<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 7
Statement of Operations.......................... 8
Statement of Changes in Net Assets............... 9
Financial Highlights............................. 10
Notes to Financial Statements.................... 12
</TABLE>
VKC SAR 2/97
<PAGE> 2
LETTER TO SHAREHOLDERS
February 10, 1997
Dear Shareholder,
Bond prices appreciated during
the second half of 1996, recovering
much of the ground they had lost in
the first half of the year. Slower
economic growth and moderate [PHOTO]
inflation eased fears that the
Federal Reserve Board would raise
interest rates. Specifically,
economic growth (real gross domestic
product, adjusted for inflation)
slowed to 2.0 percent in the third DENNIS J. MCDONNELL AND DON G. POWELL
quarter, significantly lower than the
4.7 percent recorded in the second quarter. Employment costs fell, and the Fed
refrained from tightening credit. By year end, the yield on the 30-year Treasury
bond retreated from above 7.00 percent in July and September to approximately
6.6 percent. A strong dollar encouraged heavy buying of U.S. Treasuries by
foreign investors, which also supported the market.
During much of the second half of the year, municipal bonds outperformed
Treasuries due to supply-and-demand fundamentals. According to early estimates,
the net outstanding issues of municipal bonds (new issues minus maturities and
calls) increased by less than $13 billion in 1996. This relatively small
increase helped to maintain good value in tax-exempt investments. Also, concerns
over tax reform abated, which strengthened the demand for municipal securities.
California bonds were among the best performers in the municipal market
during the second half of the year. Demand for California bonds was particularly
strong because of continuing improvement in the state's economy, which grew at a
faster pace than the nation as a whole.
PORTFOLIO STRATEGY
We manage the California Municipal Trust in a relatively conservative
manner. From a credit perspective, 48.5 percent of the Trust's bonds are
AAA-rated, the highest credit rating assigned to bonds by Standard & Poor's
Ratings Group. These bonds usually involve very little credit risk, are highly
liquid, and typically respond quickly to interest rate changes. BBB-rated
securities account for 15.1 percent of long-term investments. A combination of
higher quality holdings and lower-rated holdings has the potential to help
balance the portfolio's volatility to interest rate movements. AAA-rated
securities typically have performed better in a declining interest rate
environment, while lower-rated bonds have lagged. The reverse has typically been
true when rates rise.
The Trust's largest sector concentrations are in health care, single family
housing, and transportation, providing some of the most attractive yields in the
California tax-exempt markets. Our credit research team has significant
expertise in these sectors.
The portfolio's current duration is 6.25 years, which is short relative to
the Lehman Brothers California Municipal Bond Index of 8.22 years. Duration,
which is expressed in
Continued on page two
1
<PAGE> 3
years, is a measure of a bond's price sensitivity to changes in interest rates.
The longer the Trust's duration, the greater the effect of changes in interest
rate movements on the Trust's net asset value. Funds with shorter durations have
tended to perform better when interest rates increase, while funds with longer
durations have usually outperformed in declining rate environments.
The Trust has a well-diversified mix of high-coupon securities currently
priced at premiums above par. This portion of the portfolio is subject to calls,
which presents a risk that the bond issuer might redeem its securities in the
near future, forcing the Trust to reinvest those proceeds in lower yielding
securities available in the market at the time the securities are called. We
seek to manage this risk by ensuring that only a small percentage of the Trust's
assets are callable in any year. Approximately 7 percent of the Trust's assets
are subject to call risk over the next year. Our strategy is to exchange these
holdings (some of which are AAA-rated) before they are called for lower-rated
securities to help maintain or enhance the yield potential.
A percentage of holdings in the Trust are discount bonds, which are
securities with prices below par. A mixture of premium and discount securities
may help minimize volatility in the Trust, as discount securities have tended to
perform better in declining rate environments, and premiums usually out-perform
in rising rate environments.
[CREDIT QUALITY GRAPH]
PORTFOLIO COMPOSITION BY CREDIT QUALITY
AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
AAA.............. 48.5%
AA............... 9.9%
A................ 23.8%
BBB.............. 15.1%
Non-Rated........ 2.7%
</TABLE>
AS OF JUNE 30, 1996
<TABLE>
<S> <C>
AAA.............. 49.0%
AA............... 8.6%
A................ 23.9%
BBB.............. 15.8%
Non-Rated........ 2.7%
</TABLE>
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
For the six-month period ended December 31, 1996, the Trust generated a
total return at market price of 14.45 percent(1). This performance reflects a
9.20 percent increase in market price per common share on the American Stock
Exchange from $10.875 on June 30, 1996 to $11.875 on December 31, 1996,
including reinvestment of dividends totaling $.375 per share.
Many closed-end municipal bond funds, such as the California Municipal
Trust, currently offer higher after-tax yields than taxable income alternatives.
The Trust offered a tax-exempt distribution rate of 6.32 percent(3), based on
the closing stock price of $11.875 per common share as of December 31, 1996. For
California residents in the combined federal and state income tax bracket of 43
percent, this distribution rate is equivalent to a yield of 11.09 percent(4) on
a taxable investment.
Continued on page three
2
<PAGE> 4
OUTLOOK
We believe that the economy will grow at a modest pace in 1997, near 2.5
percent, although there could be periods of greater strength. While these growth
spurts may be accompanied by short-term market fluctuations, we do not believe
they will be strong enough to reignite inflation. Price pressures are
well-contained and should remain so.
Relatively stable interest rates would be favorable for the leveraged
structure of a closed-end fund, which involves borrowing short-term funds to
purchase long-term securities. Depending on the difference between long- and
short-term market rates, this structure provides opportunities for additional
earnings. The leveraged capital structure of the Trust continues to provide
common shareholders with above-market levels of dividend income. It should be
noted, however, that a rise in short-term rates would have an unfavorable effect
on the dividend paying ability of the common shares and could also negatively
impact the share price.
The bond market should find continued support from the results of the
November national elections--the combination of a Democratic president and a
Republican Congress should help restrain potential spending increases and tax
cuts, and therefore keep the budget deficit under control. This split government
should also help minimize the chances of major tax reform, which would likely
affect the municipal bond market. The stock market is another factor that will
influence the performance of bonds this year. If stocks suffer a protracted
setback, the demand for bonds, including municipal securities, could increase.
Overall, our expectation is that most fixed-income products will have
relatively uneventful performance during the year. While we expect the Trust to
provide steady dividend income, we do not look for significant fluctuations in
share price. We are more positive, however, about the California market. In
California, local governments may find it more difficult to raise revenues for
municipal projects due to the passage of Proposition 218. We expect that the
result will be lower California municipal bond supply, which should help to
boost California municipal bond prices.
Finally, we will continue to closely monitor any new developments in the
financial markets and in Washington in order to evaluate their potential impact
on the Trust.
CORPORATE NEWS
As you may be aware, shareholders approved the acquisition of VK/AC Holding,
Inc. by Morgan Stanley Group Inc. We believe this acquisition will further help
investors achieve their long-term goals. Morgan Stanley's strong global presence
and commitment to superior investment performance complement our broad range of
investment products, money management capability and high level of service.
Thank you for your continued confidence in your investment with Van Kampen
American Capital.
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.
Please see footnotes on page four
3
<PAGE> 5
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1996
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
(AMEX TICKER SYMBOL--VKC)
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on market price(1)............ 14.45%
Six-month total return based on NAV(2)..................... 6.99%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 6.32%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 11.09%
SHARE VALUATIONS
Net asset value............................................ $ 10.46
Closing common stock price................................. $11.875
One-year high common stock price (12/05/96)................ $12.125
One-year low common stock price (07/01/96)................. $10.875
Preferred share rate(5).................................... 3.60%
</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
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS 98.6%
$ 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 $ 1,968,660
790 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Agy
Pool Rev Ser A (FSA Insd)........................ 6.000 12/15/15 823,330
500 Brea & Olinda, CA Unified Sch Dist Ctfs Partn Sr
High Sch Pgm Ser A Rfdg (FSA Insd)............... 6.000 08/01/09 525,575
1,000 California Edl Fac Auth Rev Harvey Mudd
College.......................................... 6.100 12/01/13 1,023,740
500 California Hlth Fac Fin Auth Rev Children's Hosp
Los Angeles Ser A (Prerefunded @ 06/01/01)....... 7.125 06/01/21 562,700
1,000 California Hlth Fac Fin Auth Rev Insd Amern
Baptist Homes West Ser A......................... 7.650 04/01/14 1,056,500
1,300 California Hlth Fac Fin Auth Rev Insd Episcopal
Homes Ser A...................................... 7.800 07/01/15 1,389,518
1,000 California Hlth Fac Fin Auth Rev Pomona Vly Cmnty
Hosp Ser A....................................... 7.000 01/01/17 1,011,570
1,500 California Hlth Fac Fin Auth Rev Saint Joseph
Hlth Sys Ser A (Prerefunded @ 07/01/01).......... 6.750 07/01/21 1,668,135
3,205 California Hsg Fin Agy Rev Homeowner Mtg Ser D... * 08/01/20 521,870
15,000 California Hsg Fin Agy Rev Homeowner Mtg Ser D
(AMBAC Insd)..................................... * 08/01/20 2,442,450
2,000 California Hsg Fin Agy Rev Homeowner Mtg Ser N... 6.375 02/01/27 2,040,080
1,280 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Pacific Gas & Elec Co Ser B (AMBAC Insd)......... 8.875 01/01/10 1,359,565
2,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co (Embedded Cap) (AMBAC Insd)
(b).............................................. 6.000 07/01/27 2,019,920
1,300 California St Dept Veteran Affairs Home Pur Rev
Ser A............................................ 8.300 08/01/19 1,355,055
1,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Projs Ser A................................. 6.300 10/01/10 1,067,820
1,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Projs Ser A................................. 6.375 10/01/14 1,058,670
800 California St Var Purp (MBIA Insd)............... 6.000 10/01/14 831,272
2,000 California Statewide Cmnty Dev Auth Rev Ctfs
Partn Sutter Hlth Oblig (MBIA Insd).............. 5.500 08/15/23 1,954,780
785 Central Contra Costa, CA Santn Dist Rev Wastewtr
Fac Impt Proj (MBIA Insd)........................ 6.250 09/01/11 843,537
1,000 Contra Costa, CA Tran Auth Sales Tax Rev Ser A... 6.875 03/01/07 1,122,470
2,300 Desert Hosp Dist CA Hosp Rev Ctfs Partn Desert
Hosp Corp Proj (Prerefunded @ 07/01/00).......... 8.100 07/01/20 2,627,543
1,500 Eden Twp, CA Hosp Dist Hosp Rev Ser A............ 7.200 11/01/16 1,536,975
2,000 Emeryville, CA Pub Fin Auth Rev Hsg Increment Sub
Lien A (Prerefunded @ 02/01/01).................. 7.875 02/01/15 2,297,860
1,000 Foothill/Eastern Tran Agy Conv Cap Apprec Sr Lien
Ser A (c)........................................ 0/7.050 01/01/10 639,720
5,435 Foothill/Eastern Tran Corridor Agy CA Toll Rd Rev
Sr Lien Ser A.................................... * 01/01/19 1,412,448
2,000 Foothill/Eastern Tran Corridor Agy CA Toll Rd Rev
Sr Lien Ser A.................................... * 01/01/28 290,620
1,690 Long Beach, CA Harbor Rev (MBIA Insd)............ 5.500 05/15/10 1,703,165
790 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................. * 03/01/10 349,093
800 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................. * 03/01/11 329,976
1,700 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................. * 03/01/12 653,888
975 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................. * 03/01/13 349,372
</TABLE>
See Notes to Financial Statements
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 155 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................. * 03/01/20 $ 34,052
1,000 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................. * 09/01/20 212,620
1,487 Los Angeles Cnty, CA Tran Comm Lease Rev Dia RR
Lease Ltd (FSA Insd)............................. 7.375% 12/15/06 1,659,195
1,285 Montebello, CA Ctfs Partn Cap Impt Proj
(Prerefunded @ 06/01/00)......................... 7.000 06/01/15 1,418,267
1,800 Mountain View Los Altos, CA Union High Sch Dist
Ctfs Partn (MBIA Insd)........................... 5.625 08/01/16 1,793,556
3,095 Paramount, CA Redev Agy Tax Alloc Redev Proj Area
No 1 Ser B (MBIA Insd)........................... * 08/01/26 451,591
1,000 San Francisco, CA City & Cnty Arpt Comm Intl Arpt
Rev Second Ser Issue 12-A (FGIC Insd)............ 5.800 05/01/21 1,001,060
895 San Jose, CA Arpt Rev (AMBAC Insd)............... 7.500 03/01/18 943,733
915 Santa Barbara, CA Ctfs Partn..................... 7.650 05/01/15 999,455
1,450 Santa Barbara, CA Ctfs Partn Wtr Sys Impt Proj &
Rfdg (AMBAC Insd)................................ 6.700 04/01/27 1,592,941
100 Southern CA Home Fin Auth Single Family Mtg Rev
Ser B (GNMA Collateralized)...................... 7.750 03/01/24 105,925
600 Southern CA Pub Pwr Auth Pwr Proj Rev Multi
Projs............................................ 5.500 07/01/20 582,678
900 Southern CA Pub Pwr Auth Pwr Proj Rev Multi Projs
Ser 1989 (Prerefunded @ 07/01/00)................ 5.500 07/01/20 939,357
2,000 Westminster, CA Redev Agy Tax Alloc Rev Coml
Redev Proj No 1 Ser A Rfdg....................... 7.300 08/01/21 2,167,960
-----------
TOTAL LONG-TERM INVESTMENTS 98.6%
(Cost $48,945,466) (a)....................................................... $52,740,267
SHORT-TERM INVESTMENTS AT AMORTIZED COST 1.3%................................. 700,000
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1%.................................... 76,767
-----------
NET ASSETS 100.0%.............................................................. $53,517,034
===========
</TABLE>
*Zero coupon bond
(a) At December 31, 1996, cost for federal income tax purposes is $48,945,466;
the aggregate gross unrealized appreciation is $3,799,046 and the aggregate
gross unrealized depreciation is $4,245, resulting in net unrealized
appreciation of $3,794,801.
(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.
These derivative instruments are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation on
securities. Upon disposition, a realized gain or loss is recognized
accordingly.
(c) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
See Notes to Financial Statements
6
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $48,945,466)
(Note 1).................................................. $52,740,267
Short-Term Investments (Note 1)............................. 700,000
Cash........................................................ 79,469
Interest Receivable......................................... 895,970
Other....................................................... 539
-----------
Total Assets.......................................... 54,416,245
-----------
LIABILITIES:
Payables:
Income Distributions--Common and Preferred Shares......... 718,303
Investment Advisory Fee (Note 2).......................... 27,557
Affiliates (Note 2)....................................... 4,714
Accrued Expenses............................................ 92,230
Deferred Compensation and Retirement Plans (Note 2)......... 56,407
-----------
Total Liabilities..................................... 899,211
-----------
NET ASSETS.................................................. $53,517,034
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.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, 3,205,175 shares issued and
outstanding) (Note 3)..................................... 32,052
Paid in Surplus............................................. 28,976,921
Net Unrealized Appreciation on Investments.................. 3,794,801
Accumulated Undistributed Net Investment Income............. 535,977
Accumulated Net Realized Gain on Investments................ 177,283
-----------
Net Assets Applicable to Common Shares................ 33,517,034
-----------
NET ASSETS.................................................. $53,517,034
===========
NET ASSET VALUE PER COMMON SHARE ($33,517,034 divided by
3,205,175 shares outstanding)............................. $ 10.46
===========
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF OPERATIONS
For the Six Months Ended
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $1,696,868
----------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 162,038
Preferred Share Maintenance (Note 5)........................ 35,124
Accounting (Note 2)......................................... 15,524
Audit....................................................... 14,904
Printing.................................................... 14,904
Trustees Fees and Expenses (Note 2)......................... 13,354
Legal (Note 2).............................................. 5,520
Other....................................................... 2,949
----------
Total Expenses.......................................... 264,317
----------
NET INVESTMENT INCOME....................................... $1,432,551
==========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Gain on Investments............................ 263,122
----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period................................... 2,907,755
End of the Period......................................... 3,794,801
----------
Net Unrealized Appreciation on Investments During the
Period.................................................... 887,046
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. $1,150,168
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $2,582,719
==========
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1996 and
the Year Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1996 June 30, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 1,432,551 $ 2,935,023
Net Realized Gain on Investments......................... 263,122 727,805
Net Unrealized Appreciation/Depreciation on Investments
During the Period...................................... 887,046 (746,729)
----------- -----------
Change in Net Assets from Operations..................... 2,582,719 2,916,099
----------- -----------
Distributions from Net Investment Income:
Common Shares.......................................... (1,200,699) (2,390,456)
Preferred Shares....................................... (338,530) (733,594)
----------- -----------
(1,539,229) (3,124,050)
Distributions from Net Realized Gain on
Investments--Common Shares (Note 1).................... (490,394) (158,645)
----------- -----------
Total Distributions.................................... (2,029,623) (3,282,695)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 553,096 (366,596)
FROM CAPITAL TRANSACTIONS (NOTE 3):
Value of Common Shares Issued Through Dividend
Reinvestment........................................... 87,095 235,180
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS.................... 640,191 (131,416)
NET ASSETS:
Beginning of the Period.................................. 52,876,843 53,008,259
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of $535,977 and $642,655,
respectively).......................................... $53,517,034 $52,876,843
=========== ===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended -----------------------------
December 31, 1996 1996 1995 1994
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the
Period (a).............................. $10.283 $10.395 $10.301 $10.963
------- ------- ------- -------
Net Investment Income................... .447 .919 .951 .956
Net Realized and Unrealized Gain/Loss on
Investments........................... .361 (.001) .111 (.740)
------- ------- ------- -------
Total from Investment Operations.......... .808 .918 1.062 .216
------- ------- ------- -------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders........... .375 .750 .725 .712
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders........................ .106 .230 .237 .156
Distributions from Net Realized Gain on
Investments Paid to Common
Shareholders (Note 1)................. .153 .050 .006 .010
------- ------- ------- -------
Total Distributions....................... .634 1.030 .968 .878
------- ------- ------- -------
Net Asset Value, End of the Period........ $10.457 $10.283 $10.395 $10.301
======= ======= ======= =======
Market Price Per Share at End of the
Period.................................. $11.875 $10.875 $10.750 $10.625
Total Investment Return at Market
Price (b)............................... 14.45%* 9.02% 8.67% 4.32%
Total Return at Net Asset Value (c)....... 6.99%* 6.62% 8.47% .35%
Net Assets at End of the Period (In
millions)............................... $ 53.5 $ 52.9 $ 53.0 $ 52.6
Ratio of Expenses to Average Net Assets
Applicable to Common Shares............. 1.57% 1.65% 1.65% 1.53%
Ratio of Expenses to Average Net Assets... .99% 1.03% 1.02% .97%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common
Shares (d).............................. 6.52% 6.57% 7.02% 7.28%
Portfolio Turnover........................ 13%* 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
10
<PAGE> 12
- --------------------------------------------------------------------------------
<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>
$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
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
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 60 days or less 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 December 31, 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.
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
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.
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 six months ended December 31, 1996, the Trust recognized expenses of
approximately $18,900 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.
3. CAPITAL TRANSACTIONS
At December 31, 1996 and June 30, 1996, paid in surplus related to common shares
aggregated $28,976,921 and $28,889,905, respectively.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1996 JUNE 30, 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares......................... 3,197,321 3,175,320
Shares Issued Through Dividend
Reinvestment........................... 7,854 22,001
--------- ---------
Ending Shares............................ 3,205,175 3,197,321
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $6,712,850 and $7,009,560, 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 December 31, 1996, was 3.60%, and for the six
months then ended rates ranged from 3.19% to 3.60%.
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.
14
<PAGE> 16
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
Growth 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
MORGAN STANLEY FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
Worldwide High Income 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 weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds, or
1-800-282-4404 for Morgan Stanley retail funds.
15
<PAGE> 17
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
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 (ILLINOIS)
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., 1997
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
RESULTS OF SHAREHOLDER VOTES
A Special Meeting of Shareholders of the Trust was held on October 23, 1996,
where shareholders voted on a new investment advisory agreement and changes to
investment policies. With regard to the approval of a new investment advisory
agreement between Van Kampen American Capital Investment Advisory Corp. and the
Trust, 2,539,844 shares voted for the proposal, 76,476 shares voted against,
132,252 shares abstained and 150,089 shares represented broker non-votes. With
regard to the approval of certain changes to the Trust's fundamental investment
policies with respect to investments in other investment companies, 1,451,625
shares voted for the proposal, 29,162 shares voted against and 85,705 shares
abstained and 1,218,020 shares represented broker non-votes.
16
