<PAGE> 1
- ---------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 9
Statement of Operations.......................... 10
Statement of Changes in Net Assets............... 11
Financial Highlights............................. 12
Notes to Financial Statements.................... 14
Independent Accountants' Report.................. 17
Dividend Reinvestment Plan....................... 18
</TABLE>
VKC ANR 8/96
<PAGE> 2
LETTER TO SHAREHOLDERS
August 15, 1996
Dear Shareholder,
During the first half of the
Fund's fiscal year, bond prices
appreciated as interest rates on
intermediate and long-term bonds fell
steadily. However, in February, [PHOTO]
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 DENNIS J. MCDONNELL AND DON G. POWELL
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, which would
cause interest rates to rise and bond prices to fall.
PORTFOLIO STRATEGY
We manage the California Municipal Trust in a relatively conservative
manner, with nearly 50 percent of the portfolio invested in bonds rated AAA, the
highest credit rating assigned to bonds by Standard & Poor's Ratings Group.
While a sizable amount is invested in high-quality paper, we also invest in
bonds that have the potential for credit quality upgrades. These bonds typically
pay a higher coupon rate than AAA-rated securities and can add to the defensive
position of the Trust because they have tended to be less sensitive to interest
rate fluctuations.
In terms of major market sectors, the Trust is invested in health care,
transportation, and single family housing issues. Additionally, we believe the
water and sewer, electric, and education sectors are particularly attractive,
and we will continue to seek investment opportunities in these areas.
California's municipal bond market outperformed other states during the
period due to its strengthening economy, which has been supported by thriving
entertainment and tourism industries. In fact, the state's job growth continues
to outpace the national average.
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 - 49.0% AAA - 49.4%
AA - 8.6% AA - 6.5%
A - 23.9% A - 29.1%
BBB - 15.8% BBB - 12.3%
Non-Rated - 2.7% Non-Rated - 2.7%
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. However, as mentioned earlier, the California municipal market
performed more favorably than other states. This was primarily due to the
improved economy, an increasing demand by California residents for tax-free
income, and a growing percentage of municipal bonds backed by private insurance.
The Trust achieved a one-year total return at market price of 9.02
percent(1). This return reflects the change in market price per common share on
the American Stock Exchange from $10.750 on June 30, 1995 to $10.875 on June 30,
1996 and reinvestment of dividends totaling $0.750 per share.
Many closed-end municipal bond funds are currently offering higher after-tax
yields than taxable income alternatives, and your Trust is no exception. Based
on the closing stock price on June 30, 1996, the California Municipal Trust had
a tax-exempt distribution rate of 6.90 percent(3). California residents in the
combined federal and state income tax bracket of 43 percent would need to invest
in a taxable investment yielding 12.11 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.
Our outlook for the California municipal market is very positive. The state
created a framework for resolving the Orange County's bankruptcy situation that
was well received by the market. In fact, when Orange County recently issued
nearly $900 million in bonds, with credit enhancements, the market readily
accepted them.
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 CALIFORNIA MUNICIPAL TRUST
(AMEX TICKER SYMBOL--VKC)
TOTAL RETURNS
<TABLE>
<S> <C>
One-year total return based on market price(1)............. 9.02%
One-year total return based on NAV(2)...................... 6.62%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 6.90%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 12.11%
SHARE VALUATIONS
Net asset value............................................ $10.28
Closing common stock price................................. $10.875
One-year high common stock price (03/07/96)................ $11.625
One-year low common stock price (07/20/95)................. $10.250
Preferred share rate(5).................................... 3.50%
</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 43%
combined federal and state tax bracket, which takes into consideration the
deductibility of individual state taxes paid.
(5)See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance 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>
CALIFORNIA MUNICIPAL BONDS 97.7%
$ 2,000 Antioch Area Pub Fac Fin Agy CA Spl Tax Cmnty
Fac Dist No 1989-1 Rfdg (FGIC Insd)............. 5.375% 08/01/13 $ 1,904,320
790 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Agy
Pool Rev Ser A (Cap Guar Insd).................. 6.000 12/15/15 799,464
500 Brea & Olinda, CA Unified Sch Dist Ctfs Partn Sr
High Sch Pgm Ser A Rfdg (Cap Guar Insd)......... 6.000 08/01/09 513,660
1,000 California Edl Fac Auth Rev Harvey Mudd
College......................................... 6.100 12/01/13 1,001,720
500 California Hlth Fac Fin Auth Rev Children's Hosp
Los Angeles Ser A (Prerefunded @ 06/01/01)...... 7.125 06/01/21 561,510
1,000 California Hlth Fac Fin Auth Rev Insd Amern
Baptist Homes West Ser A........................ 7.650 04/01/14 1,063,260
1,300 California Hlth Fac Fin Auth Rev Insd Episcopal
Homes Ser A..................................... 7.800 07/01/15 1,398,878
1,000 California Hlth Fac Fin Auth Rev Kaiser
Permanente Ser A (FSA Insd)..................... 5.550 08/15/25 938,970
1,000 California Hlth Fac Fin Auth Rev Pomona Vly
Cmnty Hosp Ser A................................ 7.000 01/01/17 1,021,160
1,500 California Hlth Fac Fin Auth Rev Saint Joseph
Hlth Sys Ser A (Prerefunded @ 07/01/01)......... 6.750 07/01/21 1,662,060
1,225 California Hsg Fin Agy Rev Homeowner Mtg Ser
A............................................... 8.100 08/01/16 1,254,375
3,205 California Hsg Fin Agy Rev Homeowner Mtg Ser
D............................................... * 08/01/20 501,326
15,000 California Hsg Fin Agy Rev Homeowner Mtg Ser D
(AMBAC Insd).................................... * 08/01/20 2,302,950
1,280 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Pacific Gas & Elec Co Ser B (AMBAC Insd)........ 8.875 01/01/10 1,377,907
2,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co (Embedded Cap) (AMBAC
Insd) (b)....................................... 6.000 07/01/27 1,999,400
1,300 California St Dept Veteran Affairs Home Pur Rev
Ser A........................................... 8.300 08/01/19 1,359,904
</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>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Projs Ser A................................ 6.300% 10/01/10 $ 1,041,670
1,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Projs Ser A................................ 6.375 10/01/14 1,032,560
800 California St Var Purp (MBIA Insd).............. 6.000 10/01/14 808,992
2,000 California Statewide Cmnty Dev Auth Rev Ctfs
Partn Sutter Hlth Oblig (MBIA Insd)............. 5.500 08/15/23 1,870,500
785 Central Contra Costa, CA Santn Dist Rev Wastewtr
Fac Impt Proj (MBIA Insd)....................... 6.250 09/01/11 823,787
1,000 Contra Costa, CA Tran Auth Sales Tax Rev Ser
A............................................... 6.875 03/01/07 1,027,880
2,300 Desert Hosp Dist CA Hosp Rev Ctfs Partn Desert
Hosp Corp Proj (Prerefunded @ 07/01/00)......... 8.100 07/01/20 2,629,498
1,500 Eden Twp, CA Hosp Dist Hosp Rev Ser A........... 7.200 11/01/16 1,507,035
2,000 Emeryville, CA Pub Fin Auth Rev Hsg Increment
Sub Lien A (Prerefunded @ 02/01/01)............. 7.875 02/01/15 2,294,840
5,000 Foothill/Eastern Tran Agy Cap Apprec Sr Lien Ser
A............................................... * 01/01/27 653,950
1,000 Foothill/Eastern Tran Agy Conv Cap Apprec Sr
Lien Ser A (c).................................. 0/7.050 01/01/10 594,250
5,435 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/19 1,225,049
2,000 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/28 244,700
1,690 Long Beach, CA Harbor Rev (MBIA Insd)........... 5.500 05/15/10 1,645,130
790 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/10 318,686
800 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/11 299,856
1,700 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/12 591,481
975 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/13 314,584
155 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/20 30,402
</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>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 09/01/20 $ 189,510
1,548 Los Angeles Cnty, CA Tran Comm Lease Rev Dia RR
Lease Ltd (FSA Insd)............................ 7.375% 12/15/06 1,716,624
1,285 Montebello, CA Ctfs Partn Cap Impt Proj
(Prerefunded @ 06/01/00)........................ 7.000 06/01/15 1,413,847
1,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)........................................... 5.750 06/01/15 988,030
3,095 Paramount, CA Redev Agy Tax Alloc Redev Proj
Area No 1 Ser B (MBIA Insd)..................... * 08/01/26 426,584
1,000 San Diego, CA Indl Dev Rev San Diego G&E Co Ser
A (AMBAC Insd).................................. 7.625 07/01/21 1,022,910
895 San Jose, CA Arpt Rev (AMBAC Insd).............. 7.500 03/01/18 948,924
915 Santa Barbara, CA Ctfs Partn.................... 7.650 05/01/15 995,557
1,450 Santa Barbara, CA Ctfs Partn Wtr Sys Impt Proj &
Rfdg (AMBAC Insd)............................... 6.700 04/01/27 1,548,150
100 Southern CA Home Fin Auth Single Family Mtg Rev
Ser B (GNMA/FNMA Collateralized)................ 7.750 03/01/24 105,836
600 Southern CA Pub Pwr Auth Pwr Proj Rev Multi
Projs........................................... 5.500 07/01/20 556,704
900 Southern CA Pub Pwr Auth Pwr Proj Rev Multi
Projs Ser 1989 (Prerefunded @ 07/01/00)......... 5.500 07/01/20 930,834
2,000 Westminster, CA Redev Agy Tax Alloc Rev Coml
Redev Proj No 1 Ser A Rfdg...................... 7.300 08/01/21 2,167,300
-----------
TOTAL LONG-TERM INVESTMENTS 97.7%
(Cost $48,718,769)(a)...................................................... 51,626,524
SHORT-TERM INVESTMENTS AT AMORTIZED COST 1.3%............................... 700,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.0%.................................. 550,319
-----------
NET ASSETS 100%.............................................................. $52,876,843
===========
</TABLE>
*Zero coupon bond
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996
- --------------------------------------------------------------------------------
(a) At June 30, 1996, cost for federal income tax purposes is $48,718,769; the
aggregate gross unrealized appreciation is $3,147,656 and the aggregate
gross unrealized depreciation is $239,901, resulting in net unrealized
appreciation of $2,907,755.
(b) 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 based rises above the strike level. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. 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.
(c) Security is a "step up" bond where the coupon increases or steps up at a
predetermined date.
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $48,718,769) (Note 1)................. $51,626,524
Short-Term Investments (Note 1).......................................... 700,000
Interest Receivable...................................................... 932,390
Cash..................................................................... 55,137
Other.................................................................... 1,277
-----------
Total Assets....................................................... 53,315,328
-----------
LIABILITIES:
Payables:
Income Distributions--Common and Preferred Shares...................... 249,699
Investment Advisory Fee (Note 2)....................................... 25,831
Distributor and Affiliates (Note 2).................................... 8,106
Accrued Expenses......................................................... 110,110
Deferred Compensation and Retirement Plans (Note 2)...................... 44,739
-----------
Total Liabilities.................................................. 438,485
-----------
NET ASSETS............................................................... $52,876,843
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 1,000,000 shares, 400 shares
are issued with a liquidation preference of $50,000 per share) (Note
5)..................................................................... $20,000,000
-----------
Common Shares ($.01 par value with an unlimited number of shares
authorized, 3,197,321 shares issued and outstanding) (Note 3).......... 31,973
Paid in Surplus.......................................................... 28,889,905
Net Unrealized Appreciation on Securities................................ 2,907,755
Accumulated Undistributed Net Investment Income.......................... 642,655
Accumulated Net Realized Gain on Securities.............................. 404,555
-----------
Net Assets Applicable to Common Shares............................. 32,876,843
-----------
NET ASSETS............................................................... $52,876,843
===========
NET ASSET VALUE PER COMMON SHARE ($32,876,843 divided by 3,197,321
shares outstanding).................................................... $ 10.28
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................ $ 3,486,669
------------
EXPENSES:
Investment Advisory Fee (Note 2)........................................ 321,155
Preferred Share Maintenance (Note 5).................................... 61,276
Printing................................................................ 34,646
Custody................................................................. 31,045
Trustees Fees and Expenses (Note 2)..................................... 28,117
Legal (Note 2).......................................................... 9,980
Other................................................................... 65,427
------------
Total Expenses...................................................... 551,646
------------
NET INVESTMENT INCOME................................................... $ 2,935,023
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments........................................ 727,805
------------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................... 3,654,484
End of the Period:
Investments......................................................... 2,907,755
------------
Net Unrealized Depreciation on Securities During the Period............. (746,729)
------------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.......................... $ (18,924)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $ 2,916,099
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
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...................................... $ 2,935,023 $ 3,015,820
Net Realized Gain/Loss on Securities....................... 727,805 (164,482)
Net Unrealized Appreciation/Depreciation on Securities
During the Period........................................ (746,729) 512,873
----------- -----------
Change in Net Assets from Operations....................... 2,916,099 3,364,211
----------- -----------
Distributions from Net Investment Income:
Common Shares............................................ (2,390,456) (2,297,195)
Preferred Shares......................................... (733,594) (750,639)
----------- -----------
(3,124,050) (3,047,834)
Distributions from Net Realized Gain on Securities--Common
Shares................................................... (158,645) (19,001)
----------- -----------
Total Distributions...................................... (3,282,695) (3,066,835)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES........ (366,596) 297,376
FROM CAPITAL TRANSACTIONS (NOTE 3):
Value of Common Shares Issued Through Dividend
Reinvestment............................................. 235,180 137,858
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS...................... (131,416) 435,234
NET ASSETS:
Beginning of the Period.................................... 53,008,259 52,573,025
----------- -----------
End of the Period (Including undistributed net investment
income of $642,655 and $831,682, respectively)........... $52,876,843 $53,008,259
=========== ===========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period (a).... $10.395 $10.301 $10.963
------- ------- -------
Net Investment Income......................... .919 .951 .956
Net Realized and Unrealized Gain/Loss on
Securities.................................. (.001) .111 (.740)
------- ------- -------
Total from Investment Operations................ .918 1.062 .216
------- ------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders................. .750 .725 .712
Common Share Equivalent of Distributions
Paid to Preferred Shareholders............ .230 .237 .156
Distributions from Net Realized Gain on
Securities Paid to Common Shareholders...... .050 .006 .010
------- ------- -------
Total Distributions............................. 1.030 .968 .878
------- ------- -------
Net Asset Value, End of the Period.............. $10.283 $10.395 $10.301
======= ======= =======
Market Price Per Share at End of the Period..... $10.875 $10.750 $10.625
Total Investment Return at Market Price (b)..... 9.02% 8.67% 4.32%
Total Return at Net Asset Value (c)............. 6.62% 8.47% .35%
Net Assets at End of the Period (In millions)... $52.9 $53.0 $52.6
Ratio of Expenses to Average Net Assets
Applicable to Common Shares................... 1.65% 1.65% 1.53%
Ratio of Expenses to Average Net Assets......... 1.03% 1.02% .97%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)........ 6.57% 7.02% 7.28%
Portfolio Turnover.............................. 19% 16% 11%
</TABLE>
(a) Net asset value at November 1, 1988 of $9.300 is adjusted for common share
offering costs of $.145 per common share. Net asset value at June 30, 1989
of $9.416 is adjusted for preferred share offering costs of $.204 per common
share.
(b) Total investment return at market price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(c) Total return at net asset value (NAV) reflects the change in the 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.
* Non-annualized
** If certain expenses had not been assumed by VKAC, the annualized ratio of
expenses to average net assets applicable to common shares, ratio of expenses
to average net assets and the ratio of net investment income to average net
assets applicable to common shares would have been 2.06%, 1.22% and 6.80% for
the year ended June 30, 1991, 1.31%, 1.13% and 6.21% for the year ended June
30, 1990, and 1.09%, 1.09% and 6.04% for the period ended June 30, 1989.
N/A = Not Applicable
12
<PAGE> 14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 1, 1988
(Commencement
Year Ended June 30 of Investment
- --------------------------------------------------- Operations) to
1993 1992 1991 1990 June 30, 1989
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$10.147 $ 9.408 $9.095 $9.212 $9.155
------- ------- ------ ------ ------
.968 .946 .975 .719 .385
.788 .719 .313 (.117) .261
------- ------- ------ ------ ------
1.756 1.665 1.288 .602 .646
------- ------- ------ ------ ------
.663 .654 .648 .648 .385
.167 .245 .327 .071 -0-
.110 .027 -0- -0- -0-
------- ------- ------ ------ ------
.940 .926 .975 .719 .385
------- ------- ------ ------ ------
$10.963 $10.147 $9.408 $9.095 $9.416
======= ======= ====== ====== ======
$10.875 $ 9.875 $9.750 $9.125 $9.875
18.49% 8.44% 14.51% (.95%) 2.92%*
16.19% 15.54% 10.85% 4.27% (2.43%)*
$54.5 $51.9 $49.5 $ 48.4 $ 29.3
1.57% 2.07% 1.88%** .50%** .87%**
.98% 1.26% 1.11%** .43%** N/A
7.62% 7.74% 6.98%** 7.01%** 6.26%**
18% 41% 99% 100% 57%
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital California 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 and California
income taxes with safety of principal. The Trust will invest in a portfolio
consisting substantially of California municipal obligations rated investment
grade at the time of investment. The Trust commenced investment operations on
November 1, 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 those estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 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. At June 30, 1996, there were no when
issued or delayed delivery purchase commitments.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996
- --------------------------------------------------------------------------------
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.
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 dividends from
net investment income to common shareholders monthly. 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 end June 30, 1996, 100% of the income distributions made by the
Trust were exempt from federal income taxes. In January, 1997, the Trust 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 $12,300 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.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At June 30, 1996 and 1995, paid in surplus related to common shares aggregated
$28,889,905 and $28,654,945, 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............................. 3,175,320 3,162,077
Shares Issued Through Dividend
Reinvestment............................... 22,001 13,243
--------- ---------
Ending Shares................................ 3,197,321 3,175,320
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $9,851,906 and $10,822,692, respectively.
5. REMARKETED PREFERRED SHARES
The Trust has outstanding 400 shares of Remarketed Preferred Shares ("RP").
Dividends are cumulative and the rate is reset through an auction process every
28 days. The rate in effect on June 30, 1996, was 3.50%, and for the year then
ended rates ranged from 3.32% to 3.95%.
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 RP are redeemable at the option of the Trust in whole or in part at the
liquidation value of $50,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests, and the RP are subject to
mandatory redemptions if the tests are not met.
16
<PAGE> 18
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Trustees and Shareholders of
Van Kampen American Capital California Municipal Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital California Municipal 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. 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 California Municipal 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
17
<PAGE> 19
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
automatically reinvested in Common Shares of the Trust.
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
State Street Bank and Trust Company, as your Plan Agent, serves as agent for the
Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the American Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
18
<PAGE> 20
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free
Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal
Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
19
<PAGE> 21
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL 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.
(C) Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
