VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST, N-30D, 1996-08-28

VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
N-30D, 1996-08-28

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 18
Independent Accountants' Report.................. 23
Dividend Reinvestment Plan....................... 24
</TABLE>

VMT ANR 8/96
<PAGE> 2

LETTER TO SHAREHOLDERS

August 15, 1996

Dear Shareholder,

During the first half of the
Trust's fiscal year, bond prices
appreciated as interest rates on [PHOTO]
intermediate and long-term bonds fell
steadily. However, in February, DENNIS J. MCDONNELL AND DON G. POWELL
interest rates began to change
direction as economic growth
accelerated. The yield on the
benchmark 30-year U.S. Treasury bond
rose from 6.01 percent at the end of
January to 6.53 percent by the end of
February. Consequently, although the municipal bond market outperformed the U.S.
Treasury market during the past year, all fixed-income securities were placed
under pressure by rising interest rates since February.

After an anemic 0.3 percent growth rate in gross domestic product in the
fourth quarter of 1995, GDP rose 2.0 percent in the first quarter of 1996 and,
more recently, 4.2 percent in the second quarter. The strengthening economic
growth was spurred by consumer spending, as retail sales rose more than 5
percent in the first five months of this year versus the comparable 1995 period.
This brisk activity generated concerns about inflation, which had been running
at about 3 percent for several years. Investors began to suspect that the
Federal Reserve might tighten monetary policy to ward off inflation. This would
cause interest rates to rise and bond prices to fall.

PORTFOLIO STRATEGY

The Municipal Income Trust is positioned defensively with a fairly short
duration of 6.44 years and a good mix of bonds paying high coupon rates. The
shorter the duration, the less sensitive a portfolio is expected to be to
interest rate changes. At the same time, we continue to focus on minimizing our
exposure to the risk that bond issuers will redeem their securities in the near
future.

In terms of investment quality, the Trust employs a barbell approach by
investing at both ends of the investment-grade quality spectrum. For example,
nearly 37 percent of the Trust's portfolio is currently comprised of securities
rated AAA, the highest credit rating assigned to bonds by Standard & Poor's
Ratings Group. These bonds involve very little credit risk, are highly liquid,
and typically respond quickly to interest rate changes. The next largest holding
in the portfolio includes bonds rated BBB, the lowest credit rating within the
investment-grade category, but offer greater yield potential than AAA-rated
securities.

This investment approach allows the Trust's credit analysts to find what we
believe are the best relative values in municipal sectors, such as health care,
single family housing, general purpose, and airports. These sectors are
currently among the top five sectors held by the Trust.

Continued on page two

1
<PAGE> 3
PORTFOLIO COMPOSITION BY CREDIT QUALITY

AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995

[PIE CHART] [PIE CHART]

AAA - 36.9% AAA - 38.8%
AA - 9.4% AA - 9.3%
A - 18.1% A - 15.0%
BBB - 25.0% BBB - 25.9%
BB - 5.9% BB - 5.9%
B - 0.2% B - 0.2%
Non-Rated - 4.5% Non-Rated - 4.9%

Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's, the Moody's rating is used.

PERFORMANCE SUMMARY
Because of the volatile interest rate environment, municipal bonds provided
attractive returns in the last half of 1995 but struggled through the first half
of 1996.
The Trust generated a one-year total return at market price of -4.27
percent(1). This return reflects the change in market price per common share on
the New York Stock Exchange from $11.125 on June 30, 1995 to $9.875 on June 30,
1996 and reinvestment of dividends totaling $0.770 per share.
During the last half of the period, the Trust realized a reduction in its
monthly dividend from $0.065 to $0.060 per common share, effective March 1, 1996
and first payable March 31, 1996. Due to a series of substantial increases by
the Federal Reserve in 1994, short-term interest rates are significantly higher
today. This short-term rate pressure has had an adverse impact on Trust's
earnings, necessitating the dividend adjustment.
Despite the decline in income, the Trust produced a tax-exempt distribution
rate of 7.29 percent(3), based on the closing stock price of $9.875 per share on
June 30, 1996. On a taxable-equivalent basis, an investor in the 36 percent
federal income tax bracket would need to invest in a taxable investment yielding
11.39 percent(4) to achieve the same after-tax rate as the Trust.

MARKET OUTLOOK
We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in the
coming months. That suggests an upward bias for short-term interest rates and
for yields on long-term bonds to remain steady at current levels. In particular,
we expect long-term municipal bond yields to trade within a range of 5.7 and 6.3
percent. In the meantime, we expect the Municipal Income Trust will continue to
offer attractive returns, particularly when compared to taxable investments.

Continued on page three

2
<PAGE> 4

CORPORATE NEWS
As you may be aware, an agreement was reached in late June for VK/AC
Holding, Inc., the parent company of Van Kampen American Capital, Inc., to be
acquired by the Morgan Stanley Group Inc. While this announcement may appear
commonplace in an ever-changing financial industry, we believe it represents an
exciting opportunity for shareholders of our investment products.
With Morgan Stanley's global leadership in investment banking and asset
management and Van Kampen American Capital's reputation for competitive
long-term performance and superior investor services, together we will offer a
broader range of investment opportunities.
The new ownership will not affect our commitment to pursuing excellence in
all aspects of our business. And, we expect very little change in the way your
closed-end fund account is maintained and serviced.
A proxy will be mailed to you shortly explaining the acquisition and asking
for your vote of approval. Please read it carefully and return your response for
inclusion in the shareholder vote. We value our relationship with you and look
forward to communicating more details of this transaction, which is anticipated
to be completed in November.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

3
<PAGE> 5

PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996

VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VMT)

<TABLE>
<S> <C>
TOTAL RETURNS
One-year total return based on market price(1).............. (4.27%)
One-year total return based on NAV(2)....................... 8.02%

DISTRIBUTION RATES

Distribution rate as a % of closing stock price(3).......... 7.29%
Taxable-equivalent distribution rate as a % of closing stock
price(4).................................................. 11.39%

SHARE VALUATIONS

Net asset value............................................. $ 9.76
Closing stock price......................................... $ 9.875
One-year high common stock price (08/17/95)................. $11.375
One-year low common stock price (06/27/96).................. $ 9.750
Preferred share (Series A) rate(5).......................... 3.65%
Preferred share (Series B) rate(5).......................... 3.60%
Preferred share (series C) rate(5).......................... 3.45%
</TABLE>

(1)Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common stock price at the end of the period
indicated.

(2)Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.

(3)Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.

(4)The taxable-equivalent distribution rate is calculated assuming a 36% federal
tax bracket.

(5)See "Notes to Financial Statements" footnote #6, for more information
concerning Preferred Share reset periods.

A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).

Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.

4
<PAGE> 6

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
ALASKA 2.8%
$ 345 Alaska St Hsg Fin Corp Rfdg..................... 7.800% 12/01/30 $ 354,153
8,475 Alaska St Hsg Fin Corp Ser A (MBIA Insd)........ 5.875 12/01/30 8,142,695
3,500 North Slope Borough, AK Ser B (Cap Guar Insd)... 6.100 06/30/99 3,643,815
------------
12,140,663
------------
ARKANSAS 0.2%
1,000 Conway, AR Hosp Rev Conway Regl Hosp Rfdg....... 8.375 07/01/11 1,078,140
------------
CALIFORNIA 5.4%
5,500 Anaheim, CA Pub Fin Auth Rev (MBIA Insd)........ 5.625 10/01/22 5,309,425
11,150 California Hsg Fin Agy Rev Homeowner Mtg Ser
D............................................... * 08/01/20 1,744,083
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(MBIA Insd)..................................... * 09/01/17 1,338,950
9,915 Foothill/Eastern Tran Corridor Agy CA Toll Road
Rev Sr Lien Ser A............................... * 01/01/20 2,086,909
2,690 Los Angeles Cnty, CA Pub Wks Fin Auth Lease Rev
Multi-Cap Fac Proj IV (MBIA Insd)............... 5.250 12/01/16 2,488,384
5,000 Mount Diablo, CA Hosp Dist Rev Ser A (Embedded
Cap) (AMBAC Insd)............................... 5.125 12/01/23 4,409,450
6,075 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)........................................... 6.000 06/01/09 6,245,404
------------
23,622,605
------------
COLORADO 11.9%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser B................................ 6.950 08/31/20 1,042,890
1,500 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser B................................ 7.000 08/31/26 1,570,590
19,405 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C................................ * 08/31/26 2,126,982
2,000 Denver, CO City & Cnty Arpt Rev Ser A........... 8.500 11/15/07 2,286,080
12,400 Denver, CO City & Cnty Arpt Rev Ser A........... 8.250 11/15/12 14,079,828
5,600 Denver, CO City & Cnty Arpt Rev Ser A........... 8.500 11/15/23 6,401,024
6,000 Denver, CO City & Cnty Arpt Rev Ser A........... 8.750 11/15/23 7,121,100
5,000 Denver, CO City & Cnty Arpt Rev Ser C (MBIA
Insd)........................................... 5.600 11/15/25 4,728,250
6,000 Denver, CO City & Cnty Sch Dist No 1 Ser A
Rfdg............................................ 5.125 12/01/12 5,637,960
2,000 Douglas Cnty, CO Sch Dist No 1 Rev Douglas &
Elbert Cntys Impt Ser A (MBIA Insd)............. 6.400 12/15/11 2,129,100
</TABLE>

See Notes to Financial Statements

5
<PAGE> 7

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO (CONTINUED)
$ 3,000 Meridian Metro Dist CO Peninsular & Oriental
Steam Navig Co Rfdg............................. 7.500% 12/01/11 $ 3,249,180
1,850 Montrose Cnty, CO Ctfs Partn.................... 6.350 06/15/06 1,781,347
------------
52,154,331
------------
DISTRICT OF COLUMBIA 1.9%
1,000 District of Columbia Ctfs Partn................. 6.875 01/01/03 997,150
2,775 District of Columbia Hosp Rev Medlantic Hlthcare
Ser A Rfdg (MBIA Insd).......................... 5.250 08/15/12 2,569,705
4,500 District of Columbia Ser A (Prerefunded @
06/01/97) (AMBAC Insd) (c)...................... 8.000 06/01/07 4,740,615
------------
8,307,470
------------
FLORIDA 5.5%
3,150 Broward Cnty, FL Tourist Dev Tax Spl Rev
Convention Cent Proj (Prerefunded @ 10/01/98)
(FGIC Insd) (c)................................. 7.750 10/01/13 3,447,391
5,000 Dunes, FL Cmnty Dev Dist Rev Wtr & Swr Proj
(Prerefunded @ 10/01/98)........................ 8.250 10/01/18 5,519,650
4,660 Florida St Brd Edl Cap Outlay Pub Edl Ser A Rfdg
(Prerefunded @ 06/01/00)........................ * 06/01/15 1,357,225
1,000 Florida St Muni Pwr Agy Rev All Requirements Pwr
Supply Proj (AMBAC Insd)........................ 5.100 10/01/25 890,960
295 Largo, FL Sun Coast Hlth Sys Rev Ser 1993....... 5.750 03/01/99 292,764
285 Largo, FL Sun Coast Hlth Sys Rev Ser 1993....... 5.750 03/01/01 280,164
3,630 Orange Cnty, FL Hsg Fin Auth Mtg Rev Ser A (GNMA
Collateralized)................................. 8.375 03/01/21 3,870,923
5,685 Palm Beach Cnty, FL Hlth Fac Auth Rev JFK Med
Cent Inc Proj Ser 1988 Rfdg (Prerefunded @
12/01/98)....................................... 8.875 12/01/18 6,348,610
1,675 Pinellas Cnty, FL Hlth Fac Auth Sun Coast Hlth
Sys Rev Sun Coast Hosp Ser A (Prerefunded @
03/01/00)....................................... 8.500 03/01/20 1,923,269
------------
23,930,956
------------
GEORGIA 3.0%
7,000 Fulton Cnty, GA Lease Rev (d)................... 7.250 06/15/10 7,885,920
2,300 Georgia Muni Elec Auth Pwr Rev Ser O............ 8.125 01/01/17 2,464,496
2,635 Municipal Elec Auth GA Spl Oblig 1st Crossover
(MBIA Insd)..................................... 6.500 01/01/20 2,875,444
------------
13,225,860
------------
IDAHO 1.1%
4,390 Boise, ID Urban Renewal Agy Park Ser A.......... 8.125 09/01/15 4,719,206
------------
</TABLE>

See Notes to Financial Statements

6
<PAGE> 8

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS 12.5%
$ 3,035 Alsip, IL Indl Dev Rev New Process Steel Corp
Proj............................................ 8.300% 10/01/04 $ 3,241,896
2,500 Alton, IL Hosp Fac Rev Saint Anthony's Hlth Cent
Proj (Prerefunded @ 09/01/99)................... 8.375 09/01/14 2,787,575
14,550 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Proj Ser 84A.......................... 8.850 05/01/18 16,234,308
2,750 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Proj Ser 84B.......................... 8.850 05/01/18 3,095,263
4,895 Chicago, IL Pub Bldg Comm Bldg Rev Ser A (MBIA
Insd)........................................... * 01/01/07 2,767,829
1,000 Chicago, IL Rfdg Ser B (AMBAC Insd)............. 5.125 01/01/15 919,220
2,910 Cook Cnty, IL Cmnty Cons Sch Rfdg Cap Apprec Ser
A (MBIA) (b).................................... * 12/01/15 905,679
2,500 Illinois Edl Fac Auth Rev Silver Cross Hosp..... 5.875 08/15/16 2,464,975
1,630 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D............................................... 9.500 11/15/15 1,863,074
1,275 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
D (Prerefunded @ 11/15/00)...................... 9.500 11/15/15 1,533,468
650 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
E............................................... 9.500 11/15/19 742,944
1,310 Illinois Hlth Fac Auth Rev Glenoaks Med Cent Ser
E (Prerefunded @ 11/15/00)...................... 9.500 11/15/19 1,575,563
1,000 Illinois Hlth Fac Auth Rev Lutheran Social Svcs
Proj Ser A (Prerefunded @ 08/01/00)............. 7.650 08/01/20 1,112,730
3,205 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys
Rfdg............................................ 6.000 11/15/23 3,118,721
2,000 Illinois Hlth Fac Auth Rev Servantcor Ser A Var
Rate Cpn (Prerefunded @ 08/15/01)............... 8.000 08/15/21 2,307,800
2,000 Illinois Hlth Fac Auth Rev Servantcor Ser B
(Prerefunded @ 08/15/99)........................ 7.875 08/15/19 2,210,800
45,775 Illinois Hsg Dev Auth Multi-Family Hsg Ser A.... * 07/01/27 4,279,962
1,745 Illinois Hsg Dev Auth Multi-Family Hsg Ser C.... 7.400 07/01/23 1,815,376
1,250 Sangamon Cnty, IL Ctfs Partn.................... 10.000 12/01/06 1,706,750
------------
54,683,933
------------
INDIANA 0.8%
1,370 Indiana Hlth Fac Fin Auth Hosp Rev Bartholomew
Cnty Hosp Proj (Prerefunded @ 08/15/00) (FSA
Insd)........................................... 7.750 08/15/20 1,548,004
1,650 Indiana St Edl Fac Auth Rev Univ Evansville Proj
(Prerefunded @ 11/01/00)........................ 8.125 11/01/10 1,875,819
------------
3,423,823
------------
</TABLE>

See Notes to Financial Statements

7
<PAGE> 9

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LOUISIANA 2.0%
$ 1,751 Lafayette, LA Pub Fin Auth Single Family Mtg Rev
Ser A Var Rate Cpn.............................. 8.500% 11/15/12 $ 1,884,166
5,050 Louisiana Pub Fac Auth Rev Multi-Family Hsg Proj
Var Rate Cpn (GNMA Collateralized).............. 8.375 07/20/23 5,404,526
1,250 New Orleans, LA Hsg Dev Multi-Family Rev Ser A
(FNMA Collateralized)........................... 7.700 02/01/22 1,331,338
------------
8,620,030
------------
MAINE 0.3%
1,335 Maine St Hsg Auth Ser C......................... 8.300 11/15/20 1,400,041
------------
MARYLAND 0.5%
4,650 Baltimore, MD Cap Apprec Cons Pub Impt Ser (FGIC
Insd)........................................... * 10/15/09 2,178,479
------------
MASSACHUSETTS 0.7%
2,695 Massachusetts St Hlth & Edl Fac Auth Rev
Farmingham Union Hosp Ser B (Prerefunded @
07/01/00)....................................... 8.500 07/01/10 3,089,548
------------
MICHIGAN 2.3%
4,535 Michigan St Hosp Fin Auth Hosp Rev Battle Creek
Ser G Rfdg (c).................................. 9.500 11/15/15 5,396,605
2,000 Michigan St Hosp Fin Auth Hosp Rev Bay Med Cent
Ser A
Rfdg............................................ 8.250 07/01/12 2,141,020
2,300 Muskegon, MI Hosp Fin Auth Hosp Rev Hackley Hosp
Ser A........................................... 8.000 02/01/08 2,438,483
------------
9,976,108
------------
MINNESOTA 1.6%
5,000 Duluth, MN Econ Dev Hlthcare Fac Rev
(Prerefunded @ 02/15/00)........................ 8.375 02/15/20 5,700,700
6,000 Southern MN Muni Pwr Agy Pwr Supply Sys Rev Ser
A (MBIA Insd)................................... * 01/01/22 1,302,720
------------
7,003,420
------------
MISSISSIPPI 0.3%
1,500 Mississippi Hosp Equip & Fac MS Baptist Med Cent
Rfdg
(MBIA Insd)..................................... 6.000 05/01/13 1,522,545
------------
MISSOURI 1.3%
1,000 Clay Cnty, MO Indl Dev Auth Indl Dev Rev........ 8.250 10/01/08 1,036,200
3,000 Missouri St Hsg Dev Cmnty Mtg Rev Ser B......... 7.000 09/01/10 3,163,560
1,500 Phelps Cnty, MO Hosp Rev Phelps Cnty Regl Med
Cent (Prerefunded @ 03/01/00)................... 8.300 03/01/20 1,708,455
------------
5,908,215
------------
</TABLE>

See Notes to Financial Statements

8
<PAGE> 10

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEBRASKA 1.9%
$ 7,535 Nebraska Invt Fin Single Family Secs Pgm B
(Inverse Fltg) (GNMA Collateralized)............ 11.293% 03/15/22 $ 8,260,244
------------
NEVADA 2.9%
10,000 Nevada Hsg Div Single Family Mtg Ser C (b)...... 6.500 04/01/28 10,049,300
2,600 Nevada Hsg Div Single Family Pgm Ser B.......... 8.375 10/01/20 2,708,030
------------
12,757,330
------------
NEW YORK 11.8%
2,250 New York City Muni Wtr Fin Auth & Swr Sys Rev
(Prerefunded @ 06/15/01)........................ 7.750 06/15/20 2,571,525
7,000 New York City Ser A Rfdg........................ 7.000 08/01/04 7,456,890
4,500 New York City Ser B (AMBAC Insd)................ 7.250 08/15/07 5,262,615
3,800 New York City Ser C............................. 7.000 08/15/08 3,995,206
1,000 New York City Ser J............................. 5.875 02/15/19 931,390
1,000 New York City Tran Auth Tran Fac Livingston
Plaza Proj Rfdg (FSA Insd)...................... 5.400 01/01/18 958,890
8,625 New York St Dorm Auth Rev City Univ Ser F....... 5.500 07/01/12 7,992,787
5,000 New York St Dorm Auth Rev City Univ Ser F....... 5.000 07/01/20 4,171,300
4,615 New York St Dorm Auth Rev St Univ Edl Fac Ser
B............................................... 7.000 05/15/16 4,882,624
1,105 New York St Med Care Fac Fin Agy Rev Mental Hlth
Svcs Fac Ser A.................................. 7.750 08/15/11 1,233,335
5 New York St Med Care Fac Fin Agy Rev Mental Hlth
Svcs Fac Ser A (Prerefunded @ 02/15/01)......... 7.750 08/15/11 5,723
2,530 New York St Med Care Fac Fin Agy Rev
Presbyterian Hosp Ser A Rfdg (MBIA Insd)........ 5.375 02/15/25 2,355,531
2,500 New York St Mtg Agy Rev Homeowner Mtg Ser 54
Rfdg............................................ 6.200 10/01/26 2,462,775
2,520 New York St Thruway Auth Genl Rev Spl Oblig
Crossover Ser A................................. * 01/01/97 2,453,396
2,200 New York St Urban Dev Corp Rev Correctional Cap
Fac Ser C (Prerefunded @ 01/01/98) (AMBAC
Insd)........................................... 7.750 01/01/13 2,366,694
2,635 New York St Urban Dev Corp Rev Youth Fac........ 5.875 04/01/08 2,585,462
------------
51,686,143
------------
</TABLE>

See Notes to Financial Statements

9
<PAGE> 11

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NORTH CAROLINA 5.4%
$ 7,000 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev
Ser B Rfdg (Embedded Cap)....................... 6.000% 01/01/14 $ 6,707,750
15,000 North Carolina Muni Pwr Agy No 1 Catawba Elec
Rev (Embedded Cap).............................. 6.000 01/01/12 14,850,900
2,555 University NC Chapel Hill Univ NC Hosp Rev...... 5.000 02/15/29 2,228,497
------------
23,787,147
------------
NORTH DAKOTA 0.3%
1,280 North Dakota St Hsg Single Family Mtg Rev Ser
A............................................... 8.375 07/01/21 1,350,707
------------
OHIO 1.1%
3,920 Mason, OH Hlth Care Fac Rev (FHA Gtd)........... 7.625 02/01/40 3,999,929
1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd
Partnership Proj Rfdg (AMBAC Insd).............. 6.375 04/01/29 1,031,780
------------
5,031,709
------------
OKLAHOMA 0.3%
1,250 Tulsa, OK Indl Auth Hosp Rev Tulsa Reg Med Cent
(Prerefunded @ 06/01/03)........................ 7.200 06/01/17 1,421,075
------------
OREGON 0.6%
2,500 Oregon St Hsg & Cmnty Svcs Dept Mtg Rev Single
Family Mtg Proj Ser B........................... 6.875 07/01/28 2,645,625
------------
PENNSYLVANIA 7.7%
6,000 Delaware Cnty, PA Indl Dev Auth Rev Res Recovery
Proj Ser A...................................... 8.100 12/01/13 6,276,840
1,750 Emmaus, PA Genl Auth Rev Var Loc Govt Bond Pool
Pgm Ser B Var Rate Cpn (BIGI Insd).............. 8.000 05/15/18 1,878,590
10,000 Geisinger Auth PA Hlth Sys Ser A (Embedded
Cap)............................................ 6.400 07/01/22 10,159,300
5,000 Pennsylvania St Higher Edl Assistance Agy
Student Ln Rev Ser B (Inverse Fltg) (MBIA
Insd)........................................... 11.033 03/01/20 5,681,250
1,100 Pennsylvania St Higher Edl Fac Auth Rev Med
College PA Ser A (Prerefunded @ 03/01/99)....... 8.375 03/01/11 1,224,685
1,750 Philadelphia, PA Sch Dist Ser A (AMBAC Insd).... * 07/01/01 1,374,975
2,000 Ridley Park, PA Hosp Auth Rev Hosp Auth Rev Ser
1993 A.......................................... 6.000 12/01/13 1,820,880
4,745 Sayre, PA Hlthcare Fac Auth Rev VHA Cap Asset
Fin Pgm Ser A (AMBAC Insd)...................... 7.700 12/01/15 5,199,808
------------
33,616,328
------------
RHODE ISLAND 0.3%
1,000 Providence, RI Pub Bldg Auth Ser B (Cap Guar
Insd)........................................... 7.250 12/15/10 1,105,680
------------
</TABLE>

See Notes to Financial Statements

10
<PAGE> 12

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SOUTH CAROLINA 0.4%
$ 1,610 South Carolina St Hsg Fin Dev Auth Homeowner Ser
A............................................... 7.400% 07/01/23 $ 1,673,112
------------
TENNESSEE 2.9%
12,230 Tennessee Hsg Dev Agy Mtg Fin Ser A............. 7.125 07/01/26 12,729,840
------------
TEXAS 4.6%
7,065 Dallas Cnty, TX Util & Reclamation Dist Cap
Apprec
(MBIA Insd)..................................... * 02/15/20 1,344,470
935 Dallas Cnty, TX Util & Reclamation Dist Cap
Apprec (Prerefunded @ 02/15/00) (MBIA Insd)..... * 02/15/20 183,802
4,820 Harris Cnty, TX Toll Road (Prerefunded @
08/15/09) (AMBAC Insd).......................... * 08/15/18 1,261,346
1,000 Harris Cnty, TX Toll Road (Prerefunded @
08/15/09) (AMBAC Insd).......................... * 08/15/21 210,180
3,525 Texas Muni Pwr Agy Rev (AMBAC Insd)............. * 09/01/07 1,901,561
8,420 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation Rfdg (Cap Guar Insd)................ 5.500 09/01/13 8,169,084
1,860 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation (Prerefunded @ 01/01/98) (BIGI
Insd)........................................... 7.875 01/01/08 1,966,373
2,000 Texas St Pub Ppty Fin Corp Rev Mental Hlth &
Retardation (Prerefunded @ 01/01/98) (BIGI
Insd)........................................... 7.875 01/01/09 2,064,000
1,750 Trinity River Auth TX Pollutn TX Instruments Inc
Proj............................................ 6.200 03/01/20 1,756,300
1,250 West Side Calhoun Cnty, TX Navig Dist Solid
Waste Disp Union Carbide Chem & Plastics........ 8.200 03/15/21 1,394,400
------------
20,251,516
------------
UTAH 2.0%
5,210 Salt Lake City, UT Arpt Rev Delta Airls Inc
Proj............................................ 7.900 06/01/17 5,503,479
3,300 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg
(Embedded Cap).................................. 5.500 02/15/17 3,066,855
------------
8,570,334
------------
WEST VIRGINIA 1.0%
2,480 South Charleston, WV Indl Dev Rev Union Carbide
Chem & Plastics Ser A........................... 8.000 08/01/20 2,654,344
1,600 West Virginia St Hsg Dev Hsg Fin Ser A.......... 7.400 11/01/11 1,671,136
------------
4,325,480
------------
WISCONSIN 0.7%
3,000 Wisconsin St Hlth & Edl Fac Auth Rev Wheaton
Franciscan (Prerefunded @ 08/15/98)............. 8.200 08/15/18 3,298,110
------------
</TABLE>

See Notes to Financial Statements

11
<PAGE> 13

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PUERTO RICO 0.2%
$ 635 Puerto Rico Elec Pwr Auth Pwr (Prerefunded @
07/01/99)....................................... 7.000% 07/01/07 $ 689,496
365 Puerto Rico Elec Pwr Auth Pwr Ser N............. 7.000 07/01/07 395,572
------------
1,085,068
------------
TOTAL LONG-TERM INVESTMENTS 98.2%
(Cost $403,897,302) (a)..................................................... 430,580,821
SHORT-TERM INVESTMENTS AT AMORTIZED COST 2.8%................................ 12,400,000
LIABILITIES IN EXCESS OF OTHER ASSETS (1.0%)................................. (4,282,083)
------------
NET ASSETS 100%.............................................................. $438,698,738
============
*Zero coupon bond
</TABLE>

(a) At June 30, 1996, cost for federal income tax purposes is $403,897,302; the
aggregate gross unrealized appreciation is $28,382,140 and the aggregate
gross unrealized depreciation is $1,698,621, resulting in net unrealized
appreciation of $26,683,519.

(b) Securities purchased on a when issued or delayed delivery basis.

(d) Private placement issue.

See Notes to Financial Statements

12
<PAGE> 14

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $403,897,302) (Note 1)............... $430,580,821
Short-Term Investments (Note 1)......................................... 12,400,000
Cash.................................................................... 38,197
Receivables:
Interest.............................................................. 7,306,559
Securities Sold....................................................... 85,000
Other................................................................... 10,628
------------
Total Assets........................................................ 450,421,205
------------
LIABILITIES:
Payables:
Securities Purchased.................................................. 10,944,261
Income Distributions -- Common and Preferred Shares................... 299,617
Investment Advisory Fee (Note 2)...................................... 214,163
Distributor and Affiliates (Note 2)................................... 43,565
Accrued Expenses........................................................ 178,912
Deferred Compensation and Retirement Plans (Note 2)..................... 41,949
------------
Total Liabilities................................................... 11,722,467
------------
NET ASSETS.............................................................. $438,698,738
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 1,000,000 shares, 330
issued with liquidation preference of $500,000 per share) (Note 6).... $165,000,000
------------
Common Shares ($.01 par value with an unlimited number of shares
authorized, 28,047,767 shares issued and outstanding) (Note 3)........ 280,478
Paid in Surplus (Note 3)................................................ 259,324,321
Net Unrealized Appreciation on Securities............................... 26,683,519
Accumulated Undistributed Net Investment Income......................... 1,755,615
Accumulated Net Realized Loss on Securities............................. (14,345,195)
------------
Net Assets Applicable to Common Shares.............................. 273,698,738
------------
NET ASSETS.............................................................. $438,698,738
============
NET ASSET VALUE PER COMMON SHARE ($273,698,738 divided by 28,047,767
shares outstanding)................................................... $ 9.76
============
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................. $29,852,769
-----------
EXPENSES:
Investment Advisory Fee (Note 2)......................................... 2,651,369
Preferred Share Maintenance (Note 6)..................................... 454,989
Legal (Note 2)........................................................... 42,090
Trustees Fees and Expenses (Note 2)...................................... 33,117
Other.................................................................... 436,446
-----------
Total Expenses....................................................... 3,618,011
-----------
NET INVESTMENT INCOME.................................................... $26,234,758
===========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments............................................................ $ 4,465,413
Options................................................................ 42,080
Futures................................................................ (117,239)
-----------
Net Realized Gain on Securities.......................................... 4,390,254
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................................ 29,850,950
End of the Period:
Investments.......................................................... 26,683,519
-----------
Net Unrealized Depreciation on Securities During the Period.............. (3,167,431)
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES........................... $ 1,222,823
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS............................... $27,457,581
===========
</TABLE>

See Notes to Financial Statements

14
<PAGE> 16

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income........................................ $ 26,234,758 $ 26,682,469
Net Realized Gain/Loss on Securities......................... 4,390,254 (13,002,677)
Net Unrealized Appreciation/Depreciation on
Securities During the Period............................... (3,167,431) 11,076,634
------------ ------------
Change in Net Assets from Operations......................... 27,457,581 24,756,426
------------ ------------
Distributions from Net Investment Income:
Common Shares.............................................. (21,482,382) (23,197,415)
Preferred Shares........................................... (6,131,780) (6,187,268)
------------ ------------
Total Distributions.......................................... (27,614,162) (29,384,683)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.......... (156,581) (4,628,257)
FROM CAPITAL TRANSACTIONS (NOTE 3):
Value of Common Shares Issued Through Dividend
Reinvestment............................................... 2,765,783 3,009,912
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS........................ 2,609,202 (1,618,345)
NET ASSETS:
Beginning of the Period...................................... 436,089,536 437,707,881
------------ ------------
End of the Period (Including undistributed net investment
income of
$1,755,615 and $3,135,019, respectively)................... $438,698,738 $436,089,536
============ ============
</TABLE>

See Notes to Financial Statements

15
<PAGE> 17

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
--------------------------------------
1996 1995 1994
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period (a)..... $9.760 $ 9.924 $11.133
------ ------- -------
Net Investment Income............................ .940 .964 1.000
Net Realized and Unrealized Gain/Loss on
Securities..................................... .048 (.065) (1.214)
------ ------- -------
Total from Investment Operations................. .988 .899 (.214)
------ ------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders.................. .770 .840 .840
Common Share Equivalent of Distributions Paid
to Preferred Shareholders.................. .220 .223 .155
Distributions from and in Excess of Net
Realized Gain on Securities Paid to Common
Shareholders (Note 1)........................ -0- -0- -0-
------ ------- -------
Total Distributions.............................. .990 1.063 .995
------ ------- -------
Net Asset Value, End of the Period............... $9.758 $ 9.760 $ 9.924
====== ======= =======
Market Price Per Share at End of the Period...... $9.875 $11.125 $11.125
Total Investment Return at Market Price (b)...... (4.27%) 8.59% (0.05%)
Total Return at Net Asset Value (c).............. 8.02% 7.24% (3.63%)
Net Assets at End of the Period (In millions).... $438.7 $436.1 $437.7
Ratio of Expenses to Average Net Assets
Applicable to Common Shares.................... 1.31% 1.33% 1.28%
Ratio of Expenses to Average Net Assets.......... .82% .83% .82%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)......... 7.26% 7.56% 7.86%
Portfolio Turnover............................... 29% 38% 45%
</TABLE>

* Non-Annualized

** If certain expenses had not been assumed by the Adviser for the period ended
June 30, 1989, the ratio of expenses to average net assets applicable to
common shares would have been 1.07% and the ratio of net investment income to
average net assets applicable to common shares would have been 5.99%.

(a) Net asset value at August 26, 1988, is adjusted for common and preferred
share offering costs of $.120 per share.

(b) Total investment return at market price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.

(c) Total return at net asset value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.

(d) Net investment income is adjusted for common share equivalent of
distributions paid to preferred shareholders.

N/A = Not Applicable

16
<PAGE> 18

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
August 26,
1988
(Commencement
Year Ended June 30 of Investment
- -------------------------------------------------- Operations) to
1993 1992 1991 1990 June 30, 1989
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.688 $ 9.805 $ 9.534 $9.767 $9.180
------- ------- ------- ------ ------
1.078 1.095 1.093 1.070 .766
.520 .848 .295 (.229) .559
------- ------- ------- ------ ------
1.598 1.943 1.388 .841 1.325
------- ------- ------- ------ ------
.829 .791 .725 .685 .501
.162 .238 .337 .389 .237
.162 .031 .055 -0- -0-
------- ------- ------- ------ ------
1.153 1.060 1.117 1.074 .738
------- ------- ------- ------ ------
$11.133 $10.688 $ 9.805 $9.534 $9.767
======= ======= ======= ====== ======
$12.000 $11.375 $10.125 $9.250 $9.500
15.20% 21.65% 18.71% 4.65% .10%*
13.97% 18.08% 11.61% 4.76% 10.62%*
$467.9 $452.7 $426.7 $418.3 $424.4
1.25% 1.35% 1.46% 1.43% .92%**
.80% .84% .89% .87% N/A
8.41% 8.41% 7.88% 7.11% 6.15%**
45% 27% 69% 116% *90%
</TABLE>

See Notes to Financial Statements

17
<PAGE> 19

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Municipal Income 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 taxes with safety of
principal through investment in a diversified portfolio of investment grade
tax-exempt municipal securities. The Trust commenced investment operations on
August 26, 1988.

The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.

A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of less than 60 days are valued at
amortized cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.

C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.

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.

18
<PAGE> 20

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

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 June 30, 1996, the Trust had an accumulated capital loss carryforward
for tax purposes of $14,345,195. Of this amount $464,734 and $13,880,461 will
expire on June 30, 2002 and 2004, respectively. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.

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 to common shareholders. Distributions from net
realized gains for book purposes may include short-term capital gains, which are
included as ordinary income for tax purposes.

For the year ended June 30, 1996, 99.8% of the income distributions made by
the Fund were exempt from Federal income taxes. In January, 1997, the Fund will
provide tax information to shareholders for the 1996 calendar year.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Trust for an annual fee payable monthly
of .60% of the average net assets of the Trust.

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.

For the year ended June 30, 1996, the Trust recognized expenses of
approximately $36,000 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting,
legal and certain shareholder services to the Trust.

Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.

The Trust has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.

19
<PAGE> 21

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

3. CAPITAL TRANSACTIONS

At June 30, 1996 and 1995, common share paid in surplus aggregated $259,324,321
and $256,561,256, respectively.

Transactions in common shares were as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares.............................. 27,775,981 27,479,484
Shares Issued Through Dividend Reinvestment... 271,786 296,497
---------- ----------
Ending Shares................................. 28,047,767 27,775,981
========== ==========
</TABLE>

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments
excluding short-term investments, were $127,395,037 and $130,443,977,
respectively.

5. 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 has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
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 on investments. Upon disposition, a realized gain or
loss is recognized accordingly, except for exercised option contracts where the
recognition of gain or loss is postponed until the disposal of the security
underlying the option contract.

Summarized below are the specific types of derivative financial instruments
used by the Trust.

A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.

20
<PAGE> 22

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

Transactions in options for the year ended June 30, 1996, were as follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 30, 1995..................... -0- $ -0-
Options Written and Purchased (Net).............. 1,852 (235,729)
Options Terminated in Closing Transactions
(Net).......................................... (671) 72,893
Options Expired (Net)............................ (1,081) 96,443
Options Exercised (Net).......................... (100) 66,393
------ ---------
Outstanding at June 30, 1996..................... -0- $ -0-
====== =========
</TABLE>

B. FUTURES CONTRACTS--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 futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used by the Trust to manage the portfolio's effective
maturity and duration.

Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. 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 cost of securities acquired through
delivery under a contract is adjusted by the unrealized gain or loss on the
contract.

Transactions in futures contracts for the year ended June 30, 1996, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1995................................. 1,150
Futures Opened............................................... 890
Futures Closed............................................... (2,040)
-------
Outstanding at June 30, 1996................................. -0-
=======
</TABLE>

C. INDEXED SECURITIES--These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.

An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yield of the portfolio.

An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is

21
<PAGE> 23

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

based rises above the strike level. The Trust invests in these instruments as a
hedge against a rise in the short term interest rates which it pays on its
preferred shares.

6. PREFERRED SHARES

The Trust has outstanding 330 shares of rate adjusted tax-exempt preferred
shares ("Rates") in three series of 110 shares each. Dividends are cumulative
and the rate on each series is currently reset every 28 days through an auction
process. The average rate in effect on June 30, 1996, was 3.567%. During the
year ended June 30, 1996, the rates ranged from 3.340% to 4.099%.

The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.

The Rates are redeemable at the option of the Trust in whole or in part at a
price of $500,000 per share plus accumulated and unpaid dividends. The Trust is
subject to certain asset coverage tests, and the Rates are subject to mandatory
redemption if the tests are not met.

22
<PAGE> 24

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Municipal Income Trust:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Municipal Income Trust (the "Trust"), including the
portfolio of investments, as of June 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Municipal Income Trust as of June 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Chicago, Illinois
July 30, 1996

23
<PAGE> 25

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 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
changes 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 American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056

24
<PAGE> 26

VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST

OFFICERS AND TRUSTEES

DON G. POWELL*
Chairman and Trustee

DENNIS J. MCDONNELL*
President and Trustee

DAVID C. ARCH
Trustee

ROD DAMMEYER
Trustee

HOWARD J KERR
Trustee

THEODORE A. MYERS
Trustee

HUGO F. SONNENSCHEIN
Trustee

WAYNE W. WHALEN*
Trustee

PETER W. HEGEL*
Vice President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Treasurer

SCOTT E. MARTIN*
Assistant Secretary

WESTON B. WETHERELL*
Assistant Secretary

NICHOLAS DALMASO*
Assistant Secretary

JOHN L. SULLIVAN*
Controller

STEVEN M. HILL*
Assistant Treasurer

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

CUSTODIAN AND TRANSFER AGENT

STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive

Chicago, Illinois 60601

* "Interested" persons of the Trust, as defined in the
Investment Company Act of 1940.

(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.