<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 8
Statement of Operations.......................... 9
Statement of Changes in Net Assets............... 10
Financial Highlights............................. 11
Notes to Financial Statements.................... 12
</TABLE>
VMV SAR 06/97
<PAGE> 2
LETTER TO SHAREHOLDERS
June 5, 1997
Dear Shareholder,
As mentioned in your previous
report, VK/AC Holding, Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset
management. More recently, on February [PHOTO]
5, 1997, Morgan Stanley Group Inc. and
Dean Witter, Discover & Co. announced
their agreement to merge, and you
received a proxy in April. The merger
was completed on May 31, 1997, creating
the combined company of Morgan Stanley, Dean Witter, Discover & Co. This
preeminent global financial services firm boasts a market capitalization of $21
billion and leading market positions in securities, asset management, and credit
services. As the financial industry continues to witness unprecedented
consolidations and new partnerships, we believe that those firms that are
leaders in all facets of their business will be able to offer investors the
greatest opportunities and services as we move into the next century. We are
confident that this merger will provide investors with those benefits.
ECONOMIC REVIEW
Bond prices were volatile during the six months ended April 30, 1997. Prices
initially rose as the economy slowed, erasing fears of an interest rate hike by
the Federal Reserve Board. The November election of a Democratic president and
Republican Congress was positive for bonds because the split government was
viewed as a restraint on spending increases that could potentially swell the
budget deficit. In addition, support diminished for radical tax reform that
could threaten the tax-free status of municipal bonds.
By the beginning of 1997, the situation changed. Bond prices began to fall
as the economy picked up speed, culminating in a 5.60 percent annualized growth
rate in the first quarter. This strength, coupled with warnings by Fed Chairman
Alan Greenspan that tighter monetary policy might be appropriate, reignited
fears of a rate hike. On March 25, the Fed raised short-term rates by a modest
0.25 percent, which sent the 30-year Treasury bond yield above 7.00 percent for
the first time in six months. By the end of April, the 30-year Treasury bond
yield slipped back below 7.00 percent as the market turned its attention to
positive news about inflation, and bonds recovered some of their earlier losses.
Throughout most of the six months ended April 30, municipal bonds generally
outperformed Treasuries. Between October 31 and April 30, yields on long-term
municipal revenue bonds rose 21 basis points, while yields on 30-year Treasury
bonds jumped 31 basis points. Because bond yields move in the opposite direction
of prices, the smaller
Continued on page two
1
<PAGE> 3
increase in municipal yields meant that municipal bond prices did not fall as
sharply as Treasury bond prices did. A relatively stable supply of new issues,
combined with an increase in retail demand, contributed to the improved
performance of municipal bonds.
Massachusetts general obligation bonds benefited from strong economic growth
in the Commonwealth, as well as continued fiscal discipline on the part of the
government to restrain debt issuance and spending. If these trends continue,
Massachusetts general obligation bonds, currently rated A+, could be upgraded
later this year.
FUND STRATEGY
In managing the Trust, we maintained a concentration in AAA-rated bonds
during the period. As of April 30, approximately 60 percent of the Trust's
long-term investments were AAA-rated, the highest credit rating assigned to
bonds by the Standard & Poor's Ratings Group. In addition, approximately 27
percent of long-term investments were rated AA or A, and 13 percent were
non-rated or rated BBB or lower. BBB is the lowest rating Standard & Poor's
assigns to bonds in the investment-grade category. AAA-rated securities
typically have tended to perform better when interest rates are declining and
provide the potential for safety of principal. They are extremely liquid because
most are insured bonds. BBB-rated securities have tended to perform better when
rates are rising, and they have the potential to provide additional income.
Portfolio Composition by Credit Quality
as a Percentage of Long-Term Investments as of April 30, 1997
<TABLE>
<S> <C>
AAA............ 60.4%
AA............. 4.6%
A.............. 22.0%
BBB............ 8.2%
B.............. 1.4%
Non-Rated...... 3.4%
</TABLE>
Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's the Moody's rating is used.
Portfolio turnover was minimal during the reporting period due to the lack
of attractive bonds that might enhance the Trust's dividend or performance
characteristics. Market yields were much lower than the yields of bonds already
in the Trust's portfolio, and Trust holdings were already well-diversified and
of high credit quality. Activity was also limited by the tight spreads between
yields of AAA-rated bonds and lower-rated bonds. These spreads remained narrow
due to the increasing number of insured bonds in the municipal market. As a
result, there was not enough yield reward to justify the additional credit risk
associated with purchasing lower-rated securities.
Acquisitions focused on public education and general purpose bonds. Sales
included securities which had appreciated in price due to strong retail demand
and which we felt had reached their upside potential. In addition, we reduced
the Trust's holdings of Saints
Continued on page three
2
<PAGE> 4
Memorial Hospital bonds after the credit was upgraded. When buying new
securities for the portfolio, we attempt to identify those bonds that we believe
will outperform within a particular sector and that can be purchased at an
attractive price. We believe this "bottom-up" approach, supported by our
research, provides significant added value to the portfolio.
We shortened the duration slightly during this period of rising interest
rates in order to potentially reduce the Trust's volatility to rate increases.
Duration, which is expressed in years, is a measure of a portfolio's sensitivity
to interest rate movements. Portfolios with long durations have tended to
perform better when rates are falling, and portfolios with short durations have
tended to perform better when rates are rising. At the end of the period, the
Trust's portfolio duration stood at 7.55 years compared to 7.86 years for the
Lehman Brothers Massachusetts Municipal Bond Index benchmark.
[DIVIDEND HISTORY GRAPH]
SIX-MONTH DIVIDEND HISTORY
FOR THE PERIOD ENDED APRIL 30, 1997
Distribution
per Share
-----------------
Nov. 1996................... $.0600
Dec. 1996................... $.0650
Jan. 1997................... $.0650
Feb. 1997................... $.0650
Mar. 1997................... $.0650
Apr. 1997................... $.0650
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
PERFORMANCE SUMMARY
We are pleased to report that the Van Kampen American Capital Massachusetts
Value Municipal Income Trust continued its positive performance over the first
half of its fiscal year. For the six-month period ended April 30, 1997, the
Trust generated a total return at market price of 8.17 percent(1). The Trust
offered a tax-exempt distribution rate of 6.00 percent(3), based on the closing
common stock price of $13.00 per share on April 30, 1997. Because income from
the Trust is exempt from federal and Massachusetts state income taxes, this
distribution rate represents a yield equivalent to a taxable investment earning
10.66 percent(4) (for investors in the combined federal and state income tax
bracket of 43.7 percent). At the end of reporting period, the closing share
price of the Trust traded at a 9.7 percent discount to its net asset value of
$14.40.
Continued on page four
3
<PAGE> 5
The Trust's earnings exceeded the distribution rate and, as a result, the
Board of Trustees approved a slight increase in its monthly dividend from $0.060
to $0.065 per common share, payable December 31, 1996.
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR AS OF APRIL 30, 1997*
Health Care....................... 22.6%
Transportation.................... 14.7%
Student Loans..................... 12.0%
General Purpose................... 10.6%
Multi-Family Housing............... 9.4%
*As a Percentage of Long-Term
Investments
MUNICIPAL MARKET OUTLOOK
We continue to see signs of a strong economy, although we do not expect the
unusually brisk growth rate of the first quarter to be sustained throughout the
year. As a result, we believe the Fed will monitor the economy closely and take
aggressive action to control growth if inflation picks up or the high growth
rate is sustained. However, if growth slows, we believe the Fed will leave rates
unchanged. Given this outlook, we expect that yields on the 30-year Treasury
bond will range between 6.75 and 7.40 percent for the remainder of the year,
with higher levels occurring early and lower yields dominating the second half
of 1997. Although short-term interest rates have risen, this has not had a
significant impact on the leveraged structure of the Trust.
We believe the Trust is positioned to perform well in the coming months, and
we do not anticipate major structural changes in the portfolio. In light of our
expectations for interest rates, we will continue to maintain a slightly
defensive posture by keeping a relatively short duration for the portfolio and
adjusting the duration when prudent. We will also continue to seek a balance
between the Trust's total return and its dividend income, as well as to add
value through security selection. Thank you for your continued confidence in Van
Kampen American Capital and your Trust's team of managers.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1997
VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS
VALUE MUNICIPAL INCOME TRUST
(AMEX TICKER SYMBOL--VMV)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)............ 8.17%
Six-month total return based on NAV(2)..................... 1.75%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 6.00%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)...................................... 10.66%
SHARE VALUATIONS
Net asset value............................................ $ 14.40
Closing common stock price................................. $13.000
Six-month high common stock price (02/25/97)............... $13.500
Six-month low common stock price (12/20/96)................ $12.125
Preferred share rate(5).................................... 4.15%
</TABLE>
(1) Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common stock price at the end of the period
indicated.
(2) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) The taxable-equivalent distribution rate is calculated assuming a 43.7%
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 #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.
Market forecasts provided in this report may not necessarily come to pass.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS
MASSACHUSETTS 91.5%
$ 1,705 Boston, MA Metro Dist Rfdg....................... 6.500% 12/01/13 $ 1,823,395
2,000 Chelsea, MA Sch Proj Ln Act 1948 (AMBAC Insd).... 5.700 06/15/06 2,076,940
1,000 Chelsea, MA Sch Proj Ln Act 1948 (AMBAC Insd).... 6.500 06/15/12 1,074,260
1,325 Holyoke, MA Ser B Rfdg (FSA Insd)................ 6.000 06/15/05 1,401,625
2,400 Lowell, MA (FSA Insd)............................ 6.625 04/01/15 2,598,528
1,500 Lowell, MA (Prerefunded @ 02/15/01).............. 8.300 02/15/05 1,721,355
1,500 Massachusetts Bay Tran Auth MA Genl Tran Sys Ser
B................................................ 5.900 03/01/12 1,532,265
1,000 Massachusetts Edl Ln Auth Edl Ln Rev Issue E Ser
B (AMBAC Insd)................................... 6.250 07/01/11 1,025,840
1,245 Massachusetts Edl Ln Auth Edl Ln Rev Issue E Ser
B (AMBAC Insd)................................... 6.300 07/01/12 1,277,270
925 Massachusetts Muni Wholesale Elec Co Pwr Supply
Sys Rev Ser B (Prerefunded @ 07/01/02)........... 6.750 07/01/17 1,019,544
1,000 Massachusetts Muni Wholesale Elec Co Pwr Supply
Sys Rev Ser C (MBIA Insd)........................ 6.625 07/01/10 1,084,100
1,000 Massachusetts St Hlth & Edl Fac Auth Rev (MBIA
Insd)............................................ 6.300 08/15/24 1,042,350
500 Massachusetts St Hlth & Edl Fac Auth Rev (FHA
Gtd)............................................. 5.950 02/15/17 497,360
1,000 Massachusetts St Hlth & Edl Fac Auth Rev (MBIA
Insd)............................................ 6.750 07/01/24 1,072,900
1,500 Massachusetts St Hlth & Edl Fac Auth Rev Baystate
Med Cent Ser D Rfdg (FGIC Insd).................. 5.000 07/01/12 1,402,875
2,000 Massachusetts St Hlth & Edl Fac Auth Rev Cape Cod
Hlth Ser A3 (Embedded Swap) (Connie Lee Insd).... 5.000 11/15/11 1,872,220
2,500 Massachusetts St Hlth & Edl Fac Auth Rev Faulkner
Hosp Ser C....................................... 6.000 07/01/13 2,473,525
2,000 Massachusetts St Hlth & Edl Fac Auth Rev New
England Med Cent Hosp Ser F (FGIC Insd).......... 6.500 07/01/12 2,134,340
1,000 Massachusetts St Hlth & Edl Fac Auth Rev Newton
Wellesley Hosp Issue Ser E (MBIA Insd)........... 5.875 07/01/15 1,011,350
2,000 Massachusetts St Hlth & Edl Fac Auth Rev North
Shore Med Cent Ser A (MBIA Insd)................. 5.625 07/01/14 1,980,300
1,000 Massachusetts St Hlth & Edl Fac Auth Rev Saint
Mem Med Cent Ser A............................... 6.000 10/01/23 880,270
1,000 Massachusetts St Hlth & Edl Fac Auth Rev Suffolk
Univ Ser C (Connie Lee Insd)..................... 5.750 07/01/16 975,750
1,000 Massachusetts St Hlth & Edl Fac Auth Rev Vly Regl
Hlth Sys Ser C Rfdg (Connie Lee Insd)............ 7.000 07/01/10 1,135,610
2,000 Massachusetts St Hsg Fin Agy (FNMA
Collateralized).................................. 6.800 11/15/12 2,126,200
750 Massachusetts St Hsg Fin Agy Rental Mtg Ser D
(AMBAC Insd)..................................... 6.200 07/01/15 765,225
2,500 Massachusetts St Hsg Fin Agy Hsg Rev Insd Rental
Ser A Rfdg (AMBAC Insd).......................... 6.600 07/01/14 2,588,300
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
$ 1,500 Massachusetts St Indl Fin Agy Rev Edl Dexter Sch
Proj Rfdg (MBIA Insd)............................ 5.550% 05/01/27 $ 1,452,150
500 Massachusetts St Indl Fin Agy Rev First Mtg
Loomis House & Vlg Proj.......................... 7.500 07/01/17 524,425
1,500 Massachusetts St Indl Fin Agy Rev Whitehead Inst
Biomedical Research.............................. 5.125 07/01/26 1,361,175
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
American Hingham................................. 6.900 12/01/29 1,049,710
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
American Hingham................................. 6.950 12/01/35 1,038,160
1,000 Massachusetts St Spl Oblig Rev Ser A............. 5.700 06/01/10 1,014,880
3,000 Massachusetts St Tpk Auth Rev Ser A Rfdg......... 5.000 01/01/13 2,818,080
1,500 Massachusetts St Wtr Res Auth Ser A (Prerefunded
@ 12/01/01)...................................... 6.500 12/01/19 1,632,120
1,185 Massachusetts St Wtr Res Auth Ser C Rfdg......... 5.100 12/01/04 1,186,422
2,550 New England Edl Ln Mktg Corp MA Student Ln Rev
Sub Issue G...................................... 6.000 03/01/02 2,632,722
2,500 New England Edl Ln Mktg Corp MA Student Ln Rev
Sub Issue H...................................... 6.900 11/01/09 2,720,075
1,000 1,000 South Essex, MA Sewage Dist Ser A Rfdg
(MBIA Insd)...................................... 5.250 06/15/24 932,310
825 Taunton, MA Elec................................. 8.000 02/01/04 949,963
-----------
57,905,889
-----------
GUAM 1.6%
1,000 Guam Govt Ser A.................................. 5.750 09/01/04 1,003,190
-----------
PUERTO RICO 5.1%
2,000 Puerto Rico Comwlth Hwy & Tran Ser Y (Embedded
Cap) (FSA Insd).................................. 5.730 07/01/21 2,152,520
365 Puerto Rico Elec Pwr Auth Pwr Rev Ser N.......... 7.000 07/01/07 390,364
635 Puerto Rico Elec Pwr Auth Pwr Rev Ser N
(Prerefunded @ 07/01/99)......................... 7.000 07/01/07 676,942
-----------
3,219,826
-----------
TOTAL LONG-TERM INVESTMENTS 98.2%
(Cost $60,007,642) (a).............................................................. 62,128,905
SHORT-TERM INVESTMENTS 0.3%
(Cost $200,000) (a)................................................................. 200,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.5%........................................... 957,885
-----------
NET ASSETS 100.0%.................................................................... $63,286,790
-----------
</TABLE>
(a) At April 30, 1997, cost of long- and short-term investments for federal
income tax purposes is $60,207,642; the aggregate gross unrealized
appreciation is $2,338,786 and the aggregate gross unrealized depreciation
is $217,523, resulting in net unrealized appreciation of $2,121,263.
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $60,007,642) (Note 1).............. $62,128,905
Short-Term Investments (Cost $200,000) (Note 1)................................. 200,000
Cash............................................................................ 14,396
Interest Receivable............................................................. 1,204,880
Unamortized Organizational Costs (Note 1)....................................... 4,985
Other........................................................................... 936
-----------
Total Assets.............................................................. 63,554,102
-----------
LIABILITIES:
Payables:
Investment Advisory Fee (Note 2).............................................. 33,630
Income Distributions--Common and Preferred Shares............................. 20,322
Administrative Fee (Note 2)................................................... 10,348
Affiliates (Note 2)........................................................... 5,343
Accrued Expenses................................................................ 135,032
Deferred Compensation and Retirement Plans (Note 2)............................. 62,637
-----------
Total Liabilities......................................................... 267,312
-----------
NET ASSETS...................................................................... $63,286,790
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 500 issued with liquidation preference of $50,000
per share) (Note 5)........................................................... $25,000,000
-----------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 2,658,297 shares issued and
outstanding).................................................................. 26,583
Paid in Surplus................................................................. 38,866,724
Net Unrealized Appreciation on Investments...................................... 2,121,263
Accumulated Undistributed Net Investment Income................................. 374,913
Accumulated Net Realized Loss on Investments.................................... (3,102,693)
-----------
Net Assets Applicable to Common Shares.................................... 38,286,790
-----------
NET ASSETS...................................................................... $63,286,790
===========
NET ASSET VALUE PER COMMON SHARE ($38,286,790 divided by 2,658,297
shares outstanding)........................................................... $ 14.40
===========
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................ $1,802,570
----------
EXPENSES:
Investment Advisory Fee (Note 2)........................................ 205,339
Administrative Fee (Note 2)............................................. 63,181
Preferred Share Maintenance (Note 5).................................... 35,539
Trustees Fees and Expenses (Note 2)..................................... 12,833
Legal (Note 2).......................................................... 5,430
Custody................................................................. 3,777
Amortization of Organizational Costs (Note 1)........................... 2,478
Other................................................................... 67,574
----------
Total Expenses...................................................... 396,151
----------
NET INVESTMENT INCOME................................................... $1,406,419
==========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Loss on Investments........................................ $ (72,120)
----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period............................................... 2,421,250
End of the Period..................................................... 2,121,263
----------
Net Unrealized Depreciation on Investments During the Period............ (299,987)
----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS......................... $ (372,107)
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $1,034,312
==========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1997
and the Year Ended October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................................... $ 1,406,419 $ 2,863,444
Net Realized Gain/Loss on Investments...................... (72,120) 301,150
Net Unrealized Appreciation/Depreciation on
Investments During the Period............................ (299,987) 263,612
----------- -----------
Change in Net Assets from Operations....................... 1,034,312 3,428,206
----------- -----------
Distributions from Net Investment Income:
Common Shares............................................ (1,023,391) (1,913,894)
Preferred Shares......................................... (360,119) (777,484)
----------- -----------
Total Distributions........................................ (1,383,510) (2,691,378)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................................... (349,198) 736,828
NET ASSETS:
Beginning of the Period.................................... 63,635,988 62,899,160
----------- -----------
End of the Period (Including accumulated undistributed net
investment income of $374,913 and $352,004,
respectively)............................................ $63,286,790 $63,635,988
=========== ===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, 1993
Six Months (Commencement
Ended Year Ended October 31, of Investment
April 30, --------------------------- Operations) to
1997 1996 1995 1994 October 31, 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a).... $14.534 $14.257 $12.269 $15.470 $14.658
------- ------- ------- ------- -------
Net Investment Income.......... .529 1.077 1.078 1.090 .392
Net Realized and Unrealized
Gain/Loss on Investments..... (.140) .212 2.013 (3.162) .754
------- ------- ------- ------- -------
Total from Investment
Operations..................... .389 1.289 3.091 (2.072) 1.146
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders............... .385 .720 .774 .828 .276
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders..... .135 .292 .329 .227 .058
Distributions from Net Realized
Gain on Investments (Note 1):
Paid to Common
Shareholders............... -0- -0- -0- .063 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders..... -0- -0- -0- .011 -0-
------- ------- ------- ------- -------
Total Distributions.............. .520 1.012 1.103 1.129 .334
------- ------- ------- ------- -------
Net Asset Value, End of the
Period......................... $14.403 $14.534 $14.257 $12.269 $15.470
======= ======= ======= ======= =======
Market Price Per Share at End of
the Period..................... $13.000 $12.375 $12.000 $11.375 $15.375
Total Investment Return at
Market Price (b)............... 8.17%* 9.26% 12.26% (20.95%) 4.38%*
Total Return at Net Asset Value
(c)............................ 1.75%* 7.13% 23.19% (15.40%) 5.01%*
Net Assets at End of the Period
(In millions).................. $63.3 $63.6 $62.9 $57.6 $66.1
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares......................... 2.06% 2.06% 2.17% 2.12% 1.91%
Ratio of Expenses to Average Net
Assets......................... 1.25% 1.24% 1.27% 1.26% 1.40%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common Shares
(d)............................ 5.45% 5.49% 5.65% 6.22% 4.45%
Portfolio Turnover............... 3%* 12% 65% 108% 35%*
</TABLE>
(a) Net Asset Value at April 30, 1993, is adjusted for common and preferred
share offering costs of $.342 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
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Massachusetts Value Municipal Income Trust (the
"Trust") is registered as a non-diversified closed-end management investment
company under the Investment Company Act of 1940, as amended. The Trust's
investment objective is to seek to provide Common Shareholders with a high level
of current income exempt from federal income taxes and Massachusetts personal
income tax, consistent with preservation of capital. The Trust will invest
substantially all of its assets in Massachusetts municipal securities rated
investment grade at the time of investment. The Trust commenced investment
operations on April 30, 1993.
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. At April 30, 1997, there were no
when issued or delayed delivery purchase commitments.
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
D. ORGANIZATIONAL COSTS--The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization in the amount of $25,000. These costs
are being amortized on a straight line basis over the 60 month period ending
April 29, 1998. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") has agreed that in the event any of the initial shares of the Trust
originally purchased by VKAC are redeemed during the amortization period, the
Trust will be reimbursed for any unamortized organizational costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
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.
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, 1996, the Trust had an accumulated capital loss
carryforward for tax purposes of $3,030,573 which will expire between October
31, 2002 and October 31, 2003.
F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .65% of the average net assets of the Trust. In addition, the Trust
will pay a monthly administrative fee to VKAC, the Trust's Administrator, at an
annual rate of .20% of the average net assets of the Trust. The administrative
services provided by the Administrator include record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Trust, of which a trustee of the Trust is an
affiliated person.
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<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1997, the Trust recognized expenses of
approximately $22,200 representing VKAC's cost of providing accounting and legal
services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit under the plan is equal to the trustees' annual retainer fee, which is
currently $2,500.
At April 30, 1997, VKAC owned 6,700 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $1,950,845 and $1,861,818, 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 utilizes Indexed Securities, a type of derivative, as a hedge
against a rise in the short-term interest rate paid on the Trust's preferred
shares. All of the Trust's portfolio holdings, including derivative instruments,
are marked to market each day with the change in value reflected in the
unrealized appreciation/depreciation on investments. Upon disposition, a
realized gain or loss is recognized accordingly. The price of these Indexed
Securities, which are identified in the portfolio of investments, may be more
volatile than the price of a comparable fixed rate security.
A. 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.
B. 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.
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<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
5. PREFERRED SHARES
The Trust has outstanding 500 Auction Preferred Shares ("APS"). Dividends are
cumulative and the dividend rate is currently reset every seven days through an
auction process. The rate in effect on April 30, 1997 was 4.15%. During the six
months ended April 30, 1997, the rates ranged from 2.10% to 4.15%.
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.
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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 Jersey Tax Free 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 Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate 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 1-800-282-4404 for Morgan Stanley retail funds.
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VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
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.
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