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, New York, New York, 10020
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York, 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
Date of reporting period: 4/30/04
Item 1. Report to Shareholders.
The Trust's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Investment Grade Municipal Trust performed during the semiannual period.
The portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the trust's financial statements and a list of trust investments
as of April 30, 2004.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the trust will achieve its investment
objective. Trusts are subject to market risk, which is the possibility
that the market values of securities owned by the trust will decline and
that the value of trust shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in this trust.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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</Table>
Performance Summary as of 4/30/04
<Table>
<Caption>
INVESTMENT GRADE MUNICIPAL TRUST
SYMBOL: VIG
- ------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (11/30/89) 6.11% 4.33%
10-year 5.61 2.92
5-year 5.34 1.34
1-year 3.03 -0.24
6-month 1.27 -2.36
- ------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, net asset
value (NAV) and common share market price 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. NAV per share is determined by dividing the
value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding. The common share
market price is 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. Total return assumes an
investment at the beginning of the period, reinvestment of all distributions for
the period in accordance with the trust's dividend reinvestment plan, and sale
of all shares at the end of the period.
The Lehman Brothers Municipal Bond Index is a broad-based statistical composite
of municipal bonds. The index is unmanaged and does not include any sales
charges or fees. Such costs would lower performance. It is not possible to
invest directly in an index.
1
Trust Report
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2004
Van Kampen Investment Grade Municipal Trust is managed by the adviser's
Municipal Fixed Income team.(1) Current members include Thomas Byron, Vice
President; Robert Wimmel, Vice President; and John Reynoldson, Executive
Director.
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust, with Gross
Domestic Product growth topping 4 percent in both the last quarter of 2003 and,
preliminarily, the first quarter of this year. While this strength in output has
historically triggered fears of rising interest rates, yields remained
stubbornly low across the municipal curve. These low yields were partly the
result of the continued low levels of observed inflation in the U.S. economy.
Unfortunately, they also reflected continuing weakness in the job market, which
remained soft throughout most of the period. The soft job numbers, coupled with
persistently low inflation, led the Federal Open Market Committee (the Fed) to
maintain its accommodative stance throughout the period.
The surprisingly rapid job growth data released in April, coupled with rapidly
rising commodity and high oil prices, led many investors to fear that the Fed
would be forced to raise interest rates earlier than the market initially
expected. As a result, bond yields across all major sectors spiked in April.
Supply of new municipal bonds in calendar 2003 hit record levels as
municipalities moved to take advantage of historically low interest rates. Many
cities and states sought to reduce expenditures by refinancing existing debt and
replacing it with lower-yielding bonds. In other cases, municipalities attempted
to meet current and future funding needs by issuing new debt. This activity
slowed in the first months of 2004.
The low interest rates that prevailed over much of the period also had an impact
on the demand for municipal bonds. Retail and institutional investor activity
slowed as holders of municipal bonds saw little reason to sell bonds purchased
at higher yield levels and reinvest at lower yields. However, the period was
marked by rising activity among non-traditional investors, such as hedge funds
and insurance companies seeking to take advantage of the attractiveness of
municipal bonds relative to some taxable securities. Additionally, investors'
search for yield led to significant outperformance by lower-rated bonds with
greater credit risk. Sectors such as health care, with a preponderance of
lower-rated issues, performed particularly well.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
Closed-end fund returns can be calculated based upon either the market price or
the net asset value (NAV) of its shares. NAV per share is determined by dividing
the value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding, while market
price reflects the supply and demand for the shares. As a result, the two
returns can differ significantly. On an NAV basis, the trust outperformed its
benchmark, the Lehman Brothers Municipal Bond Index, but underperformed on a
market-price basis. (See table below.)
The trust uses leverage to enhance its dividend to common shareholders. The
trust borrows money at short-term rates through the issuance of preferred
shares. The proceeds are typically reinvested in longer-term securities, taking
advantage of the difference between short- and longer-term rates. As yields rose
during the period, the prices of bonds declined. The trust's use of leverage
magnified this negative movement. However, the portfolio saw strong relative
performance from its higher-yielding holdings during the period, which
counterbalanced the effects of the leverage and helped produce a total return at
NAV slightly higher than that of the benchmark, which is not leveraged.
Our analysis of the macroeconomic environment, coupled with the levels of
interest rates near multi-decade lows, led us to believe that interest rates
were more likely to rise than to fall further. As a result, we kept the trust's
duration (a measure of interest-rate sensitivity) below that of its benchmark in
order to limit the potentially damaging impact of any increase in interest
rates. This approach hampered the trust's returns for much of the period as
interest rates fell; however, it helped buoy returns when interest rates soared
in the final weeks of the period.
The trust's performance was also modestly hampered by its bias, relative to the
benchmark, toward high-quality securities. Municipal-bond investors during the
period responded to the improving economy by reducing the yield spreads between
higher- and lower-rated bonds (yield spreads reflect the premium demanded by
investors to buy lower-rated bonds). As a result, lower-quality bonds
outperformed. The portfolio had a 77 percent exposure to bonds rated AA/Aa or
higher at the end of the period.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2004
<Table>
<Caption>
- ----------------------------------------------------------
BASED ON BASED ON LEHMAN BROTHERS
NAV MARKET PRICE MUNICIPAL BOND INDEX
1.27% -2.36% 1.19%
- ----------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, net asset
value and common share market price will fluctuate and trust shares, when sold,
may be worth more or less than their original cost. See Performance Summary for
additional performance information and index definition.
3
We adjusted the portfolio's term structure in anticipation of rising interest
rates. Our research showed that the intermediate portion of the curve offered
the most promising total-return potential. As a result, we focused our purchases
on the 14- to 19-year segment of the curve. Many of the securities we identified
had the added appeal of premium coupons and 10-year call dates, which served to
add income to the portfolio while limiting its interest-rate exposure.
Our trading activity during the period was well below traditional norms because
we wanted to avoid having to reinvest into securities with low yields. That
said, we were able to make selective relative-value trades among securities and
sectors as they moved into and out of fair value. Some of these acquisitions
were funded by the proceeds of housing bonds that were called away by their
issuers during the period. In other cases we sold bonds that met their
performance objectives. We reinvested this cash into securities with more
promising total-return characteristics.
The trust's portfolio remained well diversified during the period, with its
holdings spread across many major municipal-bond sectors. We believe this
long-standing strategy helps to minimize the risk of over-concentration in any
single sector, while also giving the portfolio exposure to as many potential
sources of return as possible. The three largest sector exposures at the end of
the period were general purpose, public building and public education. The trust
also benefited from its holdings of United Airline-backed securities, which
appreciated strongly during the period.
As mentioned above, the portfolio's below-market duration served it well in the
final weeks of the period, when interest rates rose sharply. While it is
impossible to predict how long this trend will hold, we believe that the trust
is well positioned to weather further increases in rates. We look forward to
becoming
<Table>
TOP 5 SECTORS AS OF 4/30/04 RATINGS ALLOCATION AS OF 4/30/04
General Purpose 13.8% AAA/Aaa 68.1%
Public Building 13.3 AA/Aa 9.3
Public Education 11.9 A/A 9.7
Health Care 11.1 BBB/Baa 6.6
Single-Family Housing 8.1 BB/Ba 0.7
B/B 0.5
CC/Ca 0.2
Non-Rated 4.9
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Ratings allocations based upon ratings as
issued by Standard and Poor's and Moody's. Van Kampen is a wholly owned
subsidiary of a global securities firm which is engaged in a wide range of
financial services including, for example, securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
4
more active in seeking attractive structures and relative-value trading
opportunities now that rates have moved into a more normal range.
5
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
6
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MUNICIPAL BONDS 149.3%
ALABAMA 2.2%
$1,000 Gadsden, AL Wts Ser B (AMBAC Insd)............... 5.250% 08/01/21 $ 1,055,520
------------
ALASKA 4.6%
1,000 Alaska St Intl Arpt Rev Ser B (AMBAC Insd)....... 5.750 10/01/17 1,107,210
1,000 Matanuska-Susitna Boro, AK Ctf Part Pub Safety
Bldg Lease (FSA Insd)............................ 5.750 03/01/16 1,108,990
------------
2,216,200
------------
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 1,171,260
------------
ARKANSAS 0.9%
426 Dogwood Addition PRD Muni Ppty Owners Multi-Purp
Imp Dist No 8 Maumelle AK Impt Ser 2001 Rfdg
(Acquired 03/14/01, Cost $425,960) (a) (h)....... 7.500 03/01/06 421,832
------------
CALIFORNIA 15.7%
750 California St Dept Wtr Res Pwr Ser A............. 6.000 05/01/15 829,627
1,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)............................................ 5.375 05/01/18 1,071,450
995 California St Pub Wks Brd UCLA Replacement Hosp
Ser A (FSA Insd)................................. 5.375 10/01/20 1,054,342
4,290 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(Escrowed to Maturity) (MBIA Insd) (b)........... * 09/01/17 2,172,671
225 Foothill/Eastern Corridor Agy CA Toll Rd Rev Conv
Cap Apprec Sr Lien Ser A (Prerefunded @ 01/01/10)
(c).............................................. 0/7.150 01/01/13 263,151
500 Fresno, CA Uni Sch Dist Ser A Rfdg (MBIA Insd)... 6.100 08/01/12 581,740
1,000 Los Angeles, CA Uni Sch Dist Ser A (MBIA Insd)... 5.375 07/01/18 1,083,450
1,000 San Joaquin Hills, CA Transn Corridor Agy Toll Rd
Rev Cap Apprec Ser A Rfdg (MBIA Insd)............ * 01/15/27 284,990
1,000 San Joaquin Hills, CA Transn Corridor Agy Toll Rd
Rev Cap Apprec Ser A Rfdg (MBIA Insd)............ * 01/15/28 268,420
------------
7,609,841
------------
COLORADO 6.4%
425 Boulder Cnty, CO Dev Rev Univ Corp (AMBAC Insd).. 5.000 09/01/23 430,189
160 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500 09/01/04 165,414
180 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500 09/01/05 203,274
205 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500 09/01/06 247,978
235 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500 09/01/07 301,002
</Table>
See Notes to Financial Statements 7
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$ 265 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500% 09/01/08 $ 355,537
300 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500 09/01/09 418,356
340 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500 09/01/10 490,137
220 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 11.500 09/01/11 327,026
100 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity)..................................... 9.000 09/01/12 134,986
------------
3,073,899
------------
FLORIDA 11.0%
1,000 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd)............................................ 5.950 07/01/20 1,044,640
500 Florida St Dept Envrnmtl FL Forever Ser A (MBIA
Insd)............................................ 5.375 07/01/17 543,260
1,000 Highlands Cnty, FL Hlth Fac Auth Rev Hosp
Adventist Hlth Sys Ser D......................... 5.375 11/15/35 1,003,300
1,000 Jacksonville, FL Rev Better Jacksonville (MBIA
Insd)............................................ 5.250 10/01/21 1,056,640
243 Sun N Lake of Sebring, FL Impt Dist Spl Assmt (d)
(e) (h).......................................... * 03/01/05 0
225 Sun N Lake of Sebring, FL Impt Dist Spl Assmt (d)
(e) (h).......................................... 3.000 12/15/11 0
2,300 Sun N Lake of Sebring, FL Impt Dist Spl Assmt Ser
A (Acquired 12/07/89, Cost $2,300,000) (a) (d)
(e) (h).......................................... 10.000 12/15/11 616,400
1,000 West Palm Beach, FL.............................. 5.250 03/01/14 1,071,240
------------
5,335,480
------------
GEORGIA 2.2%
1,000 Municipal Elec Auth GA Combustion Turbine Proj
Ser A (MBIA Insd)................................ 5.250 11/01/16 1,069,630
------------
ILLINOIS 15.3%
150 Bedford Park, IL Tax Increment 71st & Cicero Proj
Rfdg............................................. 7.000 01/01/06 153,443
1,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien C 2 Rfdg (FSA Insd) (AMT)................... 5.250 01/01/30 1,004,820
400 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airl Inc Proj Ser B Rfdg (AMT) (d) (f)........... 6.100 11/01/35 128,000
1,250 Chicago, IL Proj Ser C Rfdg (FGIC Insd).......... 5.500 01/01/40 1,297,850
85 Chicago, IL Single Family Mtg Rev Ser B (GNMA
Collateralized) (AMT)............................ 7.625 09/01/27 86,725
510 Cook Cnty, IL Sch Dist No 107.................... 7.150 12/01/08 598,913
575 Cook Cnty, IL Sch Dist No 107.................... 7.200 12/01/09 688,200
625 Cook Cnty, IL Sch Dist No 107.................... 7.000 12/01/10 749,888
500 Hodgkins, IL Tax Increment Ser A Rfdg............ 7.625 12/01/13 533,870
</Table>
8 See Notes to Financial Statements
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 275 Illinois Hsg Dev Auth Rev Homeowner Mtg G2
(AMT)............................................ 6.050% 08/01/29 $ 285,885
1,000 Illinois St Sales Tax Rev Build IL............... 5.000 06/15/23 1,012,230
250 Lake Cnty, IL Cmnty Unit (Escrowed to Maturity)
(Radian Insd) (b)................................ 7.600 02/01/14 319,853
1,000 McHenry & Kane Cntys, IL Cmnty (FGIC Insd)....... * 01/01/16 568,930
------------
7,428,607
------------
INDIANA 2.2%
1,000 MSD Warren Twp IN Vision 2005 First Mtg (FGIC
Insd)............................................ 5.500 07/15/20 1,077,000
------------
KANSAS 8.6%
1,825 Cowley Cnty, KS Uni Sch Dist Impt Rfdg (MBIA
Insd)............................................ 5.250 10/01/22 1,916,925
400 Overland Pk, KS Dev Corp Rev First Tier Overland
Park Ser A....................................... 7.375 01/01/32 395,152
1,000 Wyandotte Cnty, KS Sch Dist 500 Rfdg (FSA
Insd)............................................ 5.000 09/01/19 1,045,320
740 Wyandotte Cnty/Kansas City, KS Uni Govt Indl Rev
Brd Pub Util Office Bldg Complex Proj (MBIA
Insd)............................................ 5.000 05/01/09 804,979
------------
4,162,376
------------
MARYLAND 2.5%
500 Maryland St Econ Dev Corp Student Hsg Rev Univ MD
College Pk Proj.................................. 5.625 06/01/35 505,430
750 Maryland St Medstar Hlth & Higher Hlth Rfdg...... 5.500 08/15/33 726,098
------------
1,231,528
------------
MASSACHUSETTS 4.8%
600 Massachusetts St Dev Fin Agy Proj Ser A
(MBIA Insd)...................................... 5.125 02/01/34 602,694
1,500 Massachusetts St Fed Hwy Grant Antic Nt Ser A.... 5.750 06/15/14 1,700,715
------------
2,303,409
------------
MISSOURI 8.2%
1,000 Cape Girardeau Cnty, MO Indl Dev Auth Hlthcare
Fac Rev Southeast MO Hosp Assoc.................. 5.625 06/01/27 1,010,940
400 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Proj Rfdg................................. 7.000 10/01/21 429,076
1,000 Saint Charles, MO Ctf Part Ser B................. 5.500 05/01/18 1,034,060
1,460 Saint Louis, MO Brd Ed Direct Dep Pgm Ser A Rfdg
(FSA Insd)....................................... 5.000 04/01/21 1,503,888
------------
3,977,964
------------
NEVADA 1.4%
685 Nevada Hsg Div Single Family Mtg Mezz Ser D2
(AMT)............................................ 6.300 04/01/21 694,980
------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
NEW HAMPSHIRE 3.1%
$ 525 New Hampshire Hlth & Ed Fac Auth Rev Derryfield
Sch.............................................. 6.750% 07/01/20 $ 516,080
1,000 New Hampshire Hlth & Ed Fac Hlthcare Sys Covenant
Hlth (g)......................................... 5.500 07/01/34 986,010
------------
1,502,090
------------
NEW JERSEY 9.0%
1,000 New Jersey Econ Dev Auth Econ Dev Rev Kapkowski
Rd Landfill Proj Rfdg............................ 5.750 04/01/31 944,750
1,500 New Jersey Econ Dev Auth Wtr Fac Rev NJ American
Wtr Co Inc Ser B (FGIC Insd) (AMT)............... 5.375 05/01/32 1,532,370
1,000 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser
A (AMBAC Insd)................................... 5.250 09/01/21 1,050,530
765 New Jersey St Trans Corp Cap Grant Antic Nt Ser B
(AMBAC Insd)..................................... 5.500 02/01/08 840,291
------------
4,367,941
------------
NEW YORK 5.6%
1,000 New York City Ser H.............................. 5.750 03/15/13 1,091,490
1,000 New York St Urban Dev Corp Rev Personal Income
Tax Ser C 1 (FGIC Insd).......................... 5.500 03/15/19 1,088,860
500 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty Dev
Ppty Yonkers Inc Ser A........................... 6.625 02/01/26 532,330
------------
2,712,680
------------
NORTH CAROLINA 2.2%
1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd).... 5.250 01/01/20 1,050,720
------------
OHIO 4.8%
1,000 Franklin Cnty, OH Convention Fac Auth Tax & Lease
Rev Antic Bds Rfdg (AMBAC Insd).................. 5.250 12/01/19 1,059,460
1,250 Ohio St Bldg Auth St Fac Admin Bldg Fd Proj Ser A
(FSA Insd)....................................... 5.000 04/01/22 1,271,613
------------
2,331,073
------------
OREGON 2.2%
1,000 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)...... 5.250 11/01/18 1,057,650
------------
PENNSYLVANIA 4.0%
1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev
Coll Toledo Edison Co Proj Rfdg.................. 7.625 05/01/20 1,069,850
315 Crawford Cnty, PA Hosp Auth Sr Living Fac Rev
Wesbury Utd Methodist Cmnty...................... 5.875 08/15/10 325,899
500 Harrisburg, PA Res Gtd Sub Ser D 2 (FSA Insd).... 5.000 12/01/33 531,120
------------
1,926,869
------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
SOUTH CAROLINA 4.8%
$1,235 Rock Hill, SC Util Sys Rev Ser C Rfdg (FSA
Insd)............................................ 5.250% 01/01/15 $ 1,318,325
1,000 South Carolina Jobs Econ Elec & Gas Co Proj Ser A
(AMBAC Insd)..................................... 5.200 11/01/27 1,021,840
------------
2,340,165
------------
TENNESSEE 2.0%
400 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp First
Mtg Ser B Impt & Rfdg............................ 8.000 07/01/33 462,240
400 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp Ser B
Impt & Rfdg (MBIA Insd).......................... 7.750 07/01/29 509,392
------------
971,632
------------
TEXAS 12.9%
1,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser A
Rfdg (AMT) (FGIC Insd)........................... 5.500 11/01/31 1,024,360
1,500 Fort Worth, TX Wtr & Swr Rev Impt Rfdg........... 5.750 02/15/16 1,660,185
1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (AMT)
(FSA Insd)....................................... 5.625 07/01/30 1,022,420
400 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones
Mem Hosp Proj.................................... 7.250 01/01/31 377,444
1,000 North Cent TX Hlth Fac Dev Hosp Baylor Hlthcare
Sys Proj Ser A................................... 5.125 05/15/29 981,990
223 Pecos Cnty, TX Ctf Part (Acquired 06/23/97, Cost
$223,192) (a).................................... 6.000 01/12/08 224,034
930 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (FSA Insd)...................... 5.500 09/01/13 950,358
------------
6,240,791
------------
WASHINGTON 8.2%
1,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg
(FSA Insd)....................................... 5.500 07/01/17 1,081,640
1,660 Pierce Cnty, WA (AMBAC Insd)..................... 5.750 08/01/16 1,844,094
1,000 Port Seattle, WA Rev Ser B (MBIA Insd) (AMT)..... 5.625 02/01/24 1,031,820
------------
3,957,554
------------
GUAM 2.1%
1,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)............. 5.250 10/01/34 1,022,570
------------
TOTAL LONG-TERM INVESTMENTS 149.3%
(Cost $71,034,511)........................................................... 72,311,261
SHORT-TERM INVESTMENT 2.7%
(Cost $1,300,000)............................................................ 1,300,000
------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $152.0%
(Cost $72,334,511)........................................................... $ 73,611,261
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4%).................................. (172,132)
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (51.6%).................... (25,011,294)
------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%................................. $ 48,427,835
============
</Table>
* Zero coupon bond
(a) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 2.6% of net
assets applicable to common shares.
(b) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(c) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(d) Non-income producing security.
(e) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(f) This borrower has filed for protection in federal bankruptcy court.
(g) Securities purchased on a when-issued or delayed delivery basis.
(h) Affiliated Issuer. See Notes to Financial Statements.
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
Radian--Radian Asset Assurance
12 See Notes to Financial Statements
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $72,334,511)........................ $73,611,261
Cash........................................................ 55,021
Receivables:
Interest.................................................. 1,045,810
Investments Sold.......................................... 10,127
Other....................................................... 229
-----------
Total Assets............................................ 74,722,448
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 982,590
Investment Advisory Fee................................... 36,523
Variation Margin on Futures............................... 17,063
Income Distributions--Common Shares....................... 16,574
Other Affiliates.......................................... 4,291
Trustees' Deferred Compensation and Retirement Plans........ 189,500
Accrued Expenses............................................ 36,778
-----------
Total Liabilities....................................... 1,283,319
Preferred Shares (including accrued distributions).......... 25,011,294
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $48,427,835
===========
NET ASSET VALUE PER COMMON SHARE
($48,427,835 divided by 4,839,000 shares outstanding)..... $ 10.01
===========
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............................................. 51,562,586
Net Unrealized Appreciation................................. 1,426,475
Accumulated Undistributed Net Investment Income............. (301,605)
Accumulated Net Realized Loss............................... (4,308,011)
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $48,427,835
===========
PREFERRED SHARES
($.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....................... $73,427,835
===========
</Table>
See Notes to Financial Statements 13
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended April 30, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $1,850,298
----------
EXPENSES:
Investment Advisory Fee..................................... 224,250
Preferred Share Maintenance................................. 41,255
Trustees' Fees and Related Expenses......................... 35,627
Legal....................................................... 8,082
Custody..................................................... 3,288
Other....................................................... 59,947
----------
Total Expenses.......................................... 372,449
----------
NET INVESTMENT INCOME....................................... $1,477,849
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (20,501)
Futures................................................... (408,245)
----------
Net Realized Loss........................................... (428,746)
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,859,177
----------
End of the Period:
Investments............................................. 1,276,750
Futures................................................. 149,725
----------
1,426,475
----------
Net Unrealized Depreciation During the Period............... (432,702)
----------
NET REALIZED AND UNREALIZED LOSS............................ $ (861,448)
==========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (122,590)
==========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 493,811
==========
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 1,477,849 $ 3,033,160
Net Realized Gain/Loss.................................. (428,746) 841,950
Net Unrealized Depreciation During the Period........... (432,702) (334,213)
Distributions to Preferred Shareholders:
Net Investment Income................................. (122,590) (271,360)
----------- -----------
Change in Net Assets Applicable to Common Shares from
Operations............................................ 493,811 3,269,537
Distributions to Common Shareholders:
Net Investment Income................................. (1,190,175) (2,380,271)
----------- -----------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM INVESTMENT ACTIVITIES............................ (696,364) 889,266
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period................................. 49,124,199 48,234,933
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of ($301,605) and ($466,689),
respectively)......................................... $48,427,835 $49,124,199
=========== ===========
</Table>
See Notes to Financial Statements 15
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
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, -------------------
2004 2003 2002 (a)
--------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................. $ 10.15 $ 9.97 $ 10.01
-------- -------- --------
Net Investment Income.................................. .31 .63 .65
Net Realized and Unrealized Gain/Loss.................. (.17) .10 (.13)
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income................................ (.03) (.06) (.07)
-------- -------- --------
Total from Investment Operations......................... .11 .67 .45
Distributions Paid to Common Shareholders:
Net Investment Income................................ (.25) (.49) (.49)
-------- -------- --------
NET ASSET VALUE, END OF THE PERIOD....................... $ 10.01 $ 10.15 $ 9.97
======== ======== ========
Common Share Market Price at End of the Period........... $ 8.52 $ 8.96 $ 8.69
Total Return (b)......................................... -2.36%* 8.91% 5.64%
Net Assets Applicable to Common Shares at End of the
Period (In millions)................................... $ 48.4 $ 49.1 $ 48.2
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (c)...................................... 1.49% 1.49% 1.42%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (c)........................ 5.92% 6.19% 6.62%
Portfolio Turnover....................................... 10%* 36% 37%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
Preferred Shares (c)................................... 1.00% .99% .93%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d)........................ 5.43% 5.64% 5.87%
SENIOR SECURITIES:
Total Preferred Shares Outstanding....................... 250 250 250
Asset Coverage Per Preferred Share (e)................... $293,757 $296,504 $292,949
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.
16
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
- ------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
$ 9.43 $ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75 $ 10.50 $ 12.09
-------- -------- -------- -------- -------- -------- -------- --------
.67 .76 .83 .86 .96 .88 .88 .96
.59 .09 (1.26) .01 .12 (.19) .40 (1.48)
(.18) (.21) (.17) (.19) (.18) (.19) (.20) (.14)
-------- -------- -------- -------- -------- -------- -------- --------
1.08 .64 (.60) .68 .90 .50 1.08 (.66)
(.50) (.60) (.67) (.68) (.71) (.78) (.83) (.93)
-------- -------- -------- -------- -------- -------- -------- --------
$ 10.01 $ 9.43 $ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75 $ 10.50
======== ======== ======== ======== ======== ======== ======== ========
$ 8.70 $ 8.08 $ 8.8125 $11.0625 $10.9375 $ 11.00 $ 10.625 $ 11.125
14.11% -1.60% -15.09% 7.63% 6.13% 11.02% 2.88% -13.59%
$ 48.4 $ 45.6 $ 45.4 $ 51.6 $ 51.6 $ 50.7 $ 52.0 $ 50.8
1.46% 1.52% 1.69% 1.47% 1.47% 1.51% 1.52% 1.47%
6.77% 8.25% 8.11% 8.14% 9.14% 8.32% 8.22% 8.45%
45% 41% 46% 33% 25% 39% 50% 30%
.96% .98% 1.12% .99% .99% 1.01% 1.02% 1.01%
4.98% 5.92% 6.41% 6.40% 7.38% 6.55% 6.31% 7.20%
250 250 250 250 250 250 250 250
$293,730 $282,465 $281,691 $306,365 $306,303 $302,730 $308,150 $303,231
$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 17
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (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. Effective November 30, 2003, the Trust's investment adviser, Van Kampen
Investment Advisory Corp. merged into its affiliate, Van Kampen Asset
Management.
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
segregate assets with its custodian 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, 2004, the Trust had $982,590 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.
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, 2003, the Trust had an
18
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
accumulated capital loss carryforward for tax purposes of $3,897,092, which will
expire between October 31, 2005 and October 31, 2010.
At April 30, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $72,315,567
===========
Gross tax unrealized appreciation........................... $ 3,898,482
Gross tax unrealized depreciation........................... (2,602,788)
-----------
Net tax unrealized appreciation on investments.............. $ 1,295,694
===========
</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 and a portion of futures gains,
which are included as ordinary income for tax purposes.
The tax character of distributions paid during the year ended October 31,
2003 was as follows:
<Table>
Distributions paid from:
Ordinary income........................................... $3,083
Long-term capital gain.................................... -0-
------
$3,083
======
</Table>
As of October 31, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $15,735
</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 Asset
Management (the "Adviser") provides investment advice and facilities to the
Trust for an annual fee payable monthly of .60% of the average daily net assets
of the Trust. In addition, the Trust pays a monthly administrative fee to Van
Kampen Investments Inc. or its affiliates (collectively "Van Kampen"), the
Trust's Administrator, at an annual rate of .05% of the average daily net assets
of the Trust. Effective June 1, 2004, the administrative fee was reduced from
..05% to .00%.
For the six months ended April 30, 2004, the Trust recognized expenses of
approximately $2,000 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, 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, 2004, the Trust recognized expenses of approximately $12,000
representing Van Kampen Investments Inc.'s or its affiliates'
19
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
(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.
During the period, the Trust owned shares of the following affiliated
companies. Affiliated companies are defined by the Investment Company Act of
1940, as amended, as those companies in which a fund holds 5% or more of the
outstanding voting securities.
<Table>
<Caption>
REALIZED INTEREST MARKET VALUE
NAME PAR GAIN/(LOSS) INCOME 4/30/04 COST
Dogwood Addition PRD Muni
Ppty Owners Multi-Purp Dist
No 8 Maumelle AK Impt Ser
2001 Rfdg.................. $ 425,960 $0 $20,736 $421,832 $ 425,960
Sun N Lake of Sebring, FL
Impt Dist Spl Assmt........ 242,942 0 0 0 242,942
Sun N Lake of Sebring, FL
Impt Dist Spl Assmt........ 225,000 0 0 0 224,243
Sun N Lake of Sebring, FL
Impt Dist Spl Assmt Ser
A.......................... 2,300,000 0 0 616,400 2,300,000
</Table>
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $8,741,237 and $7,592,694, 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.
20
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
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
Investment Company Act of 1940, 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, each with a par value of $100,000, for
the six months ended April 30, 2004, were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at October 31, 2003............................. 62
Futures Opened.............................................. 184
Futures Closed.............................................. (170)
----
Outstanding at April 30, 2004............................... 76
====
</Table>
The futures contracts outstanding as of April 30, 2004 and the descriptions and
unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures June 2004 (Current
Notional Value of $110,500 per contract)................ 13 $ 32,851
U.S. Treasury Notes 5-Year Futures June 2004 (Current
Notional Value of $109,938 per contract)................ 63 116,874
-- --------
76 $149,725
== ========
</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, 2004 was 0.97%. During the
six months ended April 30, 2004, the rates ranged from 0.923% to 1.120%.
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.
21
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be
re-registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued
on the valuation date, generally at the lower of market price or net asset
value, except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value
22
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
DIVIDEND REINVESTMENT PLAN continued
of the Trust's Common Shares, resulting in the acquisition of fewer Common
Shares than if the dividend or distribution had been paid in Common Shares
issued by the Trust. All reinvestments are in full and fractional Common shares
and are carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
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 by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
23
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, NY 10020
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 LLP
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.
24
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 conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "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 Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., 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)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC.
VIG SAR 6/04 RN04-00736P-Y04/04
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.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) 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.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
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
By: /s/ Ronald E. Robison
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 22, 2004
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
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 22, 2004
By: /s/ John L. Sullivan
----------------------
Name: John L. Sullivan
Title: Principal Financial Officer
Date: June 22, 2004