<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 10
Statement of Operations.......................... 11
Statement of Changes in Net Assets............... 12
Financial Highlights............................. 13
Notes to Financial Statements.................... 14
</TABLE>
VQC SAR 4/97
<PAGE> 2
LETTER TO SHAREHOLDERS
March 21, 1997
Dear Shareholder,
As mentioned in your previous
report, VK/AC Holding, Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset [PHOTO]
management and investment banking. The
transaction was completed in October,
and we look forward to exploring the
opportunities it creates for investors.
As part of the acquisition, Van Kampen DENNIS J. MCDONNELL AND DON G. POWELL
American Capital became the distributor
of Morgan Stanley retail funds on January 2, 1997.
More recently, on February 5, 1997, it was announced that Morgan Stanley
Group Inc. and Dean Witter, Discover & Co. agreed to merge. The combined company
will be a preeminent global financial services firm, with leading market
positions in securities, asset management and credit services. As the financial
industry continues to witness unprecedented consolidations and new partnerships,
we believe those firms that want to offer investors the greatest opportunities
and services in the next century must be market leaders in all facets of their
business.
ECONOMIC REVIEW
Due to fears that strong economic growth would trigger higher inflation and
cause the Federal Reserve Board to raise interest rates, bond prices dropped
sharply in the first few months of 1996. The Fed ultimately decided to take no
action, however, and bond prices responded with a rally in May. The rally
continued through the latter part of 1996, with bonds regaining much of the loss
they had experienced earlier in the year. Election-year politics further
strengthened the municipal bond market; the flat federal income tax proposal
lost support, and the status quo of a split government (a Democratic president
and a Republican Congress) was maintained.
Fixed-income prices showed some volatility in the first two months of 1997,
but remained unchanged from year end. During the six-month reporting period,
municipal bond yields decreased an average of 25 basis points. In comparison,
taxable yields decreased 30 to 35 basis points over the same period. The Trust
performed well in this environment in which interest rates declined and the
price of bonds increased.
Continued on page two
1
<PAGE> 3
FUND STRATEGY
We employed the following strategies in managing the Trust:
- - We invested 51.8 percent of the Trust's long-term investments in AAA-rated
securities and 21.6 percent in BBB-rated or non-rated (with an equivalent
rating of investment grade at the time of purchase) securities as of
February 28, 1997. By investing at both ends of the investment grade rating
spectrum, the portfolio's exposure to the volatility of interest rate
movements tends to be more balanced. While the AAA-rated securities have
provided safety of principal and total return opportunities, lower-rated and
non-rated bonds provide income potential and have tended to exhibit lower
price volatility as interest rates change. The value of Trust shares will
fluctuate.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality
as of February 28, 1997
<TABLE>
<S> <C>
AAA................. 51.8%
AA.................. 2.7%
A................... 22.5%
BBB................. 9.2%
BB.................. 1.4%
Non-Rated........... 12.4%
</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.
- - Rather than focusing on market timing, we attempt to identify securities
that we believe will outperform within a sector and which can be acquired at
an attractive price. This "bottom-up" approach to security selection, aided
by our research team, provides significant added value to the portfolio.
- - We invested in bonds in the 15- to 25-year range of the yield curve, seeking
to capture the maximum yield with less volatility. Yields on securities in
this maturity range were almost 90 percent of the yields on securities
maturing in 30 years, with substantially reduced volatility--about
two-thirds of the longer maturity securities.
- - We adjusted the Trust's duration to seek to manage volatility. Duration,
which is expressed in years, is a measurement of the portfolio's volatility
to interest rate movements. Portfolios with shorter durations have tended to
perform better when interest rates are rising. At the end of the period, the
Trust's duration stood at 6.71 years, comparatively shorter than the Lehman
Brothers California Municipal Bond Index benchmark of 8.22 years. While the
shorter duration boosted the Trust's performance in the first half of 1996
when interest rates rose sharply, it prevented the Trust from taking full
advantage of the decline in interest rates during the latter half.
Continued on page three
2
<PAGE> 4
[DISTRIBUTION HISTORY BAR GRAPH]
Six-month Distribution History For the Period Ended February 28, 1997
<TABLE>
<CAPTION>
Sep 1996 Oct 1996 Nov 1996 Dec 1996 Jan 1997 Feb 1997
<S> <C> <C> <C> <C> <C> <C>
Capital Gain $ .1593
Dividends $ .0875 $ .0875 $ .0875 $ .0875 $ .0875 $ .0875
</TABLE>
The dividend and/or capital gains history represent past performance of the
Trust and does not predict the Trust's future distributions.
PERFORMANCE SUMMARY
We are pleased to report that the Van Kampen American Capital California
Quality Municipal Trust continued its positive performance over the first half
of its fiscal year. For the six-month period ended February 28, 1997, the Trust
generated a total return at market price of 6.89 percent(1), including
reinvestment of income dividends totaling $.525 per share and capital gains of
$.07179 per share. The Trust offered a tax-exempt distribution rate of 6.46
percent(3), based on the closing common stock price of $16.25 per share on
February 28, 1997. Because income from the Trust is exempt from federal and
state income tax, this distribution rate represents a yield equivalent to a
taxable investment earning 11.33 percent(4) (for California investors in the 43
percent combined federal and state income tax bracket).
<TABLE>
<S> <C>
TOP 5 PORTFOLIO INDUSTRY HOLDINGS BY SECTOR*
AS OF
FEBRUARY 28, 1997
General Purpose............................................. 22.0%
Retail Electric/Gas/Telephone............................... 10.4%
Health Care................................................. 10.2%
Multi-Family Housing........................................ 9.6%
Public Building............................................. 9.4%
</TABLE>
*As a Percentage of Long-Term Investments
MUNICIPAL MARKET OUTLOOK
California, with the world's seventh largest economy, exhibited stronger
growth than the U.S. economy as a whole. The state's budget is as healthy as it
has been in years, and the population trend appears to be stabilizing after a
slight decline. In addition,
Continued on page four
3
<PAGE> 5
California's non-farm employment gains in 1996 outpaced the national increase.
The robust economy, along with the passage of Proposition 218 last November,
should keep the price of California tax-exempt securities at relatively high
levels. Proposition 218 limits the ability of local governments to raise revenue
without taxpayer consent. This could potentially lead to a low volume of total
municipal bonds and higher bond prices.
Nationwide, we continue to see signs of a strengthening economy. As a
result, we believe it is more likely that interest rates will rise rather than
decline, although we do not expect to see a drastic move in either direction. We
are, however, maintaining a slightly defensive posture with the Trust by
maintaining a relatively short duration in the event of an increase in interest
rates.
Relatively stable interest rates are favorable for the leveraged structure
of our closed-end funds, which involves borrowing short-term funds to purchase
long-term municipal securities. The leveraged capital structure of the Trust has
continued to provide common shareholders with above-market levels of dividend
income. It should be noted, however, that a significant rise in short-term
interest rates would have an unfavorable effect on the dividend-paying ability
of the common shares, and would also negatively impact the price.
We believe the Trust is positioned to perform well in the coming months, and
do not anticipate major changes in the portfolio's characteristics. We will
continue to seek to balance the Trust's total return and dividend income. At the
same time, we seek to manage the volatility of the Trust by adjusting the
duration when necessary, and to continue to add value through security
selection. Thank you for your confidence in Van Kampen American Capital and in
your Trust's management team.
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 five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED FEBRUARY 28, 1997
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
(NYSE TICKER SYMBOL--VQC)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)........... 6.89%
Six-month total return based on NAV(2).................... 6.62%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 6.46%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 11.33%
SHARE VALUATIONS
Net asset value........................................... $ 16.75
Closing common stock price................................ $16.250
Six-month high common stock price (01/10/97).............. $16.750
Six-month low common stock price (10/24/96)............... $15.750
Preferred share rate(5)................................... 3.240%
</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.
Market forecasts provided in this report may not necessarily come to pass.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
CALIFORNIA 94.9%
$ 1,610 Blythe, CA Redev Agy Redev Proj No 1 Tax Alloc Ser
A Rfdg............................................ 7.500% 05/01/23 $ 1,782,254
2,000 California Edl Fac Auth Rev Univ of La Verne...... 6.375 04/01/13 2,042,880
1,800 California Hlth Fac Fin Auth Rev Kaiser Permanente
Ser A............................................. 7.000 12/01/10 1,975,428
1,000 California Hsg Fin Agy Rev Home Mtg Ser B (MBIA
Insd)............................................. 6.100 02/01/28 1,014,330
2,070 California Hsg Fin Agy Rev Home Mtg Ser E (FHA
Gtd).............................................. 8.350 08/01/19 2,152,345
1,090 California Hsg Fin Agy Rev Home Mtg Ser F (FHA
Gtd).............................................. 6.750 08/01/11 1,142,440
1,000 California Hsg Fin Agy Rev Home Mtg Ser N (FHA
Gtd).............................................. 6.375 02/01/27 1,023,980
2,120 California Hsg Fin Agy Rev Insd Hsg Ser E (MBIA
Insd)............................................. 7.000 08/01/26 2,228,777
3,000 California Hsg Fin Agy Rev Multi-Unit Rental Hsg
Ser C II.......................................... 6.850 08/01/15 3,128,940
8,190 California Hsg Fin Agy Rev Multi-Unit Rental Hsg
Ser C II.......................................... 6.875 08/01/24 8,509,574
10,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co (Embedded Cap) (AMBAC
Insd)............................................. 6.000 07/01/27 10,232,200
4,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co Ser B (AMBAC Insd).......... 6.400 12/01/24 4,236,080
7,800 California Pollutn Ctl Fin Auth Solid Waste Disp
Rev North Cnty Recycling Ser A (Prerefunded @
07/01/04)......................................... 6.750 07/01/17 8,958,924
1,000 California St (AMBAC Insd)........................ 6.200 02/01/16 1,022,820
3,655 California St Cpn Muni Rcpts...................... * 03/01/08 2,065,989
3,655 California St Cpn Muni Rcpts...................... * 09/01/09 1,888,319
9,600 California St Prin Muni Rcpts..................... * 09/01/09 4,959,744
1,125 California Statewide Cmntys Dev Auth Rev Ctfs
Partn Saint Joseph Hlth (AMBAC Insd).............. 6.100 07/01/07 1,213,673
9,000 California Statewide Cmntys Dev Corp Ctfs Partn
Insd United Westn Med Cent (Prerefunded @
12/01/01)......................................... 6.750 12/01/21 10,088,010
5,500 Capistrano, CA Unified Sch Dist Cmnty Fac Dist Spl
Tax No 87-1 (Prerefunded @ 10/01/00).............. 8.375 10/01/20 6,350,190
1,600 Carson, CA Impt Bond Act 1915 Assmt Dist No
92-1.............................................. 7.375 09/02/22 1,695,232
1,000 Central Contra Costa, CA Santn Dist Rev Wastewtr
Fac Impt Proj (MBIA Insd)......................... 6.250 09/01/11 1,076,040
1,870 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers C.................................. * 08/01/97 1,842,081
1,860 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers C.................................. * 02/01/98 1,796,779
1,930 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers C.................................. * 08/01/98 1,829,215
1,940 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers C.................................. * 02/01/99 1,789,805
2,000 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers C.................................. * 08/01/99 1,806,940
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,895 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers C.................................. * 02/01/00 $ 1,668,775
2,055 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers C.................................. * 02/01/01 1,726,323
2,660 Chula Vista, CA Redev Agy Tax Alloc Sr Bayfront
Ser D Rfdg........................................ 8.625% 09/01/24 3,185,323
2,000 Contra Costa Cnty, CA Ctfs Partn Merrithew Mem
Hosp Proj Rfdg (MBIA Insd)........................ 5.500 11/01/22 1,937,060
1,176 Contra Costa Cnty, CA Multi-Family Hsg Rev
Crescent Park Apts Proj Ser B (GNMA
Collateralized)................................... 7.800 12/20/14 1,317,508
1,000 Contra Costa Cnty, CA Pub Fin Auth Tax Alloc Rev
Ser A............................................. 7.100 08/01/22 1,067,380
1,935 Delano, CA Ctfs Partn Ser A....................... 9.250 01/01/22 2,174,669
935 Fairfield, CA Hsg Auth Mtg Rev Creekside Estates
Proj Rfdg......................................... 7.875 02/01/15 963,162
6,000 Foothill/Eastern Tran Agy Cap Apprec Sr Lien Ser
A................................................. * 01/01/27 918,240
2,000 Foothill/Eastern Tran Agy Conv Cap Apprec Sr Lien
Ser A (d)......................................... 0/7.050 01/01/10 1,315,480
1,500 Huntington Beach, CA Pub Fin Auth Rev Huntington
Beach Redev Proj.................................. 7.000 08/01/24 1,504,875
665 Inglewood, CA Redev Agy Tax Alloc Century Redev
Proj Ser A........................................ 6.125 07/01/23 665,366
3,205 Lompoc, CA Wtr & Wastewtr Impts Fin Auth Rev Wtr &
Wastewtr Sys Fin Proj Ser A (MBIA Insd)........... 6.700 03/01/22 3,529,058
5,000 Long Beach, CA Harbor Rev Ser A (MBIA Insd)....... 7.375 05/15/09 5,274,750
1,000 Long Beach, CA Harbor Rev Ser A (MBIA Insd)....... 7.250 05/15/19 1,053,490
7,000 Los Angeles Cnty, CA Ctfs Partn................... 6.600 11/01/11 7,331,030
12,000 Los Angeles Cnty, CA Pension Oblig Ctfs Ltd Muni
Oblig Ser A (MBIA Insd) (c)....................... 6.900 06/30/08 14,030,280
1,795 Los Angeles, CA Cmnty Redev Agy Ctfs Partn
Allright Garage................................... 7.550 11/01/08 1,908,049
2,500 Los Angeles, CA Multi-Family Rev Hsg Earthquake
Rehab Proj Ser A (FNMA Insd)...................... 5.700 12/01/27 2,512,250
1,780 Los Angeles, CA Single Family Home Mtg Rev Pgm Ser
A (GNMA Collateralized)........................... 6.875 06/01/25 1,845,290
825 Mendota & Parlier, CA Unified Sch Dist Ctfs Partn
Cap Outlay Fin Pgm................................ 7.400 01/01/06 837,656
195 Mendota & Parlier, CA Unified Sch Dist Ctfs Partn
Cap Outlay Fin Pgm................................ 7.500 01/01/11 197,521
635 Mendota & Parlier, CA Unified Sch Dist Ctfs Partn
Cap Outlay Fin Pgm................................ 7.550 01/01/17 641,242
1,000 Montebello, CA Unified Sch Dist Ctfs Partn Cap
Impts Proj........................................ 6.300 06/01/11 1,033,990
2,490 Mount Diablo, CA Hosp Dist Rev Ser A (Embedded
Cap) (AMBAC Insd)................................. 5.125 12/01/23 2,269,012
2,000 Needles, CA Pub Util Auth Util Sys Acquisition
(b)............................................... 6.500 02/01/22 1,958,820
1,650 Newport Beach, CA Spl Tax Spl Impt Dist No 95-1
Ser A............................................. 6.750 09/01/20 1,693,049
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 2,000 Oakland, CA Unified Sch Dist Alameda Cnty Ctfs
Partn Energy Retrofit Proj........................ 6.750% 11/15/14 $ 2,010,740
1,000 Oakland, CA Unified Sch Dist Almeda Cnty Ctfs
Partn............................................. 7.000 11/15/11 1,085,679
2,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA Insd)... 5.750 06/01/15 2,028,420
2,095 Palm Springs, CA Ctfs Partn Multi-Cap Fac Proj
Rfdg (AMBAC Insd)................................. 5.750 04/01/17 2,095,775
6,000 Paramount, CA Redev Agy Tax Alloc Redev Proj Area
No 1 Ser B (MBIA Insd)............................ * 08/01/26 880,800
1,500 Pasadena, CA Spl Tax Cmnty Fac Dist No 1 Civic
Cent West......................................... * 12/01/07 727,680
2,000 Pasadena, CA Spl Tax Cmnty Fac Dist No 1 Civic
Cent West......................................... * 12/01/17 440,580
1,000 Port of Oakland, CA Spl Fac Rev Mitsui O.S.K. Line
Ltd Ser A......................................... 6.800 01/01/19 1,056,860
1,400 Rancho Mirage, CA Jt Pwrs Fin Auth Ctfs Partn
Eisenhower Med Cent Ser A (MBIA Insd)............. 5.375 07/01/22 1,327,606
1,250 Redding, CA Redev Agy Tax Alloc Market Street
Redev Proj Ser A.................................. 6.700 09/01/23 1,312,238
1,000 Redondo Beach, CA Pub Fin Auth Rev South Bay Cent
Redev Proj........................................ 7.000 07/01/16 1,051,450
2,000 Richmond, CA Rev YMCA East Bay Proj Rfdg.......... 7.250 06/01/17 2,054,820
5,000 Sacramento, CA City Fin Auth Rev (Prerefunded @
11/01/01)......................................... 6.800 11/01/20 5,622,900
6,000 San Diego Cnty, CA Wtr Auth Wtr Rev Ctfs Partn Ser
91 B (Inverse Fltg) (MBIA Insd)................... 8.820 04/08/21 6,667,500
2,650 San Diego, CA Indl Dev Rev San Diego Gas & Elec
Ser A (MBIA Insd)................................. 6.400 09/01/18 2,841,224
5,000 San Diego, CA Indl Dev Rev San Diego Gas & Elec
Ser A (AMBAC Insd)................................ 6.100 09/01/19 5,174,650
3,000 San Francisco, CA City & Cnty Arpt Comm Intl Arpt
Rev Second Ser Issue 12-A (FGIC Insd)............. 5.800 05/01/21 2,959,440
2,305 San Francisco, CA City & Cnty Redev Agy Hotel Tax
Rev (FSA Insd).................................... 6.750 07/01/15 2,579,940
5,000 San Francisco, CA City & Cnty Redev Agy Lease Rev
George Moscone.................................... * 07/01/08 2,717,150
3,520 San Francisco, CA City & Cnty Redev Agy Lease Rev
George Moscone.................................... * 07/01/09 1,791,117
4,250 San Francisco, CA City & Cnty Redev Agy Lease Rev
George Moscone.................................... * 07/01/12 1,770,465
2,130 San Francisco, CA City & Cnty Redev Agy Lease Rev
George Moscone.................................... * 07/01/14 778,366
800 San Francisco, CA City & Cnty Redev Agy Lease Rev
George Moscone (FSA Insd)......................... 6.750 07/01/15 895,424
1,000 San Jose, CA Arpt Rev (AMBAC Insd)................ 7.500 03/01/18 1,050,450
1,000 San Jose, CA Single Family Mtg Rev Cap Apprec Ser
A................................................. * 04/01/16 330,620
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,000 Santa Ana, CA Multi-Family Hsg Rev Villa Del Sol
Apartments Ser B (FNMA Insd)...................... 5.650% 11/01/21 $ 1,022,900
1,000 Santa Clara Cnty, CA Fin Auth Lease Rev VMC Fac
Replacement Proj Ser A (AMBAC Insd)............... 6.875 11/15/14 1,131,320
1,000 Santa Clara, CA Impt Bond Act 1915 Assessment Dist
187 Ser 1996-1.................................... 7.000 09/02/11 1,027,090
2,000 Santa Clarita, CA Cmnty Fac Dist Spl Tax No 92-1
Ser A............................................. 7.450 11/15/10 2,127,880
1,760 Southern CA Home Fin Auth Single Family Mtg Rev
Pgm B (GNMA Collateralized)....................... 6.900 10/01/24 1,832,442
5,000 Southern CA Pub Pwr Auth Pwr Proj Rev
Multi-Projs....................................... 6.750 07/01/12 5,661,050
2,750 Tulare, CA Loc Hosp Dist Hlth Fac Rev Ser A....... 6.750 12/01/21 2,948,137
1,875 Visalia, CA Ctfs Partn Multi-Proj Ser B Rfdg (MBIA
Insd)............................................. 5.375 12/01/19 1,789,631
2,785 Yolo Cnty, CA Hsg Auth Mtg Rev Mtg Waggener Ranch
Proj (FHA Gtd).................................... 7.000 10/01/33 2,888,323
------------
224,093,304
------------
GUAM 0.4%
1,000 Guam Arpt Auth Rev Ser B.......................... 6.700 10/01/23 1,035,200
------------
PUERTO RICO 1.1%
1,000 Centro De Recaudaciones De Ingresos Muni Ctfs
Partn............................................. 6.850 10/17/03 1,026,630
1,580 Puerto Rico Hsg Fin Single Family Mtg Rev
Portfolio 1 C (GNMA Collateralized)............... 6.850 10/15/23 1,659,348
------------
2,685,978
------------
U. S. VIRGIN ISLANDS 3.1%
6,750 Virgin Islands Pub Fin Auth Rev Matching Fd Ln Nts
Ser A Rfdg........................................ 7.250 10/01/18 7,310,993
------------
TOTAL LONG-TERM INVESTMENTS 99.5%
(Cost $217,454,891) (a)....................................................... 235,125,475
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%..................................... 1,093,624
------------
NET ASSETS 100.0%.............................................................. $236,219,099
============
</TABLE>
*Zero coupon bond
(a) At February 28, 1997, cost for federal income tax purposes is $217,454,891;
the aggregate gross unrealized appreciation is $17,777,047 and the aggregate
gross unrealized depreciation is $106,463, resulting in net unrealized
appreciation of $17,670,584.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
(d) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $217,454,891) (Note 1)... $235,125,475
Receivables:
Interest.................................................. 3,358,472
Investments Sold.......................................... 763,420
Other....................................................... 4,077
------------
Total Assets.......................................... 239,251,444
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,953,486
Custodian Bank............................................ 662,554
Investment Advisory Fee (Note 2).......................... 126,959
Income Distributions--Common and Preferred Shares......... 85,012
Administrative Fee (Note 2)............................... 36,274
Affiliates (Note 2)....................................... 6,339
Accrued Expenses............................................ 103,321
Deferred Compensation and Retirement Plans (Note 2)......... 58,400
------------
Total Liabilities..................................... 3,032,345
------------
NET ASSETS.................................................. $236,219,099
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,500 issued with liquidation preference of
$50,000 per share) (Note 5)............................... $ 75,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 9,623,295 shares issued and
outstanding).............................................. 96,233
Paid in Surplus............................................. 142,409,084
Net Unrealized Appreciation on Investments.................. 17,670,584
Accumulated Undistributed Net Investment Income............. 752,942
Accumulated Net Realized Gain on Investments................ 290,256
------------
Net Assets Applicable to Common Shares................ 161,219,099
------------
NET ASSETS.................................................. $236,219,099
============
NET ASSET VALUE PER COMMON SHARE ($161,219,099 divided
by 9,623,295 shares outstanding).......................... $ 16.75
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF OPERATIONS
For the Six Months Ended February 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 7,364,311
-----------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 815,322
Administrative Fee (Note 2)................................. 232,949
Preferred Share Maintenance (Note 5)........................ 101,677
Trustees Fees and Expenses (Note 2)......................... 13,166
Legal (Note 2).............................................. 12,707
Custody..................................................... 12,415
Amortization of Organizational Expenses (Note 1)............ 428
Other....................................................... 97,281
-----------
Total Expenses........................................ 1,285,945
-----------
NET INVESTMENT INCOME....................................... $ 6,078,366
===========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Gain on Investments............................ $ 290,294
-----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period................................... 12,435,094
End of the Period......................................... 17,670,584
-----------
Net Unrealized Appreciation on Investments During the
Period.................................................... 5,235,490
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. $ 5,525,784
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $11,604,150
===========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended February 28, 1997
and the Year Ended August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 28, 1997 August 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 6,078,366 $ 12,115,305
Net Realized Gain on Investments..................... 290,294 1,920,906
Net Unrealized Appreciation on Investments During the
Period............................................. 5,235,490 317,965
------------ ------------
Change in Net Assets from Operations................. 11,604,150 14,354,176
------------ ------------
Distributions from Net Investment Income:
Common Shares...................................... (5,052,140) (10,104,222)
Preferred Shares................................... (1,133,455) (2,753,746)
------------ ------------
(6,185,595) (12,857,968)
------------ ------------
Distributions from and in Excess of Net Realized Gain
on Investments (Note 1):
Common Shares...................................... (690,856) -0-
Preferred Shares................................... (203,049) -0-
------------ ------------
(893,905) -0-
------------ ------------
Total Distributions.................................. (7,079,500) (12,857,968)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 4,524,650 1,496,208
NET ASSETS:
Beginning of the Period.............................. 231,694,449 230,198,241
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $752,942 and
$860,171, respectively)............................ $236,219,099 $231,694,449
============ ============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 27, 1991
(Commencement
Year Ended August 31 of Investment
Six Months Ended ------------------------------------- Operations) to
February 28, 1997 1996 1995 1994 1993 August 31, 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period(a)...... $16.283 $16.127 $15.699 $17.454 $15.816 $14.805
------- ------- ------- ------- ------- -------
Net Investment Income........... .632 1.259 1.269 1.286 1.305 1.038
Net Realized and Unrealized
Gain/Loss on Investments...... .574 .233 .523 (1.693) 1.658 .870
------- ------- ------- ------- ------- -------
Total from Investment
Operations...................... 1.206 1.492 1.792 (.407) 2.963 1.908
------- ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common Shareholders... .525 1.050 1.050 1.050 .981 .698
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders...... .118 .286 .311 .235 .206 .199
Distributions from and in Excess
of Net Realized Gain on
Investments (Note 1):
Paid to Common Shareholders... .072 -0- .002 .054 .100 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders...... .021 -0- .001 .009 .028 -0-
------- ------- ------- ------- ------- -------
Total Distributions.............. .736 1.336 1.364 1.348 1.325 .897
------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period.......................... $16.753 $16.283 $16.127 $15.699 $17.454 $15.816
------- ------- ------- ------- ------- -------
Market Price Per Share at End of
the Period...................... $16.250 $16.125 $15.000 $15.500 $16.750 $15.125
Total Investment Return at Market
Price(b)........................ 6.89%* 14.89% 3.95% (.90%) 18.66% 5.69%*
Total Return at Net Asset
Value(c)........................ 6.62%* 7.60% 10.02% (3.81%) 17.89% 11.80%*
Net Assets at End of the Period
(In millions)................... $236.2 $231.7 $230.2 $226.1 $243.0 $227.2
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares.......................... 1.61% 1.64% 1.66% 1.62% 1.58% 1.55%
Ratio of Expenses to Average
Net Assets...................... 1.09% 1.11% 1.10% 1.10% 1.07% 1.09%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)............... 6.18% 5.95% 6.22% 6.34% 6.70% 6.09%
Portfolio Turnover............... 10%* 10% 16% 7% 26% 93%*
</TABLE>
(a) Net Asset Value at September 27, 1991, is adjusted for common and preferred
share offering costs of $.195 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
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital California Quality 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 consistent with preservation of capital. The Trust will invest in a
portfolio consisting substantially of California municipal obligations rated
investment grade at the time of investment, but may invest up to 20% of its
assets in unrated securities which are believed to be of comparable quality to
those rated investment grade. The Trust commenced investment operations on
September 27, 1991.
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.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
D. ORGANIZATIONAL EXPENSES--The Trust reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization and initial registration in the amount
of $30,000. These costs were amortized on a straight line basis over the
60-month period ended September 26, 1996.
E. 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.
F. 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 .70% of the average net assets of the Trust. In addition, the Trust will pay
a monthly administrative fee to VKAC, the Trust's Administrator, at an annual
rate of .20% of the average net assets of the Trust. The administrative services
provided by the Administrator include record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
Certain legal expenses are paid to 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 February 28, 1997, the Trust recognized expenses of
approximately $29,300 representing VKAC's cost of providing accounting and legal
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)
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $23,697,229 and $22,668,611,
respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation on investments. Upon disposition, a realized gain or
loss is recognized accordingly.
The following types of Indexed Securities are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.
A. An Inverse Floating security is one where the coupon is inversely indexed
to a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yield of the portfolio.
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 Trust invests in these
instruments as a hedge against a rise in the short-term interest rates which it
pays on its preferred shares.
5. PREFERRED SHARES
The Trust has outstanding 1,500 shares of Auction Preferred Shares ("APS").
Dividends are cumulative and the rate is reset through an auction process every
28 days. The rate in effect on February 28, 1997, was 3.24% and for the six
months then ended rates ranged from 3.24% to 4.75%.
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1997 (Unaudited)
- --------------------------------------------------------------------------------
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 APS 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 APS are subject to
mandatory redemptions if the tests are not met.
17
<PAGE> 19
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
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.
18
<PAGE> 20
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY 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, 7,455,039 shares voted for the proposal, 146,251 shares voted against,
259,296 shares abstained and 1,030,261 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, 3,599,687
shares voted for the proposal, 225,352 shares voted against, 248,179 shares
abstained and 4,817,631 shares represented broker non-votes.
19
<PAGE> 21
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
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20
