<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Glossary of Terms................................ 5
Performance Results.............................. 7
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 18
Dividend Reinvestment Plan....................... 23
</TABLE>
VIG SAR 6/98
<PAGE> 2
LETTER TO SHAREHOLDERS
May 22, 1998
Dear Shareholder,
The Taxpayer Relief Act of 1997,
signed into law by President Clinton
last year, was created to fill the need
for a broad variety of tax-advantaged
investments to promote asset growth. We
are pleased that you selected our Trust
as a vehicle to provide the potential [PHOTO]
for tax-free income within your
investment portfolio. As you are aware,
dividends distributed by the Trust are DENNIS J. MCDONNELL AND DON G. POWELL
generally free from federal income
taxes, and often from state and local
taxes as well. At Van Kampen American Capital, we strive not only for a high
level of current income, but total return performance as well.
ECONOMIC OVERVIEW
After nearly seven years of continuous growth, the economy remained buoyant
with few signs of accelerating inflation. Wholesale prices in the first quarter
plummeted at an annual rate of 4.2 percent, while consumer prices inched up 0.2
percent and employment costs rose just 0.7 percent. However, inflationary
pressures were eased by factors such as lower oil prices, increasing
productivity, and a pending budget surplus. The Asian financial crisis led to a
stronger dollar and a decline in the prices of Asian imports, which in turn has
discouraged price increases on competing U.S. goods.
To date, Asia's slowdown has had a modest impact on U.S. economic growth. In
the first quarter, the U.S. economy grew at a 4.2 percent annual rate, its
fastest pace in the past year. Strong consumer spending and inventory buildup by
manufacturers offset a decrease in exports to Asia. Despite the economy's
strength, the Federal Reserve Board refrained from raising interest rates, given
the lack of domestic inflationary pressure and concerns about Asia's economic
future.
MARKET OVERVIEW
Against the backdrop of benign inflation and no action by the Fed, U.S. bond
prices rose during the past six months, although they ended the reporting period
below the highs reached in early January.
The yield of the 30-year Treasury bond, which moves in the opposite
direction of its price, fell from 6.15 percent on October 31 to 5.95 percent on
April 30. Bond prices hit a record high as yields reached 5.69 percent in early
January amidst expectations that the Fed would cut interest rates, but the yield
went back to 6.00 percent in early March after the Fed chose not to act. Yields
were volatile for the rest of the reporting period, as
Continued on page two
1
<PAGE> 3
foreign investors sold U.S. Treasury holdings and investors began to fear that
the Fed was leaning toward a rate hike.
Municipal bond yields generally moved in unison with Treasuries but did not
gain nearly as much in price. By the end of the reporting period, the average
yield of AAA-rated, 30-year generic general obligation bonds was 5.14 percent,
two basis points above the yield posted on October 31 of last year. The
underperformance of municipal bonds can be attributed in part to heavy supply
that outpaced demand. Supply increased as state and local governments took
advantage of low interest rates by issuing bonds to refinance outstanding issues
with higher interest rates, as well as to fund new projects. In the first
quarter, long-term municipal issuance totaled $71 billion, up from $40 billion a
year earlier.
More than half of the new issue volume was AAA-rated and insured, which
significantly diminished the amount of uninsured, higher-yielding securities
available in the marketplace. The dominance of insured volume and the high
demand for uninsured paper created an imbalance that compressed the yields
between higher-quality and lower-quality bonds.
[CREDIT QUALITY PIE CHART]
Portfolio Composition by Credit Quality
as of April 30, 1998*
<TABLE>
<S> <C>
AAA.............. 41.0%
AA............... 9.5%
A................ 14.0%
BBB.............. 21.7%
BB............... 3.5%
Non-Rated........ 10.3%
</TABLE>
* As a Percentage of Long-Term Investments
Based upon the highedst credit quality ratings as issued by Standard & Poor's
or Moody's.
TRUST STRATEGY
We used the following strategies to manage the Trust during the period:
We maintained a mix of high-quality and low-quality bonds to balance the
portfolio's volatility in response to changing market conditions. Higher-quality
issues generally have performed better than lower-rated securities when interest
rates are falling, which was the case for most of the period. Lower-quality
securities tend to outperform when rates are rising, and they usually pay higher
yields. During the reporting period, we sold some of our AAA-rated insured bonds
and purchased A- and AA-rated bonds in an effort to boost the Trust's yield.
Overall, new acquisitions were limited because current market yields were
below the average yield of bonds in the Trust. Most purchases were intended to
extend the duration of the Trust in order to maintain its sensitivity to
changing interest rates. The Trust's
Continued on page three
2
<PAGE> 4
duration had been decreasing as the lower interest rate environment caused
several positions to be priced to call dates rather than maturities. As of April
30, the duration of the Trust was 7.99 years, compared with 7.76 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.
We purchased discount bonds that had the potential to appreciate in value.
In addition, we bought high-yielding premium bonds in order to enhance the
Trust's income-earning ability. These trades helped extend the call protection
of the Trust.
TOP FIVE PORTFOLIO SECTORS AS OF APRIL 30, 1998*
Health Care....................... 25.9%
Single-Family Housing............. 14.2%
Industrial Revenue................ 12.7%
Retail Electric/Gas/Telephone...... 7.7%
Public Education................... 6.9%
*As a Percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the six-month period ended April 30, 1998, the Trust generated a total
return of (2.13) percent(1). This reflects a decrease in market price per common
share from $10.9375 on October 31, 1997, to $10.3750 on April 30, 1998, plus
reinvestment of all dividends. The Trust had a tax-exempt distribution rate of
6.59 percent(3), based on the closing price of its common shares. Because income
from the Trust is exempt from federal income taxes, this distribution rate is
equivalent to a yield of 10.30 percent(4) on a taxable investment for investors
in the 36 percent federal income tax bracket. Please refer to the chart on page
seven for additional performance numbers.
Continued on page four
3
<PAGE> 5
[DIVIDEND HISTORY GRAPH]
Six-month Dividend History
For the Period Ended April 30, 1998
<TABLE>
<CAPTION>
Distribution per Common Share
<S> <C>
DEC 1997.......................... $.0570
JAN 1998.......................... $.0570
FEB 1998.......................... $.0570
MAR 1998.......................... $.0570
APR 1998.......................... $.0570
</TABLE>
ECONOMIC OUTLOOK
We expect the economy to slow from its brisk first-quarter pace, although
the extent of the slowdown depends on the continued effects of Asia's crisis and
on Fed policy. We believe the Fed is biased toward raising rates, given concerns
about the economy's increasing strength. If economic strength ignites
inflationary pressures, then we believe the Fed will raise interest rates later
this year. As a result, the yield of the 30-year Treasury bond could top 6.25
percent.
We will continue to track market developments and their effects on the
Trust. When appropriate, we will make adjustments to the portfolio. As we
mentioned earlier, our goal remains a high level of current income for
investors, plus gains in total return. Thank you for your continued support and
confidence in Van Kampen American Capital and the management of your Trust.
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 seven
4
<PAGE> 6
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to one percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis point move.
CALL FEATURE: Allows the issuer to buy back a bond on specific call dates before
maturity. Call dates and prices are set when the bond is issued. To compensate
the bond holder for loss of income and ownership, the call price is usually
higher than the face value of the bond. Bonds are usually called when interest
rates drop so significantly that the issuer can save money by issuing new bonds
at lower rates.
A callable bond is "priced to call" when it is selling at a premium, because it
is assumed that the issuer will redeem the bond at its call date, rather than at
maturity.
COUPON RATE: The stated rate of interest a bond pays until maturity, expressed
as a percentage of its face value.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investor Services are two
companies that assign bond ratings. Standard & Poor's ratings range from a high
of AAA to a low of D; Moody's ratings range from a high of Aaa to a low of D.
CREDIT SPREAD: The difference in yield between higher-quality issues and
lower-quality issues. Normally, lower-quality issues provide higher yields than
higher-quality issues in order to compensate investors for the additional credit
risk.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected
one-percent change in the price of the bond for every one-percent change in
interest rates. The longer a fund's duration, the greater the effect of interest
rate movements on net asset value. Typically, funds with shorter durations have
performed better in rising rate environments, while funds with longer durations
have performed better when rates decline.
FEDERAL RESERVE BOARD (THE FED): A group that meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.
GENERAL OBLIGATION BONDS: Bonds backed by the full faith and credit (taxing
authority) of the issuer for timely payment of interest and principal. These
bonds are issued to finance essential government projects, such as highways and
schools.
5
<PAGE> 7
INFLATION: An economic situation in which money supply and business activity
dramatically increase, accompanied by sharply rising prices. Inflation is widely
measured by the Consumer Price Index, an economic indicator that measures the
change in the cost of purchased goods and services.
INSURED BOND: A bond that is insured against default by the municipal bond
insurer. If the issuer defaults, the insurance company will step in and take
over payments of interest and principal. As a result of this protection against
credit risk, most municipal bonds are AAA-rated. Insurance on the bonds does not
relate to mutual fund shares, which will fluctuate in price.
INVESTMENT GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.
MARKET PRICE: The price of a share of a closed-end fund trading on a stock
exchange. When the price is less than a fund's NAV, the fund is trading at a
discount. When the price is more than the NAV, the fund is trading at a premium.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
governmental entity to finance capital expenditures such as the construction of
highways or public works.
NET ASSET VALUE (NAV): The value of a fund share, calculated by deducting a
fund's liabilities from its total assets and dividing this amount by the number
of shares outstanding.
PREREFUNDING: A process whereby new bonds are issued to refinance an outstanding
bond issue. This typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
PREMIUM BOND: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond.
YIELD SPREAD: The difference between the yields of distinct bonds, due to
variant credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities are
narrow, there is less incentive to own the bond with the longer maturity. In
both cases, the investor is not being compensated for the additional risk.
ZERO COUPON BONDS: A corporate or municipal debt security that trades at a deep
discount to face value and pays no interest. It may be redeemed at maturity for
full face value.
6
<PAGE> 8
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1998
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).......... (2.13)%
Six-month total return based on NAV(2)................... 1.81%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)............................................... 6.59%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 10.30%
SHARE VALUATIONS
Net asset value.......................................... $ 10.51
Closing common stock price............................... $10.3750
Six-month high common stock price (1/13/98).............. $11.3750
Six-month low common stock price (4/30/98)............... $10.3125
Preferred share rate(5).................................. 3.74%
</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.
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 104.4%
ALASKA 4.3%
$ 3,250 Valdez, AK Marine Term Rev BP Pipeline Inc Proj
Ser B Rfdg...................................... 5.500% 10/01/28 $ 3,259,652
-----------
ARIZONA 3.0%
2,675 Maricopa Cnty, AZ Uni Sch Dist No 69 Paradise
Vly (FSA Insd) (a).............................. 4.000 07/01/16 2,280,732
-----------
ARKANSAS 1.6%
1,000 Dogwood Addition PRD Muni Ppty Owners Multi-Purp
Impt Dist No 8 AR Impt Ser A (e)................ 7.500 01/31/06 960,000
919 Dogwood Addition PRD Muni Ppty Owners Multi-Purp
Impt Dist No 8 AR Impt Ser B (e)................ 7.500 01/31/06 275,613
-----------
1,235,613
-----------
CALIFORNIA 3.3%
4,490 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(MBIA Insd)..................................... * 09/01/17 1,630,499
225 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A (d)........................... 0/7.15 01/01/13 172,017
650 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/28 122,486
500 Fresno, CA Uni Sch Dist Ser A Rfdg (MBIA
Insd)........................................... 6.100 08/01/12 559,345
-----------
2,484,347
-----------
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 1,487,700
2,560 Denver Co City & Cnty Arpt Rev Ser A............ 8.500 11/15/23 2,829,415
240 Denver Co City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/00)........................ 8.500 11/15/23 269,273
220 Jefferson Cnty, CO Residential Mtg Rev.......... 11.500 09/01/11 361,363
100 Jefferson Cnty, CO Residential Mtg Rev.......... 9.000 09/01/12 140,897
145 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/03)........................ 11.500 09/01/11 192,534
160 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/04)........................ 11.500 09/01/11 219,904
180 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/05)........................ 11.500 09/01/11 255,668
205 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/06)........................ 11.500 09/01/11 299,936
235 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/07)........................ 11.500 09/01/11 353,125
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLORADO (CONTINUED)
$ 265 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/08)........................ 11.500% 09/01/11 $ 407,885
300 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/09)........................ 11.500 09/01/11 472,188
340 Jefferson Cnty, CO Residential Mtg Rev
(Prerefunded @ 09/01/10)........................ 11.500 09/01/11 545,649
-----------
7,835,537
-----------
FLORIDA 4.3%
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser A (Prerefunded @ 06/01/99)........ 8.750 06/01/16 1,070,150
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp Orlando
Genl Hosp Ser B (Prerefunded @ 06/01/99)........ 8.750 06/01/16 1,070,150
2,300 Sun N Lake of Sebring, FL Impt Dist Spl Assmt
Ser A (c) (e)................................... 10.000 12/15/11 1,150,000
-----------
3,290,300
-----------
ILLINOIS 23.2%
1,000 Alton, IL Hlth Fac Rev & Impt Christian Hlth Ser
C Rfdg (Prerefunded @ 02/15/01) (FGIC Insd)..... 7.200 02/15/21 1,094,860
2,435 Alton, IL Hosp Fac Rev Saint Anthony's Hlth Cent
Proj (Prerefunded @ 09/01/99) (b)............... 8.375 09/01/14 2,607,763
5,380 Aurora, IL Single Family Mtg Rev Cap Apprec
(AMBAC Insd).................................... * 12/01/22 789,730
450 Bedford Park, IL Tax Increment 71st & Cicero
Proj Rfdg....................................... 7.000 01/01/06 482,166
250 Chicago, IL Brd of Ed Chicago Sch Reform (AMBAC
Insd)........................................... 5.750 12/01/27 260,295
2,595 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Ser B (b)............................. 8.950 05/01/18 2,913,952
1,415 Chicago, IL Single Family Mtg (GNMA
Collateralized)................................. 7.625 09/01/27 1,610,242
510 Cook Cnty, IL Sch Dist No 107 La Grange (b)..... 7.150 12/01/08 605,171
575 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.200 12/01/09 689,132
625 Cook Cnty, IL Sch Dist No 107 La Grange......... 7.000 12/01/10 739,400
500 Hodgkins, IL Tax Increment Ser A Rfdg........... 7.625 12/01/13 552,960
885 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D............................................... 9.500 11/15/15 1,029,113
745 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D (Prerefunded @ 11/15/00)...................... 9.500 11/15/15 853,569
500 Illinois Hlth Fac Auth Rev Lutheran Social Svcs
Proj Ser A (Prerefunded @ 08/01/00)............. 7.650 08/01/20 546,335
1,910 Illinois Hsg Dev Auth Residential Mtg Rev Ser B
(b)............................................. 7.250 08/01/17 2,021,334
250 Lake Cnty, IL Cmnty Unit (b).................... 7.600 02/01/14 310,255
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 500 Robbins, IL Res Recovery Rev.................... 8.375% 10/15/16 $ 519,570
-----------
17,625,847
-----------
INDIANA 2.7%
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 2,067,260
-----------
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 1,664,295
-----------
MARYLAND 2.6%
1,845 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty Dev
Single Family Ser 4 (FHA Gtd)................... 7.450 04/01/32 1,943,541
-----------
MASSACHUSETTS 1.1%
360 Massachusetts St Hlth & Edl Fac Auth Rev Cent
New England Hlth Sys Ser A...................... 6.125 08/01/13 374,252
395 Massachusetts St Hsg Fin Agy Multi-Family
Residential Dev
Ser A (FNMA Collateralized)..................... 8.150 02/01/29 418,732
-----------
792,984
-----------
MICHIGAN 1.2%
820 Michigan St Hosp Fin Auth Rev Battle Creek Hosp
Ser H (Prerefunded @ 11/15/00).................. 9.500 11/15/15 937,350
-----------
MISSISSIPPI 1.9%
1,500 Medical Cent Ed Bldg Corp MS Rev Univ MS Med
Cent Ser B Rfdg (AMBAC Insd) (a)................ 5.000 12/01/16 1,450,575
-----------
MONTANA 4.2%
2,900 Forsyth, MT Pollutn Ctl Rev Puget Sound Pwr & Lt
Ser B Rfdg (AMBAC Insd) (b)..................... 7.250 08/01/21 3,162,856
-----------
NEVADA 2.1%
1,500 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser A
(FGIC Insd)..................................... 6.700 06/01/22 1,621,680
-----------
NEW HAMPSHIRE 4.2%
2,500 New Hampshire Higher Edl & Hlth Fac Auth Rev
Hosp Catholic Med Cent Rfdg (b)................. 8.250 07/01/13 2,628,975
500 New Hampshire St Indl Dev Auth Rev Pollutn Ctl
Pub Svcs Co of NH Proj Ser C.................... 7.650 05/01/21 532,655
-----------
3,161,630
-----------
NEW JERSEY 0.9%
650 New Jersey Hlthcare Fac Fin Auth Rev Palisades
Med Cent........................................ 7.500 07/01/06 696,326
-----------
NEW YORK 5.3%
1,240 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev (AMBAC Insd) (b)............................ 6.750 06/15/06 1,337,216
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<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)
(b)............................................. 6.750% 06/15/06 $ 1,364,517
1,305 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd) (b)............ 5.750 12/01/22 1,349,579
-----------
4,051,312
-----------
NORTH CAROLINA 2.5%
2,000 North Carolina Med Care Comm Hlthcare Fac Rev
Novant Hlth Proj Ser A Rfdg (MBIA Insd) (a)..... 5.000 10/01/24 1,901,500
-----------
OHIO 1.8%
800 Cuyahoga Cnty, OH Multi-Family Rev Hsg Wtr St
Assoc Ltd Proj (GNMA Collateralized)............ 6.250 12/20/36 845,824
500 Ohio St Solid Waste Rev Republic Engineered
Steels Proj..................................... 8.250 10/01/14 515,510
-----------
1,361,334
-----------
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 1,135,810
-----------
TENNESSEE 3.0%
2,140 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev Open
Arms Dev Cent Ser E (b)......................... 9.750 08/01/19 2,274,135
-----------
TEXAS 10.2%
1,000 Alliance Arpt Auth Inc TX Spl Fac Rev American
Airls Inc....................................... 7.000 12/01/11 1,161,510
491 Pecos Cnty, TX Ctfs Partn....................... 6.000 01/12/08 508,656
2,480 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (Cap Guar Insd) (b)............ 5.500 09/01/13 2,529,253
2,500 Victoria, TX Util Sys Rev (MBIA Insd)........... 5.000 12/01/21 2,393,100
1,000 West Side Calhoun Cnty, TX Navig Dist Solid
Waste Disp Union Carbide Chem & Plastics........ 8.200 03/15/21 1,105,810
-----------
7,698,329
-----------
WEST VIRGINIA 4.1%
3,000 Braxton Cnty, WV Solid Waste Variable
Weyerhaeuser Co Proj............................ 5.800 06/01/27 3,089,280
-----------
WISCONSIN 1.4%
935 Wisconsin St Hlth & Edl Fac Auth Rev Chippewa
Vly Hosp Ser F Rfdg............................. 9.500 11/15/12 1,086,003
-----------
PUERTO RICO 1.5%
1,250 Puerto Rico Comwlth Hwy & Tran Auth Tran Rev Ser
A............................................... 4.750 07/01/38 1,132,237
-----------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- ------------------------------------------------------------------------------------------
<S> <C>
TOTAL LONG-TERM INVESTMENTS 104.4%
(Cost $76,074,817)........................................................ $79,240,465
SHORT-TERM INVESTMENTS 0.1%
(Cost $71,429)............................................................ 53,571
-----------
TOTAL INVESTMENTS 104.5%
(Cost $76,146,246)........................................................ 79,294,036
LIABILITIES IN EXCESS OF OTHER ASSETS (4.5%)............................... (3,431,805)
-----------
NET ASSETS 100.0%.......................................................... $75,862,231
===========
</TABLE>
*Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, open option and open futures transactions.
(c) Non-Income producing security.
(d) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(e) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $76,146,246)........................ $79,294,036
Receivables:
Investments Sold.......................................... 1,740,813
Interest.................................................. 1,557,559
Variation Margin on Futures............................... 53,594
Other....................................................... 20,314
-----------
Total Assets.......................................... 82,666,316
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 5,722,419
Custodian Bank............................................ 801,797
Income Distributions--Common and Preferred Shares......... 60,895
Investment Advisory Fee................................... 37,657
Affiliates................................................ 9,884
Options at Market Value (Net premiums received of
$61,693).................................................. 18,750
Trustees' Deferred Compensation and Retirement Plans........ 86,892
Accrued Expenses............................................ 65,791
-----------
Total Liabilities..................................... 6,804,085
-----------
NET ASSETS.................................................. $75,862,231
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................. 3,139,865
Accumulated Distributions in Excess of Net Investment
Income.................................................... (924,281)
Accumulated Net Realized Loss............................... (4,101,762)
-----------
Net Assets Applicable to Common Shares................ 50,862,231
-----------
NET ASSETS.................................................. $75,862,231
===========
NET ASSET VALUE PER COMMON SHARE ($50,862,231 divided
by 4,839,000 shares outstanding).......................... $ 10.51
===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Six Months Ended April 30,1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 2,484,773
-----------
EXPENSES:
Investment Advisory Fee..................................... 227,835
Preferred Share Maintenance................................. 40,655
Audit....................................................... 19,990
Trustees' Fees and Expenses................................. 14,671
Legal....................................................... 4,763
Custody..................................................... 1,957
Other....................................................... 52,494
-----------
Total Expenses.......................................... 362,365
-----------
NET INVESTMENT INCOME....................................... $ 2,122,408
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments (Including reorganization and restructuring
costs of $7,866)........................................ $ 639,896
Options................................................... 116,483
Futures................................................... (208,657)
-----------
Net Realized Gain........................................... 547,722
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 4,419,117
-----------
End of the Period:
Investments............................................. 3,147,790
Options................................................. 42,943
Futures................................................. (50,868)
-----------
3,139,865
-----------
Net Unrealized Depreciation During the Period............... (1,279,252)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $ (731,530)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,390,878
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1998 and
the Year Ended October 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 2,122,408 $ 4,640,504
Net Realized Gain/Loss.................................. 547,722 (1,805,353)
Net Unrealized Appreciation/Depreciation
During the Period..................................... (1,279,252) 2,386,852
------------ ------------
Change in Net Assets from Operations.................... 1,390,878 5,222,003
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (1,654,687) (3,435,176)
Preferred Shares...................................... (449,588) (893,796)
------------ ------------
Total Distributions..................................... (2,104,275) (4,328,972)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... (713,397) 893,031
NET ASSETS:
Beginning of the Period................................. 76,575,628 75,682,597
------------ ------------
End of the Period (Including accumulated distributions
in excess of net investment income of $924,281 and
$942,414, respectively)............................... $75,862,231 $76,575,628
============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
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, 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a).............. $10.658 $ 10.474 $10.754 $10.500
------- ------- ------- -------
Net Investment Income.................... .439 .959 .882 .877
Net Realized and Unrealized Gain/Loss.... (.151) .120 (.195) .406
------- ------- ------- -------
Total from Investment Operations........... .288 1.079 .687 1.283
------- ------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income:
Paid to Common Shareholders............ .342 .710 .780 .825
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... .093 .185 .187 .204
------- ------- ------- -------
Total Distributions........................ .435 .895 .967 1.029
------- ------- ------- -------
Net Asset Value,
End of the Period........................ $10.511 $10.658 $10.474 $10.754
======= ======= ======= =======
Market Price Per Share at End of
the Period............................... $10.3750 $10.9375 $11.000 $10.625
Total Investment Return at
Market Price (b)......................... (2.13%)* 6.13% 11.02% 2.88%
Total Return at Net Asset Value (c)........ 1.81%* 8.91% 4.83% 10.59%
Net Assets at End of the Period
(In millions)............................ $75.9 $76.6 $75.7 $77.0
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............ 1.42% 1.47% 1.51% 1.52%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common Shares
(d)...................................... 6.54% 7.38% 6.55% 6.31%
Portfolio Turnover......................... 17%* 25% 39% 50%
* Non-Annualized
**Ratio of Expenses to Average Net
Assets Including Preferred Shares........ .95% .99% 1.01% 1.02%
</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
16
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 30, 1989
(Commencement
of Investment
Operations) to
Year Ended October 31 October 31, 1990
- -------------------------------------------------------------------------------
1994 1993 1992 1991 October 31, 1990
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12.094 $11.151 $11.502 $10.832 $10.901
------- ------- ------- ------- -------
9.58 1.090 1.090 1.153 1.001
(1.480) .917 (.348) .647 (.115)
------- ------- ------- ------- -------
(.522) 2.007 .742 1.800 .886
------- ------- ------- ------- -------
.930 .930 .925 .886 .725
.142 .134 .168 .244 .230
------- ------- ------- ------- -------
1.072 1.064 1.093 1.130 .955
------- ------- ------- ------- -------
$10.500 $12.094 $11.151 $11.502 $10.832
======= ======= ======= ======= =======
$11.125 $13.875 $11.750 $12.250 $10.500
(13.59%) 26.46% 3.10% 25.65% .21%*
(5.77%) 17.40% 5.04% 14.87% 3.70%*
$75.8 $83.5 $79.0 $80.7 $77.4
1.47% 1.35% 1.52% 1.53% 1.41%
7.20% 8.14% 8.01% 8.12% 7.75%
30% 7% 21% 52% 134%*
1.01% .94% 1.05% 1.05% N/A
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
April 30, 1998 (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.
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.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (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, 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 April 30, 1998, for federal income tax purposes, cost of long- and
short-term investments is $76,232,994; the aggregate gross unrealized
appreciation is $5,625,384 and the aggregate gross unrealized depreciation is
$2,572,267 resulting in net unrealized appreciation including open option and
futures transactions of $3,053,717.
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.
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 six months ended April 30, 1998, the Trust recognized expenses of
approximately $600 representing legal services provided by Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
For the six months ended April 30, 1998, the Trust recognized expenses of
approximately $21,600 representing Van Kampen American Capital Distributors,
Inc.'s or
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
its affiliates' (collectively "VKAC") cost of providing accounting, legal and
certain shareholder services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust 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 per trustee under the plan is $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $20,156,026 and $12,702,885,
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. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising a call option contract or taking
delivery of a security underlying a futures contract. In these instances, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.
Summarized on the following pages are the specific types of derivative
financial instruments used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in options for the six months ended April 30, 1998, were as
follows:
<TABLE>
<CAPTION>
Contracts Premium
- ------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1997................. 435 $ 26,396
Options Written and Purchased (Net)............. 618 131,075
Options Terminated in Closing Transactions
(Net)......................................... (52) 65,420
Options Expired (Net)........................... (901) (161,198)
------- ---------
Outstanding at April 30, 1998................... 100 $ 61,693
======== =========
</TABLE>
The related futures contracts of the outstanding option transactions as of April
30, 1998, and the description and market value are as follows:
<TABLE>
<CAPTION>
Market
Exp. Month/ Value
Contracts Exercise Price of Options
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Muni Bond Future
June 1998 -- Written Put
(Current Notional Value
of $121,063 per contract).......... 100 June/117 $ (18,750)
====== ==========
</TABLE>
B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin). The potential risk of loss associated
with a futures contract could be in excess of the variation margin reflected on
the Statement of Assets and Liabilities.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in futures contracts for the six months ended April 30, 1998,
were as follows:
<TABLE>
<CAPTION>
Contracts
- ---------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1997........................... 0
Futures Opened............................................ 279
Futures Closed............................................ (244)
-------
Outstanding at April 30, 1998............................. 35
========
</TABLE>
The futures contracts outstanding as of April 30, 1998, and the description
and unrealized depreciation are as follows:
<TABLE>
<CAPTION>
Unrealized
Contracts Depreciation
- -------------------------------------------------------------------------
<S> <C> <C>
Long Contracts -- U.S. Treasury Bond Futures
June 1998
(Current Notional Value $120,219 per
contract)..................................... 35 $ 50,868
====== =========
</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, 1998 was 3.740%. During the
six months ended April 30, 1998, the rates ranged from 3.450% to 3.875%.
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.
22
<PAGE> 24
DIVIDEND REINVESTMENT PLAN
The Trust offers a Dividend Reinvestment Plan (the "Plan") in which Common
Shareholders may elect to have dividends and capital gains distributions
automatically reinvested in Common Shares of the Trust. The service is entirely
voluntary and you may join or withdraw at any time.
HOW TO PARTICIPATE
If you wish to elect to participate in the Plan and your shares are held in your
own name, call 1-800-341-2929 for more information and a 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
State Street Bank and Trust Company, as your Plan Agent, serves as agent for the
Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, 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 capital gains distribution paid subsequent to written
notice of the change sent to all Common Shareholders of the Trust at least 90
days before the record date for the dividend or distribution. The Plan also may
be amended or terminated by the Plan Agent, with the written consent of the
Trust, by providing at least 90 days written notice to all Participants in the
Plan.
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 capital gains distributions.
RIGHT TO WITHDRAW
You may withdraw from the Plan at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company. 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
23
<PAGE> 25
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales
charges, risks, and expenses. Please read it carefully before you invest or
send money.
To view a current Van Kampen American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:
- visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a Prospectus
- call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- e-mail us by visiting WWW.VKAC.COM and selecting Investors' Place
24
<PAGE> 26
VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
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., 1998 All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
25
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> INVESTMENT GRADE MUNI
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 76,146,246
<INVESTMENTS-AT-VALUE> 79,294,036
<RECEIVABLES> 3,351,966
<ASSETS-OTHER> 20,314
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 82,666,316
<PAYABLE-FOR-SECURITIES> 5,722,419
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,081,666
<TOTAL-LIABILITIES> 6,804,085
<SENIOR-EQUITY> 25,000,000
<PAID-IN-CAPITAL-COMMON> 52,748,409
<SHARES-COMMON-STOCK> 4,839,000
<SHARES-COMMON-PRIOR> 4,839,000
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</TABLE>
