<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 9
Statement of Operations.......................... 10
Statement of Changes in Net Assets............... 11
Financial Highlights............................. 12
Notes to Financial Statements.................... 14
</TABLE>
VIG SAR 6/96
<PAGE> 2
LETTER TO SHAREHOLDERS
May 15, 1996
Dear Shareholder,
While interest rates drifted
downward during the fourth quarter of
last year, such was not the case in the
first quarter of 1996. Early in the [PHOTO]
quarter, municipal bond prices
demonstrated increased volatility in
conjunction with February's economic
announcements, which revealed a revival [Dennis J. McDonnell
in economic growth, impressive and Don G. Powell]
employment levels, and moderate
inflation. This positive economic
environment, however, did not translate
into positive movement for the bond markets. Instead, the markets became wary,
because inflation often accompanies economic growth.
Other factors influencing the municipal bond market early in the year
included:
- Intense weather conditions, which hindered distribution and manufacturing,
were experienced by much of the United States and affected certain
municipal bond sectors.
- The expectation that a federal budget agreement was forthcoming helped
bolster municipal bonds, especially at the longer end of the spectrum.
- The proposal of tax reform--and the threat of municipal bonds having
diminished tax-exempt status--continued to dampen demand for municipals,
resulting in lower bond prices.
We believe the beginning of 1996 reflected the market's reaction to the
possibility of a return to long-term economic growth. This, coupled with
continued low inflationary conditions, has served to put the Federal Reserve
Board in a neutral policy mode, bringing relative calm to the market--although
currently at higher interest rate levels.
PERFORMANCE SUMMARY
The Van Kampen American Capital Investment Grade Municipal Trust's (ticker
symbol VIG) common stock price was up 2 percent during the six-month period,
closing at $10.875, while the municipal bond market was down 4 percent for the
same period, according to the Bond Buyer's 40 Municipal Bond Index.
For the six months ended April 30, 1996, the Trust achieved a total return
of 6.00 percent(1), based on market price. Longer term, the Trust's one-year
total return was 1.51 percent(1), based on market price for the period ended
April 30, 1996, including reinvestment of dividends.
Continued on page two
1
<PAGE> 3
Many closed-end municipal bond funds are currently offering higher after-tax
yields than taxable income alternatives, and your Trust is no exception. Based
on the closing common stock price on April 30, 1996, the Investment Grade
Municipal Trust had a tax-exempt distribution rate of 7.17 percent(3). In other
words, investors in the 36 percent federal income tax bracket would have to earn
a yield of 11.20 percent(4) on a taxable investment to equal your Trust's
tax-exempt distribution rate.
MARKET OUTLOOK
The economy rebounded in the first quarter of 1996, despite poor weather in
the East and the remnants of a slow fourth quarter of 1995, which was hindered
by weak construction activity, two government shutdowns, and a strike at Boeing.
We believe the momentum of the first quarter can carry into the second, due in
part to renewed auto production in the aftermath of the General Motors strike
and an end to the budget stalemate between the White House and Congress. We
expect a modest slowdown in the summer months, as higher interest rates could
slow activity in interest-sensitive sectors of the economy, such as housing.
Top 5 Portfolio Holdings by Industry as of April 30,
1996
Industrial Revenue................ 16.8%
General Purpose................... 16.2%
Health Care....................... 10.8%
Single-Family Housing............. 10.1%
Wholesale Electric................ 7.2%
The Fed's protracted period of easing, and relatively neutral stance, favors
the growth we are currently experiencing. Given the strong employment situation
and commodity price increases, we think the Fed will await further economic
evidence before adjusting interest rates again--probably summertime at the
earliest. So far, guides such as the Consumer Price Index continue to indicate
modest levels of inflation. More importantly, we continue to see few signs of
emerging inflation in either unit labor costs, hourly earnings or the employment
cost index.
- --------------------------------------------------------------------------------
INVESTMENT TERM: REVENUE BONDS
Revenue bonds are one of the three most common types of municipal bonds--the
other two are general obligation bonds and municipal notes. Revenue bonds
are issued to finance income-generating projects such as turnpikes, toll
bridges and airports. The revenues these projects bring in are used to pay
interest and principal to bondholders.
- --------------------------------------------------------------------------------
Continued on page three
2
<PAGE> 4
Finally, as the November elections approach, the debate on tax reform may
grow. We believe the outcome in the long run will be positive, or at worst
neutral, for municipal bonds. That's good news for the market, which was
concerned that flat tax proposals could threaten the tax-exempt status of
municipal bonds. While the debate may not be over and legislation may be
forthcoming, the market should be more confident.
Indeed, we expect investor demand for municipal securities to exceed supply,
which should add price stability to the general market. And with municipal bond
yields currently at attractive levels relative to Treasuries, investor demand
for tax-exempt securities should increase.
In summary, our view of the general municipal market is positive. From the
decreasing likelihood of tax reform in the near term to specific market
conditions, we believe the market is on solid ground. With our dedication to
comprehensive research and long-term investment perspective, we believe your
Trust is in a position to benefit in the coming months.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality
as of April 30, 1996
<TABLE>
<S> <C>
AAA........................ 36.0%
AA......................... 5.7%
A.......................... 8.6%
BBB........................ 27.9%
BB......................... 8.0%
Non-Rated.................. 13.8%
</TABLE>
Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's, the Moody's ratings is used.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
3
<PAGE> 5
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1996
VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
(NYSE TICKER SYMBOL--VIG)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)........... 6.00%
Six-month total return based on NAV(2).................... (.28%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................ 7.17%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)................................... 11.20%
SHARE VALUATIONS
Net asset value........................................... $ 10.34
Closing common stock price................................ $10.875
Six-month high common stock price (02/01/96).............. $12.000
Six-month low common stock price (11/09/95)............... $10.375
Preferred share rate(5)................................... 3.77%
</TABLE>
(1)Total return based on market price assumes an investment at the 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 stock price at the end of the period
indicated.
(2)Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3)Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4)The taxable-equivalent distribution rate is calculated assuming a 36% federal
income tax bracket.
(5)See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
ARKANSAS 4.2%
$ 1,000 Dogwood Addition PRD Muni Ppty Owners Multi Purp
Impt Dist No 8 AR Impt Ser A (c)................ 9.750% 07/01/12 $ 629,000
1,000 Dogwood Addition PRD Muni Ppty Owners Multi Purp
Impt Dist No 8 AR Impt Ser B (c)................ 9.750 07/01/12 629,000
2,095 Maumelle, AR West Pointe Addition Muni Ppty
Owners Multi Purp Impt Dist No 7................ 9.500 12/01/10 1,885,500
------------
3,143,500
------------
CALIFORNIA 4.4%
4,490 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(MBIA Insd)..................................... * 09/01/17 1,161,204
225 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev............................................. * 01/01/13 131,204
650 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien
Ser A........................................... * 01/01/28 76,303
2,000 Metropolitan Wtrwks Dist Southern CA Rev........ 5.950 08/05/22 1,937,880
------------
3,306,591
------------
COLORADO 10.1%
10,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C................................ * 08/31/26 1,078,800
2,800 Denver, CO City & Cnty Arpt Rev Ser A........... 8.500 11/15/23 3,227,924
220 Jefferson Cnty, CO Residential Mtg Rev.......... 11.500 09/01/11 350,669
100 Jefferson Cnty, CO Residential Mtg Rev.......... 9.000 09/01/12 136,006
145 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/03)........................ 11.500 09/01/11 201,940
160 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/04)........................ 11.500 09/01/11 228,269
180 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/05)........................ 11.500 09/01/11 263,176
205 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/06)........................ 11.500 09/01/11 305,965
235 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/07)........................ 11.500 09/01/11 358,328
265 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/08)........................ 11.500 09/01/11 409,648
300 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/09)........................ 11.500 09/01/11 469,062
340 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/10)........................ 11.500 09/01/11 536,557
------------
7,566,344
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FLORIDA 5.6%
$ 2,000 Florida Hsg Fin Agy Hsg Bradley Park Apts
Proj (c)........................................ 9.750% 12/01/19 $ 569,200
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser A (Prerefunded @ 06/01/99)........ 8.750 06/01/16 1,133,430
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser B (Prerefunded @ 06/01/99)........ 8.750 06/01/16 1,133,430
2,300 Sun N Lake of Sebring, FL Impt Dist Spl Assmt
Ser A (c)....................................... 10.000 12/15/11 1,357,000
------------
4,193,060
------------
ILLINOIS 19.7%
1,000 Alton, IL Hlth Fac Rev & Impt Christian Hlth Ser
C Rfdg (Prerefunded @ 02/15/01) (FGIC
Insd) (b)....................................... 7.200 02/15/21 1,123,390
2,500 Alton, IL Hosp Fac Rev Saint Anthony's Hlth Cent
Proj (Prerefunded @ 02/15/01)................... 8.375 09/01/14 2,792,150
6,910 Aurora, IL Single Family Mtg Rev Cap Apprec
(AMBAC Insd).................................... * 12/01/22 836,939
2,700 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Ser B................................. 8.950 05/01/18 3,052,593
510 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.150 12/01/08 578,702
575 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.200 12/01/09 654,586
625 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.000 12/01/10 696,794
500 Hodgkins, IL Tax Increment Rev Ser A Rfdg....... 7.625 12/01/13 510,005
950 Illinois Hlth Fac Auth Rev Glenoaks Med Cent
Ser D........................................... 9.500 11/15/15 1,098,048
745 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D (Prerefunded @ 11/15/00)...................... 9.500 11/15/15 904,668
500 Illinois Hlth Fac Auth Rev Lutheran Social Svcs
Proj Ser A (Prerefunded @ 08/01/00)............. 7.650 08/01/20 561,055
1,910 Illinois Hsg Dev Auth Residential Mtg Rev
Ser B........................................... 7.250 08/01/17 2,006,149
------------
14,815,079
------------
INDIANA 3.0%
2,000 Kokomo, IN Hosp Auth Hosp Rev Saint Joseph Hosp
& Hlth Cent Ser A Rfdg (Prerefunded @
08/15/98)....................................... 8.750 02/15/13 2,221,120
------------
LOUISIANA 2.1%
1,500 Ouachita Parish, LA Hosp Svcs Dist No 1 Rev
Glenwood Regl Med Cent.......................... 7.500 07/01/21 1,592,775
------------
MARYLAND 4.6%
2,800 Baltimore, MD Cap Apprec Cons Pub Impt Ser (FGIC
Insd)........................................... * 10/15/08 1,392,076
2,000 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty Dev
Single Family Ser 4 (FHA Gtd)................... 7.450 04/01/32 2,086,300
------------
3,478,376
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MASSACHUSETTS 1.2%
$ 500 Massachusetts St Hlth & Edl Fac Auth Rev
Melrose-Wakefield Hosp Ser A (Prerefunded @
07/01/96)....................................... 8.625% 07/01/18 $ 514,125
395 Massachusetts St Hsg Fin Agy Multi Family
Residential Dev Ser A (FNMA Collateralized)..... 8.150 02/01/29 418,787
------------
932,912
------------
MICHIGAN 1.4%
850 Michigan St Hosp Fin Auth Rev Battle Creek Hosp
Ser H........................................... 9.500 11/15/15 1,020,909
------------
MINNESOTA 1.7%
5,660 Southern MN Muni Pwr Agy Pwr Supply Sys Rev Ser
A (MBIA Insd)................................... * 01/01/21 1,282,047
------------
MONTANA 4.6%
2,900 Forsyth, MT Pollutn Ctl Rev Puget Sound Pwr & Lt
Ser B Rfdg (AMBAC Insd) (b)..................... 7.250 08/01/21 3,161,667
300 Montana St Brd Invt Res Recovery Rev Yellowstone
Energy L P Proj................................. 7.000 12/31/19 278,934
------------
3,440,601
------------
NEVADA 2.1%
1,500 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser A
(FGIC Insd)..................................... 6.700 06/01/22 1,554,255
------------
NEW HAMPSHIRE 4.3%
2,500 New Hampshire Higher Edl & Hlth Fac Auth Rev
Hosp Catholic Med Cent Rfdg (b)................. 8.250 07/01/13 2,690,025
500 New Hampshire St Indl Dev Auth Rev Pollutn Ctl
Pub Svcs Co NH Proj C........................... 7.650 05/01/21 520,240
------------
3,210,265
------------
NEW YORK 9.7%
1,260 New York City Muni Wtr Fin Auth Ser A
(Prerefunded @ 06/15/01) (AMBAC Insd)........... 6.750 06/15/06 1,392,628
1,240 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev (AMBAC Insd)................................ 6.750 06/15/06 1,336,385
1,000 New York City Ser D............................. 6.000 02/15/15 947,640
1,000 New York St Med Care Fac Fin Agy Rev
Presbyterian Hosp Ser A Rfdg (MBIA Insd)........ 5.375 02/15/25 907,760
2,000 New York St Urban Dev Corp Rev Correctional Fac
Ser A Rfdg (AMBAC Insd)......................... 5.000 01/01/17 1,772,300
1,000 Niagara Falls, NY Brdg Comm Toll Rev Ser B Rfdg
(FGIC Insd)..................................... 5.250 10/01/21 904,570
------------
7,261,283
------------
PENNSYLVANIA 3.2%
1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev
Coll Toledo Edison Co Proj Rfdg................. 7.625 05/01/20 1,022,770
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 500 Pennsylvania Econ Dev Fin Auth Recycling Rev
Ponderosa Fibres Proj Ser A..................... 9.250% 01/01/22 $ 500,115
1,000 Ridley Park, PA Hosp Auth Rev Hosp Auth Rev Ser
1993 A.......................................... 6.000 12/01/13 896,880
------------
2,419,765
------------
TENNESSEE 3.1%
2,195 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev Open
Arms Dev Cent Ser E............................. 9.750 08/01/19 2,365,420
------------
TEXAS 6.3%
1,000 Alliance Arpt Auth Inc TX Spl Fac Rev America
Airls Inc....................................... 7.000 12/01/11 1,077,370
2,580 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (Cap Guar Insd)................ 5.500 09/01/13 2,502,703
1,000 West Side Calhoun Cnty, TX Navig Dist Solid
Waste Disp Union Carbide Chem & Plastics........ 8.200 03/15/21 1,115,370
------------
4,695,443
------------
WISCONSIN 1.5%
990 Wisconsin St Hlth & Edl Fac Auth Rev Chippewa
Vly Hosp Ser F Rfdg............................. 9.500 11/15/12 1,144,282
------------
WYOMING 1.4%
1,000 Laramie Cnty, WY Indl Dev Rev Cheyenne Lt, Fuel
& Pwr Co Ser A (AMBAC Insd)..................... 7.250 09/01/21 1,050,890
------------
TOTAL LONG-TERM INVESTMENTS 94.2%
(Cost $68,648,312)(a)........................................................ 70,694,917
SHORT-TERM INVESTMENTS AT AMORTIZED COST 3.5%................................. 2,600,000
OTHER ASSETS IN EXCESS OF LIABILITIES 2.3%.................................... 1,717,752
------------
NET ASSETS 100%............................................................... $75,012,669
-----------
*Zero coupon bond
</TABLE>
(a) At April 30, 1996, for federal income tax purposes cost is $68,839,894, the
aggregate gross unrealized appreciation is $5,251,054 and the aggregate
gross unrealized depreciation is $3,497,997, resulting in net unrealized
appreciation including open futures transactions of $1,753,057.
(b) Assets segregated as collateral for open futures transactions.
(c) Non-Income producing security.
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $68,648,312) (Note 1)................. $70,694,917
Short-Term Investments (Note 1).......................................... 2,600,000
Cash..................................................................... 46,446
Receivables:
Interest............................................................... 2,157,490
Investments Sold....................................................... 40,000
Other.................................................................... 9,367
------------
Total Assets....................................................... 75,548,220
------------
LIABILITIES:
Payables:
Income Distributions--Common and Preferred Shares...................... 332,611
Investment Advisory Fee (Note 2)....................................... 37,084
Margin on Futures (Note 4)............................................. 34,375
Accrued Expenses......................................................... 90,723
Deferred Compensation and Retirement Plans (Note 2)...................... 40,758
------------
Total Liabilities.................................................. 535,551
------------
NET ASSETS............................................................... $75,012,669
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000 shares, 250
issued with liquidation preference of $100,000 per share) (Note 5)..... $25,000,000
------------
Common Shares ($.01 par value with an unlimited number of shares
authorized, 4,839,000 shares issued and outstanding)................... 48,390
Paid in Surplus.......................................................... 52,700,019
Net Unrealized Appreciation on Investments............................... 1,944,639
Accumulated Distributions in Excess of Net Investment Income (Note 1).... (1,084,084)
Accumulated Net Realized Loss on Investments............................. (3,596,295)
------------
Net Assets Applicable to Common Shares............................. 50,012,669
------------
NET ASSETS............................................................... $75,012,669
===========
NET ASSET VALUE PER COMMON SHARE ($50,012,669 divided
by 4,839,000 shares outstanding)....................................... $ 10.34
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................. $ 2,488,095
-----------
EXPENSES:
Investment Advisory Fee (Note 2)......................................... 230,939
Preferred Share Maintenance (Note 5)..................................... 40,879
Shareholder Services..................................................... 23,031
Audit.................................................................... 22,022
Custody.................................................................. 20,015
Trustees Fees and Expenses (Note 2)...................................... 11,361
Legal (Note 2)........................................................... 7,280
Other.................................................................... 28,648
-----------
Total Expenses....................................................... 384,175
-----------
NET INVESTMENT INCOME.................................................... $ 2,103,920
===========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales.................................................... $ 7,337,626
Cost of Securities Sold (Including reorganization and restructuring
costs of $44,030).................................................... (7,507,861)
-----------
Net Realized Loss on Investments (Including realized loss on closed and
expired option and futures transactions of $106,529 and $326,344,
respectively).......................................................... (170,235)
-----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period................................................ 3,555,116
End of the Period (Including unrealized depreciation on open futures
transactions of $101,966)............................................ 1,944,639
-----------
Net Unrealized Depreciation on Investments During the Period............. (1,610,477)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS.......................... $(1,780,712)
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS............................... $ 323,208
==========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1996
and the Year Ended October 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 2,103,920 $ 4,244,004
Net Realized Loss on Investments......................... (170,235) (1,891,568)
Net Unrealized Appreciation/Depreciation on Investments
During the Period...................................... (1,610,477) 3,856,765
--------- ---------
Change in Net Assets from Operations..................... 323,208 6,209,201
--------- ---------
Distributions from Net Investment Income:
Common Shares.......................................... (1,642,998) (3,256,358)
Preferred Shares....................................... (460,922) (987,646)
--------- ---------
(2,103,920) (4,244,004)
Distributions in Excess of Net Investment
Income--Common Shares (Note 1)......................... (244,007) (735,484)
--------- ---------
Total Distributions...................................... (2,347,927) (4,979,488)
--------- ---------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... (2,024,719) 1,229,713
NET ASSETS:
Beginning of the Period.................................. 77,037,388 75,807,675
--------- ---------
End of the Period (Including undistributed net investment
income of $(1,084,084) and $(840,077), respectively)... $75,012,669 $77,037,388
========== ==========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
April 30, --------------------------
1996 1995 1994
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Net Asset Value,
Beginning of the Period (a)............ $10.754 $10.500 $12.094
------ ------ ------
Net Investment Income.................. .435 .877 .958
Net Realized and Unrealized Gain/Loss
on Investments....................... (.369) .406 (1.480)
------ ------ ------
Total from Investment Operations......... .066 1.283 (.522)
------ ------ ------
Less:
Distributions from and in Excess of Net
Investment Income (Note 1):
Paid to Common Shareholders.......... .390 .825 .930
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders....................... .095 .204 .142
------ ------ ------
Total Distributions...................... .485 1.029 1.072
------ ------ ------
Net Asset Value,
End of the Period...................... $10.335 $10.754 $10.500
======= ======= =======
Market Price Per Share at End of
the Period............................. $10.875 $10.625 $11.125
Total Investment Return at
Market Price (b)....................... 6.00%* 2.88% (13.59%)
Total Return at Net Asset Value (c)...... (.28%)* 10.59% (5.77%)
Net Assets at End of the Period
(In millions).......................... $75.0 $77.0 $75.8
Ratio of Expenses to Average Net Assets
Applicable to Common Shares............ 1.47% 1.52% 1.47%
Ratio of Expenses to Average Net
Assets................................. .99% 1.02% 1.01%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common Shares
(d).................................... 6.27% 6.31% 7.20%
Portfolio Turnover....................... 9.53%* 50.27% 29.89%
</TABLE>
(a) Net asset value at November 30, 1989, is adjusted for common and preferred
share offering costs of $.259 per common share.
(b) Total investment return at market price reflects the change in market value
of the common shares for the period indicated with reinvestment of
dividends in accordance with the Trust's dividend reinvestment plan.
(c) Total return at net asset value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based on NAV.
(d) Net investment income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
N/A=Not Applicable
* Non-Annualized
See Notes to Financial Statements
12
<PAGE> 14
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 30, 1989
(Commencement
of Investment
Year Ended October 31 Operations) to
- ------------------------------------------------------------------
1993 1992 1991 October 31, 1990
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------
$11.151 $11.502 $10.832 $10.901
------ ------ ------ -----------
1.090 1.090 1.153 1.001
.917 (.348) .647 (.115)
------ ------ ------ -----------
2.007 .742 1.800 .886
------ ------ ------ -----------
.930 .925 .886 .725
.134 .168 .244 .230
------ ------ ------ -----------
1.064 1.093 1.130 .955
------ ------ ------ -----------
$12.094 $11.151 $11.502 $10.832
====== ====== ====== ===========
$13.875 $11.750 $12.250 $10.500
26.46% 3.10% 25.65% .21%*
17.40% 5.04% 14.87% 3.70%*
$83.5 $79.0 $80.7 $77.4
1.35% 1.52% 1.53% 1.41%
.94% 1.05% 1.05% N/A
8.14% 8.01% 8.12% 7.75%
7.04% 20.87% 52.20% 133.73%*
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Investment Grade Municipal 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 will normally invest at least
80% of its total assets in tax-exempt municipal securities rated investment
grade at the time of investment. The Trust commenced investment operations on
November 30, 1989.
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 generally accepted
accounting principles 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--Investments are stated at value using market quotations,
prices provided by market makers or estimates obtained from yield data relating
to instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees. Investments
valued using estimates of market value are generally those non-rated securities
in which the Trust owns over 90% of the original bond issue. At April 30, 1996,
approximately 7.4% of the Trust's net assets consisted of such securities.
Short-term securities with remaining maturities of less than 60 days are valued
at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At April 30, 1996, there were no
when issued or delayed delivery purchase commitments.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized 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, 1995, the Trust had an accumulated capital loss
carryforward of $3,278,508, of which $414,447, $15,580, $1,028,658 and
$1,819,823 will expire on October 31, 1998, 2001, 2002 and 2003, respectively.
Net realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of the capitalization of reorganization and restructuring
costs for tax purposes.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually. Due to inherent differences in the recognition of
interest income under generally accepted accounting principles and federal
income tax purposes, for those securities which the Trust has placed on
non-accrual status, the amount of distributable net investment income may differ
between book and federal income tax purposes for a particular period. These
differences are temporary in nature, but may result in book basis distributions
in excess of net investment income for certain periods.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Trust for an annual fee payable monthly
of .60% of the average net assets of the Trust.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
For the six months ended April 30, 1996, the Trust recognized expenses of
approximately $10,700 representing Van Kampen American Capital Distributors,
Inc.'s or
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
its affiliates' (collectively "VKAC") cost of providing accounting, legal and
certain shareholder services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.
3. INVESTMENT TRANSACTIONS
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes and reorganization and restructuring costs, for the six months
ended April 30, 1996 were $7,099,305 and $7,463,831, 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.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation on investments. Upon disposition, a realized gain or
loss is recognized accordingly, except for exercised option contracts where the
recognition of gain or loss is postponed until the disposal of the security
underlying the option contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in options for the six months ended April 30, 1996, were as
follows:
<TABLE>
<CAPTION>
Contracts Premium
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1995.................. 50 $ 39,441
Options Written and Purchased (Net).............. 400 (196,892)
Options Terminated in Closing Transactions
(Net).......................................... (170) 45,240
Options Expired (Net)............................ (230) 75,128
Options Exercised (Net).......................... (50) 37,083
---- ---------
Outstanding at April 30, 1996.................... -0- $ -0-
==== =========
</TABLE>
B. FUTURES CONTRACTS--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 futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
The fluctuation in market value of the contracts is settled daily through a
cash margin account. Realized gains and losses are recognized when the contracts
are closed or expire.
Transactions in futures contracts for the six months ended April 30, 1996,
were as follows:
<TABLE>
<CAPTION>
Contracts
=======================================================================
<S> <C>
Outstanding at October 31, 1995............................ 150
Futures Opened............................................. 275
Futures Closed............................................. (375)
----
Outstanding at April 30, 1996.............................. 50
====
</TABLE>
The futures contracts outstanding as of April 30, 1996, and the description
and unrealized depreciation is as follows:
<TABLE>
<CAPTION>
Unrealized
Contracts Depreciation
===========================================================================
<S> <C> <C>
U.S. Treasury Bond Futures
June 1996--Buys to Open...................... 50 $(101,966)
==
==========
</TABLE>
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
5. PREFERRED SHARES
The Trust has outstanding 250 Remarketed Preferred Shares ("RP"). Dividends are
cumulative and the dividend rate is currently reset every 28 days through a
remarketing process. The rate in effect on April 30, 1996 was 3.77%. During the
six months ended April 30, 1996, the rates ranged from 3.500% to 3.905%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
shares. These fees are included as a component of Preferred Share Maintenance
expense.
The RP are redeemable at the option of the Trust in whole or in part at the
liquidation value of $100,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the RP are subject to
mandatory redemption if the tests are not met.
18
<PAGE> 20
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free
Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal
Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
19
<PAGE> 21
VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
OFFICERS AND TRUSTEES
DON G. POWELL*
Chairman and Trustee
DENNIS J. MCDONNELL*
President and Trustee
DAVID C. ARCH
Trustee
ROD DAMMEYER
Trustee
HOWARD J KERR
Trustee
THEODORE A. MYERS
Trustee
HUGO F. SONNENSCHEIN
Trustee
WAYNE W. WHALEN*
Trustee
PETER W. HEGEL*
Vice President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Treasurer
SCOTT E. MARTIN*
Assistant Secretary
WESTON B. WETHERELL*
Assistant Secretary
NICHOLAS DALMASO*
Assistant Secretary
JOHN L. SULLIVAN*
Controller
STEVEN M. HILL*
Assistant Treasurer
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
20
