UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: 4/30/05
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, 2005.
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>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 4/30/05
<Table>
<Caption>
INVESTMENT GRADE MUNICIPAL TRUST
SYMBOL: VIG
- ------------------------------------------------------------
BASED ON BASED ON
AVERAGE ANNUAL TOTAL RETURNS NAV MARKET PRICE
Since Inception (11/30/89) 6.29% 4.78%
10-year 5.93 3.78
5-year 8.32 7.83
1-year 8.92 11.48
6-month 2.38 1.87
- ------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, 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.
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 does not include any expenses, fees or sales
charges, which would lower performance. The index is unmanaged and should not be
considered an investment. It is not possible to invest directly in an index.
1
Trust Report
FOR THE 6-MONTH PERIOD ENDED APRIL 30, 2005
Van Kampen Investment Grade Municipal Trust is managed by the Adviser's
Municipal Fixed Income team.(1) Current members include Thomas Byron and Robert
Wimmel, Vice Presidents of the Adviser; and John Reynoldson, Executive Director
of the Adviser.
MARKET CONDITIONS
The six-month period ended April 30, 2005, was characterized by continued
short-term interest rate increases. As crude oil prices reached record highs,
the prospect of rising inflation also cast a shadow. The Federal Open Market
Committee (the "Fed") raised the federal funds target rate 100 basis points
during the period through a series of four, "measured" 0.25 percent tightenings
to 2.75 percent by the end of April. Although rates in the short and
intermediate areas of the yield curve shifted upward as the Fed tightened, long-
term interest rates fell as buyers did not seem deterred by the prospect of
rising inflation. As a result, the yield curve (the difference between short and
longer-term yields) flattened and the long end of the municipal market handily
outperformed the shorter end.
The municipal market in total posted positive returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a flat to slightly negative showing. Within the investment-grade segment of
the market, yield differentials between BBB-rated and AAA-rated municipal
securities were slightly wider, though BBB-rated securities still outperformed
high grades due to their higher coupons, while securities rated below investment
grade strongly outperformed as investors sought out their higher yields.
The Fed's interest rate hikes did not appear to dampen investors' appetites for
municipal bonds, as net inflows into municipal bond funds topped $290 million
during the period. The supply of new issues was modest during the closing months
of 2004 (the first two months of the period) before soaring in the opening
months of 2005 as long-term issuers rushed to bring securities to market in
anticipation of additional interest rate increases in the near term.
PERFORMANCE ANALYSIS
The trust's return 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, as
(1)Team members may change without notice at any time.
2
they did during the reporting period. On an NAV basis, the trust outperformed
its benchmark index, the Lehman Brothers Municipal Bond Index. On a market price
basis, the trust underperformed its index.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005
<Table>
<Caption>
- ----------------------------------------------------------
BASED ON BASED ON LEHMAN BROTHERS
NAV MARKET PRICE MUNICIPAL BOND INDEX
2.38% 1.87% 1.93%
- ----------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. 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.
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 reinvested in longer-term securities, taking advantage
of the difference between short- and longer-term rates. The Fed's policy of
raising interest rates throughout the period made the trust's borrowing activity
more expensive. These expenses, however, were more than offset by the positive
performance of the bonds held by the trust.
One of our key strategies in managing the trust during the period was to
position it for rising interest rates. This approach was largely the result of
our analysis of interest rates, which remained relatively low by historical
standards even after rising from their multi-decade lows earlier. First, we kept
the trust's duration (a measure of interest-rate sensitivity) below that of its
benchmark. Second, to limit the trust's exposure to areas of the market that
would be most likely susceptible to rising rates, we trimmed exposure to bonds
with maturities in the 10- to 15-year range. We also reduced positions in
pre-refunded bonds. We reinvested the proceeds from those sales into bonds with
maturities of 20 years or longer, particularly bonds with maturities 25 years
and longer. In addition to offering relatively attractive income streams, these
longer-maturity securities positioned the trust to benefit from any future
flattening of the yield curve. When they were available, we favored bonds with
premium coupons and priced to shorter call dates.
We continued to focus on relative-value trading between liquid, high-quality
securities to capture relative value opportunities identified by our analysts.
The trust's overall credit exposure remained tilted toward higher-quality
securities, with more than 71 percent of its exposure at the end of the period
in bonds rated AA or better. We took advantage of some compelling opportunities
to include BBB rated securities in the portfolio when our analysts identified
securities with attractive structures and yield characteristics. By the end of
the period, bonds rated BBB represented 9 percent of the portfolio. The trust
also
3
held unrated securities, totaling 6 percent at the close of the reporting
period. These lower rated and unrated allocations proved beneficial as the
market favored higher-yielding securities.
The trust's portfolio remained well diversified across the major sectors of the
municipal bond market, with its top three sectors at the end of the period being
public building, general purpose, and health care.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the trust in the future.
4
<Table>
<Caption>
RATINGS ALLOCATION AS OF 4/30/05
AAA/Aaa 65.5%
AA/Aa 5.8
A/A 12.2
BBB/Baa 9.4
BB/Ba 0.7
B/B 0.5
Non-Rated 5.9
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 4/30/05
California 10.7%
Texas 9.2
Illinois 8.6
Florida 6.2
Kansas 5.8
New Jersey 5.6
Missouri 5.5
Washington 5.4
Colorado 3.9
North Carolina 3.8
New York 3.3
South Carolina 3.2
Alaska 3.0
Indiana 2.9
Pennsylvania 2.3
Connecticut 2.0
Ohio 1.8
Nevada 1.7
Arizona 1.5
Georgia 1.5
Alabama 1.5
Oregon 1.4
Guam 1.4
Puerto Rico 1.4
Michigan 1.3
Tennessee 1.3
New Hampshire 1.1
Massachusetts 0.8
Maryland 0.7
Wisconsin 0.5
Idaho 0.4
Arkansas 0.3
-----
Total Investments 100.0%
<Caption>
TOP 5 SECTORS AS OF 4/30/05
Public Building 14.0%
General Purpose 13.8
Health Care 13.3
Public Education 11.3
Wholesale Electric 7.2
</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. Ratings and summary of investments by
state classification are as a percentage of total investments. Sectors are as a
percentage of long-term investments. Securities are classified by sectors that
represent broad groupings of related industries. 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. Rating allocations based upon ratings as issued by Standard
and Poor's and Moody's, respectively.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen trust provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
trust's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to trust shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each trust files a
complete schedule of portfolio holdings with the SEC for the trust's
first and third fiscal quarters on Form N-Q. Van Kampen does not deliver
the reports for the first and third fiscal quarters to shareholders, nor
are the reports posted to the Van Kampen public Web site. You may,
however, obtain the Form N-Q filings (as well as the Form N-CSR and
N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You
may also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a trust's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
The trust's policies and procedures with respect to the voting of proxies
relating to the trust's portfolio securities and information on how the
trust voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our Web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
6
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MUNICIPAL BONDS 149.0%
ALABAMA 2.2%
$1,000 Gadsden, AL Wts Ser B (AMBAC Insd)................ 5.250% 08/01/21 $ 1,104,330
------------
ALASKA 4.5%
1,000 Alaska St Intl Arpt Rev Ser B (AMBAC Insd)........ 5.750 10/01/17 1,132,310
1,000 Matanuska-Susitna Boro, AK Ctf Part Pub Safety
Bldg Lease (FSA Insd)............................. 5.750 03/01/16 1,105,350
------------
2,237,660
------------
ARIZONA 2.3%
1,000 Phoenix, AZ Civic Impt Corp Wastewtr Sys Rev Jr
Lien (Prerefunded @ 07/01/10) (FGIC Insd)......... 6.250 07/01/17 1,157,160
------------
ARKANSAS 0.4%
221 Dogwood Addition PRD Muni Ppty Owners Multi-Purp
Imp Dist No 8 Maumelle AK Impt Ser 2001 Rfdg
(Acquired 03/14/01, Cost $220,707) (a)............ 7.500 03/01/06 220,762
------------
CALIFORNIA 16.1%
750 California St Dept Wtr Res Pwr Ser A.............. 6.000 05/01/15 864,157
1,000 California St Dept Wtr Res Pwr Ser A
(AMBAC Insd)...................................... 5.375 05/01/18 1,111,250
995 California St Pub Wks Brd UCLA Replacement Hosp
Ser A (FSA Insd).................................. 5.375 10/01/20 1,084,411
1,000 California Statewide Cmnty Dev Auth Rev Daughters
of Charity Hlth Ser A............................. 5.250 07/01/35 1,031,590
3,990 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(Escrowed to Maturity) (MBIA Insd) (b)............ * 09/01/17 1,908,736
225 Foothill/Eastern Corridor Agy CA Toll Rd Rev Conv
Cap Apprec Sr Lien Ser A
(Prerefunded @ 01/01/10).......................... 7.150 01/01/13 269,273
1,000 Los Angeles, CA Uni Sch Dist Ser A (MBIA Insd).... 5.375 07/01/18 1,117,150
1,000 San Joaquin Hills, CA Transn Corridor Agy Toll Rd
Rev Cap Apprec Ser A Rfdg (MBIA Insd)............. * 01/15/27 342,250
1,000 San Joaquin Hills, CA Transn Corridor Agy Toll Rd
Rev Cap Apprec Ser A Rfdg (MBIA Insd)............. * 01/15/28 325,040
------------
8,053,857
------------
COLORADO 5.9%
1,000 Colorado Hlth Fac Auth Rev Evangelical Lutheran
Ser A............................................. 5.250 06/01/34 1,027,150
235 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity) (c)........................ 11.500 09/01/07 278,249
265 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity) (c)........................ 11.500 09/01/08 333,055
300 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity) (c)........................ 11.500 09/01/09 397,143
</Table>
See Notes to Financial Statements 7
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$ 340 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity) (c)........................ 11.500% 09/01/10 $ 470,914
220 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity)............................ 11.500 09/01/11 316,675
100 Jefferson Cnty, CO Residential Mtg Rev
(Escrowed to Maturity) (c)........................ 9.000 09/01/12 133,767
------------
2,956,953
------------
CONNECTICUT 3.0%
1,360 Bridgeport, CT Ser A (MBIA Insd).................. 5.250 08/15/24 1,473,873
------------
FLORIDA 9.3%
400 Capital Tr Agy FL Rev Ft Lauderdale Proj (AMT).... 5.750 01/01/32 402,616
1,000 Escambia Cnty, FL Hlth Fac Auth Rev
(AMBAC Insd)...................................... 5.950 07/01/20 1,015,510
1,000 Highlands Cnty, FL Hlth Fac Auth Rev Hosp
Adventist Hlth Sys Ser D.......................... 5.375 11/15/35 1,045,950
1,000 Jacksonville, FL Rev Better Jacksonville (MBIA
Insd)............................................. 5.250 10/01/21 1,103,640
1,000 West Palm Beach, FL............................... 5.250 03/01/14 1,065,370
------------
4,633,086
------------
GEORGIA 2.2%
1,000 Municipal Elec Auth GA Combustion Turbine Proj Ser
A (MBIA Insd)..................................... 5.250 11/01/16 1,101,800
------------
ILLINOIS 13.0%
100 Bedford Park, IL Tax Increment 71st & Cicero Proj
Rfdg.............................................. 7.000 01/01/06 101,118
1,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien C 2 Rfdg (AMT) (FSA Insd).................... 5.250 01/01/30 1,048,540
400 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airl Inc Proj Ser B Rfdg (AMT) (d) (e)............ 6.100 11/01/35 68,552
1,250 Chicago, IL Proj Ser C Rfdg (FGIC Insd)........... 5.500 01/01/40 1,362,100
45 Chicago, IL Single Family Mtg Rev Ser B (AMT)
(GNMA Collateralized)............................. 7.625 09/01/27 45,620
510 Cook Cnty, IL Sch Dist No 107 (c)................. 7.150 12/01/08 576,958
575 Cook Cnty, IL Sch Dist No 107 (c)................. 7.200 12/01/09 668,840
625 Cook Cnty, IL Sch Dist No 107..................... 7.000 12/01/10 737,644
500 Hodgkins, IL Tax Increment Ser A Rfdg............. 7.625 12/01/13 524,260
250 Lake Cnty, IL Cmnty Unit (Escrowed to Maturity)
(Radian Insd) (b)................................. 7.600 02/01/14 322,940
1,000 McHenry & Kane Cntys, IL Cmnty (FGIC Insd)........ * 01/01/16 625,190
400 Pingree Grove Vlg, IL Spl Svc Area No 1 Spl Tax
Cambridge Lakes Proj Ser-05....................... 5.250 03/01/15 399,212
------------
6,480,974
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
INDIANA 4.3%
$1,000 Indiana Hlth Fac Fin Auth Hosp Rev Cmnty Proj Ser
A (AMBAC Insd) (f)................................ 5.000% 05/01/35 $ 1,036,660
1,000 MSD Warren Twp IN Vision 2005 First Mtg
(Prerefunded @ 01/15/11) (FGIC Insd).............. 5.500 07/15/20 1,118,580
------------
2,155,240
------------
KANSAS 8.7%
1,825 Cowley Cnty, KS Uni Sch Dist Impt Rfdg
(MBIA Insd) (c)................................... 5.250 10/01/22 2,014,143
400 Overland Pk, KS Dev Corp Rev First Tier Overland
Park Ser A........................................ 7.375 01/01/32 438,384
1,000 Wyandotte Cnty, KS Sch Dist 500 Rfdg (FSA Insd)... 5.000 09/01/19 1,090,230
740 Wyandotte Cnty/Kansas City, KS Uni Govt Indl Rev
Brd Pub Util Office Bldg Complex Proj (MBIA Insd)
(c)............................................... 5.000 05/01/09 793,125
------------
4,335,882
------------
MARYLAND 1.0%
500 Maryland St Econ Dev Corp Student Hsg Rev Univ MD
College Pk Proj................................... 5.625 06/01/35 518,505
------------
MASSACHUSETTS 1.3%
600 Massachusetts St Dev Fin Agy Rev Proj Ser A-100
(MBIA Insd)....................................... 5.125 02/01/34 628,284
------------
MICHIGAN 2.0%
1,000 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser A..... 5.250 07/01/30 1,007,770
------------
MISSOURI 8.2%
1,000 Cape Girardeau Cnty, MO Indl Dev Auth Hlthcare Fac
Rev Southeast MO Hosp Assoc....................... 5.625 06/01/27 1,030,310
400 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs
Proj Rfdg......................................... 7.000 10/01/21 432,756
1,000 Saint Charles, MO Ctf Part Ser B.................. 5.500 05/01/18 1,069,720
1,460 Saint Louis, MO Brd Ed Direct Dep Pgm Ser A Rfdg
(FSA Insd)........................................ 5.000 04/01/21 1,570,259
------------
4,103,045
------------
NEVADA 2.6%
1,000 Clark Cnty, NV Indl Dev Rev Southwest Gas Corp
Proj Ser A (AMT) (AMBAC Insd)..................... 5.250 07/01/34 1,049,120
240 Nevada Hsg Div Single Family Mtg Mezz
Ser D2 (AMT)...................................... 6.300 04/01/21 242,885
------------
1,292,005
------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW HAMPSHIRE 1.6%
$ 525 New Hampshire Hlth & Ed Fac Auth Rev Derryfield
Sch............................................... 6.750% 07/01/20 $ 556,867
250 New Hampshire Hlth & Ed Fac Hlthcare Sys Covenant
Hlth.............................................. 5.500 07/01/34 262,730
------------
819,597
------------
NEW JERSEY 8.4%
1,000 New Jersey Econ Dev Auth Econ Dev Rev Kapkowski Rd
Landfill Proj Rfdg................................ 5.750 04/01/31 1,001,960
500 New Jersey Econ Dev Auth Rev Cigarette Tax........ 5.750 06/15/34 534,550
1,500 New Jersey Econ Dev Auth Wtr Fac Rev NJ American
Wtr Co Inc Ser B (AMT) (FGIC Insd)................ 5.375 05/01/32 1,564,110
1,000 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser A
(AMBAC Insd)...................................... 5.250 09/01/21 1,087,380
------------
4,188,000
------------
NEW YORK 4.1%
1,000 New York City Ser H............................... 5.750 03/15/13 1,117,160
400 New York City Indl Dev Agy Rev World Trade Ctr
Ser A............................................. 6.250 03/01/15 408,672
500 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty Dev
Ppty Yonkers Inc Ser A............................ 6.625 02/01/26 540,025
------------
2,065,857
------------
NORTH CAROLINA 5.7%
1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)..... 5.250 01/01/20 1,090,100
1,650 Raleigh Durham, NC Arpt Auth Rev Ser A (AMBAC
Insd)............................................. 5.000 05/01/30 1,733,787
------------
2,823,887
------------
OHIO 2.7%
1,250 Ohio St Bldg Auth St Fac Admin Bldg Fd Proj Ser A
(FSA Insd)........................................ 5.000 04/01/22 1,327,225
------------
OREGON 2.2%
1,000 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)....... 5.250 11/01/18 1,090,700
------------
PENNSYLVANIA 3.5%
1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev Coll
Toledo Edison Co Proj Rfdg........................ 7.625 05/01/20 1,022,860
315 Crawford Cnty, PA Hosp Auth Sr Living Fac Rev
Wesbury Utd Methodist Cmnty (c)................... 5.875 08/15/10 330,655
400 Montgomery Cnty, PA Indl Dev Auth Rev Whitemarsh
Continuing Care Proj.............................. 6.125 02/01/28 408,852
------------
1,762,367
------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (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) (c).................................... 5.250% 01/01/15 $ 1,342,025
1,000 South Carolina Jobs Econ Elec & Gas Co Proj Ser A
(AMBAC Insd)...................................... 5.200 11/01/27 1,072,050
------------
2,414,075
------------
TENNESSEE 2.0%
400 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp First
Mtg Ser B Impt & Rfdg............................. 8.000 07/01/33 476,868
400 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp Ser B
Impt & Rfdg (MBIA Insd)........................... 7.750 07/01/29 505,184
------------
982,052
------------
TEXAS 13.9%
1,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser A
Rfdg (AMT) (FGIC Insd)............................ 5.500 11/01/31 1,057,880
1,500 Fort Worth, TX Wtr & Swr Rev Impt Rfdg............ 5.750 02/15/16 1,667,865
1,000 Harris Cnty, TX Sports Auth Spl Rev Ser B Rfdg
(MBIA Insd)....................................... 5.250 11/15/40 1,040,650
1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (AMT) (FSA
Insd)............................................. 5.625 07/01/30 1,078,090
400 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones
Mem Hosp Proj..................................... 7.250 01/01/31 407,888
1,000 North Cent TX Hlth Fac Dev Hosp Baylor Hlthcare
Sys Proj Ser A.................................... 5.125 05/15/29 1,029,000
168 Pecos Cnty, TX Ctf Part (Acquired 06/23/97, Cost
$168,483) (a)..................................... 6.000 01/12/08 169,132
490 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (FSA Insd)....................... 5.500 09/01/13 494,258
------------
6,944,763
------------
WASHINGTON 8.1%
1,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg
(FSA Insd)........................................ 5.500 07/01/17 1,107,250
1,660 Pierce Cnty, WA (AMBAC Insd) (c).................. 5.750 08/01/16 1,847,215
1,000 Port Seattle, WA Rev Ser B (AMT) (MBIA Insd)...... 5.625 02/01/24 1,077,500
------------
4,031,965
------------
WISCONSIN 0.8%
400 Wisconsin St Hlth & Ed Fac Beaver Dam Cmnty Hosp
Inc Ser A......................................... 6.000 08/15/19 396,216
------------
GUAM 2.1%
1,000 Guam Pwr Auth Rev Ser A (AMBAC Insd).............. 5.250 10/01/34 1,070,240
------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
PUERTO RICO 2.1%
$1,000 Puerto Rico Pub Bldg Auth Rev Gtd Govt Fac Ser I
(Comwlth Gtd)..................................... 5.250% 07/01/33 $ 1,064,300
------------
TOTAL LONG-TERM INVESTMENTS 149.0%
(Cost $69,698,370).......................................................... 74,442,430
SHORT-TERM INVESTMENTS 1.4%
(Cost $700,000)............................................................. 700,000
------------
TOTAL INVESTMENTS 150.4%
(Cost $70,398,370).......................................................... 75,142,430
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3%)................................. (161,749)
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (50.1%)................... (25,030,206)
------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%................................ $ 49,950,475
============
</Table>
Percentages are calculated as a percentage of net assets applicable to common
shares.
* 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 0.8% 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) The Trust owns 100% of the bond issuance.
(d) Non-income producing security.
(e) This borrower has filed for protection in federal bankruptcy court.
(f) Securities purchased on a when-issued or delayed delivery basis.
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
Comwth Gtd--Commonwealth of Puerto Rico
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, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $70,398,370)........................ $75,142,430
Cash........................................................ 52,437
Receivables:
Interest.................................................. 1,052,829
Investments Sold.......................................... 53,069
Variation Margin on Futures............................... 20,250
Other....................................................... 210
-----------
Total Assets............................................ 76,321,225
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,017,310
Investment Advisory Fee................................... 33,633
Income Distributions--Common Shares....................... 15,332
Other Affiliates.......................................... 5,754
Trustees' Deferred Compensation and Retirement Plans........ 214,554
Accrued Expenses............................................ 53,961
-----------
Total Liabilities....................................... 1,340,544
Preferred Shares (including accrued distributions).......... 25,030,206
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $49,950,475
===========
NET ASSET VALUE PER COMMON SHARE ($49,950,475 divided by
4,839,000 shares outstanding)............................. $ 10.32
===========
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................................. 4,645,048
Accumulated Undistributed Net Investment Income............. (3,581)
Accumulated Net Realized Loss............................... (6,301,968)
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $49,950,475
===========
PREFERRED SHARES ($.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....................... $74,950,475
===========
</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, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $1,929,707
----------
EXPENSES:
Investment Advisory Fee..................................... 204,196
Preferred Share Maintenance................................. 40,078
Trustees' Fees and Related Expenses......................... 16,132
Legal....................................................... 11,689
Custody..................................................... 4,204
Other....................................................... 66,549
----------
Total Expenses.......................................... 342,848
----------
NET INVESTMENT INCOME....................................... $1,586,859
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 377,877
Futures................................................... 52,508
----------
Net Realized Gain........................................... 430,385
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 5,435,875
----------
End of the Period:
Investments............................................. 4,744,060
Futures................................................. (99,012)
----------
4,645,048
----------
Net Unrealized Depreciation During the Period............... (790,827)
----------
NET REALIZED AND UNREALIZED LOSS............................ $ (360,442)
==========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (234,173)
==========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 992,244
==========
</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, 2005 OCTOBER 31, 2004
-----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 1,586,859 $ 2,960,961
Net Realized Gain/Loss................................... 430,385 (2,854,188)
Net Unrealized Appreciation/Depreciation During the
Period................................................. (790,827) 3,576,698
Distributions to Preferred Shareholders:
Net Investment Income.................................. (234,173) (279,002)
----------- -----------
Change in Net Assets Applicable to Common Shares from
Operations............................................. 992,244 3,404,469
Distributions to Common Shareholders:
Net Investment Income.................................. (1,190,131) (2,380,306)
----------- -----------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
INVESTMENT ACTIVITIES.................................. (197,887) 1,024,163
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period.................................. 50,148,362 49,124,199
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of $(3,581) and $(166,136),
respectively).......................................... $49,950,475 $50,148,362
=========== ===========
</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, --------------------
2005 2004 2003
----------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................. $ 10.36 $ 10.15 $ 9.97
-------- -------- --------
Net Investment Income.................................. .33 .61 .63
Net Realized and Unrealized Gain/Loss.................. (.07) .15 .10
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income................................ (.05) (.06) (.06)
-------- -------- --------
Total from Investment Operations......................... .21 .70 .67
Distributions Paid to Common Shareholders:
Net Investment Income.................................. (.25) (.49) (.49)
-------- -------- --------
NET ASSET VALUE, END OF THE PERIOD....................... $ 10.32 $ 10.36 $ 10.15
======== ======== ========
Common Share Market Price at End of the Period........... $ 8.99 $ 9.07 $ 8.96
Total Return (b)......................................... 1.87%* 6.85% 8.91%
Net Assets Applicable to Common Shares at End of the
Period (In millions)................................... $ 50.0 $ 50.1 $ 49.1
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (c)...................................... 1.39% 1.53% 1.49%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (c)........................ 6.42% 5.99% 6.19%
Portfolio Turnover....................................... 12%* 19% 36%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
Preferred Shares (c)................................... .92% 1.01% .99%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d)........................ 5.47% 5.42% 5.64%
SENIOR SECURITIES:
Total Preferred Shares Outstanding....................... 250 250 250
Asset Coverage Per Preferred Share (e)................... $299,923 $300,616 $296,504
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
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
- ------------------------------------------------------------------------------------------
2002 (a) 2001 2000 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
$ 10.01 $ 9.43 $ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75 $ 10.50
-------- -------- -------- -------- -------- -------- -------- --------
.65 .67 .76 .83 .86 .96 .88 .88
(.13) .59 .09 (1.26) .01 .12 (.19) .40
(.07) (.18) (.21) (.17) (.19) (.18) (.19) (.20)
-------- -------- -------- -------- -------- -------- -------- --------
.45 1.08 .64 (.60) .68 .90 .50 1.08
(.49) (.50) (.60) (.67) (.68) (.71) (.78) (.83)
-------- -------- -------- -------- -------- -------- -------- --------
$ 9.97 $ 10.01 $ 9.43 $ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75
======== ======== ======== ======== ======== ======== ======== ========
$ 8.69 $ 8.70 $ 8.08 $ 8.8125 $11.0625 $10.9375 $ 11.00 $ 10.625
5.64% 14.11% -1.60% -15.09% 7.63% 6.13% 11.02% 2.88%
$ 48.2 $ 48.4 $ 45.6 $ 45.4 $ 51.6 $ 51.6 $ 50.7 $ 52.0
1.42% 1.46% 1.52% 1.69% 1.47% 1.47% 1.51% 1.52%
6.62% 6.77% 8.25% 8.11% 8.14% 9.14% 8.32% 8.22%
37% 45% 41% 46% 33% 25% 39% 50%
.93% .96% .98% 1.12% .99% .99% 1.01% 1.02%
5.87% 4.98% 5.92% 6.41% 6.40% 7.38% 6.55% 6.31%
250 250 250 250 250 250 250 250
$292,949 $293,730 $282,465 $281,691 $306,365 $306,303 $302,730 $308,150
$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, 2005 (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
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, 2005, the Trust had $1,017,310 of when-issued or
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 Subchapter M 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, 2004, the Trust had an
18
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
accumulated capital loss carryforward for tax purposes of $6,800,874, which will
expire according to the following schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$1,930,614.................................................. October 31, 2005
965.................................................. October 31, 2007
196,107.................................................. October 31, 2008
840,184.................................................. October 31, 2009
929,222.................................................. October 31, 2010
2,903,782.................................................. October 31, 2012
</Table>
At April 30, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $70,332,831
===========
Gross tax unrealized appreciation........................... $ 5,142,971
Gross tax unrealized depreciation........................... (333,372)
-----------
Net tax unrealized appreciation on investments.............. $ 4,809,599
===========
</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,
2004 was as follows:
<Table>
Distributions paid from:
Ordinary income........................................... $15,735
Long-term capital gain.................................... -0-
-------
$15,735
=======
</Table>
As of October 31, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $9,230
</Table>
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 .55% of the average daily net assets
of the Trust. Effective November 1, 2004, the investment advisory fee was
reduced from .60% to .55%.
For the six months ended April 30, 2005, the Trust recognized expenses of
approximately $1,900 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust
is a partner of such firm and he and his law firm provide legal services as
legal counsel to the Trust.
19
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
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, 2005, the Trust recognized expenses of approximately $15,700
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
also 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 $9,417,177 and $9,155,763, respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust may invest up to 15% of its net assets in "inverse floating rate
obligations." The inverse floating rate obligations in which the Trust may
invest are typically created through a division of a fixed-rate municipal
obligation into two separate instruments, a short-term obligation and a
long-term obligation. The interest rate on the short-term obligation is set at
periodic auctions. The interest rate on the long-term obligation which the Trust
may purchase is the rate the issuer would have paid on the fixed-income
obligation, (i) plus the difference between such fixed rate and the rate on the
short-term obligation, if the short-term rate is lower than the fixed rate; or
(ii) minus such difference if the interest rate on the short-term obligation is
higher than the fixed rate. These securities have varying degrees of liquidity
and the market value of such securities generally will fluctuate in response to
changes in market rates of interest to a greater extent than the value of an
equal principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity. These securities tend to underperform the
market for fixed rate bonds in a rising interest rate environment, but tend to
outperform the market for fixed rate bonds when interest rates decline or remain
relatively stable. Although volatile, inverse floating rate obligations
typically offer the potential for yields exceeding the yields available on fixed
rate bonds with comparable credit quality, coupon, call provisions and maturity.
These securities usually permit the investor to convert the floating rate
security counterpart to a fixed rate (normally adjusted downward), and this
optional conversion feature may provide a partial hedge against rising rates if
exercised at an opportune time.
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
20
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
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.
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, 2005, were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at October 31, 2004............................. 95
Futures Opened.............................................. 176
Futures Closed.............................................. (190)
----
Outstanding at April 30, 2005............................... 81
====
</Table>
The futures contracts outstanding as of April 30, 2005 and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 5-Year Futures June 2005 (Current
Notional Value of $108,453 per contract).................. 81 $(99,012)
</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, 2005 was 2.450%. During the
six months ended April 30, 2005, the rates ranged from 1.650% to 2.450%.
21
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
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.
6. INDEMNIFICATIONS
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
7. TRUST MERGER
On March 18, 2005, the Trustees of Investment Grade Municipal Trust ("Target
Trust") announced its intention to merge the Target Trust into Municipal Trust
("Acquiring Trust"). The Trustees of each of the trusts have approved in
principal an agreement and plan of reorganization between the trusts providing
for a transfer of assets and liabilities of the Target Trust to the Acquiring
Trust in exchange for shares of beneficial interest of the Acquiring Trust (the
"Reorganization"). The Reorganization is subject to the approval by the
shareholders of the Target Trust.
22
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
BOARD OF TRUSTEES, OFFICERS, AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
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
OFFICERS
MITCHELL M. MERIN
President and Chief Executive Officer
RONALD E. ROBISON
Executive Vice President
and Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President
and Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
TRANSFER AGENT
EQUISERVE TRUST COMPANY, N.A.
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 REGISTERED PUBLIC
ACCOUNTING FIRM
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.
23
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
VIG SAR 6/05 RN05-01285P-Y04/05
(VAN KAMPEN INVESTMENTS LOGO)
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. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. 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 12. 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 16, 2005
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 16, 2005
By: /s/ James W. Garrett
----------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: June 16, 2005