VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST, N-30D, 1998-06-09

VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
N-30D, 1998-06-09

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Glossary of Terms................................ 5
Performance Results.............................. 7
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 19
</TABLE>

VKA SAR 6/98
<PAGE> 2

LETTER TO SHAREHOLDERS

May 22, 1998

Dear Shareholder,
The Taxpayer Relief Act of 1997,
signed into law by President Clinton
last year, was created to fill the
need for a broad variety of
tax-advantaged investments to promote
asset growth. We are pleased that you
selected our Trust as a vehicle to [PHOTO]
provide the potential for tax-free
income within your investment
portfolio. As you are aware,
dividends distributed by the Trust
are generally free from federal DENNIS J. MCDONNELL AND DON G. POWELL
income taxes, and often from state
and local taxes as well. At Van Kampen American Capital, we strive not only for
a high level of current income, but total return performance as well.

ECONOMIC OVERVIEW

After nearly seven years of continuous growth, the economy remained buoyant
with few signs of accelerating inflation. Wholesale prices in the first quarter
plummeted at an annual rate of 4.2 percent, while consumer prices inched up 0.2
percent and employment costs rose just 0.7 percent. However, inflationary
pressures were eased by factors such as lower oil prices, increasing
productivity, and a pending budget surplus. The Asian financial crisis led to a
stronger dollar and a decline in the prices of Asian imports, which in turn has
discouraged price increases on competing U.S. goods.
To date, Asia's slowdown has had a modest impact on U.S. economic growth. In
the first quarter, the U.S. economy grew at a 4.2 percent annual rate, its
fastest pace in the past year. Strong consumer spending and inventory buildup by
manufacturers offset a decrease in exports to Asia. Despite the economy's
strength, the Federal Reserve Board refrained from raising interest rates, given
the lack of domestic inflationary pressure and concerns about Asia's economic
future.

MARKET OVERVIEW

Against the backdrop of benign inflation and no action by the Fed, U.S. bond
prices rose during the past six months, although they ended the reporting period
below the highs reached in early January.
The yield of the 30-year Treasury bond, which moves in the opposite
direction of its price, fell from 6.15 percent on October 31 to 5.95 percent on
April 30. Bond prices hit a record high as yields reached 5.69 percent in early
January amidst expectations that the Fed would cut interest rates, but the yield
went back to 6.00 percent in early March after the Fed chose not to act. Yields
were volatile for the rest of the reporting period, as foreign investors sold
U.S. Treasury holdings and investors began to fear that the Fed was leaning
toward a rate hike.

Continued on page two

1
<PAGE> 3
Municipal bond yields generally moved in unison with Treasuries but did not
gain nearly as much in price. By the end of the reporting period, the average
yield of AAA-rated, 30-year generic general obligation bonds was 5.14 percent,
two basis points above the yield posted on October 31 of last year. The
underperformance of municipal bonds can be attributed in part to heavy supply
that outpaced demand. Supply increased as state and local governments took
advantage of low interest rates by issuing bonds to refinance outstanding issues
with higher interest rates, as well as to fund new projects. In the first
quarter, long-term municipal issuance totaled $71 billion, up from $40 billion a
year earlier.
More than half of the new issue volume was AAA-rated and insured, which
significantly diminished the amount of uninsured, higher-yielding securities
available in the marketplace. The dominance of insured volume and the high
demand for uninsured paper created an imbalance that compressed the yields
between higher-quality and lower-quality bonds.

[CREDIT QUALITY GRAPH]

Portfolio Composition by Credit Quality
as of April 30, 1998*

*As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's.

TRUST STRATEGY

We used the following strategies to manage the Trust during the period:
We maintained a portfolio consisting primarily of high-quality bonds with a
heavy emphasis on AAA-rated securities. Under current market conditions, we
believe the yield spread between higher-rated and lower-rated securities does
not adequately compensate the investor for the additional credit risk of the
lower-rated security. Also, high-quality bonds generally have performed better
than lower-quality holdings when interest rates are falling, which was the case
for most of the reporting period.
Overall, we limited the number of acquisitions because current market yields
were lower than the average yields of bonds in the portfolio. Some of the
Trust's bonds, however, were called away by issuers taking advantage of lower
interest rates, and others were prerefunded. We replaced these bonds with new
long-term securities and extended the call protection of the Trust. We had
little trouble finding replacement bonds because there was a substantial supply
of new high-quality securities from which to choose,

Continued on page three

2
<PAGE> 4

especially AAA-rated insured bonds. The yields of these bonds were generally
lower than the yields of the bonds they replaced, due to lower current interest
rates.
Our purchases emphasized bonds issued by high-tax states such as New York.
These so-called specialty state bonds tend to benefit from strong demand because
of their relatively high after-tax yields. They can be high in demand and have a
strong potential to appreciate in value. Although these bonds may yield slightly
less than other securities, they are likely to provide higher total return.
Most of our purchases were discount securities. In a falling interest rate
environment, these securities have the potential to appreciate faster than
premium securities as they move closer to maturity. They also have a longer
duration, which makes them more sensitive to changing interest rates. Discount
bonds helped offset the declining duration of the portfolio that occurred when
bonds were prerefunded or repriced to their call date. As of April 30, the
duration of the Trust was 7.30 years compared with 7.76 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.

TOP 5 PORTFOLIO SECTORS AS OF APRIL 30, 1998*

Single-Family Housing............................... 15.2%
Transportation...................................... 15.1%
Industrial Revenue.................................. 13.3%
Health Care......................................... 11.2%
Higher Education..................................... 8.5%
*As a Percentage of Long-Term Investments

PERFORMANCE SUMMARY

For the six-month period ended April 30, 1998, the Trust generated a total
return of 1.76 percent(1). This reflects a decrease in market price per common
share from $15.0625 on October 31, 1997, to $14.8750 on April 30, 1998, plus
reinvestment of all dividends. The Trust had a tax-exempt distribution rate of
6.05 percent(3), based on the closing price of its common shares. Because income
from the Trust is exempt from federal income taxes, this distribution rate is
equivalent to a yield of 9.45 percent(4) on a taxable investment for investors
in the 36 percent federal income tax bracket.
As a result of a decrease in Trust earnings, the Board of Trustees approved
a decrease in its monthly dividend from $0.0775 to $0.0750 per common share,
payable April 30, 1998. Please refer to the chart on page seven for additional
performance numbers.

Continued on page four

3
<PAGE> 5
[DIVIDEND HISTORY GRAPH]

Six-month Dividend History
For the Period Ended April 30, 1998

Distribution per Common Share
<S> <C>
Nov 1997................................... $0.0775
Dec 1997................................... $0.0775
Jan 1998................................... $0.0775
Feb 1998................................... $0.0775
Mar 1998................................... $0.0775
Apr 1998................................... $0.0750

</TABLE>

The dividend history reprensents past performance of the Trust and does
not predict the Trust's future distributions.

ECONOMIC OUTLOOK

We expect the economy to slow from its brisk first-quarter pace, although
the extent of the slowdown depends on the continued effects of Asia's crisis and
on Fed policy. We believe the Fed is biased toward raising rates, given concerns
about the economy's increasing strength. If economic strength ignites
inflationary pressures, then we believe the Fed would raise interest rates later
this year. As a result, the yield of the 30-year Treasury bond could top 6.25
percent.
We will continue to track market developments and their effects on the
Trust. When appropriate, we will make adjustments to the portfolio. As we
mentioned earlier, our goal remains a high level of current income for
investors. Thank you for your continued support and confidence in Van Kampen
American Capital and the management of your Trust.

Sincerely,

Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.

Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

Please see footnotes on page seven

4
<PAGE> 6

GLOSSARY OF TERMS

BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to one percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis point move.

CALL FEATURE: Allows the issuer to buy back a bond on specific call dates before
maturity. Call dates and prices are set when the bond is issued. To compensate
the bond holder for loss of income and ownership, the call price is usually
higher than the face value of the bond. Bonds are usually called when interest
rates drop so significantly that the issuer can save money by issuing new bonds
at lower rates.

A callable bond is "priced to call" when it is selling at a premium, because it
is assumed that the issuer will redeem the bond at its call date, rather than at
maturity.

COUPON RATE: The stated rate of interest a bond pays until maturity, expressed
as a percentage of its face value.

CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investor Services are two
companies that assign bond ratings. Standard & Poor's ratings range from a high
of AAA to a low of D; Moody's ratings range from a high of Aaa to a low of D.

CREDIT SPREAD: The difference in yield between higher-quality issues and
lower-quality issues. Normally, lower-quality issues provide higher yields than
higher-quality issues in order to compensate investors for the additional credit
risk.

DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond.

DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected
one-percent change in the price of the bond for every one-percent change in
interest rates. The longer a fund's duration, the greater the effect of interest
rate movements on net asset value. Typically, funds with shorter durations have
performed better in rising rate environments, while funds with longer durations
have performed better when rates decline.

FEDERAL RESERVE BOARD (THE FED): A group that meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.

GENERAL OBLIGATION BONDS: Bonds backed by the full faith and credit (taxing
authority) of the issuer for timely payment of interest and principal. These
bonds are issued to finance essential government projects, such as highways and
schools.

5
<PAGE> 7

INFLATION: An economic situation in which money supply and business activity
dramatically increase, accompanied by sharply rising prices. Inflation is widely
measured by the Consumer Price Index, an economic indicator that measures the
change in the cost of purchased goods and services.

INSURED BOND: A bond that is insured against default by the municipal bond
insurer. If the issuer defaults, the insurance company will step in and take
over payments of interest and principal. As a result of this protection against
credit risk, most municipal bonds are AAA-rated. Insurance on the bonds does not
relate to mutual fund shares, which will fluctuate in price.

INVESTMENT GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.

MARKET PRICE: The price of a share of a closed-end fund trading on a stock
exchange. When the price is less than a fund's NAV, the fund is trading at a
discount. When the price is more than the NAV, the fund is trading at a premium.

MUNICIPAL BOND: A debt security issued by a state, municipality, or other
governmental entity to finance capital expenditures such as the construction of
highways or public works.

NET ASSET VALUE (NAV): The value of a fund share, calculated by deducting a
fund's liabilities from its total assets and dividing this amount by the number
of shares outstanding.

PREREFUNDING: A process whereby new bonds are issued to refinance an outstanding
bond issue. This typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.

PREMIUM BOND: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond.

YIELD SPREAD: The difference between the yields of distinct bonds, due to
variant credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities are
narrow, there is less incentive to own the bond with the longer maturity. In
both cases, the investor is not being compensated for the additional risk.

ZERO COUPON BONDS: A corporate or municipal debt security that trades at a deep
discount to face value and pays no interest. It may be redeemed at maturity for
full face value.

6
<PAGE> 8

PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1998

VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VKA)

<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1).......... 1.76%
Six-month total return based on NAV(2)................... 2.88%

DISTRIBUTION RATES

Distribution rate as a % of closing common stock
price(3)................................................. 6.05%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 9.45%

SHARE VALUATIONS

Net asset value.......................................... $ 16.36
Closing common stock price............................... $14.8750
Six-month high common stock price (02/11/98)............. $15.9375
Six-month low common stock price (04/27/98).............. $14.5000
Preferred share (Series A) rate(5)....................... 3.850%
Preferred share (Series B) rate(5)....................... 3.590%
Preferred share (Series C) rate(5)....................... 3.645%
Preferred share (Series D) rate(5)....................... 3.750%
</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 36% federal
income tax bracket.

(5)See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.

A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).

Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.

7
<PAGE> 9
PORTFOLIO OF INVESTMENTS

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 100.1%
ALABAMA 1.2%
$ 6,050 Alabama Wtr Pollutn Ctl Auth Revolving Fund Ln
Ser A (AMBAC Insd)............................... 5.000% 08/15/15 $ 5,859,002
------------
ALASKA 1.9%
10,000 Alaska St Hsg Fin Corp Ser A Rfdg (b)............ 5.000 12/01/18 9,699,400
------------
ARIZONA 0.9%
4,260 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig
Irvington Proj Tucson Ser A Rfdg (FSA Insd)...... 7.250 07/15/10 4,727,492
------------
CALIFORNIA 4.3%
4,215 California Hlth Fac Fin Auth Rev Kaiser
Permanente Med Cent.............................. 5.450 10/01/13 4,256,686
5,000 California St Pub Wks Brd Lease Rev Var CA St
Univ Projs Ser A................................. 5.250 12/01/13 5,030,850
2,500 Los Angeles Cnty, CA Pub Wks Fin Auth Rev Cap
Constr Rfdg (AMBAC Insd)......................... 5.000 03/01/11 2,509,875
7,500 Los Angeles Cnty, CA Tran Comm Sales Tax Rev Prop
C Ser A (Prerefunded @ 07/01/02)................. 6.500 07/01/20 8,265,450
1,500 Orange Cnty, CA Recovery Ctfs Ser A (MBIA
Insd)............................................ 6.000 07/01/07 1,650,840
------------
21,713,701
------------
COLORADO 2.9%
8,500 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C (Prerefunded @ 08/31/05)........ * 08/31/26 1,264,545
2,130 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
B1............................................... 7.900 12/01/25 2,355,503
1,290 Colorado Hsg Fin Auth Single Family Pgm Sr Ser D1
Rfdg............................................. 8.000 12/01/24 1,451,598
4,371 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
E................................................ 8.125 12/01/24 4,801,949
3,215 Denver, CO City & Cnty Arpt Rev Ser C............ 6.350 11/15/01 3,407,643
1,000 Meridian Metro Dist CO Peninsular & Oriental
Steam Navig Co Rfdg.............................. 7.500 12/01/11 1,086,720
------------
14,367,958
------------
CONNECTICUT 0.2%
1,000 Connecticut St Dev Auth Wtr Fac Rev Brdgeport
Hydraulic........................................ 6.150 04/01/35 1,073,030
------------
FLORIDA 0.5%
3,000 Tampa, FL Rev Hlth Sys Catholic Hlth Ser A3 (MBIA
Insd)............................................ 4.750 11/15/28 2,709,750
------------
GEORGIA 1.4%
1,000 Atlanta, GA Spl Purp Fac Rev Delta Airls Ser B... 7.900 12/01/18 1,066,320
1,500 George L Smith II GA Wrld Congress Cent Auth Rev
Domed Stadium Proj Rfdg (MBIA Insd) (a).......... 5.500 07/01/20 1,451,055
3,770 Monroe Cnty, GA Dev Auth Pollutn Ctl Rev
Oglethorpe Pwr Corp Scherer Ser A................ 6.800 01/01/12 4,363,850
------------
6,881,225
------------
</TABLE>

See Notes to Financial Statements

8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEORGIA (CONTINUED)
HAWAII 1.4%
$ 5,045 Hawaii St Arpt Sys Rev 2nd Ser (FGIC Insd)....... 7.500% 07/01/20 $ 5,429,328
1,490 Hawaii St Hsg Fin & Dev Corp Single Family Mtg
Purp Rev Ser A (FHA Gtd)......................... 8.125 07/01/17 1,523,823
------------
6,953,151
------------
ILLINOIS 7.4%
1,505 Aurora, IL Single Family Mtg Rev Ser B Rfdg (GNMA
Collateralized).................................. 8.050 09/01/25 1,709,409
3,000 Chicago, IL O'Hare Intl Arpt Spl Fac Rev American
Airls Inc Proj Ser B............................. 7.875 11/01/25 3,265,440
5,000 Chicago, IL O'Hare Intl Arpt Spl Fac Rev Intl
Terminal (MBIA Insd)............................. 6.750 01/01/18 5,402,800
5,000 Chicago, IL Sch Fin Auth Ser A (MBIA Insd) (b)... 5.000 06/01/09 5,039,200
3,000 Cicero, IL (MBIA Insd)........................... 6.500 12/01/14 3,323,430
2,360 Cook Cnty, IL Cmnty High Sch (FSA Insd).......... * 12/01/11 1,174,926
2,360 Cook Cnty, IL Cmnty High Sch (FSA Insd).......... * 12/01/12 1,100,397
2,235 Cook Cnty, IL Cmnty High Sch (FSA Insd).......... * 12/01/13 981,523
1,000 Illinois Dev Fin Auth Pollutn Ctl Rev IL Pwr Co
Proj Ser A Rfdg (MBIA Insd)...................... 5.400 03/01/28 993,470
3,000 Illinois Dev Fin Auth Solid Waste Disposal Rev... 5.950 12/01/24 3,231,270
3,545 Illinois Edl Fac Auth Rev Lake Forest College
(FSA Insd)....................................... 6.750 10/01/21 3,840,617
5,000 Regional Tran Auth IL Ser B (AMBAC Insd)......... 8.000 06/01/17 6,710,800
1,150 Will Cnty, IL Cmnty Sch Dist 365U Vly View Ser B
(FSA Insd)....................................... * 11/01/15 448,707
------------
37,221,989
------------
INDIANA 1.4%
4,000 Indiana Hlth Fac Fin Auth Hosp Rev Cmnty Hosp
Proj (MBIA Insd)................................. 6.850 07/01/22 4,375,000
2,000 Indiana Hlth Fac Fin Auth Hosp Rev Columbus Regl
Hosp Rfdg (FSA Insd)............................. 7.000 08/15/15 2,435,580
------------
6,810,580
------------
IOWA 0.3%
1,555 Des Moines, IA Aviation Sys Rev Ser B (FSA Insd)
(a).............................................. 5.125 07/01/28 1,478,261
------------
KANSAS 2.1%
5,500 Burlington, KS Pollutn Ctl Rev KS Gas & Elec Co
Proj Rfdg (MBIA Insd)............................ 7.000 06/01/31 5,966,070
1,395 Sedgwick & Shawnee Cntys, KS Single Family Rev
Coll Mtg Ser A Rfdg (GNMA Collateralized)........ 8.050 05/01/24 1,558,187
2,780 Sedgwick Cnty, KS Single Family Mtg Rev Coll Ser
A Rfdg (GNMA Collateralized)..................... 8.125 05/01/24 3,081,324
------------
10,605,581
------------
</TABLE>

See Notes to Financial Statements

9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KENTUCKY 2.6%
$ 7,750 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac Delta
Airls Proj Ser A................................. 7.125% 02/01/21 $ 8,422,622
4,450 Louisville & Jefferson Cnty, KY Metropolitan Swr
Dist Drainage Rev Rfdg (MBIA Insd)............... 5.300 05/15/19 4,433,135
------------
12,855,757
------------
LOUISIANA 1.6%
1,950 Louisiana Hsg Fin Agy Mtg Rev Multi-Family
Emerald Pointe Apts (FHA Gtd).................... 7.100 11/01/33 2,065,635
2,515 Louisiana Hsg Fin Agy Mtg Rev Single Family
Access Pgm Ser B (GNMA Collateralized)........... 8.000 03/01/25 2,866,899
3,000 Saint Charles Parish, LA Environmental Impt Rev
LA Pwr & Lt Co Ser A (AMBAC Insd)................ 6.875 07/01/24 3,342,810
------------
8,275,344
------------
MARYLAND 2.1%
1,270 Baltimore, MD Ctfs Partn Brd of Edl Admin Proj
Ser A Rfdg (MBIA Insd) (a)....................... 5.000 04/01/15 1,189,253
9,000 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty Dev
Single Family Pgm 3rd Ser (FHA Gtd).............. 7.375 04/01/26 9,293,670
------------
10,482,923
------------
MASSACHUSETTS 2.8%
2,500 Chelsea, MA Sch Proj Ln Act 1948 (AMBAC Insd).... 6.500 06/15/12 2,813,750
3,955 Massachusetts Bay Tran Auth MA Genl Tran Sys Ser
A Rfdg........................................... 5.500 03/01/12 4,170,745
2,250 Massachusetts Bay Tran Auth MA Genl Tran Sys Ser
B Rfdg (MBIA Insd)............................... 6.000 03/01/10 2,416,073
3,500 Massachusetts Muni Whsl Elec Co Pwr Supply Sys
Rev Ser A Rfdg (AMBAC Insd)...................... 5.000 07/01/10 3,503,920
1,000 Massachusetts St Hlth & Edl Fac Auth Rev Saints
Mem Med Cent Ser A............................... 6.000 10/01/23 1,001,120
------------
13,905,608
------------
MICHIGAN 4.7%
1,680 Michigan Higher Edl Fac Auth Rev Ltd Oblig Hope
College Proj Rfdg (Connie Lee Insd).............. 7.000 10/01/14 1,881,583
1,000 Michigan St Hosp Fin Auth Rev Hosp Genesys Regl
Med Rfdg (ACA Insd).............................. 5.500 10/01/18 1,002,470
2,000 Michigan St Hosp Fin Auth Rev Hosp Genesys Regl
Med Rfdg (ACA Insd).............................. 5.500 10/01/27 1,994,120
3,350 Michigan St Hosp Fin Auth Rev Hosp Mid-MI Oblig
Group (Prerefunded @ 12/01/02)................... 6.800 12/01/14 3,740,242
10,900 Michigan St Hsg Dev Auth Rental Hsg Rev Ser A
Rfdg............................................. 6.600 04/01/12 11,767,640
3,000 Michigan St Strategic Fund Ltd Oblig Rev Ser CC
Rfdg (FGIC Insd)................................. 6.950 09/01/21 3,254,400
------------
23,640,455
------------
</TABLE>

See Notes to Financial Statements

10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSISSIPPI 2.6%
$ 6,500 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser B (GNMA Collateralized)........... 7.900% 03/01/25 $ 7,250,750
2,113 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser C (GNMA Collateralized)........... 8.125 12/01/24 2,352,947
3,072 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser E (GNMA Collateralized)........... 8.100 12/01/25 3,434,250
------------
13,037,947
------------
MISSOURI 0.5%
2,100 Kansas City, MO Arpt Rev Genl Impt Ser A (FSA
Insd)............................................ 6.900 09/01/10 2,345,322
------------
NEW HAMPSHIRE 0.2%
1,000 New Hampshire St Business Fin Auth Wtr Fac Rev
Pennichuck Wtrwks Inc (AMBAC Insd)............... 6.300 05/01/22 1,086,910
------------
NEW JERSEY 5.4%
10,000 New Jersey Econ Dev Auth St Contract Econ
Recovery (MBIA Insd)............................. 5.900 03/15/21 10,986,200
8,000 New Jersey Econ Dev Auth Wtr Fac Rev NJ American
Wtr Co Inc Proj Ser A (FGIC Insd)................ 6.875 11/01/34 8,949,520
2,000 New Jersey St Hwy Auth Garden St Pkwy Genl Rev Sr
Pkwy............................................. 6.250 01/01/14 2,156,640
4,650 Salem Cnty, NJ Indl Pollutn Ctl Fin Auth Rev Pub
Svc Elec & Gas Ser D Rfdg (MBIA Insd)............ 6.550 10/01/29 5,128,020
------------
27,220,380
------------
NEW YORK 28.8%
1,500 Broome Cnty, NY Ctfs Partn Pub Safety Fac (MBIA
Insd)............................................ 5.250 04/01/15 1,491,615
1,500 Metropolitan Tran Auth NY Commuter Fac Rev Ser A
(MBIA Insd)...................................... 5.625 07/01/27 1,538,025
2,500 Metropolitan Tran Auth NY Dedicated Tax Fund Ser
A (FGIC Insd).................................... 4.750 04/01/28 2,280,750
3,000 Metropolitan Tran Auth NY Tran Fac Rev Svcs
Contract
Ser R Rfdg....................................... 5.500 07/01/17 3,012,960
1,500 Metropolitan Tran Auth NY Trans Fac Rev Ser K
Rfdg............................................. 6.250 07/01/11 1,594,380
4,250 New York City Indl Dev Agy Civic Fac Rev USTA
Natl Tennis Cent Proj (FSA Insd)................. 6.375 11/15/14 4,674,617
2,360 New York City Indl Dev Agy Spl Fac United Airls
Inc Proj......................................... 5.650 10/01/32 2,371,706
1,300 New York City Indl Dev Civic YMCA Greater NY
Proj............................................. 5.800 08/01/16 1,344,850
5,500 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev
Ser B............................................ 5.750 06/15/26 5,687,275
10 New York City Ser A.............................. 8.000 08/15/19 11,114
1,325 New York City Ser B1 (Prerefunded @ 08/15/04).... 7.000 08/15/16 1,521,325
1,170 New York City Ser C.............................. 7.125 08/15/12 1,254,380
480 New York City Ser C (Prerefunded @ 08/15/01)..... 7.125 08/15/12 521,395
2,040 New York City Ser C.............................. 7.250 08/15/24 2,194,795
835 New York City Ser C (Prerefunded @ 08/15/01)..... 7.250 08/15/24 912,062
2,225 New York City Ser F Rfdg......................... 6.000 08/01/11 2,372,584
</TABLE>

See Notes to Financial Statements

11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 1,000 New York City Subser A1 (Embedded Swap).......... 4.820% 08/01/12 $ 1,020,640
3,000 New York City Transitional Fin Auth Rev Future
Tax Ser C (a).................................... 4.750 05/01/23 2,753,430
2,525 New York St Dorm Auth Lease Rev Muni Hlth Fac
Impt Pgm Ser A (FSA Insd)........................ 5.500 05/15/25 2,554,113
3,970 New York St Dorm Auth Rev City Univ Ser F........ 5.000 07/01/14 3,795,757
2,600 New York St Dorm Auth Rev Cons City Univ Sys 2nd
Genl Res Ser A................................... 5.750 07/01/13 2,730,416
5,050 New York St Dorm Auth Rev Cons City Univ Sys 2nd
Genl Res Ser B................................... 5.375 07/01/07 5,187,562
3,100 New York St Dorm Auth Rev Cons City Univ Sys Ser
A................................................ 5.625 07/01/16 3,223,721
4,050 New York St Dorm Auth Rev Court Fac Lease Ser
A................................................ 5.300 05/15/07 4,128,489
2,550 New York St Dorm Auth Rev Mental Hlth Svcs Fac
Ser B Rfdg....................................... 5.750 08/15/11 2,674,160
5,000 New York St Dorm Auth Rev St Univ Edl Fac........ 5.125 05/15/27 4,771,250
5,000 New York St Dorm Auth Rev St Univ Edl Fac Ser A
Rfdg............................................. 5.500 05/15/08 5,225,500
2,000 New York St Dorm Auth Rev St Univ Edl Fac Ser B
Rfdg............................................. 7.500 05/15/11 2,424,840
3,000 New York St Energy Resh & Dev Auth Elec Fac Rev
Cons Edison Co of NY Inc Proj Ser A.............. 6.750 01/15/27 3,170,670
1,020 New York St Med Care Fac Fin Agy Rev Mental Hlth
Ser B............................................ 7.375 02/15/14 1,075,029
1,150 New York St Med Care Fac Fin Agy Rev Mental Hlth
Ser B (Prerefunded @ 08/15/99)................... 7.375 02/15/14 1,221,841
1,560 New York St Med Care Fac Fin Agy Rev Mental Hlth
Svcs Fac Ser A................................... 7.500 02/15/21 1,706,734
2,615 New York St Med Care Fac Fin Agy Rev Mental Hlth
Svcs Fac Ser A (Prerefunded @ 02/15/01).......... 7.500 02/15/21 2,885,679
5,000 New York St Med Care Fac Fin Agy Rev NY Downtown
Hosp Ser A (Prerefunded @ 02/15/05).............. 6.800 02/15/20 5,715,050
2,000 New York St Med Care Fac Fin Agy Rev NY Hosp Mtg
Ser A (Prerefunded @ 02/15/01) (AMBAC Insd)...... 6.600 02/15/11 2,121,260
6,750 New York St Med Care Fac Fin Agy Rev NY Hosp Mtg
Ser A (Prerefunded @ 02/15/05) (AMBAC Insd)...... 6.300 08/15/06 7,530,300
7,000 New York St Med Care Fac Fin Agy Rev NY Hosp Mtg
Ser A (Prerefunded @ 02/15/05) (AMBAC Insd)...... 6.400 08/15/07 7,849,730
3,000 New York St Pwr Auth Rev & Genl Purp Ser Y....... 6.750 01/01/18 3,246,750
5,695 New York St Thruway Auth Svc Contract Rev Loc Hwy
& Brdg........................................... 5.750 04/01/08 6,021,039
7,500 New York St Thruway Auth Svc Contract Rev Loc Hwy
& Brdg........................................... 5.250 04/01/13 7,408,050
3,550 New York St Urban Dev Corp Rev Correctional Cap
Fac Ser 7........................................ 5.700 01/01/27 3,594,978
3,000 New York St Urban Dev Corp Rev Correctional Fac
Rfdg............................................. 5.000 01/01/19 2,808,870
12,500 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK Intl
Arpt Terminal 6 (MBIA Insd)...................... 5.750 12/01/25 12,870,500
</TABLE>

See Notes to Financial Statements

12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED)
$ 2,000 Triborough Brdg & Tunl Auth NY Rev Genl Purp Ser
X................................................ 6.500% 01/01/19 $ 2,157,120
------------
144,657,311
------------
NORTH CAROLINA 2.4%
11,000 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev
(Indexed Cap) (MBIA Insd)........................ 6.000 01/01/12 12,136,520
------------
OHIO 0.4%
1,000 Marion Cnty, OH Hosp Impt Rev Cmnty Hosp Rfdg.... 6.375 05/15/11 1,090,670
1,000 Sandusky Cnty, OH Hosp Fac Rev Mem Hosp Rfdg..... 5.150 01/01/08 989,810
------------
2,080,480
------------
OKLAHOMA 0.2%
1,100 Oklahoma City, OK Indl & Cultural Fac Trust Rev
Dist Heating & Cooling Trigen.................... 6.750 09/15/17 1,126,290
------------
PENNSYLVANIA 3.4%
5,785 Erie, PA Sch Dist Cap Apprec Rfdg (FSA Insd)
(a).............................................. * 09/01/17 2,068,543
2,665 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC
Insd)............................................ * 03/15/14 1,159,781
1,830 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC
Insd)............................................ * 09/15/14 775,810
2,900 Indiana Cnty, PA Indl Dev Auth Pollutn Ctl Rev
Metro Edison Co Proj A (AMBAC Insd).............. 5.950 05/01/27 3,043,289
4,000 Pennsylvania Intergovt Coop Auth Spl Tax Rev
Philadelphia Funding Pgm (Prerefunded @ 06/15/05)
(FGIC Insd)...................................... 6.750 06/15/21 4,549,680
5,200 Randor Twp, PA Sch Dist.......................... 5.750 03/15/26 5,397,184
------------
16,994,287
------------
RHODE ISLAND 1.6%
7,800 Rhode Island Hsg & Mtg Fin Corp Homeownership
Oppty Ser 5...................................... 6.400 04/01/24 8,167,068
------------
TENNESSEE 1.1%
5,000 Tennessee Hsg Dev Agy Homeownership Proj T....... 7.375 07/01/23 5,276,600
------------
TEXAS 5.1%
825 Brazos, TX Higher Edl Auth Inc Student Ln Rev
Subser A2 Rfdg................................... 6.800 12/01/04 899,976
1,084 Brazos, TX Higher Edl Auth Inc Student Ln Rev
Subser C2 Rfdg................................... 7.100 11/01/04 1,195,468
5,000 Dallas-Fort Worth, TX Intl Arpt Fac Impt Corp Rev
American Airls Inc............................... 7.250 11/01/30 5,536,150
5,340 Dallas-Fort Worth, TX Intl Arpt Fac Impt Corp Rev
Delta Airls Inc.................................. 7.625 11/01/21 5,898,777
1,500 Dallas-Fort Worth, TX Intl Arpt Fac Impt Corp Rev
Delta Airls Inc.................................. 7.125 11/01/26 1,602,750
5,140 Little Elm, TX Indpt Sch Dist Rfdg (PSFG Insd)... 6.750 08/15/29 5,776,949
2,000 Tarrant Cnty, TX Jr College Dist................. 5.050 02/15/10 2,023,920
2,000 Texas St Dept Hsg & Cmnty Affairs Single Family
Rev Mtg Jr Lien Ser A Rfdg....................... 8.100 09/01/15 2,268,840
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 1,200 Wylie, TX Indpt Sch Dist Cap Apprec Rfdg (PSFG
Insd)............................................ * 08/15/17 $ 418,944
------------
25,621,774
------------
UTAH 0.6%
1,500 Intermountain Pwr Agy UT Pwr Supply Rev Ser B
Rfdg (MBIA Insd)................................. 5.750% 07/01/19 1,566,525
1,525 Salt Lake City, UT Arpt Rev Delta Airls Inc
Proj............................................. 7.900 06/01/17 1,607,243
------------
3,173,768
------------
WASHINGTON 1.0%
1,400 King Cnty, WA Hsg Auth Hsg Rev Pooled Sr Ser A
Rfdg............................................. 6.700 03/01/15 1,488,998
3,450 Washington St Pub Pwr Supply Sys Nuclear Proj No
2 Rev Ser B Rfdg (Prerefunded @ 07/01/00) (FSA
Insd)............................................ 7.000 07/01/12 3,715,202
------------
5,204,200
------------
WEST VIRGINIA 2.5%
2,500 Berkeley Cnty, WV Bldg Comm Hosp Rev City Hosp
Proj............................................. 6.500 11/01/22 2,679,100
5,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co Proj
Ser C Rfdg (MBIA Insd)........................... 6.850 06/01/22 5,462,250
2,000 West Virginia St Hsg Dev Fund Hsg Fin Ser A...... 5.550 05/01/17 2,034,880
2,220 West Virginia St Hsg Dev Fund Hsg Fin Ser A...... 5.450 11/01/21 2,237,649
------------
12,413,879
------------
WISCONSIN 1.7%
5,000 Madison, WI Indl Dev Rev Madison Gas & Elec Co
Proj Ser A....................................... 6.750 04/01/27 5,347,600
3,000 Wisconsin Hsg & Econ Dev Auth Homeownership Rev
Ser A............................................ 6.450 03/01/17 3,175,260
------------
8,522,860
------------
WYOMING 0.4%
1,880 Wyoming Cmnty Dev Auth Insd Single Family Mtg Ser
B................................................ 6.700 06/01/17 1,991,221
------------
PUERTO RICO 2.5%
1,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser V
Rfdg............................................. 5.750 07/01/18 1,020,300
10,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser Y
Rfdg (Embedded Cap) (FSA Insd)................... 5.730 07/01/21 11,451,900
------------
12,472,200
------------
TOTAL INVESTMENTS 100.1%
(Cost $463,024,313).......................................................... 502,790,224
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%).................................. (291,064)
------------
NET ASSETS 100.0%............................................................. $502,499,160
===========
</TABLE>

* Zero coupon bond

(a) Securities purchased on a when issued or delayed delivery basis.

(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.

See Notes to Financial Statements

14
<PAGE> 16

STATEMENT OF ASSETS AND LIABILITIES

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $463,024,313)....................... $502,790,224
Receivables:
Interest.................................................. 8,611,820
Investments Sold.......................................... 2,507,820
Other....................................................... 8,126
------------
Total Assets.......................................... 513,917,990
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 9,039,825
Custodian Bank............................................ 1,492,807
Income Distributions--Common and Preferred Shares......... 328,809
Investment Advisory Fee................................... 270,561
Administrative Fee........................................ 83,250
Affiliates................................................ 16,469
Accrued Expenses............................................ 103,226
Trustees' Deferred Compensation and Retirement Plans........ 83,883
------------
Total Liabilities..................................... 11,418,830
------------
NET ASSETS.................................................. $502,499,160
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 3,800 issued with liquidation preference of
$50,000 per share)........................................ $190,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized,
19,106,785 shares issued and outstanding)................. 191,068
Paid in Surplus............................................. 282,031,706
Net Unrealized Appreciation................................. 39,765,911
Accumulated Undistributed Net Investment Income............. 1,011,199
Accumulated Net Realized Loss............................... (10,500,724)
------------
Net Assets Applicable to Common Shares.................... 312,499,160
------------
NET ASSETS.................................................. $502,499,160
============
NET ASSET VALUE PER COMMON SHARE ($312,499,160 divided
by 19,106,785 shares outstanding)......................... $ 16.36
============
</TABLE>

See Notes to Financial Statements

<PAGE> 17

STATEMENT OF OPERATIONS

For the Six Months Ended April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $14,516,179
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,634,816
Administrative Fee.......................................... 503,021
Preferred Share Maintenance................................. 247,048
Custody..................................................... 17,160
Trustees' Fees and Expenses................................. 13,928
Legal....................................................... 9,326
Other....................................................... 143,196
-----------
Total Expenses.......................................... 2,568,495
-----------
NET INVESTMENT INCOME....................................... $11,947,684
===========
NET REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 921,950
Futures................................................... (273,489)
-----------
Net Realized Gain........................................... 648,461
-----------
Net Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 40,118,744
End of the Period......................................... 39,765,911
-----------
Net Unrealized Depreciation During the Period............... (352,833)
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 295,628
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $12,243,312
===========
</TABLE>

See Notes to Financial Statements

16
<PAGE> 18

STATEMENT OF CHANGES IN NET ASSETS

For the Six Months Ended April 30, 1998
and the Year Ended October 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 11,947,684 $ 24,197,395
Net Realized Gain..................................... 648,461 925,006
Net Unrealized Appreciation/Depreciation During the
Period.............................................. (352,833) 12,769,504
------------ ------------
Change in Net Assets from Operations.................. 12,243,312 37,891,905
------------ ------------
Distributions from Net Investment Income:
Common Shares....................................... (8,836,454) (18,341,741)
Preferred Shares.................................... (3,398,009) (6,745,718)
------------ ------------
Total Distributions................................... (12,234,463) (25,087,459)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... 8,849 12,804,446
NET ASSETS:
Beginning of the Period............................... 502,490,311 489,685,865
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $1,011,199 and $1,297,978,
respectively)....................................... $502,499,160 $502,490,311
============ ============
</TABLE>

See Notes to Financial Statements

17
<PAGE> 19

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
September 25, 1992
Six Months (Commencement
Ended Year Ended October 31 of Investment
April 30, ------------------------------------------------ Operations) to
1998 1997 1996 1995 1994 1993 October 31, 1992 (a)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period (a)......... $ 16.354 $ 15.684 $15.612 $13.992 $17.177 $14.587 $ 14.771
-------- -------- ------- ------- ------- ------- --------------
Net Investment Income..... .625 1.266 1.293 1.330 1.354 1.369 .056
Net Realized and
Unrealized Gain/Loss.... .017 .717 .159 1.701 (3.148) 2.408 (.237)
-------- -------- ------- ------- ------- ------- --------------
Total from Investment
Operations................ .642 1.983 1.452 3.031 (1.794) 3.777 (.181)
-------- -------- ------- ------- ------- ------- --------------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders........ .463 .960 1.020 1.020 1.020 .884 -0-
Common Share
Equivalent of
Distributions Paid
to Preferred
Shareholders........ .178 .353 .360 .391 .285 .303 .003
Distributions from Net
Realized Gain:
Paid to Common
Shareholders.......... -0- -0- -0- -0- .067 -0- -0-
Common Share Equivalent
of Distributions Paid
to Preferred
Shareholders.......... -0- -0- -0- -0- .019 -0- -0-
-------- -------- ------- ------- ------- ------- --------------
Total Distributions........ .641 1.313 1.380 1.411 1.391 1.187 .003
-------- -------- ------- ------- ------- ------- --------------
Net Asset Value, End of the
Period.................... $ 16.355 $ 16.354 $15.684 $15.612 $13.992 $17.177 $ 14.587
========= = ========= ======= ======= ======= ======= ==============
Market Price Per Share at
End of the Period......... $ 14.875 $15.0625 $14.750 $14.375 $12.750 $16.000 $ 13.875
Total Investment Return at
Market Price (b).......... 1.76%* 8.96% 9.88% 21.06% (14.17%) 22.08% (7.50%)*
Total Return at Net Asset
Value (c)................. 2.88%* 10.74% 7.22% 19.46% (12.71%) 24.24% (2.73%)*
Net Assets at End of the
Period (In millions)...... $ 502.5 $ 502.5 $ 489.7 $ 488.3 $ 457.3 $ 518.2 $ 468.7
Ratio of Expenses to
Average Net Assets
Applicable to Common
Shares**.................. 1.63% 1.66% 1.72% 1.72% 1.64% 1.66% 1.12%
Ratio of Net Investment
Income to Average Net
Assets Applicable to
Common Shares (d)......... 5.43% 5.76% 5.99% 6.31% 6.81% 6.57% 3.52%
Portfolio Turnover......... 13%* 49% 37% 79% 133% 112% 15%*
* Non-Annualized
** Ratio of Expenses to
Average Net Assets
Including Preferred
Shares.................... 1.02% 1.02% 1.05% 1.03% 1.00% 1.03% 1.00%
</TABLE>

(a) Net Asset Value at September 25, 1992, is adjusted for common and preferred
share offering costs of $.229 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 on NAV.

(d) Net Investment Income is adjusted for common share equivalent of
distributions paid to preferred shareholders.

See Notes to Financial Statements

18
<PAGE> 20

NOTES TO FINANCIAL STATEMENTS

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Advantage Municipal Income Trust (the "Trust") is
registered as a diversified closed-end management investment company under the
Investment Company Act of 1940, as amended. The Trust's investment objective is
to provide a high level of current income exempt from federal income tax,
consistent with preservation of capital. In normal market conditions, the Trust
will invest substantially all of its net assets in municipal securities rated
investment grade at the time of investment. The Trust commenced investment
operations on September 25, 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.

19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.

The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1997, the Trust had an accumulated capital loss
carryforward for tax purposes of $11,385,441, which will expire between October
31, 2002 and October 31, 2003.

At April 30, 1998, for federal income tax purposes cost of long-term
investments is $463,024,313, the aggregate gross unrealized appreciation is
$40,230,263 and the aggregate gross unrealized depreciation is $464,352,
resulting in net unrealized appreciation of $39,765,911.

E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.

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 Van Kampen American Capital Distributors, Inc.
or its affiliates (collectively "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 six months ended April 30, 1998, the Trust recognized expenses of
approximately $4,100 representing legal services provided by Skadden, Arps,
Slate,

20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

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, 1998, the Trust recognized expenses of
approximately $54,800 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 has implemented 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 per trustee under the plan is $2,500.

At April 30, 1998, VKAC owned 6,700 common shares of the Trust.

3. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $68,119,906 and $76,431,747,
respectively.

4. DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.

The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising an option contract or taking
delivery of a security underlying a futures contract. In these instances the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.

Summarized below are the specific types of derivative financial instruments
used by the Trust.

A. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally

21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

invests in futures on U.S. Treasury Bonds and the Municipal Bond Index and
typically closes the contract prior to the delivery date. These contracts are
generally used to manage the portfolio's effective maturity and duration.

Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).

Transactions in futures contracts for the six months ended April 30, 1998,
were as follows:

<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1997............................. 100
Futures Opened.............................................. -0-
Futures Closed.............................................. (100)
-----
Outstanding at April 30, 1998............................... -0-
=====
</TABLE>

B. INDEXED SECURITIES--These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.

An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short term interest rates which it
pays on its preferred shares.

An Embedded Swap security includes a swap component such that the fixed
coupon component of the underlying bond is adjusted by the difference between
the security's fixed swap rate and the floating swap index. 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.

22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

5. PREFERRED SHARES

The Trust has outstanding 3,800 Auction Preferred Shares ("APS") in four series.
Series A, B and C each contain 1,000 shares while Series D contains 800 shares.
Dividends are cumulative and the dividend rate is reset every 28 days through an
auction process. The average rate in effect on April 30, 1998 was 3.707%. During
the six months ended April 30, 1998, the rates ranged from 3.400% to 3.900%.

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.

23
<PAGE> 25

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American

FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money

To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales
charges, risks, and expenses. Please read it carefully before you invest or
send money.

To view a current Van Kampen American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:

- visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a Prospectus

- call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)

- e-mail us by visiting WWW.VKAC.COM and selecting Investors' Place

24
<PAGE> 26

VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST

BOARD OF TRUSTEES

DAVID C. ARCH

ROD DAMMEYER

HOWARD J KERR

DENNIS J. MCDONNELL*--Chairman

STEVEN MULLER

THEODORE A. MYERS

DON G. POWELL*

HUGO F. SONNENSCHEIN

WAYNE W. WHALEN*

OFFICERS

DENNIS J. MCDONNELL*
President

RONALD A. NYBERG*
Vice President and Secretary

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.

(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.

<ARTICLE> 6
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<NUMBER> 11
<NAME> adv muni
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 463,024,313
<INVESTMENTS-AT-VALUE> 502,790,224
<RECEIVABLES> 11,119,640
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,126
<TOTAL-ASSETS> 513,917,990
<PAYABLE-FOR-SECURITIES> 9,039,825
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,379,005
<TOTAL-LIABILITIES> 11,418,830
<SENIOR-EQUITY> 190,000,000
<PAID-IN-CAPITAL-COMMON> 282,222,774
<SHARES-COMMON-STOCK> 19,106,785
<SHARES-COMMON-PRIOR> 19,106,785
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<EXPENSES-NET> (2,568,495)
<NET-INVESTMENT-INCOME> 11,947,684
<REALIZED-GAINS-CURRENT> 648,461
<APPREC-INCREASE-CURRENT> (352,833)
<NET-CHANGE-FROM-OPS> 12,243,312
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,234,463)
<DISTRIBUTIONS-OF-GAINS> 0
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<GROSS-ADVISORY-FEES> 1,634,816
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,568,495
<AVERAGE-NET-ASSETS> 507,259,890
<PER-SHARE-NAV-BEGIN> 16.354
<PER-SHARE-NII> 0.625
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<PER-SHARE-NAV-END> 16.355
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<AVG-DEBT-PER-SHARE> 0

</TABLE>