<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 10
Statement of Operations.......................... 11
Statement of Changes in Net Assets............... 12
Financial Highlights............................. 13
Notes to Financial Statements.................... 14
</TABLE>
VIC SAR 06/97
<PAGE> 2
LETTER TO SHAREHOLDERS
June 5, 1997
Dear Shareholder,
As mentioned in your previous
report, VK/AC Holding, Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset
management. More recently, on February [PHOTO]
5, 1997, Morgan Stanley Group Inc. and
Dean Witter, Discover & Co. announced
their agreement to merge, and you DENNIS J. MCDONNELL AND DON G. POWELL
received a proxy in April. The merger
was completed on May 31, 1997, creating
the combined company of Morgan Stanley, Dean Witter, Discover & Co. This
preeminent global financial services firm boasts a market capitalization of $21
billion and leading market positions in securities, asset management, and credit
services. As the financial industry continues to witness unprecedented
consolidations and new partnerships, we believe that those firms that are
leaders in all facets of their business will be able to offer investors the
greatest opportunities and services as we move into the next century. We are
confident that this merger will provide investors with those benefits.
ECONOMIC OVERVIEW
Bond prices were volatile during the six months ended April 30, 1997.
Prices initially rose as the economy slowed, erasing fears of an interest rate
hike by the Federal Reserve Board. The November election of a Democratic
president and Republican Congress was positive for bonds because the split
government was viewed as a restraint on spending increases that could
potentially swell the budget deficit. In addition, support diminished for
radical tax reform that could threaten the tax-free status of municipal bonds.
By the beginning of 1997, the situation changed. Bond prices began to fall
as the economy picked up speed, culminating in a 5.60 percent annualized growth
rate in the first quarter. This strength, coupled with warnings by Fed Chairman
Alan Greenspan that tighter monetary policy might be appropriate, reignited
fears of a rate hike. On March 25, the Fed raised short-term rates by a modest
0.25 percent, which sent the 30-year Treasury bond yield above 7.00 percent for
the first time in six months. By the end of April, the 30-year Treasury bond
yield slipped back below 7.00 percent as the market turned its attention to
positive news about inflation, and bonds recovered some of their earlier losses.
Throughout most of the six months ended April 30, municipal bonds generally
outperformed Treasuries. Between October 31 and April 30, yields on long-term
municipal revenue bonds rose 21 basis points, while yields on 30-year Treasury
bonds jumped 31 basis points. Because bond yields move in the opposite direction
of prices, the smaller
Continued on page two
1
<PAGE> 3
increase in municipal yields meant that municipal bond prices did not fall as
sharply as Treasury bond prices did. A relatively stable supply of new issues,
combined with an increase in retail demand, contributed to the improved
performance of municipal bonds.
In California, the economy grew well ahead of the national rate, which
boosted the state's short-term financial prospects. A $525 million sale of
general obligation bonds in March was highly successful, and there is the
potential for a ratings upgrade later this year. For the long term, however,
California continues to be vulnerable to an economic downturn due to its small
budget surplus. In addition, the feud continues between state and county
governments over who should pay for state-mandated local services.
FUND STRATEGY
In managing the Trust, we maintained a high concentration in AAA-rated bonds
during the period. As of April 30, approximately 67 percent of the Trust's
long-term investments were AAA-rated, the highest credit rating assigned to
bonds by the Standard & Poor's Ratings Group. In addition, approximately 22
percent of long-term investments were AA- or A-rated, and approximately 11
percent were either non-rated or rated BBB or below. BBB is the lowest rating
Standard & Poor's assigns to bonds in the investment-grade category. AAA-rated
securities typically have performed better when interest rates are declining and
provide the potential for safety of principal. They are extremely liquid because
most are insured bonds. BBB-rated securities have tended to perform better when
rates are rising, and they have the potential to provide additional income.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality
as a Percentage of Long-Term
<TABLE>
<S> <C>
AAA.................... 67.2%
AA..................... 0.9%
A...................... 20.8%
BBB.................... 5.1%
BB..................... 1.7%
Non-Rated.............. 4.3%
</TABLE>
Portfolio turnover during the period was minimal because market conditions
offered few opportunities to add value over existing holdings. The majority of
bonds in the portfolio had higher yields than current market levels. In
addition, many bonds had built-in gains, which, if the bonds were sold, would
have resulted in a taxable event. Activity was also limited by the tight spreads
between yields of AAA-rated bonds and lower-rated bonds. These spreads remained
narrow due to the increasing number of insured bonds in the municipal market. As
a result, there was often not enough yield reward to justify the additional
credit risk of purchasing lower-rated securities.
Purchases focused on long-term, higher-yielding housing securities, which
have tended to perform well during periods of rising interest rates, and
long-term discount
Continued on page three
2
<PAGE> 4
bonds to enhance the call protection of the Trust. In other words, we hope to
lessen the concentration of bonds that can be called at any one time. These
purchases were financed by sales of premium prerefunded bonds, which we believed
had little potential for further price appreciation, plus sales of par and zero
coupon bonds. (A bond that is priced at its face value is selling at par. If it
is priced below par, it is selling at a discount. Conversely, a bond priced
above par is selling at a premium.) When buying new securities for the
portfolio, we attempt to identify those bonds that we believe will outperform
within a particular sector and that can be purchased at an attractive price. We
believe this "bottom-up" approach, supported by our research, provides
significant added value to the portfolio.
We maintained a relatively short duration during this period of rising
interest rates in order to potentially reduce the Trust's volatility to rate
increases. Duration, which is expressed in years, is a measure of a portfolio's
sensitivity to interest rate movements. Portfolios with long durations have
tended to perform better when rates are falling, and portfolios with short
durations have tended to perform better when rates are rising. At the end of the
period, the Trust's duration stood at 7.52 years compared to 8.68 years for the
Lehman Brothers Municipal Bond Index benchmark.
Six-month Distribution History
For the Period Ended April 30, 1997
<TABLE>
<CAPTION>
Dividend Capital Gain
-------- ------------
<S> <C> <C>
Nov 1996............... $.0800
Dec 1996............... $.0825 .2826
Jan 1997............... $.0825
Feb 1997............... $.0825
Mar 1997............... $.0825
Apr 1997............... $.0825
</TABLE>
PERFORMANCE SUMMARY
For the six-month period ended April 30, 1997, the Van Kampen American
Capital Trust for Investment Grade California Municipals generated a total
return at market price of 1.49 percent(1). The Trust offered a tax-exempt
distribution rate of 6.39 percent(3), based on the closing common stock price of
$15.50 per share on April 30, 1997. Because income from the Trust is exempt from
federal and California state income taxes, this distribution rate represents a
yield equivalent to a taxable investment earning 11.21 percent(4) (for investors
in the combined federal and state income tax bracket of 43 percent). At the end
Continued on page four
3
<PAGE> 5
of the reporting period, the closing share price of the Trust traded at a 5.14
percent discount to its net asset value of $16.34.
As a result of the Trust's improved earnings, its Board of Trustees approved
a slight increase in its monthly dividend from $0.0800 to $0.0825 per common
share, payable December 31, 1996. The Trust declared a capital gains
distribution of $0.2001 per share payable on December 31, 1996, as a result of
the sale of some assets that had appreciated in value.
TOP 5 PORTFOLIO INDUSTRY HOLDINGS BY SECTOR AS OF APRIL 30, 1997*
Retail Electric/Gas/Telephone................................ 18.5%
Transportation............................................... 15.6%
Health Care.................................................. 13.5%
Public Education............................................. 7.7%
Public Building.............................................. 7.7%
*As a Percentage of Long-Term Investments
MUNICIPAL MARKET OUTLOOK
We continue to see signs of a strong economy, although we do not expect the
unusually brisk growth rate of the first quarter to be sustained throughout the
year. As a result, we believe the Fed will monitor the economy closely and take
aggressive action to control growth if inflation picks up or the high growth
rate is sustained. However, if growth slows, we believe the Fed will leave rates
unchanged. Given this outlook, we expect that yields on the 30-year Treasury
bond will range between 6.75 and 7.40 percent for the remainder of the year,
with higher levels occurring early and lower yields dominating the second half
of 1997. Although short-term interest rates have risen, this has not had a
significant impact on the leveraged structure of the Trust.
We believe the Trust is positioned to perform well in the coming months, and
we do not anticipate major structural changes in the portfolio. In light of our
expectations for interest rates, we will continue to maintain a slightly
defensive posture by keeping a relatively short duration for the portfolio and
adjusting the duration when prudent. We will also continue to seek a balance
between the Trust's total return and its dividend income, as well as to add
value through security selection. Thank you for your continued confidence in Van
Kampen American Capital and your Trust's team of managers.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1997
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
(NYSE TICKER SYMBOL--VIC)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)............ 1.49%
Six-month total return based on NAV(2)..................... 1.53%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 6.39%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 11.21%
SHARE VALUATIONS
Net asset value............................................ $ 16.34
Closing common stock price................................. $15.500
Six-month high common stock price (03/03/97)............... $16.250
Six-month low common stock price (04/30/97)................ $15.500
Preferred share rate(5).................................... 3.740%
</TABLE>
(1) Total return based on market price assumes an investment at the market
price at the beginning of the period indicated, reinvestment of all
distributions for the period in accordance with the Trust's dividend
reinvestment plan, and sale of all shares at the closing common stock price at
the end of the period indicated.
(2) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) The taxable-equivalent distribution rate is calculated assuming a 43%
combined federal and state income tax bracket, which takes into consideration
the deductibility of individual state taxes paid.
(5) See "Notes to Financial Statements" footnote #4, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
Market forecasts provided in this report may not necessarily come to pass.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
CALIFORNIA 91.6%
$ 1,000 Bakersfield, CA Ctfs Partn Convention Cent
Expansion Proj (MBIA Insd)..................... 5.875% 04/01/22 $ 1,000,740
1,000 Brea & Olinda, CA Unified Sch Dist Ctfs Partn
Sr High Sch Pgm Ser A Rfdg (FSA Insd).......... 6.000 08/01/09 1,043,130
1,250 California Edl Fac Auth Rev Loyola Marymount
Univ Ser B..................................... 6.550 10/01/12 1,328,613
1,300 California Edl Fac Auth Rev Mills College...... 6.875 09/01/22 1,395,095
1,000 California Edl Fac Auth Rev Student Ln CA Ln Pg
Ser A
(MBIA Insd).................................... 6.000 03/01/16 1,002,840
1,000 California Edl Fac Auth Rev Univ of La Verne... 6.300 04/01/09 1,025,270
1,100 California Hlth Fac Fin Auth Rev Hlth Fac Small
Fac Ln
Ser A.......................................... 6.700 03/01/11 1,170,994
1,500 California Hlth Fac Fin Auth Rev Hlth Fac Small
Fac Ln
Ser A.......................................... 6.750 03/01/20 1,597,980
2,500 California Hlth Fac Fin Auth Rev Insd Hlth Fac
Valleycare
Ser A.......................................... 6.125 05/01/12 2,541,175
2,000 California Hlth Fac Fin Auth Rev Insd Hosp
Marshall Hosp Ser A............................ 6.500 11/01/12 2,114,680
1,000 California Hlth Fac Fin Auth Rev Kaiser
Permanente Ser A (FSA Insd).................... 5.550 08/15/25 955,330
1,000 California Hsg Fin Agy Rev Multi-Family Hsg III
Ser A (MBIA Insd).............................. 5.850 08/01/17 991,700
1,000 California Hsg Fin Agy Rev Home Mtg Ser B (MBIA
Insd).......................................... 6.000 08/01/16 1,003,240
1,000 California Hsg Fin Agy Rev Home Mtg Ser N...... 6.375 02/01/27 1,017,150
1,000 California Hsg Fin Agy Rev Multi-Family Hsg III
Ser A (MBIA Insd).............................. 5.950 08/01/28 997,070
10,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co (Embedded Cap) (AMBAC
Insd) (b)...................................... 6.000 07/01/27 10,096,300
2,000 California St (AMBAC Insd)..................... 6.200 02/01/16 2,022,640
2,000 California St Dept Tran Ctfs Partn East Bay St
Bldg Ser A..................................... 6.500 03/01/16 2,082,820
1,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Proj Ser A (Prerefunded @ 10/01/02)....... 6.700 10/01/17 1,108,940
1,000 California Statewide Cmntys Dev Auth Rev Ctfs
Partn Saint Joseph Hlth (AMBAC Insd)........... 6.100 07/01/07 1,067,150
2,000 California Statewide Cmntys Dev Corp Ctfs Partn
Insd
United Westn Med Cent (Prerefunded @
12/01/01)...................................... 6.750 12/01/21 2,200,040
2,070 Central San Joaquin Vly, CA Risk Mgmt Auth Rev
Pooled Workers Ser C........................... * 08/01/00 1,774,031
315 Centralia, CA Sch Dist Ctfs Partn Cap Apprec... * 06/01/00 273,338
260 Centralia, CA Sch Dist Ctfs Partn Cap Apprec... * 06/01/01 214,191
505 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/02 399,814
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 540 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/03 $ 398,909
580 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/04 399,202
625 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/05 401,181
630 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/06 376,236
720 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/07 400,802
1,700 Chula Vista, CA Indl Dev Rev San Diego Gas &
Elec Co Ser A (AMBAC Insd)..................... 6.400% 12/01/27 1,750,745
1,000 Contra Costa Cnty, CA Pub Fin Auth Tax Alloc
Rev Ser A...................................... 7.100 08/01/22 1,062,770
3,000 Foothill/Eastern Tran Agy Conv Cap Apprec Sr
Lien Ser A (c)................................. 0/7.050 01/01/10 1,946,640
7,455 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien
Ser A.......................................... * 01/01/23 1,457,676
3,000 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien
Ser A.......................................... * 01/01/24 550,470
2,000 Huntington Beach, CA Pub Fin Auth Rev
Huntington Beach Redev Proj.................... 7.000 08/01/10 2,003,180
1,000 Long Beach, CA Harbor Rev Ser A (MBIA Insd).... 7.250 05/15/19 1,047,320
1,000 Los Angeles Cnty, CA Tran Comm Sales Tax Rev
Ser B Rfdg (MBIA Insd)......................... 6.500 07/01/13 1,070,650
2,000 Los Angeles, CA Dept Wtr & Pwr Elec Plt Rev
Second Issue (Crossover Rfdg @ 09/15/00)....... 7.250 09/15/30 2,194,140
2,500 Los Angeles, CA Multi-Family Rev Hsg Earthquake
Rehab Proj Ser A (FNMA Insd)................... 5.700 12/01/27 2,519,250
1,000 Mountain View, CA Cap Impts Fin Auth Rev City
Hall/Cmnty Theatre (MBIA Insd)................. 6.500 08/01/16 1,071,550
1,820 Orange Cnty, CA Arpt Rev Rfdg (MBIA Insd)...... 5.625 07/01/12 1,795,212
1,930 Orange Cnty, CA Ctfs Partn Juvenile Justice
Cent Fac Rfdg (AMBAC Insd)..................... 6.375 06/01/11 2,052,246
880 Paramount, CA Redev Agy Tax Alloc (MBIA
Insd).......................................... 6.250 08/01/10 936,848
2,500 Port Oakland, CA Port Rev Ser E (MBIA Insd).... 6.500 11/01/16 2,623,050
2,000 Riverside Cnty, CA Brd Edl Ctfs Partn Fin Proj
Ser A.......................................... 6.650 11/01/17 2,100,380
1,980 Riverside, CA Elec Rev Rfdg (MBIA Insd)........ 5.000 10/01/13 1,848,389
1,000 Sacramento, CA Muni Util Dist Elec Rev Ser B
(MBIA Insd).................................... 6.375 08/15/22 1,050,960
2,425 San Benito, CA Hosp Dist Hlth Fac Rev Ser A.... 6.750 12/01/21 2,588,639
1,730 San Bernadino, CA Muni Wtr Dept Ctfs Partn Swr
(FGIC Insd).................................... 6.250 02/01/17 1,786,623
1,000 San Bernardino Cnty, CA Ctfs Partn Med Cent Fin
Proj (MBIA Insd)............................... 5.000 08/01/28 891,000
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 5,000 San Diego, CA Indl Dev Rev San Diego Gas & Elec
Ser A (AMBAC Insd)............................. 6.100% 09/01/19 $ 5,083,650
5,000 San Diego, CA Port Fac Rev Natl Steel &
Shipbldg Co Rfdg............................... 6.600 12/01/02 5,151,000
2,500 San Francisco, CA City & Cnty Intl Arpt Rev
Second Ser Issue 12A (FGIC Insd)............... 5.800 05/01/21 2,453,975
3,565 San Francisco, CA City & Cnty Redev Agy Hotel
Tax Rev (FSA Insd)............................. 6.750 07/01/15 3,901,857
1,500 Santa Ana, CA Multi-Family Hsg Rev Villa Del
Sol Apartments Ser B (FNMA Insd)............... 5.650 11/01/21 1,525,395
2,250 Santa Barbara, CA Ctfs Partn Harbor Proj
Rfdg........................................... 6.750 10/01/27 2,397,847
1,000 Santa Clara Cnty, CA Fin Auth Lease Rev VMC Fac
Replacement Proj Ser A (AMBAC Insd)............ 6.875 11/15/14 1,105,380
835 Southern CA Home Fin Auth Single Family Mtg Rev
Ser A (GNMA Collateralized).................... 6.750 09/01/22 860,184
1,080 Stanislaus Cnty, CA Ctfs Partn Cap Impt Pgm Ser
A Rfdg (MBIA Insd)............................. 5.250 05/01/14 1,032,620
1,000 Stockton, CA Hlth Fac Rev Saint Joseph Med Cent
Ser A (MBIA Insd).............................. 5.625 06/01/13 987,970
3,000 Upland, CA Ctfs Partn Wtr Sys Proj Rfdg (FGIC
Insd).......................................... 6.600 08/01/16 3,238,560
1,000 Visalia, CA Ctfs Partn Mult Projs Ser B Rfdg
(MBIA Insd).................................... 5.375 12/01/19 952,250
2,835 West Covina, CA Ctfs Partn Civic Cent Proj Rfdg
(FSA Insd) (d)................................. 5.500 09/01/14 2,798,939
2,000 William S Hart CA Jt Sch Fin Auth Spl Tax Rev
Cmnty Fac Rfdg (FSA Insd)...................... 6.500 09/01/14 2,173,700
------------
110,411,666
------------
GUAM 3.5%
4,000 Guam Govt Ltd Oblig Hwy Ser A (FSA Insd) (e)... 6.250 05/01/07 4,249,360
------------
PUERTO RICO 3.7%
1,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser
T (Prerefunded @ 07/01/02)..................... 6.500 07/01/22 1,093,230
2,000 Puerto Rico Comwlth Pub Impt (Prerefunded @
07/01/02)...................................... 6.800 07/01/21 2,213,720
1,000 Puerto Rico Pub Bldgs Auth Rev Gtd Ser K
(Prerefunded @ 07/01/02)....................... 6.875 07/01/21 1,110,260
------------
4,417,210
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL LONG-TERM INVESTMENTS 98.8%
(Cost $113,723,186) (a)..................................................... $119,078,236
SHORT-TERM INVESTMENTS 2.2%
(Cost $2,300,000) (a)....................................................... 2,300,000
LIABILITIES IN EXCESS OF OTHER ASSETS (1.0%)................................. (905,049)
------------
NET ASSETS 100.0%............................................................ $120,473,187
============
</TABLE>
*Zero coupon bond
(a) At April 30, 1997, cost of long- and short-term investments for federal
income tax purposes is $116,023,186; the aggregate gross unrealized
appreciation is $5,488,164 and the aggregate gross unrealized depreciation
is $133,114, resulting in net unrealized appreciation of $5,355,050.
(b) An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. The Trust invests in these instruments as a hedge against a rise
in the short-term interest rates which it pays on its preferred shares.
These derivative instruments are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation on
investments. Upon disposition, a realized gain or loss is recognized
accordingly.
(c) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
(d) Securities purchased on a when issued or delayed delivery basis.
(e) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $113,723,186)
(Note 1).................................................. $119,078,236
Short-Term Investments (Cost $2,300,000) (Note 1)........... 2,300,000
Interest Receivable......................................... 2,085,096
Cash........................................................ 41,210
Other....................................................... 1,793
------------
Total Assets.......................................... 123,506,335
============
LIABILITIES:
Payables:
Investments Purchased..................................... 2,676,520
Income Distributions--Common and Preferred Shares......... 91,149
Investment Advisory Fee (Note 2).......................... 63,972
Administrative Fee (Note 2)............................... 19,684
Affiliates (Note 2)....................................... 6,346
Accrued Expenses............................................ 114,999
Deferred Compensation and Retirement Plans (Note 2)......... 60,478
------------
Total Liabilities..................................... 3,033,148
------------
NET ASSETS.................................................. $120,473,187
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 900 issued with liquidation preference of $50,000
per share) (Note 4)....................................... $ 45,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 4,619,242 shares issued and
outstanding).............................................. 46,192
Paid in Surplus............................................. 67,813,169
Net Unrealized Appreciation on Investments.................. 5,355,050
Accumulated Undistributed Net Investment Income............. 1,380,997
Accumulated Net Realized Gain on Investments................ 877,779
------------
Net Assets Applicable to Common Shares................ 75,473,187
------------
NET ASSETS.................................................. $120,473,187
============
NET ASSET VALUE PER COMMON SHARE ($75,473,187 divided
by 4,619,242 shares outstanding).......................... $ 16.34
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $3,584,934
----------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 390,558
Administrative Fee (Note 2)................................. 120,172
Preferred Share Maintenance (Note 4)........................ 60,811
Trustees Fees and Expenses (Note 2)......................... 12,833
Custody..................................................... 7,556
Legal (Note 2).............................................. 5,795
Amortization of Organizational Costs (Note 1)............... 2,001
Other....................................................... 85,463
----------
Total Expenses.......................................... 685,189
----------
NET INVESTMENT INCOME....................................... $2,899,745
==========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Gain on Investments............................ $ 877,779
----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period................................... 6,286,473
End of the Period......................................... 5,355,050
----------
Net Unrealized Depreciation on Investments During the
Period.................................................... (931,423)
----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS............. $ (53,644)
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $2,846,101
==========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1997 and
the Year Ended October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 2,899,745 $ 6,006,464
Net Realized Gain on Investments........................ 877,779 1,231,942
Net Unrealized Appreciation/Depreciation on Investments
During the Period..................................... (931,423) 619,453
------------ ------------
Change in Net Assets from Operations.................... 2,846,101 7,857,859
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (2,274,859) (4,420,235)
Preferred Shares...................................... (475,141) (1,507,837)
------------ ------------
(2,750,000) (5,928,072)
------------ ------------
Distributions from Net Realized Gain on Investments
(Note 1):
Common Shares......................................... (924,173) (407,627)
Preferred Shares...................................... (307,769) (178,664)
------------ ------------
(1,231,942) (586,291)
------------ ------------
Total Distributions..................................... (3,981,942) (6,514,363)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... (1,135,841) 1,343,496
NET ASSETS:
Beginning of the Period................................. 121,609,028 120,265,532
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $1,380,997 and $1,231,252,
respectively)......................................... $120,473,187 $121,609,028
============ ============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 27, 1992
(Commencement
Year Ended October 31 of Investment
Six Months Ended ------------------------------------- Operations) to
April 30, 1997 1996 1995 1994 1993 October 31, 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period
(a).......................... $16.584 $16.294 $14.670 $17.644 $14.878 $14.704
------ ------- ------- ------- ------- -------
Net Investment Income........ .628 1.300 1.296 1.282 1.281 .594
Net Realized and Unrealized
Gain/Loss on Investments... (.011) .400 1.648 (3.002) 2.851 .098
------ ------- ------- ------- ------- -------
Total from Investment
Operations................... .617 1.700 2.944 (1.720) 4.132 .692
------ ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders............. .493 .957 .924 .924 .924 .385
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders... .102 .326 .396 .259 .258 .133
Distributions from Net
Realized Gain on
Investments (Note 1):
Paid to Common
Shareholders............. .200 .088 -0- .058 .136 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders... .067 .039 -0- .013 .048 -0-
------ ------- ------- ------- ------- -------
Total Distributions........... .862 1.410 1.320 1.254 1.366 .518
------ ------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $16.339 $16.584 $16.294 $14.670 $17.644 $14.878
======= ======= ======= ======= ======== =======
Market Price Per Share at End
of the Period................ $15.500 $15.750 $14.750 $12.750 $16.375 $14.250
Total Investment Return at
Market Price (b)............. 1.49%* 14.14% 23.60% (16.67%) 23.01% (2.50%)*
Total Return at Net Asset
Value (c).................... 1.53%* 8.05% 17.86% (11.63%) 26.44% 1.70%*
Net Assets at End of the
Period (In millions)......... $120.5 $121.6 $120.3 $112.8 $126.5 $113.7
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares................ 1.80% 1.80% 1.83% 1.79% 1.73% 1.70%
Ratio of Expenses to Average
Net Assets................... 1.13% 1.13% 1.12% 1.12% 1.09% 1.18%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common Shares
(d).......................... 6.37% 5.97% 5.83% 6.31% 6.21% 5.18%
Portfolio Turnover............ 10%* 16% 13% 14% 27% 51%*
</TABLE>
(a) Net Asset Value at March 27, 1992, is adjusted for common and preferred
share offering costs of $.296 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 the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Trust for Investment Grade California 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. The
Trust commenced investment operations on March 27, 1992.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
D. ORGANIZATIONAL COSTS--The Trust reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
the Trust's organization in the amount of $25,000. These costs were amortized on
a straight line basis over the 60 month period ending March 26, 1997.
E. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually 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, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .65% of the average net assets of the Trust. In addition, the Trust
will pay a monthly administrative fee to VKAC, the Trust's Administrator, at an
annual rate of .20% of the average net assets of the Trust. The administrative
services provided by the Administrator include record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Trust, of which a trustee of the Trust is an
affiliated person.
For the six months ended April 30, 1997, the Trust recognized expenses of
approximately $35,700 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.
At April 30, 1997, VKAC owned 6,700 common shares of the Trust.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $12,160,957 and $12,684,715,
respectively.
4. PREFERRED SHARES
The Trust has outstanding 900 Auction Preferred Shares ("APS"). Dividends are
cumulative and the dividend rate is currently reset every 28 days through an
auction process. The rate in effect on April 30, 1997, was 3.740%. During the
six months ended April 30, 1997, the rates ranged from 3.150% to 3.740%.
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.
16
<PAGE> 18
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND
TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in the Investment Company Act of
1940.
(C) Van Kampen American Capital Distributors, Inc., 1997 All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
17
