<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
Report of Independent Accountants................ 17
Dividend Reinvestment Plan....................... 18
</TABLE>
VIC ANR 12/97
<PAGE> 2
LETTER TO SHAREHOLDERS
December 4, 1997
Dear Shareholder,
In the past year, we have been
participants in and witnesses to two
mergers that we believe have positioned
our company at the forefront of the [PHOTO]
financial industry's evolution. Our
latest announcement continues our
forward progress. I am pleased to
announce that Philip N. Duff, formerly
the chief financial officer of DENNIS J. MCDONNELL AND DON G. POWELL
Morgan Stanley, has joined Van Kampen
American Capital as president and chief
executive officer. I will continue as
chairman of the firm. Together, we will continue to work to the benefit of our
fund shareholders as Van Kampen American Capital advances toward the next
century.
ECONOMIC REVIEW
The last quarter of 1996 brought renewed strength and rumblings of
inflation, which continued to feed investors' uncertainties about the direction
of interest rates. This was reflected in the volatility of taxable yields, with
the 30-year Treasury ranging from a high of 6.70 percent to a low of 6.35
percent, and ending the period at 6.64 percent.
The bond market advanced in price during the first 10 months of 1997, but
its ascension was not a smooth ride. Bond prices fell early in the period as
economic growth soared, fueling concerns about rising inflation and a potential
interest rate hike by the Federal Reserve Board. When the Fed did raise interest
rates by a modest 0.25 percent in late March, bond prices fell further, sending
the yield of the 30-year U.S. Treasury bond above 7.0 percent for the first time
in six months. By mid-April, however, the market's mood had changed, reflecting
few signs of price pressures despite the economy's strength. Bonds also
benefited from continued heavy purchases by foreign investors and concerns that
the stock market rally was nearing an end. The 7.0 percent slump in the Dow
Jones Industrial Average on October 27 reinforced the benefit of owning bonds
for diversification. By the end of October, the yield on the 30-year Treasury
bond was near its lowest level in 20 months, at 6.15 percent.
Throughout 1997, municipal bond prices moved in the same direction as the
Treasury bond market, but gained less when Treasury prices rallied and lost less
when Treasuries fell. Between December 31, 1996 and October 31, 1997, the yield
on the long-term municipal revenue bond index fell 36 basis points as the yield
on the 30-year Treasury bond fell 48 basis points. Because yields move in the
opposite direction of prices, the smaller yield decline of municipal bonds
indicates that their prices did not rise as much as Treasuries.
California's economy has continued to expand at a moderate, sustainable
pace, supported by gains in employment, a rebound in construction, and growth in
the high-technology and entertainment sectors.
Continued on page two
1
<PAGE> 3
[CREDIT QUALITY PIE CHART]
Portfolio Composition by Credit Quality
as of October 31, 1997
<TABLE>
<S> <C>
AAA............ 66.8%
AA............. 2.7%
A.............. 18.1%
BBB............ 6.4%
BB............. 1.7%
Non-Rated...... 4.3%
</TABLE>
TRUST STRATEGY
In managing the Trust, we used the following strategies:
We maintained a portfolio heavily weighted toward high-quality bonds. The
high concentration in AAA-rated securities in the portfolio reflects the
proliferation of insured bonds, which currently comprise well over half of new
issues in the municipal bond market and more than 70 percent of new California
securities. Bonds rated AAA are extremely liquid and carry minimal credit risk.
When interest rates fall, as they did for most of the second half of the fiscal
year, these bonds tend to outperform lower-rated securities. Bonds rated BBB,
the lowest investment-grade credit rating assigned by the Standard & Poor's
Ratings Group, tend to perform better when rates are rising, and have the
potential to provide additional income.
Portfolio turnover during the fiscal year was minimal due to a lack of
opportunities in the market to add value to existing holdings. The average yield
of bonds in the Trust's portfolio was higher than average market yields. Also,
the supply of new issues was tight, especially during the first half of the
period. The enactment of Proposition 218 in late 1996, which requires voter
approval of most tax increases to fund bond issues, contributed to the lack of
new supply.
Narrow spreads between the yields of high-quality and low-quality bonds
further limited trading opportunities. These spreads have compressed to
historically tight levels due to the increasing number of insured bonds in the
municipal market. For example, the BBB-rated portion of a new $1.5 billion San
Joaquin Hills Transportation Corridor bond issue in September yielded only 20
basis points more than its AAA-rated insured portion. In this environment of
narrow yield spreads, it was difficult to justify buying lower-rated securities
and assuming additional credit risk.
Trades that we initiated during the period focused on purchasing
high-quality, long-term bonds in order to maintain the dividend-paying ability
of the Trust and enhance its call protection. In other words, we hope to limit
the number of bonds that could be "called" at any one time. Acquisitions
included par bonds with relatively high yields as well as discount bonds, which
have the potential to enhance the price appreciation of the Trust. The purchases
included AAA-rated insured bonds that were part of the San Joaquin Hill
transportation issue. Sales of bonds with relatively low yields, including
pre-refunded securities, were used to finance these purchases.
Continued on page three
2
<PAGE> 4
When searching for new securities for the Trust's portfolio, we try to
identify 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 hope to take advantage of opportunities to purchase more
California bonds as issuance increases.
During the second half of the fiscal year, the duration of the portfolio
declined slightly due to the market rally, which caused some bonds to trade to
their call dates rather than their maturity dates. Duration, which is expressed
in years, is a measure of a portfolio's sensitivity to interest rate movements.
Portfolios with long durations tend to perform better when interest rates are
falling, while portfolios with short durations tend to do better when rates are
rising. Although the relatively short duration of the Trust hindered performance
during the second half of the period, its leveraged structure enhanced its
gains. Leverage involves borrowing short-term securities in order to purchase
long-term assets. It is most successful when short-term rates are well below
long-term rates, which was the case during the second half of the period. It
should be noted, however, that if short-term rates rise, borrowing costs would
increase; this would negatively impact the income and performance of common
shares.
As of October 31, the duration of the Trust's bond portfolio stood at 6.95
years, compared to 7.34 years for the Lehman Brothers Municipal Bond Index.
Because of the longer-term nature of the Trust, the calculation of this index's
duration has been adjusted to eliminate bonds with maturities of five years or
less. Looking ahead, we hope to extend the duration of the Trust by purchasing
long-term zero coupon bonds as opportunities arise.
Top Five Portfolio Industry Holdings by Sector as of October 31, 1997*
Transportation.......................... 18.3%
Retail Electric/Gas/Telephone........... 16.2%
Health Care............................. 12.7%
Public Education........................ 8.6%
Public Building......................... 7.8%
*As a Percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the one-year period ended October 31, 1997, the Van Kampen American
Capital Trust for Investment Grade California Municipals generated a total
return at market price of 12.96 percent(1). The Trust offered a tax-exempt
distribution rate of 5.91 percent(3), based on the closing common stock price on
October 31, 1997. At the end of the reporting period, the closing share price of
the Trust traded at $16.75, a 2.39 percent discount to its net asset value of
$17.16. Because income from the Trust is exempt from federal and California
income taxes, this distribution rate represents a yield equivalent to a taxable
investment earning 10.19 percent(4) (for investors in the combined federal and
state income tax bracket of 42 percent).
As a result of the Trust's improved earnings, the Board of Trustees approved
a slight increase in its monthly dividend from $0.0800 to $0.0825 per common
share, paid December 31, 1996. The Trust also declared a capital gains
distribution of $0.2001 per share paid December 31, 1996, as a result of the
sale of some assets that had appreciated in value.
Continued on page four
3
<PAGE> 5
[DISTRIBUTION HISTORY BAR CHART]
TWELVE-MONTH DISTRIBUTION HISTORY
FOR THE PERIOD ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1996 1996 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends $.0800 $.0825 $.0825 $.0825 $.0825 $.0825 $.0825 $.0825 $.0825 $.0825 $.0825 $.0825
Capital Gains $.2001
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
OUTLOOK
We expect the economy to remain strong in the coming months, although the
growth rate might slow to a more moderate pace. The weakness in the Far East,
which was the impetus for the recent volatility in world stock markets, will
most likely reduce U.S. exports to the region. In turn, this could trim U.S.
economic growth as well as the earnings of many U.S. companies. As a result, we
believe there is little chance that the Fed will raise interest rates in the
coming months. A rate hike reemerges as a possibility if inflation picks up, or
if growth continues at its current brisk pace.
As a result of this outlook, we expect that the yield on the 30-year
Treasury bond will trade within a range of 5.75 percent and 6.50 percent for the
next six months, possibly falling further in mid-1998. A decline in rates would
not only boost the prices of long-term investments in the portfolio, but could
also positively affect the Trust as a result of its leveraged structure. That
structure, which involves borrowing short-term funds to purchase long-term
municipal bonds, provides common shareholders with above-market levels of
dividend income.
We will continue to seek a balance between the Trust's total return and its
dividend income, and to add value through our investment strategies and bond
selection. Thank you for 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 five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE
CALIFORNIA MUNICIPALS
(NYSE TICKER SYMBOL--VIC)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
One-year total return based on market price(1)............. 12.96%
One-year total return based on NAV(2)...................... 9.78%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 5.91%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 10.19%
SHARE VALUATIONS
Net asset value............................................ $ 17.16
Closing common stock price................................. $16.750
One-year high common stock price (10/03/97)................ $17.125
One-year low common stock price (04/30/97)................. $15.500
Preferred share rate(5).................................... 3.100%
</TABLE>
(1) Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common stock price at the end of the period
indicated.
(2) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) The taxable-equivalent distribution rate is calculated assuming a 42%
combined federal and state 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.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 98.0%
CALIFORNIA 90.9%
$ 1,000 Bakersfield, CA Ctfs Partn Convention Cent
Expansion Proj (MBIA Insd)..................... 5.875% 04/01/22 $ 1,039,030
1,000 Brea & Olinda, CA Unified Sch Dist Ctfs Partn
Sr High Sch Pgm Ser A Rfdg (FSA Insd).......... 6.000 08/01/09 1,070,770
1,000 California Edl Fac Auth Rev College
Chiropractic Rfdg (a).......................... 5.600 11/01/17 1,000,000
1,250 California Edl Fac Auth Rev Loyola Marymount
Univ Ser B..................................... 6.550 10/01/12 1,354,787
1,300 California Edl Fac Auth Rev Mills College...... 6.875 09/01/22 1,421,524
1,000 California Edl Fac Auth Rev Student Ln CA Ln
Pgm Ser A (MBIA Insd).......................... 6.000 03/01/16 1,021,350
1,000 California Edl Fac Auth Rev Univ of La Verne... 6.300 04/01/09 1,058,730
1,100 California Hlth Fac Fin Auth Rev Hlth Fac Small
Fac Ln Ser A................................... 6.700 03/01/11 1,191,058
1,500 California Hlth Fac Fin Auth Rev Hlth Fac Small
Fac Ln Ser A................................... 6.750 03/01/20 1,625,220
2,500 California Hlth Fac Fin Auth Rev Insd Hlth Fac
Valleycare Ser A............................... 6.125 05/01/12 2,613,575
2,000 California Hlth Fac Fin Auth Rev Insd Hosp
Marshall Hosp Ser A............................ 6.500 11/01/12 2,162,520
1,000 California Hlth Fac Fin Auth Rev Kaiser
Permanente Ser A (FSA Insd).................... 5.550 08/15/25 1,000,960
1,000 California Hsg Fin Agy Rev Home Mtg Ser B (MBIA
Insd).......................................... 6.000 08/01/16 1,042,280
1,000 California Hsg Fin Agy Rev Home Mtg Ser E
(AMBAC Insd)................................... 6.100 08/01/29 1,041,650
1,000 California Hsg Fin Agy Rev Home Mtg Ser N...... 6.375 02/01/27 1,055,240
1,000 California Hsg Fin Agy Rev Multi-Family Hsg III
Ser A (MBIA Insd).............................. 5.850 08/01/17 1,023,070
1,000 California Hsg Fin Agy Rev Multi-Family Hsg III
Ser A (MBIA Insd).............................. 5.950 08/01/28 1,026,300
10,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co (AMBAC Insd)............. 6.000 07/01/27 10,342,700
2,000 California St (AMBAC Insd)..................... 6.200 02/01/16 2,048,480
2,000 California St Dept Tran Ctfs Partn East Bay St
Bldg Ser A (Prerefunded @ 03/01/01)............ 6.500 03/01/16 2,183,920
2,000 California Statewide Cmntys Dev Corp Ctfs Partn
Insd United Westn Med Cent (Prerefunded @
12/01/01)...................................... 6.750 12/01/21 2,229,220
315 Centralia, CA Sch Dist Ctfs Partn Cap Apprec... * 06/01/00 283,396
260 Centralia, CA Sch Dist Ctfs Partn Cap Apprec... * 06/01/01 223,353
505 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/02 416,191
540 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/03 415,244
580 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/04 415,547
625 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/05 417,613
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 630 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/06 $ 391,640
720 Centralia, CA Sch Dist Ctfs Partn Cap Apprec
(Prerefunded @ 06/01/01)....................... * 06/01/07 417,218
1,700 Chula Vista, CA Indl Dev Rev San Diego Gas &
Elec Co Ser A (AMBAC Insd)..................... 6.400% 12/01/27 1,829,642
1,000 Contra Costa Cnty, CA Pub Fin Auth Tax Alloc
Rev Ser A...................................... 7.100 08/01/22 1,093,300
1,245 Duarte, CA Multi-Family Rev Hsg Heritage Park
Apts Ser A (FNMA Insd)......................... 5.850 05/01/30 1,271,294
1,000 Folsom, CA Spl Tax Cmnty Fac Dist No. 2 Rfdg
(Connie Lee Insd).............................. 5.250 12/01/19 982,000
3,000 Foothill/Eastern Tran Agy Conv Cap Apprec Sr
Lien Ser A (b)................................. 0/7.050 01/01/10 2,207,370
7,455 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A.............................. * 01/01/23 1,800,979
3,000 Foothill/Eastern Tran Corridor Agy CA Toll Rd
Rev Sr Lien Ser A.............................. * 01/01/24 684,960
2,655 Grand Terrace, CA Ctfs Partn Rfdg (MBIA
Insd).......................................... 5.450 09/01/21 2,657,071
2,000 Huntington Beach, CA Pub Fin Auth Rev
Huntington Beach Redev Proj.................... 7.000 08/01/10 2,064,220
1,000 Long Beach, CA Harbor Rev Ser A (MBIA Insd).... 7.250 05/15/19 1,035,520
1,000 Los Angeles Cnty, CA Tran Comm Sales Tax Rev
Ser B Rfdg (MBIA Insd)......................... 6.500 07/01/13 1,087,730
2,000 Los Angeles, CA Dept Wtr & Pwr Elec Plt Rev
Second Issue (Crossover Rfdg @ 09/15/00) (c)... 7.250 09/15/30 2,200,520
2,500 Los Angeles, CA Multi-Family Rev Hsg Earthquake
Rehab Proj Ser A (FNMA Insd)................... 5.700 12/01/27 2,620,800
1,000 Mountain View, CA Cap Impts Fin Auth Rev City
Hall/Cmnty Theatre (MBIA Insd)................. 6.500 08/01/16 1,089,130
1,930 Orange Cnty, CA Ctfs Partn Juvenile Justice
Cent Fac Rfdg (AMBAC Insd)..................... 6.375 06/01/11 2,103,874
1,000 Pajaro Vly, CA Uni Sch Dist Ctfs Partn Sch Fac
Brdg Fdg Pgm (FSA Insd)........................ 5.850 09/01/32 1,040,660
880 Paramount, CA Redev Agy Tax Alloc (MBIA
Insd).......................................... 6.250 08/01/10 962,359
2,500 Port Oakland, CA Port Rev Ser E (MBIA Insd).... 6.500 11/01/16 2,727,550
2,000 Riverside Cnty, CA Brd Edl Ctfs Partn Fin Proj
Ser A.......................................... 6.650 11/01/17 2,143,600
2,425 San Benito, CA Hosp Dist Hlth Fac Rev Ser A.... 6.750 12/01/21 2,624,189
1,730 San Bernadino, CA Muni Wtr Dept Ctfs Partn Swr
(FGIC Insd).................................... 6.250 02/01/17 1,837,381
1,000 San Bernardino Cnty, CA Ctfs Partn Med Cent Fin
Proj (MBIA Insd)............................... 5.000 08/01/28 951,740
5,000 San Diego, CA Indl Dev Rev San Diego Gas & Elec
Ser A (AMBAC Insd)............................. 6.100 09/01/19 5,334,200
5,000 San Diego, CA Port Fac Rev Natl Steel &
Shipbldg Co Rfdg............................... 6.600 12/01/02 5,247,500
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,500 San Francisco, CA City & Cnty Arpt Comm Intl
Arpt Rev Second Ser Issue 12A (FGIC Insd)...... 5.800% 05/01/21 $ 1,535,175
3,565 San Francisco, CA City & Cnty Redev Agy Hotel
Tax Rev (FSA Insd)............................. 6.750 07/01/15 4,046,525
3,500 San Joaquin Hills, CA Trns Toll Cap Apprec Ser
A Rfdg (MBIA Insd)............................. * 01/15/29 650,685
1,000 San Joaquin Hills, CA Trns Toll Ser A Rfdg
(MBIA Insd).................................... 5.375 01/15/29 999,160
1,000 San Joaquin Hills, CA Trns Toll Ser A Rfdg
(MBIA Insd).................................... 5.250 01/15/30 984,640
1,500 Santa Ana, CA Multi-Family Hsg Rev Villa Del
Sol Apts Ser B (FNMA Insd)..................... 5.650 11/01/21 1,567,905
2,250 Santa Barbara, CA Ctfs Partn Harbor Proj
Rfdg........................................... 6.750 10/01/27 2,446,717
1,000 Santa Clara Cnty, CA Fin Auth Lease Rev VMC Fac
Replacement Proj Ser A (Prerefunded @ 11/15/04)
(AMBAC Insd)................................... 6.875 11/15/14 1,170,770
835 Southern CA Home Fin Auth Single Family Mtg Rev
Ser A (GNMA Insd).............................. 6.750 09/01/22 879,622
1,000 Stockton, CA Hlth Fac Rev Saint Joseph Med Cent
Ser A (MBIA Insd).............................. 5.625 06/01/13 1,031,040
3,000 Upland, CA Ctfs Partn Wtr Sys Proj Rfdg (FGIC
Insd).......................................... 6.600 08/01/16 3,298,770
2,835 West Covina, CA Ctfs Partn Civic Cent Proj Rfdg
(FSA Insd)..................................... 5.500 09/01/14 2,906,187
2,000 William S Hart CA Jt Sch Fin Auth Spl Tax Rev
Cmnty Fac Rfdg (FSA Insd)...................... 6.500 09/01/14 2,250,040
------------
112,897,411
------------
GUAM 3.5%
4,000 Guam Govt Ltd Oblig Hwy Ser A (FSA Insd)....... 6.250 05/01/07 4,366,640
------------
PUERTO RICO 3.6%
1,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser
T (Prerefunded @ 07/01/02)..................... 6.500 07/01/22 1,111,310
2,000 Puerto Rico Comwlth Pub Impt (Prerefunded @
07/01/02)...................................... 6.800 07/01/21 2,247,840
1,000 Puerto Rico Pub Bldgs Auth Rev Gtd Ser K
(Prerefunded @ 07/01/02)....................... 6.875 07/01/21 1,127,070
------------
4,486,220
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------
<S> <C>
TOTAL LONG-TERM INVESTMENTS 98.0%
(Cost $113,089,047)....................................... $121,750,271
SHORT-TERM INVESTMENTS 1.4%
(Cost $1,700,000)......................................... 1,700,000
------------
TOTAL INVESTMENTS 99.4%
(Cost $114,789,047)....................................... 123,450,271
OTHER ASSETS IN EXCESS OF LIABILITIES 0.6%................. 800,923
------------
NET ASSETS 100.0%.......................................... $124,251,194
============
</TABLE>
*Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
(c) 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
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $114,789,047)....................... $123,450,271
Interest Receivable......................................... 2,016,827
Cash........................................................ 84,015
Other....................................................... 1,613
------------
Total Assets.......................................... 125,552,726
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 982,300
Investment Advisory Fee................................... 68,295
Income Distributions--Common and Preferred Shares......... 34,180
Administrative Fee........................................ 21,014
Affiliates................................................ 11,072
Accrued Expenses............................................ 112,249
Trustees' Deferred Compensation and Retirement Plans........ 72,422
------------
Total Liabilities..................................... 1,301,532
------------
NET ASSETS.................................................. $124,251,194
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 900 issued with liquidation preference of $50,000
per share)................................................ $ 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................................. 8,661,224
Accumulated Net Realized Gain............................... 1,491,617
Accumulated Undistributed Net Investment Income............. 1,238,992
------------
Net Assets Applicable to Common Shares................ 79,251,194
------------
NET ASSETS.................................................. $124,251,194
============
NET ASSET VALUE PER COMMON SHARE ($79,251,194 divided
by 4,619,242 shares outstanding).......................... $ 17.16
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $7,190,672
----------
EXPENSES:
Investment Advisory Fee..................................... 792,956
Administrative Fee.......................................... 243,987
Preferred Share Maintenance................................. 124,691
Trustees' Fees and Expenses................................. 27,780
Legal....................................................... 3,872
Custody..................................................... 2,132
Amortization of Organizational Costs........................ 2,001
Other....................................................... 163,127
----------
Total Expenses.......................................... 1,360,546
----------
NET INVESTMENT INCOME....................................... $5,830,126
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $1,491,617
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 6,286,473
End of the Period......................................... 8,661,224
----------
Net Unrealized Appreciation During the Period............... 2,374,751
----------
NET REALIZED AND UNREALIZED GAIN............................ $3,866,368
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $9,696,494
==========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 5,830,126 $ 6,006,464
Net Realized Gain....................................... 1,491,617 1,231,942
Net Unrealized Appreciation During the Period........... 2,374,751 619,453
------------ ------------
Change in Net Assets from Operations.................... 9,696,494 7,857,859
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (4,561,267) (4,420,235)
Preferred Shares...................................... (1,261,119) (1,507,837)
------------ ------------
(5,822,386) (5,928,072)
------------ ------------
Distributions from Net Realized Gain:
Common Shares......................................... (924,173) (407,627)
Preferred Shares...................................... (307,769) (178,664)
------------ ------------
(1,231,942) (586,291)
------------ ------------
Total Distributions..................................... (7,054,328) (6,514,363)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 2,642,166 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 $1,238,992 and $1,231,252,
respectively)......................................... $124,251,194 $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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 27, 1992
(Commencement
Year Ended October 31 of Investment
----------------------------------------------- Operations) to
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................. 1.262 1.300 1.296 1.282 1.281 .594
Net Realized and Unrealized
Gain/Loss........................... .839 .400 1.648 (3.002) 2.851 .098
------- ------- ------- ------- ------- -------
Total from Investment Operations....... 2.101 1.700 2.944 (1.720) 4.132 .692
------- ------- ------- ------- ------- -------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders......... .988 .957 .924 .924 .924 .385
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders...................... .273 .326 .396 .259 .258 .133
Distributions from Net Realized Gain:
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.................... 1.528 1.410 1.320 1.254 1.366 .518
------- ------- ------- ------- ------- -------
Net Asset Value, End of the Period..... $17.157 $16.584 $16.294 $14.670 $17.644 $14.878
======= ======= ======= ======= ======= =======
Market Price Per Share at End of the
Period................................ $16.750 $15.750 $14.750 $12.750 $16.375 $14.250
Total Investment Return at Market Price
(b)................................... 12.96% 14.14% 23.60% (16.67%) 23.01% (2.50%)*
Total Return at Net Asset Value (c).... 9.78% 8.05% 17.86% (11.63%) 26.44% 1.70%*
Net Assets at End of the Period (In
millions)............................. $124.3 $121.6 $120.3 $112.8 $126.5 $113.7
Ratio of Expenses to Average Net Assets
Applicable to Common Shares........... 1.77% 1.80% 1.83% 1.79% 1.73% 1.70%
Ratio of Expenses to Average Net
Assets................................ 1.12% 1.13% 1.12% 1.12% 1.09% 1.18%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)..................... 5.93% 5.97% 5.83% 6.31% 6.21% 5.18%
Portfolio Turnover..................... 23% 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
October 31, 1997
- --------------------------------------------------------------------------------
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)
October 31, 1997
- --------------------------------------------------------------------------------
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.
At October 31, 1997, for federal income tax purposes cost of long- and
short-term investments is $114,789,047, the aggregate gross unrealized
appreciation is $8,661,224 and the aggregate gross unrealized depreciation is
$0, resulting in net unrealized appreciation of $8,661,224.
F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
For the year ended October 31, 1997, 99.9% of the income distributions made
by the Trust were exempt from federal income taxes. Additionally, during the
period, the Trust paid a 28% rate gain distribution of $1,200,953. In January,
1998, the Trust will provide tax information to shareholders for the 1997
calendar year.
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 .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.
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $2,000 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.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $70,800 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 trustee's 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 $27,878,073 and $29,911,250,
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 October 31, 1997 was 3.100%. During the
year ended October 31, 1997, the rates ranged from 3.090% to 3.789%.
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.
5. CAPITAL GAIN DISTRIBUTION
On December 1, 1997, the Trust declared a capital gain of $0.2535 per common
share, of which 94.9 percent is long-term and 5.1 percent is short-term, to
common shareholders of record on December 15, 1997 which will be payable on
December 31, 1997.
16
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Trust for Investment Grade California Municipals:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Trust for Investment Grade California Municipals (the
"Trust"), including the portfolio of investments, as of October 31, 1997, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Trust for Investment Grade California Municipals as of
October 31, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
December 4, 1997
17
<PAGE> 19
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be re-
registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common Shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
18
<PAGE> 20
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds or
Morgan Stanley funds.
19
<PAGE> 21
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.
20
<PAGE> 22
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, the election of
Trustees whose terms expired in 1997 and independent public accountants.
1) With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Trust,
4,047,491 shares voted for the proposal, 52,510 shares voted against, 174,112
shares abstained and 0 shares represented broker non-votes.
2) With regard to the election of Rod Dammeyer as elected trustee by the
preferred shareholders of the Trust, 756 shares voted in his favor, 0 shares
withheld.
3) With regard to the election of Wayne W. Whalen as elected trustee by the
common shareholders of the Trust, 4,211,081 shares voted in his favor, 62,276
shares withheld.
4) With regard to the ratification of KPMG Peat Marwick LLP as independent
public accountants for its current fiscal year, 4,189,418 shares voted for the
proposal, 6,774 shares voted against, 77,921 shares abstained and 0 shares
represented broker non-votes.
21
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 114,789,047
<INVESTMENTS-AT-VALUE> 123,450,271
<RECEIVABLES> 2,016,827
<ASSETS-OTHER> 1,613
<OTHER-ITEMS-ASSETS> 84,015
<TOTAL-ASSETS> 125,552,726
<PAYABLE-FOR-SECURITIES> 982,300
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 319,232
<TOTAL-LIABILITIES> 1,301,532
<SENIOR-EQUITY> 45,000,000
<PAID-IN-CAPITAL-COMMON> 67,859,361
<SHARES-COMMON-STOCK> 4,619,242
<SHARES-COMMON-PRIOR> 4,619,242
<ACCUMULATED-NII-CURRENT> 1,238,992
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,491,617
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,661,224
<NET-ASSETS> 124,251,194
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,190,672
<OTHER-INCOME> 0
<EXPENSES-NET> (1,360,546)
<NET-INVESTMENT-INCOME> 5,830,126
<REALIZED-GAINS-CURRENT> 1,491,617
<APPREC-INCREASE-CURRENT> 2,374,751
<NET-CHANGE-FROM-OPS> 9,696,494
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,822,386)
<DISTRIBUTIONS-OF-GAINS> (1,231,942)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,642,166
<ACCUMULATED-NII-PRIOR> 1,231,252
<ACCUMULATED-GAINS-PRIOR> 1,231,942
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 792,956
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,360,546
<AVERAGE-NET-ASSETS> 76,997,828
<PER-SHARE-NAV-BEGIN> 16.584
<PER-SHARE-NII> 1.262
<PER-SHARE-GAIN-APPREC> 0.839
<PER-SHARE-DIVIDEND> (1.261)
<PER-SHARE-DISTRIBUTIONS> (0.267)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.157
<EXPENSE-RATIO> 1.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
