<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 11
Statement of Operations.......................... 12
Statement of Changes in Net Assets............... 13
Financial Highlights............................. 14
Notes to Financial Statements.................... 16
</TABLE>
VIG SAR 6/97
<PAGE> 2
LETTER TO SHAREHOLDERS
June 5, 1997
Dear Shareholder,
As mentioned in your previous
report, VK/AC Holding, Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset
management. More recently, on February
5, 1997, Morgan Stanley Group Inc. and [PHOTO]
Dean Witter, Discover & Co. announced
their agreement to merge, and you DENNIS J. MCDONNELL AND DON G. POWELL
received a proxy in April. The merger
was completed on May 31, 1997, creating
the combined company of Morgan Stanley, Dean Witter, Discover & Co. This
preeminent global financial services firm boasts a market capitalization of $21
billion and leading market positions in securities, asset management, and credit
services. As the financial industry continues to witness unprecedented
consolidations and new partnerships, we believe that those firms that are
leaders in all facets of their business will be able to offer investors the
greatest opportunities and services as we move into the next century. We are
confident that this merger will provide investors with those benefits.
ECONOMIC REVIEW
Bond prices were volatile during the six months ended April 30, 1997. Prices
initially rose as the economy slowed, erasing fears of an interest rate hike by
the Federal Reserve Board. The November election of a Democratic president and
Republican Congress was positive for bonds because the split government was
viewed as a restraint on spending increases that could potentially swell the
budget deficit. In addition, support diminished for radical tax reform that
could threaten the tax-free status of municipal bonds.
By the beginning of 1997, the situation changed. Bond prices began to fall
as the economy picked up speed, culminating in a 5.60 percent annualized growth
rate in the first quarter. This strength, coupled with warnings by Fed Chairman
Alan Greenspan that tighter monetary policy might be appropriate, reignited
fears of a rate hike. On March 25, the Fed raised short-term rates by a modest
0.25 percent, which sent the 30-year Treasury bond yield above 7.00 percent for
the first time in six months. By the end of April, the 30-year Treasury bond
yield slipped back below 7.00 percent as the market turned its attention to
positive news about inflation, and bonds recovered some of their earlier losses.
Throughout most of the six months ended April 30, municipal bonds generally
outperformed Treasuries. Between October 31 and April 30, yields on long-term
municipal revenue bonds rose 21 basis points, while yields on 30-year Treasury
bonds jumped 31 basis points. Because bond yields move in the opposite direction
of prices, the smaller
Continued on page two
1
<PAGE> 3
increase in municipal yields meant that municipal bond prices did not fall as
sharply as Treasury bond prices did. A relatively stable supply of new issues,
combined with an increase in retail demand, contributed to the improved
performance of municipal bonds.
FUND STRATEGY
In managing the Trust, we maintained a "barbell" approach to credit quality,
which means we invested in both the highest and lowest levels of the ratings
spectrum. Investing at both ends of the ratings spectrum helps to balance the
portfolio's volatility to interest rate movements. AAA-rated securities
typically have performed better when interest rates are declining and provide
the potential for safety of principal. They are also extremely liquid because
most are insured bonds. BBB-rated and non-rated securities have tended to
perform better when rates are rising, and they have the potential to provide
additional income. As of April 30, approximately 43 percent of the Trust's
long-term investments were rated AAA, the highest credit rating assigned to
bonds by the Standard & Poor's Ratings Group, and approximately 13 percent of
long-term investments were rated AA or A. Approximately 23 percent of long-term
investments were rated BBB, the lowest rating Standard & Poor's assigns to bonds
in the investment-grade category. In addition, approximately 21 percent of
long-term investments were rated below BBB or were non-rated.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality as a Percentage of Long-Term
Investments as of April 30, 1997
<TABLE>
<S> <C>
AAA............ 43.1%
AA............. 2.9%
A.............. 9.5%
BBB............ 23.4%
BB............. 8.9%
B.............. 0.8%
Non-Rated...... 11.4%
</TABLE>
Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's, the Moody's rating is used.
Portfolio turnover during the period was minimal because market conditions
offered few opportunities to add value over existing holdings. The average
yields of bonds in the portfolio were higher than market yields, and spreads
between the yields of AAA-rated bonds and lower-rated bonds were tight. These
spreads remained narrow due to the increasing number of insured bonds in the
municipal market. As a result, there was often not enough yield reward to
justify the additional credit risk of purchasing lower-rated securities.
We sold bonds that we expected would be called in the near term and replaced
them with longer-term securities in order to help minimize reinvestment risk and
enhance the portfolio's call protection. In other words, we hope to lessen the
concentration of bonds that can be called at any one time. When buying new
securities for the portfolio, we use a "bottom-up" approach, attempting to
identify those bonds that we believe will outperform
Continued on page three
2
<PAGE> 4
within a particular sector and that can be purchased at an attractive price. In
addition, we seek to maintain a well-diversified selection of securities,
especially among the lower-rated bonds, in order to seek to minimize credit
risk.
We shortened the duration during this period of rising interest rates in
order to potentially reduce the Trust's volatility to rate increases. Duration,
which is expressed in years, is a measure of a portfolio's sensitivity to
interest rate movements. Portfolios with long durations have tended to perform
better when rates are falling, and portfolios with short durations have tended
to perform better when rates are rising. At the end of the period, the Trust's
duration stood at 7.37 years compared to 8.10 years for the Lehman Brothers
Municipal Bond Index benchmark.
[DIVIDEND HISTORY GRAPH]
SIX-MONTH DIVIDEND HISTORY FOR THE PERIOD ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
Distribution per Share
<S> <C>
Nov 1996........................ $.065
Dec 1996........................ $.060
Jan 1997........................ $.060
Feb 1997........................ $.060
Mar 1997........................ $.060
Apr 1997........................ $.060
</TABLE>
The dividend history represents past performance of the Trust and does
not predict the Trust's future distributions.
PERFORMANCE SUMMARY
For the six-month period ended April 30, 1997, the Van Kampen American
Capital Investment Grade Municipal Trust generated a total return at market
price of -0.11 percent(1). The Trust offered a tax-exempt distribution rate of
6.78 percent(3), based on the closing common stock price of $10.625 per share on
April 30, 1997. Because income from the Trust is exempt from federal income tax,
this distribution rate represents a yield equivalent to a taxable investment
earning 10.59 percent(4) (for investors in the 36 percent federal income tax
bracket). At the end of the reporting period, the closing share price of the
Trust traded at a 3.1 percent premium to its net asset value of $10.31.
As a result of the Trust's earnings decline, its Board of Trustees approved
a slight decrease in its monthly dividend from $0.065 to $0.060 per common
share, payable January 15, 1997.
Continued on page four
3
<PAGE> 5
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR AS OF APRIL 30, 1997*
Health Care.................................................... 23.3%
Single-Family Housing.......................................... 14.6%
Industrial Revenue............................................. 10.3%
Other Care..................................................... 7.0%
Public Building................................................ 7.0%
*As a Percentage of Long-Term Investments
MUNICIPAL MARKET OUTLOOK
We continue to see signs of a strong economy, although we do not expect the
unusually brisk growth rate of the first quarter to be sustained throughout the
year. As a result, we believe the Fed will monitor the economy closely and take
aggressive action to control growth if inflation picks up or the high growth
rate is sustained. However, if growth slows, we believe the Fed will leave rates
unchanged. Given this outlook, we expect that yields on the 30-year Treasury
bond will range between 6.75 and 7.40 percent for the remainder of the year,
with higher levels occurring early and lower yields dominating the second half
of 1997. Although short-term interest rates have risen, this has not had a
significant impact on the leveraged structure of the Trust.
We believe the Trust is positioned to perform well in the coming months, and
we do not anticipate major structural changes in the portfolio. In light of our
expectations for interest rates, we will continue to maintain a slightly
defensive posture by keeping a relatively short duration for the portfolio and
adjusting the duration when prudent. We will also continue to seek a balance
between the Trust's total return and its dividend income, as well as to add
value through security selection. Thank you for your continued confidence in Van
Kampen American Capital and your Trust's team of managers.
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 APRIL 30, 1997
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)............ (.11%)
Six-month total return based on NAV(2)..................... 1.97%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock price(3).. 6.78%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)...................................... 10.59%
SHARE VALUATIONS
Net asset value............................................ $ 10.31
Closing common stock price................................. $10.625
Six-month high common stock price (11/21/96)............... $11.500
Six-month low common stock price (04/21/97)................ $10.250
Preferred share rate(5).................................... 3.65%
</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.
Market forecasts provided in this report may not necessarily come to pass.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS
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 2.2%
4,490 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(MBIA Insd)..................................... * 09/01/17 1,395,447
225 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev............................................. * 01/01/13 145,575
650 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/28 92,489
------------
1,633,511
------------
COLORADO 10.2%
10,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C................................ * 08/31/26 1,229,200
2,800 Denver, CO City & Cnty Arpt Rev Ser A........... 8.500 11/15/23 3,166,772
220 Jefferson Cnty, CO Residential Mtg Rev.......... 11.500 09/01/11 350,154
100 Jefferson Cnty, CO Residential Mtg Rev.......... 9.000 09/01/12 135,743
145 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/03)........................ 11.500 09/01/11 195,296
160 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/04)........................ 11.500 09/01/11 222,173
180 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/05)........................ 11.500 09/01/11 257,031
205 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/06)........................ 11.500 09/01/11 300,018
235 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/07)........................ 11.500 09/01/11 351,586
265 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/08)........................ 11.500 09/01/11 402,299
300 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/09)........................ 11.500 09/01/11 461,958
340 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/10)........................ 11.500 09/01/11 529,876
------------
7,602,106
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FLORIDA 7.4%
$ 9,805 Dade Cnty, FL Spl Oblig Cap Apprec Bond Ser B
Rfdg (AMBAC Insd)............................... * 10/01/25 $ 1,737,446
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser A (Prerefunded @ 06/01/99)........ 8.750% 06/01/16 1,100,200
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser B (Prerefunded @ 06/01/99)........ 8.750 06/01/16 1,100,200
2,300 Sun N Lake of Sebring, FL Impt Dist Spl Assmt
Ser A (d)....................................... 10.000 12/15/11 1,581,250
------------
5,519,096
------------
ILLINOIS 23.8%
1,000 Alton, IL Hlth Fac Rev & Impt Christian Hlth Ser
C Rfdg (Prerefunded @ 02/15/01) (FGIC Insd)..... 7.200 02/15/21 1,101,660
2,500 Alton, IL Hosp Fac Rev Saint Anthony's Hlth Cent
Proj (Prerefunded @ 09/01/99)................... 8.375 09/01/14 2,722,450
6,135 Aurora, IL Single Family Mtg Rev Cap Apprec
(AMBAC Insd).................................... * 12/01/22 831,599
500 Bedford Park, IL Tax Increment 71st & Cicero
Proj Rfdg....................................... 7.000 01/01/06 501,540
250 Chicago, IL Brd of Ed Sch Reform (AMBAC Insd)
(b)............................................. 5.750 12/01/27 244,530
2,650 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Ser B................................. 8.950 05/01/18 2,976,082
1,500 Chicago, IL Single Family Mtg (GNMA
Collateralized)................................. 7.625 09/01/27 1,656,165
510 Cook Cnty, IL Sch Dist No 107 La Grange (c)..... 7.150 12/01/08 584,720
575 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.200 12/01/09 660,641
625 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.000 12/01/10 705,513
500 Hodgkins, IL Tax Increment Rev Ser A Rfdg....... 7.625 12/01/13 517,380
920 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D............................................... 9.500 11/15/15 1,039,591
745 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D (Prerefunded @ 11/15/00)...................... 9.500 11/15/15 872,633
500 Illinois Hlth Fac Auth Rev Lutheran Social Svcs
Proj Ser A (Prerefunded @ 08/01/00)............. 7.650 08/01/20 552,475
1,910 Illinois Hsg Dev Auth Residential Mtg Rev Ser
B............................................... 7.250 08/01/17 2,009,358
250 Lake Cnty, IL Cmnty Unit (c).................... 7.600 02/01/14 293,038
500 Robbins, IL Res Recovery Rev.................... 8.375 10/15/16 520,410
------------
17,789,785
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDIANA 2.9%
$ 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 $ 2,151,520
------------
LOUISIANA 2.2%
1,500 Ouachita Parish, LA Hosp Svcs Dist No 1 Rev
Glenwood Regl Med Cent (Prerefunded @
07/01/01)....................................... 7.500 07/0 1/21 1,672,545
------------
MARYLAND 4.6%
2,800 Baltimore, MD Cap Apprec Cons Pub Impt Ser (FGIC
Insd)........................................... * 10/15/08 1,484,364
1,845 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty Dev
Single Family Ser 4 (FHA Gtd)................... 7.450 04/01/32 1,932,619
------------
3,416,983
------------
MASSACHUSETTS 1.0%
360 Massachusetts St Hlth & Edl Fac Auth Rev Cent
New England Hlth Sys Ser A...................... 6.125 08/01/13 345,625
395 Massachusetts St Hsg Fin Agy Multi-Family
Residential Dev Ser A (FNMA Collateralized)..... 8.150 02/01/29 419,352
------------
764,977
------------
MICHIGAN 1.3%
835 Michigan St Hosp Fin Auth Rev Battle Creek Hosp
Ser H (Prerefunded @ 11/15/00).................. 9.500 11/15/15 974,470
------------
MONTANA 4.2%
2,900 Forsyth, MT Pollutn Ctl Rev Puget Sound Pwr & Lt
Ser B Rfdg (AMBAC Insd)......................... 7.250 08/01/21 3,156,012
------------
NEVADA 2.1%
1,500 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser A
(FGIC Insd)..................................... 6.700 06/01/22 1,587,690
------------
NEW HAMPSHIRE 4.2%
2,500 New Hampshire Higher Edl & Hlth Fac Auth Rev
Hosp Catholic Med Cent Rfdg (c)................. 8.250 07/01/13 2,664,175
500 New Hampshire St Indl Dev Auth Rev Pollutn Ctl
Pub Svcs Co of NH Proj Ser C.................... 7.650 05/01/21 512,380
------------
3,176,555
------------
NEW JERSEY 1.0%
700 New Jersey Hlthcare Fac Fin Auth Rev Palisades
Med Cent........................................ 7.500 07/01/06 723,905
------------
NEW YORK 7.7%
1,260 New York City Muni Wtr Fin Auth Ser A
(Prerefunded @ 06/15/01) (AMBAC Insd)........... 6.750 06/15/06 1,366,886
1,240 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev (AMBAC Insd)................................ 6.750 06/15/06 1,318,579
2,000 New York St Urban Dev Corp Rev Correctional Fac
Ser A Rfdg (AMBAC Insd)......................... 5.000 01/01/17 1,821,220
1,305 Port Auth NY & NJ Spl Oblig Spl Proj JFK Intl
Arpt Terminal 6 (MBIA Insd) (b)................. 5.750 12/01/22 1,276,707
------------
5,783,392
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO 1.7%
$ 800 Cuyahoga Cnty, OH Multi-Family Rev Hsg Wtr St
Assoc Ltd Proj (GNMA Collateralized)............ 6.250% 12/20/36 $ 804,456
500 Ohio St Solid Waste Rev Republic Engineered
Steels Proj..................................... 8.250 10/01/14 485,470
-----------
1,289,926
-----------
PENNSYLVANIA 2.0%
1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev
Collateral Toledo Edison Co Proj Rfdg........... 7.625 05/01/20 1,083,610
500 Pennsylvania Econ Dev Fin Auth Recycling Rev
Ponderosa Fibres Proj Ser A..................... 9.250 01/01/22 429,695
-----------
1,513,305
-----------
TENNESSEE 3.1%
2,170 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev Open
Arms Dev Cent Ser E............................. 9.750 08/01/19 2,321,640
-----------
TEXAS 8.3%
1,000 Alliance Arpt Auth Inc TX Spl Fac Rev American
Airls Inc ...................................... 7.000 12/01/11 1,106,840
600 Houston, TX Airport Sys Rev Spl Fac Continental
Airl Term Impt Ser B............................ 6.125 07/15/27 574,752
1,000 Lower Colorado Rvr Auth TX Polltn Ctrl Rev
Samsung Austin Semiconductor.................... 6.375 04/01/27 1,008,910
2,480 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (Cap Guar Insd) (c)............ 5.500 09/01/13 2,430,102
1,000 West Side Calhoun Cnty, TX Navig Dist Solid
Waste Disp Union Carbide Chem & Plastics........ 8.200 03/15/21 1,110,230
-----------
6,230,834
-----------
UTAH 4.0%
3,000 Intermountain Pwr Agy UT Pwr Supply Rev Ser B
Rfdg (MBIA Insd)................................ 5.750 07/01/19 2,971,920
-----------
WISCONSIN 3.8%
1,750 Southeast Wisconsin Prof Baseball Park Dist
Sales Tax Rev (MBIA Insd)....................... 5.700 12/15/17 1,745,030
965 Wisconsin St Hlth & Edl Fac Auth Rev Chippewa
Vly Hosp Ser F Rfdg............................. 9.500 11/15/12 1,098,585
-----------
2,843,615
-----------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $ 1,029,850
-----------
TOTAL LONG-TERM INVESTMENTS 100.7%
(Cost $72,502,362) (a)............................................. 75,389,250
SHORT-TERM INVESTMENTS 0.1%
(Cost $71,429) (a)................................................. 71,429
LIABILITIES IN EXCESS OF OTHER ASSETS (0.8%)...................... (592,657)
-----------
NET ASSETS 100.0%................................................. $74,868,022
===========
</TABLE>
* Zero coupon bond
(a) At April 30, 1997, for federal income tax purposes, cost of long- and
short-term investments is $72,650,194; the aggregate gross unrealized
appreciation is $4,947,039 and the aggregate gross unrealized depreciation
is $2,112,739, resulting in net unrealized appreciation including open
options transactions of $2,834,300.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments and open option transactions.
(d) Non-Income producing security.
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $72,502,362) (Note 1)....... $75,389,250
Short-Term Investments (Cost $71,429) (Note 1)........................... 71,429
Receivables:
Interest............................................................... 1,360,699
Securities Sold........................................................ 50,000
Other.................................................................... 8,240
-----------
Total Assets....................................................... 76,879,618
-----------
LIABILITIES:
Payables:
Securities Purchased................................................... 1,501,936
Custodian Bank......................................................... 267,361
Income Distributions--Common and Preferred Shares...................... 64,621
Investment Advisory Fee (Note 2)....................................... 36,756
Affiliates (Note 2).................................................... 6,895
Accrued Expenses......................................................... 67,955
Deferred Compensation and Retirement Plans (Note 2)...................... 63,728
Options at Market Value (Net premiums received of $26,159) (Note 4)...... 2,344
-----------
Total Liabilities.................................................. 2,011,596
-----------
NET ASSETS............................................................... $74,868,022
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.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 Securities................................ 2,910,703
Accumulated Distributions in Excess of Net Investment Income (Note 1).... (971,711)
Accumulated Net Realized Loss on Securities.............................. (4,819,379)
-----------
Net Assets Applicable to Common Shares............................. 49,868,022
-----------
NET ASSETS............................................................... $74,868,022
===========
NET ASSET VALUE PER COMMON SHARE ($49,868,022 divided by 4,839,000
shares outstanding).................................................... $ 10.31
===========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................... $ 2,846,141
-----------
EXPENSES:
Investment Advisory Fee (Note 2)....................................... 224,728
Preferred Share Maintenance (Note 5)................................... 36,155
Accounting Services.................................................... 22,991
Trustees Fees and Expenses (Note 2).................................... 19,833
Legal (Note 2)......................................................... 17,435
Custody................................................................ 2,826
Other.................................................................. 39,526
-----------
Total Expenses..................................................... 363,494
-----------
NET INVESTMENT INCOME.................................................. $ 2,482,647
===========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments (Including reorganization and restructuring
costs of $44,221).................................................. $(1,943,929)
Options.............................................................. (31,319)
-----------
Net Realized Loss on Securities........................................ (1,975,248)
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.............................................. 2,032,265
-----------
End of the Period:
Investments........................................................ 2,886,888
Options............................................................ 23,815
-----------
2,910,703
-----------
Net Unrealized Appreciation on Securities During the Period............ 878,438
-----------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES......................... $(1,096,810)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS............................. $ 1,385,837
===========
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1997
and the Year Ended October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 2,482,647 $ 4,265,725
Net Realized Gain/Loss on Securities.................... (1,975,248) 581,929
Net Unrealized Appreciation/Depreciation on Securities
During the Period..................................... 878,438 (1,522,851)
----------- -----------
Change in Net Assets from Operations.................... 1,385,837 3,324,803
----------- -----------
Distributions from Net Investment Income:
Common Shares......................................... (1,765,958) (3,360,123)
Preferred Shares...................................... (434,454) (905,602)
----------- -----------
(2,200,412) (4,265,725)
Distributions in Excess of Net Investment
Income--Common Shares (Note 1)........................ 0 (413,869)
----------- -----------
Total Distributions..................................... (2,200,412) (4,679,594)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................................ (814,575) (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 $971,711 and
$1,253,946, respectively)............................. $74,868,022 $75,682,597
=========== ===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
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, 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..................... .513 .882 .877 .958
Net Realized and Unrealized Gain/Loss on
Securities.............................. (.227) (.195) .406 (1.480)
------- ------- ------- -------
Total from Investment Operations............ .286 .687 1.283 (.522)
------- ------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income (Note 1):
Paid to Common Shareholders............. .365 .780 .825 .930
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........ .090 .187 .204 .142
------- ------- ------- -------
Total Distributions......................... .455 .967 1.029 1.072
------- ------- ------- -------
Net Asset Value,
End of the Period......................... $10.305 $10.474 $10.754 $10.500
======= ======= ======= =======
Market Price Per Share at End of
the Period................................ $10.625 $11.000 $10.625 $11.125
Total Investment Return at
Market Price (b).......................... (.11%)* 11.02% 2.88% (13.59%)
Total Return at Net Asset Value (c)......... 1.97%* 4.83% 10.59% (5.77%)
Net Assets at End of the Period
(In millions)............................. $74.9 $75.7 $77.0 $75.8
Ratio of Expenses to Average Net Assets
Applicable to Common Shares............... 1.45% 1.51% 1.52% 1.47%
Ratio of Expenses to Average Net Assets..... .97% 1.01% 1.02% 1.01%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common Shares
(d)....................................... 8.17% 6.55% 6.31% 7.20%
Portfolio Turnover.......................... 11%* 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
14
<PAGE> 16
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>
$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
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (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, 1997,
approximately 6.9% 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.
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.
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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, 1996, the Trust had an accumulated capital loss
carryforward of $2,752,228, which will expire between October 31, 1998 and
October 31, 2003. 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
(Illinois), counsel to the Trust, of which a trustee of the Trust is an
affiliated person.
For the six months ended April 30, 1997, the Trust recognized expenses of
approximately $19,000 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.
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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 $8,680,772 and $8,593,614, 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.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
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.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in options for the six months ended April 30, 1997, were as
follows:
<TABLE>
<CAPTION>
Contracts Premium
- -----------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1996.................. -0- $ -0-
Options Written and Purchased (Net).............. 600 (4,451)
Options Terminated in Closing Transactions
(Net).......................................... (475) 28,730
Options Expired (Net)............................ (75) 1,880
---- -------
Outstanding at April 30, 1997.................... 50 $26,159
==== =======
</TABLE>
The related futures contracts of the outstanding option transactions as of April
30, 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
June 1997--Written Puts (Current
Notional Value of $106,969 per
contract)........................ 50 Jun/106 $(2,344)
===== =======
</TABLE>
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, 1997 was 3.650%. During the
six months ended April 30, 1997, the rates ranged from 3.350% to 3.650%.
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.
19
<PAGE> 21
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 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
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate 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 1-800-282-4404 for Morgan Stanley retail funds.
20
<PAGE> 22
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.
21
