<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 17
</TABLE>
VKV SAR 6/96
<PAGE> 2
LETTER TO SHAREHOLDERS
May 15, 1996
Dear Shareholder,
While interest rates drifted
downward during the fourth quarter of
last year, such was not the case in the
first quarter of 1996. Early in the
quarter, municipal bond prices [PHOTO]
demonstrated increased volatility in
conjunction with February's economic
announcements, which revealed a revival
in economic growth, impressive
employment levels, and moderate
inflation. This positive economic
environment, however, did not translate
into positive movement for the bond markets.
Instead, the markets became wary, because inflation often accompanies economic
growth.
Other factors influencing the municipal bond market early in the year
included:
- Intense weather conditions, which hindered distribution and manufacturing,
were experienced by much of the United States and affected certain
municipal bond sectors.
- The expectation that a federal budget agreement was forthcoming helped
bolster municipal bonds, especially at the longer end of the spectrum.
- The proposal of tax reform--and the threat of municipal bonds having
diminished tax-exempt status--continued to dampen demand for municipals,
resulting in lower bond prices.
We believe the beginning of 1996 reflected the market's reaction to the
possibility of a return to long-term economic growth. This, coupled with
continued low inflationary conditions, has served to put the Federal Reserve
Board in a neutral policy mode, bringing relative calm to the market--although
currently at higher interest rate levels.
PERFORMANCE SUMMARY
The Van Kampen American Capital Value Municipal Income Trust's (ticker
symbol VKV) common stock price declined 6 percent during the six-month period,
closing at $12.00, while the general municipal bond market was down 4 percent
for the same period, according to the Bond Buyer's 40 Municipal Bond Index.
For the six months ended April 30, 1996, the Trust posted a total return of
- -2.68 percent(1), based on market price. Longer term, the Trust's one-year total
return was 2.92 percent(1), based on market price for the period ended April 30,
1996, including reinvestment of dividends.
Continued on page two
1
<PAGE> 3
The Trust sustained two reductions in its monthly dividend over the past six
months. The first adjustment from $0.0760 to $0.0710 per common share was
effective December 1, 1995 and first payable December 31, 1995. The second
adjustment from $0.0710 to $0.0675 per common share was effective March 1, 1996
and first payable March 31, 1996. Although short-term municipal rates have
recently notched lower, due to a series of Fed easings beginning in 1995,
short-term rates in general are significantly higher than two years ago. This
short-term rate pressure, combined with efforts to manage the Trust's callable
bonds, has impacted the Trust's earning potential and necessitated the two
dividend adjustments.
Despite the decline in income, many closed-end municipal bond funds are
currently offering higher after-tax yields than taxable income alternatives, and
your Trust is no exception. Based on the closing common stock price on April 30,
1996, the Value Municipal Income Trust had a tax-exempt distribution rate of
6.75 percent (3). In other words, investors in the 36 percent federal income tax
bracket would have to earn a yield of 10.55 percent (4) on a taxable investment
to equal your Trust's tax-exempt distribution rate.
MARKET OUTLOOK
The economy rebounded in the first quarter of 1996, despite poor weather in
the East and the remnants of a slow fourth quarter of 1995, which was hindered
by weak construction activity, two government shutdowns, and a strike at Boeing.
We believe the momentum of the first quarter can carry into the second, due in
part to renewed auto production in the aftermath of the General Motors strike
and an end to the budget stalemate between the White House and Congress. We
expect a modest slowdown in the summer months, as higher interest rates could
slow activity in interest-sensitive sectors of the economy, such as housing.
TOP 5 PORTFOLIO HOLDINGS BY INDUSTRY AS OF APRIL 30, 1996
Health Care....................... 17.1%
Industrial Revenue................ 12.3%
Water & Sewer..................... 9.4%
Higher Education.................. 8.6%
Public Building................... 8.5%
The Fed's protracted period of easing, and relatively neutral stance, favors
the growth we are currently experiencing. Given the strong employment situation
and commodity price increases, we think the Fed will await further economic
evidence before adjusting interest rates again--probably summertime at the
earliest. So far, guides such as the Consumer Price Index continue to indicate
modest levels of inflation. More importantly, we continue to see few signs of
emerging inflation in either unit labor costs, hourly earnings or the employment
cost index.
- --------------------------------------------------------------------------------
INVESTMENT TERM: REVENUE BONDS
Revenue bonds are one of the three most common types of municipal bonds--the
other two are general obligation bonds and municipal notes. Revenue bonds
are issued to finance income-generating projects such as turnpikes, toll
bridges and airports. The revenues these projects bring in are used to pay
interest and principal to bondholders.
- --------------------------------------------------------------------------------
Continued on page three
2
<PAGE> 4
Finally, as the November elections approach, the debate on tax reform may
grow. We believe the outcome in the long run will be positive, or at worst
neutral, for municipal bonds. That's good news for the market, which was
concerned that flat tax proposals could threaten the tax-exempt status of
municipal bonds. While the debate may not be over and legislation may be
forthcoming, the market should be more confident.
[CREDIT QUALITY]
Portfolio Composition by Credit Quality as of April 30, 1996
<TABLE>
<S> <C>
AAA.................. 60%
AA................... 6%
A.................... 10%
BBB.................. 17%
BB................... 6%
NON-RATED............ 1%
</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.
Indeed, we expect investor demand for municipal securities to exceed supply,
which should add price stability to the general market. And with municipal bond
yields currently at attractive levels relative to Treasuries, investor demand
for tax-exempt securities should increase.
In summary, our view of the general municipal market is positive. From the
decreasing likelihood of tax reform in the near term to specific market
conditions, we believe the market is on solid ground. With our dedication to
comprehensive research and long-term investment perspective, we believe your
Trust is in a position to benefit in the coming months.
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.
3
<PAGE> 5
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1996
VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VKV)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)........... (2.68%)
Six-month total return based on NAV(2).................... .22%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................ 6.75%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)................................... 10.55%
SHARE VALUATIONS
Net asset value........................................... $ 13.99
Closing common stock price................................ $12.000
Six-month high common stock price (02/23/96).............. $13.375
Six-month low common stock price (04/08/96)............... $11.625
Preferred share (Series A) rate(5)........................ 3.690%
Preferred share (Series B) rate(5)........................ 3.747%
Preferred share (Series C) rate(5)........................ 3.650%
Preferred share (Series D) rate(5)........................ 3.445%
Preferred share (Series E) rate(5)........................ 3.700%
</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.
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
ALABAMA 1.4%
$ 3,000 Birmingham, AL Spl Care Fac Fin Auth Hlthcare Fac
Rev Childrens Hosp Ser A (FGIC Insd)............. 5.625% 06/01/13 $ 2,967,390
2,650 Huntsville, AL Hlthcare Auth Hlthcare Fac Rev Ser
A (MBIA Insd).................................... 6.375 06/01/22 2,730,216
2,000 Mobile, AL Indl Dev Brd Solid Waste Disp Rev
Mobile Energy Svcs Co Proj Rfdg.................. 6.950 01/01/20 2,075,720
------------
7,773,326
------------
ALASKA 0.2%
1,000 North Slope Borough, AK Ser B (FSA Insd)......... 7.500 06/30/01 1,122,160
------------
ARIZONA 1.2%
6,000 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig
Irvington Proj Tucson Ser A Rfdg (FSA Insd)...... 7.250 07/15/10 6,579,180
------------
CALIFORNIA 9.0%
1,000 California Hsg Fin Agy Rev Home Mtg Ser B1....... 6.300 08/01/08 1,023,380
1,750 California Rural Home Mtg Fin Auth Single Family
Mtg Rev Ser B (GNMA Collateralized).............. 7.750 09/01/26 1,905,540
1,500 California St Pub Wks Brd Lease Rev Dept of
Corrections Monterey Ser A (MBIA Insd)........... 6.400 11/01/10 1,601,070
6,000 California St Pub Wks Brd Lease Rev Dept of
Corrections St Prisons Ser A Rfdg (AMBAC Insd)... 5.250 12/01/13 5,718,300
2,000 California St Pub Wks Brd Lease Rev Dept of
Corrections St Prisons Ser A Rfdg (AMBAC Insd)... 5.000 12/01/19 1,785,060
1,000 Foothill/Eastern Tran Corridor Agy CA Toll Rd Rev
Ser A............................................ 6.500 01/01/32 989,610
2,000 Fresno, CA Hlth Fac Rev Holy Cross Hlth Sys Saint
Agnes Med (MBIA Insd)............................ 6.625 06/01/21 2,101,880
1,250 Kings Cnty, CA Waste Mgmt Auth Solid Waste Rev... 7.200 10/01/14 1,317,813
1,000 Los Angeles, CA Cmnty Redev Agy Cmnty Redev Fin
Auth Rev Grand Cent Qualified Redev Ser A........ 5.900 12/01/13 943,090
9,500 Los Angeles, CA Dept Wtr & Pwr Elec Plant Rev
Crossover Rfdg (FGIC Insd)....................... 5.375 09/01/23 8,700,290
12,500 Mount Diablo, CA Hosp Dist Rev Ser A (Embedded
Cap) (AMBAC Insd)................................ 5.125 12/01/23 10,824,000
1,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)............................................ 5.600 06/01/07 1,008,830
2,995 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)............................................ 6.000 06/01/08 3,117,705
5,700 Sacramento, CA City Fin Auth Rev Comb Proj B
(MBIA Insd)...................................... * 11/01/15 1,780,167
2,000 San Francisco, CA City & Cnty Arpts Comm Intl
Arpt Rev 2nd Ser Issue 8A (FGIC Insd)............ 6.250 05/01/20 2,018,480
3,250 San Marcos, CA Pub Fac Auth Rev Pub Impt Civic
Cent
Ser A Rfdg....................................... 6.200 08/01/22 3,048,142
2,000 Southern CA Pub Pwr Auth (FSA Insd).............. 6.000 07/01/12 2,011,340
------------
49,894,697
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO 5.7%
$ 5,640 Adams & Arapahoe Cntys, CO Jt Sch Dist Ser C..... 5.750% 12/01/08 $ 5,805,308
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser B................................. 6.950 08/31/20 1,045,870
3,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser B................................. 7.000 08/31/26 3,137,220
9,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C................................. * 08/31/26 970,920
2,000 Colorado Hlth Fac Auth Rev Childrens Hosp Assn
Proj (MBIA Insd)................................. 5.250 10/01/26 1,815,820
1,750 Denver, CO City & Cnty Arpt Rev Ser A............ 6.900 11/15/98 1,849,330
1,250 Denver, CO City & Cnty Arpt Rev Ser A............ 8.875 11/15/12 1,477,188
3,095 Denver, CO City & Cnty Arpt Rev Ser A............ 8.500 11/15/23 3,568,009
3,000 Denver, CO City & Cnty Arpt Rev Ser B (MBIA
Insd)............................................ 6.250 11/15/07 3,140,640
6,000 Denver, CO City & Cnty Arpt Rev Ser C............ 6.600 11/15/04 6,373,500
2,000 Meridian Metro Dist CO Peninsular & Oriental
Steam Navig Co Rfdg.............................. 7.500 12/01/11 2,158,680
------------
31,342,485
------------
CONNECTICUT 0.5%
2,500 Connecticut St Hlth & Edl Fac Auth Rev Nursing
Home Pgm AHF/Hartford............................ 7.125 11/01/14 2,776,500
------------
FLORIDA 5.8%
1,985 Bay Cnty, FL Sch Brd Ctfs Partn (AMBAC Insd)..... 6.750 07/01/12 2,151,958
3,500 Citrus Cnty, FL Hosp Brd Rev Citrus Mem Hosp Ser
A Rfdg (FSA Insd)................................ 6.500 08/15/12 3,686,130
5,000 Dade Cnty, FL Sch Brd Ctfs Partn Ser A (AMBAC
Insd) (b)........................................ 5.500 05/01/25 4,733,700
1,425 Florida Hsg Fin Agy Single Family Mtg Ser A Rfdg
(GNMA Collateralized)............................ 6.650 01/01/24 1,443,283
3,000 Hillsborough Cnty, FL Cap Impt Pgm Rev Criminal
Justice Fac Rfdg (FGIC Insd)..................... 5.250 08/01/16 2,786,040
3,000 Hillsborough Cnty, FL Indl Dev Auth Pollutn Ctl
Rev Tampa Elec Co Proj Ser 92 Rfdg............... 8.000 05/01/22 3,512,910
2,945 Hillsborough Cnty, FL Sch Brd Ctfs Partn (MBIA
Insd)............................................ 6.000 07/01/12 2,995,153
1,300 Jacksonville, FL Hlth Fac Auth Hosp Rev Baptist
Med Cent Proj Ser A Rfdg (MBIA Insd)............. 7.300 06/01/19 1,409,304
4,000 Orlando, FL Util Comm Wtr & Elec Rev Ser A
(Prerefunded @ 10/01/01)......................... 6.500 10/01/20 4,408,000
5,000 Pinellas Cnty, FL Hsg Fin Auth Single Family Mtg
Rev Multi Cnty Pgm Ser A (GNMA Collateralized)... 6.700 02/01/28 5,060,050
------------
32,186,528
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GEORGIA 1.9%
$ 3,000 Burke Cnty, GA Dev Auth Pollutn Ctl Rev GA Pwr Co
Plant Vogtle Proj (MBIA Insd).................... 6.350% 05/01/19 $ 3,031,380
5,000 Georgia Muni Elec Auth Pwr Rev Ser B Rfdg (FGIC
Insd)............................................ 5.700 01/01/19 4,940,050
2,700 Marietta, GA Dev Auth Rev 1st Mtg Life Coll Ser B
(FSA Insd)....................................... 5.375 09/01/09 2,646,945
------------
10,618,375
------------
HAWAII 0.4%
2,250 Hawaii St Arpts Sys Rev 3rd Ser Rfdg (AMBAC
Insd)............................................ 5.750 07/01/09 2,265,300
------------
ILLINOIS 5.3%
3,500 Chicago, IL Cap Apprec (AMBAC Insd).............. * 01/01/17 914,795
1,000 Chicago, IL Park District........................ 6.700 01/01/11 1,069,090
4,000 Chicago, IL Wastewater Transmission Rev (FGIC
Insd)............................................ 5.125 01/01/25 3,511,120
5,000 Chicago, IL Wtr Rev (FGIC Insd).................. 5.000 11/01/20 4,348,000
1,560 Illinois Hlth Fac Auth Rev Carle Fndtn Ser A Rfdg
(FGIC Insd)...................................... 6.750 01/01/10 1,641,697
3,000 Illinois Hlth Fac Auth Rev Children's Mem Hosp
(MBIA Insd)...................................... 6.250 08/15/13 3,142,470
2,250 Illinois Hlth Fac Auth Rev Evangelical Hosps Ser
A Rfdg (FSA Insd)................................ 6.750 04/15/17 2,354,737
1,250 Illinois Hlth Fac Auth Rev Evangelical Hosps Ser
C (FSA Insd)..................................... 6.750 04/15/17 1,308,188
3,000 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys
Rfdg............................................. 5.750 11/15/07 2,961,390
2,070 Northern IL Univ Ctfs Partn Hoffman Estates Cent
Proj (Cap Guar Insd)............................. 5.400 09/01/16 1,923,879
5,000 Regional Tran Auth IL Ser A (AMBAC Insd)......... 8.000 06/01/17 6,310,200
------------
29,485,566
------------
INDIANA 1.2%
12,750 Indiana Tran Fin Auth Hwy Rev Cap Apprec Ser A
(AMBAC Insd)..................................... * 06/01/17 3,489,930
5,500 Indiana Tran Fin Auth Hwy Rev Cap Apprec Ser A
(AMBAC Insd)..................................... * 06/01/18 1,410,860
2,000 Petersburg, IN Pollutn Ctl Rev Indianapolis Pwr &
Lt Ser A Rfdg.................................... 6.100 01/01/16 2,012,900
------------
6,913,690
------------
KENTUCKY 2.8%
9,900 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac Delta
Airls Proj Ser A (c)............................. 7.500 02/01/12 10,567,458
3,500 Kenton Cnty, KY Arpt Brd Arpt Rev Spl Fac Delta
Airls Proj Ser A................................. 7.500 02/01/20 3,727,080
1,250 Mount Sterling, KY Lease Rev KY League Cities Fdg
Ser A............................................ 6.100 03/01/18 1,241,675
------------
15,536,213
------------
LOUISIANA 1.2%
6,000 Saint Charles Parish, LA Solid Waste Disp Rev LA
Pwr & Lt Co Proj (FSA Insd)...................... 7.050 04/01/22 6,435,240
------------
MAINE 1.2%
3,000 Maine Edl Ln Marketing Corp Student Ln Rev Ser
A4............................................... 5.950 11/01/03 3,102,180
1,630 Maine St Hsg Auth Mtg Purp Ser A6................ 6.350 11/15/22 1,636,602
2,000 Maine St Hsg Auth Mtg Purp Ser C2................ 6.875 11/15/23 2,042,360
------------
6,781,142
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MARYLAND 1.4%
$ 8,700 Maryland St Hlth & Higher Edl Fac Auth Rev (FGIC
Insd)............................................ 5.000% 07/01/20 $ 7,651,998
------------
MASSACHUSETTS 5.3%
2,000 Massachusetts St Hlth & Edl Fac Auth Rev (AMBAC
Insd)............................................ 7.100 07/01/21 2,174,660
1,000 Massachusetts St Hlth & Edl Fac Auth Rev Brigham
& Womens Hosp Ser C.............................. 7.125 06/01/09 1,060,790
7,000 Massachusetts St Hsg Fin Agy Hsg Proj Ser A...... 6.375 04/01/21 7,034,930
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
American Hingham................................. 6.750 12/01/20 1,003,910
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
American Hingham................................. 6.900 12/01/29 1,003,870
1,000 Massachusetts St Indl Fin Agy Wtr Treatment
American Hingham................................. 6.950 12/01/35 1,003,860
14,500 Massachusetts St Wtr Res Auth Ser A (Prerefunded
@ 12/01/01)...................................... 6.500 12/01/19 16,003,505
------------
29,285,525
------------
MICHIGAN 2.8%
1,250 Battle Creek, MI Downtown Dev Auth Tax Increment
Rev.............................................. 7.600 05/01/16 1,359,137
5,000 Detroit, MI Downtown Dev Auth Tax Increment Rev
Dev Area No 1 Projs Ser C1....................... 6.250 07/01/25 4,871,950
2,750 Detroit, MI Ser B Rfdg........................... 7.000 04/01/04 2,967,855
4,000 Michigan St Bldg Auth Rev Ser I Rfdg (MBIA
Insd)............................................ 6.250 10/01/20 4,101,000
2,500 Michigan St Hosp Fin Auth Rev Hosp Port Huron
Hosp Oblig Rfdg (FSA Insd)....................... 5.375 07/01/12 2,371,700
------------
15,671,642
------------
MISSISSIPPI 0.3%
1,500 Claiborne Cnty, MS Pollutn Ctl Rev Sys Energy Res
Inc Rfdg......................................... 7.300 05/01/25 1,553,820
------------
MISSOURI 0.4%
2,395 Kansas City, MO Port Auth Fac Riverfront Park
Proj Ser A....................................... 5.750 10/01/03 2,451,450
------------
NEVADA 2.9%
5,750 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj C Rfdg
(AMBAC Insd)..................................... 7.200 10/01/22 6,355,187
7,205 Clark Cnty, NV Passenger Fac Las Vegas Macarran
Intl Arpt (MBIA Insd)............................ 5.750 07/01/23 6,794,387
2,675 Nevada Hsg Division Single Family Pgm Mezzanine
B................................................ 6.550 10/01/12 2,712,290
------------
15,861,864
------------
NEW JERSEY 4.0%
1,000 Bordentown, NJ Swr Auth Rev Ser C (MBIA Insd).... 6.800 12/01/25 1,069,910
1,600 Middlesex Cnty, NJ Ctfs Partn (MBIA Insd)........ 6.125 02/15/19 1,634,064
1,000 New Jersey Econ Dev Auth Econ Dev Rev Manahawkin
Convalescent Ser A Rfdg (FHA Gtd)................ 6.650 08/01/18 1,005,470
2,500 New Jersey Econ Dev Auth Mkt Transition Fac Rev
Sr Lien Ser A (MBIA Insd)........................ 5.800 07/01/09 2,566,425
2,290 New Jersey Hlthcare Fac Fin Auth Rev Deborah
Heart & Lung Cent................................ 6.200 07/01/13 2,276,604
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW JERSEY (CONTINUED)
$ 1,695 New Jersey Hlthcare Fac Fin Auth Rev Genl Hosp
Cent at Passaic (FSA Insd)....................... 6.000% 07/01/06 $ 1,808,497
2,500 New Jersey Hlthcare Fac Fin Auth Rev Genl Hosp
Cent at Passaic (FSA Insd)....................... 6.750 07/01/19 2,653,625
2,250 New Jersey St Edl Fac Auth Rev Glassboro St
College Ser A (MBIA Insd)........................ 6.700 07/01/21 2,414,880
6,750 Salem Cnty, NJ Indl Pollutn Ctl Fin Auth Rev
Pollutn Ctl Pub Svc Elec & Gas Ser A (MBIA
Insd)............................................ 5.450 02/01/32 6,136,627
2,500 West New York, NJ Muni Util Auth Swr Rev Rfdg
(FGIC Insd)...................................... * 12/15/18 670,375
------------
22,236,477
------------
NEW YORK 12.4%
2,070 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev
Ser A............................................ 7.000 06/15/09 2,243,238
2,105 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev
Ser A (Prerefunded @ 06/15/01)................... 7.000 06/15/09 2,343,223
7,270 New York City Ser A Rfdg......................... 7.000 08/01/04 7,874,501
5,000 New York City Ser B Rfdg......................... 6.375 08/15/12 5,001,400
5,700 New York City Ser E Rfdg......................... 6.600 08/01/03 6,024,900
2,000 New York St Dorm Auth Rev City Univ 3rd Genl
Resources Ser 2 (MBIA Insd)...................... 6.250 07/01/19 2,037,520
7,500 New York St Dorm Auth Rev Cons City Univ Sys Ser
A................................................ 5.750 07/01/13 7,195,350
2,500 New York St Dorm Auth Rev Dept of Hlth........... 5.500 07/01/25 2,223,675
4,000 New York St Dorm Auth Rev St Univ Edl Fac Ser A
Rfdg (AMBAC Insd)................................ 5.500 05/15/09 4,042,600
5,215 New York St Dorm Auth Rev St Univ Edl Fac Ser B
Rfdg............................................. 7.375 05/15/14 5,703,280
5,885 New York St Energy Research & Dev Auth Fac Rev... 7.125 12/01/29 6,494,156
2,310 New York St Med Care Fac Fin Agy Rev Saint
Peter's Hosp Proj Ser A (AMBAC Insd)............. 5.375 11/01/13 2,196,856
4,000 New York St Urban Dev Corp Rev Correctional Cap
Fac Rfdg......................................... 5.500 01/01/15 3,636,960
3,130 New York St Urban Dev Corp Rev Correctional Fac
Ser A Rfdg....................................... 5.500 01/01/16 2,838,128
5,000 New York St Urban Dev Corp Rev Rfdg St Fac....... 5.700 04/01/20 4,704,900
4,000 Port Auth NY & NJ Cons Ninety-fifth Ser.......... 6.125 07/15/29 4,041,880
------------
68,602,567
------------
NORTH CAROLINA 1.3%
7,935 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev
Ser A Rfdg (AMBAC Insd).......................... 5.375 01/01/20 7,382,645
------------
NORTH DAKOTA 0.4%
2,000 Ward Cnty, ND Hlthcare Fac Rev Saint Joseph Hosp
Corp Proj........................................ 8.875 11/15/24 2,168,540
------------
OHIO 4.2%
2,110 Cleveland Rock Glen Hsg Assistance Corp OH Mtg
Rev Ser A Rfdg (FHA Gtd)......................... 6.750 01/15/25 2,173,279
2,000 Cuyahoga Cnty, OH Multi Family Rev Hsg Dale Brdg
Apt (GNMA Collateralized)........................ 6.600 10/20/30 2,046,800
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OHIO (CONTINUED)
$ 5,000 Cuyahoga Cnty, OH Hosp Rev Ser A Rfdg & Impt
(MBIA Insd)...................................... 5.625% 01/15/26 $ 4,731,050
3,345 Franklin Cnty, OH Hosp Rev & Impt Doctors Hosp
Proj Rfdg........................................ 5.875 12/01/23 3,120,684
1,600 Middleburg Heights, OH Hosp Rev Southwest Genl
Hlth Cent (FSA Insd)............................. 5.750 08/15/21 1,551,152
5,130 Muskingum Cnty, OH Hosp Fac Rev Rfdg & Impt
Bethesda Care Sys (Connie Lee Insd).............. 6.250 12/01/10 5,413,740
1,000 Ohio St Higher Edl Fac Comm Rev Higher Edl OH
Wesleyan Univ (MBIA Insd)........................ 6.125 11/15/17 1,025,730
2,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac Rev OH
Edison Co
Proj Rfdg........................................ 5.950 05/15/29 1,794,860
1,500 Ohio St Wtr Dev Auth Pollutn Ctl Fac Rev PA Pwr
Co Proj Rfdg (AMBAC Insd)........................ 6.150 08/01/23 1,537,080
------------
23,394,375
------------
OKLAHOMA 1.9%
10,000 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc.............................................. 7.375 12/01/20 10,585,700
------------
OREGON 1.7%
6,000 Oregon Hlth Sciences Univ Rev Ser B (MBIA
Insd)............................................ 5.250 07/01/28 5,484,420
3,795 Oregon St Dept Administrative Services Ctfs Partn
Ser A (MBIA Insd)................................ 5.250 11/01/10 3,680,770
------------
9,165,190
------------
PENNSYLVANIA 4.7%
3,730 Delaware Cnty, PA Auth Hlthcare Rev Mercy Hlth
Corp of Southeastn PA Ser A Rfdg (Connie Lee
Insd)............................................ 5.375 11/15/23 3,396,650
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
43............................................... 7.500 10/01/25 1,026,060
3,000 Pennsylvania St Higher Edl Fac Auth Rev Med
College PA Ser A................................. 7.250 03/01/11 3,116,370
9,450 Philadelphia, PA Gas Wks Rev 14th Ser (FSA
Insd)............................................ 6.250 07/01/08 10,041,570
2,525 Philadelphia, PA Gas Wks Rev 14th Ser Rfdg (FSA
Insd)............................................ 6.375 07/01/26 2,611,456
800 Philadelphia, PA Hosps & Higher Ed Fac Auth Rev
Cmnty College Ser A (MBIA Insd).................. 6.100 05/01/09 841,896
1,370 Philadelphia, PA Hosps & Higher Ed Fac Auth Rev
Cmnty College Ser B Rfdg (MBIA Insd)............. 6.500 05/01/08 1,520,426
3,500 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser
A................................................ 6.000 12/01/05 3,357,095
------------
25,911,523
------------
RHODE ISLAND 0.2%
1,050 Rhode Island St Hlth & Edl Bldg Corp Rev Higher
Edl Fac Roger Williams (Connie Lee Insd)......... 7.200 11/15/14 1,144,784
------------
SOUTH CAROLINA 0.6%
2,240 Marion Cnty, SC Hosp Dist (Connie Lee Insd)...... 5.500 11/01/10 2,200,509
1,185 Spartanburg Cnty, SC Sch Dist No 005 Pub Fac Corp
Ctfs Partn (MBIA Insd)........................... 5.600 07/01/10 1,182,713
------------
3,383,222
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TENNESSEE 1.2%
$ 1,000 Knox Cnty, TN Indl Dev Brd Multi Family Rev (FHA
Gtd)............................................. 5.850% 03/01/15 $ 974,320
2,250 Tennessee Hsg Dev Agy Homeownership Proj T....... 7.375 07/01/23 2,331,180
3,000 Tennessee Hsg Dev Agy Mtg Fin Ser A.............. 7.125 07/01/26 3,114,240
------------
6,419,740
------------
TEXAS 3.6%
9,065 Alliance Arpt Auth Inc TX Spl Fac Rev American
Airls Inc Proj (c)............................... 7.500 12/01/29 9,640,446
2,250 Harris Cnty, TX Hlth Fac Dev Corp Hosp Rev
Hermann Hosp Proj (MBIA Insd).................... 6.375 10/01/24 2,327,738
5,000 Harris Cnty, TX Toll Rd Sr Lien Rfdg (FGIC
Insd)............................................ 5.000 08/15/16 4,501,300
1,275 Matagorda Cnty, TX Navig Dist No 1 Rev Houston Lt
& Pwr Ser A Rfdg (AMBAC Insd).................... 6.700 03/01/27 1,367,297
2,250 Tomball, TX Hosp Auth Rev Rfdg................... 6.125 07/01/23 2,099,475
------------
19,936,256
------------
UTAH 0.2%
4,950 Intermountain Pwr Agy UT Pwr Supply Rev Ser A
Rfdg (FGIC Insd)................................. * 07/01/17 1,307,097
------------
VIRGINIA 1.6%
2,250 Fredericksburg, VA Indl Dev Auth Hosp Fac Rev
(Inverse Fltg) (FGIC Insd)....................... 6.600 08/15/23 2,327,108
3,000 Isle Wight Cnty, VA Indl Dev Auth Solid Waste
Disposal Fac Rev Union Camp Corp Proj............ 6.550 04/01/24 3,089,730
2,000 Loudoun Cnty, VA Ctfs Partn (FSA Insd)........... 6.900 03/01/19 2,152,840
1,500 Virginia St Hsg Dev Auth Multi Family Ser E
Rfdg............................................. 5.900 11/01/17 1,467,840
------------
9,037,518
------------
WASHINGTON 0.8%
4,000 Washington St Pub Pwr Supply Ser A Rfdg (FGIC
Insd)............................................ 7.000 07/01/08 4,515,400
------------
WEST VIRGINIA 2.5%
5,920 Harrison Cnty, WV Cnty Cmnty Solid Waste Disp Rev
West PA Pwr Co Ser C (AMBAC Insd)................ 6.750 08/01/24 6,244,002
4,000 Marshall Cnty, WV Pollutn Ctl Rev OH Pwr Co Proj
Ser C Rfdg (MBIA Insd)........................... 6.850 06/01/22 4,308,560
3,000 West Virginia St Wtr Dev Auth Wtr Dev Rev Ln Prog
II Ser A (Prerefunded @ 11/01/04) (FSA Insd)..... 6.750 11/01/33 3,411,780
------------
13,964,342
------------
WISCONSIN 1.9%
3,500 Wisconsin Hsg & Econ Dev Auth Homeownership Rev
Ser A............................................ 6.450 03/01/17 3,555,615
5,000 Wisconsin St Hlth & Edl Fac Auth Rev Children's
Hosp (Embedded Cap) (FGIC Insd).................. * 08/15/10 4,636,850
2,360 Wisconsin St Hlth & Edl Fac Waukesha Mem Hosp Ser
A (AMBAC Insd)................................... 5.000 08/15/09 2,201,030
------------
10,393,495
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PUERTO RICO 4.0%
$ 7,000 Puerto Rico Comwlth Hwy & Tran Ser Y (Embedded
Cap) (FSA Insd).................................. 5.730% 07/01/21 $ 7,400,820
4,500 Puerto Rico Elec Pwr Auth Pwr Rev Ser Z Rfdg..... 5.500 07/01/13 4,255,875
10,000 Puerto Rico Pub Bldgs Auth Gtd Pub Ed & Hlth Fac
Rfdg Ser M (MBIA Insd)........................... 5.600 07/01/08 10,301,000
------------
21,957,695
------------
TOTAL LONG-TERM INVESTMENTS 98.1%
(Cost $531,602,390) (a)...................................................... 543,693,267
SHORT-TERM INVESTMENTS AT AMORTIZED COST 0.5%................................. 2,815,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%.................................... 8,006,818
------------
NET ASSETS 100%............................................................... $554,515,085
============
</TABLE>
*Zero coupon bond
(a) At April 30, 1996, cost for federal income tax purposes is $531,602,390; the
aggregate gross unrealized appreciation is $16,085,214 and the aggregate
gross unrealized depreciation is $3,787,228, resulting in net unrealized
appreciation including open option and futures transactions of $12,297,986.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments and open option and futures transactions.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $531,602,390) (Note 1).............. $543,693,267
Short-Term Investments (Note 1)........................................ 2,815,000
Cash................................................................... 56,262
Receivables:
Interest............................................................. 10,224,817
Investments Sold..................................................... 3,050,550
Margin on Futures (Note 4)........................................... 97,500
Options at Market Value (Net premiums paid of $233,186) (Note 4)....... 323,531
Unamortized Organizational Expenses (Note 1)........................... 15,198
Other.................................................................. 15,947
------------
Total Assets..................................................... 560,292,072
------------
LIABILITIES:
Payables:
Investments Purchased................................................ 4,703,122
Income Distributions--Common and Preferred Shares.................... 412,090
Investment Advisory Fee (Note 2)..................................... 295,699
Administrative Fee (Note 2).......................................... 90,984
Accrued Expenses....................................................... 236,749
Deferred Compensation and Retirement Plans (Note 2).................... 38,343
------------
Total Liabilities................................................ 5,776,987
------------
NET ASSETS............................................................. $554,515,085
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000 shares, 4,500
issued with liquidation preference of $50,000 per share) (Note 5).... $225,000,000
------------
Common Shares ($.01 par value with an unlimited number of shares
authorized, 23,555,115 shares issued and outstanding)................ 235,551
Paid in Surplus........................................................ 348,118,080
Net Unrealized Appreciation on Investments............................. 12,297,986
Accumulated Undistributed Net Investment Income........................ 1,441,674
Accumulated Net Realized Loss on Investments........................... (32,578,206)
------------
Net Assets Applicable to Common Shares........................... 329,515,085
------------
NET ASSETS............................................................. $554,515,085
============
NET ASSET VALUE PER COMMON SHARE ($329,515,085 divided
by 23,555,115 shares outstanding).................................... $ 13.99
============
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................................................. $ 16,791,983
------------
EXPENSES:
Investment Advisory Fee (Note 2)...................................... 1,837,195
Administrative Fee (Note 2)........................................... 565,291
Preferred Share Maintenance (Note 5).................................. 329,564
Legal (Note 2)........................................................ 26,390
Trustees Fees and Expenses (Note 2)................................... 11,361
Amortization of Organizational Expenses (Note 1)...................... 3,988
Other................................................................. 201,160
------------
Total Expenses.................................................... 2,974,949
------------
NET INVESTMENT INCOME................................................. $ 13,817,034
=============
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales................................................. $ 119,257,818
Cost of Securities Sold............................................. (117,033,504)
------------
Net Realized Gain on Investments (Including realized gain on closed
option transactions of $191,725 and realized loss on futures
transactions of $567,044)........................................... 2,224,314
------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period............................................. 23,170,303
End of the Period (Including unrealized appreciation on open option
and futures transactions of $90,345 and $116,764, respectively)... 12,297,986
------------
Net Unrealized Depreciation on Investments During the Period.......... (10,872,317)
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS....................... $ (8,648,003)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS............................ $ 5,169,031
============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1996
and the Year Ended October 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 13,817,034 $ 27,860,675
Net Realized Gain/Loss on Investments.................... 2,224,314 (24,781,547)
Net Unrealized Appreciation/Depreciation on Investments
During the Period...................................... (10,872,317) 61,794,014
------------ ------------
Change in Net Assets from Operations..................... 5,169,031 64,873,142
----------- ------------
Distributions from Net Investment Income:
Common Shares.......................................... (9,987,248) (21,482,127)
Preferred Shares....................................... (4,057,826) (8,891,837)
------------ ------------
Total Distributions...................................... (14,045,074) (30,373,964)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... (8,876,043) 34,499,178
NET ASSETS:
Beginning of the Period.................................. 563,391,128 528,891,950
------------ ------------
End of the Period (Including undistributed net investment
income of $1,441,674 and $1,669,714, respectively)..... $554,515,085 $563,391,128
============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 26, 1993
Six Months (Commencement
Ended Year Ended Year Ended of Investment
April 30, October 31, October 31, Operations) to
1996 1995 1994 October 31, 1993
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of the Period (a).... $14.366 $12.901 $16.427 $14.789
------ ------ ------ ------
Net Investment Income.......... .586 1.183 1.177 .639
Net Realized and Unrealized
Gain/Loss on Investments..... (.367) 1.571 (3.340) 1.487
------ ------ ------ ------
Total from Investment
Operations..................... .219 2.754 (2.163) 2.126
------ ------ ------ ------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders............... .424 .912 .912 .380
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders..... .172 .377 .238 .108
Distributions from Net Realized
Gain on Investments (Note 1):
Paid to Common
Shareholders............... -0- -0- .177 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders..... -0- -0- .036 -0-
------ ------ ------ ------
Total Distributions.............. .596 1.289 1.363 .488
------ ------ ------ ------
Net Asset Value, End of the
Period......................... $13.989 $14.366 $12.901 $16.427
====== ====== ====== =======
Market Price Per Share at End of
the Period..................... $12.000 $12.750 $10.750 $15.250
Total Investment Return at
Market Price (b)............... (2.68%)* 27.67% (23.52%) 4.25%*
Total Return at Net Asset Value
(c)............................ .22%* 19.04% (15.48%) 12.14%*
Net Assets at End of the Period
(In millions).................. $ 554.5 $ 563.4 $ 528.9 $ 611.9
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares......................... 1.73% 1.80% 1.70% 1.46%
Ratio of Expenses to Average Net
Assets......................... 1.05% 1.06% 1.03% 1.00%
Ratio of Net Investment Income to
Average Net Assets Applicable
to Common Shares (d)........... 5.68% 5.90% 6.39% 5.59%
Portfolio Turnover............... 20.62%* 49.85% 79.05% 65.72%*
</TABLE>
(a) Net asset value at March 26, 1993, is adjusted for common and preferred
share offering costs of $.211 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
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Value 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. The Trust will invest in a portfolio
consisting substantially of municipal obligations rated investment grade at the
time of investment. The Trust commenced investment operations on March 26, 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 less than 60 days are valued at
amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
D. ORGANIZATIONAL EXPENSES--The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
connection with the Trust's organization in the amount of $40,000. These costs
are being amortized on a straight line basis over the 60 month period ending
March 25, 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 expenses 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, 1995, the Trust had an accumulated capital loss carry
forward for tax purposes of $34,802,520, of which $10,020,973 and $24,781,547
will expire on October 31, 2002 and 2003, respectively.
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,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1996, the Trust recognized expenses of
approximately $16,000 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. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.
At April 30, 1996, VKAC owned 6,700 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the six months ended April 30, 1996, were $116,096,049 and
$117,033,504, respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation on investments. Upon disposition, a realized gain or
loss is recognized accordingly, except for exercised option contracts where the
recognition of gain or loss is postponed until the disposal of the security
underlying the option contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in options for the six months ended April 30, 1996, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- ------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1995................... -0- $ -0-
Options Written and Purchased (Net)............... 1,103 (796,699)
Options Terminated in Closing Transactions
(Net)........................................... (900) 563,513
----- --------
Outstanding at April 30, 1996..................... 203 $(233,186)
===== ========
</TABLE>
The related futures contracts of the outstanding option transactions as of
April 30, 1996, and the description and market value is as follows:
<TABLE>
<CAPTION>
MARKET
EXP. MONTH/ VALUE
CONTRACTS EXERCISE PRICE OF OPTIONS
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bond Futures
June 1996--Purchased Puts......... 203 June/110 $323,531
=== ========
</TABLE>
B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
The fluctuation in market value of the contracts is settled daily through a
cash margin account. Realized gains and losses are recognized when the contracts
are closed or expire.
Transactions in futures contracts for the six months ended April 30, 1996,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1995............................. 165
Futures Opened.............................................. 295
Futures Closed.............................................. (330)
----
Outstanding at April 30, 1996............................... 130
====
</TABLE>
The futures contracts outstanding as of April 30, 1996, and the description
and unrealized appreciation is as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C>
Municipal Bond Index Futures June 1996--Sells
to Open.................................... 130 $116,764
=== ========
</TABLE>
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
C. INDEXED SECURITIES--These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.
An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yield of the portfolio.
An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short-term interest rates which it
pays on its preferred shares.
5. PREFERRED SHARES
The Trust has outstanding 4,500 Auction Preferred Shares ("APS") in five series.
Series A, B, C and D each contain 1,000 shares and Series E contains 500 shares.
Dividends are cumulative and the dividend rate is periodically reset through an
auction process. The dividend period for Series A and E is seven days, and for
Series B, C and D is 28 days. The average rate in effect on April 30, 1996 was
3.640%. During the six months ended April 30, 1996, the rates ranged from 3.20%
to 5.05%.
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
Pace Fund
Growth & Income
Balanced Fund
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
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies 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 direct at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
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VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
OFFICERS AND TRUSTEES
DON G. POWELL*
Chairman and Trustee
DENNIS J. MCDONNELL*
President and Trustee
DAVID C. ARCH
Trustee
ROD DAMMEYER
Trustee
HOWARD J KERR
Trustee
THEODORE A. MYERS
Trustee
HUGO F. SONNENSCHEIN
Trustee
WAYNE W. WHALEN*
Trustee
PETER W. HEGEL*
Vice President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Treasurer
SCOTT E. MARTIN*
Assistant Secretary
WESTON B. WETHERELL*
Assistant Secretary
NICHOLAS DALMASO*
Assistant Secretary
JOHN L. SULLIVAN*
Controller
STEVEN M. HILL*
Assistant Treasurer
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
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
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., 1996
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
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VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
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