<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 9
Statement of Operations.......................... 10
Statement of Changes in Net Assets............... 11
Financial Highlights............................. 12
Notes to Financial Statements.................... 13
</TABLE>
VTP SAR 6/97
<PAGE> 2
LETTER TO SHAREHOLDERS
June 5, 1997
Dear Shareholder,
As mentioned in your previous
report, VK/AC Holding, Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset
management. More recently, on February
5, 1997, Morgan Stanley Group Inc. and [PHOTO]
Dean Witter, Discover & Co. announced
their agreement to merge, and you DENNIS J. MCDONNELL AND DON G. POWELL
received a proxy in April. The merger
was completed on May 31, 1997, creating
the combined company of Morgan Stanley, Dean Witter, Discover & Co. This
preeminent global financial services firm boasts a market capitalization of $21
billion and leading market positions in securities, asset management, and credit
services. As the financial industry continues to witness unprecedented
consolidations and new partnerships, we believe that those firms that are
leaders in all facets of their business will be able to offer investors the
greatest opportunities and services as we move into the next century. We are
confident that this merger will provide investors with those benefits.
ECONOMIC REVIEW
Bond prices were volatile during the six months ended April 30, 1997. Prices
initially rose as the economy slowed, erasing fears of an interest rate hike by
the Federal Reserve Board. The November election of a Democratic president and
Republican Congress was positive for bonds because the split government was
viewed as a restraint on spending increases that could potentially swell the
budget deficit. In addition, support diminished for radical tax reform that
could threaten the tax-free status of municipal bonds.
By the beginning of 1997, the situation changed. Bond prices began to fall
as the economy picked up speed, culminating in a 5.60 percent annualized growth
rate in the first quarter. This strength, coupled with warnings by Fed Chairman
Alan Greenspan that tighter monetary policy might be appropriate, reignited
fears of a rate hike. On March 25, the Fed raised short-term rates by a modest
0.25 percent, which sent the 30-year Treasury bond yield above 7.00 percent for
the first time in six months. By the end of April, the 30-year Treasury bond
yield slipped back below 7.00 percent as the market turned its attention to
positive news about inflation, and bonds recovered some of their earlier losses.
Throughout most of the six months ended April 30, municipal bonds generally
outperformed Treasuries. Between October 31 and April 30, yields on long-term
municipal revenue bonds rose 21 basis points, while yields on 30-year Treasury
bonds jumped 31 basis points. Because bond yields move in the opposite direction
of prices, the smaller
Continued on page two
1
<PAGE> 3
increase in municipal yields meant that municipal bond prices did not fall as
sharply as Treasury bond prices did. A relatively stable supply of new issues,
combined with an increase in retail demand, contributed to the improved
performance of municipal bonds.
In Pennsylvania, economic growth was sluggish and below the national
average. Since emerging from the recession in the early 1990s, the Commonwealth
has failed to replenish budgetary reserves and expects to end the current fiscal
year with a modest fund balance. Pennsylvania's health-care sector is
experiencing tremendous volatility due to rapidly changing market conditions.
Hospitals in Philadelphia are especially vulnerable due to low occupancy rates,
a high HMO concentration, and rapid consolidation among a handful of large
hospital systems.
FUND STRATEGY
In managing the Trust, we maintained a heavy weighting in high-quality
bonds, many of which are insured. As of April 30, approximately 81 percent of
the Trust's long-term investments were AAA-rated, the highest credit rating
assigned to bonds by the Standard & Poor's Ratings Group. In addition,
approximately 13 percent of long-term investments were rated AA or A, and
approximately 6 percent were rated BBB or below. BBB is the lowest rating
Standard & Poor's assigns to bonds in the investment-grade category. AAA-rated
bonds are extremely liquid and provide the potential for safety of principal,
but they have tended to perform better when interest rates are falling, which
was not the case for most of the period. BBB-rated securities provide the
potential for additional income and have tended to outperform when rates are
rising.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality as a Percentage of Long-Term
Investments as of April 30, 1997
<TABLE>
<S> <C>
AAA............................ 81.1%
AA............................. 9.0%
A.............................. 3.6%
BBB............................ 4.9%
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.
Portfolio turnover was minimal during the period due to tight supplies of
Pennsylvania bonds and market conditions that offered few opportunities to add
value over existing holdings. The average yield of bonds in the portfolio was
higher than current market yields, and spreads between yields of AAA-rated bonds
and lower-rated bonds remained narrow. As a result, there was little incentive
to justify the additional credit risk of purchasing lower-rated securities.
These spreads have continued to tighten due to the increasing number of insured
bonds in the municipal market.
Also restricting trading activity were the capital gains built into the
Trust's holdings. Selling those securities would have resulted in taxable events
for Trust shareholders.
Continued on page three
2
<PAGE> 4
Despite limited opportunities, the Trust was able to purchase some bonds to
enhance its call protection. In other words, we hope to lessen the concentration
of bonds that can be called at any one time. The Trust financed these
acquisitions with sales of premium bonds. (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.)
We maintained a short duration during this period of rising interest rates
in order to seek to reduce the Trust's volatility to rate increases. Duration,
which is expressed in years, is a measure of a portfolio's sensitivity to
interest rate movements. Portfolios with long durations have tended to perform
better when rates are falling, and portfolios with short durations have tended
to perform better when rates are rising. At the end of the period, the Trust's
duration stood at 7.10 years compared to 7.89 years for the Lehman Brothers
Pennsylvania Municipal Bond Index benchmark.
[DISTRIBUTION HISTORY GRAPH]
Six-month Distribution History
For the Period Ended April 30, 1997
<TABLE>
<CAPTION>
Distribution per Share
Dividends Capital Gains
<S> <C> <C>
Nov 1996........................ $0.830
Dec 1996........................ $0.830 $.0011
Jan 1997........................ $.0830
Feb 1997........................ $.0830
Mar 1997........................ $.0810
Apr 1997........................ $.0810
</TABLE>
The dividend and/or capital gains history reprents 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 Pennsylvania Municipals generated a total
return at market price of 2.34 percent(1). The Trust offered a tax-exempt
distribution rate of 6.27 percent(3), based on the closing common stock price of
$15.50 per share on April 30, 1997. Because income from the Trust is exempt from
federal and Pennsylvania state income taxes, this distribution rate represents a
yield equivalent to a taxable investment earning 10.08 percent(4) (for investors
in the combined federal and state income tax bracket of 37.80 percent). At the
end of the reporting period, the closing share price of the Trust traded at a
7.20 percent discount to its net asset value of $16.70.
The Trust declared a long-term capital gains distribution of $0.0011 per
common share, payable December 31, 1996. Over a period of several months, the
Trust's earnings fell short of the distribution rate. As a result, the Board of
Trustees approved a slight
Continued on page four
3
<PAGE> 5
decrease in its monthly dividend from $0.083 to $0.081 per common share, payable
March 31, 1997.
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR AS OF APRIL 30, 1997*
Health Care....................... 25.2%
General Purpose................... 17.1%
Public Education.................. 13.0%
Water & Sewer...................... 9.3%
Higher Education................... 6.3%
*As a percentage of Long-Term Investments
MUNICIPAL MARKET OUTLOOK
We continue to see signs of a strong economy, although we do not expect the
unusually brisk growth rate of the first quarter to be sustained throughout the
year. As a result, we believe the Fed will monitor the economy closely and take
aggressive action to control growth if inflation picks up or the high growth
rate is sustained. However, if growth slows, we believe the Fed will leave rates
unchanged. Given this outlook, we expect that yields on the 30-year Treasury
bond will range between 6.75 and 7.40 percent for the remainder of the year,
with higher levels occurring early and lower yields dominating the second half
of 1997. Although short-term interest rates have risen, this has not had a
significant impact on the leveraged structure of the Trust.
We believe the Trust is positioned to perform well in the coming months, and
we do not anticipate major structural changes in the portfolio. In light of our
expectations for interest rates, we will continue to maintain a slightly
defensive posture by keeping a relatively short duration for the portfolio and
adjusting the duration when prudent. We will also continue to seek a balance
between the Trust's total return and its dividend income, as well as to add
value through security selection. Thank you for your continued confidence in Van
Kampen American Capital and your Trust's team of managers.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1997
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE
PENNSYLVANIA MUNICIPALS
(NYSE TICKER SYMBOL--VTP)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)................ 2.34%
Six-month total return based on NAV(2)......................... 1.56%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock price(3)...... 6.27%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)........................................ 10.08%
SHARE VALUATIONS
Net asset value................................................ $16.70
Closing common stock price..................................... $15.500
Six-month high common stock price (12/06/96)................... $16.125
Six-month low common stock price (04/21/97).................... $15.125
Preferred share rate(5)........................................ 3.61%
</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.
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
PENNSYLVANIA 93.8%
$9,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser B (FSA Insd)............................ 6.625% 01/01/22 $ 9,412,470
1,000 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh
Mercy Hlth Sys Inc (AMBAC Insd).................. 5.625 08/15/26 962,450
1,000 Allegheny Cnty, PA Indl Dev Auth Rev
Environmental Impt USX Corp Proj Rfdg............ 6.100 07/15/20 1,003,040
1,090 Allegheny Cnty, PA Residential Fin Auth Mtg Rev
Single Family (GNMA Collateralized).............. 7.100 05/01/24 1,140,838
1,755 Allegheny Cnty, PA San Auth Swr Rev (FGIC
Insd)............................................ * 12/01/15 597,718
1,000 Allegheny Cnty, PA San Auth Swr Rev Ser C
(Prerefunded @ 12/01/01) (FGIC Insd)............. 6.500 12/01/16 1,071,940
4,070 Armstrong Cnty, PA Hosp Auth Hlth Cent Rev
Canterbury Pl Proj Rfdg (MBIA Insd).............. 6.500 12/01/21 4,263,773
2,675 Armstrong Cnty, PA Hosp Auth Hosp Rev Armstrong
Cnty Mem Hosp Ser A.............................. 7.500 11/01/16 2,633,618
2,000 Armstrong Cnty, PA Hosp Auth Hosp Rev Saint
Francis Med Cent Proj A Rfdg (AMBAC Insd)........ 6.250 06/01/13 2,080,400
1,310 Bangor, PA Area Sch Dist (AMBAC Insd)............ 5.375 03/01/15 1,277,630
1,000 Beaver Cnty, PA Hosp Auth Rev Med Cent of Beaver
Cnty Inc (AMBAC Insd)............................ 6.625 07/01/10 1,069,000
5,000 Berks Cnty, PA Muni Auth Rev Highlands at
Wyomissing Proj B................................ 6.875 10/01/17 5,235,950
3,000 Bethlehem, PA Auth Wtr Rev (Prerefunded @
11/15/01) (MBIA Insd)............................ 6.250 11/15/21 3,183,720
2,880 Blair Cnty, PA Hosp Auth Rev Altoona Hosp Proj
(AMBAC Insd)..................................... 6.500 07/01/22 3,070,771
5,630 Blairsville-Saltsburg Sch Dist PA Ser 1992
(Prerefunded @ 05/15/02) (MBIA Insd)............. 6.500 05/15/16 6,044,818
5,000 Bristol Twp, PA Sch Dist Ser A (Prerefunded @
02/15/02) (MBIA Insd)............................ 6.625 02/15/12 5,457,800
1,200 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/04 822,612
2,150 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/05 1,390,233
1,565 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/07 898,858
1,000 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/08 538,830
1,665 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/09 840,026
815 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/10 386,294
1,270 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/11 565,645
1,030 Delaware Cnty, PA Cap Apprec Rfdg................ * 11/15/12 430,664
1,800 Exeter Twp, PA Sch Dist (FGIC Insd).............. * 11/15/13 705,870
5,200 Falls Twp, PA Hosp Auth Hosp Rev Delaware Vly Med
Rfdg (FHA Gtd)................................... 7.000 08/01/22 5,549,388
4,000 Franklin Cnty, PA Indl Dev Auth Hosp Rev
Chambersburg Hosp Proj (FGIC Insd)............... 6.250 07/01/22 4,133,560
2,500 Governor Mifflin PA Sch Dist (Prerefunded @
02/01/02) (AMBAC Insd)........................... 6.500 02/01/13 2,674,625
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$2,500 Interboro Sch Dist PA Delaware Cnty Rfdg
(Prerefunded @ 10/01/02) (MBIA Insd)............. 6.600% 10/01/12 $ 2,722,950
5,250 Lancaster Cnty, PA Hosp Auth Rev Lancaster Genl
Hosp Proj Rfdg (AMBAC Insd)...................... 6.125 07/01/12 5,394,217
1,600 Lancaster, PA Higher Edl Auth College Rev
Franklin & Marshall College Proj (MBIA Insd)..... 6.700 04/15/12 1,707,616
2,715 Langhorne Manor Boro, PA Higher Edl & Hlth Auth
Rev Woods Sch (Connie Lee Insd).................. 6.500 11/15/14 2,848,252
4,000 Lehigh Cnty, PA Genl Purp Auth Rev Good Shepherd
Rehab Hosp....................................... 7.500 11/15/21 4,258,000
2,000 Lehigh Cnty, PA Genl Purp Auth Rev Lehigh Vly
Hosp Inc Ser A Rfdg (MBIA Insd).................. 6.500 07/01/10 2,143,740
1,000 Lower Providence Twp, PA Swr Auth Swr Rev
(Prerefunded @ 05/01/02)......................... 6.750 05/01/22 1,080,970
2,000 Luzerne Cnty, PA Ser B (FGIC Insd)............... 6.000 09/15/11 2,036,120
4,250 Media Boro, PA Gtd Wtr Rev Rfdg (MBIA Insd)...... 6.600 01/01/22 4,553,960
3,000 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp
Rev Abington Hosp (AMBAC Insd)................... 6.000 06/01/16 3,021,750
1,000 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp
Rev Pottstown Mem Med Cent Proj.................. 7.350 11/15/05 1,072,360
1,000 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp
Rev Pottstown Mem Med Cent Proj.................. 6.875 11/15/20 1,035,700
4,500 Montgomery Cnty, PA Higher Edl & Hlth Auth Rev
Saint Josephs Univ (Connie Lee Insd)............. 6.500 12/15/22 4,755,330
1,000 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn Ctl
Ser E Rfdg (MBIA Insd)........................... 6.700 12/01/21 1,076,470
5,000 North Allegheny, PA Sch Dist Ser A Rfdg (AMBAC
Insd)............................................ 6.350 11/01/12 5,241,700
1,000 North Penn, PA Wtr Auth Wtr Rev (Prerefunded @
11/01/04) (FGIC Insd)............................ 6.875 11/01/19 1,126,690
350 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)............................................ * 09/01/09 179,652
500 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)............................................ * 03/01/10 247,935
885 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)............................................ * 09/01/10 427,013
500 Northeastern York Cnty, PA Sch Dist Ser B (FGIC
Insd)............................................ * 03/01/11 233,175
4,820 Northhampton Cnty, PA Hosp Auth Rev Easton Hosp
Ser A Rfdg (MBIA Insd)........................... 6.250 01/01/11 5,047,311
9,000 Northumberland Cnty, PA Auth Comwlth Lease Rev
Correctional Fac (MBIA Insd)..................... * 10/15/11 4,049,910
2,000 Pennsylvania Econ Dev Fin Auth Res Recovery Rev
Colver Proj Ser D................................ 7.050 12/01/10 2,126,980
5,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
34B (FHA Gtd).................................... 7.000 04/01/24 5,219,100
1,750 Pennsylvania Infrastructure Invt Auth Rev
Pennvest Subser B................................ 6.800 09/01/10 1,893,115
2,750 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City
of Philadelphia Funding Pgm (Prerefunded @
06/15/02)........................................ 6.800 06/15/12 2,992,522
6,000 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City
of Philadelphia Funding Pgm (MBIA Insd).......... 5.600 06/15/15 5,895,060
5,700 Pennsylvania St Higher Edl Assistance Agy Student
Ln Rev Ser C (AMBAC Insd)........................ 6.400 03/01/22 5,804,367
</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>
PENNSYLVANIA (CONTINUED)
$2,660 Pennsylvania St Higher Edl Fac Auth College &
Univ Rev Temple Univ 1st Ser (MBIA Insd)......... 6.500% 04/01/21 $ 2,835,799
3,000 Pennsylvania St Ser 1............................ 6.375 09/15/12 3,192,240
1,020 Pennsylvania St Ser A (Prerefunded @ 11/15/01)... 6.500 11/15/10 1,103,834
5,000 Philadelphia, PA Gas Wks Rev Ser 14 (FSA Insd)... 6.250 07/01/08 5,319,750
1,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp
Rev Frankford Hosp Rfdg (Connie Lee Insd)........ 5.750 01/01/19 984,700
500 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp
Rev Temple Univ Hosp Ser A....................... 6.625 11/15/23 517,425
2,980 Philadelphia, PA Redev Auth Hsg Rev Rfdg (GNMA
Collateralized).................................. 6.875 02/01/24 3,120,477
500 Pittsburgh, PA Urban Redev Mtg Ser C Rfdg........ 6.500 10/01/23 511,740
1,710 Pottstown Boro, PA Auth Swr Rev Gtd (FGIC
Insd)............................................ * 11/01/13 666,678
750 Reading, PA (Prerefunded @ 11/15/02) (AMBAC
Insd)............................................ 6.500 11/15/12 810,053
5,000 Saint Mary Hosp Auth Bucks Cnty, PA Rev
Franciscan Hlth Saint Mary Ser A (MBIA Insd)..... 6.500 07/01/22 5,331,200
2,220 Silver Spring Twp Auth, PA Swr Rev Gtd (FGIC
Insd)............................................ 6.700 07/15/21 2,332,732
1,035 Unity Twp, PA Muni Auth Gtd Swr Rev Cap Apprec
(AMBAC Insd)..................................... * 11/01/15 360,635
1,750 West Allegheny, PA Sch Dist Ser AA (AMBAC
Insd)............................................ 6.250 02/01/14 1,815,047
7,090 Westmoreland Cnty, PA (AMBAC Insd)............... * 08/01/15 2,496,956
3,545 Westmoreland Cnty, PA (AMBAC Insd)............... * 08/01/16 1,168,148
7,090 Westmoreland Cnty, PA (AMBAC Insd)............... * 08/01/17 2,192,370
2,000 Wilkinsburg, PA Jt Wtr Auth Wtr Rev Ser B (AMBAC
Insd)............................................ * 08/15/12 853,120
1,670 Yough Sch Dist, PA Cap Apprec (MBIA Insd)........ * 10/01/14 617,900
------------
181,865,310
------------
PUERTO RICO 5.1%
6,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser T
(Prerefunded @ 07/01/02)......................... 6.500 07/01/22 6,559,380
2,000 Puerto Rico Comwlth Pub Impt (Prerefunded @
07/01/02)........................................ 6.800 07/01/21 2,213,720
1,000 Puerto Rico Pub Bldgs Auth Rev Gtd Ser K
(Prerefunded @ 07/01/02)......................... 6.875 07/01/21 1,110,260
------------
9,883,360
------------
TOTAL LONG-TERM INVESTMENTS 98.9%
(Cost $177,935,856)(a)...................................................... 191,748,670
OTHER ASSETS IN EXCESS OF LIABILITIES 1.1%................................... 2,153,808
------------
NET ASSETS 100.0%............................................................ $193,902,478
============
</TABLE>
*Zero coupon bond
(a) At April 30, 1997, cost for federal income tax purposes is $177,935,856; the
aggregate gross unrealized appreciation is $13,863,714 and the aggregate
gross unrealized depreciation is $50,900, resulting in net unrealized
appreciation of $13,812,814.
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $177,935,856) (Note 1)... $191,748,670
Interest Receivable................................................... 3,348,163
Other................................................................. 3,210
------------
Total Assets.................................................... 195,100,043
------------
LIABILITIES:
Payables:
Custodian Bank...................................................... 708,103
Income Distributions--Common and Preferred Shares................... 181,312
Investment Advisory Fee (Note 2).................................... 102,994
Administrative Fee (Note 2)......................................... 31,690
Affiliates (Note 2)................................................. 10,834
Accrued Expenses...................................................... 102,144
Deferred Compensation and Retirement Plans (Note 2)................... 60,488
------------
Total Liabilities............................................... 1,197,565
------------
NET ASSETS............................................................ $193,902,478
------------
NET ASSETS CONSIST OF:
Preferred Shares ($.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............................ 13,812,814
Accumulated Undistributed Net Investment Income....................... 553,277
Accumulated Net Realized Gain on Investments.......................... 39,077
------------
Net Assets Applicable to Common Shares.......................... 123,902,478
------------
NET ASSETS............................................................ $193,902,478
------------
NET ASSET VALUE PER COMMON SHARE ($123,902,478 divided
by 7,420,972 shares outstanding).................................... $ 16.70
============
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 5,837,771
-----------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 630,157
Administrative Fee (Note 2)................................. 193,894
Preferred Share Maintenance (Note 4)........................ 94,935
Trustees Fees and Expenses (Note 2)......................... 12,833
Custody..................................................... 9,023
Legal (Note 2).............................................. 7,240
Amortization of Organizational Costs (Note 1)............... 2,001
Other....................................................... 93,929
-----------
Total Expenses.......................................... 1,044,012
-----------
NET INVESTMENT INCOME....................................... $ 4,793,759
===========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Gain on Investments............................ $ 39,077
-----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period................................... 15,506,082
End of the Period......................................... 13,812,814
-----------
Net Unrealized Depreciation on Investments During the
Period.................................................... (1,693,268)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS............. $(1,654,191)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,139,568
===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
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................................... $ 4,793,759 $ 9,677,648
Net Realized Gain on Investments........................ 39,077 10,791
Net Unrealized Appreciation/Depreciation on Investments
During
the Period............................................ (1,693,268) 288,963
------------ ------------
Change in Net Assets from Operations.................... 3,139,568 9,977,402
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (3,665,795) (7,391,361)
Preferred Shares...................................... (1,219,539) (2,480,595)
------------ ------------
(4,885,334) (9,871,956)
------------ ------------
Distributions from Net Realized Gain on Investments:
Common Shares......................................... (8,032) (187,473)
Preferred Shares...................................... (2,759) (74,998)
------------ ------------
(10,791) (262,471)
------------ ------------
Total Distributions..................................... (4,896,125) (10,134,427)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... (1,756,557) (157,025)
NET ASSETS:
Beginning of the Period................................. 195,659,035 195,816,060
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $553,277 and $644,852,
respectively)......................................... $193,902,478 $195,659,035
============ ============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
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
1997 1996 1995 1994 1993 October 31, 1992
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period (a)................... $16.933 $16.954 $15.017 $17.889 $14.914 $14.763
------- ------- ------- ------- ------- -------
Net Investment Income........ .646 1.304 1.312 1.327 1.324 .598
Net Realized and Unrealized
Gain/Loss on Investments... (.224) .040 1.997 (2.906) 2.942 .100
------- ------- ------- ------- ------- -------
Total from Investment
Operations................... .422 1.344 3.309 (1.579) 4.266 .698
------- ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders............. .494 .996 .996 .996 .996 .415
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders... .164 .334 .376 .255 .282 .132
Distributions from Net
Realized Gain on
Investments (Note 1):
Paid to Common
Shareholders............. .001 .025 -0- .033 .010 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders... -0- .010 -0- .009 .003 -0-
------- ------- ------- ------- ------- -------
Total Distributions............ .659 1.365 1.372 1.293 1.291 .547
------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $16.696 $16.933 $16.954 $15.017 $17.889 $14.914
======= ======= ======= ======= ======= =======
Market Price Per Share at End
of the Period................ $15.500 $15.625 $15.000 $12.875 $17.250 $15.000
Total Investment Return at
Market Price (b)............. 2.34%* 11.14% 24.53% (20.21%) 22.29% 2.72%*
Total Return at Net Asset
Value (c).................... 1.56%* 6.10% 20.03% (10.65%) 27.39% 2.56%*
Net Assets at End of the Period
(In millions)................ $193.9 $195.7 $195.8 $181.4 $202.8 $180.6
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares................ 1.68% 1.69% 1.67% 1.66% 1.60% 1.53%
Ratio of Expenses to Average
Net Assets................... 1.08% 1.08% 1.05% 1.06% 1.02% 1.09%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common
Shares (d)................... 5.73% 5.76% 5.83% 6.45% 6.25% 5.09%
Portfolio Turnover............. 1%* 4% 5% 5% 4% 4%*
</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) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized
See Notes to Financial Statements
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (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 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. At April 30, 1997, 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.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
D. ORGANIZATIONAL COSTS--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
were amortized on a straight line basis over the 60 month period ended March 26,
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.
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 $22,150 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.
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
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
to the Trust. The maximum annual benefit under the plan is equal to the
trustees' annual retainer fee, which is currently $2,500.
At April 30, 1997, VKAC owned 6,700 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $1,968,520 and $1,947,260, 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, 1997, was 3.61%. During the six
months ended April 30, 1997, the rates ranged from 3.350% to 4.025%.
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.
15
<PAGE> 17
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.
16
<PAGE> 18
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA 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.
17
