<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 8
Statement of Operations.......................... 9
Statement of Changes in Net Assets............... 10
Financial Highlights............................. 11
Notes to Financial Statements.................... 12
</TABLE>
VTP SAR 6/96
<PAGE> 2
LETTER TO SHAREHOLDERS
May 15, 1996
Dear Shareholder,
While interest rates drifted
downward during the fourth quarter of
last year, such was not the case in the
first quarter of 1996. Early in the
quarter, municipal bond prices
demonstrated increased volatility in [PHOTO]
conjunction with February's economic
announcements, which revealed a revival
in economic growth, impressive
employment levels, and moderate
inflation. This positive economic
environment, however, did not translate
into positive movement for the bond markets. Instead, the markets became wary,
because inflation often accompanies economic growth.
Other factors influencing the municipal bond market early in the year
included:
- Intense weather conditions, which hindered distribution and manufacturing,
were experienced by much of the United States and affected certain
municipal bond sectors.
- The expectation that a federal budget agreement was forthcoming helped
bolster municipal bonds, especially at the longer end of the spectrum.
- The proposal of tax reform--and the threat of municipal bonds having
diminished tax-exempt status--continued to dampen demand for municipals,
resulting in lower bond prices.
We believe the beginning of 1996 reflected the market's reaction to the
possibility of a return to long-term economic growth. This, coupled with
continued low inflationary conditions, has served to put the Federal Reserve
Board in a neutral policy mode, bringing relative calm to the market--although
currently at higher interest rate levels.
PERFORMANCE SUMMARY
The Van Kampen American Capital Trust for Investment Grade Pennsylvania
Municipals' (ticker symbol VTP) common stock price was up 2.5 percent during the
six-month period, closing at $15.375, while the municipal bond market was down 4
percent for the same period, according to the Bond Buyer's 40 Municipal Bond
Index.
For the six months ended April 30, 1996, the Trust achieved a total return
of 5.95 percent(1), based on market price. Longer term, the Trust achieved a
one-year total return of 8.56 percent(1), based on market price for the period
ended April 30, 1996, including reinvestment of dividends and capital gains.
Continued on page two
1
<PAGE> 3
Many closed-end municipal bond funds are currently offering higher after-tax
yields than taxable income alternatives, and your Trust is no exception. Based
on the closing common stock price on April 30, 1996, the Trust for Investment
Grade Pennsylvania Municipals had a tax-exempt distribution rate of 6.48
percent(3). In other words, Pennsylvania residents in the 37.8 percent combined
marginal income tax bracket would have to earn a yield of 10.42 percent(4) on a
taxable investment to equal your Trust's tax-exempt distribution rate.
MARKET OUTLOOK
The economy rebounded in the first quarter of 1996, despite poor weather in
the East and the remnants of a slow fourth quarter of 1995, which was hindered
by weak construction activity, two government shutdowns, and a strike at Boeing.
We believe the momentum of the first quarter can carry into the second, due in
part to renewed auto production in the aftermath of the General Motors strike
and an end to the budget stalemate between the White House and Congress. We
expect a modest slowdown in the summer months, as higher interest rates could
slow activity in interest-sensitive sectors of the economy, such as housing.
TOP 5 PORTFOLIO HOLDINGS BY INDUSTRY AS OF APRIL 30, 1996
Health Care....................................... 24.6%
General Purpose................................... 16.5%
Public Education.................................. 15.1%
Water & Sewer..................................... 9.3%
Higher Education.................................. 6.8%
The Fed's protracted period of easing, and relatively neutral stance, favors
the growth we are currently experiencing. Given the strong employment situation
and commodity price increases, we think the Fed will await further economic
evidence before adjusting interest rates again--probably summertime at the
earliest. So far, guides such as the Consumer Price Index continue to indicate
modest levels of inflation. More importantly, we continue to see few signs of
emerging inflation in either unit labor costs, hourly earnings or the employment
cost index.
- --------------------------------------------------------------------------------
INVESTMENT TERM: REVENUE BONDS
Revenue bonds are one of the three most common types of municipal bonds--the
other two are general obligation bonds and municipal notes. Revenue bonds
are issued to finance income-generating projects such as turnpikes, toll
bridges and airports. The revenues these projects bring in are used to pay
interest and principal to bondholders.
- --------------------------------------------------------------------------------
Continued on page three
2
<PAGE> 4
Finally, as the November elections approach, the debate on tax reform may
grow. We believe the outcome in the long run will be positive, or at worst
neutral, for municipal bonds. That's good news for the market, which was
concerned that flat tax proposals could threaten the tax-exempt status of
municipal bonds. While the debate may not be over and legislation may be
forthcoming, the market should be more confident.
Indeed, we expect investor demand for municipal securities to exceed supply,
which should add price stability to the general market. And with municipal bond
yields currently at attractive levels relative to Treasuries, investor demand
for tax-exempt securities should increase.
In summary, our view of the general municipal market is positive. From the
decreasing likelihood of tax reform in the near term to specific market
conditions, we believe the market is on solid ground. With our dedication to
comprehensive research and long-term investment perspective, we believe your
Trust is in a position to benefit in the coming months.
[CREDIT QUALITY GRAPH]
PORTFOLIO COMPOSITION BY CREDIT QUALITY
AS OF APRIL 30, 1996
<TABLE>
<S> <C>
AAA.......... 81.2%
AA........... 10.0%
A............ 3.6%
BBB.......... 3.8%
BB........... 1.4%
</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.
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.
3
<PAGE> 5
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1996
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE
PENNSYLVANIA MUNICIPALS
(NYSE TICKER SYMBOL--VTP)
<TABLE>
<CAPTION>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1)........... 5.95%
Six-month total return based on NAV(2).................... (.25%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................ 6.48%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)................................... 10.42%
SHARE VALUATIONS
Net asset value........................................... $ 16.40
Closing common stock price................................ $15.375
Six-month high common stock price (02/13/96).............. $16.375
Six-month low common stock price (12/19/95)............... $14.875
Preferred share rate(5)................................... 3.70%
</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 37.8%
combined federal and state income tax bracket, which takes into consideration
the deductibility of individual state taxes paid.
(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 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.
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
PENNSYLVANIA 92.8%
$ 9,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser B (FSA Insd)........................... 6.625% 01/01/22 $ 9,260,100
1,090 Allegheny Cnty, PA Residential Fin Auth Mtg Rev
Single Family (GNMA Collateralized)............. 7.100 05/01/24 1,131,485
1,755 Allegheny Cnty, PA San Auth Swr Rev (FGIC
Insd)........................................... * 12/01/15 543,734
1,000 Allegheny Cnty, PA San Auth Swr Rev Ser C
(Prerefunded @ 12/01/01) (FGIC Insd)............ 6.500 12/01/16 1,088,250
4,070 Armstrong Cnty, PA Hosp Auth Hlth Cent Rev
Canterbury Pl Proj Rfdg (MBIA Insd)............. 6.500 12/01/21 4,199,141
2,675 Armstrong Cnty, PA Hosp Auth Hosp Rev Armstrong
Cnty Mem Hosp Ser A............................. 7.500 11/01/16 2,575,062
2,000 Armstrong Cnty, PA Hosp Auth Hosp Rev Saint
Francis Med Cent Proj A Rfdg (AMBAC Insd)....... 6.250 06/01/13 2,064,480
2,310 Bangor, PA Area Sch District (AMBAC Insd)....... 5.375 03/01/15 2,202,007
1,000 Beaver Cnty, PA Hosp Auth Rev Med Cent of Beaver
Cnty, Inc (AMBAC Insd).......................... 6.625 07/01/10 1,071,580
5,000 Berks Cnty, PA Muni Auth Rev Highlands at
Wyomissing Proj B............................... 6.875 10/01/17 5,154,600
3,000 Bethlehem, PA Auth Wtr Rev (Prerefunded @
11/15/01) (MBIA Insd)........................... 6.250 11/15/21 3,226,740
2,880 Blair Cnty, PA Hosp Auth Rev Altoona Hosp Proj
AMBAC Insd)..................................... 6.500 07/01/22 2,995,171
5,630 Blairsville-Saltsburg Sch Dist PA Ser 1992
(Prerefunded @ 05/15/02) (MBIA Insd)............ 6.500 05/15/16 6,137,432
5,000 Bristol Twp, PA Sch Dist Ser A (Prerefunded @
02/15/02) (MBIA Insd)........................... 6.625 02/15/12 5,544,250
1,000 Cumberland Cnty, PA Muni Auth College Rev
Messiah College Proj (AMBAC Insd)............... 5.125 10/01/15 919,180
1,200 Delaware Cnty, PA............................... * 11/15/04 771,444
2,150 Delaware Cnty, PA............................... * 11/15/05 1,300,342
1,565 Delaware Cnty, PA............................... * 11/15/07 828,245
1,000 Delaware Cnty, PA............................... * 11/15/08 494,770
1,665 Delaware Cnty, PA............................... * 11/15/09 768,664
815 Delaware Cnty, PA............................... * 11/15/10 350,393
1,270 Delaware Cnty, PA............................... * 11/15/11 511,340
1,030 Delaware Cnty, PA............................... * 11/15/12 388,001
1,800 Exeter Twp, PA Sch Dist (FGIC Insd)............. * 11/15/13 633,780
5,200 Falls Twp, PA Hosp Auth Hosp Rev Delaware Vly
Med Rfdg (FHA Gtd).............................. 7.000 08/01/22 5,398,588
4,000 Franklin Cnty, PA Indl Dev Auth Hosp Rev
Chambersburg Hosp Proj (FGIC Insd).............. 6.250 07/01/22 4,077,640
2,500 Governor Mifflin PA Sch Dist (Prerefunded @
02/01/02) (AMBAC Insd).......................... 6.500 02/01/13 2,715,775
2,500 Interboro Sch Dist PA Delaware Cnty Rfdg (MBIA
Insd)........................................... 6.600 10/01/12 2,752,200
</TABLE>
See Notes to Financial Statements
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 5,250 Lancaster Cnty, PA Hosp Auth Rev Lancaster Genl
Hosp Proj (AMBAC Insd).......................... 6.125% 07/01/12 $ 5,351,902
1,600 Lancaster, PA Higher Edl Auth College Rev
Franklin & Marshall College Proj (MBIA Insd).... 6.700 04/15/12 1,686,000
2,715 Langhorne Manor Boro, PA Higher Edl & Hlth Auth
Rev Woods Sch (Connie Lee Insd)................. 6.500 11/15/14 2,787,681
4,000 Lehigh Cnty, PA Genl Purp Auth Rev Good Shepherd
Rehab Hosp...................................... 7.500 11/15/21 4,127,240
2,000 Lehigh Cnty, PA Genl Purp Auth Rev Lehigh Vly
Hosp Inc Ser A Rfdg (MBIA Insd)................. 6.500 07/01/10 2,119,880
1,000 Lower Providence Twp, PA Swr Auth Swr Rev
(Prerefunded @ 05/01/02)........................ 6.750 05/01/22 1,102,580
2,000 Luzerne Cnty, PA Ser B (FGIC Insd).............. 6.000 09/15/11 2,036,320
4,250 Media Boro, PA Gtd Wtr Rev Rfdg (MBIA Insd)..... 6.600 01/01/22 4,531,775
3,000 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp
Rev Abington Hosp (AMBAC Insd).................. 6.000 06/01/16 2,982,510
1,000 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp
Rev Pottstown Mem Med Cent Proj................. 7.350 11/15/05 1,052,430
1,000 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp
Rev Pottstown Mem Med Cent Proj................. 6.875 11/15/20 1,001,410
4,500 Montgomery Cnty, PA Higher Edl & Hlth Auth Rev
Saint Josephs Univ (Connie Lee Insd)............ 6.500 12/15/22 4,644,810
1,000 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn
Ctl Ser E Rfdg (MBIA Insd)...................... 6.700 12/01/21 1,066,520
5,000 North Allegheny, PA Sch Dist Ser A Rfdg
(AMBAC Insd).................................... 6.350 11/01/12 5,197,900
1,000 North Penn, PA Wtr Auth Wtr Rev (FGIC Insd)..... 6.875 11/01/19 1,124,580
350 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)........................................... * 09/01/09 163,489
500 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)........................................... * 03/01/10 223,950
885 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)........................................... * 09/01/10 385,055
500 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)........................................... * 03/01/11 209,805
4,820 Northhampton Cnty, PA Hosp Auth Rev Easton Hosp
Ser A (MBIA Insd)............................... 6.250 01/01/11 4,982,820
9,000 Northumberland Cnty, PA Auth Comwlth Lease Rev
Correctional Fac (MBIA Insd).................... * 10/15/11 3,641,400
5,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
34B (FHA Gtd)................................... 7.000 04/01/24 5,168,100
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
47.............................................. 5.700 10/01/26 926,750
1,750 Pennsylvania Infrastructure Invt Auth Rev
Pennvest Subser B............................... 6.800 09/01/10 1,876,000
2,750 Pennsylvania Intergvtl Coop Auth Spl Tax Rev
City of Philadelphia Funding Pgm (Prerefunded @
06/15/02)....................................... 6.800 06/15/12 3,046,532
6,000 Pennsylvania Intergvtl Coop Auth Spl Tax Rev
City of Philadelphia Funding Pgm (MBIA Insd).... 5.600 06/15/15 5,791,440
5,700 Pennsylvania St Higher Edl Assistance Agy
Student Ln Rev Ser C (AMBAC Insd)............... 6.400 03/01/22 5,583,093
2,660 Pennsylvania St Higher Edl Fac Auth College &
Univ Rev Temple Univ 1st Ser (MBIA Insd)........ 6.500 04/01/21 2,822,765
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 1,020 Pennsylvania St Ser A........................... 6.500% 11/15/10 $ 1,083,719
3,000 Pennsylvania St Ser 1........................... 6.375 09/15/12 3,137,340
1,500 Pennsylvania St Ser 3........................... 5.000 09/01/13 1,370,535
5,000 Philadelphia, PA Gas Wks Rev Fourteenth Ser (FSA
Insd)........................................... 6.250 07/01/08 5,313,000
1,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp
Rev Frankford Hosp Rfdg (Connie Lee Insd)....... 5.750 01/01/19 953,100
500 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp
Rev Temple Univ Hosp Ser A...................... 6.625 11/15/23 510,605
2,980 Philadelphia, PA Redev Auth Hsg Rev Rfdg
(GNMA Collateralized)........................... 6.875 02/01/24 3,096,339
1,710 Pottstown Boro, PA Auth Swr Rev Gtd (FGIC
Insd)........................................... * 11/01/13 603,493
750 Reading, PA (Prerefunded @ 11/15/02) (AMBAC
Insd)........................................... 6.500 11/15/12 822,383
5,000 Saint Mary Hosp Auth Bucks Cnty, PA Rev
Franciscan Hlth Saint Mary Ser A (MBIA Insd).... 6.500 07/01/22 5,199,950
2,220 Silver Spring Twp Auth, PA Swr Rev Gtd (FGIC
Insd)........................................... 6.700 07/15/21 2,343,765
1,035 Unity Twp, PA Muni Auth Gtd Swr Rev Cap Apprec
(AMBAC Insd).................................... * 11/01/15 322,454
1,750 West Allegheny, PA Sch Dist Ser AA (AMBAC
Insd)........................................... 6.250 02/01/14 1,797,530
7,090 Westmoreland Cnty, PA (AMBAC Insd).............. * 08/01/15 2,254,762
3,545 Westmoreland Cnty, PA (AMBAC Insd).............. * 08/01/16 1,061,834
7,090 Westmoreland Cnty, PA (AMBAC Insd).............. * 08/01/17 1,998,884
2,000 Wilkinsburg, PA Jt Wtr Auth Wtr Rev Ser B (AMBAC
Insd)........................................... * 08/15/12 774,340
1,670 Yough Sch Dist, PA Cap Apprec (MBIA Insd)....... * 10/01/14 558,081
------------
177,941,245
------------
GUAM 0.5%
1,000 Guam Govt Ser A................................. 5.625 09/01/02 1,002,640
------------
PUERTO RICO 5.2%
6,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser
T (Prerefunded @ 07/01/02)...................... 6.500 07/01/22 6,631,200
2,000 Puerto Rico Comwlth Pub Impt (Prerefunded @
07/01/02)....................................... 6.800 07/01/21 2,244,000
1,000 Puerto Rico Pub Bldgs Auth Rev Gtd Ser K
(Prerefunded @ 07/01/02)........................ 6.875 07/01/21 1,128,500
------------
10,003,700
------------
TOTAL LONG-TERM INVESTMENTS 98.5%
(Cost $177,435,440) (a)........................................................ 188,947,585
OTHER ASSETS IN EXCESS OF LIABILITIES 1.5%..................................... 2,781,243
------------
NET ASSETS 100%................................................................ $191,728,828
============
*Zero coupon bond
</TABLE>
(a) At April 30, 1996, cost for federal income tax purposes is $177,435,440; the
aggregate gross unrealized appreciation is $11,812,044 and the aggregate
gross unrealized depreciation is $299,899, resulting in net unrealized
appreciation of $11,512,145.
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $177,435,440) (Note 1).............. $188,947,585
Interest Receivable.................................................... 3,302,460
Unamortized Organizational Expenses (Note 1)........................... 4,520
Other.................................................................. 5,477
------------
Total Assets..................................................... 192,260,042
------------
LIABILITIES:
Payables:
Income Distributions--Common and Preferred Shares.................... 180,265
Investment Advisory Fee (Note 2)..................................... 102,377
Custodian Bank....................................................... 87,176
Administrative Fee (Note 2).......................................... 31,500
Accrued Expenses....................................................... 91,081
Deferred Compensation and Retirement Plans (Note 2).................... 38,815
------------
Total Liabilities................................................ 531,214
------------
NET ASSETS............................................................. $191,728,828
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000 shares, 1,400
issued with liquidation preference of $50,000 per share) (Note 4).... $ 70,000,000
------------
Common Shares ($.01 par value with an unlimited number of shares
authorized, 7,420,972 shares issued and outstanding)................. 74,210
Paid in Surplus........................................................ 109,423,100
Net Unrealized Appreciation on Investments............................. 11,512,145
Accumulated Undistributed Net Investment Income........................ 715,055
Accumulated Net Realized Gain on Investments........................... 4,318
------------
Net Assets Applicable to Common Shares........................... 121,728,828
------------
NET ASSETS............................................................. $191,728,828
============
NET ASSET VALUE PER COMMON SHARE ($121,728,828 divided
by 7,420,972 shares outstanding)..................................... $ 16.40
============
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................ $ 5,869,175
-----------
EXPENSES:
Investment Advisory Fee (Note 2)........................................ 636,591
Administrative Fee (Note 2)............................................. 195,874
Preferred Share Maintenance (Note 4).................................... 95,459
Trustees Fees and Expenses (Note 2)..................................... 16,544
Legal (Note 2).......................................................... 8,280
Amortization of Organizational Expenses (Note 1)........................ 2,491
Other................................................................... 94,834
-----------
Total Expenses...................................................... 1,050,073
-----------
NET INVESTMENT INCOME................................................... $ 4,819,102
===========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales................................................... $ 5,312,530
Cost of Securities Sold............................................... (5,308,212)
-----------
Net Realized Gain on Investments........................................ 4,318
-----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period............................................... 15,217,119
End of the Period..................................................... 11,512,145
-----------
Net Unrealized Depreciation on Investments During the Period............ (3,704,974)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS......................... $(3,700,656)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $ 1,118,446
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1996
and the Year Ended October 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 4,819,102 $ 9,737,641
Net Realized Gain on Investments...................... 4,318 317,833
Net Unrealized Appreciation/Depreciation on
Investments During the Period....................... (3,704,974) 14,502,110
------------ ------------
Change in Net Assets from Operations.................. 1,118,446 24,557,584
------------ ------------
Distributions from Net Investment Income:
Common Shares....................................... (3,695,826) (7,391,153)
Preferred Shares.................................... (1,247,381) (2,789,395)
------------ ------------
(4,943,207) (10,180,548)
------------ ------------
Distributions from Net Realized Gain on Investments:
Common Shares....................................... (187,473) -0-
Preferred Shares.................................... (74,998) -0-
------------ ------------
(262,471) -0-
------------ ------------
Total Distributions................................... (5,205,678) (10,180,548)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (4,087,232) 14,377,036
NET ASSETS:
Beginning of the Period............................... 195,816,060 181,439,024
------------ ------------
End of the Period (Including undistributed net
investment income of $715,055 and $839,160,
respectively)....................................... $191,728,828 $195,816,060
============ ============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 27, 1992
Six Months (Commencement
Ended Year Ended October 31 of Investment
April 30, --------------------------- Operations) to
1996 1995 1994 1993 October 31, 1992
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of the Period.......... $16.954 $15.017 $17.889 $14.914 $14.763
------- ------- ------- ------- -------
Net Investment Income............ .649 1.312 1.327 1.324 .598
Net Realized and Unrealized
Gain/Loss on Investments....... (.499) 1.997 (2.906) 2.942 .100
------- ------- ------- ------- -------
Total from Investment Operations... .150 3.309 (1.579) 4.266 .698
------- ------- ------- ------- -------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders.... .498 .996 .996 .996 .415
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders....... .168 .376 .255 .282 .132
Distributions from Net Realized
Gain on Investments:
Paid to Common Shareholders.... .025 -0- .033 .010 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders....... .010 -0- .009 .003 -0-
------- ------- ------- ------- -------
Total Distributions................ .701 1.372 1.293 1.291 .547
------- ------- ------- ------- -------
Net Asset Value, End of the
Period........................... $16.403 $16.954 $15.017 $17.889 $14.914
======= ======= ======= ======= =======
Market Price Per Share at End of
the Period....................... $15.375 $15.000 $12.875 $17.250 $15.000
Total Investment Return at Market
Price (b)........................ 5.95%* 24.53% (20.21%) 22.29% 2.72%*
Total Return at Net Asset Value
(c).............................. (.25%)* 20.03% (10.65%) 27.39% 2.56%*
Net Assets at End of the Period (In
millions)........................ $191.7 $195.8 $181.4 $202.8 $180.6
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares (d)....................... 1.65% 1.67% 1.66% 1.60% 1.53%
Ratio of Expenses to Average Net
Assets (d)....................... 1.07% 1.05% 1.06% 1.02% 1.09%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (e)................ 5.63% 5.83% 6.45% 6.25% 5.09%
Portfolio Turnover................. 2.17%* 4.58% 4.89% 3.99% 3.51%*
</TABLE>
(a) Net asset value at March 27, 1992, is adjusted for common and preferred
share offering costs of $.237 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) Beginning with the year ended October 31, 1995, the Ratios of Expenses are
based upon Total Expenses which does not reflect credits earned, if any, on
overnight cash balances.
(e) Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized
See Notes to Financial Statements
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<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Trust for Investment Grade Pennsylvania Municipals
(the "Trust") is registered as a non-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 and Pennsylvania income taxes and, where possible under local law,
local income and personal property taxes, consistent with preservation of
capital. The Trust will invest substantially all of its assets in Pennsylvania
municipal securities rated investment grade at the time of investment. The Trust
commenced investment operations on March 27, 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 less than 60 days are valued at
amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At April 30, 1996, there were no
when issued or delayed delivery purchase commitments.
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.
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<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
D. ORGANIZATIONAL EXPENSES--The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization in the amount of $25,000. These costs
are being amortized on a straight line basis over the 60 month period ending
March 26, 1997. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") has agreed that in the event any of the initial shares of the Trust
originally purchased by VKAC are redeemed during the amortization period, the
Trust will be reimbursed for any unamortized organizational expenses in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
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.
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, 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,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
For the six months ended April 30, 1996, the Trust recognized expenses of
approximately $8,900 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.
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<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
The Trust has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.
At April 30, 1996, VKAC owned 6,700 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the six months ended April 30, 1996, were $4,215,720 and
$5,308,212, respectively.
4. PREFERRED SHARES
The Trust has outstanding 1,400 Auction Preferred Shares ("APS"). Dividends are
cumulative and the dividend rate is currently reset every 28 days through an
auction process. The rate in effect on April 30, 1996, was 3.70%. During the six
months ended April 30, 1996, the rates ranged from 3.400% to 4.625%.
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> 16
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
Pace Fund
Growth & Income
Balanced Fund
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
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies 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 direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
15
<PAGE> 17
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
OFFICERS AND TRUSTEES
DON G. POWELL*
Chairman and Trustee
DENNIS J. MCDONNELL*
President and Trustee
DAVID C. ARCH
Trustee
ROD DAMMEYER
Trustee
HOWARD J KERR
Trustee
THEODORE A. MYERS
Trustee
HUGO F. SONNENSCHEIN
Trustee
WAYNE W. WHALEN*
Trustee
PETER W. HEGEL*
Vice President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Treasurer
SCOTT E. MARTIN*
Assistant Secretary
WESTON B. WETHERELL*
Assistant Secretary
NICHOLAS DALMASO*
Assistant Secretary
JOHN L. SULLIVAN*
Controller
STEVEN M. HILL*
Assistant Treasurer
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
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
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., 1996
All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
16
