<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 6
Portfolio of Investments......................... 7
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
Dividend Reinvestment Plan....................... 17
</TABLE>
VKC SAR 2/98
<PAGE> 2
LETTER TO SHAREHOLDERS
February 3, 1998
Dear Shareholder,
The new year ushers in what
promises to be an exciting and
challenging time for investors. The
Taxpayer Relief Act of 1997 signed
into law by President Clinton in
August creates many new opportunities [PHOTO]
for you and your family to take a
more active role in achieving your
long-term financial goals.
Most Americans will benefit from DENNIS J. MCDONNELL AND DON G. POWELL
the bill's $95 billion in tax cuts
over five years. The so-called Kiddie
Credit gives parents $400 in immediate tax relief for every child under age 17,
and families will find it easier to save for their children's college expenses
through the new Education IRA. The bill also cuts capital gains tax rates for
the first time in over a decade and loosens restrictions on tax-deductible IRA
contributions. Perhaps the most exciting feature of all is the new Roth IRA,
which allows investment earnings to grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk to your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.
ECONOMIC REVIEW
The bond market rallied during the second half of 1997 as fears of rising
inflation dissipated, easing concerns that the Federal Reserve Board might raise
interest rates. Despite strong economic growth, there was little evidence of
increasing inflation -- consumer prices and wholesale prices rose only slightly
during the second half of the year.
In addition to a favorable inflation scenario, bonds reaped the benefits of
an improved supply-and-demand balance. The supply of new Treasury securities
declined as the federal budget deficit dropped to its lowest level in 23 years.
At the same time, the demand for Treasury issues among U.S. investors increased
amid growing concerns that the stock market rally was nearing an end. The seven
percent slump in the Dow Jones Industrial Average on October 27 reinforced the
benefit of owning bonds for diversification. Foreign investors also continued to
be heavy purchasers of U.S. Treasury bonds throughout the year. As a result of
these bullish factors, the yield of the 30-year Treasury fell to 5.92 percent on
December 31, 1997, down from 6.79 percent on June 30, 1997.
During the same six-month period, the yield on the long-term municipal
revenue bond index fell from 5.78 percent to 5.40 percent. Because yields move
in the opposite direction of prices, the smaller yield decline of municipal
bonds indicates that municipal
Continued on page two
1
<PAGE> 3
bond prices did not rise as much as Treasuries. This lag is typical of market
rallies partly because municipal bonds are less liquid than Treasuries.
In California, a broad-based economic expansion led to the creation of more
jobs than in any other state in the nation, and contributed to a large increase
in personal tax collections. At the same time, however, spending grew. The
state's latest budget estimates a seven-percent increase in revenues but an
eight-percent increase in expenditures, due to a large state pension fund
payment and mandated increases in school funding. As a result, the state's
deficit, which has declined sharply since 1994, is expected to increase in 1998.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality
as of December 31, 1997*
<TABLE>
<S> <C>
AAA...................... 50.1%
AA....................... 14.4%
A........................ 13.6%
BBB...................... 21.9%
</TABLE>
*As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's
or Moody's.
TRUST STRATEGY
In managing the Trust, we maintained a diverse mix of credit quality in
order to help limit the portfolio's volatility in response to changing interest
rates. Bonds rated AAA, the highest credit rating used by the Standard & Poor's
Ratings Group, have tended to perform better when interest rates are declining
and provide the potential for safety of principal. Many of the AAA-rated bonds
in the Trust are insured, which helps protect against credit risk, and insured
bonds currently comprise well over half of all new California municipal issues.
As a result of their high degree of liquidity and credit protection, insured
bonds benefit from strong demand, which enhances their price appreciation
potential. Bonds rated BBB, the lowest investment-grade credit rating, have
tended to perform better when rates are rising and have the potential to provide
additional income.
During the six months ended December 31, we moderately increased the portion
of AAA- and AA-rated portfolio assets. This adjustment reflected the narrow
yield spreads between high- and low-quality bonds. In adding securities to the
portfolio, we favored higher-rated securities because they generated almost as
much income as lower-rated bonds with far less credit risk.
Trading focused on enhancing the Trusts call protection in order to limit
the potentially negative impact of calls on the portfolio. We try to ensure that
only a small portion of Trust assets will be subject to calls in any given year
to help reduce the risk of reinvesting at a lower yield. As a result, we sell
bonds that we believe are likely to be called in the
Continued on page three
2
<PAGE> 4
near term and replace them with new longer-term issues that are not callable for
many years.
During the reporting period, our purchases favored long-term discount bonds,
which are priced below their face value. When interest rates fall, as they did
throughout most of the second half of the year, discount bonds tend to
outperform because they have more room to appreciate in price. We emphasized
long-term bonds because they usually yield more than shorter-term securities.
When selecting new securities, we try to identify those bonds that we believe
will outperform within a particular sector and can be purchased at an attractive
price. We believe this selective approach, which is supported by our research,
provides significant added value to the portfolio.
During the reporting period, we extended the duration of the Trust in order
to bring it closer to the duration of its benchmark index. Duration, which is
measured in years, is a gauge of a portfolio's sensitivity to interest rate
movements. Portfolios with shorter durations tend to outperform when rates are
rising, while portfolios with longer durations tend to perform better when rates
are falling. At the end of period, the Trust's duration stood at 8.16 years
compared to 7.25 years for it's benchmark, the Lehman Brothers Municipal Bond
Index, adjusted to include only bonds with maturities exceeding five years. The
longer duration of the Trust helped to boost its performance during the second
half of 1997, when rates were falling.
We increased the portfolio's heavy concentration in transportation bonds by
purchasing two new toll road issues. We believe both securities have the
potential to be upgraded and prerefunded. The Trust remains well-diversified in
terms of industry sectors, with high concentrations in health care and
single-family housing.
<TABLE>
<S> <C>
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR
AS OF DECEMBER 31, 1997*
Single-Family Housing................................... 15.9%
Transportation.......................................... 11.6%
Tax District............................................ 11.3%
Health Care............................................. 11.2%
General Purpose......................................... 7.0%
</TABLE>
* As a Percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the six-month period ended December 31, 1997, the Trust generated a
total return at market price of 6.20 percent(1). This gain reflects an increase
in market price per common share from $12.1875 on June 30, 1997 to $12.3125 on
December 31, 1997, plus reinvestment of all dividends. The Trust had a
tax-exempt distribution rate of 5.60 percent(3), based on the closing price of
its common shares. Because income from the Trust is exempt from federal income
tax, this distribution represents a yield equivalent to a taxable investment
earning 9.66 percent(4) for investors in the 42 percent combined federal and
state income tax bracket.
As a result of a moderate decline in the Trust's earnings, the Board of
Trustees approved a decrease in its monthly dividend from $0.0625 to $0.0575 per
common share payable December 31, 1997.
Continued on page five
3
<PAGE> 5
[DISTRIBUTION HISTORY GRAPH]
Six-month Distribution History
For the Period Ended December 31, 1997
<TABLE>
<CAPTION>
Distribution per Common Share
Dividends Capital Gains
<S> <C> <C>
Jul 1997.......................... $0.0625
Aug 1997.......................... $0.0625
Sep 1997.......................... $0.0625
Oct 1997.......................... $0.0625
Nov 1997.......................... $0.0625
Dec 1997.......................... $0.0575 $0.2207
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
ECONOMIC OUTLOOK
We expect the national economy and the California economy to remain strong
going into 1998, although their growth rates are likely to slow from current
levels. The financial crisis in Southeast Asia is anticipated to curb U.S.
exports to the region, which could trim the earnings of many U.S. companies and
reduce overall U.S. growth. As a result, we believe there is little chance that
the Fed will raise interest rates in the near term, and a decline in rates is
certainly a possibility.
A decline in rates would not only boost the prices of long-term assets in
the portfolio but also positively affect the leveraged structure of the Trust.
That structure, which involves borrowing short-term funds to purchase longterm
municipal bonds, provides common shareholders with above-market levels of
dividend income. It should be noted, however, that if short-term rates rise,
borrowing costs would increase and that would negatively impact the
dividend-paying ability of common shares as well as their price.
Continued on page five
4
<PAGE> 6
Finally, we expect the yield on the 30-year Treasury bond to remain at
current levels in the coming months and possibly decline further later on in
1998. We believe the Trust's diversity of credit ratings and industry sector
exposure will help to limit its price volatility in response to changing market
conditions. At this time we do not anticipate making any major changes to the
portfolio until market fundamentals shift more dramatically. We will continue to
seek a balance between the Trust's total return and its dividend income, and
look to add value through our investment strategies and bond selection. Thank
you for your continued confidence in Van Kampen American Capital and the
management of your Trust.
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 six
5
<PAGE> 7
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
(AMEX TICKER SYMBOL--VKC)
<TABLE>
<CAPTION>
TOTAL RETURNS
<S> <C>
Six months total return based on market price(1).......... 6.20%
Six months total return based on NAV(2)................... 7.53%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 5.60%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 9.66%
SHARE VALUATIONS
Net asset value........................................... $10.69
Closing common stock price................................ $12.3125
Six months high common stock price (10/07/97)............. $12.9375
Six months low common stock price (10/28/97).............. $11.3125
Preferred share rate(5)................................... 4.250%
</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 42%
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.
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS 102.2%
$ 790 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Agy
Pool Rev Ser A (FSA Insd)....................... 6.000% 12/15/15 $ 856,352
500 Brea & Olinda, CA Unified Sch Dist Ctfs Partn Sr
High Sch Pgm Ser A Rfdg (FSA Insd).............. 6.000 08/01/09 543,255
1,000 California Edl Fac Auth Rev Student Ln CA Ln Pgm
Ser A (MBIA Insd)............................... 6.000 03/01/16 1,038,680
1,300 California Hlth Fac Fin Auth Rev Insd Episcopal
Homes Ser A..................................... 7.800 07/01/15 1,348,451
1,500 California Hlth Fac Fin Auth Rev Saint Joseph
Hlth Sys Ser A (Prerefunded @ 07/01/01)......... 6.750 07/01/21 1,656,750
1,000 California Hsg Fin Agy Rev Home Mtg Ser E (AMBAC
Insd)........................................... 6.100 08/01/29 1,051,720
2,000 California Hsg Fin Agy Rev Home Mtg Ser N....... 6.375 02/01/27 2,130,620
3,205 California Hsg Fin Agy Rev Homeowner Mtg Ser
D............................................... * 08/01/20 570,971
15,000 California Hsg Fin Agy Rev Homeowner Mtg Ser D
(AMBAC Insd).................................... * 08/01/20 2,672,250
1,000 California Hsg Fin Agy Rev Multi-Family Hsg III
Ser A (MBIA Insd)............................... 5.850 08/01/17 1,039,650
2,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southn CA Edison Co (AMBAC Insd)................ 6.000 07/01/27 2,139,380
885 California Rural Home Mtg Fin Auth Single Family
Mtg Rev Ser C (GNMA Collateralized)............. 7.800 02/01/28 1,012,750
2,000 California St Ser BH (FSA Insd)................. 5.400 12/01/15 2,022,160
1,000 California St Ser BH (FSA Insd)................. 5.500 12/01/24 1,006,960
1,300 California St Dept Vet Affairs Home Pur Rev Ser
A (b)........................................... 8.300 08/01/19 1,340,729
1,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Projs Ser A................................ 6.300 10/01/10 1,106,770
1,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Projs Ser A................................ 6.375 10/01/14 1,102,490
800 California St Var Purp (MBIA Insd).............. 6.000 10/01/14 857,040
3,000 California Statewide Cmntys Dev Auth Spl Fac
United Airls.................................... 5.625 10/01/34 3,021,780
785 Central Contra Costa, CA Santn Dist Rev Wastewtr
Fac Impt Proj (MBIA Insd)....................... 6.250 09/01/11 872,575
1,000 Contra Costa, CA Tran Auth Sales Tax Rev Ser
A............................................... 6.875 03/01/07 1,144,430
1,000 Desert Hosp Dist CA Hosp Rev Ctfs Partn Desert
Hosp Corp Proj (Prerefunded @ 07/01/00)......... 8.100 07/01/20 1,117,160
1,500 Eden Twp, CA Hosp Dist Hosp Rev Ser A........... 7.200 11/01/16 1,531,965
1,280 El Cerrito, CA Redev Agy Tax Alloc (MBIA Insd)
(a)............................................. 5.250 07/01/15 1,273,997
2,000 Emeryville, CA Pub Fin Auth Rev Hsg Increment
Sub Lien A (Prerefunded @ 02/01/01)............. 7.875 02/01/15 2,252,280
1,000 Folsom, CA Spl Tax Cmnty Fac Dist No 2 Rfdg
(Connie Lee Insd)............................... 5.250 12/01/19 1,001,710
1,000 Foothill/Eastern Tran Agy Conv Cap Apprec Sr
Lien Ser A (c).................................. 0/7.050 01/01/10 746,510
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 5,435 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/19 $ 1,751,755
3,000 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A............................... * 01/01/28 593,460
790 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/10 412,633
800 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/11 393,608
1,700 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/12 787,100
975 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/13 424,398
155 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 03/01/20 43,643
1,000 Los Angeles Cnty, CA Ctfs Partn Disney Pkg
Proj............................................ * 09/01/20 273,630
1,359 Los Angeles Cnty, CA Tran Comm Lease Rev Dia RR
Lease Ltd (FSA Insd)............................ 7.375% 12/15/06 1,504,562
1,390 Metropolitan Wtr Dist Southn CA Wtrwks Rev Ser
C............................................... 5.000 07/01/37 1,359,545
1,800 Mountain View Los Altos CA Union High Sch Dist
Ctfs Partn (MBIA Insd).......................... 5.625 08/01/16 1,848,312
3,095 Paramount, CA Redev Agy Tax Alloc Redev Proj
Area No 1 Ser B (MBIA Insd)..................... * 08/01/26 491,145
1,000 San Bernardino Cnty, CA Ctfs Partn Med Cent Fin
Proj (MBIA Insd)................................ 5.000 08/01/28 973,980
3,440 San Joaquin Hills, CA Trns Toll Cap Apprec Ser A
Rfdg (MBIA Insd)................................ * 01/15/28 723,570
895 San Jose, CA Arpt Rev (AMBAC Insd).............. 7.500 03/01/18 917,778
1,210 San Jose, CA Redev Tax Alloc Hsg Set Aside Mergd
Area Ser E (MBIA Insd).......................... 5.750 08/01/17 1,287,912
890 Santa Barbara, CA Ctfs Partn.................... 7.650 05/01/15 967,198
1,450 Santa Barbara, CA Ctfs Partn Wtr Sys Impt Proj &
Rfdg (AMBAC Insd)............................... 6.700 04/01/27 1,592,477
95 Southern CA Home Fin Auth Single Family Mtg Rev
Ser B (GNMA Collateralized)..................... 7.750 03/01/24 100,628
600 Southern CA Pub Pwr Auth Pwr Proj Rev
Multi-Projs..................................... 5.500 07/01/20 602,358
2,000 Westminster, CA Redev Agy Tax Alloc Rev Coml
Redev Proj No 1 Ser A Rfdg...................... 7.300 08/01/21 2,246,840
-----------
TOTAL LONG-TERM INVESTMENTS 102.2%
(Cost $51,057,930)............................................................ 55,755,917
LIABILITIES IN EXCESS OF OTHER ASSETS (2.2%)................................... (1,226,818)
-----------
NET ASSETS 100.0%.............................................................. $54,529,099
===========
</TABLE>
*Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
(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
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $51,057,930)........................ $55,755,917
Interest Receivable......................................... 915,404
Other....................................................... 4,226
-----------
Total Assets.......................................... 56,675,547
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,244,518
Custodian Bank............................................ 673,730
Income Distributions--Preferred Shares.................... 34,931
Investment Advisory Fee................................... 27,725
Affiliates................................................ 6,225
Trustees' Deferred Compensation and Retirement Plans........ 83,375
Accrued Expenses............................................ 75,944
-----------
Total Liabilities..................................... 2,146,448
-----------
NET ASSETS.................................................. $54,529,099
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 1,000,000
shares, 400 shares are issued and outstanding with a
liquidation preference of $50,000 per share).............. $20,000,000
-----------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 3,229,108 shares issued and
outstanding).............................................. 32,291
Paid in Surplus............................................. 29,252,838
Net Unrealized Appreciation................................. 4,697,987
Accumulated Undistributed Net Investment Income............. 279,960
Accumulated Net Realized Gain............................... 266,023
-----------
Net Assets Applicable to Common Shares................ 34,529,099
-----------
NET ASSETS.................................................. $54,529,099
===========
NET ASSET VALUE PER COMMON SHARE ($34,529,099 divided by
3,229,108 shares outstanding)............................. $ 10.69
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $1,694,263
----------
EXPENSES:
Investment Advisory Fee..................................... 163,985
Preferred Share Maintenance................................. 33,330
Accounting Services......................................... 15,126
Audit....................................................... 14,904
Trustees' Fees and Expenses................................. 13,006
Custody..................................................... 5,423
Legal....................................................... 1,783
Other....................................................... 24,203
----------
Total Expenses.......................................... 271,760
----------
NET INVESTMENT INCOME....................................... $1,422,503
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 506,686
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 3,593,450
End of the Period......................................... 4,697,987
----------
Net Unrealized Appreciation During the Period............... 1,104,537
----------
NET REALIZED AND UNREALIZED GAIN............................ $1,611,223
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $3,033,726
==========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1997
and the Year Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 1,422,503 $ 2,852,759
Net Realized Gain........................................ 506,686 556,587
Net Unrealized Appreciation During the Period............ 1,104,537 685,695
----------- -----------
Change in Net Assets from Operations..................... 3,033,726 4,095,041
----------- -----------
Distributions from Net Investment Income:
Common Shares.......................................... (1,191,517) (2,405,288)
Preferred Shares....................................... (362,907) (678,245)
----------- -----------
(1,554,424) (3,083,523)
Distributions from Net Realized Gain--Common Shares...... (711,433) (490,372)
----------- -----------
Total Distributions.................................... (2,265,857) (3,573,905)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 767,869 521,136
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment........................................... 139,035 224,216
----------- -----------
TOTAL INCREASE IN NET ASSETS............................. 906,904 745,352
NET ASSETS:
Beginning of the Period.................................. 53,622,195 52,876,843
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of $279,960 and $411,881,
respectively).......................................... $54,529,099 $53,622,195
=========== ===========
</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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended -----------------------------------------
December 31, 1997 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a).......................... $10.450 $10.283 $10.395 $10.301 $10.963
-------- -------- ------- ------- -------
Net Investment Income............... .441 .888 .919 .951 .956
Net Realized and Unrealized
Gain/Loss......................... .505 .393 (.001) .111 (.740)
-------- -------- ------- ------- -------
Total from Investment Operations...... .946 1.281 .918 1.062 .216
-------- -------- ------- ------- -------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders....... .370 .750 .750 .725 .712
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders.................... .112 .211 .230 .237 .156
Distributions from Net Realized Gain
Paid to Common Shareholders....... .221 .153 .050 .006 .010
-------- -------- ------- ------- -------
Total Distributions................... .703 1.114 1.030 .968 .878
-------- -------- ------- ------- -------
Net Asset Value, End of the Period.... $10.693 $10.450 $10.283 $10.395 $10.301
======== ======== ======= ======= =======
Market Price Per Share at End of the
Period.............................. $12.3125 $12.1875 $10.875 $10.750 $10.625
Total Investment Return at Market
Price (b)........................... 6.20%* 21.40% 9.02% 8.67% 4.32%
Total Return at Net Asset Value (c)... 7.53%* 10.76% 6.62% 8.47% .35%
Net Assets at End of the Period (In
millions)........................... $54.5 $53.6 $52.9 $53.0 $52.6
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**............................ 1.58% 1.58% 1.65% 1.65% 1.53%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)................... 6.14% 6.51% 6.57% 7.02% 7.28%
Portfolio Turnover.................... 38%* 30% 19% 16% 11%
* Non-Annualized
** Ratio of Expenses to Average Net
Assets Including Preferred
Shares............................. .99% .99% 1.03% 1.02% .97%
</TABLE>
*** 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 Including Preferred Shares 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.
(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.
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>
$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%***
7.62% 7.74% 6.98%*** 7.01%*** 6.26%***
18% 41% 99% 100% 57%*
.98% 1.26% 1.11%** .43%*** N/A
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (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.
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
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required.
At December 31, 1997, cost of long-term investments for federal income tax
purposes is $51,057,930; the aggregate gross unrealized appreciation is
$4,697,987 and the aggregate gross unrealized depreciation is $0, resulting in
net unrealized appreciation of $4,697,987.
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 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.
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.
For the six months ended December 31, 1997, the Trust recognized expenses of
approximately $500 representing legal services provided by Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
For the six months ended December 31, 1997, the Trust recognized expenses of
approximately $16,400 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 provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
to the Trust. The maximum annual benefit under the plan is equal to the
trustee's annual retainer fee, which is currently $2,500.
3. CAPITAL TRANSACTIONS
At December 31, 1997 and June 30, 1997, paid in surplus related to common shares
aggregated $29,252,838 and $29,113,921, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares......................... 3,217,303 3,197,321
Shares Issued Through Dividend
Reinvestment........................... 11,805 19,982
--------- ---------
Ending Shares............................ 3,229,108 3,217,303
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $22,073,309 and $20,534,224,
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, 1997, was 4.250%, and for the six
months then ended rates ranged from 3.25% to 4.25%.
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
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
17
<PAGE> 19
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales
charges, risks, and expenses. Please read it carefully before you invest or
send money.
To view a current Van Kampen American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:
- visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a Prospectus
- call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- e-mail us by visiting WWW.VKAC.COM and selecting Investors' Place
18
<PAGE> 20
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
STEVEN MULLER
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., 1998
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
19
<PAGE> 21
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
THIS PAGE INTENTIONALLY LEFT BLANK
20
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> CALMUNI TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 51,057,930
<INVESTMENTS-AT-VALUE> 55,755,917
<RECEIVABLES> 915,404
<ASSETS-OTHER> 4,226
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,675,547
<PAYABLE-FOR-SECURITIES> 1,244,518
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 901,930
<TOTAL-LIABILITIES> 2,146,448
<SENIOR-EQUITY> 20,000,000
<PAID-IN-CAPITAL-COMMON> 29,285,129
<SHARES-COMMON-STOCK> 3,229,108
<SHARES-COMMON-PRIOR> 3,217,303
<ACCUMULATED-NII-CURRENT> 279,960
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 266,023
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,697,987
<NET-ASSETS> 54,529,099
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,694,263
<OTHER-INCOME> 0
<EXPENSES-NET> (271,760)
<NET-INVESTMENT-INCOME> 1,422,503
<REALIZED-GAINS-CURRENT> 506,686
<APPREC-INCREASE-CURRENT> 1,104,537
<NET-CHANGE-FROM-OPS> 3,033,726
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,554,424)
<DISTRIBUTIONS-OF-GAINS> (711,433)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 11,805
<NET-CHANGE-IN-ASSETS> 906,904
<ACCUMULATED-NII-PRIOR> 411,881
<ACCUMULATED-GAINS-PRIOR> 470,770
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 163,985
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 271,760
<AVERAGE-NET-ASSETS> 34,216,784
<PER-SHARE-NAV-BEGIN> 10.450
<PER-SHARE-NII> 0.441
<PER-SHARE-GAIN-APPREC> 0.505
<PER-SHARE-DIVIDEND> (0.482)
<PER-SHARE-DISTRIBUTIONS> (0.221)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.693
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
