGIC Insd)              5.250    11/15/31    2,657,050                -         2,657,050
  2,500     2,000     4,500  Nassau Cnty, NY Interim Fin
                             Auth Sales Tax Secd Ser A
                             (Prerefunded @ 11/15/10)            5.750    11/15/13    2,899,900        2,319,920         5,219,820
  5,700         -     5,700  New York City Muni Wtr Fin
                             Auth Ser A (FSA Insd) (a)           5.375    06/15/17    6,327,228                -         6,327,228
      -     2,500     2,500  New York City Ser A Rfdg            7.000    08/01/05            -        2,593,000         2,593,000
      -     3,000     3,000  New York City Ser A Rfdg            7.000    08/01/06            -        3,248,400         3,248,400
  4,500         -     4,500  New York City Ser B (AMBAC
                             Insd)                               7.250    08/15/07    5,112,585                -         5,112,585
    445         -       445  New York City Ser C                 7.000    08/15/08      446,784                -           446,784
            1,305     1,305  New York City Ser G                 5.875    10/15/14            -        1,434,352         1,434,352
              545       545  New York City Ser G
                             (Prerefunded @ 10/15/07)            5.875    10/15/14            -          610,171           610,171
  1,000     1,000     2,000  New York City Ser H                 5.750    03/15/13    1,132,340        1,132,340         2,264,680
      -     3,055     3,055  New York City Ser I                 6.000    04/15/12            -        3,330,408         3,330,408
      -     2,500     2,500  New York City Ser I (MBIA
                             Insd)                               5.000    08/01/17            -        2,752,150         2,752,150
      -     1,945     1,945  New York City Ser I
                             (Prerefunded @ 4/15/07)             6.000    04/15/12            -        2,151,909         2,151,909
  6,930    10,000    16,930  New York City Trans Auth
                             Trans Fac Livingston Plaza
                             Proj Rfdg (Escrowed to
                             Maturity) (FSA Insd)                5.400    01/01/18    7,960,006       11,486,300        19,446,306
  3,000     3,000     6,000  New York City Transitional
                             Future Tax Secd Ser A Rfdg
                             (e)                          5.500/14.000    11/01/26    3,396,060        3,396,060         6,792,120
      -     5,305     5,305  New York City Transitional
                             Future Tax Secd Ser C
                             (AMBAC Insd)                        5.250    08/01/20            -        5,774,439         5,774,439
      -     2,000     2,000  New York City Transitional
                             Future Tax Secd Ser C
                             (AMBAC Insd)                        5.250    08/01/22            -        2,160,320         2,160,320
      -     4,545     4,545  New York City Transitional
                             Future Tax Secd Ser D (MBIA
                             Insd)                               5.250    02/01/21            -        4,952,505         4,952,505
      -     2,500     2,500  New York St Dorm Auth Lease
                             Rev Muni Hlth Fac Impt Pgm
                             Ser A (FSA Insd)                    5.500    05/15/25            -        2,696,600         2,696,600
  3,000         -     3,000  New York St Dorm Auth Rev
                             Hosp (MBIA Insd)                    5.000    08/01/33    3,099,210                -         3,099,210
  2,000         -     2,000  New York St Dorm Auth Rev
                             Sch Dist Fin Pgm Ser D
                             (MBIA Insd)                         5.500    10/01/17    2,282,040                -         2,282,040
      -     1,250     1,250  New York St Dorm Auth Lease
                             Rev St Univ Dorm Fac Ser C
                             (Prerefunded @ 07/01/09)
                             (MBIA Insd)                         5.500    07/01/29            -        1,425,175         1,425,175
      -    13,500    13,500  New York St Dorm Auth Rev
                             City Univ Sys Ser C                 7.500    07/01/10            -       15,542,145        15,542,145
      -     3,000     3,000  New York St Dorm Auth Rev
                             St Univ Ed Fac (Prerefunded
                             @ 05/15/10) (FGIC Insd)             5.750    05/15/24            -        3,482,280         3,482,280
      -     2,000     2,000  New York St Dorm Auth Rev
                             St Univ Ed Fac 1989 Res
                             (MBIA Insd)                         6.000    05/15/16            -        2,317,400         2,317,400
      -     1,880     1,880  New York St Dorm Auth Rev
                             St Univ Ed Fac Ser B                5.250    05/15/10            -        2,092,628         2,092,628
      -     1,500     1,500  New York St Environmental
                             Fac Revolving Fds Ser C             5.000    07/15/21            -        1,601,160         1,601,160
      -     2,840     2,840  New York St Loc Govt
                             Assistance Corp Ser E Rfdg          6.000    04/01/14            -        3,373,721         3,373,721
      -     3,000     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            -        3,103,740         3,103,740
      -     5,875     5,875  New York St Med Care Fac
                             Fin Agy Rev Saint Peter's
                             Hosp Proj Ser A (AMBAC Insd)        5.375    11/01/20            -        5,946,616         5,946,616
  3,000         -     3,000  New York St Urban Dev Corp
                             Rev Personal Income Tax Ser
                             C (Prerefunded @ 03/15/13)
                             (FGIC Insd)                         5.500    03/15/18    3,413,850                -         3,413,850
      -     1,500     1,500  New York St Urban Dev Corp
                             Rev Proj Cent for Indl
                             Innovation Rfdg                     5.500    01/01/13            -        1,709,835         1,709,835
  3,000         -     3,000  New York, NY City Muni Wtr
                             Fin Auth Wtr & Sew Sys Rev
                             Ser A (AMBAC Insd)                  5.000    06/15/35    3,084,930                -         3,084,930
  2,680         -     2,680  Port Auth NY & NJ Cons
                             119th Ser (AMT) (FGIC Insd)         5.500    09/15/17    2,823,407                -         2,823,407
      -     3,000     3,000  Port Auth NY & NJ Spl Oblig
                             Rev Spl Proj JFK Intl Arpt
                             Terminal 6 (AMT) (MBIA Insd)        5.750    12/01/22            -        3,269,700         3,269,700
      -     3,000     3,000  Port Auth NY & NJ Spl Oblig
                             Rev Spl Proj JFK Intl Arpt
                             Terminal 6 (AMT) (MBIA Insd)        5.750    12/01/25            -        3,210,870         3,210,870
  2,500         -     2,500  Sales Tax Asset Receivable
                             Corp Ser A (MBIA Insd) (f)          5.000    10/15/23    2,666,625                -         2,666,625
                                                                                     ----------------------------    --------------
                                                                                     50,730,775      102,835,034       153,565,809
                                                                                     ----------------------------    --------------

                             NORTH CAROLINA    5.3%
  2,000         -     2,000  Charlotte, NC Ctf Part
                             Convention Fac Proj Ser A
                             Rfdg                                5.500    08/01/19    2,248,760                -         2,248,760
      -     2,000     2,000  Johnston Cnty, NC (FGIC
                             Insd)                               5.900    03/01/19            -        2,310,120         2,310,120
  3,000     1,000     4,000  North Carolina Eastern Muni
                             Pwr Agy Pwr Sys Rev Ser D           6.750    01/01/26    3,344,460        1,114,820         4,459,280
 10,000    15,000    25,000  North Carolina Muni Pwr Agy
                             No 1 Catawba Elec Rev Rfdg
                             (MBIA Insd)                         6.000    01/01/12   11,742,700       17,614,050        29,356,750
      -     2,500     2,500  North Carolina Muni Pwr Agy
                             Ser A (MBIA Insd)                   5.250    01/01/19            -        2,729,525         2,729,525
                                                                                     ----------------------------    --------------
                                                                                     17,335,920       23,768,515        41,104,435
                                                                                     ----------------------------    --------------
                             NORTH DAKOTA    0.2%






                                      G-9



                                                                                             
      -     1,225     1,225  North Dakota St Hsg Fin Agy
                             Rev Hsg Fin Pgm Home Mtg Fin
                             Ser B (AMT) (MBIA Insd)             5.500    07/01/29            -       1,258,785       1,258,785
                                                                                     -----------------------------   ------------

                             OHIO    4.2%
      -     1,400     1,400  Bowling Green St Univ OH Gen
                             Rcpt (FGIC Insd)                    5.750    06/01/12            -       1,605,450       1,605,450
  1,000         -     1,000  Cleveland, OH Muni Sch Dist
                             (FSA Insd)                          5.250    12/01/23    1,085,020               -       1,085,020
  3,000         -     3,000  Columbus, OH City Sch Dist Sch
                             Fac Constr & Impt (FSA Insd)        5.250    12/01/22    3,294,330               -       3,294,330
  1,000     1,000     2,000  Cuyahoga Cnty, OH Hosp Fac Rev
                             Canton Inc Proj                     7.500    01/01/30    1,108,460       1,108,460       2,216,920
            1,000     1,000  Delaware Cnty, OH Cap Fac
                             (Prerefunded @12/01/10)             6.000    12/01/25            -       1,178,470       1,178,470
  3,000         -     3,000  Franklin Cnty, OH Convention
                             Fac Auth Tax & Lease Rev Antic
                             Bds Rfdg (AMBAC Insd)               5.250    12/01/19    3,318,210               -       3,318,210
      -     1,000     1,000  Hamilton, OH One Renaissance
                             Ctr Ser A (AMBAC Insd)              5.500    11/01/16            -       1,135,820       1,135,820
  2,660         -     2,660  Licking Heights, OH Loc Sch
                             Dist (FGIC Insd)                    5.250    12/01/23    2,897,112               -       2,897,112
  1,000         -     1,000  Lorain Cnty, OH Hosp Rev
                             Catholic Hlthcare                   5.375    10/01/30    1,032,490               -       1,032,490
  2,000         -     2,000  Lorain, OH City Sch Dist
                             Classroom Fac Impt (MBIA Insd)      5.250    12/01/20    2,198,140               -       2,198,140
      -     1,000     1,000  Mahoning Cnty, OH Hosp Fac
                             Forum Hlth Oblig Group Ser A        6.000    11/15/32            -       1,059,030       1,059,030
  1,925         -     1,925  Ohio Muni Elec Generation Agy
                             Jt Venture Ctf Ben Int Rfdg
                             (AMBAC Insd)                        5.000    02/15/22    2,046,179               -       2,046,179
  1,000     1,000     2,000  Ohio St Air Quality Dev Auth
                             Rev JMG Fdg Ltd Part Proj Rfdg
                             (AMT) (AMBAC Insd)                  6.375    04/01/29    1,023,300       1,023,300       2,046,600
  1,500         -     1,500  Ohio St Bldg Auth St Fac Admin
                             Bldg Fd Proj A (FSA Insd)           5.500    04/01/15    1,700,850               -       1,700,850
            1,840     1,840  Pickerington, OH Loc Sch Dist
                             Cap Apprec Sch Fac Contr (FGIC
                             Insd)                                 *      12/01/12            -       1,367,819       1,367,819
  3,000     1,000     4,000  University Cincinnati OH Gen
                             Ser A (FGIC Insd)                   5.500    06/01/09    3,371,340       1,123,780       4,495,120
                                                                                     -----------------------------   ------------
                                                                                     23,075,431       9,602,129      32,677,560
                                                                                     -----------------------------   ------------

                             OKLAHOMA    0.9%
  1,000         -     1,000  Central, OK Trans & Pkg Auth
                             Pkg Sys (AMBAC Insd)                5.000    07/01/18    1,079,080               -       1,079,080
      -     1,500     1,500  Jenks, OK Aquarium Auth Rev
                             First Mtg (Prerefunded @
                             07/01/10) (MBIA Insd)               6.100    07/01/30            -       1,765,935       1,765,935
      -     1,575     1,575  Oklahoma City, OK Arpt Tr Jr
                             Lien 27th Ser B (AMT) (FSA
                             Insd)                               5.750    07/01/16            -       1,726,925       1,726,925
      -     2,250     2,250  Tulsa Cnty, OK Pub Fac Auth
                             Cap Impt Rev (AMBAC Insd)           6.250    11/01/22            -       2,628,945       2,628,945
                                                                                     -----------------------------   ------------
                                                                                      1,079,080       6,121,805       7,200,885
                                                                                     -----------------------------   ------------

                             OREGON    2.7%
  1,000         -     1,000  Clackamas Cnty, OR Sch Dist         5.500    06/01/10    1,135,720               -       1,135,720
  1,350     4,000     5,350  Oregon Hlth Sciences Univ Insd
                             Ser A (MBIA Insd)                   5.250    07/01/22    1,459,242       4,323,680       5,782,922
  2,060     3,000     5,060  Oregon St Dept Admin Ser C
                             Rfdg (MBIA Insd)                    5.250    11/01/17    2,293,274       3,339,720       5,632,994
      -     1,075     1,075  Oregon St Veterans Welfare Ser
                             76A                                 6.050    10/01/28            -       1,089,384       1,089,384
  1,250     1,190     2,440  Portland, OR Cmnty College
                             Dist Ser B                          5.250    06/01/12    1,403,313       1,335,954       2,739,267
  1,135         -     1,135  Portland, OR Swr Sys Rev
                             Second Lien Ser A Rfdg (FSA
                             Insd)                               5.250    06/01/19    1,247,183               -       1,247,183
      -     1,985     1,985  Portland, OR Urban Renewal &
                             Redev Downtown Wtrfront Ser A
                             (AMBAC Insd)                        5.750    06/15/16            -       2,263,615       2,263,615
      -     1,000     1,000  Washington Multnomah & Yamhill
                             (MBIA Insd)                         5.000    06/01/13            -       1,102,890       1,102,890
                                                                                     -----------------------------   ------------
                                                                                      7,538,732      13,455,243      20,993,975
                                                                                     -----------------------------   ------------

                             PENNSYLVANIA    5.2%
  1,500         -     1,500  Allegheny Cnty, PA San Auth
                             Swr Rev (MBIA Insd)                 5.500    12/01/30    1,635,660               -       1,635,660
      -     1,250     1,250  Allegheny Cnty, PA San Auth
                             Swr Rev (MBIA Insd)                 5.750    12/01/16            -       1,443,225       1,443,225
  1,000         -     1,000  Allegheny Cnty, PA Ser C-53
                             Rfdg (FGIC Insd)                    5.500    11/01/14    1,133,170               -       1,133,170
      -     4,680     4,680  Erie, PA Sch Dist Cap Apprec
                             Rfdg (FSA Insd)                       *      09/01/19            -       2,397,049       2,397,049
      -     3,535     3,535  Falls Twp, PA Hosp Auth Hosp
                             Rev DE Vly Med Rfdg (FHA Gtd)       7.000    08/01/22            -       3,665,088       3,665,088
  1,000         -     1,000  Greensburg Salem, PA Sch Dist
                             Rfdg (FGIC Insd)                    5.375    09/15/15    1,130,280               -       1,130,280
  2,000     2,000     4,000  Harrisburg, PA Auth Res Gtd
                             Sub Ser D-2 (Variable Rate
                             Coupon) (FSA Insd)                  5.000    12/01/33    2,194,220       2,194,220       4,388,440
      -     1,905     1,905  Harrisburg, PA Cap Apprec Ser
                             D Rfdg (AMBAC Insd) (a)               *      09/15/16            -       1,149,306       1,149,306
      -     1,710     1,710  Harrisburg, PA Cap Apprec Ser
                             D Rfdg (AMBAC Insd)                   *      03/15/19            -         894,245         894,245
  1,200         -     1,200  Harrisburg, PA Cap Apprec Ser
                             F Rfdg (AMBAC Insd)                   *      09/15/14      806,004               -         806,004
      -     1,385     1,385  Harrisburg, PA Cap Apprec Ser
                             F Rfdg (AMBAC Insd)                   *      09/15/19            -         708,151         708,151
      -     1,500     1,500  Penn Cambria Sch Dist PA Cap
                             Apprec (FGIC Insd) (a)                *      08/15/20            -         725,730         725,730
      -        60        60  Penn Hills, PA (Prerefunded @
                             12/01/07) (FGIC Insd)               5.900    12/01/17            -          66,747          66,747
      -     1,000     1,000  Pennsylvania St Higher Ed Fac
                             Auth College & Univ Rev Bryn
                             Mawr College (MBIA Insd)            5.625    12/01/27            -       1,085,210       1,085,210
      -     1,000     1,000  Philadelphia, PA Auth Indl Dev
                             Philadelphia Arpt Sys Proj Ser
                             A (AMT) (FGIC Insd)                 5.125    07/01/19            -       1,059,740       1,059,740
  2,600         -     2,600  Philadelphia, PA Auth Indl Ser
                             B (FSA Insd)                        5.500    10/01/16    2,939,300                       2,939,300
  2,400         -     2,400  Philadelphia, PA Gas Wks Rev
                             1998 Gen Ordinance Fourth Ser
                             (FSA Insd)                          5.250    08/01/22    2,580,144                       2,580,144
  1,290         -     1,290  Philadelphia, PA Gas Wks Rev
                             Eighteenth Ser (AGC Insd)           5.250    08/01/19    1,405,507                       1,405,507
      -     1,400     1,400  Philadelphia, PA Sch Dist Ser
                             A (Prerefunded @ 02/01/11)
                             (FSA Insd)                          5.750    02/01/12            -       1,617,000       1,617,000






                                      G-10




                                                                                             
  4,570         -     4,570  Pittsburgh, PA Ser A (AMBAC
                             Insd)                               5.500    09/01/16    5,044,777                -        5,044,777
      -     1,500     1,500  Pittsburgh, PA Ser A
                             (Prerefunded @ 09/01/09)
                             (FGIC Insd)                         5.750    09/01/23            -        1,698,735        1,698,735
  2,000         -     2,000  Ridley Park, PA Hosp Auth Rev
                             Taylor Hosp Ser A (Escrowed
                             to Maturity)                        6.000    12/01/13    2,284,840                -        2,284,840
      -     1,005     1,005  Southeast Delco Sch Dist PA
                             Cap Apprec (MBIA Insd)                *      02/01/17            -          590,247          590,247
                                                                                     ----------------------------    -------------
                                                                                     21,153,902       19,294,693       40,448,595
                                                                                     ----------------------------    -------------

                             RHODE ISLAND    0.2%
      -     1,490     1,490  Providence, RI Redev Agy Rev
                             Pub Safety & Muni Bldgs Ser A
                             (AMBAC Insd)                        5.500    04/01/14            -        1,682,970        1,682,970
                                                                                                     ------------    -------------

                             SOUTH CAROLINA    2.8%
      -     2,275     2,275  Beaufort Cnty, SC Tax
                             Increment New River Redev
                             Proj Area (MBIA Insd) (a)           5.500    06/01/19            -        2,577,120        2,577,120
      -     2,375     2,375  Berkeley Cnty, SC Sch Dist
                             Ctfs Part Berkeley Sch Facs
                             Grp Inc (Escrowed to
                             Maturity) (MBIA Insd)               5.250    02/01/16            -        2,490,164        2,490,164
      -     2,700     2,700  Charleston Cnty, SC Solid
                             Waste (Prerefunded @
                             01/01/05) (MBIA Insd)               6.000    01/01/14            -        2,773,602        2,773,602
  1,000         -     1,000  Chesterfield Cnty, SC Sch
                             Dist (FSA Insd)                     5.375    03/01/18    1,122,440                -        1,122,440
      -     1,840     1,840  Myrtle Beach, SC Hospitality
                             Fee Rev Ser A (FGIC Insd) (a)       5.375    06/01/21            -        2,032,832        2,032,832
      -     1,935     1,935  Myrtle Beach, SC Hospitality
                             Fee Rev Ser A (FGIC Insd) (a)       5.375    06/01/22            -        2,126,488        2,126,488
  1,000     3,500     4,500  South Carolina Jobs Econ Dev
                             Auth Indl Rev Elec & Gas Co
                             Proj Ser A (AMBAC Insd)             5.200    11/01/27    1,052,450        3,683,575        4,736,025
      -     3,750     3,750  South Carolina Jobs Econ Dev
                             Auth Indl Rev Elec & Gas Co
                             Proj Ser B (AMT) (AMBAC Insd)       5.450    11/01/32            -        3,942,975        3,942,975
                                                                                     ----------------------------    -------------
                                                                                      2,174,890       19,626,756       21,801,646
                                                                                     ----------------------------    -------------

                             SOUTH DAKOTA    0.6%
    875     1,375     2,250  Deadwood, SD Ctf Part (ACA
                             Insd)                               6.375    11/01/20      944,545        1,484,285        2,428,830
      -     1,000     1,000  South Dakota St Hlth & Ed Fac
                             Auth Rev Childrens Care Hosp
                             Rfdg                                6.125    11/01/29            -        1,063,240        1,063,240
      -       990       990  South Dakota St Hlth & Ed Fac
                             Auth Vocational Ed Pgm Ser A
                             (AMBAC Insd)                        5.400    08/01/13            -        1,089,465        1,089,465
                                                                                     ----------------------------    -------------
                                                                                        944,545        3,636,990        4,581,535
                                                                                     ----------------------------    -------------

                             TENNESSEE    1.7%
  2,000     1,500     3,500  Johnson City, TN Hlth & Ed
                             Fac Brd Hosp Rev First Mtg
                             Mtn States Rfdg (MBIA Insd)         7.500    07/01/25    2,523,280        1,892,460        4,415,740
  2,500         -     2,500  Memphis, TN (Prerefunded @
                             10/01/06)                           5.250    10/01/14    2,680,175                -        2,680,175
      -       410       410  Montgomery Cnty, TN Pub Impt
                             Rfdg (FGIC Insd) (a)                5.500    05/01/16            -          464,583          464,583
      -     5,090     5,090  Montgomery Cnty, TN Pub Impt
                             Rfdg (Prerefunded @ 05/01/12)
                             (FGIC Insd) (a)                     5.500    05/01/16            -        5,873,707        5,873,707
                                                                                     ----------------------------    -------------
                                                                                      5,203,455        8,230,750       13,434,205
                                                                                     ----------------------------    -------------

                             TEXAS    13.0%
  2,050         -     2,050  Austin, TX Wtr & Wastewtr
                             Rfdg (MBIA Insd)                    5.750    05/15/12    2,320,621                -        2,320,621
  1,000         -     1,000  Austin, TX Wtr & Wastewtr
                             Rfdg (MBIA Insd)                    5.250    11/15/19    1,094,620                -        1,094,620
      -     2,685     2,685  Beaumont, TX Wtrwks & Swr Sys
                             (FGIC Insd) (a)                     6.250    09/01/15            -        3,129,529        3,129,529
    400         -       400  Brazos Cnty, TX Hlth Fac Dev
                             Oblig Grp                           5.375    01/01/32      406,336                -          406,336
      -     1,275     1,275  Cameron Cnty, TX Ctf Oblig
                             (AMBAC Insd) (a)                    5.750    02/15/13            -        1,437,282        1,437,282
  1,430         -     1,430  Cameron Cnty, TX Ctf Oblig
                             (AMBAC Insd) (a)                    5.750    02/15/15    1,613,283                -        1,613,283
  1,500         -     1,500  Corpus Christi, TX Util Sys
                             Rev Impt Rfdg (Prerefunded @
                             07/15/12) (FSA Insd)                5.250    07/15/19    1,650,960                -        1,650,960
      -     3,000     3,000  Dallas Cnty, TX Util &
                             Reclamation Dist Ser B Rfdg
                             (AMBAC Insd)                        5.875    02/15/29            -        3,032,340        3,032,340
      -     2,000     2,000  Dallas, TX Wtrwks & Swr Sys
                             Rev Rfdg                            5.750    10/01/17            -        2,273,680        2,273,680
      -     4,000     4,000  Dallas-Fort Worth, TX Intl
                             Arpt Rev Impt Jt Ser A Rfdg
                             (AMT) (FGIC Insd)                   5.500    11/01/31            -        4,185,480        4,185,480
      -     4,000     4,000  Dallas-Fort Worth, TX Intl
                             Arpt Rev Jt Ser A (AMT) (FGIC
                             Insd)                               5.750    11/01/30            -        4,268,920        4,268,920
  2,000         -     2,000  Fort Worth, TX Wtr & Swr Rev
                             Impt Rfdg                           5.500    02/15/05    2,021,940                -        2,021,940
  1,000         -     1,000  Harris Cnty, TX Hlth Fac Dev
                             Mem Hermann Hlthcare Ser A          6.375    06/01/29    1,098,900                -        1,098,900
  2,000         -     2,000  Harris Cnty, TX Perm Impt &
                             Rfdg                                5.000    10/01/11    2,143,820                -        2,143,820
  4,820         -     4,820  Harris Cnty, TX Toll Rd
                             (Prerefunded @ 08/15/09)
                             (AMBAC Insd)                          *      08/15/18    2,244,867                -        2,244,867
  1,000         -     1,000  Harris Cnty, TX Toll Rd
                             (Prerefunded @ 08/15/09)
                             (AMBAC Insd)                          *      08/15/21      378,880                -          378,880
      -     1,000     1,000  Houston, TX Arpt Sys Rev Sub
                             Lien Ser A (AMT) (FSA Insd)         5.625    07/01/30            -        1,062,540        1,062,540
  2,105     3,000     5,105  Houston, TX Hotel Occupancy
                             Tax & Spl Rev Convention &
                             Entmt Ser B (AMBAC Insd)            5.750    09/01/15    2,407,236        3,430,740        5,837,976
     95       130       225  Houston, TX Pub Impt Rfdg
                             (FSA Insd)                          5.750    03/01/15      108,320          148,227          256,547
    905     1,370     2,275  Houston, TX Pub Impt Rfdg
                             (Prerefunded 09/01/10) (FSA
                             Insd)                               5.750    03/01/15    1,034,641        1,566,253        2,600,894
      -     6,000     6,000  Houston, TX Util Sys Rev
                             First Lien Ser A Rfdg (FSA
                             Insd)                               5.250    05/15/21            -        6,562,680        6,562,680
      -     6,000     6,000  Houston, TX Util Sys Rev
                             First Lien Ser A Rfdg (FGIC
                             Insd)                               5.250    05/15/23            -        6,488,640        6,488,640
  2,000         -     2,000  Houston, TX Wtr & Swr Sys Rev
                             Jr Lien Ser B Rfdg (Escrowed
                             to Maturity) (FGIC Insd)            6.250    12/01/05    2,095,160                -        2,095,160
      -     1,925     1,925  Houston, TX Wtr & Swr Sys Rev
                             Jr Lien Ser C (Prerefunded @
                             12/01/07) (FGIC Insd)               5.375    12/01/27            -        2,124,565        2,124,565
  1,500         -     1,500  Mesquite, TX Hlth Fac Dev
                             Retirement Fac Christian A          7.500    02/15/18    1,608,735                -        1,608,735





                                      G-11



                                                                                             
  1,100         -     1,100  Metropolitan Hlth Fac Dev Corp
                             TX Wilson N Jones Mem Hosp Proj     7.200    01/01/21     1,099,846               -       1,099,846
      -     1,500     1,500  Metropolitan Hlth Fac Dev Corp
                             TX Wilson N Jones Mem Hosp Proj     7.250    01/01/31             -       1,450,065       1,450,065
  1,000     1,500     2,500  North Cent TX Hlth Fac Dev
                             Hosp Baylor Hlthcare Sys Proj
                             Ser A                               5.125    05/15/29     1,016,360       1,524,540       2,540,900
  1,750     4,000     5,750  North Cent TX Hlth Fac Dev
                             Hosp Childrens Med Ctr Dallas
                             (AMBAC Insd)                        5.250    08/15/32     1,827,525       4,177,200       6,004,725
      -     3,000     3,000  San Antonio, TX Elec & Gas Sys
                             Rfdg                                5.375    02/01/16             -       3,355,470       3,355,470
  2,805         -     2,805  Tarrant Regl Wtr Dist TX Wtr
                             Impt Rfdg (FSA Insd)                5.250    03/01/19     3,064,911               -       3,064,911
  3,297         -     3,297  Texas Mun Pwr Agy Rev (AMBAC
                             Insd)                                 *      09/01/07     3,081,079               -       3,081,079
    228         -       228  Texas Mun Pwr Agy Rev
                             (Escrowed to Maturity) (AMBAC
                             Insd)                                 *      09/01/07       213,189               -         213,189
  1,995         -     1,995  Texas St Pub Ppty Fin Corp Rev
                             Mental Hlth & Retardation Rfdg
                             (FSA Insd)                          5.500    09/01/13     2,037,613               -       2,037,613
      -     2,750     2,750  Texas St Vets Housing
                             Assistance Pgm Vet Ser B (AMT)
                             (FHA Gtd)                           6.100    06/01/31             -       2,939,365       2,939,365
  1,000         -     1,000  Texas Tech Univ Rev Fin Sys
                             Seventh (MBIA Insd)                 5.000    08/15/25     1,035,450               -       1,035,450
  1,500         -     1,500  Texas Wtr Dev Brd Rev St
                             Revolving Fd Sr Lien Ser B          5.250    07/15/17     1,646,820               -       1,646,820
  1,000         -     1,000  Trinity River Auth TX Rev
                             Tarrant Cnty Wtr Proj Impt &
                             Rfdg (MBIA Insd)                    5.500    02/01/21     1,118,310               -       1,118,310
      -     3,000     3,000  University of TX Univ Rev Fin
                             Sys Ser A                           5.250    08/15/20             -       3,281,370       3,281,370
  2,500         -     2,500  University of TX Univ Rev Fin
                             Sys Ser B                           5.250    08/15/20     2,734,475               -       2,734,475
      -     2,300     2,300  University of TX Univ Rev Fin
                             Sys Ser C (Prerefunded @
                             08/15/11)                           5.375    08/15/19             -       2,622,782       2,622,782
                                                                                     ----------------------------    ------------
                                                                                      41,103,897      59,061,668     100,165,565
                                                                                     ----------------------------    ------------

                             UTAH    0.7%
  1,000         -     1,000  Salt Lake Cnty, UT College Rev
                             Westminster College Proj            5.750    10/01/27     1,018,710               -       1,018,710
      -       105       105  Utah St Hsg Fin Agy Single
                             Family Mtg Mezzanine Issue H1
                             (AMBAC Insd)                        6.000    07/01/12             -         109,318         109,318
    135         -       135  Utah St Hsg Fin Agy Single
                             Family Mtg Ser B Class 2 (AMT)
                             (FHA/VA Gtd)                        6.250    07/01/14       135,142               -         135,142
      -     3,625     3,625  Utah St Ser A                       5.000    07/01/07             -       3,902,095       3,902,095
                                                                                     ----------------------------    ------------
                                                                                       1,153,852       4,011,413       5,165,265
                                                                                     ----------------------------    ------------

                             VIRGINIA    0.3%
      -     1,320     1,320  Fairfax Cnty, VA Ctf Part           5.300    04/15/23             -       1,417,654       1,417,654
      -     1,000     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             -       1,059,810       1,059,810
                                                                                     ----------------------------    ------------
                                                                                               -       2,477,464       2,477,464
                                                                                     ----------------------------    ------------

                             WASHINGTON    5.5%
  3,410         -     3,410  Clark Cnty, WA Pub Util Dist
                             Rfdg (FSA Insd) (a)                 5.500    01/01/08     3,740,224               -       3,740,224
  2,595         -     2,595  Clark Cnty, WA Pub Util Dist
                             Rfdg (FSA Insd)                     5.500    01/01/09     2,891,167               -       2,891,167
  1,300         -     1,300  Energy Northwest WA Elec Rev
                             Proj No 3 Ser A Rfdg (FSA Insd)     5.500    07/01/17     1,461,291               -       1,461,291
      -     2,500     2,500  Energy Northwest WA Elec Rev
                             Proj No 3 Ser A Rfdg (FSA Insd)     5.500    07/01/18             -       2,810,175       2,810,175
      -     5,360     5,360  Energy Northwest WA Elec Rev
                             Proj No 3 Ser B Rfdg (FSA Insd)     6.000    07/01/16             -       6,262,356       6,262,356
  4,400         -     4,400  King Cnty, WA Ser B Rfdg (MBIA
                             Insd)                               5.250    01/01/34     4,605,040               -       4,605,040
      -     1,485     1,485  Pierce Cnty, WA (AMBAC Insd)
                             (a)                                 5.750    08/01/14             -       1,690,910       1,690,910
      -     1,000     1,000  Port Seattle, WA Rev Ser B
                             (AMT) (MBIA Insd)                   5.625    02/01/24             -       1,085,740       1,085,740
      -     1,435     1,435  Radford Ct Pptys WA Student
                             Hsg Rev (MBIA Insd) (a)             6.000    06/01/15             -       1,651,900       1,651,900
      -     1,585     1,585  Radford Ct Pptys WA Student
                             Hsg Rev (MBIA Insd) (a)             6.000    06/01/16             -       1,824,573       1,824,573
      -     1,150     1,150  Seattle, WA Muni Lt & Pwr Rev       5.250    12/01/08             -       1,265,633       1,265,633
      -     1,315     1,315  Seattle, WA Muni Lt & Pwr Rev       5.500    12/01/09             -       1,475,706       1,475,706
      -     1,000     1,000  Seattle, WA Muni Lt & Pwr Rev       5.625    12/01/18             -       1,086,730       1,086,730
  1,000         -     1,000  Spokane, WA Pub Fac Dist Hotel
                             (MBIA Insd)                         5.750    12/01/20     1,162,420               -       1,162,420
  2,100         -     2,100  Spokane, WA Pub Fac Dist Hotel
                             (MBIA Insd)                         5.750    12/01/21     2,433,165               -       2,433,165
      -     3,000     3,000  Spokane, WA Pub Fac Dist Hotel
                             Motel & Sales Use Tax (MBIA
                             Insd)                               5.250    09/01/33             -       3,160,470       3,160,470
      -     1,350     1,350  Tacoma, WA Elec Sys Rev Ser A
                             Rfdg (FSA Insd)                     5.750    01/01/15             -       1,537,799       1,537,799
      -     1,650     1,650  Tacoma, WA Elec Sys Rev Ser B
                             Rfdg (FSA Insd)                     5.500    01/01/12             -       1,884,036       1,884,036
                                                                                     ----------------------------    ------------
                                                                                      16,293,307      25,736,028      42,029,335
                                                                                     ----------------------------    ------------

                             WISCONSIN    1.5%
  2,345         -     2,345  Appleton, WI Wtrwks Rev Rfdg
                             (FGIC Insd)                         5.375    01/01/19     2,618,802               -       2,618,802
      -     1,225     1,225  De Pere, WI Unit Sch Dist Rfdg
                             (FGIC Insd)                         5.000    10/01/13             -       1,350,281       1,350,281
  3,500         -     3,500  Milwaukee, WI Redev Auth Rev
                             Milwaukee Pub Schs (AMBAC Insd)     5.125    08/01/22     3,734,115               -       3,734,115
      -     1,340     1,340  Oconto Falls, WI Pub Sch Dist
                             Ser A Rfdg (Prerefunded @
                             03/01/11) (FSA Insd) (a)            5.750    03/01/15             -       1,548,879       1,548,879
      -     2,000     2,000  Southeast WI Professional
                             Baseball Pk Dist Sales Tax Rev
                             Ser A Rfdg (MBIA Insd)              5.500    12/15/20             -       2,352,620       2,352,620
                                                                                     ----------------------------    ------------
                                                                                       6,352,917       5,251,780      11,604,697
                                                                                     ----------------------------    ------------

                             GUAM    0.8%
  2,800     3,000     5,800  Guam Pwr Auth Rev Ser A (AMBAC
                             Insd)                               5.250    10/01/34     2,960,048       3,171,480       6,131,528
                                                                                     ----------------------------    ------------

                             PUERTO RICO    0.8%
      -     1,110     1,110  Puerto Rico Comwlth Aqueduct &
                             Swr Auth Rev Rfdg (Comwlth Gtd)     5.000    07/01/15             -       1,146,963       1,146,963





                                      G-12


                                                                                                
                       Puerto Rico Indl Tourist Ed Med & Environmental
  1,000      -  1,000  Ctl Fac Fin Auth Higher Ed Rev                   5.375  02/01/19   1,044,910             -       1,044,910
                       Puerto Rico Pub Bldgs Auth Rev Gtd Govt Facs                                                
                                                                                                                   
      -  3,500  3,500  Ser I (Comwlth Gtd)                              5.250  07/01/33           -     3,667,405       3,667,405
                                                                                       --------------------------   -------------
                                                                                          1,044,910     4,814,368       5,859,278
                                                                                       --------------------------   -------------




TOTAL LONG-TERM INVESTMENTS    153.6%
   (Cost $428,284,650, $655,054,667, and $1,083,339,317)                                462,085,804   722,389,216   1,184,475,020

SHORT-TERM INVESTMENTS    0.5%
   (Cost $2,415,000, $1,300,000, and $3,715,000)                                          2,415,000     1,300,000       3,715,000
                                                                                       --------------------------   -------------
                                                                                                                             
TOTAL INVESTMENTS    154.1%                                        
   (Cost $430,699,650, $656,354,667, and $1,087,054,317)                                464,500,804   723,689,216   1,188,190,020

OTHER ASSETS IN EXCESS OF LIABILITIES    1.7%                                             2,975,956     9,867,943      12,843,899

PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS)    (55.8%)                          (165,143,422) (265,222,637)   (430,366,059)
                                                                                       --------------------------   -------------

NET ASSETS APPLICABLE TO COMMON SHARES    100.0%                                        302,333,338  $468,334,522     770,667,860(g)
                                                                                       ==========================   =============


Percentages are calculated as a percentage of net assets applicable to common
shares.

*  Zero coupon bond

(a)  The Trust owns 100% of the bond issuance.

(b)  All or a portion of these securities have been physically segregated in
connection with open futures contracts.

(c)  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.

(d)  These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with qualified
institutional buyers. Restricted securities comprise 1.4%, 0.3% and 0.7% of net
assets applicable to common shares of Municipal Income Trust, Trust for
Investment Grade Municipal and Pro-Forma, respectively.

(e)  Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.

(f)  Securities purchased on a when-issued or delayed delivery basis.
(g)  Does not reflect a non-recurring cost associated with this transaction of
approximately $491,000, with $241,866 to be borne by the common shareholders of
Van Kampen Municipal Income Trust and $187,334 to be borne by the common
shareholders of Van Kampen Trust for Investment Grade Municipals. The remaining
$61,800 will be borne by Van Kampen.


ACA - American Capital Access 
AGC - AGC Insured Custody Certificates 
AMBAC - AMBAC Indemnity Corp. 
AMT - Alternative Minimum Tax 
Comwth Gtd - Commonwealth of Puerto Rico 
FGIC - Financial Guaranty Insurance Co. 
FHA/VA - Federal Housing Administration 
FSA - Financial Security Assurance Inc. 
GNMA - Government National Mortgage Association 
LOC - Letter of Credit 
MBIA - Municipal Bond Investors Assurance Corp. 
XLCA - XL Capital Assurance Inc.


                                      G-13

                       VAN KAMPEN MUNICIPAL INCOME TRUST -
                VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
                  PROFORMA STATEMENT OF ASSETS AND LIABILITIES
                                OCTOBER 31, 2004
                                   (UNAUDITED)
                              AMOUNTS IN THOUSANDS





                                                                              VAN KAMPEN
                                                           VAN KAMPEN         TRUST FOR
                                                           MUNICIPAL          INVESTMENT
                                                          INCOME TRUST     GRADE MUNICIPALS   ADJUSTMENTS          PROFORMA
                                                          ------------     ----------------   -----------         ------------
                                                                                                      
ASSETS:
Total Investments (Cost of $430,700
     $656,354 and $1,087,054, respectively)                $   464,501       $   723,689                          $ 1,188,190
Cash                                                                38                20                                   58
Receivable:                                                                                                                 0
    Interest                                                     6,379            10,507                               16,886
    Investments Sold                                                                 456                                  456
Other                                                               10                13                                   23
                                                           -----------       -----------        ----------        -----------
        Total Assets                                           470,928           734,685                          $ 1,205,613
                                                           -----------       -----------        ----------        -----------

LIABILITIES:
Payables:
    Investments Purchased                                        2,665                                                  2,665
    Investment Advisory Fee                                        237               371                                  608
    Variation Margin on Futures                                     19               134                                  153
    Income Distributions-Common Shares                              96               103                                  199
    Other Affiliates                                                13                34                                   47
Trustee's Deferred Compensation and Retirement Plans               289               333                                  622
Accrued Expenses                                                   132               152                                  284
Merger Costs                                                         0                 0        $      429 (3)            429
                                                           -----------       -----------        ----------        -----------
        Total Liabilities                                        3,451             1,127               429              5,007
Preferred Shares (including accrued distributions)             165,144           265,223                              430,367
                                                           -----------       -----------        ----------        -----------
NET ASSETS APPLICABLE TO COMMON SHARES                     $   302,333       $   468,335        $     (429)       $   770,239
                                                           ===========       ===========        ==========        ===========

NET ASSET VALUE PER COMMON SHARE                           $     10.54       $     17.34                          $     17.34
                                                           ===========       ===========                          ===========

NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited
       number of shares authorized, 28,685, 27,013
       and 44,424 shares issued and outstanding)           $       287       $       270        $     (113)(3)    $       444
Paid in Surplus                                                265,829           399,274              (316)(3)        664,787
Net Unrealized Appreciation                                     33,745            66,944                              100,689
Accumulated Undistributed Net Investment Income                  2,046             2,903                                4,949
Accumulated Net Realized Gain (Loss)                               426            (1,056)                                (630)
                                                           -----------       -----------        -----------------------------
NET ASSETS APPLICABLE TO COMMON SHARES                     $   302,333       $   468,335        $     (429)       $   770,239
                                                           ===========       ===========        =============================

PREFERRED SHARES                                           $   165,000       $   265,000                          $   430,000
                                                           ===========       ===========        ==========        ===========

NET ASSETS INCLUDING PREFERRED SHARES                      $   467,333       $   733,335        $     (429)       $ 1,200,239
                                                           ===========       ===========        ==========        ===========


(1) THE PRO FORMA STATEMENTS ARE PRESENTED AS IF THE REORGANIZATION WAS
EFFECTIVE OCTOBER 31, 2004. THE PRO FORMA STATEMENTS GIVE EFFECT TO THE PROPOSED
EXCHANGE OF STOCK FOR ASSETS AND LIABILITIES WITH THE VAN KAMPEN TRUST FOR
INVESTMENT GRADE MUNICIPALS BEING THE SURVIVING ENTITY. THE PROPOSED TRANSACTION
WILL BE ACCOUNTED FOR IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES OF AMERICA, AS A TAX-FREE REORGANIZATION. THE
HISTORICAL COST BASIS OF THE INVESTMENTS IS CARRIED OVER TO THE SURVIVING
ENTITY.

(2) THE PRO FORMA STATEMENTS PRESUME THE ISSUANCE BY THE VAN KAMPEN TRUST FOR
INVESTMENT GRADE MUNICIPAL OF APPROXIMATELY 17,421,653 COMMON SHARES IN EXCHANGE
FOR THE ASSETS AND LIABILITIES OF THE VAN KAMPEN MUNICIPAL INCOME TRUST.

(3) A NON-RECURRING COST ASSOCIATED WITH THIS TRANSACTION OF APPROXIMATELY
$491,000 WILL BE INCURRED. APPROXIMATELY $241,866, OR $.008 WILL BE BORNE BY THE
COMMON SHAREHOLDERS OF THE VAN KAMPEN MUNICIPAL INCOME TRUST, WHILE
APPROXIMATELY $187,334, OR $.007 WILL BE BORNE BY THE COMMON SHAREHOLDERS OF THE
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS. THE REMAINING $61,800 WILL BE 
BORNE BY VAN KAMPEN.




                                      G-14

   VAN KAMPEN MUNICIPAL INCOME TRUST - VAN KAMPEN TRUST FOR INVESTMENT GRADE
                                   MUNICIPALS
                        PROFORMA STATEMENT OF OPERATIONS
                  FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2004
                                  (UNAUDITED)
                              AMOUNTS IN THOUSANDS



                                                                                 VAN KAMPEN
                                                               VAN KAMPEN        TRUST FOR
                                                               MUNICIPAL         INVESTMENT
                                                              INCOME TRUST    GRADE MUNICIPALS    ADJUSTMENTS           PROFORMA
                                                             --------------   ----------------   --------------      --------------
                                                                                                         
INVESTMENT INCOME:
Interest                                                     $       22,066    $       35,602                        $       57,668
                                                             --------------    --------------    --------------      --------------

EXPENSES:
Investment Advisory Fee                                               2,782             4,366                                 7,148
Preferred Share Maintenance                                             437               716    $          (17)(1)           1,136
Administrative Fee                                                                        213                                   213
Trustees' Fees and Related Expenses                                     105               134              (124)(1)             115
Legal                                                                    50                79               (29)(1)             100
Custody                                                                  27                41                (2)(1)              66
Other                                                                   281               306              (120)(1)             467
                                                             --------------    --------------    --------------      --------------
     Total Expenses                                                   3,682             5,855              (292)              9,245
                                                             --------------    --------------    --------------      --------------
NET INVESTMENT INCOME                                        $       18,384    $       29,747    $          292      $       48,423
                                                             ==============    ==============    ==============      ==============

REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
     Investments                                             $          882    $        2,203                        $        3,085
     Futures                                                           (711)           (5,329)                               (6,040)
                                                             --------------    --------------    --------------      --------------
Net Realized Gain/Loss:                                                 171            (3,126)                               (2,955)
                                                             --------------    --------------    --------------      --------------

Unrealized Appreciation/Depreciation:
     Beginning of the Period                                         27,661            55,619                                83,280
                                                             --------------    --------------    --------------      --------------
     End of the Period:
           Investments                                               33,801            67,335                               101,136
           Futures                                                      (56)             (391)                                 (447)
                                                             --------------    --------------    --------------      --------------
                                                                     33,745            66,944                               100,689
                                                             --------------    --------------    --------------      --------------
Net Unrealized Appreciation/Depreciation During the Period            6,084            11,325                                17,409
                                                             --------------    --------------    --------------      --------------
NET REALIZED AND UNREALIZED GAIN                             $        6,255    $        8,199                        $       14,454
                                                             ==============    ==============    ==============      ==============
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS                      $       (1,880)   $       (3,048)                       $       (4,928)
                                                             ==============    ==============    ==============      ==============
NET INCREASE IN NET ASSETS APPLICABLE TO
COMMON SHARES FROM OPERATIONS                                $       22,759    $       34,898    $          292      $       57,949
                                                             ==============    ==============    ==============      ==============




(1) Reflects the reduction in other operating expenses as a result of the
elimination of certain duplicative expenses and the result of operating a
larger, more efficient fund.



                                      G-15


VAN KAMPEN MUNICIPAL INCOME TRUST-VAN KAMPEN TRUST FOR INVESTMENT 
GRADE MUNICIPALS
NOTES TO PRO FORMA FINANCIAL STATEMENTS - OCTOBER 31, 2004 (UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES
The Acquiring Trust, Van Kampen Trust for Investment Grade Municipals (the
"Acquiring Trust") is registered as a diversified, closed-end management
investment company under the Investment Company Act of 1940 (the "1940 Act"), as
amended. The Acquiring Trust's investment objective is to provide a high level
of current income exempt from federal income tax, consistent with preservation
of capital. The Acquiring Trust will invest substantially all of its assets in
municipal securities rated investment grade at the time of investment. The
Acquiring Trust commenced investment operations on January 24, 1992.
         The following is a summary of significant accounting policies
consistently followed by the Acquiring 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
Acquiring 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
Acquiring 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.

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 Acquiring 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.

E. DISTRIBUTION OF INCOME AND GAINS The Acquiring 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.



                                      G-16



                           PART C: OTHER INFORMATION

ITEM 15. INDEMNIFICATION

         Section 5.3 of the Registrant's Declaration of Trust, a copy of which
is filed as an exhibit hereto, provides for indemnification, as set forth below:

         Section 5.3 Mandatory Indemnification.

         (a) Subject to the exceptions and limitations contained in paragraph
(b) below:

              (i)    every person who is or has been a Trustee or officer of the
                     Trust shall be indemnified by the Trust to the fullest
                     extent permitted by law against all liability and against
                     all expenses reasonably incurred or paid by him in
                     connection with any claim, action, suit or proceeding in
                     which he becomes involved as a party or otherwise by virtue
                     of his being or having been a Trustee or officer and
                     against amounts paid or incurred by him in the settlement
                     thereof;

              (ii)   the words, "claim," "action," "suit," or "proceeding" shall
                     apply to all claims, actions, suits or proceedings (civil,
                     criminal, administrative or other, including appeals),
                     actual or threatened; and the words "liability" and
                     "expenses" shall include, without limitation, attorneys'
                     fees, costs, judgments, amounts paid in settlement, fines,
                     penalties and other liabilities.

         (b) No indemnification shall be provided hereunder to a Trustee or
officer:

              (i)    against any liability to the Trust or its Shareholders by
                     reason of a final adjudication by the court or other body
                     before which the proceeding was brought that he engaged in
                     willful misfeasance, bad faith, gross negligence or
                     reckless disregard of the duties involved in the conduct of
                     his office;

              (ii)   with respect to any matter as to which he shall have been
                     finally adjudicated not to have acted in good faith in the
                     reasonable belief that his action was in the best interest
                     of the Trust;

              (iii)  in the event of a settlement or other disposition not
                     involving a final adjudication as provided in paragraph
                     (b)(i) or (b)(ii) resulting in a payment by a Trustee or
                     officer, unless there has been either a determination that
                     such Trustee or officer did not engage in willful
                     misfeasance, bad faith, gross negligence or reckless
                     disregard of the duties involved in the conduct of his
                     office by the court or other body approving the settlement
                     or other disposition or a reasonable determination, based
                     upon a review of readily available facts (as opposed to a
                     full trial-type inquiry) that he did not engage in such
                     conduct:

                                      C-1


                     (A)   by vote of a majority of the Disinterested Trustees
                           acting on the matter (provided that a majority of
                           the Disinterested Trustees then in office act on the
                           matter); or

                     (B)   by written opinion of independent legal counsel.

                     (C)   The rights of indemnification herein provided by be
                           insured against by policies maintained by the Trust,
                           shall be severable, shall not effect any other rights
                           to which any Trustee or officer may now or hereafter
                           be entitled, shall continue as to a Person who has
                           ceased to be such Trustee or officer and shall inure
                           to the benefit of the heirs, executors,
                           administrators, and assigns of such Person. Nothing
                           contained herein shall affect any rights to
                           indemnification to which personnel of the Trust other
                           than Trustees and officers may be entitled by
                           contract or otherwise under law.

                     (D)   Expenses of preparation and presentation of a defense
                           to any claim, action, suit, or proceeding of the
                           character described in paragraph (a) of this Section
                           5.3 shall be advanced by the Trust prior to final
                           disposition thereof upon receipt of an undertaking by
                           or on behalf of the recipient to repay such amount if
                           it is ultimately determined that he is not entitled
                           to indemnification under this Section 5.3, provided
                           that either:

                           (i)   such undertaking is secured by a surety bond or
                                 some other appropriate security or the Trust
                                 shall be insured against losses arising out of
                                 any such advances; or

                           (ii)  a majority of the Disinterested Trustees acting
                                 on the matter (provided that a majority of the
                                 Disinterested Trustees then in office act on
                                 the matter) or an independent legal counsel in
                                 a written opinion shall determine, based upon a
                                 review of readily available facts (as opposed
                                 to a full trial-type inquiry), that there is
                                 reason to believe that the recipient ultimately
                                 will be found entitled to indemnification.

         As used in this Section 5.3, a "Disinterested Trustee" is one (i) who
         is not an "Interested Person" of the Trust (including anyone who has
         been exempted from being an "Interested Person" by any rule, regulation
         or order of the Commission), and (ii) against whom none of such
         actions, suits or other proceedings or another action, suit or other
         proceeding on the same or similar grounds is thenor had been pending.

ITEM 16. EXHIBITS


         (1)   (a)  (i) Declaration of Trust of the Registrant+

                   (ii) Certificates of Amendment to the Declaration of Trust+


                                      C-2


               (b)   Form of Certificate of Vote Establishing Preferred Shares
                     of the Registrant and amendments thereto (included as
                     Appendix B to the Statement of Additional Information
                     contained in this Registration Statement)+


         (2)   (a)   By-Laws of the Registrant+

               (b)   Articles of Amendment to the By-Laws of the Registrant+

         (3)         Not applicable

         (4)         Form of Agreement and Plan of Reorganization between the
                     Registrant and the Target Fund (included as Appendix A to
                     the Statement of Additional Information contained in this
                     Registration Statement)+

         (5)   (a)   Specimen share certificate for common shares of the 
                     Registrant+ 

               (b)   Specimen share certificate for preferred shares of the 
                     Registrant+

         (6)   (a)   Investment Advisory Agreement+

               (b)   Amendment Number One to the Investment Advisory Agreement+

         (7)         Not Applicable

         (8)   (a)   Form of Amended and Restated Deferred Compensation 
                     Agreement+

               (b)   Form of Retirement Plan+


         (9)   (a)   Custodian Contract+

               (b)   Amendment to Custodian Contract+


         (10)        Not Applicable

         (11)        Opinion of Skadden, Arps, Slate, Meagher & Flom
                     LLP+





         (12)        Tax opinion of Skadden, Arps, Slate, Meagher & Flom LLP++


         (13)  (a)   Transfer Agency and Service Agreement+ 

               (b)   Auction Agency Agreement+ 

               (c)   Form of Broker-Dealer Agreement+ 


               (d)   (i)    Letter of Representations+

                     (ii)   Form of Letter of Representations+






               (e)   Fund Accounting Agreement+

               (f)   Amended and Restated Legal Services Agreement+

               (g)   Administration Agreement+


         (14)        Consent of Independent Registered Public Accounting Firm+




         (15)        Not Applicable

         (16)        Power of Attorney+

         (17)  (a)   Code of Ethics of the Investment Adviser+

               (b)   Codes of Ethics of the Funds+     

         (99)  (a)   Proxy card for the Target Fund Common Shares+

               (b)   Proxy card for the Target Fund APS+

               (c)   Proxy card for the Acquiring Fund Common Shares+


                                      C-3



          +     Filed herewith.

         ++ To be filed by further amendment.


ITEM 17. UNDERTAKINGS

         (1)      The undersigned Registrant agrees that prior to any public
                  reoffering of the securities registered through use of a
                  prospectus which is part of this Registration Statement by any
                  person or party who is deemed to be an underwriter within the
                  meaning of Rule 145(c) of the Securities Act of 1933, as
                  amended, the reoffering prospectus will contain information
                  called for by the applicable registration form for reofferings
                  by persons who may be deemed underwriters, in addition to the
                  information called for by other items of the applicable form.

         (2)      The undersigned Registrant agrees that every prospectus that
                  is filed under paragraph (1) above will be filed as part of an
                  amendment to the registration statement and will not be used
                  until the amendment is effective, and that, in determining any
                  liability under the Securities Act of 1933, as amended, each
                  post-effective amendment shall be deemed to be a new
                  registration statement for the securities offered therein, and
                  the offering of securities at that time shall be deemed to be
                  the initial bona fide offering of them.

         (3)      The undersigned Registrant agrees that, if the Reorganization
                  discussed in the registration statement closes, it shall file
                  by post-effective amendment either a copy of the Internal
                  Revenue Service private letter ruling applied for or an
                  opinion supporting the tax matters discussed in the
                  registration statement.





                                      C-4



                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of New York,
and the Sate of New York, on May 5, 2005.

                                        VAN KAMPEN TRUST FOR INVESTMENT
                                          GRADE MUNICIPALS

                                        By:   /s/ Lou Anne McInnis
                                              ----------------------------------
                                               Lou Anne McInnis
                                               Assistant Secretary

         Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.

               SIGNATURES               TITLE
               ----------               -----
PRINCIPAL EXECUTIVE OFFICER:


/s/ Ronald E. Robison*                  Executive Vice President
--------------------------------------
Ronald E. Robison 


PRINCIPAL FINANCIAL OFFICER:


/s/ James W. Garrett*                   Chief Financial Officer and Treasurer
---------------------------------------
James W. Garrett


TRUSTEES:

/s/ David C. Arch*                      Trustee
---------------------------------------
David C. Arch

/s/ Jerry D. Choate*                    Trustee
---------------------------------------
Jerry D. Choate

/s/ Rod Dammeyer*                       Trustee
---------------------------------------
Rod Dammeyer


                                      C-5



/s/ Linda Hutton Heagy*                 Trustee
---------------------------------------
Linda Hutton Heagy

/s/ R. Craig Kennedy*                   Trustee
---------------------------------------
R. Craig Kennedy

/s/ Howard J Kerr*                      Trustee
---------------------------------------
Howard J Kerr

/s/ Michell M. Merin*                   Trustee
---------------------------------------
Michell M. Merin

/s/ Jack E. Nelson*                     Trustee
---------------------------------------
Jack E. Nelson

/s/ Richard F. Powers, III*             Trustee
---------------------------------------
Richard F. Powers, III

/s/ Hugo F. Sonnenschein*               Trustee
---------------------------------------
Hugo F. Sonnenschein

/s/ Wayne W. Whalen*                     Trustee
---------------------------------------
Wayne W. Whalen

/s/ Suzanne H. Woolsey*                  Trustee
---------------------------------------
Suzanne H. Woolsey

------------------
* Signed by Lou Anne McInnis pursuant to a power of attorney filed herewith.

         /s/ Lou Anne McInnis                       May 5, 2005
         ----------------------------------------
         Lou Anne McInnis
         Attorney-in-Fact




                                      C-6


                                  EXHIBIT INDEX



(1)   (a) (i)  Declaration of Trust of the Registrant

(1)   (a) (ii) Certificates of Amendment to the Declaration of Trust

(2)   (a)      By-Laws of the Registrant

(2)   (b)      Articles of Amendment to the By-Laws of the Registrant

(5)   (a)      Specimen share certificate for common shares of the Registrant

(5)   (b)      Specimen share certificate for preferred shares of the Registrant

(6)   (a)      Investment Advisory Agreement

(6)   (b)      Amendment Number One to the Investment Advisory Agreement

(8)   (a)      Form of Amended and Restated Deferred Compensation Plan

(8)   (b)      Form of Retirement Plan

(9)   (a)      Custodian Contract

(9)   (b)      Amendment to Custodian Contract

(11)           Opinion of Skadden, Arps, Slate, Meagher & Flom LLP

(13)  (a)      Transfer Agency and Service Agreement

(13)  (b)      Auction Agency Agreement

(13)  (c)      Form of Broker-Dealer Agreement

(13)  (d) (i)  Letter of Representations

          (ii) Form of Letter of Representations

(13)  (e)      Fund Accounting Agreement

(13)  (f)      Amended and Restated Legal Services Agreement

(13)  (g)      Administration Agreement

(14)           Consent of Independent Registered Public Accounting Firm

(16)           Power of Attorney

(17)  (a)      Code of Ethics of the Investment Adviser

(17)  (b)      Code of Ethics of the Fund

(99)  (a)      Proxy Card for the Target Fund Common Shares

(99)  (b)      Proxy Card for the Target Fund APS

(99)  (c)      Proxy Card for the Acquiring Fund Common Shares