<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
A Farewell from the Chairman..................... 1
Portfolio of Investments......................... 2
Statement of Assets and Liabilities.............. 7
Statement of Operations.......................... 8
Statement of Changes in Net Assets............... 9
Financial Highlights............................. 10
Notes to Financial Statements.................... 12
Report of Independent Accountants................ 17
Dividend Reinvestment Plan....................... 18
</TABLE>
VQC ANR 12/98
<PAGE> 2
A FAREWELL FROM THE CHAIRMAN
------------------------ - ------------------------
Dear Shareholder,
Since I became president and chief executive officer in 1987, much has
changed in our business. However, one thing has remained constant through these
years--my commitment to you, the trust shareholder. Through the many events at
Van Kampen that have marked the passage of time--including several mergers,
company name changes, and leadership changes--we have always focused on
providing superior investments and the highest level of customer service to help
you meet your investment objectives. I'm proud to say that during my tenure, Van
Kampen won eight consecutive awards for high-quality customer service--more
consecutive service awards than any other firm in the financial services
industry.(1) My successor, Dick Powers, shares this commitment to meeting your
needs and providing innovative and efficient ways to help you work with your
investment adviser to reach your financial goals.
Although my official retirement begins on January 1, 1999, I will remain
active in the industry and the community. I plan to continue my service as a
member of the board of directors of the Investment Company Institute, the
leading mutual fund industry association, and I will remain a trustee of your
Trust.
In closing, I want to say farewell to all of you. Thank you for your support
of Van Kampen over the years and for giving me the opportunity to serve you.
Best wishes,
[SIG]
Don G. Powell
------------------------ - ------------------------
(1)American Capital, which merged with Van Kampen in 1995, received the DALBAR
Service Award annually from 1990 to 1994. The award was called the Quality
Tested Service Seal until 1997.
1
<PAGE> 3
PORTFOLIO OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 100.5%
CALIFORNIA 95.5%
$ 2,100 Alameda, CA Pub Fin Auth Rev Marina Vlg Assmt
Dist Rfdg....................................... 6.375% 09/02/14 $ 2,156,112
1,000 Bakersfield, CA Ctfs Partn Convention Cent
Expansion Proj (MBIA Insd)...................... 5.875 04/01/22 1,086,700
1,090 Baldwin Park, CA Pub Fin Auth San Gabriel River
Tax Alloc (MBIA Insd)........................... 5.000 08/01/21 1,091,363
1,610 Blythe, CA Redev Agy Redev Proj No 1 Tax Alloc
Ser A Rfdg...................................... 7.500 05/01/23 1,851,065
1,055 Borrego, CA Wtr Dist Ctfs Partn Wtr Sys
Acquisition..................................... 7.000 04/01/27 1,138,757
1,000 California Edl Fac Auth Rev Pooled Coll & Univ
Projs B......................................... 6.125 04/01/13 1,086,440
2,000 California Edl Fac Auth Rev Student Ln CA Ln Pgm
Ser A (MBIA Insd)............................... 6.000 03/01/16 2,097,980
2,000 California Edl Fac Auth Rev Univ of La Verne.... 6.375 04/01/13 2,141,140
1,800 California Hlth Fac Fin Auth Rev Kaiser
Permanente Ser A................................ 7.000 12/01/10 1,951,974
1,000 California Hsg Fin Agy Rev Home Mtg Ser B (MBIA
Insd)........................................... 6.100 02/01/28 1,069,910
1,000 California Hsg Fin Agy Rev Home Mtg Ser E (AMBAC
Insd)........................................... 6.100 08/01/29 1,072,470
1,090 California Hsg Fin Agy Rev Home Mtg Ser F (FHA
Gtd)............................................ 6.750 08/01/11 1,159,727
1,000 California Hsg Fin Agy Rev Home Mtg Ser M (MBIA
Insd)........................................... 5.550 08/01/17 1,045,060
2,120 California Hsg Fin Agy Rev Insd Hsg Ser E (MBIA
Insd)........................................... 7.000 08/01/26 2,259,284
3,000 California Hsg Fin Agy Rev Multi-Unit Rental Hsg
Ser C II........................................ 6.850 08/01/15 3,213,840
8,190 California Hsg Fin Agy Rev Multi-Unit Rental Hsg
Ser C II........................................ 6.875 08/01/24 8,751,670
10,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southn CA Edison Co (AMBAC Insd)................ 6.000 07/01/27 10,758,000
4,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southn CA Edison Co Ser B (AMBAC Insd).......... 6.400 12/01/24 4,403,320
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 8,702,460
880 California Rural Home Mtg Fin Auth Single Family
Mtg Rev Ser C (GNMA Collateralized)............. 7.800 02/01/28 1,037,916
1,000 California St (AMBAC Insd)...................... 6.200 02/01/16 1,022,040
3,500 California St Ser BH (FSA Insd)................. 5.200 12/01/11 3,570,805
1,000 California St Ser BH (FSA Insd)................. 5.400 12/01/15 1,029,390
1,000 California St Ser BH (FSA Insd)................. 5.400 12/01/16 1,029,390
3,655 California St Cpn Muni Rcpts.................... * 03/01/08 2,471,548
3,655 California St Cpn Muni Rcpts.................... * 09/01/09 2,296,473
9,600 California St Prin Muni Rcpts................... * 09/01/09 6,031,776
4,000 California Statewide Cmntys Dev Auth Spl Fac
United Airls.................................... 5.625 10/01/34 4,126,640
8,000 California Statewide Cmntys Dev Corp Ctfs Partn
Insd United Westn Med Cent (Prerefunded @
12/01/01)....................................... 6.750 12/01/21 8,899,760
</TABLE>
See Notes to Financial Statements
2
<PAGE> 4
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,000 Camarillo, CA Multi-Family Hsg Park Glenn Apts
(FNMA Collateralized)........................... 5.400% 03/01/28 $ 1,016,790
1,555 Carson, CA Impt Bond Act 1915 Assmt Dist No
92-1............................................ 7.375 09/02/22 1,703,471
1,000 Central Contra Costa, CA Santn Dist Rev Wastewtr
Fac Impt Proj (MBIA Insd)....................... 6.250 09/01/11 1,148,550
2,055 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers Ser C............................ * 02/01/01 1,882,503
1,000 Central Vly Sch Dist Fin Auth CA Cap Apprec Sch
Dist Ser A Rfdg (MBIA Insd)..................... * 02/01/10 610,420
1,565 Central Vly Sch Dist Fin Auth CA Cap Apprec Sch
Dist Ser A Rfdg (MBIA Insd)..................... * 08/01/10 934,587
2,605 Chula Vista, CA Redev Agy Tax Alloc Sr Bayfront
Ser D Rfdg...................................... 8.625 09/01/24 3,229,783
2,000 Contra Costa Cnty, CA Ctfs Partn Merrithew Mem
Hosp Proj Rfdg (MBIA Insd)...................... 5.500 11/01/22 2,122,980
1,000 Contra Costa Cnty, CA Pub Fin Auth Tax Alloc Rev
Ser A........................................... 7.100 08/01/22 1,096,400
1,000 Davis, CA Pub Fac Fin Auth Loc Agy Rev Mace
Ranch Area Ser A................................ 6.500 09/01/15 1,070,180
1,000 Delano, CA Ctfs Partn Delano Regal Med Cent..... 5.250 01/01/18 984,490
1,935 Delano, CA Ctfs Partn Ser A (Prerefunded @
01/01/03)....................................... 9.250 01/01/22 2,400,174
1,000 Duarte, CA Redev Agy Tax Alloc Davis Addition
Proj Area Rfdg.................................. 6.700 09/01/14 1,078,660
905 Fairfield, CA Hsg Auth Mtg Rev Creekside Estates
Proj Rfdg....................................... 7.875 02/01/15 945,300
1,000 Folsom, CA Spl Tax Cmnty Fac Dist No 2 Rfdg
(Connie Lee Insd)............................... 5.250 12/01/19 1,019,750
1,000 Fontana, CA Redev Agy Tax Southeast Indl Park
Proj Rfdg (MBIA Insd)........................... 5.000 09/01/22 1,001,180
6,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Sr Lien Ser A............................ * 01/01/27 1,352,220
2,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Conv Cap Apprec Sr Lien Ser A (a)............... 0/7.050 01/01/10 1,653,000
2,000 Hawaii Desert, CA Mem Hlthcare Dist Rev Rfdg.... 5.500 10/01/19 1,964,560
1,500 Huntington Beach, CA Pub Fin Auth Rev Huntington
Beach Redev Proj................................ 7.000 08/01/24 1,590,465
1,000 Huntington Park, CA Pub Fin Auth Lease Rev
Wastewtr Sys Proj Ser A......................... 6.200 10/01/25 1,043,890
1,000 Imperial, CA Irrig Dist Elec Rev Sys Rfdg (MBIA
Insd)........................................... 5.000 11/01/18 1,008,000
665 Inglewood, CA Redev Agy Tax Alloc Centy Redev
Proj Ser A...................................... 6.125 07/01/23 699,427
3,205 Lompoc, CA Wtr & Wastewtr Impts Fin Auth Rev Wtr
& Wastewtr Sys Fin Proj Ser A (Prerefunded @
03/01/02) (MBIA Insd)........................... 6.700 03/01/22 3,534,538
4,000 Los Angeles Cnty, CA Ctfs Partn (Prerefunded @
11/01/01)....................................... 6.600 11/01/11 4,419,520
</TABLE>
See Notes to Financial Statements
3
<PAGE> 5
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$12,000 Los Angeles Cnty, CA Pension Oblig Ctfs Ltd Muni
Oblig Ser A (MBIA Insd) (c)..................... 6.900% 06/30/08 $ 14,646,720
1,665 Los Angeles, CA Cmnty Redev Agy Ctfs Partn
Allright Garage (Prerefunded @ 05/01/03)........ 7.550 11/01/08 1,906,325
1,900 Los Angeles, CA Ctfs Partn...................... 5.700 02/01/18 1,921,052
2,500 Los Angeles, CA Multi-Family Rev Hsg Earthquake
Rehab Proj Ser A (FNMA Insd).................... 5.700 12/01/27 2,680,925
1,690 Los Angeles, CA Single Family Home Mtg Rev Pgm
Ser A (GNMA Collateralized)..................... 6.875 06/01/25 1,785,096
1,000 Metropolitan Wtr Dist Southn CA Wtrwks Rev Ser
C............................................... 5.000 07/01/37 992,310
795 Montebello, CA Unified Sch Dist Ctfs Partn Cap
Impts Proj...................................... 6.300 06/01/11 856,151
2,000 Needles, CA Pub Util Auth Util Sys
Acquisition..................................... 6.500 02/01/22 2,124,960
1,500 Newport Beach, CA Spl Tax Spl Impt Dist No 95-1
Ser A........................................... 6.750 09/01/20 1,642,860
2,000 Oakland, CA Unified Sch Dist Alameda Cnty Ctfs
Partn Energy Retrofit Proj...................... 6.750 11/15/14 2,159,620
1,000 Oakland, CA Unified Sch Dist Alameda Cnty Ctfs
Partn........................................... 7.000 11/15/11 1,132,540
1,000 Oceanside, CA Mobile Home Pk Fin Auth Rev....... 5.800 03/01/28 1,015,610
2,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)........................................... 5.750 06/01/15 2,172,680
1,500 Paramount, CA Multi-Family Rev Hsg Twin Twrs
Apts Ser A Rfdg (GNMA Insd)..................... 5.700 02/20/33 1,551,240
6,000 Paramount, CA Redev Agy Tax Alloc Redev Proj
Area No 1 Ser B (Prerefunded @ 08/01/03) (MBIA
Insd)........................................... * 08/01/26 1,068,600
1,500 Pasadena, CA Spl Tax Cmnty Fac Dist No 1 Civic
Cent West....................................... * 12/01/07 1,003,800
2,000 Pasadena, CA Spl Tax Cmnty Fac Dist No 1 Civic
Cent West (Prerefunded @ 12/01/07).............. * 12/01/17 641,300
1,500 Pomona, CA Pub Fin Auth Rev Southwest Pomona
Redev Proj Ser W Rfdg (MBIA Insd)............... 5.000 02/01/30 1,498,710
1,100 Pomona, CA Redev Agy Tax Alloc Downtown No 2
Redev Proj Ser U Rfdg........................... 5.750 04/01/19 1,097,976
1,000 Port of Oakland, CA Spl Fac Rev Mitsui O.S.K.
Line Ltd Ser A.................................. 6.800 01/01/19 1,068,600
1,210 Redding, CA Redev Agy Tax Alloc Market Street
Redev Proj Ser A................................ 6.700 09/01/23 1,335,913
1,000 Redondo Beach, CA Pub Fin Auth Rev South Bay
Cent Redev Proj................................. 7.000 07/01/16 1,121,650
2,000 Richmond, CA Rev YMCA East Bay Proj Rfdg........ 7.250 06/01/17 2,214,240
1,360 Roseville, CA Fin Auth Local Agy Rev Northeast
Cfd Bond Ser A Rfdg (FSA Insd).................. 5.000 09/01/21 1,361,360
1,000 Sacramento, CA City Fin Auth Lease Rev (AMBAC
Insd) (b)....................................... 4.750 05/01/23 966,000
1,000 Salinas, CA Santn Swr Sys Rev (FGIC Insd)....... 5.000 08/01/20 1,004,050
</TABLE>
See Notes to Financial Statements
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,000 San Bernardino Cnty, CA Ctfs Partn Med Cent Fin
Proj (MBIA Insd)................................ 5.000% 08/01/28 $ 996,080
6,000 San Diego Cnty, CA Wtr Auth Wtr Rev Ctfs Partn
Ser 91 B (Inverse Fltg) (Prerefunded @ 04/27/06)
(MBIA Insd)..................................... 8.670 04/08/21 7,912,500
2,650 San Diego, CA Indl Dev Rev San Diego Gas & Elec
Ser A (MBIA Insd)............................... 6.400 09/01/18 2,924,964
5,000 San Diego, CA Indl Dev Rev San Diego Gas & Elec
Ser A (AMBAC Insd).............................. 6.100 09/01/19 5,465,950
1,000 San Francisco, CA City & Cnty Arpt Comm Intl
Arpt Rev Second Ser Issue 12-A (FGIC Insd)...... 5.800 05/01/21 1,062,330
2,305 San Francisco, CA City & Cnty Redev Agy Hotel
Tax Rev (Prerefunded @ 07/01/04) (FSA Insd)..... 6.750 07/01/15 2,698,233
5,000 San Francisco, CA City & Cnty Redev Agy Lease
Rev George Moscone.............................. * 07/01/08 3,290,250
3,520 San Francisco, CA City & Cnty Redev Agy Lease
Rev George Moscone.............................. * 07/01/09 2,195,178
4,250 San Francisco, CA City & Cnty Redev Agy Lease
Rev George Moscone.............................. * 07/01/12 2,229,720
2,130 San Francisco, CA City & Cnty Redev Agy Lease
Rev George Moscone.............................. * 07/01/14 986,211
800 San Francisco, CA City & Cnty Redev Agy Lease
Rev George Moscone (FSA Insd)................... 6.750 07/01/15 916,960
3,330 San Joaquin Hills, CA Transn Corridor Agy Toll
Rd Rev Ser A Rfdg (MBIA Insd)................... * 01/15/27 801,131
1,000 San Jose, CA Single Family Mtg Rev Cap Apprec
Ser A........................................... * 04/01/16 420,900
1,000 Santa Ana, CA Multi-Family Hsg Rev Villa Del Sol
Apts Ser B (FNMA Insd).......................... 5.650 11/01/21 1,067,580
3,000 Santa Clara Cnty, CA Fin Auth Lease Rev Multiple
Facs Proj Ser B (AMBAC Insd) (b)................ 5.500 05/15/10 3,142,440
1,000 Santa Clara Cnty, CA Fin Auth Lease Rev VMC Fac
Replacement Proj Ser A (Prerefunded @ 11/15/04)
(AMBAC Insd).................................... 6.875 11/15/14 1,185,890
2,000 Santa Clarita, CA Cmnty Fac Dist Spl Tax No 92-1
Ser A........................................... 7.450 11/15/10 2,185,000
1,325 Simi Valley, CA Cmnty Dev Agy Coml Rfdg Sycamore
Plaza II........................................ 6.000 09/01/12 1,347,008
1,650 Southern CA Home Fin Auth Single Family Mtg Rev
Pgm B (GNMA Collateralized)..................... 6.900 10/01/24 1,741,427
5,000 Southern CA Pub Pwr Auth Pwr Proj Rev
Multi-Projs..................................... 6.750 07/01/12 6,136,000
1,000 Stockton, CA Cmnty Fac Dist Spl Tax............. 5.800 09/01/14 1,031,290
1,000 Stockton, CA South Stockton Cmnty Facs Dist Spl
Tax No 90-1 Rfdg................................ 6.400 09/01/15 1,069,080
</TABLE>
See Notes to Financial Statements
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 2,750 Tulare, CA Local Hosp Dist Hlth Fac Rev Ser A... 6.750% 12/01/21 $ 2,977,150
1,000 Vista, CA Mobile Home Pk Rev Estrella De Oro
Mobile Home Ser A............................... 5.875 02/01/28 1,012,050
2,785 Yolo Cnty, CA Hsg Auth Mtg Rev Mtg Waggener
Ranch Proj (FHA Gtd)............................ 7.000 10/01/33 2,958,171
------------
236,787,629
------------
GUAM 0.9%
2,000 Guam Arpt Auth Rev Ser B........................ 6.700 10/01/23 2,190,320
------------
PUERTO RICO 1.0%
761 Centro de Recaudaciones de Ingresos Muni Ctfs
Partn PR........................................ 6.850 10/17/03 795,470
1,580 Puerto Rico Hsg Fin Single Family Mtg Rev
Portfolio 1 C (GNMA Collateralized)............. 6.850 10/15/23 1,689,604
------------
2,485,074
------------
U. S. VIRGIN ISLANDS 3.1%
6,750 Virgin Islands Pub Fin Auth Rev Matching Fd Ln
Nts Ser A Rfdg (Prerefunded @ 10/01/02)......... 7.250 10/01/18 7,741,508
------------
TOTAL INVESTMENTS 100.5%
(Cost $222,276,763)......................................................... 249,204,531
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%)................................. (1,280,575)
------------
NET ASSETS 100.0%............................................................ $247,923,956
============
</TABLE>
*Zero coupon bond
(a) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
PORTFOLIO COMPOSITION BY CREDIT QUALITY*
The following table summarizes the portfolio composition at October 31,
1998, based upon the highest credit quality ratings as determined by Standard &
Poor's or Moody's.
<TABLE>
<S> <C>
AAA....................... 49.6%
AA........................ 5.7
A......................... 16.3
BBB....................... 11.6
BB........................ 0.6
NR........................ 16.2
-----
100.0%
=====
</TABLE>
* As a Percentage of Long-Term Investments.
See Notes to Financial Statements
6
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $222,276,763)....................... $249,204,531
Receivables:
Interest.................................................. 3,537,035
Investments Sold.......................................... 65,000
Other....................................................... 2,657
------------
Total Assets.......................................... 252,809,223
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 4,121,388
Custodian Bank............................................ 158,955
Income Distributions--Preferred Shares.................... 156,683
Investment Advisory Fee................................... 147,987
Administrative Fee........................................ 42,282
Affiliates................................................ 12,290
Accrued Expenses............................................ 154,154
Trustees' Deferred Compensation and Retirement Plans........ 91,528
------------
Total Liabilities..................................... 4,885,267
------------
NET ASSETS.................................................. $247,923,956
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,500 issued
with liquidation preference of $50,000 per share)......... $ 75,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 9,646,008 shares issued and
outstanding).............................................. 96,460
Paid in Surplus............................................. 142,796,541
Net Unrealized Appreciation................................. 26,927,768
Accumulated Net Realized Gain............................... 2,395,073
Accumulated Undistributed Net Investment Income............. 708,114
------------
Net Assets Applicable to Common Shares................ 172,923,956
------------
NET ASSETS.................................................. $247,923,956
============
NET ASSET VALUE PER COMMON SHARE ($172,923,956 divided
by 9,646,008 shares outstanding).......................... $ 17.93
============
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF OPERATIONS
For the Two Months Ended October 31, 1998
and the Year Ended August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Two Months Ended Year Ended
October 31, 1998 August 31, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................. $ 2,406,668 $14,500,974
----------- -----------
EXPENSES:
Investment Advisory Fee.............................. 290,246 1,703,571
Administrative Fee................................... 82,927 486,735
Preferred Share Maintenance.......................... 34,267 205,039
Custody.............................................. 2,895 16,678
Trustees' Fees and Expenses.......................... 1,362 27,621
Legal................................................ 1,036 13,073
Other................................................ 44,145 223,019
----------- -----------
Total Expenses................................. 456,878 2,675,736
----------- -----------
NET INVESTMENT INCOME................................ $ 1,949,790 $11,825,238
=========== ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain.................................... $ 61,515 $ 2,333,794
----------- -----------
Unrealized Appreciation/Depreciation:
Beginning of the Period............................ 26,182,231 20,310,340
End of the Period.................................. 26,927,768 26,182,231
----------- -----------
Net Unrealized Appreciation During the Period........ 745,537 5,871,891
----------- -----------
NET REALIZED AND UNREALIZED GAIN..................... $ 807,052 $ 8,205,685
=========== ===========
NET INCREASE IN NET ASSETS FROM OPERATIONS........... $ 2,756,842 $20,030,923
=========== ===========
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
For the Two Months Ended October 31, 1998
and the Years Ended August 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Two Months Ended Year Ended Year Ended
October 31, 1998 August 31, 1998 August 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................. $ 1,949,790 $ 11,825,238 $ 12,150,732
Net Realized Gain..................... 61,515 2,333,794 810,425
Net Unrealized Appreciation During the
Period.............................. 745,537 5,871,891 7,875,246
------------ ------------ ------------
Change in Net Assets from
Operations.......................... 2,756,842 20,030,923 20,836,403
------------ ------------ ------------
Distributions from Net Investment
Income:
Common Shares....................... (1,590,741) (9,531,032) (9,815,485)
Preferred Shares.................... (388,870) (2,343,161) (2,424,442)
------------ ------------ ------------
(1,979,611) (11,874,193) (12,239,927)
------------ ------------ ------------
Distributions from Net Realized Gain:
Common Shares....................... -0- (649,552) (690,815)
Preferred Shares.................... -0- (161,112) (203,049)
------------ ------------ ------------
-0- (810,664) (893,864)
------------ ------------ ------------
Total Distributions................... (1,979,611) (12,684,857) (13,133,791)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES............... 777,231 7,346,066 7,702,612
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through
Dividend Reinvestment............... 116,196 287,402 -0-
------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS.......... 893,427 7,633,468 7,702,612
NET ASSETS:
Beginning of the Period............... 247,030,529 239,397,061 231,694,449
------------ ------------ ------------
End of the Period (Including
accumulated undistributed net
investment income of $708,114,
$737,935 and $770,976,
respectively)....................... $247,923,956 $247,030,529 $239,397,061
============ ============ ============
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Two Months Ended -----------------------------------
October 31, 1998 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a).............. $17.846 $17.083 $16.283 $16.127
------- ------- ------- -------
Net Investment Income.................... .202 1.228 1.263 1.259
Net Realized and Unrealized Gain/Loss.... .084 .852 .902 .233
------- ------- ------- -------
Total from Investment Operations.......... .286 2.080 2.165 1.492
------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common Shareholders............ .165 .990 1.02 1.050
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... .040 .243 .252 .286
Distributions from and in Excess of Net
Realized Gain:
Paid to Common Shareholders............ -0- .067 .072 -0-
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... -0- .017 .021 -0-
------- ------- ------- -------
Total Distributions....................... .205 1.317 1.365 1.336
------- ------- ------- -------
Net Asset Value, End of the Period........ $17.927 $17.846 $17.083 $16.283
======= ======= ======= =======
Market Price Per Share at End of the
Period................................... $18.4375 $17.875 $16.8125 $16.125
Total Investment Return at Market Price
(b)...................................... 4.09%* 12.96% 11.45% 14.89%
Total Return at Net Asset Value (c)....... 1.37%* 10.99% 11.96% 7.60%
Net Assets at End of the Period (In
millions)................................ $247.9 $247.0 $239.4 $231.7
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............ 1.58% 1.59% 1.61% 1.64%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common Shares
(d)...................................... 5.40% 5.63% 6.05% 5.95%
Portfolio Turnover........................ 2%* 21% 17% 10%
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares............. 1.10% 1.10% 1.10% 1.11%
</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.
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 27, 1991
(Commencement
August 31, of Investment
- ---------------------------------------- Operations) to
1995 1994 1993 August 31, 1992
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
$15.699 $17.454 $15.816 $14.805
------- ------- ------- -------
1.269 1.286 1.305 1.038
.523 (1.693) 1.658 .870
------- ------- ------- -------
1.792 (.407) 2.963 1.908
------- ------- ------- -------
1.050 1.050 .981 .698
.311 .235 .206 .199
.002 .054 .110 -0-
.001 .009 .028 -0-
------- ------- ------- -------
1.364 1.348 1.325 .897
------- ------- ------- -------
$16.127 $15.699 $17.454 $15.816
======= ======= ======= =======
$15.000 $15.500 $16.750 $15.125
3.95% (.90%) 18.66% 5.69%*
10.02% (3.81%) 17.89% 11.80%*
$230.2 $226.1 $243.0 $227.2
1.66% 1.62% 1.58% 1.55%
6.22% 6.34% 6.70% 6.09%
16% 7% 26% 93%*
1.10% 1.10% 1.07% 1.09%
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen California Quality Municipal Trust, formerly known as Van Kampen
American Capital California Quality Municipals, (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.
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
At October 31, 1998, for federal income tax purposes cost of long-term
investments is $222,276,763; the aggregate gross unrealized appreciation is
$26,939,528 and the aggregate gross unrealized depreciation is $11,760,
resulting in net unrealized appreciation on long-term investments of
$26,927,768.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between financial and tax basis
reporting for the year ended August 31, 1998 have been identified and
appropriately reclassified. Permanent book and tax basis differences relating to
expenses which are not deductible for tax purposes totaling $15,914 were
reclassified from accumulated undistributed net investment income to capital.
For the two months ended October 31, 1998, 100% of the income distributions
made by the Trust were exempt from federal income taxes. In January 1999, the
Trust will provide tax information to shareholders for the 1998 calendar year.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
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 Van Kampen Funds Inc. or its affiliates (collectively "Van
Kampen"), 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.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
For the two months ended October 31, 1998 and the year ended August 31,
1998, the Fund recognized expenses of approximately $300 and $4,100,
respectively, 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 two months ended October 31, 1998 and the year ended August 31,
1998, the Fund recognized expenses of approximately $13,100 and $88,800,
respectively, representing Van Kampen's cost of providing accounting and legal
services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. 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 to the Trust. The maximum
annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At October 31, 1998, August 31, 1998 and August 31, 1997, paid in surplus
related to common shares aggregated $142,796,541, $142,680,409 and $142,409,084,
respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
Two Months Ended Year Ended Year Ended
October 31,1998 August 31, 1998 August 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning Shares............... 9,639,553 9,623,295 9,623,295
Shares Issued Through Dividend
Reinvestment................. 6,455 16,258 -0-
------------ ------------ ------------
Ending Shares.................. 9,646,008 9,639,553 9,623,295
============ ============ ============
</TABLE>
4. INVESTMENT TRANSACTIONS
For the two months ended October 31, 1998, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $7,584,560 and
$4,160,065, respectively. For the year ended August 31, 1998, the cost of
purchases and proceeds from sales of investments, excluding short-term
investments, were $51,128,710 and $53,143,057, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
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. Upon disposition, a realized gain or loss is
recognized accordingly.
An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specific 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. This type of Indexed Security is
identified in the portfolio of investments. The price of this security may be
more volatile than the price of a comparable fixed rate security.
6. 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 October 31, 1998, was 3.050% and for the year
then ended rates ranged from 3.050% to 3.150%.
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.
7. CAPITAL GAIN DISTRIBUTION
On December 3, 1998 the Trust declared a capital gain distribution of $.1992 per
common share, of which $.1830 is long-term and $.0162 is short-term, to common
shareholders of record on December 15, 1998. The gain will be payable on
December 31, 1998.
8. YEAR 2000 COMPLIANCE (UNAUDITED)
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996 Van Kampen initiated a CountDown 2000 Project
to review both the
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
internal systems and external vendor connections. The goal of this project is to
position its business to continue unaffected as a result of the century change.
At this time, there can be no assurance that the steps taken will be sufficient
to avoid any adverse impact to the Trust, but Van Kampen does not anticipate
that the move to Year 2000 will have a material impact on its ability to
continue to provide the Trust with service at current levels. In addition, it is
possible that the securities markets in which the Trust invests may be
detrimentally affected by computer failures throughout the financial services
industry beginning January 1, 2000. Improperly functioning trading systems may
result in settlement problems and liquidity issues.
16
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen California Quality Municipal Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen California Quality Municipal Trust (the "Trust"), including the portfolio
of investments, as of October 31, 1998, and the related statement of operations
for the two-month period ended October 31, 1998 and the year ended August 31,
1998, the statement of changes in net assets for the two-month period ended
October 31, 1998 and for each of the two years in the period ended August 31,
1998, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen California Quality Municipal Trust as of October 31, 1998, the results of
its operations for the two-month period ended October 31, 1998 and the year
ended August 31, 1998, the changes in its net assets for the two-month period
ended October 31, 1998 and each of the two years in the period ended August 31,
1998, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
December 15, 1998
17
<PAGE> 19
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be
re-registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common Shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
prorata 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 Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
18
<PAGE> 20
VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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 Funds Inc., 1998. All rights reserved.
(SM)denotes a service mark of Van Kampen Funds Inc.
19
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> CAL QUALITY MUNICIPAL TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> SEP-01-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 222,276,763
<INVESTMENTS-AT-VALUE> 249,204,531
<RECEIVABLES> 3,602,035
<ASSETS-OTHER> 2,657
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 252,809,223
<PAYABLE-FOR-SECURITIES> 4,121,388
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 763,879
<TOTAL-LIABILITIES> 4,885,267
<SENIOR-EQUITY> 75,000,000
<PAID-IN-CAPITAL-COMMON> 142,893,001
<SHARES-COMMON-STOCK> 9,646,008
<SHARES-COMMON-PRIOR> 9,639,553
<ACCUMULATED-NII-CURRENT> 708,114
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,395,073
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,927,768
<NET-ASSETS> 247,923,956
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,406,668
<OTHER-INCOME> 0
<EXPENSES-NET> (456,878)
<NET-INVESTMENT-INCOME> 1,949,790
<REALIZED-GAINS-CURRENT> 61,515
<APPREC-INCREASE-CURRENT> 745,537
<NET-CHANGE-FROM-OPS> 2,756,842
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,979,611)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 6,455
<NET-CHANGE-IN-ASSETS> 777,231
<ACCUMULATED-NII-PRIOR> 737,935
<ACCUMULATED-GAINS-PRIOR> 2,333,558
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 290,246
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 456,878
<AVERAGE-NET-ASSETS> 248,070,392
<PER-SHARE-NAV-BEGIN> 17.846
<PER-SHARE-NII> 0.202
<PER-SHARE-GAIN-APPREC> 0.084
<PER-SHARE-DIVIDEND> (0.205)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.927
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
