<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 14
Statement of Operations.......................... 15
Statement of Changes in Net Assets............... 16
Financial Highlights............................. 17
Notes to Financial Statements.................... 18
Dividend Reinvestment Plan....................... 22
</TABLE>
VGM SAR 6/97
<PAGE> 2
LETTER TO SHAREHOLDERS
June 5, 1997
Dear Shareholder,
As mentioned in your previous
report, VK/AC Holding, Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset
management. More recently, on February [PHOTO]
5, 1997, Morgan Stanley Group Inc. and
Dean Witter, Discover & Co. announced
their agreement to merge, and you DENNIS J. MCDONNELL AND DON G. POWELL
received a proxy in April. The merger
was completed on May 31, 1997, creating
the combined company of Morgan Stanley, Dean Witter, Discover & Co. This
preeminent global financial services firm boasts a market capitalization of $21
billion and leading market positions in securities, asset management, and credit
services. As the financial industry continues to witness unprecedented
consolidations and new partnerships, we believe that those firms that are
leaders in all facets of their business will be able to offer investors the
greatest opportunities and services as we move into the next century. We are
confident that this merger will provide investors with those benefits.
ECONOMIC REVIEW
Bond prices were volatile during the six months ended April 30, 1997. Prices
initially rose as the economy slowed, erasing fears of an interest rate hike by
the Federal Reserve Board. The November election of a Democratic president and
Republican Congress was positive for bonds because the split government was
viewed as a restraint on spending increases that could potentially swell the
budget deficit. In addition, support diminished for radical tax reform that
could threaten the tax-free status of municipal bonds.
By the beginning of 1997, the situation changed. Bond prices began to fall
as the economy picked up speed, culminating in a 5.60 percent annualized growth
rate in the first quarter. This strength, coupled with warnings by Fed Chairman
Alan Greenspan that tighter monetary policy might be appropriate, reignited
fears of a rate hike. On March 25, the Fed raised short-term rates by a modest
0.25 percent, which sent the 30-year Treasury bond yield above 7.00 percent for
the first time in six months. By the end of April, the 30-year Treasury bond
yield slipped back below 7.00 percent as the market turned its attention to
positive news about inflation, and bonds recovered some of their earlier losses.
Throughout most of the six months ended April 30, municipal bonds generally
outperformed Treasuries. Between October 31 and April 30, yields on long-term
municipal revenue bonds rose 21 basis points, while yields on 30-year Treasury
bonds jumped 31 basis points. Because bond yields move in the opposite direction
of prices, the smaller
Continued on page two
1
<PAGE> 3
increase in municipal yields meant that municipal bond prices did not fall as
sharply as Treasury bond prices did. A relatively stable supply of new issues,
combined with an increase in retail demand, contributed to the improved
performance of municipal bonds.
FUND STRATEGY
In managing the Trust, we maintained a concentration in high-quality bonds.
As of April 30, 45 percent of the Trust's long-term investments were rated AAA,
the highest credit rating assigned to bonds by the Standard & Poor's Ratings
Group. Most of the AAA-rated bonds are insured securities, which are extremely
liquid and have tended to provide safety of principal. These bonds, however,
have tended to perform better when interest rates are falling, which was not the
case for most of the period. Approximately 24 percent of long-term investments
were rated AA or A, and 17 percent were rated BBB, the lowest credit rating
Standard & Poor's assigns to bonds in the investment-grade category. In
addition, 14 percent of long-term investments were rated below investment-grade
or not rated.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality as a Percentage of Long-Term
Investments as of April 30, 1997
<TABLE>
<S> <C>
AAA............................. 45.0%
AA.............................. 14.9%
A............................... 9.4%
BBB............................. 16.9%
BB.............................. 11.4%
Non-Rated....................... 2.4%
</TABLE>
Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's, the Moody's rating is used.
Portfolio turnover during the period was minimal because market conditions
offered few opportunities to add value over existing holdings. The average yield
of bonds in the portfolio was higher than current market yields. Activity was
also limited by the tight spreads between yields of AAA-rated bonds and
lower-rated bonds. These spreads remained narrow due to the increasing number of
insured bonds in the municipal market. As a result, there was often not enough
yield reward to justify the additional credit risk of purchasing lower-rated
securities.
We sold bonds that were priced at deep discounts with low yields, as well as
par bonds that we believed had limited upside potential. (A bond that is priced
at its face value is selling at par. If it is priced below par, it is selling at
a discount. Conversely, a bond priced above par is selling at a premium.)
Purchases favored AAA-rated securities because of the tight credit spreads, and
focused on industrial revenue and long-term housing bonds, which offer
attractive yields and the potential to perform well in rising interest rate
environments. When buying new securities for the portfolio, we attempt to
identify those bonds that we believe will outperform within a particular sector
and that can
Continued on page three
2
<PAGE> 4
be purchased at an attractive price. We believe this "bottom-up" approach,
supported by our research, provides significant added value to the portfolio.
We maintained the Trust's relatively short to neutral duration during this
period. Duration, which is expressed in years, is a measure of a portfolio's
sensitivity to interest rate movements. Portfolios with long durations have
tended to perform better when rates are falling; portfolios with short durations
have tended to perform better when rates are rising. During the early part of
the period, when rates were declining, the Trust's slightly short duration
hindered performance. Later, as rates rose, the Trust's duration had a positive
impact on performance. At the end of the period, the Trust's duration stood at
7.64 years compared to 8.10 years for the Lehman Brothers Municipal Bond Index
benchmark.
[DIVIDEND HISTORY CHART]
Six-month Dividend History
For the Period Ended April 30, 1997
<TABLE>
<CAPTION>
Distribution per Share
<S> <C>
Nov 1996.......................... $.0950
Dec 1996.......................... $.0875
Jan 1997.......................... $.0875
Feb 1997.......................... $.0875
Mar 1997.......................... $.0875
Apr 1997.......................... $.0875
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
PERFORMANCE SUMMARY
For the six-month period ended April 30, 1997, the Van Kampen American
Capital Trust for Investment Grade Municipals generated a total return at market
price of -0.19 percent(1). The Trust offered a tax-exempt distribution rate of
6.89 percent(3), based on the closing common stock price of $15.25 per share on
April 30, 1997. Because income from the Trust is exempt from federal income tax,
this distribution rate represents a yield equivalent to a taxable investment
earning 10.77 percent(4) (for investors in the 36 percent federal income tax
bracket). At the end of the reporting period, the closing share price of the
Trust traded at a 7.00 percent discount to its net asset value of $16.39.
As a result of the Trust's earnings decline, the Board of Trustees approved
a decrease in its monthly dividend from $0.0950 to $0.0875 per common share,
payable December 31, 1996.
Continued on page four
3
<PAGE> 5
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR AS OF APRIL 30, 1997*
Industrial Revenue................ 16.4%
General Purpose................... 16.0%
Health Care....................... 11.6%
Single-Family Housing............. 10.8%
Airport............................ 6.6%
*As a Percentage of Long-Term Investments
MUNICIPAL MARKET OUTLOOK
We continue to see signs of a strong economy, although we do not expect the
unusually brisk growth rate of the first quarter to be sustained throughout the
year. As a result, we believe the Fed will monitor the economy closely and take
aggressive action to control growth if inflation picks up or the high growth
rate is sustained. However, if growth slows, we believe the Fed will leave rates
unchanged. Given this outlook, we expect that yields on the 30-year Treasury
bond will range between 6.75 and 7.40 percent for the remainder of the year,
with higher levels occurring early and lower yields dominating the second half
of 1997. Although short-term interest rates have risen, this has not had a
significant impact on the leveraged structure of the Trust.
We believe the Trust is positioned to perform well in the coming months, and
we do not anticipate major structural changes in the portfolio. In light of our
expectations for interest rates, we will continue to maintain a slightly
defensive posture by keeping a relatively short duration for the portfolio and
adjusting the duration when prudent. We will also continue to seek a balance
between the Trust's total return and its dividend income, as well as to add
value through security selection. Thank you for your continued confidence in Van
Kampen American Capital and your Trust's team of managers.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1997
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
(NYSE TICKER SYMBOL--VGM)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)........... (0.19%)
Six-month total return based on NAV(2).................... 2.07%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 6.89%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 10.77%
SHARE VALUATIONS
Net asset value........................................... $ 16.39
Closing common stock price................................ $15.250
Six-month high common stock price (12/02/96).............. $16.000
Six-month low common stock price (12/17/96)............... $14.750
Preferred share (Series A) rate(5)........................ 3.750%
Preferred share (Series B) rate(5)........................ 3.559%
Preferred share (Series C) rate(5)........................ 3.668%
Preferred share (Series D) rate(5)........................ 3.705%
</TABLE>
(1)Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common stock price at the end of the period
indicated.
(2)Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3)Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4)The taxable-equivalent distribution rate is calculated assuming a 36% federal
income tax bracket.
(5)See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
Market forecasts provided in this report may not necessarily come to pass.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
ALABAMA 3.8%
$ 6,500 Birmingham, AL North Med Clinic Brd Rev Ser A
Carraway Methodist Hosp (Prerefunded @
01/01/01)....................................... 7.500% 07/01/15 $ 7,182,240
8,600 Birmingham, AL North Med Clinic Brd Rev Ser B
Carraway Methodist Hosp (Prerefunded @
01/01/01)....................................... 8.000 07/01/15 9,636,300
4,000 Courtland, AL Indl Dev Brd Solid Waste Disp Rev
Champion Intl Corp Proj......................... 7.750 01/01/20 4,227,960
4,250 Courtland, AL Indl Dev Brd Solid Waste Disp Rev
Champion Intl Corp Proj Ser A................... 6.500 09/01/25 4,276,520
1,750 Huntsville-Madison Cnty, AL Arpt Auth Arpt
Terminal Rev (MBIA Insd)........................ 5.400 07/01/19 1,643,425
------------
26,966,445
------------
ARKANSAS 1.9%
12,500 Blytheville, AR Solid Waste Recycling & Swr
Treatment Rev Nucor Corp Proj................... 6.900 12/01/21 13,185,250
------------
CALIFORNIA 5.5%
1,435 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt Proj
Ser A (FSA Insd)................................ 5.000 09/01/27 1,282,187
1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt Proj
Ser C (FSA Insd)................................ 6.000 09/01/16 1,363,180
635 California Edl Fac Auth Rev Univ of La Verne.... 5.400 04/01/99 632,447
670 California Edl Fac Auth Rev Univ of La Verne.... 5.600 04/01/00 665,772
2,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co (Embedded Cap) (AMBAC
Insd)........................................... 6.000 07/01/27 2,019,260
5,000 Desert Hosp Dist CA Hosp Rev Com Partn (FSA
Insd)........................................... 6.392 07/28/20 5,209,550
25,750 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/23 5,034,897
4,000 Los Angeles, CA Convention & Exhibition Cent
Auth Lease Rev Ser A Rfdg (MBIA Insd)........... 5.150 08/15/08 3,985,120
13,765 Orange Cnty, CA Recovery Ctfs Ser A (MBIA
Insd) (c)....................................... 6.000 07/01/06 14,641,418
2,000 Orange Cnty, CA Recovery Ctfs Ser A Rfdg (MBIA
Insd)........................................... 6.000 06/01/09 2,133,800
2,000 Southern CA Pub Pwr Auth (FSA Insd)............. 6.000 07/01/12 2,045,380
------------
39,013,011
------------
COLORADO 4.6%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser B................................ 6.950 08/31/20 1,068,280
1,000 Colorado Hsg Fin Auth Single Family Pgm Senior
Ser B1.......................................... 7.650 11/01/26 1,114,960
2,500 Colorado Hsg Fin Auth Single Family Pgm Senior
Ser B2.......................................... 7.450 11/01/27 2,811,250
7,000 Denver, CO City & Cnty Arpt Rev Ser A........... 8.500 11/15/23 7,916,930
5,000 Denver, CO City & Cnty Arpt Rev Ser A........... 8.750 11/15/23 5,845,400
7,915 Denver, CO City & Cnty Arpt Rev Ser A........... 8.000 11/15/25 8,761,984
1,685 Meridian Metro Dist CO Rfdg..................... 7.000 12/01/00 1,774,642
3,250 Meridian Metro Dist CO Rfdg..................... 7.500 12/01/11 3,554,493
------------
32,847,939
------------
CONNECTICUT 0.3%
2,000 Connecticut St Dev Auth Wtr Fac Rev Brdgeport
Hydraulic....................................... 6.150 04/01/35 2,003,220
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DISTRICT OF COLUMBIA 0.2%
$ 1,600 District of Columbia Ser E (FSA Insd)........... 6.000% 06/01/13 $ 1,616,208
------------
FLORIDA 1.8%
16,490 Dade Cnty, FL Spl Oblig Cap Apprec Ser B Rfdg
(AMBAC Insd).................................... * 10/01/26 2,730,414
1,400 Florida St Dept Corrections Ctfs Partn
Okeechobee Correctional (AMBAC Insd)............ 6.250 03/01/15 1,466,360
1,000 Hillsborough Cnty, FL Indl Dev Auth Pollutn Ctl
Rev Tampa Elec Co Proj Ser 92 Rfdg.............. 8.000 05/01/22 1,156,610
2,000 Martin Cnty, FL Indl Dev Auth Indl Dev Rev
Indiantown Cogeneration Proj A Rfdg............. 7.875 12/15/25 2,259,680
2,000 Miami Beach, FL Wtr & Swr Rev (FSA Insd)........ 5.375 09/01/15 1,949,780
3,465 Reedy Creek Impt Dist FL Ser C (AMBAC Insd)..... 4.750 06/01/15 3,055,264
------------
12,618,108
------------
GEORGIA 1.4%
3,150 Burke Cnty, GA Dev Auth Pollutn Ctl Rev GA Pwr
Co Plant Vogtle Proj (MBIA Insd)................ 6.350 05/01/19 3,237,381
5,900 Municipal Elec Auth GA Spl Oblig 5th Crossover
Ser Proj One (MBIA Insd)........................ 6.500 01/01/17 6,538,911
------------
9,776,292
------------
HAWAII 0.9%
6,000 Hawaii St Arpt Sys Rev Ser 2 (MBIA Insd)........ 6.750 07/01/21 6,388,500
------------
ILLINOIS 10.0%
2,000 Chicago, IL Brd Ed Chicago Sch Reform (AMBAC
Insd) (b)....................................... 5.750 12/01/20 1,963,180
4,865 Chicago, IL Cap Apprec (AMBAC Insd)............. * 07/01/16 1,479,009
1,600 Chicago, IL Cent Pub Lib Ser A (AMBAC Insd)..... 6.650 01/01/05 1,729,632
1,800 Chicago, IL Cent Pub Lib Ser A (AMBAC Insd)..... 6.700 01/01/06 1,960,542
1,600 Chicago, IL Cent Pub Lib Ser B (AMBAC Insd)..... 6.650 01/01/05 1,729,632
1,400 Chicago, IL Cent Pub Lib Ser C (AMBAC Insd)..... 6.650 01/01/05 1,513,428
1,500 Chicago, IL Cent Pub Lib Ser C (AMBAC Insd)..... 6.700 01/01/06 1,633,785
7,000 Chicago, IL O'Hare Intl Arpt Rev Genl Arpt 2nd
Lien Ser A (MBIA Insd).......................... 6.375 01/01/12 7,462,070
13,645 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc....................................... 8.500 05/01/18 14,876,052
3,600 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Proj Ser 84A.......................... 8.850 05/01/18 4,005,252
4,505 East Peoria, IL Ser C Rfdg...................... 7.000 05/01/17 4,942,796
3,285 Illinois Dev Fin Auth Rev Presbyterian Home Lake
Proj B.......................................... 6.300 09/01/22 3,385,324
2,000 Illinois Edl Fac Auth Rev Lewis Univ............ 6.100 10/01/16 1,987,440
2,000 Illinois Hlth Fac Auth Rev Edward Hosp Assn
Proj............................................ 7.000 02/15/12 2,122,000
1,900 Illinois Hlth Fac Auth Rev Evangelical Hosps Ser
C (FSA Insd).................................... 6.750 04/15/17 2,130,318
1,000 Illinois Hlth Fac Auth Rev Highland Park Hosp
Proj
Ser A (MBIA Insd) (b)........................... 5.750 10/01/17 984,020
2,000 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys
Rfdg............................................ 6.000 11/15/10 2,008,540
2,400 Illinois Hlth Fac Auth Rev Sarah Bush Lincoln
Hlth Cent (Prerefunded @ 05/15/02).............. 7.250 05/15/22 2,690,808
2,275 Illinois Hlth Fac Auth Rev South Suburban
Hosp............................................ 7,000 02/15/18 2,595,456
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 1,475 Illinois Hlth Fac Auth Rev South Suburban Hosp
(Prerefunded @ 02/15/02).......................... 7.000% 02/15/18 $ 1,625,450
3,185 Illinois Hsg Dev Auth Multi-Family Hsg Ser C...... 7.400 07/01/23 3,318,547
8,845 Metropolitan Pier & Expo Auth IL Dedicated St Tax
Rev McCormick Pl Expansion Ser A (FGIC Insd)...... * 06/15/16 2,860,738
1,400 Southern IL Univ Rev Hsg & Aux Fac Ser A Rfdg..... 6.750 04/01/12 1,516,396
------------
70,520,415
------------
INDIANA 0.9%
4,500 Indianapolis, IN Arpt Auth Rev Spl Fac Federal
Express Corp Proj................................. 7.100 01/15/17 4,850,235
1,600 Penn-Harris-Madison Cntys Multi-Sch Bldg Corp IN
(FSA Insd)........................................ 5.900 07/15/18 1,604,528
------------
6,454,763
------------
IOWA 0.6%
1,865 Iowa Fin Auth Multi-Family Rev Hsg Hamlet Apts
Proj A Rfdg (GNMA Collateralized)................. 6.150 05/01/32 1,880,741
2,375 Iowa Student Ln Liquidity Corp Rev Ser C.......... 6.950 03/01/06 2,536,452
------------
4,417,193
------------
KENTUCKY 3.9%
10,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac Delta
Airls Proj Ser A.................................. 7.500 02/01/20 10,748,200
11,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac Delta
Airls Proj Ser A.................................. 7.125 02/01/21 11,654,830
1,500 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn KY
Intl Arpt Ser A Rfdg (MBIA Insd) (b).............. 5.800 03/01/03 1,513,365
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn KY
Intl Arpt Ser A Rfdg (MBIA Insd) (b).............. 6.200 03/01/08 1,026,610
1,500 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn KY
Intl Arpt Ser A Rfdg (MBIA Insd) (b).............. 6.250 03/01/09 1,535,550
1,315 Kentucky Hsg Corp Hsg Rev Ser B (b)............... 6.250 07/01/28 1,324,889
------------
27,803,444
------------
MAINE 2.1%
2,650 Maine Muni Bd Bank Ser A Rfdg (MBIA Insd)......... 5.800 11/01/20 2,628,164
5,250 Maine St Hsg Auth Mtg Purch Ser D6................ 7.250 11/15/19 5,471,078
6,755 Maine St Hsg Auth Mtg Purch Ser D6................ 7.250 11/15/22 7,050,396
------------
15,149,638
------------
MARYLAND 0.7%
4,925 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty Dev
Rev Single Family Pgm 7th Ser..................... 7.300 04/01/25 5,201,785
------------
MASSACHUSETTS 2.8%
2,975 Massachusetts Muni Wholesale Elec Co Pwr Supply
Sys Rev Ser A (AMBAC Insd)........................ 5.000 07/01/14 2,747,085
12,685 Massachusetts St Cons Ln Ser D (Prerefunded @
07/01/01)......................................... 6.875 07/01/10 13,908,849
2,410 Massachusetts St Hsg Fin Agy Residential Dev Ser C
(FNMA Collateralized)............................. 6.875 11/15/11 2,572,072
1,000 Massachusetts St Wtr Res Auth Ser B (MBIA Insd)... 4.750 12/01/21 856,890
------------
20,084,896
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MICHIGAN 5.0%
$ 3,015 Detroit, MI Downtown Dev Auth Tax Increment Rev
Ser C1............................................ * 07/01/17 $ 867,958
3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev
Ser C1............................................ * 07/01/18 817,034
3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev
Ser C1............................................ * 07/01/19 767,746
3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev
Ser C1............................................ * 07/01/22 637,023
3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev
Ser C1............................................ * 07/01/23 598,593
3,050 Detroit, MI Downtown Dev Auth Tax Increment Rev
Ser C1............................................ * 07/01/24 562,481
8,015 Detroit, MI Econ Dev Corp Res Recovery Rev Ser A
(FSA Insd)........................................ 6.875% 05/01/09 8,581,500
2,000 Detroit, MI Sewage Disp Rev Ser B Rfdg (MBIA
Insd)............................................. 5.250 07/01/21 1,861,480
3,500 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA
Insd)............................................. * 06/01/15 1,229,235
2,765 Grand Rapids, MI Downtown Dev Cap Apprec (MBIA
Insd)............................................. * 06/01/16 906,367
2,500 Kalamazoo, MI Hosp Fin Auth Hosp Fac Rev Bronson
Methodist Rfdg & Impt (MBIA Insd)................. 5.875 05/15/26 2,499,925
12,995 Michigan St Hosp Fin Auth Rev Sisters of Mercy
Hlth Corp Ser J (Prerefunded @ 02/15/01).......... 7.000 02/15/21 14,226,796
1,400 Portage Lake, MI Wtr & Swr Auth Ser 3 (Prerefunded
@ 10/01/02)....................................... 7.750 10/01/20 1,614,060
------------
35,170,198
------------
MINNESOTA 0.4%
2,800 Minnesota Agricultural & Econ Dev Brd Rev Hlthcare
Sys Fairview Hosp Ser A (MBIA Insd)............... 5.750 11/15/26 2,754,948
------------
MISSISSIPPI 0.4%
3,000 Medical Cent Edl Bldg Corp MS Rev Univ MS Med Cent
Proj (MBIA Insd).................................. 5.900 12/01/23 3,005,250
------------
MISSOURI 1.3%
7,800 Saint Louis, MO Indl Dev Auth Sewage & Solid Waste
Disp Fac Rev Anheuser-Busch Proj.................. 5.750 12/01/27 7,564,986
1,500 University MO Hlth Fac Rev Hlth Svs Ser A (AMBAC
Insd)............................................. 5.600 11/01/26 1,467,165
------------
9,032,151
------------
NEVADA 0.5%
3,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser C
Rfdg (AMBAC Insd)................................. 7.200 10/01/22 3,308,250
------------
NEW HAMPSHIRE 0.5%
1,000 New Hampshire St Business Fin Auth Wtr Fac Rev
Pennichuck Wtrwks Inc (AMBAC Insd) (b)............ 6.300 05/01/22 1,020,690
2,500 New Hampshire St Indl Dev Auth Rev Pollutn Ctl Pub
Svcs Co of NH Proj Ser C.......................... 7.650 05/01/21 2,561,900
------------
3,582,590
------------
NEW JERSEY 7.0%
11,000 Mercer Cnty, NJ Impt Auth Rev Solid Waste Ser A
Rfdg (Prerefunded @ 05/15/97) (FGIC Insd) (c)..... 6.700 04/01/13 11,013,420
25,000 New Jersey Econ Dev Auth St Contract Econ Recovery
(Embedded Cap) (MBIA Insd)........................ 5.900 03/15/21 25,645,750
2,000 New Jersey Hlthcare Fac Fin Auth Rev Genl Hosp
Cent at Passaic (FSA Insd)........................ 6.000 07/01/06 2,131,120
10,000 New Jersey St Hsg & Mtg Fin Agy Rev Hsg Ser A
Rfdg.............................................. 6.950 05/01/15 10,661,400
------------
49,451,690
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK 16.5%
$ 3,000 Metropolitan Tran Auth NY Commuter Fac Rev Ser A
(MBIA Insd)..................................... 5.625% 07/01/27 $ 2,935,800
12,155 Metropolitan Tran Auth NY Svcs Contract Commuter
Fac Ser 5 Rfdg.................................. 6.500 07/01/16 12,663,201
1,740 New York City Ser A (Prerefunded @ 08/15/01).... 8.000 08/15/20 1,980,920
2,500 New York City Ser A Rfdg........................ 7.000 08/01/05 2,721,600
3,000 New York City Ser A Rfdg........................ 7.000 08/01/06 3,274,830
5,000 New York City Ser A Rfdg........................ 6.500 08/01/14 5,110,800
2,900 New York City Ser C Rfdg........................ 6.500 08/01/04 3,056,368
2,180 New York City Ser C Subser C1................... 7.500 08/01/19 2,421,457
6,320 New York City Ser C Subser C1 (Prerefunded @
08/01/02) (c)................................... 7.500 08/01/19 7,181,922
1,850 New York City Ser G............................. 5.875 10/15/14 1,803,658
5,000 New York City Ser I............................. 6.000 04/15/12 4,975,450
10,000 New York City Tran Auth Tran Fac Livingston
Plaza Proj Ridg (FSA Insd)...................... 5.400 01/01/18 9,702,500
2,500 New York St Dorm Auth Lease Rev Muni Hlth Fac
Impt Pgm Ser A (FSA Insd)....................... 5.500 05/15/25 2,394,975
13,500 New York St Dorm Auth Rev City Univ Sys Ser C... 7.500 07/01/10 15,584,940
2,000 New York St Dorm Auth Rev City Univ Sys Ser F... 5.000 07/01/20 1,716,660
1,000 New York St Dorm Auth Rev Court Fac Lease Ser
A............................................... 5.625 05/15/13 965,670
2,000 New York St Dorm Auth Rev Court Fac Lease Ser
A............................................... 5.375 05/15/16 1,830,580
2,170 New York St Dorm Auth Rev Mental Hlth Svcs Fac
Ser A........................................... 5.750 08/15/10 2,144,003
5,725 New York St Environmental Fac Corp Spl Oblig
Riverbank State Park (Prerefunded @ 04/01/02)... 7.375 04/01/22 6,458,544
5,000 New York St Hsg Fin Agy Svcs Contract Oblig Rev
Ser A (Prerefunded @ 03/15/02).................. 7.375 09/15/21 5,619,900
2,840 New York St Loc Govt Assistance Corp Ser E
Rfdg............................................ 6.000 04/01/14 2,958,258
3,000 New York St Med Care Fac Fin Agy Rev NY Hosp Mtg
Ser A (AMBAC Insd).............................. 6.750 08/15/14 3,261,090
5,875 New York St Med Care Fac Fin Agy Rev Saint
Peter's Hosp Proj Ser A (AMBAC Insd)............ 5.375 11/01/20 5,503,230
2,500 New York St Mtg Agy Rev Homeowner Mtg Ser 54
Rfdg............................................ 6.200 10/01/26 2,507,700
1,500 New York St Urban Dev Corp Rev Proj Cent for
Indl Innovation Rfdg............................ 5.500 01/01/13 1,444,245
3,000 Port Auth NY & NJ Spl Oblig Spl Proj JFK Intl
Arpt Terminal 6 (MBIA Insd) (b)................. 5.750 12/01/22 2,934,960
4,000 Port Auth NY & NJ Spl Oblig Spl Proj JFK Intl
Arpt Terminal 6 (MBIA Insd) (b)................. 5.750 12/01/25 3,903,880
------------
117,057,141
------------
NORTH CAROLINA 3.7%
5,000 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev
Ser A Rfdg (MBIA Insd).......................... 5.700 01/01/13 4,983,150
15,000 North Carolina Muni Pwr Agy No 1 Catawba Elec
Rev Rfdg (MBIA Insd)............................ 6.000 01/01/12 15,894,750
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NORTH CAROLINA (CONTINUED)
$ 5,150 North Carolina Muni Pwr Agy No 1 Catawba Elec
Rev Rfdg (FSA Insd)............................. 6.200% 01/01/18 $ 5,328,705
------------
26,206,605
------------
OHIO 0.4%
1,980 Finneytown, OH Local Sch Dist (FGIC Insd)....... 5.800 12/01/24 1,989,544
1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd
Partnership Proj Rfdg (AMBAC Insd).............. 6.375 04/01/29 1,039,380
------------
3,028,924
------------
OKLAHOMA 3.8%
17,475 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc............................................. 7.375 12/01/20 18,543,596
7,500 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc............................................. 7.600 12/01/30 8,065,650
------------
26,609,246
------------
OREGON 1.5%
7,670 Oregon St Hsg & Cmnty Svcs Dept Mtg Rev Single
Family Mtg Proj Ser B........................... 6.875 07/01/28 8,128,819
2,500 Oregon St Vets Welfare Ser 76A.................. 6.050 10/01/28 2,519,775
------------
10,648,594
------------
PENNSYLVANIA 4.3%
2,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser B (FSA Insd)........................... 6.625 01/01/22 2,614,575
2,000 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Cent
Univ Pittsburgh Med Cent Sys (MBIA Insd)........ 5.375 12/01/25 1,870,040
4,000 Falls Twp, PA Hosp Auth Hosp Rev Delaware Vly
Med Rfdg (FHA Gtd).............................. 7.000 08/01/22 4,268,760
7,000 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn
Ctl Ser E Rfdg (MBIA Insd)...................... 6.700 12/01/21 7,535,290
1,000 Penn Hills, PA (FGIC Insd) (b).................. 5.900 12/01/17 1,004,240
1,500 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
34B............................................. 7.000 04/01/24 1,565,730
3,000 Pennsylvania Hsg Fin Agy Single Family Ser
56A............................................. 6.150 10/01/27 2,999,820
1,000 Pennsylvania St Higher Edl Fac Auth College &
Univ Rev Bryn Mawr College (MBIA Insd).......... 5.625 12/01/27 975,720
6,000 Philadelphia, PA Gas Wks Rev Ser 14 (FSA
Insd)........................................... 6.250 07/01/08 6,383,700
1,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp
Rev Temple Univ Hosp Ser A...................... 6.500 11/15/08 1,050,110
------------
30,267,985
------------
RHODE ISLAND 0.2%
1,500 Rhode Island Depositors Econ Protn Corp Spl
Oblig Ser A (Prerefunded @ 08/01/02)............ 6.950 08/01/22 1,668,810
------------
SOUTH CAROLINA 0.4%
2,700 Charleston Cnty, SC Solid Waste (MBIA Insd)..... 6.000 01/01/14 2,784,645
------------
SOUTH DAKOTA 0.3%
2,140 South Dakota Hsg Dev Auth Homeownership Mtg Ser
C............................................... 7.300 05/01/24 2,214,001
------------
TENNESSEE 1.0%
6,740 Memphis, TN Hlth Edl & Hsg Fac Brd Mtg Rev
Edgewater Terr Rfdg (FHA Gtd)................... 7.375 01/20/27 7,151,410
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS 2.3%
$ 9,790 Alliance Arpt Auth Inc TX Spl Fac Rev American
Airls Inc Proj.................................. 7.500% 12/01/29 $ 10,444,951
2,000 Coastal Bend Hlth Fac Dev Corp TX Incarnate Word
Hlth Svcs Ser A (FSA Insd)...................... 6.000 11/15/22 2,007,740
2,000 Houston, TX Arpt Sys Rev Spl Facs People Mover
Ser A (FSA Insd)................................ 5.375 07/15/12 1,908,860
1,500 North Cent TX Hlth Fac Dev Hlth Fac C C Young
Mem Proj........................................ 6.300 02/15/15 1,507,755
------------
15,869,306
------------
UTAH 1.5%
2,500 Murray City, UT Hosp Rev Hlth Svc Inc Rfdg (MBIA
Insd)........................................... 4.750 05/15/20 2,119,375
2,500 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg
(Embedded Cap).................................. 5.500 02/15/17 2,383,900
1,110 Utah St Hsg Fin Agy Single Family Mtg Mezzanine
Issue H1 (AMBAC Insd)........................... 6.000 07/01/12 1,125,607
3,665 Utah St Hsg Fin Agy Single Family Mtg Ser A2
(FHA Gtd)....................................... 7.150 07/01/25 3,833,627
1,060 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A1
(FHA Gtd)....................................... 7.100 07/01/14 1,103,449
------------
10,565,958
------------
VIRGINIA 0.2%
1,000 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease Rev
Henrico Cnty Regl Jail Proj..................... 7.125 08/01/21 1,126,780
------------
WASHINGTON 1.1%
1,000 King Cnty, WA Ser B............................. 6.625 12/01/15 1,081,750
1,145 King Cnty, WA Ser D............................. 5.750 12/01/11 1,150,027
5,000 Washington St Pub Pwr Supply (FGIC Insd)........ 6.875 07/01/17 5,482,400
------------
7,714,177
------------
WEST VIRGINIA 2.7%
3,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co Proj
Ser C Rfdg (MBIA Insd).......................... 6.850 06/01/22 3,240,270
15,000 West Virginia St Hsg Dev Fd Hsg Fin Ser B (FHA
Gtd)............................................ 7.200 11/01/20 15,746,250
------------
18,986,520
------------
WISCONSIN 2.1%
2,000 Southeast WI Professional Baseball Park Dist
Sales Tax Rev (MBIA Insd)....................... * 12/15/18 564,020
1,750 Southeast WI Professional Baseball Park Dist
Sales Tax Rev (MBIA Insd)....................... * 12/15/19 467,512
4,000 Southeast WI Professional Baseball Park Dist
Sales Tax Rev (MBIA Insd)....................... 5.800 12/15/26 3,974,480
9,465 Wisconsin Hsg & Econ Dev Auth Homeownership Rev
Ser A........................................... 7.100 03/01/23 9,945,065
------------
14,951,077
------------
WYOMING 0.7%
1,500 Wyoming Cmnty Dev Auth Hsg Rev Ser 2 (b)........ 6.350 06/01/29 1,509,960
3,000 Wyoming Cmnty Dev Auth Hsg Rev Ser 4............ 6.550 06/01/28 3,068,580
------------
4,578,540
------------
PUERTO RICO 0.7%
4,485 Puerto Rico Comwlth Aqueduct & Swr Auth Rev
Rfdg............................................ 5.000 07/01/15 4,073,232
1,110 Puerto Rico Comwlth Ser A Rfdg.................. 6.000 07/01/14 1,118,558
------------
5,191,790
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
- ---------------------------------------------------------------------------------------------
<S> <C>
TOTAL LONG-TERM INVESTMENTS 99.9%
(Cost $665,749,434) (a)...................................................... $706,973,693
SHORT-TERM INVESTMENTS 1.0%
(Cost $7,050,000) (a)........................................................ 7,050,000
LIABILITIES IN EXCESS OF OTHER ASSETS (0.9%).................................. (6,150,126)
------------
NET ASSETS 100.0%............................................................. $707,873,567
============
</TABLE>
*Zero coupon bond
(a) At April 30, 1997, for federal income tax purposes, cost of long- and
short-term investments is $672,799,434; the aggregate gross unrealized
appreciation is $41,714,731 and the aggregate gross unrealized depreciation
is $490,472, resulting in net unrealized appreciation of $41,224,259.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $665,749,434) (Note 1)....... $706,973,693
Short-Term Investments (Cost $7,050,000) (Note 1)......................... 7,050,000
Cash...................................................................... 92,363
Receivables:
Interest................................................................ 13,588,777
Investments Sold........................................................ 1,270,096
Other..................................................................... 10,699
------------
Total Assets........................................................ 728,985,628
------------
LIABILITIES:
Payables:
Securities Purchased.................................................... 19,892,161
Income Distributions -- Common and Preferred Shares..................... 502,070
Investment Advisory Fee (Note 2)........................................ 358,062
Administrative Fee (Note 2)............................................. 115,711
Affiliates (Note 2)..................................................... 21,207
Accrued Expenses.......................................................... 161,639
Deferred Compensation and Retirement Plans (Note 2)....................... 61,211
------------
Total Liabilities................................................... 21,112,061
------------
NET ASSETS................................................................ $707,873,567
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 5,300 issued with liquidation preference of
$50,000 per share) (Note 5)............................................. $265,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 27,013,149 shares issued and
outstanding)............................................................ 270,131
Paid in Surplus........................................................... 399,318,038
Net Unrealized Appreciation on Securities................................. 41,224,259
Accumulated Undistributed Net Investment Income........................... 1,295,737
Accumulated Net Realized Gain on Securities............................... 765,402
------------
Net Assets Applicable to Common Shares.............................. 442,873,567
------------
NET ASSETS................................................................ $707,873,567
============
NET ASSET VALUE PER COMMON SHARE ($442,873,567 divided
by 27,013,149 shares outstanding)....................................... $ 16.39
============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $22,044,990
-----------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 2,297,027
Administrative Fee (Note 2)................................. 706,778
Preferred Share Maintenance (Note 5)........................ 338,731
Custody..................................................... 32,746
Trustees Fees and Expenses (Note 2)......................... 12,833
Legal (Note 2).............................................. 9,215
Amortization of Organizational Costs (Note 1)............... 1,793
Other....................................................... 178,379
-----------
Total Expenses.......................................... 3,577,502
-----------
NET INVESTMENT INCOME....................................... $18,467,488
===========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments............................................... $ 1,009,263
Futures................................................... 26,452
-----------
Net Realized Gain on Securities............................. 1,035,715
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................... 46,644,990
End of the Period......................................... 41,224,259
-----------
Net Unrealized Depreciation on Securities During the
Period.................................................... (5,420,731)
-----------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.............. $(4,385,016)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $14,082,472
===========
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1997
and the Year Ended October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, 1997 October 31, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 18,467,488 $ 37,296,419
Net Realized Gain on Securities...................... 1,035,715 6,088,164
Net Unrealized Depreciation on Securities
During the Period.................................. (5,420,731) (3,139,021)
------------ ------------
Change in Net Assets from Operations................. 14,082,472 40,245,562
------------ ------------
Distributions from Net Investment Income:
Common Shares...................................... (14,384,088) (30,794,252)
Preferred Shares................................... (4,627,627) (9,503,338)
------------ ------------
Total Distributions.................................. (19,011,715) (40,297,590)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... (4,929,243) (52,028)
NET ASSETS:
Beginning of the Period.............................. 712,802,810 712,854,838
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $1,295,737
and $1,839,964, respectively)...................... $707,873,567 $712,802,810
============ ============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 24, 1992
Six Months (Commencement
Ended Year Ended October 31 of Investment
April 30, ------------------------------------- Operations) to
1997 1996 1995 1994 1993 October 31, 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period (a).............. $16.577 $16.579 $15.032 $17.954 $15.557 $14.792
------- ------- ------- ------- ------- -------
Net Investment Income....... .684 1.381 1.415 1.432 1.454 1.010
Net Realized and Unrealized
Gain/Loss on Securities... (.163) .109 1.652 (2.842) 2.424 .550
------- ------- ------- ------- ------- -------
Total from Investment
Operations.................. .521 1.490 3.067 (1.410) 3.878 1.560
------- ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders............ .533 1.140 1.140 1.140 1.085 .595
Common Share Equivalent of
Distributions Paid to
Preferred
Shareholders............ .171 .352 .380 .305 .287 .200
Distributions from Net
Realized Gain on
Securities (Note 1):
Paid to Common
Shareholders............ -0- -0- -0- .056 .083 -0-
Common Share Equivalent of
Distributions Paid to
Preferred
Shareholders............ -0- -0- -0- .011 .026 -0-
------- ------- ------- ------- ------- -------
Total Distributions........... .704 1.492 1.520 1.512 1.481 .795
------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period...................... $16.394 $16.577 $16.579 $15.032 $17.954 $15.557
======= ======= ======= ======= ======= =======
Market Price Per Share at End
of the Period............... $15.250 $15.813 $15.750 $14.000 $17.375 $14.875
Total Investment Return at
Market Price (b)............ (.19%)* 7.84% 21.15% (13.12%) 25.40% 3.08%*
Total Return at Net Asset
Value (c)................... 2.07%* 7.12% 18.51% (9.99%) 23.53% 7.68%*
Net Assets at End of the
Period (In millions)........ $ 707.9 $ 712.8 $ 712.9 $ 671.1 $ 750.0 $ 685.2
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares............... 1.61% 1.62% 1.68% 1.63% 1.59% 1.54%
Ratio of Expenses to Average
Net Assets.................. 1.01% 1.02% 1.04% 1.03% 1.01% 1.01%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common Shares
(d)......................... 6.23% 6.24% 6.55% 6.79% 6.87% 6.71%
Portfolio Turnover............ 23%* 30% 15% 20% 20% 37%*
</TABLE>
(a) Net Asset Value at January 24, 1992, is adjusted for common and preferred
share offering costs of $.208 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 upon NAV.
(d) Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-annualized
See Notes to Financial Statements
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Trust for Investment Grade Municipals (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 invest substantially all
of its assets in municipal securities rated investment grade at the time of
investment. The Trust commenced investment operations on January 24, 1992.
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
or, if such valuations are not available, 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. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security Transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
D. ORGANIZATIONAL COSTS--The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
the Trust's organization in the amount of $40,000. These costs were amortized on
a straight line basis over the 60 month period ended January 23, 1997.
E. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1996, the Trust had an accumulated capital loss
carryforward for tax purposes of $270,313, which will expire on October 31,
2003.
F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
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 .65% of the average net assets of the Trust. In addition, the Trust will pay
a monthly administrative fee to VKAC, the Trust's Administrator, at an annual
rate of .20% of the average net assets of the Trust. The administrative services
provided by the Administrator include record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Trust, of which a trustee of the Trust is an
affiliated person.
For the six months ended April 30, 1997 the Trust recognized expenses of
approximately $52,900 representing VKAC's cost of providing accounting and legal
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.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit under the plan is equal to the trustees' annual retainer fee, which is
currently $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $171,960,228 and $159,289,707,
respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation on securities. Upon disposition, a realized gain or
loss is recognized accordingly, when exercising an 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 below are the specific types of derivative financial instruments
used by the Trust.
A. 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 Fund 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).
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<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in futures contracts for the six months ended April 30, 1997,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1996............................. -0-
Futures Opened.............................................. 185
Futures Closed.............................................. (185)
-----
Outstanding at April 30, 1997............................... -0-
=====
</TABLE>
B. EMBEDDED CAP SECURITIES--These securities, which are identified in the
portfolio of investments, include a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. The Trust invests in these instruments as a hedge against a rise in
the short term interest rates which it pays on its preferred shares.
5. PREFERRED SHARES
The Trust has outstanding 5,300 Auction Preferred Shares ("APS") in four series.
Series A, B, and C contain 1,500 shares each while Series D contains 800 shares.
Dividends are cumulative and the dividend rate is currently reset through an
auction process. The dividend period is 28 days for Series A, B, C and D. The
average rate in effect on April 30, 1997, was 3.666%. During the six months
ended April 30, 1997, the rates ranged from 3.350% to 4.065%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $50,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
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<PAGE> 23
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be re-
registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common Shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
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<PAGE> 24
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00 p.m.
Central time at 1-800-341-2911 for Van Kampen American Capital funds, or
1-800-282-4404 for Morgan Stanley retail funds.
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<PAGE> 25
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1997
All rights reserved.
(SM) denotes a service mark of Van Kampen American
Capital Distributors, Inc.
24
