<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 3
PORTFOLIO AT A GLANCE
CREDIT QUALITY 4
SIX-MONTH DIVIDEND HISTORY 4
TOP FIVE INDUSTRIES 5
NET ASSET VALUE AND MARKET PRICE 5
Q&A WITH YOUR PORTFOLIO MANAGERS 6
GLOSSARY OF TERMS 10
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 11
FINANCIAL STATEMENTS 17
NOTES TO FINANCIAL STATEMENTS 22
TRUST OFFICERS AND IMPORTANT ADDRESSES 25
</TABLE>
It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
May 19, 2000
Dear Shareholder,
Whether you have held your Trust for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your Trust is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we head into the second half of 2000, count on us to
continue to draw on the wisdom of our 76 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that kicked off
this spring. The message emphasizes our depth of
investment-management history, as well as our firm belief that with the right
investments, anyone can realize life's true wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED STRONG, PRIMARILY DUE TO ACTIVE CONSUMER AND BUSINESS
SPENDING. GROSS DOMESTIC PRODUCT, THE PRIMARY MEASURE OF ECONOMIC GROWTH,
INCREASED AT AN ANNUALIZED RATE OF 5.4 PERCENT IN THE FIRST QUARTER OF 2000.
WHILE THIS FIGURE INDICATES A MODEST SLOWDOWN FROM THE PREVIOUS TWO QUARTERS, IT
NEVERTHELESS REPRESENTS A HIGH RATE OF ECONOMIC GROWTH.
CONSUMER SPENDING AND EMPLOYMENT
INFLATION FEARS CONTINUED TO MOUNT BECAUSE OF STRONG CONSUMER SPENDING AND THE
TIGHT LABOR MARKET. FOR MOST OF THE REPORTING PERIOD, RISING INTEREST RATES DID
LITTLE TO REIN IN ROBUST CONSUMER SPENDING. ALTHOUGH RETAIL SALES GROWTH
MODERATED IN APRIL, THE FACTORS UNDERPINNING CONSUMER ACTIVITY REMAINED LARGELY
UNCHANGED--RISING WAGES, LOW UNEMPLOYMENT, AND A GENERALLY FAVORABLE (THOUGH
VOLATILE) STOCK MARKET.
IN ADDITION, THE JOBLESS RATE HOVERED NEAR ITS LOWEST LEVEL IN THREE DECADES.
THE EMPLOYMENT COST INDEX ACCELERATED SHARPLY IN THE FIRST QUARTER OF 2000,
REFLECTING RISING WAGES AS EMPLOYERS VIE TO ATTRACT AND RETAIN SKILLED WORKERS.
THESE WAGE PRESSURES, IN TURN, BEGAN TO AFFECT PRICES, AS COMPANIES STARTED TO
RAISE THE COST OF GOODS AND SERVICES TO COMPENSATE FOR HIGHER LABOR COSTS.
INTEREST RATES AND INFLATION
STRONG GDP DATA, CONSUMER SPENDING, AND EMPLOYMENT PROMPTED THE FEDERAL RESERVE
BOARD TO SEEK TO SLOW THE PACE OF ECONOMIC GROWTH AND WARD OFF INFLATION. THE
FED INCREASED THE FEDERAL FUNDS RATE BY 0.25 PERCENT FIVE TIMES BETWEEN JUNE
1999 AND APRIL 2000. [EDITOR'S NOTE: THE FED RAISED RATES BY 0.50 PERCENT ON MAY
16.] DESPITE THE FED'S CONCERNS, THE CONSUMER PRICE INDEX, A MEASURE OF
INFLATION, ROSE A MODERATE 3.0 PERCENT DURING THE 12 MONTHS ENDED APRIL 30,
2000.
INTEREST RATES AND INFLATION
(April 30, 1998 - April 30, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Apr 98 5.50 1.40
5.50 1.70
5.50 1.70
Jul 98 5.50 1.70
5.50 1.60
5.25 1.50
Oct 98 5.00 1.50
4.75 1.50
4.75 1.60
Jan 99 4.75 1.70
4.75 1.60
4.75 1.70
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.70
Apr 00 6.00 3.00
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last
day of each month. Inflation is indicated by the annual percent change of the
Consumer Price Index for all urban consumers at the end of each month.
2
<PAGE> 4
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of April 30, 2000)
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
NYSE Ticker Symbol VIG
------------------------------------------------------------------------
Six-month total return based on market price(1) -3.55%
------------------------------------------------------------------------
Six-month total return based on NAV(2) 1.23%
------------------------------------------------------------------------
Distribution rate as a % of closing common stock price(3) 7.62%
------------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 11.91%
------------------------------------------------------------------------
Net asset value $9.19
------------------------------------------------------------------------
Closing common stock price $8.1875
------------------------------------------------------------------------
Six-month high common stock price (11/02/99) $9.000
------------------------------------------------------------------------
Six-month low common stock price (12/16/99) $7.750
------------------------------------------------------------------------
Preferred share rate(5) 4.15%
------------------------------------------------------------------------
</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 rate.
(5) See "Notes to Financial Statements" footnote #4, 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 is no guarantee of 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.
3
<PAGE> 5
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of April 30, 2000
<S> <C> <C>
- AAA/Aaa............ 52.8%
- AA/Aa.............. 7.5%
- A/A................ 5.7%
- BBB/Baa............ 23.8%
- BB/Ba.............. 2.2%
- Non-Rated.......... 8.0%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 46.6%
- AA/Aa.............. 12.2%
- A/A................ 11.2%
- BBB/Baa............ 19.9%
- BB/Ba.............. 1.4%
- Non-Rated.......... 8.7%
[PIE CHART]
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
SIX-MONTH DIVIDEND HISTORY
(for the six months ending April 30, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
11/99 0.052
12/99 0.052
1/00 0.052
2/00 0.052
3/00 0.052
4/00 0.052
</TABLE>
The dividend history represents past performance of the Trust and is no
guarantee of the Trust's future dividends.
4
<PAGE> 6
TOP FIVE INDUSTRIES
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
APRIL 30, 2000 OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
Single-Family Housing 15.50 17.40
Health Care 12.80 13.50
Industrial Revenue 12.20 12.50
Airport 9.60 10.60
Public Education 9.00 8.60
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--April 1990 through April 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
4/90 10.7400 11.7500
10.9300 11.5000
10.7600 10.7500
12/90 11.0200 11.2500
11.0800 11.8750
11.2300 11.6250
11.5400 12.0000
12/91 11.6100 12.2500
11.4500 12.5000
11.4600 12.5000
11.4700 13.0000
12/92 11.4300 12.3750
11.7600 13.3750
11.9000 13.3750
12.1600 14.0000
12/93 12.2000 12.7500
10.9500 11.6250
10.8100 12.3750
10.7500 12.0000
12/94 10.3300 10.5000
10.9500 11.2500
10.7000 10.5000
10.7100 10.7500
12/95 11.0600 10.5000
10.5200 11.0000
10.3400 10.8750
10.4100 10.8750
12/96 10.4800 10.6250
10.2800 10.3750
10.4800 10.5625
10.6500 10.9375
12/97 10.6700 10.8750
10.6500 10.5625
10.6500 10.8750
10.7600 11.2500
12/98 10.5600 11.0625
10.4400 11.0000
9.9800 10.3750
9.6300 9.0625
9.2300 8.1250
9.3400 8.1250
4/00 9.1900 8.8175
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
5
<PAGE> 7
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE ADVISER OF THE VAN KAMPEN
INVESTMENT GRADE MUNICIPAL TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS DURING THE PAST SIX MONTHS. THE REPRESENTATIVES INCLUDE DAVID
C. JOHNSON, PORTFOLIO MANAGER, WHO HAS MANAGED THE TRUST SINCE 1989 AND WORKED
IN THE INVESTMENT INDUSTRY SINCE 1981. THE FOLLOWING COMMENTS REFLECT THE
REPRESENTATIVES' VIEWS ON THE TRUST'S PERFORMANCE DURING THE SIX MONTHS ENDED
APRIL 30, 2000.
Q WHAT WERE THE MOST IMPORTANT
DEVELOPMENTS IN THE FIXED-INCOME MARKETS DURING THE REPORTING PERIOD?
A Generally higher interest rates,
sparked by inflation worries, set the tone for the fixed-income markets during
the past six months. As the economy continued its strong advance, the markets
reacted warily to signs of potential inflationary pressures--such as rising
employment costs, healthy job growth, strong consumer spending, and spikes in
commodities prices, especially oil. These concerns fueled a steady sell-off
through the fourth quarter of 1999 and into January 2000.
To slow the economy and keep prices from rising, the Federal Reserve Board
gradually pushed short-term interest rates higher, raising the fed funds rate (a
key short-term lending rate) three times between November 1999 and April 2000.
(Editor's note: On May 16, 2000, after the reporting period ended, the Fed
raised rates a fourth time.)
In times of rising interest rates, bond prices trend downward. Add to that
the lingering effects of the Year 2000 (Y2K) computer scare early in the first
quarter of 2000, and you can see why this was a challenging period for many
fixed-income investors.
Q HOW DID THE MUNICIPAL
BOND MARKET REACT TO THESE CONDITIONS?
A Not surprisingly, higher interest
rates hurt municipal bond prices, but we believe there's always opportunity in
the market. In the past few months, we've actually seen some fairly significant
price swings--both up and down--as investors tried to anticipate the Fed's next
move and the direction of interest rates. The market was weak in late 1999 and
early 2000, but we had a nice rally in February and March, which tapered off in
April.
The strong economy has bolstered the financial condition of many
municipalities across the country, so the pace of new municipal bond issuance
dropped sharply (about 40 percent) from a year ago. With their coffers full,
municipalities haven't needed to turn to the bond market for financing. Also,
6
<PAGE> 8
higher interest rates made it more difficult for issuers to refund outstanding
bond issues, which has been a source of new investment opportunities in the
past.
Q WHAT STRATEGIES DID YOU FOLLOW
IN MANAGING THE TRUST?
A The Trust is one of our more
seasoned closed-end funds, having been established in 1989. Because of the
market conditions at the time of its inception, it held a significant percentage
of higher-yielding, longer-maturity bonds. This created a situation in which a
number of these securities, now 10 or more years into their life cycle, would
likely be called because the issuer could issue new bonds at much lower rates.
Because of their attractive coupons, these bonds were trading at a premium,
presenting us with an opportunity to capture some solid capital gains. Because
these bonds were scheduled to be called or refunded within the next year or two,
we chose to sell them while their demand--and therefore their market price--was
high. While the Trust still may lose some yield due to higher-yielding
securities being called out of the portfolio, we have actively managed the
portfolio in an attempt to decrease the impact of expected calls in 2000.
We've seen an only slight decline in portfolio income in recent months. To
help preserve the Trust's earning power, we added more longer-term securities
with stronger call protection to the portfolio. We also maintained a somewhat
aggressive stance--compared to our other closed-end funds--with regard to
lower-rated and nonrated securities, such as those rated BBB or BB or not rated
but considered by our bond analysts to have credit quality equivalent to these
ratings. As of April 30, 2000, more than 30 percent of the portfolio was
invested in securities rated BBB or BB or in nonrated securities (23.8 percent
in BBB, 2.2 percent in BB, and 8.0 percent in nonrated).
Other strategies included purchasing deeply discounted bonds, some of which
had been issued a year or so ago with coupons of 4.75, 5.00, or 5.25 percent. As
interest rates subsequently went up, these bonds began selling at a steep
discount, with some priced as low as 80 cents on the dollar. Buying these deeply
discounted bonds enabled us to purchase more par value per dollar invested.
Q WHAT AREAS OF THE MUNICIPAL
MARKET WERE MOST ATTRACTIVE TO YOU?
A Our philosophy is to seek bonds
that we feel represent the best values compared with similar offerings in the
marketplace. During the past six months, we did not specifically target one area
of the market over another. We did, however, maintain significant concentrations
in certain sectors, including single-family housing, health-care, and industrial
revenue bonds, each of which represented more than 12 percent of the portfolio's
long-term investments.
Many of our portfolio management decisions were based on pricing issues,
such as the availability of deep discounts, or structural issues, such as
7
<PAGE> 9
maintaining adequate call protection and diversification for the portfolio. The
portfolio is well diversified, with no sector representing more than 15.5
percent of long-term investments and no single security representing more than 2
percent of the portfolio. For additional portfolio highlights, please refer to
page 4.
Q HOW DID THE TRUST PERFORM
DURING THE PERIOD?
A For the six-month period ended
April 30, 2000, the Trust returned -3.55 percent based on market price. This
reflects a decrease in market price from $8.8125 per share on October 31, 1999,
to $8.1875 per share on April 30, 2000. By comparison, the total return of the
Trust's peer group (as represented by the Lehman Brothers Municipal Bond Index)
was 2.63 percent for the same period.
In November 1999, the Trust's dividend was reduced to $0.052 per share, down
from $0.054 per share. The Trust continues to provide an attractive level of
income, however, as its monthly tax-exempt dividend translates to a distribution
rate of 7.62 percent based on the Trust's closing common stock price on April
30, 2000.
Also, because the Trust is exempt from federal income taxes, this
distribution rate is equivalent to a yield of 11.91 percent for an investor in
the 36 percent federal income-tax bracket. Please refer to the chart and
footnotes on page 3 for additional performance results. Past performance is no
guarantee of future results.
Q WHAT DO YOU SEE AHEAD FOR
THE ECONOMY AND THE MUNICIPAL MARKET?
A All eyes will be on the key
economic statistics, such as GDP growth, employment costs, and the unemployment
rate. These figures measure the economy's strength and rate of growth and may
influence whether the Fed will continue to raise short-term interest rates. We
expect that the inflation rate may increase, but it's likely to remain in a
moderate range for the near term. It's anticipated that the Fed will continue to
increase short-term rates by the end of the summer, perhaps by more than 0.50
percent. Higher interest rates will, in turn, put pressure on the municipal
market in the short run.
Increased stock-price volatility in April has increased investor skepticism,
but investors continue to see price pullbacks as opportunities to buy
aggressive-growth stocks. It may take a much deeper, more sustained decline in
these stocks to convince investors to rethink their asset allocation decisions.
If the stock market does fall sharply, we could see a flight to quality, as
investors pursue investments that typically carry less risk. Such conditions
might benefit investment-grade municipal bonds.
Low municipal-bond supply could continue throughout 2000, especially if
interest rates trend higher, as expected, throughout the first half of the year.
Overall, the lower supply of bonds should help to shore up prices, as demand
remains strong. Investors can
8
<PAGE> 10
tolerate periodic price swings if they keep long-term perspectives and continue
to value the steady stream of tax-exempt income that municipal bonds provide. As
always, we will rely on our strong research efforts to evaluate opportunities in
the marketplace and identify securities that may offer superior investment
potential and value over time.
9
<PAGE> 11
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are two
companies that assign bond ratings. Standard & Poor's ratings range from a high
of AAA to a low of D, while Moody's ratings range from a high of Aaa to a low of
C.
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 does.
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 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest-rate
movements on its price. Typically, funds with shorter durations perform better
in rising rate environments, while funds with longer durations perform better
when rates decline.
INFLATION: A persistent and measurable rise in the general level of 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.
MATURITY DATE: The date a bond expires, usually at face value.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from the
new bonds are generally invested in U.S. government securities. Prerefunding
typically occurs when interest rates decline and an issuer replaces its
higher-yielding bonds with current lower-yielding issues.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings. The
spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and lower-
quality bonds.
10
<PAGE> 12
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR TRUST AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 102.4%
ALABAMA 4.4%
$1,140 Alabama Wtr Pollutn Ctrl Auth Ser B (AMBAC
Insd) (b)................................... 4.750% 08/15/18 $ 977,824
1,500 Birmingham, AL Arpt Auth Rev Rfdg (AMBAC
Insd)....................................... 5.375 07/01/20 1,378,695
800 Mobile, AL Indl Dev Brd Pollutn Ctl Rev Intl
Paper Co Proj Rfdg.......................... 4.750 04/01/10 713,840
-----------
3,070,359
-----------
ALASKA 2.9%
2,250 Valdez, AK Marine Term Rev BP Pipeline Inc
Proj Ser B Rfdg............................. 5.500 10/01/28 2,045,070
-----------
ARIZONA 3.0%
2,675 Maricopa Cnty, AZ Uni Sch Dist No 69
Paradise Vly (FSA Insd)..................... 4.000 07/01/16 2,110,522
-----------
ARKANSAS 1.6%
1,000 Dogwood Addition PRD Muni Ppty Owners
Multi-Purp Impt Dist No 8 AR Impt Ser A
(c)......................................... 9.750 07/01/12 859,400
919 Dogwood Addition PRD Muni Ppty Owners
Multi-Purp Impt Dist No 8 AR Impt Ser B
(c) (e)..................................... 9.750 07/01/12 229,678
-----------
1,089,078
-----------
CALIFORNIA 9.4%
4,490 Contra Costa, CA Home Mtg Fin Auth Home Mtg
Rev (MBIA Insd)............................. * 09/01/17 1,672,884
650 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Cap Apprec Sr Lien Ser A.................... * 01/01/28 124,728
4,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Conv Cap Apprec Rfdg........................ * 01/15/26 2,059,800
225 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Conv Cap Apprec Sr Lien Ser A (Prerefunded @
01/01/10) (d)............................... 0/7.15 01/01/13 192,717
500 Fresno, CA Uni Sch Dist Ser A Rfdg (MBIA
Insd)....................................... 6.100 08/01/12 546,020
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$3,705 San Joaquin Hills, CA Tran Corridor Agy Toll
Rd Cap Apprec Rev Ser A Rfdg (MBIA Insd).... * 01/15/27 $ 745,113
1,500 San Joaquin Hills, CA Tran Corridor Agy Toll
Rd Cap Apprec Rev Ser A Rfdg (MBIA Insd).... * 01/15/28 283,320
1,000 San Marcos, CA Pub Facs Auth Rev Rfdg....... 5.800% 09/01/27 875,020
-----------
6,499,602
-----------
COLORADO 8.1%
2,560 Denver, CO City & Cnty Arpt Rev (b)......... 8.500 11/15/23 2,652,313
145 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/03 172,983
160 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/04 198,731
180 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/05 231,923
205 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/06 272,984
235 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/07 322,352
265 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/08 373,343
300 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/09 432,942
340 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/10 501,072
220 Jefferson Cnty, CO Residential Mtg Rev...... 11.500 09/01/11 331,320
100 Jefferson Cnty, CO Residential Mtg Rev...... 9.000 09/01/12 131,740
-----------
5,621,703
-----------
FLORIDA 3.5%
560 Hillsborough Cnty, FL Indl Dev Hlth Facs
Proj Uni Cmnty Hosp Ser A................... 5.500 08/15/14 492,543
340 Lee Cnty, FL Indl Dev Auth Hlthcare Facs
Rev......................................... 5.750 11/15/13 300,621
500 Lee Cnty, FL Indl Dev Auth Hlthcare Facs
Rev......................................... 5.750 11/15/14 437,885
325 Lee Cnty, FL Indl Dev Auth Hlthcare Facs
Rev......................................... 5.750 11/15/15 280,998
2,300 Sun N Lake of Sebring, FL Impt Dist Spl
Assmt Ser A (c) (e)......................... 10.000 12/15/11 920,000
-----------
2,432,047
-----------
GEORGIA 1.2%
1,000 Private Colleges & Univs Auth GA Rev Mercer
Univ Proj Ser A Rfdg........................ 5.250 10/01/25 859,260
-----------
ILLINOIS 20.1%
1,000 Alton, IL Hlth Fac Rev & Impt Christian Hlth
Ser C Rfdg (Prerefunded @ 02/15/01) (FGIC
Insd) (b)................................... 7.200 02/15/21 1,041,290
2,655 Aurora, IL Single Family Mtg Rev Cap Apprec
(AMBAC Insd)................................ * 12/01/22 453,952
350 Bedford Park, IL Tax Increment 71st & Cicero
Proj Rfdg................................... 7.000 01/01/06 358,169
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 250 Chicago, IL Brd of Ed Chicago Sch Reform
(AMBAC Insd)................................ 5.750% 12/01/27 $ 241,803
7,500 Chicago, IL Brd of Ed Chicago Sch Reform Ser
A (FGIC Insd)............................... * 12/01/28 1,280,475
2,475 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc Ser B (b).................. 8.950 05/01/18 2,578,331
825 Chicago, IL Single Family Mtg (GNMA
Collateralized) (b)......................... 7.625 09/01/27 900,710
510 Cook Cnty, IL Sch Dist No 107 La Grange
(b)......................................... 7.150 12/01/08 571,975
575 Cook Cnty, IL Sch Dist No 107 La Grange..... 7.200 12/01/09 651,837
625 Cook Cnty, IL Sch Dist No 107 La Grange..... 7.000 12/01/10 702,137
500 Hodgkins, IL Tax Increment Ser A Rfdg....... 7.625 12/01/13 525,520
805 Illinois Hlth Fac Auth Rev Glenoaks Med Cent
Ser D....................................... 9.500 11/15/15 843,672
745 Illinois Hlth Fac Auth Rev Glenoaks Med Cent
Ser D (Prerefunded @ 11/15/00).............. 9.500 11/15/15 779,613
500 Illinois Hlth Fac Auth Rev Lutheran Social
Svcs Proj Ser A (Prerefunded @ 08/01/00)
(LOC: Bank of Japan)........................ 7.650 08/01/20 513,975
1,910 Illinois Hsg Dev Auth Residential Mtg Rev
Ser B....................................... 7.250 08/01/17 1,952,860
250 Lake Cnty, IL Cmnty Unit.................... 7.600 02/01/14 300,310
180 Robbins, IL Res Recovery Rev Restructuring
Proj Ser A (e).............................. 8.375 10/15/16 80,185
70 Robbins, IL Res Recovery Rev Restructuring
Proj Ser B (e).............................. 8.375 10/15/16 31,377
28 Robbins, IL Res Recovery Rev Restructuring
Proj Ser C.................................. 7.250 10/15/09 26,923
121 Robbins, IL Res Recovery Rev Restructuring
Proj Ser C.................................. 7.250 10/15/24 113,357
28 Robbins, IL Res Recovery Rev Restructuring
Proj. Ser D................................. * 10/15/09 13,242
-----------
13,961,713
-----------
KENTUCKY 1.8%
1,500 Louisville & Jefferson Cnty, KY Metro Swr
Dist Swr & Drainage Sys Rev (FGIC Insd)..... 4.750 05/15/28 1,234,905
-----------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MASSACHUSETTS 2.8%
$ 360 Massachusetts St Hlth & Edl Fac Auth Rev
Cent New England Hlth Sys Ser A............. 6.125% 08/01/13 $ 321,872
395 Massachusetts St Hsg Fin Agy Multi-Family
Residential Dev Ser A (FNMA
Collateralized)............................. 8.150 02/01/29 404,192
1,220 Massachusetts St Port Auth Rev Ser B (FSA
Insd)....................................... 5.500 07/01/15 1,192,306
-----------
1,918,370
-----------
MICHIGAN 1.2%
780 Michigan St Hosp Fin Auth Rev Battle Creek
Hosp Ser H (Prerefunded @ 11/15/00)......... 9.500 11/15/15 815,100
-----------
MONTANA 4.4%
2,900 Forsyth, MT Pollutn Ctl Rev Puget Sound Pwr
& Lt Ser B Rfdg (AMBAC Insd)................ 7.250 08/01/21 3,024,671
-----------
NEVADA 6.7%
1,500 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj
Ser A (FGIC Insd)........................... 6.700 06/01/22 1,558,590
3,015 Nevada Hsg Div Amt Single-Family Mtg Mezz
Ser D2 (a).................................. 6.300 04/01/21 3,070,536
-----------
4,629,126
-----------
NEW HAMPSHIRE 4.4%
2,500 New Hampshire Higher Edl & Hlth Fac Auth Rev
Hosp Catholic Med Cent Rfdg................. 8.250 07/01/13 2,551,025
500 New Hampshire St Indl Dev Auth Rev Pollutn
Ctl Pub Svcs Co of NH Proj Ser C............ 7.650 05/01/21 512,630
-----------
3,063,655
-----------
NEW JERSEY 0.8%
225 New Jersey Hlthcare Fac Fin Auth Rev........ 7.500 07/01/06 233,082
315 New Jersey Hlthcare Fac Fin Auth Rev
(Prerefunded @ 07/01/02).................... 7.500 07/01/06 330,860
-----------
563,942
-----------
NEW YORK 3.1%
1,240 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev (AMBAC Insd)........................ 6.750 06/15/06 1,279,804
1,000 New York City Tran Auth Metro Transn Auth
Triborough Ser A (AMBAC Insd)............... 5.250 01/01/29 898,480
-----------
2,178,284
-----------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
OHIO 0.2%
$ 500 Ohio St Solid Waste Rev Rep Engineered
Steels Proj................................. 8.250% 10/01/14 $ 158,945
-----------
PENNSYLVANIA 1.9%
1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl
Rev Collateral Toledo Edison Co Proj Rfdg... 7.625 05/01/20 1,062,390
315 Crawford Cnty, PA Hosp Auth Sr Living Facs
Rev......................................... 5.875 08/15/10 294,765
-----------
1,357,155
-----------
RHODE ISLAND 2.7%
905 Providence, RI Pub Bldg Auth Ser B Rfdg (FSA
Insd) (a)................................... 5.500 12/15/04 907,181
960 Providence, RI Pub Bldg Auth Ser B Rfdg (FSA
Insd) (a)................................... 5.500 12/15/05 963,792
-----------
1,870,973
-----------
TENNESSEE 0.7%
500 Elizabethton, TN Hlth & Edl Fac Brd Rev..... 7.750 07/01/29 490,910
-----------
TEXAS 9.5%
1,000 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc (b)...................... 7.000 12/01/11 1,079,990
1,670 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev.................................... 6.375 05/01/35 1,592,729
412 Pecos Cnty, TX Ctfs Partn................... 6.000 01/12/08 412,039
2,480 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (Cap Guar Insd)............ 5.500 09/01/13 2,480,372
1,000 West Side Calhoun Cnty, TX Nav Dist Sld Wst
Disp Union Carbide Chem & Plastics.......... 8.200 03/15/21 1,037,780
-----------
6,602,910
-----------
VIRGINIA 5.4%
3,740 Richmond, VA (FSA Insd) (a)................. 5.500 01/15/11 3,747,218
-----------
WISCONSIN 1.3%
870 Wisconsin St Hlth & Edl Fac Auth Rev
Chippewa Vly Hosp Ser F Rfdg................ 9.500 11/15/12 911,795
-----------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
GUAM 1.3%
$1,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)........ 5.250% 10/01/34 $ 899,140
-----------
TOTAL LONG-TERM INVESTMENTS 102.4%
(Cost $74,509,322)..................................................... 71,156,453
SHORT-TERM INVESTMENTS 3.5%
(Cost $2,400,000)...................................................... 2,400,000
-----------
TOTAL INVESTMENTS 105.9%
(Cost $76,909,322)..................................................... 73,556,453
LIABILITIES IN EXCESS OF OTHER ASSETS (5.9%)............................ (4,082,739)
-----------
NET ASSETS 100.0%....................................................... $69,473,714
===========
</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.
(c) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(d) Security is a "step-up" bond where the coupon increases or steps-up at a
predetermined date.
(e) Non-income producing security.
AMBAC--AMBAC Indemnity Corporation
Cap Guar--Capital Guarantee
FGIC--Financial Guaranty Insurance Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $76,909,322)........................ $73,556,453
Cash........................................................ 57,015
Receivables:
Interest.................................................. 1,452,534
Investments Sold.......................................... 413,012
Other....................................................... 8,341
-----------
Total Assets............................................ 75,487,355
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 5,678,492
Investment Advisory Fee................................... 36,087
Income Distributions--Common and Preferred Shares......... 34,062
Affiliates................................................ 8,191
Accrued Expenses............................................ 149,760
Trustees' Deferred Compensation and Retirement Plans........ 107,049
-----------
Total Liabilities....................................... 6,013,641
-----------
NET ASSETS.................................................. $69,473,714
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.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
Accumulated Distributions in Excess of Net Investment
Income.................................................... (1,140,280)
Net Unrealized Depreciation................................. (3,352,869)
Accumulated Net Realized Loss............................... (3,781,546)
-----------
Net Assets Applicable to Common Shares.................. 44,473,714
-----------
NET ASSETS.................................................. $69,473,714
===========
NET ASSET VALUE PER COMMON SHARE ($44,473,714 divided by
4,839,000 shares outstanding)............................. $ 9.19
===========
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
Statement of Operations
For the Six Months Ended April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 2,232,557
-----------
EXPENSES:
Investment Advisory Fee..................................... 208,308
Preferred Share Maintenance................................. 65,267
Audit....................................................... 23,436
Legal....................................................... 5,460
Trustees' Fees and Related Expenses......................... 2,981
Custody..................................................... 539
Other....................................................... 59,167
-----------
Total Expenses.......................................... 365,158
-----------
NET INVESTMENT INCOME....................................... $ 1,867,399
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain (Including reorganization and
restructuring costs of $24)............................... $ 51,018
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (2,488,385)
End of the Period......................................... (3,352,869)
-----------
Net Unrealized Depreciation During the Period............... (864,484)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $ (813,466)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,053,933
===========
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
Statement of Changes in Net Assets
For the Six Months Ended April 30, 2000 and the Year Ended October 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 1,867,399 $ 4,003,951
Net Realized Gain/Loss............................. 51,018 (3,482)
Net Unrealized Depreciation During the Period...... (864,484) (6,114,362)
----------- -----------
Change in Net Assets from Operations............... 1,053,933 (2,113,893)
----------- -----------
Distributions from and in Excess of Net Investment
Income:
Common Shares.................................... (1,509,768) (3,215,058)
Preferred Shares................................. (493,139) (839,580)
----------- -----------
Total Distributions................................ (2,002,907) (4,054,638)
----------- -----------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES............................ (948,974) (6,168,531)
----------- -----------
NET ASSETS:
Beginning of the Period............................ 70,422,688 76,591,219
----------- -----------
End of the Period (Including accumulated
distributions in excess of net investment income
of $1,140,280 and $1,004,772, respectively)...... $69,473,714 $70,422,688
=========== ===========
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
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, 2000 1999 1998 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD................... $ 9.387 $ 10.662 $ 10.658 $ 10.474 $10.754
------- -------- -------- -------- -------
Net Investment Income........ .386 .827 .867 .959 .882
Net Realized and Unrealized
Gain/Loss.................. (.168) (1.263) .006 .120 (.195)
------- -------- -------- -------- -------
Total from Investment
Operations................... .218 (.436) .873 1.079 .687
------- -------- -------- -------- -------
Less:
Distributions from and in
Excess of Net Investment
Income:
Paid to Common
Shareholders............. .312 .665 .684 .710 .780
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders... .102 .174 .185 .185 .187
------- -------- -------- -------- -------
Total Distributions............ .414 .839 .869 .895 .967
------- -------- -------- -------- -------
NET ASSET VALUE, END OF THE
PERIOD....................... $ 9.191 $ 9.387 $ 10.662 $ 10.658 $10.474
======= ======== ======== ======== =======
Market Price Per Share at End
of the Period................ $8.1875 $ 8.8125 $11.0625 $10.9375 $11.000
Total Investment Return at
Market Price (a)............. -3.55%* -15.09% 7.63% 6.13% 11.02%
Total Return at Net Asset Value
(b).......................... 1.23%* -5.98% 6.61% 8.91% 4.83%
Net Assets at End of the Period
(In millions)................ $ 69.5 $ 70.4 $ 76.6 $ 76.6 $ 75.7
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares**.............. 1.64% 1.69% 1.47% 1.47% 1.51%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common Shares
(c).......................... 6.16% 6.41% 6.40% 7.38% 6.55%
Portfolio Turnover............. 10%* 46% 33% 25% 39%
* Non-Annualized
** Ratio of Expenses to Average
Net Assets Including
Preferred Shares............ 1.05% 1.12% .99% .99% 1.01%
</TABLE>
(a) 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.
(b) 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.
(c) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
20
<PAGE> 22
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
----------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.500 $12.094 $11.151 $11.502 $10.832
------- ------- ------- ------- -------
.877 .958 1.090 1.090 1.153
.406 (1.480) .917 (.348) .647
------- ------- ------- ------- -------
1.283 (.522) 2.007 .742 1.800
------- ------- ------- ------- -------
.825 .930 .930 .925 .886
.204 .142 .134 .168 .244
------- ------- ------- ------- -------
1.029 1.072 1.064 1.093 1.130
------- ------- ------- ------- -------
$10.754 $10.500 $12.094 $11.151 $11.502
======= ======= ======= ======= =======
$10.625 $11.125 $13.875 $11.750 $12.250
2.88% -13.59% 26.46% 3.10% 25.65%
10.59% -5.77% 17.40% 5.04% 14.87%
$ 77.0 $ 75.8 $ 83.5 $ 79.0 $ 80.7
1.52% 1.47% 1.35% 1.52% 1.53%
6.31% 7.20% 8.14% 8.01% 8.12%
50% 30% 7% 21% 52%
1.02% 1.01% .94% 1.05% 1.05%
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services are valued at fair value
using procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
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 is amortized and original issue discount is accreted over the expected
life of each applicable security.
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (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, 1999, the Trust had an accumulated capital loss
carryforward of $3,740,562 which will expire between October 31, 2002 and
October 31, 2007. 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.
At April 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $76,909,322; the aggregate gross unrealized
appreciation is $2,148,965 and the aggregate gross unrealized depreciation is
$5,501,834, resulting in net unrealized depreciation on long- and short-term
investments of $3,352,869.
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
Investment Advisory Corp. (the "Adviser") will provide investment advice and
facilities to the Trust for an annual fee payable monthly of .60% of the daily
average net assets of the Trust.
For the six months ended April 30, 2000, 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.
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
For the six months ended April 30, 2000, the Trust recognized expenses of
approximately $8,100 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable 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 $7,338,368 and $8,759,144, respectively.
4. 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, 2000 was 4.150%. During the
six months ended April 30, 2000, the rates ranged from 3.550% to 4.150%.
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.
24
<PAGE> 26
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN INVESTMENT GRADE
MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
(1) Independent accountants for the Trust perform an annual audit of the Trust's
financial statements. The Board of Trustees has engaged Deloitte & Touche
LLP to be the Trust's independent accountants.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"),
ceased being the Trust's independent accountants effective April 14, 2000.
The cessation of the client- auditor relationship between the Trust and KPMG
was based solely on a possible future business relationship by KPMG with an
affiliate of the Trust's investment adviser.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
25
