<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
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
Report of Independent Accountants................ 19
Dividend Reinvestment Plan....................... 20
</TABLE>
VIG ANR 12/97
<PAGE> 2
LETTER TO SHAREHOLDERS
December 4, 1997
Dear Shareholder,
In the past year, we have been
participants in and witnesses to two
mergers that we believe have positioned
our company at the forefront of the
financial industry's evolution. Our
latest announcement continues our [PHOTO]
forward progress. I am pleased to
announce that Philip N. Duff, formerly
the chief financial officer of Morgan
Stanley, has joined Van Kampen American
Capital as president and chief DENNIS J. MCDONNELL AND DON G. POWELL
executive officer. I will continue as
chairman of the firm. Together, we will continue to work to the benefit of our
fund shareholders as Van Kampen American Capital advances toward the next
century.
ECONOMIC REVIEW
The last quarter of 1996 brought renewed strength and rumblings of
inflation, which continued to feed investors' uncertainties about the direction
of interest rates. This was reflected in the volatility of taxable yields, with
the 30-year Treasury ranging from a high of 6.70 percent to a low of 6.35
percent, and ending the period at 6.64 percent.
The economy grew at a brisk 3.9 percent annual rate during the first three
quarters of 1997. At the same time, the federal budget deficit fell to its
lowest level in 23 years, while consumer prices rose less than 2.0 percent on an
annual basis and producer prices declined 1.4 percent.
The bond market advanced in price during the first 10 months of 1997, but
its ascension was not a smooth ride. Bond prices fell early in the period as
economic growth soared, fueling concerns about rising inflation and a potential
interest rate hike by the Federal Reserve Board. When the Fed did raise interest
rates by a modest 0.25 percent in late March, bond prices fell further, sending
the yield of the 30-year U.S. Treasury bond above 7.0 percent for the first time
in six months. By mid-April, however, the market's mood had changed, reflecting
few signs of price pressures despite the economy's strength. Bonds also
benefited from continued heavy purchases by foreign investors and concerns that
the stock market rally was nearing an end. The 7.0 percent slump in the Dow
Jones Industrial Average on October 27 reinforced the benefit of owning bonds
for diversification. By the end of October, the yield on the 30-year Treasury
bond was near its lowest level in 20 months, at 6.15 percent.
Throughout 1997, municipal bond prices moved in the same direction as the
Treasury bond market, but gained less when Treasury prices rallied and lost less
when Treasuries fell. Between December 31, 1996 and October 31, 1997, the yield
on the long-term municipal revenue bond index fell 36 basis points as the yield
on the 30-year Treasury
Continued on page two
1
<PAGE> 3
bond fell 48 basis points. Because yields move in the opposite direction of
prices, the smaller yield decline of municipal bonds indicates that their prices
did not rise as much as Treasuries.
<TABLE>
<CAPTION>
Portfolio Compensation by Credit Quality*
AS OF OCTOBER 31, 1997
<S> <C>
AAA................... 40.5%
AA.................... 5.9%
A..................... 11.1%
BBB................... 26.7% [pie chart]
BB.................... 3.8%
Non-Rated............. 12.0%
*As a Percentage of Long-Term Investments based upon the highest credit quality
ratings as issued by Standard & Poor's or Moody's.
</TABLE>
TRUST STRATEGY
In managing the Trust, we used the following strategies:
We continued to position the credit quality of the portfolio's long-term
investments in a "barbell" pattern. In other words, we invested in both
high-quality and low-quality bonds, which helps to balance the portfolio's
volatility in response to changing interest rates. Bonds rated AAA, the highest
credit rating assigned to bonds by the Standard & Poor's Ratings Group, tend to
perform better when interest rates are falling. Most AAA-rated bonds are insured
bonds, which currently comprise well over half of new issues in the municipal
bond market. They are extremely liquid and carry minimal credit risk. Bonds
rated BBB, the lowest investment-grade credit rating used by Standard & Poor's,
and below BBB tend to perform better when rates are rising and have the
potential to provide additional income.
Portfolio turnover during the fiscal year was limited due to market
conditions that afforded few opportunities to add value to existing holdings.
The average yield of bonds in the Trust's portfolio was higher than average
market yields. As a result, there was little incentive to replace bonds in the
portfolio, because such trades would have reduced the Trust's dividend-paying
ability.
Trading was also restrained by tight spreads between yields of AAA-rated
bonds and lower-rated securities. These spreads compressed to historically
narrow levels due to the increasing number of insured bonds in the municipal
market. For example, when a new long-term California transportation issue was
sold in September, its BBB-rated portion yielded only 20 basis points more than
the AAA-rated insured component. As a result of the narrow yield spreads, there
was often not enough incentive to purchase lower-rated securities and assume the
additional credit risk.
Acquisitions focused on enhancing the Trust's call protection as well as its
potential for price appreciation. Because we hope to limit the number of bonds
that could be "called" at any one time, we purchased long-term discount and par
bonds that will not be
Continued on page three
2
<PAGE> 4
callable for many years, and sold bonds that we expect will be called in the
near term. A discount bond sells at a price below par.
When searching for new securities for the Trust's portfolio, we try to
identify bonds that we believe will outperform within a particular sector and
that can be purchased at an attractive price. We believe this "bottom-up"
approach, supported by our research, provides significant added value to the
portfolio.
During the second half of the fiscal year, the duration of the portfolio
declined slightly due to the market rally, which caused some bonds to trade to
their call dates rather than their maturity dates. Duration, which is expressed
in years, is a measure of a portfolio's sensitivity to interest rate movements.
Bonds that are expected to be called near term have shorter durations than bonds
that are trading to their maturity dates. Portfolios with long durations tend to
perform better when interest rates are falling, while portfolios with short
durations tend to do better when rates are rising. As of October 31, 1997, the
Trust's duration stood at 6.52 years, compared to 7.34 years for the Lehman
Brothers Municipal Bond Index. Because of the longer-term nature of the Trust,
the calculation of this index's duration has been adjusted to eliminate bonds
with maturities of five years or less.
Top Five Portfolio Industry Holdings by Sector as of October 31, 1997*
Health Care....................... 23.6%
Single-Family Housing............. 15.1%
Industrial Revenue................ 10.8%
Retail/Electric/Gas/Telephone..... 8.3%
Other Care........................ 7.2%
*As a Percentage of Long-Term
Investments
PERFORMANCE SUMMARY
For the one-year period ended October 31, 1997, the Van Kampen American
Capital Investment Grade Municipal Trust generated a total return at market
price of 6.13 percent(1). The Trust offered a tax-exempt distribution rate of
6.25 percent(3), based on the closing common stock price of $10.9375 per share
on October 31, 1997. Because income from the Trust is exempt from federal income
taxes, this distribution rate represents a yield equivalent to a taxable
investment earning 9.77 percent(4) (for investors in the 36 percent federal
income tax bracket).
Due to declining interest rates and a number of positions that were called
from the Trust, the earnings power of the Trust declined. As a result, the Board
of Trustees approved a decrease in its monthly dividend from $0.0650 to $0.0600
per common share payable January 15, 1997, and from $0.0600 to $0.0570 per
common share, payable June 30, 1997.
Continued on page four
3
<PAGE> 5
Twelve-month Dividend History
For the Period Ended October 31, 1997
Distribution per Common Share
[BAR GRAPH]
<TABLE>
<CAPTION>
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1996 1996 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$.065 $.060 $.060 $.060 $.060 $.060 $.060 $.057 $.057 $.057 $.057 $.057
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trusts future distributions.
OUTLOOK
We expect the economy to remain strong in the coming months, although the
growth rate might slow to a more moderate pace. The weakness in the Far East,
which was the impetus for the recent volatility in world stock markets, will
most likely reduce U.S. exports to the region. In turn, this could trim U.S.
economic growth as well as the earnings of many U.S. companies. As a result, we
believe there is little chance that the Fed will raise interest rates in the
coming months. A rate hike reemerges as a possibility if inflation picks up, or
if growth continues at its current brisk pace.
As a result of this outlook, we expect that the yield on the 30-year
Treasury bond will trade within a range of 5.75 percent and 6.50 percent for the
next six months, possibly falling further in mid-1998. A decline in rates would
not only boost the prices of long-term investments in the portfolio, but could
also positively affect the Trust as a result of its leveraged structure. That
structure, which involves borrowing short-term funds to purchase long-term
municipal bonds, provides common shareholders with above-market levels of
dividend income. It should be noted, however, that if short-term rates rise,
borrowing costs would increase; this would negatively impact the income and
performance of common shares.
We will continue to seek a balance between the Trust's total return and its
dividend income, and to add value through our investment strategies and bond
selection. Thank you for your continued confidence in Van Kampen American
Capital and your Trust's portfolio manager.
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.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
(NYSE TICKER SYMBOL--VIG)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
One-year total return based on market price(1)........... 6.13%
One-year total return based on NAV(2).................... 8.91%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)............................................... 6.25%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 9.77%
SHARE VALUATIONS
Net asset value.......................................... $ 10.66
Closing common stock price............................... $10.9375
One-year high common stock price (11/21/96).............. $ 11.500
One-year low common stock price (04/21/97)............... $ 10.250
Preferred share rate(5).................................. 3.54%
</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.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 94.5%
ARKANSAS 1.6%
$1,000 Dogwood Addition PRD Muni Ppty Owners Multi-Purp
Impt Dist No 8 AR Impt Ser A.................... 7.500% 01/31/06 $ 960,000
919 Dogwood Addition PRD Muni Ppty Owners Multi-Purp
Impt Dist No 8 AR Impt Ser B.................... 7.500 01/31/06 275,613
-----------
1,235,613
-----------
CALIFORNIA 2.4%
4,490 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(MBIA Insd)..................................... *..... 09/01/17 1,553,046
225 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A (b)........................... 0/7.15 01/01/13 165,787
650 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/28 118,417
-----------
1,837,250
-----------
COLORADO 10.3%
10,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C (Prerefunded @ 08/31/05)....... * 08/31/26 1,468,300
2,560 Denver, CO City & Cnty Arpt Rev Ser A........... 8.500 11/15/23 2,883,091
240 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/00)........................ 8.500 11/15/23 273,713
220 Jefferson Cnty, CO Residential Mtg Rev.......... 11.500 09/01/11 360,461
100 Jefferson Cnty, CO Residential Mtg Rev.......... 9.000 09/01/12 140,293
145 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/03)........................ 11.500 09/01/11 197,039
160 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/04)........................ 11.500 09/01/11 225,064
180 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/05)........................ 11.500 09/01/11 261,264
205 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/06)........................ 11.500 09/01/11 306,227
235 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/07)........................ 11.500 09/01/11 360,250
265 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/08)........................ 11.500 09/01/11 413,146
300 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/09)........................ 11.500 09/01/11 475,620
340 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/10)........................ 11.500 09/01/11 546,768
-----------
7,911,236
-----------
FLORIDA 7.4%
9,805 Dade Cnty, FL Spl Oblig Cap Apprec Bond Ser B
Rfdg (AMBAC Insd)............................... * 10/01/25 1,900,503
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser A (Prerefunded @ 06/01/99)........ 8.750 06/01/16 1,090,450
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser B (Prerefunded @ 06/01/99)........ 8.750 06/01/16 1,090,450
2,300 Sun N Lake of Sebring, FL Impt Dist Spl Assmt
Ser A (c)....................................... 10.000 12/15/11 1,581,250
-----------
5,662,653
-----------
ILLINOIS 23.4%
1,000 Alton, IL Hlth Fac Rev & Impt Christian Hlth Ser
C Rfdg (Prerefunded @ 02/15/01) (FGIC Insd)..... 7.200 02/15/21 1,108,780
2,435 Alton, IL Hosp Fac Rev Saint Anthony's Hlth Cent
Proj (Prerefunded @ 09/01/99)................... 8.375 09/01/14 2,669,466
5,770 Aurora, IL Single Family Mtg Rev Cap Apprec
(AMBAC Insd).................................... * 12/01/22 818,071
500 Bedford Park, IL Tax Increment 71st & Cicero
Proj Rfdg....................................... 7.000 01/01/06 529,580
250 Chicago, IL Brd of Ed Sch Reform (AMBAC Insd)... 5.750 12/01/27 258,803
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$2,650 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Ser B................................. 8.950% 05/01/18 $ 3,013,235
1,415 Chicago, IL Single Family Mtg (GNMA
Collateralized)................................. 7.625 09/01/27 1,600,959
510 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.150 12/01/08 609,047
575 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.200 12/01/09 690,058
625 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.000 12/01/10 739,963
500 Hodgkins, IL Tax Increment Rev Ser A Rfdg....... 7.625 12/01/13 546,855
885 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D............................................... 9.500 11/15/15 1,037,627
745 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D (Prerefunded @ 11/15/00)...................... 9.500 11/15/15 870,830
500 Illinois Hlth Fac Auth Rev Lutheran Social Svcs
Proj Ser A (Prerefunded @ 08/01/00)............. 7.650 08/01/20 554,270
1,910 Illinois Hsg Dev Auth Residential Mtg Rev Ser
B............................................... 7.250 08/01/17 2,025,421
250 Lake Cnty, IL Cmnty Unit........................ 7.600 02/01/14 310,278
500 Robbins, IL Res Recovery Rev.................... 8.375 10/15/16 526,535
------------
17,909,778
------------
INDIANA 2.8%
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 2,113,600
------------
LOUISIANA 2.2%
1,500 Ouachita Parish, LA Hosp Svcs Dist No 1 Rev
Glenwood Regl Med Cent (Prerefunded @
07/01/01)....................................... 7.500 07/01/21 1,689,225
------------
MARYLAND 4.6%
2,800 Baltimore, MD Cap Apprec Cons Pub Impt Ser (FGIC
Insd)........................................... * 10/15/08 1,611,624
1,845 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty Dev
Single Family Ser 4 (FHA Gtd)................... 7.450 04/01/32 1,951,272
------------
3,562,896
------------
MASSACHUSETTS 1.0%
360 Massachusetts St Hlth & Edl Fac Auth Rev Cent
New England Hlth Sys Ser A...................... 6.125 08/01/13 360,882
395 Massachusetts St Hsg Fin Agy Multi-Family
Residential Dev Ser A (FNMA Collateralized)..... 8.150 02/01/29 420,821
------------
781,703
------------
MICHIGAN 1.2%
820 Michigan St Hosp Fin Auth Rev Battle Creek Hosp
Ser H (Prerefunded @ 11/15/00).................. 9.500 11/15/15 956,186
------------
MONTANA 4.2%
2,900 Forsyth, MT Pollutn Ctl Rev Puget Sound Pwr & Lt
Ser B Rfdg (AMBAC Insd)......................... 7.250 08/01/21 3,187,332
------------
NEVADA 2.1%
1,500 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser A
(FGIC Insd)..................................... 6.700 06/01/22 1,631,655
------------
NEW HAMPSHIRE 4.2%
2,500 New Hampshire Higher Edl & Hlth Fac Auth Rev
Hosp Catholic Med Cent Rfdg..................... 8.250 07/01/13 2,657,125
500 New Hampshire St Indl Dev Auth Rev Pollutn Ctl
Pub Svcs Co of NH Proj Ser C.................... 7.650 05/01/21 531,305
------------
3,188,430
------------
NEW JERSEY 0.9%
650 New Jersey Hlthcare Fac Fin Auth Rev Palisades
Med Cent........................................ 7.500 07/01/06 692,939
------------
NEW YORK 5.3%
1,240 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev (AMBAC Insd)................................ 6.750 06/15/06 1,351,017
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$1,260 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev Ser A (Prerefunded @ 06/15/01) (AMBAC
Insd)........................................... 6.750% 06/15/06 $ 1,381,464
1,305 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)................ 5.750 12/01/22 1,346,251
-----------
4,078,732
-----------
OHIO 1.8%
800 Cuyahoga Cnty, OH Multi-Family Rev Hsg Wtr St
Assoc Ltd Proj (GNMA Collateralized)............ 6.250 12/20/36 845,064
500 Ohio St Solid Waste Rev Republic Engineered
Steels Proj..................................... 8.250 10/01/14 505,335
-----------
1,350,399
-----------
PENNSYLVANIA 1.5%
1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev
Collateral Toledo Edison Co Proj Rfdg........... 7.625 05/01/20 1,136,850
-----------
TENNESSEE 3.0%
2,140 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev Open
Arms Dev Cent Ser E (a)......................... 9.750 08/01/19 2,298,060
-----------
TEXAS 13.1%
1,000 Alliance Arpt Auth Inc TX Spl Fac Rev American
Airls Inc....................................... 7.000 12/01/11 1,168,240
1,265 De Soto, TX Independent Sch Dist................ 5.000 08/15/17 1,226,265
1,000 Lower CO Rvr Auth TX Polltn Ctl Rev Samsung
Austin Semiconductor............................ 6.375 04/01/27 1,063,800
500 Pecos Cnty, TX Ctfs Partn....................... 6.000 01/12/08 516,540
2,480 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (Cap Guar Insd) (a)............ 5.500 09/01/13 2,519,209
2,500 Victoria, TX Util Sys Rev (MBIA Insd)........... 5.000 12/01/21 2,401,800
1,000 West Side Calhoun Cnty, TX Navig Dist Solid
Waste Disp Union Carbide Chem & Plastics........ 8.200 03/15/21 1,115,840
-----------
10,011,694
-----------
WISCONSIN 1.5%
965 Wisconsin St Hlth & Edl Fac Auth Rev Chippewa
Vly Hosp Ser F Rfdg............................. 9.500 11/15/12 1,143,255
-----------
TOTAL LONG-TERM INVESTMENTS 94.5%
(Cost $67,848,109).......................................................... 72,379,486
SHORT-TERM INVESTMENTS 0.1%
(Cost $71,429).............................................................. 71,429
-----------
TOTAL INVESTMENTS 94.6%
(Cost $67,919,538).......................................................... 72,450,915
OTHER ASSETS IN EXCESS OF LIABILITIES 5.4%................................. 4,124,713
-----------
NET ASSETS 100.0%.......................................................... $76,575,628
-----------
</TABLE>
*Zero coupon bond
(a) Assets segregated as collateral for open option transactions.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) Non-Income producing security.
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $67,919,538)........................ $72,450,915
Cash........................................................ 1,237,792
Receivables:
Investments Sold.......................................... 1,884,578
Interest.................................................. 1,441,588
Other....................................................... 19,732
-----------
Total Assets.......................................... 77,034,605
-----------
LIABILITIES:
Payables:
Income Distributions--Common and Preferred Shares......... 99,000
Investment Advisory Fee................................... 38,907
Affiliates................................................ 8,569
Options at Market Value (Net premiums received of
$26,396).................................................. 138,656
Accrued Expenses............................................ 98,389
Trustees' Deferred Compensation and Retirement Plans........ 75,456
-----------
Total Liabilities..................................... 458,977
-----------
NET ASSETS.................................................. $76,575,628
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 250 issued with liquidation preference of $100,000
per share)................................................ $25,000,000
-----------
Common Shares ($.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................................. 4,419,117
Accumulated Distributions in Excess of Net Investment
Income.................................................... (942,414)
Accumulated Net Realized Loss............................... (4,649,484)
------------
Net Assets Applicable to Common Shares................ 51,575,628
-----------
NET ASSETS.................................................. $76,575,628
===========
NET ASSET VALUE PER COMMON SHARE ($51,575,628 divided
by 4,839,000 shares outstanding).......................... $ 10.66
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 5,387,437
-----------
EXPENSES:
Investment Advisory Fee..................................... 454,583
Preferred Share Maintenance................................. 76,483
Accounting Services......................................... 46,124
Trustees' Fees and Expenses................................. 30,234
Legal....................................................... 11,583
Custody..................................................... 8,711
Other....................................................... 119,215
-----------
Total Expenses.......................................... 746,933
-----------
NET INVESTMENT INCOME....................................... $ 4,640,504
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments (Including reorganization and restructuring
costs of $59,340)....................................... $(1,793,392)
Options................................................... (11,961)
-----------
Net Realized Loss........................................... (1,805,353)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,032,265
-----------
End of the Period:
Investments............................................. 4,531,377
Options................................................. (112,260)
-----------
4,419,117
-----------
Net Unrealized Appreciation During the Period............... 2,386,852
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 581,499
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 5,222,003
===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 4,640,504 $ 4,265,725
Net Realized Gain/Loss.................................. (1,805,353) 581,929
Net Unrealized Appreciation/Depreciation
During the Period..................................... 2,386,852 (1,522,851)
------------ -----------
Change in Net Assets from Operations.................... 5,222,003 3,324,803
------------ -----------
Distributions from Net Investment Income:
Common Shares......................................... (3,435,176) (3,360,123)
Preferred Shares...................................... (893,796) (905,602)
------------ -----------
(4,328,972) (4,265,725)
Distributions in Excess of Net Investment
Income--Common Shares................................. -0- (413,869)
------------ -----------
Total Distributions..................................... (4,328,972) (4,679,594)
------------ -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 893,031 (1,354,791)
NET ASSETS:
Beginning of the Period................................. 75,682,597 77,037,388
------------ -----------
End of the Period (Including accumulated distributions
in excess of net investment income of $942,414 and
$1,253,946, respectively)............................. $76,575,628 $75,682,597
============ ===========
</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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------
1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a)..................... $ 10.474 $10.754 $10.500 $12.094
------- ------- ------- -------
Net Investment Income........................... .959 .882 .877 .958
Net Realized and Unrealized Gain/Loss........... .120 (.195) .406 (1.480)
------- ------- ------- -------
Total from Investment Operations.................. 1.079 .687 1.283 (.522)
------- ------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income:
Paid to Common Shareholders................... .710 .780 .825 .930
Common Share Equivalent of Distributions Paid
to Preferred Shareholders................... .185 .187 .204 .142
------- ------- ------- -------
Total Distributions............................... .895 .967 1.029 1.072
------- ------- ------- -------
Net Asset Value,
End of the Period............................... $10.658 $10.474 $10.754 $10.500
======= ======= ======= =======
Market Price Per Share at End of
the Period...................................... $10.9375 $11.000 $10.625 $11.125
Total Investment Return at
Market Price (b)................................ 6.13% 11.02% 2.88% (13.59%)
Total Return at Net Asset Value (c)............... 8.91% 4.83% 10.59% (5.77%)
Net Assets at End of the Period
(In millions)................................... $76.6 $75.7 $77.0 $75.8
Ratio of Expenses to Average Net Assets Applicable
to Common Shares................................ 1.47% 1.51% 1.52% 1.47%
Ratio of Expenses to Average Net Assets........... .99% 1.01% 1.02% 1.01%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d).......... 7.38% 6.55% 6.31% 7.20%
Portfolio Turnover................................ 25% 39% 50% 30%
</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
12
<PAGE> 14
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 30, 1989
(Commencement
Year Ended October 31 of Investment
- ---------------------------------------------------- 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% 21% 52% 134%*
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
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 October 31,
1997, approximately 6.7% of the Trust's net assets consisted of such securities.
Short-term securities with remaining maturities of 60 days or less 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 October 31, 1997, there were no
when issued or delayed delivery purchase commitments.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
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, 1997, the Trust had an accumulated capital loss
carryforward of $4,671,592, which will expire between October 31, 1998 and
October 31, 2005. 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 and as a result of gains or losses
recognized for tax purposes on open option contracts at October 31, 1997.
At October 31, 1997, for federal income tax purposes, cost of long- and
short-term investments is $67,998,440; the aggregate gross unrealized
appreciation is $6,400,471 and the aggregate gross unrealized depreciation is
$1,947,996 resulting in net unrealized appreciation of $4,452,475.
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. 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.
For the year ended October 31, 1997, 99.8% of the income distributions made
by the Trust were exempt from federal income taxes. In January, 1998, the Trust
will provide tax information to the shareholder for the 1997 calendar year.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
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.
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $2,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $55,300 representing Van Kampen American Capital Distributors,
Inc.'s or 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 provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit under the plan is equal to the trustees' annual retainer fee, which is
currently $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $18,730,076 and $23,647,762,
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 securities. 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.
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
During the period the Trust invested in option contracts, a type of derivative.
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.
Transactions in options for the year ended October 31, 1997, were as
follows:
<TABLE>
<CAPTION>
Contracts Premium
- ------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1996................. -0- $ -0-
Options Written and Purchased (Net)............. 1,950 89,342
Options Terminated in Closing Transactions
(Net)......................................... (1,440) (91,676)
Options Expired (Net)........................... (75) 28,730
------- ---------
Outstanding at October 31, 1997................. 435 $ 26,396
======== =========
</TABLE>
The related futures contracts of the outstanding option transactions as of
October 31, 1997, and the description and market value are as follows:
<TABLE>
<CAPTION>
Market
Exp. Month/ Value
Contracts Exercise Price of Options
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bond Futures December
1997--Purchased Calls (Current
Notional Value of $118,469 per
contract).......................... 174 Dec/116 $(473,062)
U.S. Treasury Bond Futures December
1997--Written Calls (Current
Notional Value of $118,469 per
contract).......................... 261 Dec/118 $ 334,406
------ ---------
435 $(138,656)
------ ---------
</TABLE>
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
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 October 31, 1997 was 3.540%. During
the year ended October 31, 1997, the rates ranged from 3.350% to 3.750%.
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
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Investment Grade Municipal Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Investment Grade Municipal Trust (the "Trust"),
including the portfolio of investments, as of October 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. 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.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Investment Grade Municipal Trust as of October 31, 1997,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
December 11, 1997
19
<PAGE> 21
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be re-
registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common 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 American Capital
Attn.: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
20
<PAGE> 22
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
Growth Fund
Pace Fund
Growth & Income
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 York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income 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 weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds or
Morgan Stanley funds.
21
<PAGE> 23
VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
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 (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
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., 1997 All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
22
<PAGE> 24
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, the election of
Trustees whose terms expired in 1997 and independent public accountants.
1) With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Trust,
3,901,035 shares voted for the proposal, 80,281 shares voted against, 116,873
shares abstained and 0 shares represented broker non-votes.
2) With regard to the election of the following Trustees by the common
shareholders:
<TABLE>
<CAPTION>
# OF SHARES
---------------------
IN FAVOR WITHHELD
- -----------------------------------------------------------------------
<S> <C> <C>
David C. Arch 4,023,605 74,334
Howard J Kerr 4,022,175 75,764
Dennis J. McDonnell 4,023,605 74,334
</TABLE>
3) With regard to the ratification of KPMG Peat Marwick LLP as independent
public accountants for the Trust, 4,024,391 shares voted for the proposal,
18,989 shares voted against, 54,809 shares abstained and 0 shares represented
broker non-votes.
24
<PAGE> 25
VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
THIS PAGE INTENTIONALLY LEFT BLANK
25
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 67,919,538
<INVESTMENTS-AT-VALUE> 72,450,915
<RECEIVABLES> 3,326,166
<ASSETS-OTHER> 19,732
<OTHER-ITEMS-ASSETS> 1,237,792
<TOTAL-ASSETS> 77,034,605
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 458,977
<TOTAL-LIABILITIES> 458,977
<SENIOR-EQUITY> 25,000,000
<PAID-IN-CAPITAL-COMMON> 52,748,409
<SHARES-COMMON-STOCK> 4,839,000
<SHARES-COMMON-PRIOR> 4,839,000
<ACCUMULATED-NII-CURRENT> (942,414)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,649,484)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,419,117
<NET-ASSETS> 76,575,628
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,387,437
<OTHER-INCOME> 0
<EXPENSES-NET> (746,933)
<NET-INVESTMENT-INCOME> 4,640,504
<REALIZED-GAINS-CURRENT> (1,805,353)
<APPREC-INCREASE-CURRENT> 2,386,852
<NET-CHANGE-FROM-OPS> 5,222,003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,328,972)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (893,031)
<ACCUMULATED-NII-PRIOR> (1,253,946)
<ACCUMULATED-GAINS-PRIOR> (2,844,131)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 454,583
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 746,933
<AVERAGE-NET-ASSETS> 75,764,497
<PER-SHARE-NAV-BEGIN> 10.474
<PER-SHARE-NII> 0.959
<PER-SHARE-GAIN-APPREC> 0.120
<PER-SHARE-DIVIDEND> (0.895)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.658
<EXPENSE-RATIO> 1.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
