UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-5786
Van Kampen Investment Grade Municipal Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas NY NY 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas
New York, NY 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
-----------------------------
Date of fiscal year end: 10/31/03
-----------
Date of reporting period: 04/30/03
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Item 1. Report to Shareholders
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of April 30, 2003)
- -----------------------------
NYSE Ticker Symbol - VIG
- -----------------------------
<Table>
- -----------------------------------------------------------------------
Six-month total return(1) 6.59%
- -----------------------------------------------------------------------
One-year total return(1) 11.34%
- -----------------------------------------------------------------------
Five-year average annual total return(1) 3.38%
- -----------------------------------------------------------------------
Ten-year average annual total return(1) 2.45%
- -----------------------------------------------------------------------
Life-of-Trust average annual total return(1) 4.68%
- -----------------------------------------------------------------------
Commencement date 11/30/89
- -----------------------------------------------------------------------
Distribution rate as a % of closing common share market
price(2) 5.46%
- -----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common share market price(3) 8.89%
- -----------------------------------------------------------------------
Preferred share rate(4) 1.000%
- -----------------------------------------------------------------------
Net asset value $10.25
- -----------------------------------------------------------------------
Closing common share market price $9.01
- -----------------------------------------------------------------------
Six-month high common share market price (4/30/03) $9.01
- -----------------------------------------------------------------------
Six-month low common share market price (12/18/02) $8.51
- -----------------------------------------------------------------------
</Table>
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
1
(1) Total return assumes an investment at the common share 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 share market price at the end of the
period indicated.
(2) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(3) The taxable-equivalent distribution rate is calculated assuming the maximum
38.6% federal income tax rate effective for calendar year 2003.
(4) 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 is no guarantee of future results. Investment return,
common share market price and net asset value will fluctuate and Trust
shares, when sold, may be worth more or less than their original cost. An
investment in the Trust is subject to investment risks, and you could lose
money on your investment in the Trust. As a result of recent market
activity, current performance may vary from the figures shown. For more
up-to-date information, please visit vankampen.com or speak with your
financial advisor.
2
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<Table>
<Caption>
As of April 30, 2003
AAA/Aaa........................... 65.6%
AA/Aa............................. 14.1%
A/A............................... 7.6%
BBB/Baa........................... 6.1%
B/B............................... 0.5%
CC/Ca............................. 0.1%
Non-Rated......................... 6.0%
</Table>
TOP FIVE SECTORS
(as a percentage of long-term investments)
<Table>
<Caption>
As of April 30, 2003
Public Building................... 13.6%
General Purpose................... 13.1%
Health Care....................... 11.6%
Single-Family Housing............. 10.8%
Public Education.................. 8.3%
</Table>
Based upon the credit quality ratings as issued by Standard & Poor's Credit
Market Services/Moody's Investor Services, respectively. Subject to change
daily.
NET ASSET VALUE AND COMMON SHARE MARKET PRICE
(based upon quarter-end values--April 1993 through April 2003)
[LINE GRAPH]
<Table>
<Caption>
NET ASSET VALUE COMMON SHARE MARKET PRICE
--------------- -------------------------
4/93 $11.7900 $13.6250
6/93 $11.9000 $13.3750
$12.1600 $14.0000
$12.2000 $12.7500
$10.9500 $11.6250
6/94 $10.8100 $12.3750
$10.7500 $12.0000
$10.3300 $10.5000
$10.9500 $11.2500
6/95 $10.7000 $10.5000
$10.7100 $10.7500
$11.0600 $10.5000
$10.5200 $11.0000
6/96 $10.3400 $10.8750
$10.4100 $10.8750
$10.4800 $10.6250
$10.2800 $10.3750
6/97 $10.4800 $10.5620
$10.6500 $10.9370
$10.6700 $10.8750
$10.6500 $10.5625
6/98 $10.6500 $10.8750
$10.7600 $11.2500
$10.5600 $11.0625
$10.4400 $11.0000
6/99 $9.9800 $10.3750
$9.6300 $9.0625
$9.2300 $8.1250
$9.3400 $8.1250
6/00 $9.1900 $8.1875
$9.3600 $8.1900
$9.8100 $8.2000
$9.8800 $8.6200
6/01 $9.7400 $8.3800
$9.8800 $8.6700
$9.5700 $8.4000
$9.5300 $8.3600
6/02 $9.8700 $8.8500
$10.3400 $9.3300
$10.1500 $8.8500
$10.1600 $8.8900
4/03 $10.2500 $9.0100
</Table>
The solid line above represents the trust's net asset value (NAV), which
indicates overall changes in value among the trust's underlying securities. The
trust's common share market price is represented by the dashed line, which
indicates the price the market is willing to pay for shares of the trust at a
given time. Common share market price is influenced by a range of factors,
including supply and demand and market conditions.
3
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN INVESTMENT GRADE
MUNICIPAL TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
AND INFLUENCED THE TRUST'S RETURN DURING THE SIX MONTHS ENDED APRIL 30, 2003.
TOM BYRON, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 2000 AND HAS WORKED IN
THE INVESTMENT INDUSTRY SINCE 1981. THE FOLLOWING DISCUSSION REFLECTS HIS VIEWS
ON THE TRUST'S PERFORMANCE.
Q WHAT WAS THE MARKET
ENVIRONMENT OF THE PAST SIX MONTHS, AND HOW DID THE TRUST PERFORM IN THAT
ENVIRONMENT?
A The environment over the past six
months has been defined by two major themes. The first of these was the level of
interest rates. The period began with interest rates at levels not seen in over
three decades and, surprisingly for many, ended with rates slightly lower. The
Federal Reserve Board (the Fed) helped keep rates low with a widely anticipated
rate cut in November, driven by economic uncertainty and geopolitical risk. The
low level of rates led to a boom in issuance by municipalities seeking to lock
in low financing costs. As a result of this activity, issuance reached a record
level of $354 billion in 2002 and continued to be exceptional in the first
quarter of 2003.
The other theme in the market during the period was the relative
attractiveness of municipal bonds, which produced enough demand to absorb the
record issuance. Investors, wary of volatility in the equity market and in the
geopolitical arena, flocked to perceived safe haven investments. Their risk
aversion counteracted growing expectations for economic recovery and rising
interest rates and was a key factor in keeping interest rates at historically
low levels. In their ongoing preference for low-risk assets, investors bid
Treasury prices up to such high levels that municipal bonds became as
attractively valued as they have ever been relative to Treasuries. Insurance
companies also moved heavily into municipal bonds as their mainstay corporate
bond holdings became less attractive. At the same time, issuers recognized
investor concerns over economic weakness by insuring roughly 50% of all
issuance. This credit enhancement feature made municipal bonds even more
attractive to risk-averse investors.
While lower financing costs were a boon to municipal issuers, the continuing
weakness in the economy had a negative impact on municipal credit quality,
particularly in the first quarter of 2003. Moody's upgrades barely exceeded the
number of
4
downgrades in the first quarter, with credit quality facing continued pressure
from rising social service costs and weak national and regional economic
conditions. As a result, municipalities face enormous deficits in 2003, when
their combined shortfall is expected to reach $90 billion.
Performance along the yield curve was varied. The Fed's November rate cut
fueled a rally in short-term bonds that helped pull yields lower at the front
end of the curve. Despite that rally, the best performing segment of the curve
was the long-intermediate portion where performance was largely driven by buying
activity among institutional investors drawn to the bonds' attractive total
return potential.
The trust's monthly dividend of $0.0410 per share translated to a
distribution rate of 5.46 percent based on the trust's closing common share
market price on April 30, 2003. Based on these figures, investors would have to
earn a distribution rate of 8.89 percent on a taxable investment (for an
investor in the 38.60 percent federal income tax bracket) to match the
tax-exempt yield provided by the trust.
For the six months ended April 30, 2003, the trust produced a total return
of 6.59 percent based on common share market price. By comparison, the Lehman
Brothers Municipal Bond Index posted a total return of 3.59 percent for the same
period. Of course, past performance is no guarantee of future results.
Investment return, common share market price and net asset value will fluctuate
and trust shares, when sold, may be worth more or less than their original cost.
As a result of recent market activity, current performance may vary from the
figures shown. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor.
The Lehman Brothers Municipal Bond Index is an unmanaged, broad-based
statistical composite of municipal bonds. Index returns do not include any sales
charges or fees that would be paid by an investor purchasing the securities the
index represents. Such costs would lower performance. It is not possible to
invest directly in an index. For additional information, please refer to the
performance summary section.
Q WHAT STRATEGIES DID YOU PURSUE
IN MANAGING THE TRUST?
A While interest rates fell somewhat
during the period, they remained largely confined to a relatively tight trading
range at historically low levels. As a result, there were fewer compelling
opportunities for reinvesting the proceeds of sales from the portfolio than
we've seen in some time. This had the result of keeping the portfolio's turnover
low relative to normal levels as we attempted to protect the trust's dividend by
limiting the likelihood of having to reinvest in lower-yielding securities.
Overall, our focus over the period was on positioning the portfolio to
perform well in the event of rising interest rates while also maintaining an
attractive yield. One of our primary methods for doing this was to purchase
premium bonds with maturities of between 15 and 20 years and a shorter call
date. The yield of these bonds is
5
competitive, yet their interest rate volatility is more closely related to the
10-year call feature. Our quantitative analysis showed that this segment of the
yield curve offered the optimal combination of both total return potential and
downside protection.
Our approach also continued to emphasize active trading of highly liquid
bonds to capture shifts in relative value between various sectors and state
markets. For example, California was a major issuer of debt during the period,
and issued so much that prices for the state's debt temporarily dropped due to
the influx of supply. We took advantage of this issuance by purchasing several
well-structured deals for the portfolio. We anticipate that these bonds will
return to fair value, and when they do we may consider selling them.
One of the sectors we avoided during the period was tobacco bonds. These
bonds were issued by states seeking to securitize their future income streams
resulting from settlements from class action suits against the major tobacco
companies. Recent litigation in Illinois resulted in a judge awarding billions
more in a suit alleging that the companies misled smokers about the amount of
nicotine in "light" cigarettes. In order to appeal, the law required the
companies to put up such substantial amounts of money that some began talking
about potential bankruptcy, and the tobacco bonds' credit ratings and price
performance suffered accordingly. Our decision not to invest in these securities
was a benefit to shareholders during the period.
6
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
MUNICIPAL BONDS 148.8%
ALASKA 4.6%
$1,000 Alaska St Intl Arpt Rev Ser B (AMBAC Insd)
(a)......................................... 5.750% 10/01/17 $ 1,136,610
1,000 Matanuska-Susitna Boro, AK Ctf Part Pub
Safety Bldg Lease (FSA Insd)................ 5.750 03/01/16 1,147,410
-----------
2,284,020
-----------
ARIZONA 2.4%
1,000 Phoenix, AZ Civic Impt Corp Wastewtr Sys Rev
Jr Lien (Prerefunded @ 07/01/10) (FGIC
Insd)....................................... 6.250 07/01/17 1,212,310
-----------
ARKANSAS 1.2%
616 Dogwood Addition PRD Muni Ppty Owners
Multi-Purp Impt Dist No 8 Maumelle AK Impt
Ser 2001 Rfdg............................... 7.500 03/01/06 612,966
-----------
CALIFORNIA 15.7%
750 California St Dept Wtr Res Pwr Ser A........ 6.000 05/01/15 865,567
1,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd) (a)................................... 5.375 05/01/18 1,105,700
995 California St Pub Wks Brd UCLA Replacement
Hosp Ser A (FSA Insd)....................... 5.375 10/01/20 1,085,545
4,290 Contra Costa, CA Home Mtg Fin Auth Home Mtg
Rev (Escrowed to Maturity) (MBIA Insd)
(a)......................................... * 09/01/17 2,160,101
225 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Conv Cap Apprec Sr Lien Ser A (Prerefunded @
01/01/10) (b)............................... 0/7.150 01/01/13 257,134
500 Fresno, CA Uni Sch Dist Ser A Rfdg (MBIA
Insd)....................................... 6.100 08/01/12 603,505
1,000 Los Angeles, CA Uni Sch Dist Ser A (MBIA
Insd)....................................... 5.375 07/01/18 1,117,890
1,000 San Joaquin Hills, CA Transn Corridor Agy
Toll Rd Rev Cap Apprec Ser A Rfdg (MBIA
Insd)....................................... * 01/15/27 290,940
1,000 San Joaquin Hills, CA Transn Corridor Agy
Toll Rd Rev Cap Apprec Ser A Rfdg (MBIA
Insd)....................................... * 01/15/28 274,920
-----------
7,761,302
-----------
</Table>
See Notes to Financial Statements
7
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
COLORADO 6.0%
$ 145 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500% 09/01/03 $ 149,950
160 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/04 181,426
180 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/05 220,552
205 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/06 268,158
235 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/07 323,137
265 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/08 380,047
300 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/09 446,583
340 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/10 520,424
220 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 11.500 09/01/11 347,204
100 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)...................... 9.000 09/01/12 142,832
-----------
2,980,313
-----------
FLORIDA 9.0%
1,000 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd)....................................... 5.950 07/01/20 1,096,140
500 Florida St Dept Environmental FL Forever Ser
A (MBIA Insd)............................... 5.375 07/01/17 560,085
1,000 Jacksonville, FL Rev Better Jacksonville
(MBIA Insd)................................. 5.250 10/01/21 1,083,010
243 Sun N Lake of Sebring, FL Impt Dist Spl
Assmt (c) (d)............................... 10.000 03/01/04 0
225 Sun N Lake of Sebring, FL Impt Dist Spl
Assmt (c) (d)............................... 3.000 12/15/11 0
2,300 Sun N Lake of Sebring, FL Impt Dist Spl
Assmt Ser A (c) (d) (e)..................... 10.000 12/15/11 616,400
1,000 West Palm Beach, FL......................... 5.250 03/01/14 1,103,450
-----------
4,459,085
-----------
GEORGIA 2.2%
1,000 Municipal Elec Auth GA Combustion Turbine
Proj Ser A (MBIA Insd)...................... 5.250 11/01/16 1,105,090
-----------
</Table>
See Notes to Financial Statements
8
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
ILLINOIS 14.7%
$ 200 Bedford Park, IL Tax Increment 71st & Cicero
Proj Rfdg................................... 7.000% 01/01/06 $ 204,918
400 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airl Inc Proj Ser B Rfdg (c) (f)..... 6.100 11/01/35 46,800
1,250 Chicago, IL Proj Ser C Rfdg (FGIC Insd)..... 5.500 01/01/40 1,342,825
240 Chicago, IL Single Family Mtg Rev Ser B
(GNMA Collateralized)....................... 7.625 09/01/27 250,565
510 Cook Cnty, IL Sch Dist No 107 (a)........... 7.150 12/01/08 621,170
575 Cook Cnty, IL Sch Dist No 107............... 7.200 12/01/09 711,051
625 Cook Cnty, IL Sch Dist No 107............... 7.000 12/01/10 770,175
500 Hodgkins, IL Tax Increment Ser A Rfdg....... 7.625 12/01/13 534,255
1,500 Illinois Hlth Fac Auth Rev Lake Forest Hosp
Ser A....................................... 5.750 07/01/29 1,546,755
335 Illinois Hsg Dev Auth Rev Homeowner Mtg
G2.......................................... 6.050 08/01/29 356,071
250 Lake Cnty, IL Cmnty Unit (Escrowed to
Maturity) (Asset Gty Insd) (a).............. 7.600 02/01/14 334,378
1,000 McHenry & Kane Cntys, IL Cmnty (FGIC
Insd)....................................... * 01/01/16 558,560
180 Robbins, IL Res Recovery Rev Restructuring
Proj Ser A (c).............................. 8.375 10/15/16 323
70 Robbins, IL Res Recovery Rev Restructuring
Proj Ser B (c).............................. 8.375 10/15/16 127
-----------
7,277,973
-----------
INDIANA 3.1%
1,000 MSD Warren Twp IN Vision 2005 First Mtg
(FGIC Insd)................................. 5.500 07/15/20 1,080,340
500 Petersburg, IN Pollutn Ctl Rev IN Pwr &
Lt.......................................... 6.375 11/01/29 442,935
-----------
1,523,275
-----------
KANSAS 2.5%
400 Overland Pk, KS Dev Corp Rev First Tier
Overland Park Ser A......................... 7.375 01/01/32 407,672
740 Wyandotte Cnty/Kansas City, KS Uni Govt Indl
Rev Brd Pub Util Office Bldg Complex Proj
(MBIA Insd)................................. 5.000 05/01/09 828,904
-----------
1,236,576
-----------
MASSACHUSETTS 4.3%
1,500 Massachusetts St Fed Hwy Grant Antic Nt Ser
A (a)....................................... 5.750 06/15/14 1,722,900
390 Massachusetts St Port Auth Rev Ser B (FSA
Insd)....................................... 5.500 07/01/15 427,424
-----------
2,150,324
-----------
</Table>
See Notes to Financial Statements
9
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
MISSOURI 2.9%
$1,000 Cape Girardeau Cnty, MO Indl Dev Auth
Hlthcare Fac Rev Southeast MO Hosp Assoc.... 5.625% 06/01/27 $ 1,023,510
400 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Rfdg................................. 7.000 10/01/21 423,276
-----------
1,446,786
-----------
NEVADA 4.5%
2,070 Nevada Hsg Div Single Family Mtg Mezz Ser D2
(a)......................................... 6.300 04/01/21 2,227,879
-----------
NEW HAMPSHIRE 1.1%
525 New Hampshire Hlth & Ed Fac Auth Rev
Derryfield Sch.............................. 6.750 07/01/20 537,716
-----------
NEW JERSEY 9.1%
1,000 New Jersey Econ Dev Auth Econ Dev Rev
Kapkowski Rd Landfill Proj Rfdg............. 5.750 04/01/31 973,530
1,500 New Jersey Econ Dev Auth Wtr Fac Rev NJ
American Wtr Co Inc Ser B (FGIC Insd) (a)... 5.375 05/01/32 1,567,560
1,000 New Jersey St Ed Fac Auth Higher Ed Cap Impt
Ser A (AMBAC Insd).......................... 5.250 09/01/21 1,077,540
765 New Jersey St Trans Corp Cap Grant Antic Nt
Ser B (AMBAC Insd).......................... 5.500 02/01/08 867,395
-----------
4,486,025
-----------
NEW YORK 13.0%
335 Auburn, NY City Sch Dist Ser A Rfdg (FGIC
Insd)....................................... 4.000 12/01/11 349,774
1,000 Nassau Cnty, NY Interim Fin Auth Sales Tax
Sec Ser A................................... 5.750 11/15/13 1,128,070
1,000 New York City Ser H......................... 5.750 03/15/13 1,092,790
1,000 New York St Environmental Fac Ser C......... 5.000 07/15/20 1,059,330
1,000 New York St Twy Auth Svc Contract Rev Loc
Hwy & Brdg (AMBAC Insd)..................... 5.500 04/01/11 1,137,070
1,000 New York St Urban Dev Corp Personal Income
Tax Ser C 1 (FGIC Insd)..................... 5.500 03/15/19 1,117,440
500 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty
Dev Ppty Yonkers Inc Ser A.................. 6.625 02/01/26 535,550
-----------
6,420,024
-----------
NORTH CAROLINA 2.2%
1,000 North Carolina Muni Pwr Agy Ser A (MBIA
Insd)....................................... 5.250 01/01/20 1,074,860
-----------
</Table>
See Notes to Financial Statements
10
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
OHIO 4.8%
$1,000 Franklin Cnty, OH Convention Fac Auth Tax &
Lease Rev Antic Bds Rfdg (AMBAC Insd)....... 5.250% 12/01/19 $ 1,087,470
1,250 Ohio St Bldg Auth St Fac Admin Bldg Fd Proj
Ser A (FSA Insd)............................ 5.000 04/01/22 1,302,450
-----------
2,389,920
-----------
OREGON 2.2%
1,000 Oregon St Dept Admin Ser C Rfdg (MBIA
Insd)....................................... 5.250 11/01/18 1,088,600
-----------
PENNSYLVANIA 2.8%
1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl
Rev Coll Toledo Edison Co Proj Rfdg (a)..... 7.625 05/01/20 1,072,810
315 Crawford Cnty, PA Hosp Auth Sr Living Fac
Rev Wesbury Utd Methodist Cmnty............. 5.875 08/15/10 317,211
-----------
1,390,021
-----------
SOUTH CAROLINA 4.9%
1,235 Rock Hill, SC Util Sys Rev Ser C Rfdg (FSA
Insd) (a)................................... 5.250 01/01/15 1,361,143
1,000 South Carolina Jobs Econ Elec & Gas Co Proj
Ser A (AMBAC Insd).......................... 5.200 11/01/27 1,047,730
-----------
2,408,873
-----------
TENNESSEE 3.6%
400 Elizabethton, TN Hlth & Edl Fac Brd Rev Hosp
Ser B Impt & Rfdg (MBIA Insd)............... 7.750 07/01/29 523,600
400 Elizabethton, TN Hlth & Edl Fac Brd Rev Hosp
Ser B Impt & Rfdg........................... 8.000 07/01/33 453,708
750 Memphis, TN Gen Impt (g).................... 5.000 05/01/20 793,440
-----------
1,770,748
-----------
TEXAS 17.1%
500 Brazos River Auth TX Pollutn Adj TXU Elec Co
Proj Ser C Rfdg............................. 5.750 05/01/36 492,225
1,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt
Ser A Rfdg (FGIC Insd)...................... 5.500 11/01/31 1,043,080
1,500 Fort Worth, TX Wtr & Swr Rev Impt Rfdg...... 5.750 02/15/16 1,712,655
1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FSA
Insd)....................................... 5.625 07/01/30 1,041,780
400 Metropolitan Hlth Fac Dev Corp TX Wilson N
Jones Mem Hosp Proj......................... 7.250 01/01/31 361,696
1,000 North Cent TX Hlth Fac Dev Hosp Baylor
Hlthcare Sys Proj Ser A..................... 5.125 05/15/29 1,006,520
</Table>
See Notes to Financial Statements
11
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
TEXAS (CONTINUED)
$ 275 Pecos Cnty, TX Ctf Part..................... 6.000% 01/12/08 $ 280,127
2,480 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (FSA Insd) (a)............. 5.500 09/01/13 2,555,764
-----------
8,493,847
-----------
VIRGINIA 4.6%
2,000 Richmond, VA (FSA Insd) (a)................. 5.500 01/15/11 2,296,320
-----------
WASHINGTON 8.2%
1,000 Energy Northwest, WA Elec Rev Proj No 3 Ser
A Rfdg (FSA Insd)........................... 5.500 07/01/17 1,108,250
1,660 Pierce Cnty, WA (AMBAC Insd)................ 5.750 08/01/16 1,905,215
1,000 Port Seattle, WA Rev Ser B (MBIA Insd)...... 5.625 02/01/24 1,053,390
-----------
4,066,855
-----------
GUAM 2.1%
1,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)........ 5.250 10/01/34 1,050,430
-----------
TOTAL LONG-TERM INVESTMENTS 148.8%
(Cost $70,523,435)....................................................... 73,752,138
SHORT-TERM INVESTMENT 1.4%
(Cost $700,000).......................................................... 700,000
-----------
TOTAL INVESTMENTS 150.2%
(Cost $71,223,435)....................................................... 74,452,138
OTHER ASSETS IN EXCESS OF LIABILITIES 0.2%................................ 143,171
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (50.4%)................ (25,010,273)
-----------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%............................. $49,585,036
===========
</Table>
* Zero coupon bond
(a) Assets segregated as collateral for when-issued or delayed delivery purchase
commitments and open futures transactions.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) Non-income producing security.
See Notes to Financial Statements
12
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
(d) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(e) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers.
(f) This borrower has filed for protection in federal bankruptcy court.
(g) Securities purchased on a when-issued or delayed delivery basis.
AMBAC--AMBAC Indemnity Corp.
Asset Gty--Asset Guaranty Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
13
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2003 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $71,223,435)........................ $74,452,138
Cash........................................................ 87,693
Receivables:
Investments Sold.......................................... 2,000,515
Interest.................................................. 1,055,884
Other....................................................... 138
-----------
Total Assets............................................ 77,596,368
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,730,160
Variation Margin on Futures............................... 46,781
Investment Advisory Fee................................... 36,529
Affiliates................................................ 2,442
Trustees' Deferred Compensation and Retirement Plans........ 146,396
Accrued Expenses............................................ 38,751
-----------
Total Liabilities....................................... 3,001,059
Preferred Shares (including accrued distributions).......... 25,010,273
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $49,585,036
===========
NET ASSET VALUE PER COMMON SHARE ($49,585,036 divided by
4,839,000 shares outstanding)............................. $ 10.25
===========
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 4,839,000 shares issued and
outstanding).............................................. $ 48,390
Paid in Surplus............................................. 52,457,225
Net Unrealized Appreciation................................. 3,189,629
Accumulated Undistributed Net Investment Income............. (649,718)
Accumulated Net Realized Loss............................... (5,460,490)
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $49,585,036
===========
PREFERRED SHARES ($.01 par value, authorized 100,000,000
shares, 250 issued with liquidation preference of $100,000
per share)................................................ $25,000,000
===========
NET ASSETS INCLUDING PREFERRED SHARES....................... $74,585,036
===========
</Table>
See Notes to Financial Statements
14
Statement of Operations
For the Six Months Ended April 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $1,894,098
----------
EXPENSES:
Investment Advisory Fee..................................... 219,238
Preferred Share Maintenance................................. 40,180
Trustees' Fees and Related Expenses......................... 21,111
Legal....................................................... 8,059
Custody..................................................... 2,703
Other....................................................... 64,103
----------
Total Expenses.......................................... 355,394
----------
NET INVESTMENT INCOME....................................... $1,538,704
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 313,783
Futures................................................... (155,881)
----------
Net Realized Gain........................................... 157,902
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,193,390
----------
End of the Period:
Investments............................................. 3,228,703
Futures................................................. (39,074)
----------
3,189,629
----------
Net Unrealized Appreciation During the Period............... 996,239
----------
NET REALIZED AND UNREALIZED GAIN............................ $1,154,141
==========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (152,604)
==========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $2,540,241
==========
</Table>
See Notes to Financial Statements
15
Statements of Changes in Net Assets
(Unaudited)
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 1,538,704 $ 3,157,485
Net Realized Gain/Loss............................. 157,902 (941,593)
Net Unrealized Appreciation During the Period...... 996,239 324,142
Distributions to Preferred Shareholders:
Net Investment Income............................ (152,604) (357,288)
----------- -----------
Change in Net Assets Applicable to Common Shares
from Operations.................................. 2,540,241 2,182,746
Distributions to Common Shareholders:
Net Investment Income............................ (1,190,138) (2,380,294)
----------- -----------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON
SHARES FROM INVESTMENT ACTIVITIES................ 1,350,103 (197,548)
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period............................ 48,234,933 48,432,481
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of ($649,718)
and ($845,680), respectively).................... $49,585,036 $48,234,933
=========== ===========
</Table>
See Notes to Financial Statements
16
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED
APRIL 30, --------------------
2003 2002 (a) 2001
----------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD........... $ 9.97 $ 10.01 $ 9.43
-------- -------- --------
Net Investment Income............................ .32 .65 .67
Net Realized and Unrealized Gain/Loss............ .24 (.13) .59
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income........................ (.03) (.07) (.18)
-------- -------- --------
Total from Investment Operations................... .53 .45 1.08
Distributions Paid to Common Shareholders:
Net Investment Income........................ (.25) (.49) (.50)
-------- -------- --------
NET ASSET VALUE, END OF THE PERIOD................. $ 10.25 $ 9.97 $ 10.01
======== ======== ========
Common Share Market Price at End of the Period..... $ 9.01 $ 8.69 $ 8.70
Total Return (b)................................... 6.59%* 5.64% 14.11%
Net Assets Applicable to Common Shares at End of
the Period (In millions)......................... $ 49.6 $ 48.2 $ 48.4
Ratio of Expenses to Average Net Assets Applicable
to Common Shares (c)............................. 1.47% 1.42% 1.46%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (c)........... 6.37% 6.62% 6.77%
Portfolio Turnover................................. 18%* 37% 45%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
Preferred Shares (c)............................. .97% .93% .96%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)........... 5.74% 5.87% 4.98%
SENIOR SECURITIES:
Total Preferred Shares Outstanding................. 250 250 250
Asset Coverage Per Preferred Share (e)............. $298,381 $292,949 $293,730
Involuntary Liquidating Preference Per Preferred
Share............................................ $100,000 $100,000 $100,000
Average Market Value Per Preferred Share........... $100,000 $100,000 $100,000
</Table>
* Non-Annualized
(a) As required, effective November 1, 2001, the Trust has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began accreting market discount on fixed income securities. The effect
of this change for the year ended October 31, 2002 was to increase net
investment income per share by less than $.01, decrease net realized and
unrealized gains and losses per share by less than $.01 and increase the
ratio of net investment income to average net assets by .01%. Per share,
ratios, and supplemental data for periods prior to October 31, 2002 have not
been restated to reflect this change in presentation.
(b) Total return assumes an investment at the common share 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 share price at the end of the period
indicated.
(c) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(d) Ratios reflect the effect of dividend payments to preferred shareholders.
(e) Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets and dividing this by the
number of preferred shares outstanding.
17
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
- -----------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------
$ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75 $ 10.50 $ 12.09 $ 11.15
-------- -------- -------- -------- -------- -------- -------- --------
.76 .83 .86 .96 .88 .88 .96 1.09
.09 (1.26) .01 .12 (.19) .40 (1.48) .91
(.21) (.17) (.19) (.18) (.19) (.20) (.14) (.13)
-------- -------- -------- -------- -------- -------- -------- --------
.64 (.60) .68 .90 .50 1.08 (.66) 1.87
(.60) (.67) (.68) (.71) (.78) (.83) (.93) (.93)
-------- -------- -------- -------- -------- -------- -------- --------
$ 9.43 $ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75 $ 10.50 $ 12.09
======== ======== ======== ======== ======== ======== ======== ========
$ 8.08 $ 8.8125 $11.0625 $10.9375 $ 11.00 $ 10.625 $ 11.125 $ 13.875
-1.60% -15.09% 7.63% 6.13% 11.02% 2.88% -13.59% 26.46%
$ 45.6 $ 45.4 $ 51.6 $ 51.6 $ 50.7 $ 52.0 $ 50.8 $ 58.5
1.52% 1.69% 1.47% 1.47% 1.51% 1.52% 1.47% 1.35%
8.25% 8.11% 8.14% 9.14% 8.32% 8.22% 8.45% 9.28%
41% 46% 33% 25% 39% 50% 30% 7%
.98% 1.12% .99% .99% 1.01% 1.02% 1.01% .94%
5.92% 6.41% 6.40% 7.38% 6.55% 6.31% 7.20% 8.14%
250 250 250 250 250 250 250 250
$282,465 $281,691 $306,365 $306,303 $302,730 $308,150 $303,231 $334,098
$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
</Table>
See Notes to Financial Statements
18
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Investment Grade Municipal Trust (the "Trust") is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended. The Trust's investment objective is to provide
a high level of current income exempt from federal income tax, consistent with
preservation of capital. The Trust will normally invest at least 80% of its
total assets in tax-exempt municipal securities rated investment grade at the
time of investment. The Trust commenced investment operations on November 30,
1989.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made. At April 30, 2003, the Trust had
$782,220 of when-issued and delayed delivery purchase commitments.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security.
19
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 2002, the Trust had an accumulated capital loss
carryforward for tax purposes of $5,473,973, which will expire between October
31, 2003 and October 31, 2010. Of this amount, $1,576,881 will expire on October
31, 2003.
At April 30, 2003, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $71,308,046
===========
Gross tax unrealized appreciation........................... $ 6,108,597
Gross tax unrealized depreciation........................... (2,964,505)
-----------
Net tax unrealized appreciation on investments.............. $ 3,144,092
===========
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually. Distributions from net realized gains for book
purposes may include short-term capital gains, which are included as ordinary
income for tax purposes.
As of October 31, 2002, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $3,083
</Table>
Net realized gains or losses differ for financial and tax reporting purposes
primarily as a result of the capitalization of reorganization and restructuring
costs for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. (the "Adviser") will provide investment advice and
facilities to the Trust for an annual fee payable monthly of .60% of the average
daily net assets of the Trust.
For the six months ended April 30, 2003, the Trust recognized expenses of
approximately $2,400 representing legal services provided by Skadden, Arps,
Slate,
20
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each trust. For the six months ended
April 30, 2003, the Trust recognized expenses of approximately $12,500
representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van
Kampen") cost of providing accounting and legal services to the Trust, which are
reported as part of "Other" and "Legal" expenses, respectively, in the Statement
of Operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable upon retirement for a
ten-year period and are based upon each trustee's years of service to the Trust.
The maximum annual benefit per trustee under the plan is $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $14,189,037 and $12,703,750,
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.
In order to seek to manage the interest rate exposure of the Trust's
portfolio in a changing interest rate environment, the Trust may purchase or
sell financial futures contracts or engage in transactions involving interest
rate swaps, caps, floors or collars. The Trust expects to enter into these
transactions primarily as a hedge against anticipated interest rate or
fixed-income market changes, for duration management or for risk management
purposes, but may also enter into these transactions to generate additional
income. All of the Trust's portfolio holdings, including derivative instruments,
are marked to market each day with the change in value reflected in the
unrealized appreciation/depreciation. Upon disposition, a realized gain or loss
is recognized accordingly, except when taking delivery of a security underlying
a futures contract. In this instance, the recognition of gain or loss is
postponed until the disposal of the security underlying the futures contract.
Risks may arise as a result of the potential inability of the counterparties to
meet the terms of their contracts.
21
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
During the period, the Trust invested in futures contracts, a type of
derivative. 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 exchange traded futures on U.S. Treasury Bonds and Notes
and typically closes the contract prior to delivery date. Upon entering into
futures contracts, the Trust maintains an amount of cash or liquid securities
with a value equal to a percentage of the contract amount with either a future
commission merchant pursuant to rules and regulations promulgated under the 1940
Act, as amended, or with its custodian in an account in the broker's name. This
amount is known as initial margin. During the period the futures contract is
open, payments are received from or made to the broker based upon changes in the
value of the contract (the variation margin). The risk of loss associated with a
futures contract is in excess of the variation margin reflected on the Statement
of Assets and Liabilities.
Transactions in futures contracts for the six months ended April 30, 2003,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at October 31, 2002............................. 136
Futures Opened.............................................. 202
Futures Closed.............................................. (243)
----
Outstanding at April 30, 2003............................... 95
====
</Table>
The futures contracts outstanding as of April 30, 2003 and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
10-Year U.S. Treasury Notes Future June 2003
(Current Notional Value of $115,125 per contract)....... 18 $ (5,279)
5-Year U.S. Treasury Notes Future June 2003
(Current Notional Value of $113,750 per contract)....... 77 (33,795)
--- --------
95 $(39,074)
=== ========
</Table>
5. PREFERRED SHARES
The Trust has outstanding 250 Remarketed Preferred Shares ("RP"). Dividends are
cumulative and the dividend rate is currently reset every 28 days through a
remarketing process. The rate in effect on April 30, 2003 was 1.000%. During the
six months ended April 30, 2003, the rates ranged from 1.000% to 1.659%.
22
NOTES TO
FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
shares. These fees are included as a component of "Preferred Share Maintenance"
expense in the Statement of Operations.
The RP are redeemable at the option of the Trust in whole or in part at the
liquidation value of $100,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the RP are subject to
mandatory redemption if the tests are not met.
23
DIVIDEND REINVESTMENT PLAN
The Trust offers a Dividend Reinvestment Plan (the "Plan") pursuant to which
Common Shareholders who are participants in the Plan may have all distributions
of dividends and capital gains automatically reinvested in Common Shares of the
Trust. All Common Shareholders are deemed to be participants in the Plan unless
they specifically elect not to participate. Common Shareholders who elect not to
participate in the Plan will receive all distributions of dividends and capital
gains in cash paid by check mailed directly to the Common Shareholder by the
Trust's dividend disbursing agent.
HOW THE PLAN WORKS
State Street Bank and Trust Company, as your Plan Agent, serves as agent for
the Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or capital gains distribution paid subsequent to written
notice of the change sent to all Common Shareholders of the Trust at least 90
days before the record date for the dividend or distribution. The Plan also may
be amended or terminated by the Plan Agent, with the written consent of the
Trust, by providing at least 90 days written notice to all Participants in the
Plan.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
24
RIGHT TO WITHDRAW
All Common Shareholders of the Trust are deemed to be participants in the
Plan unless they specifically elect not to participate. You may withdraw from
the Plan at any time by calling 1-800-341-2929 or by writing State Street Bank
and Trust Company. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan, and a cash payment will be made for any fractional
Common Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
25
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
26
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you make with us,
our affiliates, or third parties. We may also collect information you provide
when using our web site, and text files (a.k.a. "cookies") may be placed on your
computer to help us to recognize you and to facilitate transactions you
initiate. We do not disclose any nonpublic personal information about you or any
of our former customers to anyone, except as permitted by law. For instance, so
that we may continue to offer you Van Kampen investment products and services
that meet your investing needs, and to effect transactions that you request or
authorize, we may disclose the information we collect to companies that perform
services on our behalf, such as printers and mailers that assist us in the
distribution of investor materials. These companies will use this information
only for the services for which we hired them, and are not permitted to use or
share this information for any other purpose. To protect your nonpublic personal
information internally, we permit access to it only by authorized employees, and
maintain physical, electronic and procedural safeguards to guard your nonpublic
personal information.
* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van
Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as
well as the many Van Kampen mutual funds and Van Kampen unit investment
trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
[VAN KAMPEN INVESTMENTS LOGO]
Copyright (C)2003 Van Kampen Funds Inc. All rights reserved.
VIG SAR 6/03 Member NASD/SIPC.
11266F03-AS-6/03
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. [Reserved.]
Item 9.
The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
Item 10. Exhibits.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Investment Grade Municipal Trust
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By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 23, 2003
By: /s/ John L. Sullivan
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Name: John Sullivan
Title: Principal Financial Officer
Date: June 23, 2003