<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 6
Portfolio of Investments......................... 7
Statement of Assets and Liabilities.............. 17
Statement of Operations.......................... 18
Statement of Changes in Net Assets............... 19
Financial Highlights............................. 20
Notes to Financial Statements.................... 21
Dividend Reinvestment Plan....................... 27
</TABLE>
VKQ SAR 4/98
<PAGE> 2
LETTER TO SHAREHOLDERS
March 23, 1998
Dear Shareholder,
The new year ushered in what
promises to be an exciting and
challenging time for investors. The
Taxpayer Relief Act of 1997, signed
into law by President Clinton in [PHOTO]
August, creates many new opportunities
for you and your family to take a more
active role in achieving your long-term
financial goals. DENNIS J. MCDONNELL AND DON G. POWELL
Most Americans will benefit from
the bill's $95 billion in tax cuts over
five years. The so-called Kiddie Credit
gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses with the new Education IRA. The bill also
cuts capital gains tax rates for the first time in more than a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature is the new Roth IRA, which allows investment earnings to grow
tax free, not just tax deferred.
This year, more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.
ECONOMIC REVIEW
The U.S. economy sustained its forward momentum throughout 1997, growing at
a moderate rate of 3.8 percent, as measured in terms of gross domestic product.
Despite this continuing growth trend, inflation not only remained low but was on
a decline.
Nevertheless, market watchers remained alert for signs of surging prices.
One cause of concern was the extremely tight labor market. The percentage of
unemployed Americans fell to a 24-year low of 4.6 percent in February, as the
strong economy created more jobs than expected and wages continued to rise. To
date, increased productivity has allowed the U.S. economy to absorb this growth
in the workforce without overheating or driving prices higher.
Continued on page two
1
<PAGE> 3
MARKET REVIEW
The bond market rally continued during the past six months, with both
taxable and tax-exempt yields gradually drifting downward with minimal
volatility. Bond prices move in the opposite direction of bond yields, so as
bond yields fell during the period, bond prices were on the rise. Thirty-year
Treasury yields declined from 6.61 percent on August 29, 1997 to 5.91 percent on
February 27, 1998. In addition, the currency crisis in Asia helped spark the
domestic bond market, as U.S. Treasuries enjoyed an increase in demand from both
foreign and U.S. investors.
As is typical during bond market rallies, municipal bond yields also
declined, although municipals did not perform as strongly as taxable bonds.
Heavy supply and low yield levels contributed to the weaker performance of the
municipal market. Generic general obligation 30-year AAA-rated municipal yields
dropped from 5.30 percent to 4.96 percent at the end of the period.
Credit spreads--the difference in yield between high-quality issues and
low-quality issues--remained extremely tight during the past six months. Under
normal circumstances, low-quality issues provide higher yields in order to
compensate investors for additional credit risk. In 1997, close to 49 percent of
newly issued municipal bonds were insured--causing a scarcity of
higher-yielding, lower-rated securities. This shortage, combined with low yields
in the municipal market, resulted in very narrow credit spreads.
Municipal yields continued to be very attractive compared to taxable yields.
For example, the Bond Buyer Revenue Bond Index, composed of 25 revenue bonds
with an average rating of single-A and an average maturity of 30 years, is
representative of the bonds we typically purchase for the Trust. The Index was
yielding 5.36 percent at the end of the reporting period, while the 30-year
Treasury bond was yielding 5.91 percent. In other words, the difference between
municipal bonds yields and long-term Treasury yields is historically very
narrow.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality*
As of February 28, 1998
<TABLE>
<S> <C>
AAA............... 44.6%
AA................ 9.9%
A................. 13.2%
BBB............... 20.9%
Non-Rated......... 11.4%
</TABLE>
*As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's.
Continued on page three
2
<PAGE> 4
TRUST STRATEGY
We employed the following strategies in managing the Trust during the period:
- - At the inception of the Trust in 1991, we were able to invest the Trust's
initial assets in bonds with attractive coupons and yields, and many of
these securities remain in the portfolio today. These securities, with
coupons much higher than current market levels, are approaching their
10-year call date and are at risk of being either pre-refunded or called. If
this happens, we will need to replace them with new bonds at current lower
coupons.
To help minimize this risk as the call dates approach, we gradually reduced
the Trust's holdings of pre-refunded securities and replaced them with
longer-term discount securities or securities priced near face value. If the
bond market continues to rally, discount securities are more likely to rise
in price than premium securities.
- - Duration was also a major focus. At the end of the reporting period, the
duration of the portfolio stood at 6.32 years. Duration is a measurement
used to express the sensitivity of a bond's price to changes in interest
rates. Each year of duration represents an expected one-percent change in
the price of a bond for every one-percent change in interest rates.
Typically, funds with short durations perform better when interest rates are
rising, while funds with long durations perform better when rates are
declining. Our interest rate outlook, described in more detail below, is
moderately optimistic. However, lengthening the duration of the Trust would
significantly impact the dividend, so we will maintain a somewhat short
duration in order to support the Trust's high dividend.
- - Because of the narrow credit spreads between AAA-rated and lower-rated
offerings, most acquisitions during the period were AAA-rated, as these
securities provided more relative value. However, due to our research
experience, we were able to identify and purchase several non-insured issues
at attractive yields. Examples include Puerto Rico (Baa1/A), California
State Community Development (Baa3/BB+) and New York City (Baa1/BBB+).
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR*
<TABLE>
<CAPTION>
AS OF
FEBRUARY 28, 1998
<S> <C>
Industrial Revenue...................................... 14.5%
Health Care............................................. 13.4%
General Purpose......................................... 8.9%
Single-Family Housing................................... 7.0%
Water & Sewer........................................... 7.0%
</TABLE>
*As a Percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the six months ended February 28, 1998, the Van Kampen American Capital
Municipal Trust generated a total return at market price of 5.87 percent(1),
including reinvestment of dividends totaling $.4800 per common share. The Trust
offered a
Continued on page four
3
<PAGE> 5
tax-exempt distribution rate of 5.93 percent(3), based on the closing common
stock price of $16.1875 per share on February 28, 1998. Because income from the
Trust is exempt from federal income tax, this distribution rate represents a
yield equivalent to a taxable investment earning 9.27 percent(4) (for investors
in the 36 percent federal income tax bracket). At the end of the reporting
period, the closing share price of the Trust traded at a 5.61 percent discount
to its net asset value of $17.15.
[DIVIDEND HISTORY GRAPH]
Six-month Dividend History
For the Period Ended February 28, 1998
<TABLE>
<CAPTION>
Distribution per Common Share
<S> <C>
Sep 1997............................ $.08
Oct 1997............................ $.08
Nov 1997............................ $.08
Dec 1997............................ $.08
Jan 1998............................ $.08
Feb 1998............................ $.08
</TABLE>
OUTLOOK
We expect the U.S. economy and the demand for products and services to
remain strong in the coming months. However, the impact of the Asian financial
crisis is a looming question. The fallout from Asian currency devaluations in
late 1997 occurred at a time when the U.S. dollar was extremely strong against
most major foreign currencies. If Asia's purchasing power is sharply reduced due
to weakened currencies, analysts fear that U.S. export sales will slump. At the
same time, as Asian goods become cheaper relative to American goods, domestic
companies could face a period of price competition versus imported goods. Taken
together, these developments could cut into the earnings of U.S. corporations.
There is no debate that the Federal Reserve Board believes low inflation is
the ideal environment for the economy. Because inflation is low, it is unlikely
that the Fed will change short-term rates in the near future. While the Fed
continues to give credence to signs of economic strength, we believe it will
wait to determine the impact of the Asian situation before taking any action.
Longer term, interest rates need to be high enough to control economic growth.
With a focus on inflation rather than growth, the Fed will probably take any
necessary actions to keep inflation from rising. We will expect a rate increase
by the Fed only if there are signs of an acceleration in inflation.
Continued on page five
4
<PAGE> 6
Regarding the municipal bond market, we believe yields will remain near
current levels through at least mid-summer. This will depend not only on the
general economy and the taxable bond market, but also tax-exempt bond supply and
demand levels. Given what we have seen this year, the market appears to be in a
solid equilibrium position, with strong demand to accommodate record municipal
supply.
We believe the Trust is positioned to perform well in the coming months and
do not anticipate making major changes to the structure of the portfolio. We
continue to seek a balance between the Trust's total return and its dividend
income, as well as to add value through security selection. The Trust continues
to benefit from its leveraged capital structure, which provides common
shareholders with above-market levels of dividend income. While we believe it is
unlikely that short-term interest rates will rise, this event would have an
unfavorable effect on the dividend-paying ability of the common shares and would
also negatively impact the price.
We appreciate your continued confidence in Van Kampen American Capital and
your Trust's portfolio manager.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page six
5
<PAGE> 7
PERFORMANCE RESULTS FOR THE PERIOD ENDED FEBRUARY 28, 1998
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
(NYSE TICKER SYMBOL -- VKQ)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)........... 5.87%
Six-month total return based on NAV(2).................... 6.27%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 5.93%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 9.27%
SHARE VALUATIONS
Net asset value........................................... $ 17.15
Closing common stock price................................ $16.1875
Six-month high common stock price (01/05/98).............. $ 16.500
Six-month low common stock price (10/28/97)............... $ 15.438
Preferred share (Series A) rate(5)........................ 3.450%
Preferred share (Series B) rate(5)........................ 3.451%
Preferred share (Series C) rate(5)........................ 3.190%
Preferred share (Series D) rate(5)........................ 3.500%
</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 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 36% federal
income tax bracket.
(5)See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 102.6%
CALIFORNIA 4.7%
$ 1,500 California St Dept Wtr Res Cent Vly Proj
Rev (MBIA Insd)............................ 4.750% 12/01/29 $ 1,406,550
7,250 California Statewide Cmntys Dev Auth Spl
Fac United Airls........................... 5.625 10/01/34 7,370,060
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg
Rev (MBIA Insd)............................ * 09/01/17 1,845,200
1,500 Davis, CA Pub Fac Fin Auth Loc Agy Rev..... 6.600 09/01/25 1,585,920
1,210 Del Mar, CA Race Track Auth Rev Rfdg....... 5.500 08/15/98 1,219,692
2,000 Del Mar, CA Race Track Auth Rev Rfdg....... 6.000 08/15/06 2,167,800
7,310 Delano, CA Ctfs Partn Ser A................ 9.250 01/01/22 8,572,437
2,240 Huntington Park, CA Redev Agy Rev Tax Alloc
Santa Fe Redev............................. 6.200 10/01/27 2,303,280
3,000 Los Angeles, CA Uni Sch Dist Ctfs Partn
(FSA Insd)................................. 5.500 10/01/16 3,149,760
10,000 Orange Cnty, CA Recovery Ctfs Ser A Rfdg
(MBIA Insd) (b)............................ 6.000 06/01/09 11,284,700
5,695 Sacramento, CA City Fin Auth Rev Comb Proj
B (MBIA Insd).............................. * 11/01/14 2,478,920
------------
43,384,319
------------
COLORADO 9.8%
19,500 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy
Rev E-470 Proj Ser C (Prerefunded @
08/31/05).................................. * 08/31/26 2,935,335
5,000 Boulder Cnty, CO Rev Natl Cent Atmosphere
Rfdg & Impt................................ 6.900 12/01/07 5,489,200
8,500 Boulder Cnty, CO Rev Natl Cent Atmosphere
Rfdg & Impt................................ 7.000 12/01/13 9,329,770
1,795 Colorado Hsg Fin Auth Single Family Pgm Sr
Gtd Mtg Ln D3 (FHA Gtd).................... 7.200 08/01/23 1,903,239
9,135 Denver, CO City & Cnty Arpt Rev Ser A...... 8.250 11/15/12 10,153,352
11,695 Denver, CO City & Cnty Arpt Rev Ser A...... 8.500 11/15/23 13,081,442
7,795 Denver, CO City & Cnty Arpt Rev Ser A...... 8.000 11/15/25 8,578,320
1,105 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/00)................... 8.500 11/15/23 1,254,462
740 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/00)................... 8.000 11/15/25 830,650
865 Denver, CO City & Cnty Arpt Rev Ser A
(Prerefunded @ 11/15/00)................... 8.250 11/15/12 970,837
8,790 Denver, CO City & Cnty Arpt Rev Ser D...... 7.000 11/15/25 9,465,072
2,310 Denver, CO City & Cnty Arpt Rev Ser D
(Prerefunded @ 11/15/01)................... 7.000 11/15/25 2,541,508
22,000 Meridian Metro Dist CO Peninsular &
Oriental Steam Navig Co Rfdg (b)........... 7.500 12/01/11 24,197,140
------------
90,730,327
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONNECTICUT 1.8%
$ 7,140 Connecticut St Hlth & Edl Fac Auth Rev
Nursing Home Proj AHF/Hartford............. 7.125% 11/01/24 $ 8,248,913
3,540 Mashantucket Western Pequot Tribe CT Spl
Rev Ser A, 144A -- Private Placement (c)... 6.400 09/01/11 3,962,003
3,460 Mashantucket Western Pequot Tribe CT Spl
Rev Ser A, 144A -- Private Placement (c)
(Prerefunded @ 09/01/07)................... 6.400 09/01/11 3,996,958
------------
16,207,874
------------
DELAWARE 0.5%
2,000 Delaware St Econ Dev Auth Rev Exempt Fac
Delmarva Pwr & Lt Co....................... 7.500 10/01/17 2,105,320
2,460 Delaware St Hsg Auth Rev Sr Home Mtg Ser B
Subser B2.................................. 7.200 12/01/21 2,608,264
------------
4,713,584
------------
DISTRICT OF COLUMBIA 0.3%
1,000 District of Columbia Hosp Rev Medlantic
Hlthcare Group A Rfdg (MBIA Insd) (b)...... 5.875 08/15/19 1,065,580
2,000 District of Columbia Rev Carnegie
Endowment.................................. 5.750 11/15/26 2,064,380
------------
3,129,960
------------
FLORIDA 1.8%
2,600 Brevard Cnty, FL Sch Brd Ctfs Partn Ser A
(AMBAC Insd)............................... 5.400 07/01/10 2,810,652
1,000 Florida St Correctional Privatization Comm
Ctfs Partn (AMBAC Insd).................... 5.000 08/01/17 990,160
1,000 Hillsborough Cnty, FL Indl Dev Auth Indl
Dev Rev Univ Cmnty Hosp (MBIA Insd)........ 5.750 08/15/14 1,070,470
7,690 Sarasota Cnty, FL Hlth Fac Auth Rev
Hlthcare Kobernick/Meadow Pk (Prerefunded @
07/01/02).................................. 10.000 07/01/22 9,513,299
2,000 Tampa, FL Rev Hlth Sys Catholic Hlth Ser A3
(MBIA Insd)................................ 4.750 11/15/28 1,862,540
------------
16,247,121
------------
GEORGIA 2.2%
8,950 Atlanta, GA Wtr & Swr Rev (FGIC Insd)...... 4.750 01/01/23 8,438,866
8,250 Atlanta, GA Wtr & Swr Rev (MBIA Insd)...... 4.750 01/01/23 7,778,842
4,000 Muni Elec Auth GA Proj One Subser A (AMBAC
Insd)...................................... 6.250 01/01/14 4,395,920
------------
20,613,628
------------
ILLINOIS 12.3%
4,795 Bedford Park, IL Tax Increment Rev Sr Lien
Bedford City Sq Proj....................... 9.250 02/01/12 5,537,554
3,650 Carol Stream, IL First Mtg Rev 1st Mtg
Windsor Pk Mnr Proj........................ 7.000 12/01/13 3,933,532
2,500 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Inc Proj Rfdg............... 8.200 12/01/24 3,064,225
7,475 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc........................... 8.400 05/01/04 8,098,041
10,600 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc (b)....................... 8.500 05/01/18 11,619,720
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 4,470 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc Ser A..................... 8.400% 05/01/18 $ 4,787,594
4,505 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc Ser B..................... 8.950 05/01/18 5,114,436
1,100 Hodgkins, IL Tax Increment................. 9.500 12/01/09 1,300,332
3,400 Hodgkins, IL Tax Increment (Prerefunded @
12/01/01).................................. 9.500 12/01/09 4,048,312
4,000 Hodgkins, IL Tax Increment Ser A Rfdg...... 7.625 12/01/13 4,421,520
2,500 Illinois Dev Fin Auth Rev Catholic
Charities Hsg Dev.......................... 6.350 01/01/25 2,605,425
4,000 Illinois Edl Fac Auth Rev.................. 6.000 10/01/24 4,091,280
1,740 Illinois Edl Fac Auth Rev Rfdg Riverside
Hlth Sys Ser A............................. 5.900 10/01/14 1,781,081
2,500 Illinois Hlth Fac Auth Rev Evangelical Hosp
Ser C Rfdg (FSA Insd)...................... 6.750 04/15/12 2,856,650
7,750 Illinois Hlth Fac Auth Rev Fairview Oblig
Group Proj A (Prerefunded @ 10/01/02)...... 9.500 10/01/22 9,566,600
4,565 Illinois Hlth Fac Auth Rev Hinsdale Hosp
Ser B Rfdg................................. 9.000 11/15/15 5,229,847
1,500 Illinois Hlth Fac Auth Rev Sarah Bush
Lincoln Hlth Cent (Prerefunded @
5/15/02)................................... 7.250 05/15/12 1,704,855
10,000 Illinois Hlth Fac Auth Rev Servantcor Ser A
(Prerefunded @ 08/15/01) (b)............... 8.000 08/15/21 11,402,700
1,660 Illinois Hsg Dev Auth Rev Homeowner Mtg
Subser A2.................................. 7.125 08/01/26 1,782,624
5,000 Kane Cook & Du Page Cntys, IL Sch Dist No
46 (FSA Insd).............................. 5.350 01/01/15 5,134,700
1,510 Roselle, IL Multi-Family Hsg Rev Waterbury
Apts Ser A Rfdg (GNMA Collateralized)...... 7.000 01/01/25 1,633,216
3,800 Winnebago & Boone Cntys, IL Sch Dist No 205
(FSA Insd) (b)............................. 7.125 02/01/01 4,123,570
4,125 Winnebago & Boone Cntys, IL Sch Dist No 205
(FSA Insd)................................. 7.200 02/01/02 4,586,753
4,475 Winnebago & Boone Cntys, IL Sch Dist No 205
(FSA Insd)................................. 7.300 02/01/03 5,100,426
------------
113,524,993
------------
INDIANA 1.7%
2,500 Indiana Bond Bank Spl Pgm Ser F............ 7.150 08/01/15 2,731,550
3,000 Indiana Dev Fin Auth Indl Dev Rev Unr-Rohn
Inc Proj................................... 7.500 03/01/11 3,274,110
7,620 Marion Cnty, IN Conv & Rectl Fac Auth
Excise Tax Rev (MBIA Insd)................. 5.000 06/01/27 7,347,204
2,000 Plymouth, IN Multi Sch Bldg Corp First Mtg
(Prerefunded @ 01/01/02) (AMBAC Insd)...... 6.750 01/01/13 2,218,180
------------
15,571,044
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
KANSAS 2.4%
$ 20,000 Burlington, KS Pollutn Ctl Rev KS Gas &
Elec Co Proj Rfdg (MBIA Insd) (b).......... 7.000% 06/01/31 $ 21,921,800
------------
KENTUCKY 1.9%
2,000 Ashland, KY Solid Waste Rev Ashland Oil Inc
Proj....................................... 7.200 10/01/20 2,189,660
4,000 Elsmere, KY Indl Dev Rev Rfdg.............. 6.750 04/01/10 4,319,600
10,000 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac
Delta Airls Proj Ser A..................... 7.125 02/01/21 10,992,600
------------
17,501,860
------------
LOUISIANA 0.9%
790 East Baton Rouge, LA Mtg Fin Auth Single
Family Mtg Pur Ser A Rfdg (GNMA
Collateralized) (b)........................ 7.100 10/01/24 837,321
5,850 East Baton Rouge, LA Mtg Fin Auth Single
Family Mtg Pur Ser C Rfdg (GNMA
Collateralized)............................ 7.000 04/01/32 6,179,413
2,000 New Orleans, LA Rfdg (AMBAC Insd).......... * 09/01/16 791,620
------------
7,808,354
------------
MAINE 0.1%
1,000 Maine Vets Homes ME Rev.................... 7.750 10/01/20 1,136,260
------------
MARYLAND 1.9%
2,300 Baltimore, MD Cap Apprec Cons Pub Impt Rfdg
(FGIC Insd)................................ * 10/15/06 1,563,241
3,920 Baltimore, MD Cap Apprec Cons Pub Impt Rfdg
(FGIC Insd)................................ * 10/15/07 2,500,764
139,445 Maryland St Cmnty Dev Admin Dept Hsg &
Cmnty Dev Single Family Rev Pgm 6.......... * 04/01/30 13,703,260
------------
17,767,265
------------
MASSACHUSETTS 5.0%
5,000 Massachusetts Bay Tran Auth MA Gen Tran Sys
Ser A (MBIA Insd) (a)...................... 4.750 03/01/21 4,725,700
7,500 Massachusetts Bay Tran Auth MA Gen Tran Sys
Ser A (MBIA Insd) (a)...................... 4.500 03/01/26 6,781,200
2,600 Massachusetts St Hlth & Edl Fac Auth Rev
Med Cent of Central MA..................... 7.100 07/01/21 2,819,310
5,000 Massachusetts St Hlth & Edl Fac Auth Rev
New England Med Cent Hosp Ser G (Embedded
Swap) (MBIA Insd) (d)...................... 3.100/5.000 07/01/13 4,852,350
1,375 Massachusetts St Hlth & Edl Fac Auth Rev
Winchester Hosp Ser D Rfdg (Connie Lee
Insd)...................................... 5.750 07/01/14 1,465,791
1,805 Massachusetts St Hsg Fin Agy Hsg Rev Amt
Rental Mtg Ser C (AMBAC Insd).............. 5.450 07/01/18 1,827,725
18,800 Massachusetts St Turnpike Auth Metro Ser B
(MBIA Insd) (a)............................ 5.125 01/01/37 18,472,128
5,000 Massachusetts St Wtr Res Auth Genl Ser D
Rfdg (MBIA Insd)........................... 5.000 08/01/24 4,871,050
------------
45,815,254
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MICHIGAN 1.7%
$ 1,750 Detroit MI Wtr Supply Sys Rev Sr Lien Ser A
(MBIA Insd)................................ 5.000% 07/01/27 $ 1,700,055
4,000 Detroit, MI Local Dev Fin Auth Tax
Increment Sr Ser B......................... 6.700 05/01/21 4,100,400
1,000 Detroit, MI Local Dev Fin Auth Ser C....... 6.850 05/01/21 1,028,100
2,000 Michigan Muni Bond Auth Rev Loc Govt Ln Ser
C-A (FSA Insd)............................. * 06/15/13 943,680
1,800 Michigan St Hosp Fin Auth Rev Saratoga
Cmnty Hosp Rfdg (Prerefunded @ 06/01/02)... 8.750 06/01/10 2,104,110
5,000 Portage Lake, MI Wtr & Swr Auth Ser II
(Prerefunded @ 10/01/02)................... 7.625 10/01/20 5,817,400
------------
15,693,745
------------
MISSISSIPPI 0.7%
3,750 Claiborne Cnty, MS Pollutn Ctl Rev Sys
Energy Res Inc Rfdg........................ 7.300 05/01/25 3,976,688
2,000 Mississippi Home Corp Single Family Rev Mtg
Ser F (GNMA Collateralized)................ 7.550 12/01/27 2,272,920
------------
6,249,608
------------
MISSOURI 1.3%
1,740 Good Shepherd Nursing Home Dist MO Nursing
Home Fac Rev............................... 7.625 08/15/15 1,900,219
2,730 Good Shepherd Nursing Home Dist MO Nursing
Home Fac Rev............................... 7.750 08/15/25 3,001,471
3,750 Hannibal, MO Indl Dev Auth Hlth Fac Rev
Hannibal Regl Hlthcare Sys Inc (Prerefunded
@ 09/01/01)................................ 9.500 03/01/22 4,574,100
2,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd)..... 5.000 06/01/11 2,038,460
------------
11,514,250
------------
MONTANA 0.5%
3,900 Montana St Coal Severance Tax Broadwater
Pwr Proj Ser A Rfdg........................ 6.875 12/01/17 4,195,893
------------
NEBRASKA 0.1%
1,000 Nebraska Invt Fin Auth Single Ser D (FHA
Insd)...................................... 5.850 09/01/28 1,037,330
------------
NEVADA 1.2%
2,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj
Ser B Rfdg................................. 5.900 10/01/30 2,050,620
920 Henderson, NV Loc Impt Dist No T-4 Ser A... 8.500 11/01/12 961,823
1,750 Nevada St Rfdg............................. 4.375 08/01/03 1,770,615
6,075 Washoe Cnty, NV Gas & Wtr Fac Rev Sierra
Pacific (AMBAC Insd)....................... 6.300 12/01/14 6,650,667
------------
11,433,725
------------
NEW HAMPSHIRE 0.2%
2,000 New Hampshire High Edl & Hlth Riverwoods At
Exeter Ser A............................... 6.500 03/01/23 2,119,440
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW JERSEY 5.4%
$ 4,000 Camden Cnty, NJ Impt Auth Lease Rev........ 8.000% 06/01/27 $ 4,322,200
1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/00 925,810
1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/02 851,770
1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/03 815,970
1,000 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/04 778,920
1,460 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/05 1,087,174
1,465 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/06 1,041,879
1,615 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/07 1,095,874
1,555 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg
(FGIC Insd)................................ * 03/01/08 1,003,815
5,000 New Jersey Econ Dev Auth Wtr Fac Rev (FGIC
Insd)...................................... 6.500 04/01/22 5,455,200
25,000 New Jersey Econ Dev Auth Contract Econ Rec
(Embedded Cap) (MBIA Insd)................. 5.900 03/15/21 28,020,750
3,500 New Jersey St Turnpike Auth Turnpike Rev
Ser C (FSA Insd)........................... 6.500 01/01/16 4,139,975
------------
49,539,337
------------
NEW MEXICO 0.1%
703 Santa Fe, NM Single Family Mtg Rev Rfdg.... 8.450 12/01/11 753,830
------------
NEW YORK 12.4%
4,000 Herkimer Cnty, NY Indl Dev Agy Indl Dev Rev
Burrows Paper Corp Recycling............... 8.000 01/01/09 4,183,800
5,550 Metro Tran Auth NY Svcs Contract Commuter
Fac Ser N Rfdg............................. 6.000 07/01/11 5,777,051
4,000 Metro Tran Auth NY Svcs Contract Tran Fac
(Prerefunded @ 07/01/01)................... 7.000 07/01/09 4,435,960
1,900 Metro Tran Auth NY Svcs Contract Tran Fac
Ser N Rfdg................................. 6.000 07/01/11 1,977,729
2,000 New York City Hlth & Hosp Corp Rev Ser A
Rfdg (AMBAC Insd).......................... 5.750 02/15/22 2,087,280
7,000 New York City Ser A........................ 6.250 08/01/08 7,787,500
90 New York City Ser A........................ 7.750 08/15/12 100,601
1,410 New York City Ser A (Prerefunded @
08/15/01).................................. 7.750 08/15/12 1,598,729
1,065 New York City Ser C........................ 7.100 08/15/10 1,152,937
435 New York City Ser C (Prerefunded @
8/15/01)................................... 7.100 08/15/10 478,461
5,000 New York City SubSer A1 (Embedded Swap).... 6.260 08/01/12 5,274,550
1,250 New York St Dorm Auth Rev FHA-Sarah Neuman
Nursing Home (AMBAC Insd).................. 5.500 08/01/37 1,290,663
5,000 New York St Dorm Auth Rev City Univ Ser
F.......................................... 5.500 07/01/12 5,133,200
6,800 New York St Dorm Auth Rev Cons City Univ
Sys Ser A.................................. 5.625 07/01/16 7,255,192
4,250 New York St Energy Resh & Dev Auth Fac Rev
Cons Edison Co Proj Ser B Rfdg (MBIA
Insd)...................................... 5.250 08/15/20 4,260,328
4,425 New York St Environmental Fac Corp Pollutn
Ctl Rev (Prerefunded 6/15/04).............. 6.700 06/15/10 5,078,528
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,950 New York St Environmental Fac Corp Pollutn
Ctl Rev St Wtr Revolving Fd Ser E.......... 6.700% 06/15/10 $ 3,342,733
2,920 New York St Med Care Fac Fin Agy Rev Mental
Hlth Svcs Fac Ser D........................ 7.400 02/15/18 3,281,321
7,725 New York St Med Care Fac Fin Agy Rev Mental
Hlth Svcs Fac Ser D (Prerefunded @
02/15/02).................................. 7.400 02/15/18 8,770,270
3,550 New York St Urban Dev Corp Rev............. 5.000 01/01/14 3,455,179
6,150 New York St Urban Dev Corp Rev Correctional
Cap Fac Ser A Rfdg (FSA Insd).............. 5.250 01/01/14 6,447,230
9,000 New York St Urban Dev Corp Rev St Fac
(Prerefunded @ 04/01/01) (b)............... 7.500 04/01/11 10,071,270
6,610 New York, NY Ser B......................... 7.500 02/01/05 7,391,320
390 New York, NY Ser B (Prerefunded
02/01/02).................................. 7.500 02/01/05 442,170
420 New York, NY Ser F......................... 8.250 11/15/02 479,985
1,750 New York, NY Ser F (Prerefunded
11/15/01).................................. 8.250 11/15/02 2,485,475
3,000 Onondaga Cnty, NY Indl Dev Agy Swr Fac Rev
Bristol-Meyers Squibb Co Proj.............. 5.750 03/01/24 3,274,590
6,553 Plainedge, NY Union Free Sch Dist # 2063... 6.000 06/01/12 6,900,580
------------
114,214,632
------------
NORTH CAROLINA 1.6%
13,300 North Carolina Muni Pwr Agy No 1 Catawba
Elec Rev (Indexed Cap) (MBIA Insd) (b)..... 6.000 01/01/12 15,029,532
------------
OHIO 3.4%
8,530 Cleveland, OH Ctfs Partn Cleveland Stadium
Proj (AMBAC Insd).......................... 5.250 11/15/11 8,885,872
7,130 Cleveland, OH Ctfs Partn Cleveland Stadium
Proj (AMBAC Insd).......................... 5.250 11/15/13 7,343,472
5,375 Franklin Cnty, OH Hosp Rev Holy Cross Hlth
Sys Ser B Rfdg (MBIA Insd)................. 5.250 06/01/10 5,597,471
2,270 Montgomery Cnty, OH Hosp Rev Kettering Med
Cent Rfdg & Impt (MBIA Insd)............... 6.250 04/01/20 2,632,383
1,000 Ohio St Air Qual Dev Auth Rev JMG Funding
Ltd Partnership Proj Rfdg (AMBAC Insd)..... 6.375 04/01/29 1,099,720
5,000 Reynoldsburg, OH Hlth Care Fac Rev Wesley
Ridge Proj (GNMA Collateralized)........... 6.150 10/20/38 5,372,050
------------
30,930,968
------------
OKLAHOMA 1.8%
3,095 Cleveland Cnty, OK Home Ln Auth Single
Family Mtg Rev Rfdg........................ 8.000 08/01/12 3,312,671
1,240 Kay Cnty, OK Home Fin Auth Rev Single
Family Mtg Ser A Rfdg (AMBAC Insd)......... 7.000 11/01/11 1,525,969
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OKLAHOMA (CONTINUED)
$ 9,080 Oklahoma Hsg Fin Agy Single Family Rev Mtg
Class B (GNMA Collateralized).............. 7.997% 08/01/18 $ 10,500,929
1,500 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc........................................ 7.600 12/01/30 1,658,370
------------
16,997,939
------------
PENNSYLVANIA 2.6%
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Rfdg
Hosp OH Vly Genl Hosp...................... 5.875 04/01/11 2,585,825
2,150 Butler Cnty, PA Hosp Auth Hosp Rev Butler
Mem Hosp Ser A (FSA Insd).................. 5.250 07/01/12 2,181,240
2,165 Clarion Cnty, PA Hosp Auth Hosp Rev Clarion
Hosp Proj (Prerefunded @ 07/01/01)......... 8.500 07/01/21 2,493,452
10,000 Geisinger Auth PA Hlth Sys Ser A........... 6.400 07/01/22 10,893,600
2,475 Harrisburg Pennsylvania Capital
Appreciation Refunding Notes Series F
(AMBAC Insd)............................... * 03/15/14 1,113,329
2,000 Montgomery Cnty, PA Indl Dev Auth
Retirement Cmnty Rev Adult Cmntys Total
Svcs Ser B................................. 5.625 11/15/12 2,068,980
2,700 Pennsylvania Econ Dev Fin Auth Res Recovery
Rev Colver Proj Ser D...................... 7.125 12/01/15 3,017,844
------------
24,354,270
------------
RHODE ISLAND 1.1%
2,450 Providence, RI Redev Agy Ctfs Partn Ser
A.......................................... 8.000 09/01/24 2,705,388
4,750 Rhode Island Hsg & Mtg Fin Corp Ser 8
(Inverse Fltg)............................. 10.316 04/01/24 5,385,313
2,000 Rhode Island St Hlth & Edl Bldg Corp Rev
Higher Edl Fac Roger Williams (Prerefunded
@ 11/15/04) (Connie Lee Insd).............. 7.250 11/15/24 2,379,320
------------
10,470,021
------------
TENNESSEE 0.5%
4,188 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev
Multi-Family Mtg Rock Creek Plaza Rfdg
(GNMA Collateralized)...................... 7.375 01/20/27 4,487,409
------------
TEXAS 8.0%
6,500 Alliance Arpt Auth Inc TX Spl Fac Rev
American Airls Inc Proj.................... 7.500 12/01/29 7,090,460
6,000 Brazos River Auth TX Pollutn Ctl Rev Coll
TX Util Elec Co Proj A (AMBAC Insd)........ 6.750 04/01/22 6,592,260
420 Brazos, TX Higher Edl Auth Inc Student Ln
Rev Subser C2 Rfdg......................... 7.100 11/01/04 459,787
2,500 Coastal Bend Hlth Fac Dev TX Yield Curve
Note Ser C (Inverse Floater) (AMBAC
Insd)...................................... 7.828 11/15/13 2,868,750
15,000 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev American Airls Inc (b)............ 7.500 11/01/25 16,332,450
3,600 Dallas-Fort Worth, TX Intl Arpt Fac Impt
Corp Rev Delta Airls Inc................... 7.625 11/01/21 4,007,016
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$ 5,000 Matagorda Cnty, TX Nav Dist No 1 Rev Rfdg B
(MBIA Insd) (a)............................ 5.150% 11/01/29 $ 4,922,800
1,280 North TX Muni Wtr Dist TX (FSA Insd)....... 5.000 06/01/18 1,248,154
1,025 North TX Muni Wtr Dist Upper (FSA Insd).... 5.000 06/01/18 999,498
4,975 Region One Education Service Center
Sub-Tech Fac Proj.......................... 6.590 12/15/17 5,219,571
1,794 Texas Genl Svcs Comm Partn Int Lease Purch
Ctfs....................................... 7.250 08/15/11 1,834,057
21,270 Texas St Pub Ppty Fin Corp Rev Mental Hlth
& Retardation Rfdg (FSA Insd) (b).......... 5.250 09/01/08 22,208,218
------------
73,783,021
------------
UTAH 0.7%
3,905 Bountiful, UT Hosp Rev South Davis Cmnty
Hosp Proj.................................. 9.500 12/15/18 4,699,121
1,265 Utah St Hsg Fin Agy Single Family Mtg Insd
Ser E2 (FHA Gtd)........................... 7.150 07/01/24 1,335,650
------------
6,034,771
------------
VIRGINIA 3.3%
20,000 Fairfax Cnty, VA Wtr Auth Wtr Rev Rfdg..... 5.000 04/01/29 19,475,798
1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac
Lease Rev Henrico Cnty Regl Jail Proj...... 6.500 08/01/10 1,709,130
1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac
Lease Rev Henrico Cnty Regl Jail Proj...... 7.125 08/01/21 1,763,595
2,000 Henrico Cnty, VA Indl Dev Auth Rev Solid
Waste Browning Series A.................... 5.875 03/01/17 2,101,120
5,000 Roanoke, VA Indl Dev Auth Hosp Rev Roanoke
Mem Hosp Carilion Hlth Sys Ser B Rfdg (MBIA
Insd)...................................... 4.700 07/01/20 5,247,550
1,050 Virginia St Hsg Dev Auth Comwlth Mtg Ser A
Subser A1 (FHA Gtd)........................ * 07/01/29 98,889
------------
30,396,082
------------
WASHINGTON 1.5%
5,000 Bellevue, WA Convention Cent Auth Spl Oblig
Rev Rfdg (MBIA Insd)....................... * 02/01/24 1,301,150
1,750 Washington St Pub Pwr Supply Sys Nuclear
Proj No 1 Rev (MBIA Insd).................. 5.750 07/01/12 1,875,335
10,495 Washington St Pub Pwr Supply Sys Nuclear
Proj No 1 Rev Ser B Rfdg (MBIA Insd)....... 5.600 07/01/15 10,872,085
------------
14,048,570
------------
WEST VIRGINIA 0.8%
6,550 Harrison Cnty, WV Cnty Cmnty Solid Waste
Disp Rev Potomac Edison Co Ser A........... 6.875 04/15/22 7,122,601
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WISCONSIN 1.5%
$ 1,000 Madison, WI Indl Dev Rev Madison Gas & Elec
Co Proj A.................................. 6.750% 04/01/27 $ 1,083,060
5,250 Wisconsin Hsg & Econ Dev Auth Hsg Rev Ser
B.......................................... 7.050 11/01/22 5,586,630
7,280 Wisconsin St Hlth & Edl Fac Auth Rev
Children's Hosp (Embedded Cap) (FGIC
Insd)...................................... 5.000 08/15/10 7,415,481
------------
14,085,171
------------
WYOMING 0.9%
4,000 Wyoming Cmnty Dev Auth Single Family Ser G
(FHA Gtd).................................. 7.250 06/01/21 4,286,400
4,000 Wyoming Cmnty Dev Auth Single Family Ser H
(FHA Gtd).................................. 7.100 06/01/12 4,312,800
------------
8,599,200
------------
PUERTO RICO 4.0%
2,279 Puerto Rico Comwlth Dept of Hlth Lease Pur
Ctfs (b)................................... 7.250 04/07/01 2,286,714
25,000 Puerto Rico Comwlth Hwy & Tran Auth Tran
Rev Ser A.................................. 4.750 07/01/38 23,029,500
10,000 Puerto Rico Comwlth Hwy & Tran Auth Tran
Rev Ser A.................................. 5.000 07/01/38 9,501,900
2,000 Puerto Rico Elec Pwr Auth Pwr Rev Ser P
(Prerefunded @ 07/01/01)................... 7.000 07/01/21 2,222,640
------------
37,040,754
------------
TOTAL LONG-TERM INVESTMENTS 102.6%
(Cost $871,247,230)........................................................... 946,205,742
------------
SHORT-TERM INVESTMENTS 3.5%
(Cost $31,950,000)............................................................ 31,950,000
------------
TOTAL INVESTMENTS 106.1%
(Cost $903,197,230)........................................................... 978,155,742
LIABILITIES IN EXCESS OF OTHER ASSETS (6.1%)................................... (56,069,979)
------------
NET ASSETS 100.0%.............................................................. $922,085,763
============
</TABLE>
*Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, open option and open futures transactions.
(c) 144A securities are those which are exempt from registration under rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(d) Security is a "Step-up" bond where the coupon increases or steps up at a
predetermined date.
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments, (Cost $903,197,230)...................... $978,155,742
Cash........................................................ 46,236
Receivables:
Interest.................................................. 13,904,295
Investments Sold.......................................... 5,028,125
Variation Margin on Futures............................... 58,500
Other....................................................... 17,919
------------
Total Assets.......................................... 997,210,817
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 73,506,944
Income Distributions - Common and Preferred Shares........ 514,901
Investment Advisory Fee................................... 495,999
Administrative Fee........................................ 141,714
Affiliates................................................ 53,350
Accrued Expenses............................................ 276,267
Trustees' Deferred Compensation and Retirement Plans........ 82,754
Options at Market Value (Net premiums received of
$168,544)................................................. 53,125
------------
Total Liabilities..................................... 75,125,054
------------
NET ASSETS.................................................. $922,085,763
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 6,000 issued with liquidation preference of
$50,000 per share)........................................ $300,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 36,270,469 shares issued and
outstanding).............................................. 362,705
Paid in Surplus............................................. 536,860,572
Net Unrealized Appreciation................................. 75,948,331
Accumulated Undistributed Net Investment Income............. 3,450,476
Accumulated Net Realized Gain............................... 5,463,679
------------
Net Assets Applicable to Common Shares................ 622,085,763
------------
NET ASSETS.................................................. $922,085,763
============
NET ASSET VALUE PER COMMON SHARE ($622,085,763 divided
by 36,270,469 shares outstanding)......................... $ 17.15
============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
STATEMENT OF OPERATIONS
For the Six Months Ended February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $27,579,834
-----------
EXPENSES:
Investment Advisory Fee..................................... 3,173,147
Administrative Fee.......................................... 906,614
Preferred Share Maintenance................................. 401,969
Custody..................................................... 29,227
Legal....................................................... 15,292
Trustees' Fees and Expenses................................. 15,301
Other....................................................... 226,085
-----------
Total Expenses.......................................... 4,767,635
-----------
NET INVESTMENT INCOME....................................... $22,812,199
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 6,270,541
Futures................................................... (652,775)
Options................................................... 608,990
-----------
Net Realized Gain........................................... 6,226,756
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 62,025,039
-----------
End of the Period:
Investments............................................. 74,958,512
Futures................................................. 874,400
Options................................................. 115,419
-----------
75,948,331
-----------
Net Unrealized Appreciation During the Period............... 13,923,292
-----------
NET REALIZED AND UNREALIZED GAIN............................ $20,150,048
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $42,962,247
===========
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended February 28, 1998 and
the Year Ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 28, 1998 August 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 22,812,199 $ 46,253,008
Net Realized Gain...................................... 6,226,756 7,810,403
Net Unrealized Appreciation During the Period.......... 13,923,292 18,794,517
------------ ------------
Change in Net Assets from Operations................... 42,962,247 72,857,928
------------ ------------
Distributions from Net Investment Income:
Common Shares........................................ (17,408,905) (34,818,328)
Preferred Shares..................................... (5,396,878) (10,696,162)
------------ ------------
Total Distributions.................................... (22,805,783) (45,514,490)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 20,156,464 27,343,438
NET ASSETS:
Beginning of the Period................................ 901,929,299 874,585,861
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $3,450,476 and $3,444,060,
respectively)........................................ $922,085,763 $901,929,299
============ ============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
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
Six Months Ended Year Ended August 31 of Investment
February 28, ---------------------------------------------- Operations) to
1998 1997 1996 1995 1994 1993 August 31, 1992
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period
(a)........................ $16.596 $15.842 $15.734 $15.562 $17.035 $16.328 $14.808
------- ------- ------- ------- ------- ------- -------
Net Investment Income........ .629 1.275 1.295 1.311 1.347 1.410 1.166
Net Realized and Unrealized
Gain/Loss.................. .555 .734 .105 .266 (1.424) .780 1.370
------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations................... 1.184 2.009 1.400 1.577 (.077) 2.190 2.536
------- ------- ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders............. .480 .960 .990 1.084 1.116 1.100 .811
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders... .149 .295 .302 .321 .280 .246 .205
Distributions from Net
Realized Gain:
Paid to Common
Shareholders............. -0- -0- -0- -0- -0- .111 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders... -0- -0- -0- -0- -0- .026 -0-
------- ------- ------- ------- ------- ------- -------
Total Distributions........... .629 1.255 1.292 1.405 1.396 1.483 1.016
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $17.151 $16.596 $15.842 $15.734 $15.562 $17.035 $16.328
======= ======= ======= ======= ======= ======= =======
Market Price Per Share at End
of the Period................ $16.188 $15.750 $14.500 $14.250 $15.000 $16.750 $16.125
Total Investment Return at
Market Price (b)............. 5.87%* 15.87% 8.98% 2.39% (3.94%) 11.90% 13.24%*
Total Return at Net Asset
Value (c).................... 6.27%* 11.14% 7.09% 8.55% (2.22%) 12.31% 14.64%*
Net Assets at End of the
Period (In millions)......... $922.1 $901.9 $874.6 $870.7 $864.4 $917.9 $891.7
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares**.............. 1.56% 1.61% 1.61% 1.65% 1.64% 1.59% 1.49%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common Shares
(d).......................... 5.72% 6.04% 6.20% 6.48% 6.52% 7.08% 6.85%
Portfolio Turnover............ 30%* 54% 36% 49% 47% 48% 100%*
* Non-Annualized
** Ratio of Expenses to
Average Net Assets Including
Preferred Shares............. 1.05% 1.07% 1.06% 1.07% 1.09% 1.06% 1.03%
</TABLE>
(a) Net Asset Value at September 27, 1991, is adjusted for common and preferred
share offering costs of $.192 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 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.
See Notes to Financial Statements
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital 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 income tax, consistent with
preservation of capital. The Trust will invest in a portfolio consisting
substantially of 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.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At August 31, 1997, the Trust had an accumulated capital loss
carryforward for tax purposes of $282,165 which will expire on August 31, 2004.
Net realized loss differs for financial and tax reporting purposes primarily as
a result of gains or losses recognized for tax purposes on the mark to market of
open option and futures positions at August 31, 1997.
At February 28, 1998, for federal income tax purposes, cost of long- and
short-term investments is $903,197,230; the aggregate gross unrealized
appreciation is $75,172,196 and the aggregate gross unrealized depreciation is
$213,684 resulting in net unrealized appreciation on investments of $74,958,512.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually 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.
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.
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended February 28, 1998, the Trust recognized expenses of
approximately $7,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the six months ended February 28, 1998, the Trust recognized expenses of
approximately $94,100 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 provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit under the plan is equal to the trustees' annual retainer fee, which is
currently $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $308,001,916 and $271,235,408,
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. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising an option contract or taking
delivery of a security underlying a futures contract. In this instance, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
Transactions in options for the six months ended February 28, 1998, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- ---------------------------------------------------------------------------
<S> <C> <C>
Outstanding at August 31, 1997................... 2,605 $ 158,071
Options Written and Purchased (Net).............. 4,100 526,288
Options Terminated in Closing Transactions
(Net).......................................... (1,113) 250,232
Options Expired (Net)............................ (4,792) (766,047)
-------- ---------
Outstanding at February 28, 1998................. 800 $ 168,544
======== =========
</TABLE>
The related futures contracts of the outstanding option transactions as of
February 28, 1998, and the descriptions and market values are as follows:
<TABLE>
<CAPTION>
EXPIRATION MARKET
MONTH/ VALUE OF
CONTRACTS EXERCISE PRICE OPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG CONTRACTS:
Mar. 1998 US Long Bond Future
Call............................... 200 Mar/128 $ 3,125
SHORT CONTRACTS:
Mar. 1998 US Long Bond Future
Call............................... 600 Mar/120 (56,250)
------- ---------
800 $ (53,125)
======= =========
</TABLE>
B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
made to the broker based upon changes in the value of the contract (the
variation margin). The potential risk of loss associated with a futures contract
could be in excess of the variation margin reflected on the Statement of Assets
and Liabilities.
Transactions in futures contracts for the six months ended February 28,
1998, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ------------------------------------------------------------------------
<S> <C>
Outstanding at August 31, 1997............................. 456
Futures Opened............................................. 4,225
Futures Closed............................................. (4,173)
------
Outstanding at February 28, 1998........................... 508
======
</TABLE>
The futures contracts outstanding as of February 28, 1998, and the
descriptions and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- -----------------------------------------------------------------------------
<S> <C> <C>
Long Contracts -- Mar. 1998 US Treasury Bond
Future (Current notional value of $120,781
per contract)................................ 208 $ 126,821
Short Contracts -- Mar. 1998 Municipal Bond
Future (Current notional value of $123,188
per contract)................................ 300 747,579
--- ---------
508 $ 874,400
=== =========
</TABLE>
C. INDEXED SECURITIES--These instruments 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.
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.
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.
An Embedded Swap security includes a swap component such that the fixed
coupon component of the underlying bond is adjusted by the difference between
the security's fixed swap rate and the floating swap index. As the floating rate
rises, the coupon is reduced. Conversely, as the floating rate declines, the
coupon is increased. 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.
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
5. PREFERRED SHARES
The Trust has outstanding 6,000 Auction Preferred Shares ("APS") in four series
of 1,500 shares each. Dividends are cumulative and the dividend rate is
periodically reset through an auction process. The dividend periods for Series A
and Series C are 7 days, while Series B and Series D are 28 days. The average
rate in effect on February 28, 1998, was 3.40%. During the six months ended
February 28, 1998, the rates ranged from 3.19% to 4.75%.
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 redemption if the tests are not met.
26
<PAGE> 28
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 American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
27
<PAGE> 29
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales
charges, risks, and expenses. Please read it carefully before you invest or
send money.
To view a current Van Kampen American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:
- visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a Prospectus
- call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- e-mail us by visiting WWW.VKAC.COM and selecting Investors' Place
28
<PAGE> 30
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL* - Chairman
STEVEN MULLER
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1998
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
29
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES> 11
<NUMBER> 11
<NAME> MUNICIPAL TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 903,197,230
<INVESTMENTS-AT-VALUE> 978,155,742
<RECEIVABLES> 18,990,920
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 64,155
<TOTAL-ASSETS> 997,210,817
<PAYABLE-FOR-SECURITIES> 73,506,944
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,618,110
<TOTAL-LIABILITIES> 75,125,054
<SENIOR-EQUITY> 300,000,000
<PAID-IN-CAPITAL-COMMON> 537,223,277
<SHARES-COMMON-STOCK> 36,270,469
<SHARES-COMMON-PRIOR> 36,270,469
<ACCUMULATED-NII-CURRENT> 3,450,476
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,463,679
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 75,948,331
<NET-ASSETS> 922,085,763
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,579,834
<OTHER-INCOME> 0
<EXPENSES-NET> (4,767,635)
<NET-INVESTMENT-INCOME> 22,812,199
<REALIZED-GAINS-CURRENT> 6,226,756
<APPREC-INCREASE-CURRENT> 13,923,292
<NET-CHANGE-FROM-OPS> 42,962,247
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22,805,783)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 20,156,464
<ACCUMULATED-NII-PRIOR> 3,444,060
<ACCUMULATED-GAINS-PRIOR> (763,077)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,173,147
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,767,635
<AVERAGE-NET-ASSETS> 614,341,732
<PER-SHARE-NAV-BEGIN> 16.596
<PER-SHARE-NII> 0.629
<PER-SHARE-GAIN-APPREC> 0.555
<PER-SHARE-DIVIDEND> (0.480)
<PER-SHARE-DISTRIBUTIONS> (0.149)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.151
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
