N-CSR 1 c96517nvcsr.txt CERTIFIED SHAREHOLDER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5662 Van Kampen California Municipal Trust ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) 1221 Avenue of the Americas New York, New York 10020 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas New York, New York 10020 ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: 6/30 Date of reporting period: 6/30/05 Item 1. Reports to Shareholders. The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen California Municipal Trust performed during the annual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the trust's financial statements and a list of trust investments as of June 30, 2005. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE TRUST IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE TRUST WILL DECLINE AND THAT THE VALUE OF THE TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
Performance Summary as of 6/30/2005
CALIFORNIA MUNICIPAL TRUST SYMBOL: VKC ------------------------------------------------------------ AVERAGE ANNUAL BASED ON BASED ON TOTAL RETURNS NAV MARKET PRICE Since Inception (11/1/88) 7.80% 7.09% 10-year 7.82 6.29 5-year 9.64 9.60 1-year 13.81 16.61 ------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET ASSET VALUE (NAV) AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. The common share market price is the price the market is willing to pay for shares of the trust at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions. Total return assumes an investment at the beginning of the period, reinvestment of all distributions for the period in accordance with the trust's dividend reinvestment plan, and sale of all shares at the end of the period. The Lehman Brothers California Municipal Bond Index is a broad-based statistical composite of California municipal bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. Source for index performance: Bloomberg L.P. 1 Trust Report FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2005 Van Kampen California Municipal Trust is managed by the Adviser's Municipal Fixed Income team.(1) Current members include John Reynoldson, Executive Director of the Adviser, Joseph Piraro and Robert Wimmel, Vice Presidents of the Adviser. MARKET CONDITIONS During the 12-month period ended June 30, 2005, ongoing increases in short-term interest rates were a leading influence on the municipal bond market. Continued signs of economic growth and record rising oil prices stirred inflation fears. Against this backdrop, the Federal Open Market Committee (the "Fed") raised the federal funds target at a "measured" pace. Eight increases of 25 basis points each brought the target rate from 1.25 percent at the start of the period to 3.25 percent at the close. Although the yields of short- and intermediate-term bonds rose in response to the Fed's actions, long-term interest rates fell as buyers seemed undiscouraged by the prospect for rising inflation. The difference between short and longer-term yields (also known as the yield curve) flattened and municipal bonds with long maturities generally outperformed those with shorter maturities. The municipal bond market posted solid returns overall, outpacing most other segments of the bond market. Performance was not equally robust across the municipal market, however. Shorter-term municipal bonds were impeded by the Fed's tightening, while longer-term bonds posted strong gains. As investors pursued higher yields, lower quality bonds generally outperformed higher quality issues. The supply of new municipal issues declined slightly in 2004, but ramped up steeply in 2005 as long-term issuers moved to bring securities to market in advance of additional near-term interest rate rises. During the reporting period, California continued to lead the nation in new issuance; more than half of the state's new underwriting volume was backed by insurance. The State of California continued to improve from a credit perspective. The government appeared to make strides in resolving its budgetary deficit, while both S&P and Moody upgraded the state's general obligation bonds during the period. These factors contributed to increased demand for California bonds. Despite its progress, the state still has significant ground to cover before achieving fiscal balance. Moreover, as state residents grew impatient with the pace of reforms, Governor Schwarzenegger's popularity waned as the reporting period progressed, and he could face added challenges in implementing his deficit reduction plans. (1)Team members may change without notice at any time. 2 PERFORMANCE ANALYSIS The trust's return can be calculated based upon either the market price or the net asset value (NAV) of its shares. NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding, while market price reflects the supply and demand for the shares. As a result, the two returns can differ, as they did during the reporting period. On an NAV basis, the trust outperformed its benchmark index, the Lehman Brothers Municipal Bond Index. On a market price basis, the trust outperformed its benchmark. (See table below.) TOTAL RETURNS FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2005
------------------------------------------------------------- LEHMAN BROTHERS BASED ON BASED ON CALIFORNIA NAV MARKET PRICE MUNICIPAL BOND INDEX 13.81% 16.61% 9.21% -------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN, NET ASSET VALUE AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SEE PERFORMANCE SUMMARY FOR ADDITIONAL PERFORMANCE INFORMATION AND INDEX DEFINITION. The trust often uses leverage to enhance its dividend to common shareholders. The trust borrows money at short-term rates through the issuance of preferred shares. The proceeds are reinvested in longer-term securities, taking advantage of the difference between short and longer-term rates. The Fed's policy of raising interest rates throughout the period made the trust's borrowing activity more expensive. Overall, however, the strategy of using leverage during the period was positive. Throughout the period, the trust's duration (a measure of interest rate sensitivity) was below that of its benchmark, the Lehman Brothers California Municipal Index. As a result, the trust was precluded from participating to the fullest extent as longer maturity bonds rallied. Also reflecting this conservative approach, the trust invests exclusively in bonds with investment grade credit ratings. At the end of the reporting period, AAA rated bonds accounted for approximately 78 percent of the portfolio's assets. Given the market's preference for lower-rated, higher-yielding bonds, our commitment to quality affected relative performance during the reporting period. One of our primary strategies during the period was to take advantage of compelling opportunities among longer maturity bonds. We sought to limit exposure to areas of the market that we believed would be most vulnerable to rising rates, while positioning the trust to benefit from additional flattening of the yield curve. Our purchases focused on the 20- to 25-year segment of the market during the first half of the reporting period, and the 25- to 30-year 3 segment during 2005. We favored bonds with premium (or above-market) coupons. To fund these purchases, we reinvested proceeds from refunding activity and from our sales of bonds with shorter maturities in the 10- to 15-year range. We also found opportunities to deploy additional assets into bonds with BBB ratings, which offered attractive yield characteristics as well as the investment-grade ratings that the trust's prospectus requires. Bonds rated BBB represented approximately 4 percent of the portfolio at the end of the reporting period. Portfolio holdings were well diversified across the major sectors of the municipal market. The trust maintained its long-standing emphasis on bonds tied to essential services, including tax district, education, and water and sewer bonds. In contrast, we avoided bonds with unfavorable structures or the potential for increased volatility, such as zero-coupon, noncallable and housing bonds, and bonds subject to the alternative minimum tax. There is no guarantee the security sectors mentioned will continue to perform well or be held by the trust in the future. CHANGES IN INVESTMENT POLICIES 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 recently approved a change in its investment policies to allow the Trust to invest up to 15% of its net assets in "inverse floating rate obligations." Floating rate obligations bear rates of interest that are adjusted periodically to reflect changes in market rates of interest. Inverse floating rate obligations have rates that vary inversely with changes in market rates of interest. These securities have varying degrees of liquidity and the market value of such securities generally will fluctuate in response to changes in market rates of interest to a greater extent than the value of an equal principal amount of a fixed rate security having similar credit quality, redemption provisions and maturity. 4 TOP 5 SECTORS AS OF 6/30/05 RATINGS ALLOCATION AS OF 6/30/05 Tax District 18.9% AAA/Aaa 78.3% Water & Sewer 15.1 AA/Aa 4.0 Higher Education 12.7 A/A 13.5 Public Education 11.5 BBB/Baa 4.2 Public Building 10.6
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Ratings are as a percentage of total investments and sectors are as percentage of long term investments. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. 5 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen trust provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the trust's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to trust shareholders, and makes these reports available on its public Web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public Web site, each trust files a complete schedule of portfolio holdings with the SEC for the trust's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public Web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. You may obtain copies of a trust's fiscal quarter filings by contacting Van Kampen Client Relations at 1-800-847-2424. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD You may obtain a copy of the trust's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free 800-847-2424 or by visiting our Web site at www.vankampen.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. You may obtain information regarding how the trust voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 by visiting our Web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov. 6 Investment Advisory Agreement Approval Both the Investment Company Act of 1940 and the terms of the Fund's investment advisory agreement require that the investment advisory agreement between the Fund and its investment adviser be approved annually both by a majority of the Board of Trustees and by a majority of the independent trustees voting separately. On May 25, 2005, the Board of Trustees, and the independent trustees voting separately, determined that the terms of the investment advisory agreement are fair and reasonable and approved the continuance of the investment advisory contract as being in the best interests of the Fund and its shareholders. In making its determination, the Board of Trustees considered materials that were specifically prepared by the investment adviser at the request of the Board and Fund counsel, and by an independent provider of investment company data contracted to assist the Board, relating to the contract review process. The Board also considered information received periodically about the portfolio, performance, the investment strategy, portfolio management team and fees and expenses of the Fund. Finally, the Board considered materials it had received in approving a change in the advisory fee rate effective November 1, 2004 and materials it had received in approving a reorganization of the Fund. The Board of Trustees considered the contract over a period of several months and the non-management trustees held sessions both with the investment adviser and separate from the investment adviser in reviewing and considering the contract. In approving the investment advisory agreement, the Board of Trustees considered, among other things, the nature, extent and quality of the services provided by the investment adviser, the performance, fees and expenses of the Fund compared to other similar funds and other products, the investment adviser's expenses in providing the services and the profitability of the investment adviser and its affiliated companies. The Board of Trustees considered the extent to which any economies of scale experienced by the investment adviser are shared with the Fund's shareholders, and the propriety of breakpoints in the Fund's investment advisory fee schedule. The Board of Trustees considered comparative advisory fees of the Fund and other investment companies and/or other products at different asset levels, and considered the trends in the industry. The Board of Trustees evaluated other benefits the investment adviser and its affiliates derive from their relationship with the Fund. The Board of Trustees reviewed information about the foregoing factors and considered changes, if any, in such information since its previous approval. The Board of Trustees discussed the financial strength of the investment adviser and its affiliated companies and the capability of the personnel of the investment adviser, and specifically the strength and background of its portfolio management personnel. The Board of Trustees reviewed the statutory and regulatory requirements for approval and disclosure of investment advisory agreements. The Board of Trustees, including the independent trustees, evaluated all of the foregoing and does not believe any single factor or group of 7 factors control or dominate the review process, and, after considering all factors together, has determined, in the exercise of its business judgment, that approval of the investment advisory agreement is in the best interests of the Fund and its shareholders. The following summary provides more detail on certain matters considered but does not detail all matters considered. Nature, Extent and Quality of the Services Provided. On a regular basis, the Board of Trustees considers the roles and responsibilities of the investment adviser as a whole and for those specific portfolio management, support and trading functions servicing the Fund. The trustees discuss with investment adviser the resources available and used in managing the Fund. The trustees also discuss certain other services which are provided on a cost-reimbursement basis by the investment adviser or its affiliates to the Van Kampen funds including certain accounting, administrative and legal services. The Board has determined that the nature, extent and quality of the services provided by the investment adviser support its decision to approve the investment advisory contract. Performance, Fees and Expenses of the Fund. On a regular basis, the Board of Trustees reviews the performance, fees and expenses of the Fund compared to its peers and to appropriate benchmarks. In addition, a performance committee of the Board spends more focused time on the performance of the Fund and other funds in the Van Kampen complex, paying specific attention to underperforming funds. The trustees discuss with the investment adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the trustees and the investment adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance with special attention to three-year performance) and, when a fund's weighted performance is under the fund's benchmark, they discuss the causes and where necessary seek to make specific changes to investment strategy or investment personnel. The Fund discloses more information about its performance elsewhere in this report and in the Fund's prospectus. The trustees discuss with the investment adviser the level of advisory fees for this Fund relative to comparable funds and other products advised by the adviser and others in the marketplace. The trustees review not only the advisory fees but other fees and expenses (whether paid to the adviser, its affiliates or others) and the Fund's overall expense ratio. The Board has determined that the performance, fees and expenses of the Fund support its decision to approve the investment advisory contract. Investment Adviser's Expenses in Providing the Service and Profitability. At least annually, the trustees review the investment adviser's expenses in providing services to the Fund and other funds advised by the investment adviser and the profitability of the investment adviser. These profitability reports are put together by the investment adviser with the oversight of a special ad hoc committee of the Board. The trustees discuss with the investment adviser its revenues and expenses, including among other things, revenues for advisory services, portfolio management-related expenses, revenue sharing arrangement 8 costs and allocated expenses both on an aggregate basis and per fund. The Board has determined that the analysis of the investment adviser's expenses and profitability support its decision to approve the investment advisory contract. Economies of Scale. On a regular basis, the Board of Trustees considers the size of the Fund and how that relates to the Fund's expense ratio and particularly the Fund's advisory fee rate. In conjunction with its review of the investment adviser's profitability, the trustees discuss with the investment adviser how more (or less) assets can affect the efficiency or effectiveness of managing the Fund's portfolio and whether the advisory fee level is appropriate relative to current asset levels and/or whether the advisory fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and potential economies of scale of the Fund support its decision to approve the investment advisory contract. Other Benefits of the Relationship. On a regular basis, the Board of Trustees considers other benefits to the investment adviser and it affiliates derived from its relationship with the Fund and other funds advised by the investment adviser. These benefits include, among other things, fees for transfer agency services provided to the funds, in certain cases research received by the adviser generated from commission dollars spent on funds' portfolio trading, and in certain cases distribution or service related fees related to funds' sales. The trustees review with the investment adviser each of these arrangements and the reasonableness of its costs relative to the services performed. The Board has determined that the other benefits received by the investment adviser or its affiliates support its decision to approve the investment advisory contract. 9 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE -------------------------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BONDS 156.7% $1,000 Abag Fin Auth For Nonprofit Corp CA Ctf Part Childrens Hosp Med Ctr (AMBAC Insd)............. 5.875% 12/01/19 $ 1,120,060 1,000 Abag Fin Auth For Nonprofit Corp CA Insd Rev Ctf Lincoln Glen Manor Sr Citizens (CA MTG Insd).... 6.100 02/15/25 1,065,620 1,000 Abag Fin Auth For Nonprofit Corp CA Multi-Family Rev Hsg Utd Dominion Ser A Rfdg (AMT) (GTY AGMT: Utd Dominion Realty Tr)......................... 6.400 08/15/30 1,072,830 1,205 Alameda Cnty, CA Wtr Dist Rev Rfdg (MBIA Insd)........................................... 4.750 06/01/20 1,250,983 1,000 Bay Area Toll Auth CA Toll Brdg Rev San Francisco Bay Area Ser D........................ 5.000 04/01/17 1,081,560 1,000 California Edl Fac Auth Rev Pitzer College Ser A............................................... 5.000 04/01/30 1,039,450 240 California Edl Fac Auth Rev Student Ln CA Ln Pgm Ser A (AMT) (MBIA Insd)......................... 6.000 03/01/16 252,715 1,500 California Edl Fac Auth Rev Univ of Redlands Ser A (a)........................................... 5.000 10/01/31 1,564,710 1,000 California Hlth Fac Fin Auth Rev Cedars Sinai Med Ctr Ser A................................... 6.125 12/01/19 1,099,410 1,000 California Hsg Fin Agy Rev Multi-Family Hsg III Ser A (AMT) (MBIA Insd)......................... 5.850 08/01/17 1,036,960 1,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev Southn CA Edison Co (AMT) (AMBAC Insd).......... 6.000 07/01/27 1,005,170 25 California Rural Home Mtg Fin Auth Single Family Mtg Rev Ser C (AMT) (GNMA Collateralized)....... 7.800 02/01/28 25,146 2,000 California St (FGIC Insd)....................... 5.000 10/01/23 2,109,860 1,095 California St Pub Wks Brd Univ CA Institute Proj C............................................... 5.000 04/01/26 1,167,598 1,000 California St Vet Bd Ser BH (AMT) (FSA Insd).... 5.400 12/01/15 1,061,730 1,600 Commerce, CA Jt Pwrs Fin Cmnty Ctr Proj (XLCA Insd)........................................... 5.000 10/01/29 1,687,776 1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA Insd)........................................... 5.000 06/01/21 1,068,510 1,280 El Cerrito, CA Redev Agy Tax Alloc Redev Proj Area Ser B Rfdg (AMT) (MBIA Insd) (b)........... 5.250 07/01/15 1,397,491 1,000 Emeryville, CA Pub Fin Auth Shellmound Pk Redev & Hsg Proj B (MBIA Insd)........................ 5.000 09/01/19 1,065,180 1,000 Folsom, CA Spl Tax Cmnty Fac Dist No 2 Rfdg (Connie Lee Insd)............................... 5.250 12/01/19 1,072,370 1,000 Fontana, CA Redev Agy Tax Southeast Indl Pk Proj Rfdg (MBIA Insd)................................ 5.000 09/01/22 1,055,630 1,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg..................................... * 01/15/30 240,760 1,000 Golden St TOB Securitization Corp CA Settlement Rev Ser 2003 A-1 (a)............................ 6.250 06/01/33 1,094,200 1,000 Imperial Irr Dist CA Ctf Partn Elec Sys Proj (FSA Insd)...................................... 5.250 11/01/23 1,089,660
10 See Notes to Financial Statements VAN KAMPEN CALIFORNIA MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE -------------------------------------------------------------------------------------------- $1,000 Irvine, CA Pub Fac & Infrastructure Auth Assmt Rev Ser B (AMBAC Insd).......................... 5.000% 09/02/22 $ 1,033,120 800 Kern, CA Cmnty College Sch Fac Impt Dist Mammoth Campus Ser A (AMBAC Insd) (b)................... 5.000 08/01/19 868,504 1,000 Long Beach, CA Harbor Rev Ser A Rfdg (AMT) (MBIA).......................................... 5.000 05/15/25 1,055,380 1,250 Los Angeles Cnty, CA Sch Regionalized Business Svc Ctf LA Cnty Sch Pooled Fin Proj Ser A (FSA Insd)........................................... 5.000 09/01/28 1,324,250 2,000 Los Angeles, CA Dept Wtr & Pwr Sys Ser C (MBIA Insd)........................................... 5.000 07/01/26 2,136,700 1,000 Los Angeles, CA Uni Sch Dist Ser A (FSA Insd)... 5.250 07/01/20 1,114,580 1,000 Lucia Mar Uni Sch Dist Election 2004 Ser A (FGIC Insd)........................................... 5.000 08/01/25 1,073,550 1,000 National City, CA Cmnty Dev Com Redev Proj Ser B Rfdg (AMBAC Insd)............................... 5.250 08/01/32 1,093,930 1,000 Pico Rivera, CA Wtr Auth Rev Wtr Sys Proj Ser A (MBIA Insd)..................................... 5.500 05/01/19 1,169,080 1,000 Redlands, CA Redev Agy Tax Alloc Redev Proj Ser A Rfdg (MBIA Insd).............................. 4.750 08/01/21 1,031,160 1,740 Riverside Cnty, CA Ctf Partn Historic Courthouse Ser B Rfdg (FGIC Insd) (b)...................... 5.000 11/01/25 1,865,454 955 San Diego, CA Hsg Auth Multi-Family Hsg Rev (AMT) (GNMA Collateralized)..................... 5.000 07/20/18 987,460 1,000 San Dimas, CA Redev Agy Tax Alloc Creative Growth Ser A (FSA Insd)......................... 5.000 09/01/16 1,075,510 2,000 San Jose, CA Fin Auth Lease Rev Convention Ctr Proj Ser F Rfdg (MBIA Insd)..................... 5.000 09/01/17 2,171,440 1,355 San Marcos, CA Pub Fac Auth Tax Allocation Rev Proj Areas No 2 & 3 Fin Proj Ser C (AMBAC) (b)............................................. 4.750 08/01/25 1,406,111 1,000 Sanger, CA Uni Sch Dist Rfdg (MBIA Insd)........ 5.600 08/01/23 1,199,500 1,350 Santa Ana, CA Uni Sch Dist (MBIA Insd) (b)...... 5.375 08/01/21 1,486,849 1,000 Semitropic Impt Wtr Storage Dist CA Wtr Ser A (XLCA Insd)..................................... 5.125 12/01/35 1,062,910 1,305 South Orange Cnty, CA Pub Fin Auth Reassmt Rev (FSA Insd)...................................... 5.800 09/02/18 1,453,483 600 Southern CA Pub Pwr Auth Pwr Proj Rev Multi-Projs..................................... 5.500 07/01/20 600,048 1,000 State Center, CA Cmnty Election 2002 Ser A (MBIA Insd)........................................... 5.500 08/01/28 1,123,420
See Notes to Financial Statements 11 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- JUNE 30, 2005 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE -------------------------------------------------------------------------------------------- $1,325 Sweetwater, CA Auth Wtr Rev (Prerefunded @ 04/01/10) (FSA Insd)............................ 5.500% 04/01/18 $ 1,488,108 1,000 University of CA Rev Multi Purp Proj Ser M (FGIC Insd)........................................... 5.125 09/01/17 1,085,130 ------------ TOTAL LONG-TERM INVESTMENTS 156.7% (Cost $50,598,960)......................................................... 54,631,056 ------------ SHORT-TERM INVESTMENTS 6.6% 1,300 California St Dept Wtr Res Pwr Supply Rev Ser B-6 (LOC--State Street Bank).................... 2.200 05/01/22 1,300,000 1,000 Irvine, CA Impt Bd Act 1915 Assmt Dist No 94-15 (LOC--State Street Bank)........................ 2.200 09/02/20 1,000,000 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $2,300,000).......................................................... 2,300,000 ------------ TOTAL INVESTMENTS 163.3% (Cost $52,898,960)......................................................... 56,931,056 LIABILITIES IN EXCESS OF OTHER ASSETS (5.9%)................................ (2,053,461) PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (57.4%).................. (20,010,357) ------------ NET ASSETS APPLICABLE TO COMMON SHARES 100.0%............................... $ 34,867,238 ============
Percentages are calculated as a percentage of net assets applicable to common shares. * Zero coupon bond (a) Securities purchased on a when-issued or delayed delivery basis. (b) The Trust owns 100% of the bond issuance. AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax CA MTG--California Mortgage Insurance Connie Lee--Connie Lee Insurance Co. FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association GTY AGMT--Guarantee Agreement LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. 12 See Notes to Financial Statements VAN KAMPEN CALIFORNIA MUNICIPAL TRUST FINANCIAL STATEMENTS Statement of Assets and Liabilities June 30, 2005 ASSETS: Total Investments (Cost $52,898,960)........................ $56,931,056 Cash........................................................ 151,415 Interest Receivable......................................... 764,930 Other....................................................... 1,234 ----------- Total Assets............................................ 57,848,635 ----------- LIABILITIES: Payables: Investments Purchased..................................... 2,648,364 Investment Advisory Fee................................... 24,774 Other Affiliates.......................................... 11,174 Income Distributions--Common Shares....................... 10,747 Trustees' Deferred Compensation and Retirement Plans........ 219,042 Accrued Expenses............................................ 56,939 ----------- Total Liabilities....................................... 2,971,040 Preferred Shares (including accrued distributions).......... 20,010,357 ----------- NET ASSETS APPLICABLE TO COMMON SHARES...................... $34,867,238 =========== NET ASSET VALUE PER COMMON SHARE ($34,867,238 divided by 3,257,560 shares outstanding)............................. $ 10.70 =========== NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 3,257,560 shares issued and outstanding).............................................. $ 32,576 Paid in Surplus............................................. 29,564,418 Net Unrealized Appreciation................................. 4,032,096 Accumulated Net Realized Gain............................... 1,088,871 Accumulated Undistributed Net Investment Income............. 149,277 ----------- NET ASSETS APPLICABLE TO COMMON SHARES...................... $34,867,238 =========== PREFERRED SHARES ($.01 par value, authorized 1,000,000 shares, 400 issued with liquidation preference of $50,000 per share)................................................ $20,000,000 =========== NET ASSETS INCLUDING PREFERRED SHARES....................... $54,867,238 ===========
See Notes to Financial Statements 13 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST FINANCIAL STATEMENTS continued Statement of Operations For the Year Ended June 30, 2005 INVESTMENT INCOME: Interest.................................................... $2,662,468 ---------- EXPENSES: Investment Advisory Fee..................................... 306,498 Preferred Share Maintenance................................. 64,667 Trustees' Fees and Related Expenses......................... 44,240 Legal....................................................... 30,180 Custody..................................................... 7,037 Other....................................................... 103,290 ---------- Total Expenses.......................................... 555,912 ---------- NET INVESTMENT INCOME....................................... $2,106,556 ========== REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Gain........................................... $1,077,076 ---------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 2,625,069 End of the Period......................................... 4,032,096 ---------- Net Unrealized Appreciation During the Period............... 1,407,027 ---------- NET REALIZED AND UNREALIZED GAIN............................ $2,484,103 ========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (352,679) ========== NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS................................................ $4,237,980 ==========
14 See Notes to Financial Statements VAN KAMPEN CALIFORNIA MUNICIPAL TRUST FINANCIAL STATEMENTS continued Statements of Changes in Net Assets
FOR THE FOR THE YEAR ENDED YEAR ENDED JUNE 30, 2005 JUNE 30, 2004 ------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income....................................... $ 2,106,556 $ 2,103,419 Net Realized Gain........................................... 1,077,076 42,420 Net Unrealized Appreciation/Depreciation During the Period.................................................... 1,407,027 (2,097,101) Distributions to Preferred Shareholders: Net Investment Income..................................... (352,679) (192,274) ----------- ----------- Change in Net Assets Applicable to Common Shares from Operations................................................ 4,237,980 (143,536) Distributions to Common Shareholders: Net Investment Income..................................... (1,824,299) (1,954,457) Net Realized Gain......................................... (43,112) (415,571) ----------- ----------- NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM INVESTMENT ACTIVITIES..................................... 2,370,569 (2,513,564) NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of the Period..................................... 32,496,669 35,010,233 ----------- ----------- End of the Period (Including accumulated undistributed net investment income of $149,277 and $225,039, respectively)............................................. $34,867,238 $32,496,669 =========== ===========
See Notes to Financial Statements 15 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST FINANCIAL HIGHLIGHTS THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
-------------------------------- 2005 2004 2003 -------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................. $ 9.98 $ 10.75 $ 10.25 -------- -------- -------- Net Investment Income.................................. .65 .65 .67 Net Realized and Unrealized Gain/Loss.................. .75 (.63) .64 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income................................ (.11) (.06) (.07) -------- -------- -------- Total from Investment Operations......................... 1.29 (.04) 1.24 Distributions Paid to Common Shareholders: Net Investment Income.................................. (.56) (.60) (.63) Net Realized Gain...................................... (.01) (.13) (.11) -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD....................... $ 10.70 $ 9.98 $ 10.75 ======== ======== ======== Common Share Market Price at End of the Period........... $ 9.59 $ 8.73 $ 10.45 Total Return (a)......................................... 16.61% -10.03% 10.97% Net Assets Applicable to Common Shares at End of the Period (In millions)................................... $ 34.9 $ 32.5 $ 35.0 Ratio of Expenses to Average Net Assets Applicable to Common Shares (b)...................................... 1.63% 1.65% 1.56% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (b)........................ 6.18% 6.24% 6.38% Portfolio Turnover....................................... 40% 33% 19% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (b)................................... 1.03% 1.03% .99% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c)........................ 5.15% 5.67% 5.69% SENIOR SECURITIES: Total Preferred Shares Outstanding....................... 400 400 400 Asset Coverage Per Preferred Share (d)................... $137,194 $131,256 $137,533 Involuntary Liquidating Preference Per Preferred Share... $ 50,000 $ 50,000 $ 50,000 Average Market Value Per Preferred Share................. $ 50,000 $ 50,000 $ 50,000
* Amount is less than $.01. (a)Total return assumes an investment at the common share 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 share market price at the end of the period indicated. (b)Ratios do not reflect the effect of dividend payments to preferred shareholders. (c)Ratios reflect the effect of dividend payments to preferred shareholders. (d)Calculated by subtracting the Trust's total liabilities (not including the preferred shares) from the Trust's total assets and dividing by the number of preferred shares outstanding. (e)As required, effective July 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended June 30, 2002 was to increase the ratio of net investment income to average net assets applicable to common shares by .06%. Net investment income per share and net realized and unrealized gains and losses per share were unaffected by the adjustments. Per share, ratios and supplemental data for periods prior to June 30, 2002 have not been restated to reflect this change in presentation. 16
YEAR ENDED JUNE 30, ------------------------------------------------------------------------------- 2002 (e) 2001 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------- $ 9.99 $ 9.36 $ 9.93 $ 10.67 $ 10.45 $ 10.28 $ 10.40 -------- -------- -------- -------- -------- -------- -------- .71 .73 .76 .78 .85 .89 .91 .28 .58 (.44) (.37) .53 .39 -0-* (.11) (.23) (.22) (.20) (.22) (.21) (.23) -------- -------- -------- -------- -------- -------- -------- .88 1.08 .10 .21 1.16 1.07 .68 (.55) (.45) (.53) (.62) (.72) (.75) (.75) (.07) -0-* (.14) (.33) (.22) (.15) (.05) -------- -------- -------- -------- -------- -------- -------- $ 10.25 $ 9.99 $ 9.36 $ 9.93 $ 10.67 $ 10.45 $ 10.28 ======== ======== ======== ======== ======== ======== ======== $ 10.14 $ 8.83 $ 8.375 $ 9.875 $ 12.125 $12.1875 $ 10.875 22.39% 10.99% -8.14% -11.17% 7.77% 21.40% 9.02% $ 33.4 $ 32.5 $ 30.5 $ 32.3 $ 34.5 $ 33.6 $ 32.9 1.59% 1.65% 1.47% 1.67% 1.57% 1.58% 1.65% 6.90% 7.33% 8.25% 7.38% 8.00% 8.54% 8.76% 24% 16% 60% 33% 53% 30% 19% .99% 1.02% .88% 1.05% .99% .99% 1.03% 5.86% 5.02% 5.82% 5.49% 5.91% 6.51% 6.57% 400 400 400 400 400 400 400 $133,498 $131,365 $126,216 $130,843 $136,309 $134,055 $132,192 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements 17 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen California Municipal 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 and California income taxes, consistent with preservation of capital. The Trust will invest in a portfolio consisting substantially of California municipal obligations rated investment grade at the time of investment. The Trust commenced investment operations on November 1, 1988. 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 accounting principles generally accepted in the United States of America 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 Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using 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, which approximates market value. 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 segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At June 30, 2005, the Trust had $2,648,364 of when-issued or delayed delivery purchase commitments. C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond premium is amortized and discounts are accreted over the expected life of each applicable security. D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements of Subchapter M 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. 18 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 continued At June 30, 2005, the cost and related gross unrealized appreciation and depreciation were as follows: Cost of investments for tax purposes........................ $52,825,287 =========== Gross tax unrealized appreciation........................... $ 4,107,954 Gross tax unrealized depreciation........................... (2,185) ----------- Net tax unrealized appreciation on investments.............. $ 4,105,769 ===========
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly dividends from net investment income to common shareholders. Net realized gains, if any, are distributed annually to common shareholders. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the years ended June 30, 2005 and 2004 was as follows:
2005 2004 Distributions paid from: Ordinary income........................................... $ -0- $417,385 Long-term capital gain.................................... 43,112 -0- ------- -------- $43,112 $417,385 ======= ========
Due to inherent differences in the recognition of income, expenses and realized gains/ losses under accounting principles generally accepted in the United States of America and federal income tax purposes, permanent differences between book and tax basis reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. A permanent book and tax difference relating to book to tax accretion differences totaling $5,340 has been reclassified from accumulated undistributed net investment income to accumulated net realized gain. As of June 30, 2005, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 80,097 Undistributed long-term capital gain........................ $1,002,319
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Trust's Investment Advisory Agreement, Van Kampen Asset Management (the "Adviser") provides investment advice and facilities to the Trust for an annual fee payable monthly of .55% of the average daily net assets of the Trust. Effective November 1, 2004, the investment advisory fee was reduced from .60% to .55%. For the year ended June 30, 2005, the Trust recognized expenses of approximately $4,400 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, of which a trustee of the Trust is a partner of such firm and he and his law firm provide legal services as legal counsel to the Trust. Under separate Legal Services, Accounting Services and Chief Compliance Officer ("CCO") Employment agreements, the Adviser provides accounting and legal services and the 19 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 continued CCO provides compliance services to the Trust. The costs of these services are allocated to each trust. For the year ended June 30, 2005, the Trust recognized expenses of approximately $37,100 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Trust, as well as, the salary, benefits and related costs of the CCO and related support staff paid by Van Kampen. Services provided pursuant to the Legal Services agreement are reported as part of "Legal" expenses on the Statement of Operations. Services provided pursuant to the Accounting Services and CCO Employment agreement are reported as part of "Other" expenses on the Statement of Operations. Certain officers and trustees of the Trust are also officers and directors of Van Kampen. The Trust does not compensate its officers or trustees who are also officers of Van Kampen. The Trust provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. 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 upon retirement for a ten-year period and are based upon each trustee's years of service to the Trust. The maximum annual benefit per trustee under the plan is $2,500. 3. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $22,242,546 and $22,335,067, respectively. 4. REMARKETED PREFERRED SHARES The Trust has outstanding 400 shares of Remarketed Preferred Shares ("RP"). Dividends are cumulative and the rate is reset through an auction process every 28 days. The rate in effect on June 30, 2005 was 2.100%. During the year ended June 30, 2005, rates ranged from 1.200% to 2.750%. 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 on the Statement of Operations. The RP 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 RP are subject to mandatory redemption if the tests are not met. 5. INDEMNIFICATIONS The Trust enters into contracts that contain a variety of indemnifications. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 6. TRUST MERGER On March 18, 2005, the Trustees of California Municipal Trust ("Target Trust") announced its intention to merge the Target Trust into California Value Municipal Income Trust ("Acquiring Trust"). The Trustees of each of the trusts have approved in principal an agreement and plan of reorganization between the trusts providing for a transfer of assets and liabilities of the Target Trust to the Acquiring Trust in exchange for shares of beneficial interest of the Acquiring Trust (the "Reorganization"). The Reorganization is subject to the approval by the shareholders of the Target Trust. 20 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of Van Kampen California Municipal Trust We have audited the accompanying statement of assets and liabilities of Van Kampen California Municipal Trust (the "Trust"), including the portfolio of investments, as of June 30, 2005, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the six years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The Trust's financial highlights for the periods ended prior to June 30, 2000, were audited by other auditors whose report dated, August 5, 1999 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2005, by correspondence with the Trust's custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Van Kampen California Municipal Trust as of June 30, 2005, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Chicago, Illinois August 11, 2005 21 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value 22 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST DIVIDEND REINVESTMENT PLAN continued of the Trust's Common Shares, resulting in the acquisition of fewer Common Shares than if the dividend or distribution had been paid in Common Shares issued by the Trust. All reinvestments are in full and fractional Common Shares and are carried to three decimal places. Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the changes sent to all Common Shareholders of the Trust at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days written notice to all Common Shareholders of the Trust. COSTS OF THE PLAN The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. No other charges will be made to participants for reinvesting dividends or capital gains distributions, except for certain brokerage commissions, as described above. TAX IMPLICATIONS You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. RIGHT TO WITHDRAW Plan participants may withdraw at any time by calling 1-800-341-2929 or by writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will receive, without charge, a share certificate issued in your name for all full Common Shares credited to your account under the Plan and a cash payment will be made for any fractional Common Share credited to your account under the Plan. You may again elect to participate in the Plan at any time by calling 1-800-341-2929 or writing to the Trust at: Van Kampen Funds Inc. Attn: Closed-End Funds 2800 Post Oak Blvd. Houston, TX 77056 23 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY OFFICERS MITCHELL M. MERIN President and Chief Executive Officer RONALD E. ROBISON Executive Vice President and Principal Executive Officer JOSEPH J. MCALINDEN Executive Vice President and Chief Investment Officer AMY R. DOBERMAN Vice President STEFANIE V. CHANG Vice President and Secretary JOHN L. SULLIVAN Chief Compliance Officer JAMES W. GARRETT Chief Financial Officer and Treasurer INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110-1713 TRANSFER AGENT EQUISERVE TRUST COMPANY, N.A. C/O COMPUTERSHARE INVESTOR SERVICES P.O. Box 43010 Providence, Rhode Island 02940-3010 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DELOITTE & TOUCHE LLP 111 South Wacker Drive Chicago, Illinois 60606-4301 For federal income tax purposes, the following information is furnished with respect to the distributions paid by the Trust during its taxable year ended June 30, 2005. The Trust designated 100.0% of the income distributions as a tax-exempt income distribution. The Trust designated and paid $43,112 as a long-term capital gain distribution. In January, the Trust provides tax information to shareholders for the preceding calendar year. * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. 24 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST RESULTS OF SHAREHOLDER VOTES The Special Meeting of the Shareholders of the Trust was held on June 22, 2005, where shareholders voted on the election of trustees. With regard to the election of the following trustees by the common shareholders of the Trust:
# OF SHARES --------------------- IN FAVOR WITHHELD ----------------------------------------------------------------------------------- David C. Arch............................................... 3,017,732 89,921 Jerry D. Choate............................................. 3,018,628 89,026 Howard J Kerr............................................... 3,018,733 89,921 Suzanne H. Woolsey.......................................... 3,018,654 89,421
The other trustees of the Trust whose terms did not expire in 2005 are Rod Dammeyer, Linda Hutton Heagy, R. Craig Kennedy, Mitchell M. Merin, Jack E. Nelson, Richard F. Powers III, Hugo F. Sonnenschein, and Wayne W. Whalen. 25 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION The business and affairs of the Trust are managed under the direction of the Trust's Board of Trustees and the Trust's officers appointed by the Board of Trustees. The tables below list the trustees and executive officers of the Trust and their principal occupations during the last five years, other directorships held by trustees and their affiliations, if any, with Van Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Asset Management (the "Adviser"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The term "Fund Complex" includes each of the investment companies advised by the Adviser as of the date of this Annual Report. Trustees of the Funds generally serve three year terms or until their successors are duly elected and qualified. Officers are annually elected by the trustees. INDEPENDENT TRUSTEES:
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE David C. Arch (60) Trustee Trustee Chairman and Chief 82 Trustee/Director/Managing Blistex Inc. since 1988 Executive Officer of General Partner of funds 1800 Swift Drive Blistex Inc., a consumer in the Fund Complex. Oak Brook, IL 60523 health care products manufacturer. Director of the Heartland Alliance, a nonprofit organization serving human needs based in Chicago. Director of St. Vincent de Paul Center, a Chicago based day care facility serving the children of low income families. Board member of the Illinois Manufacturers' Association. Jerry D. Choate (66) Trustee Trustee Prior to January 1999, 80 Trustee/Director/Managing 33971 Selva Road since 2003 Chairman and Chief General Partner of funds Suite 130 Executive Officer of the in the Fund Complex. Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a ("Allstate") and Allstate biotechnological company, Insurance Company. Prior and Director of Valero to January 1995, Energy Corporation, an President and Chief independent refining Executive Officer of company. Allstate. Prior to August 1994, various management positions at Allstate.
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VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Rod Dammeyer (64) Trustee Trustee President of CAC, L.L.C., 82 Trustee/Director/Managing CAC, L.L.C. since 1988 a private company General Partner of funds 4350 LaJolla Village Drive offering capital in the Fund Complex. Suite 980 investment and management Director of Stericycle, San Diego, CA 92122-6223 advisory services. Prior Inc., Ventana Medical to February 2001, Vice Systems, Inc., and GATX Chairman and Director of Corporation, and Trustee Anixter International, of The Scripps Research Inc., a global Institute. Prior to distributor of wire, January 2005, Trustee of cable and communications the University of Chicago connectivity products. Hospitals and Health Prior to July 2000, Systems. Prior to April Managing Partner of 2004, Director of Equity Group Corporate TheraSense, Inc. Prior to Investment (EGI), a January 2004, Director of company that makes TeleTech Holdings Inc. private investments in and Arris Group, Inc. other companies. Prior to May 2002, Director of Peregrine Systems Inc. Prior to February 2001, Director of IMC Global Inc. Prior to July 2000, Director of Allied Riser Communications Corp., Matria Healthcare Inc., Transmedia Networks, Inc., CNA Surety, Corp. and Grupo Azcarero Mexico (GAM).
27
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Linda Hutton Heagy (57) Trustee Trustee Managing Partner of 80 Trustee/Director/Managing Heidrick & Struggles since 2003 Heidrick & Struggles, an General Partner of funds 233 South Wacker Drive executive search firm. in the Fund Complex. Suite 7000 Trustee on the University Chicago, IL 60606 of Chicago Hospitals Board, Vice Chair of the Board of the YMCA of Metropolitan Chicago and a member of the Women's Board of the University of Chicago. Prior to 1997, Partner of Ray & Berndtson, Inc., an executive recruiting firm. Prior to 1996, Trustee of The International House Board, a fellowship and housing organization for international graduate students. Prior to 1995, Executive Vice President of ABN AMRO, N.A., a bank holding company. Prior to 1990, Executive Vice President of The Exchange National Bank. R. Craig Kennedy (53) Trustee Trustee Director and President of 80 Trustee/Director/Managing 1744 R Street, NW since 2003 the German Marshall Fund General Partner of funds Washington, DC 20009 of the United States, an in the Fund Complex. independent U.S. foundation created to deepen understanding, promote collaboration and stimulate exchanges of practical experience between Americans and Europeans. Formerly, advisor to the Dennis Trading Group Inc., a managed futures and option company that invests money for individuals and institutions. Prior to 1992, President and Chief Executive Officer, Director and member of the Investment Committee of the Joyce Foundation, a private foundation. Howard J Kerr (69) Trustee Trustee Prior to 1998, President 82 Trustee/Director/Managing 736 North Western Avenue since 1992 and Chief Executive General Partner of funds P.O. Box 317 Officer of Pocklington in the Fund Complex. Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake investment holding Forest Bank & Trust. company. Director of the Marrow Foundation.
28
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jack E. Nelson (69) Trustee Trustee President of Nelson 80 Trustee/Director/Managing 423 Country Club Drive since 2003 Investment Planning General Partner of funds Winter Park, FL 32789 Services, Inc., a in the Fund Complex. financial planning company and registered investment adviser in the State of Florida. President of Nelson Ivest Brokerage Services Inc., a member of the NASD, Securities Investors Protection Corp. and the Municipal Securities Rulemaking Board. President of Nelson Sales and Services Corporation, a marketing and services company to support affiliated companies. Hugo F. Sonnenschein (64) Trustee Trustee President Emeritus and 82 Trustee/Director/Managing 1126 E. 59th Street since 1994 Honorary Trustee of the General Partner of funds Chicago, IL 60637 University of Chicago and in the Fund Complex. the Adam Smith Director of Winston Distinguished Service Laboratories, Inc. Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago. Trustee of the University of Rochester and a member of its investment committee. Member of the National Academy of Sciences, the American Philosophical Society and a fellow of the American Academy of Arts and Sciences. Suzanne H. Woolsey, Ph.D. (63) Trustee Trustee Chief Communications 80 Trustee/Director/Managing 815 Cumberstone Road since 2003 Officer of the National General Partner of funds Harwood, MD 20776 Academy of in the Fund Complex. Sciences/National Director of Fluor Corp., Research Council, an an engineering, independent, federally procurement and chartered policy construction institution, from 2001 to organization, since November 2003 and Chief January 2004 and Director Operating Officer from of Neurogen Corporation, 1993 to 2001. Director of a pharmaceutical company, the Institute for Defense since January 1998. Analyses, a federally funded research and development center, Director of the German Marshall Fund of the United States, Director of the Rocky Mountain Institute and Trustee of Colorado College. Prior to 1993, Executive Director of the Commission on Behavioral and Social Sciences and Education at the National Academy of Sciences/National Research Council. From 1980 through 1989, Partner of Coopers & Lybrand.
29 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued INTERESTED TRUSTEES:*
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Mitchell M. Merin* (52) Trustee and Trustee President of funds in the 80 Trustee/Director/Managing 1221 Avenue of the Americas President since Fund Complex. Chairman, General Partner of funds New York, NY 10020 2003; President, Chief in the Fund Complex. President Executive Officer and since 2002 Director of the Adviser and Van Kampen Advisors Inc. since December 2002. Chairman, President and Chief Executive Officer of Van Kampen Investments since December 2002. Director of Van Kampen Investments since December 1999. Chairman and Director of Van Kampen Funds Inc. since December 2002. President, Director and Chief Operating Officer of Morgan Stanley Investment Management since December 1998. President and Director since April 1997 and Chief Executive Officer since June 1998 of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Chairman, Chief Executive Officer and Director of Morgan Stanley Distributors Inc. since June 1998. Chairman since June 1998, and Director since January 1998 of Morgan Stanley Trust. Director of various Morgan Stanley subsidiaries. President of the Morgan Stanley Funds since May 1999. Previously Chief Executive Officer of Van Kampen Funds Inc. from December 2002 to July 2003, Chief Strategic Officer of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. and Executive Vice President of Morgan Stanley Distributors Inc. from April 1997 to June 1998. Chief Executive Officer from September 2002 to April 2003 and Vice President from May 1997 to April 1999 of the Morgan Stanley Funds.
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VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (59) Trustee Trustee Advisory Director of 82 Trustee/Director/Managing 1221 Avenue of the Americas since 1999 Morgan Stanley. Prior to General Partner of funds New York, NY 10020 December 2002, Chairman, in the Fund Complex. Director, President, Chief Executive Officer and Managing Director of Van Kampen Investments and its investment advisory, distribution and other subsidiaries. Prior to December 2002, President and Chief Executive Officer of funds in the Fund Complex. Prior to May 1998, Executive Vice President and Director of Marketing at Morgan Stanley and Director of Dean Witter, Discover & Co. and Dean Witter Realty. Prior to 1996, Director of Dean Witter Reynolds Inc. Wayne W. Whalen* (66) Trustee Trustee Partner in the law firm 82 Trustee/Director/Managing 333 West Wacker Drive since 1988 of Skadden, Arps, Slate, General Partner of funds Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex. counsel to funds in the Director of the Abraham Fund Complex. Lincoln Presidential Library Foundation.
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act). Messrs. Merin and Powers are interested persons of funds in the Fund Complex and the Adviser by reason of their current or former positions with Morgan Stanley or its affiliates. Mr. Whalen is an interested person of certain funds in the Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such funds in the Fund Complex. 31 VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued OFFICERS
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS Ronald E. Robison (66) Executive Vice Officer Executive Vice President and Principal Executive Officer of 1221 Avenue of the Americas President and since 2003 funds in the Fund Complex. Chief Executive Officer and New York, NY 10020 Principal Executive Chairman of Investor Services. Managing Director of Morgan Officer Stanley. Chief Administrative Officer, Managing Director and Director of Morgan Stanley Investment Advisors Inc., Morgan Stanley Services Company Inc. and Managing Director and Director of Morgan Stanley Distributors Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Executive Vice President and Principal Executive Officer of the Institutional and Retail Morgan Stanley Funds; Director of Morgan Stanley SICAV; previously Chief Global Operations Officer and Managing Director of Morgan Stanley Investment Management Inc. Joseph J. McAlinden (62) Executive Vice President Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas and Chief Investment since 2002 Stanley Investment Advisors Inc., and Morgan Stanley New York, NY 10020 Officer Investment Management Inc. and Director of Morgan Stanley Trust for over 5 years. Executive Vice President and Chief Investment Officer of funds in the Fund Complex. Managing Director and Chief Investment Officer of Van Kampen Investments, the Adviser and Van Kampen Advisors Inc. since December 2002. Amy R. Doberman (43) Vice President Officer Managing Director and General Counsel, U.S. Investment 1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment New York, NY 10020 Management, Inc., Morgan Stanley Investment Advisers Inc. and the Adviser. Vice President of the Morgan Stanley Institutional and Retail Funds since July 2004 and Vice President of funds in the Fund Complex as of August 2004. Previously, Managing Director and General Counsel of Americas, UBS Global Asset Management from July 2000 to July 2004 and General Counsel of Aeltus Investment Management, Inc. from January 1997 to July 2000. Stefanie V. Chang (38) Vice President Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas and Secretary since 2003 Vice President and Secretary of funds in the Fund Complex. New York, NY 10020
32
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS John L. Sullivan (50) Chief Compliance Officer Officer Chief Compliance Officer of funds in the Fund Complex since 1 Parkview Plaza since 1996 August 2004. Prior to August 2004, Director and Managing Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen Advisors Inc. and certain other subsidiaries of Van Kampen Investments, Vice President, Chief Financial Officer and Treasurer of funds in the Fund Complex and head of Fund Accounting for Morgan Stanley Investment Management. Prior to December 2002, Executive Director of Van Kampen Investments, the Adviser and Van Kampen Advisors Inc. James W. Garrett (36) Chief Financial Officer Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas and Treasurer since 1995 Chief Financial Officer and Treasurer of the Morgan Stanley New York, NY 10020 Institutional Funds since 2002 and funds in the Fund Complex since January 2005.
In accordance with Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, the Fund's Chief Executive Officer has certified to the New York Stock Exchange that, as of July 18, 2005, he was not aware of any violation by the Fund of the NYSE corporate governance listing standards. The certifications by the Fund's principal executive officer and principal financial officer required by Rule 30a-2 under the 1940 Act were filed with the Fund's report to the SEC on Form N-CSR and are available on the Securities and Exchange Commission's web site at http://www.sec.gov. 33 Van Kampen California Municipal Trust An Important Notice Concerning Our U.S. Privacy Policy We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. (continued on next page) Van Kampen California Municipal Trust An Important Notice Concerning Our U.S. Privacy Policy continued For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with (continued on back) Van Kampen California Municipal Trust An Important Notice Concerning Our U.S. Privacy Policy continued other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. Van Kampen Funds Inc. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com Copyright (C)2005 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 920, 910, 106 VKC ANR 8/05 (VAN KAMPEN INVESTMENTS SHINE LOGO) RN05-01936P-Y06/05 Item 2. Code of Ethics. (a) The Trust has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Trust or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) The Trust has amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto to delete from the end of the following paragraph on page 2 of the Code the phrase "to the detriment of the Fund.": "Each Covered Officer must not use his personal influence or personal relationship improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly)." Further, due to personnel changes at the Adviser, the list of Covered Officers set forth in Exhibit B and the General Counsel designee to whom questions about the application of the Code should be referred in Exhibit C were amended during the period. Exhibit B was then amended again in March 2005 and a third time in August 2005. All three editions of Exhibit B are attached. (d) Not applicable. (e) Not applicable. (f) (1) The Trust's Code of Ethics is attached hereto as Exhibit 12A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Trust's Board of Trustees has determined that it has two "audit committee financial experts" serving on its audit committee, each of whom are "independent" Trustees : Jerry Choate and R. Craig Kennedy. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. Item 4. Principal Accountant Fees and Services. (a)(b)(c)(d) and (g). Based on fees billed for the periods shown: 2004
REGISTRANT COVERED ENTITIES(1) AUDIT FEES........................ $25,355 N/A NON-AUDIT FEES AUDIT-RELATED FEES...... $400 $321,000(2) TAX FEES................... $1,600(3) $0(4) ALL OTHER FEES........... $0 $0(5) TOTAL NON-AUDIT FEES.......... $2,000 $321,000 TOTAL.............................. $27,355 $321,000
2003
REGISTRANT COVERED ENTITIES(1) AUDIT FEES........................ $22,800 N/A NON-AUDIT FEES AUDIT-RELATED FEES..... $400 $230,000(2) TAX FEES.................. $1,550(3) $0(4) ALL OTHER FEES........... $0 $0(6) TOTAL NON-AUDIT FEES......... $1,950 $230,000 TOTAL.............................. $24,750 $230,000
N/A- Not applicable, as not required by Item 4. (1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant. (2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by the Adviser or its affiliates, specifically attestation services provided in connection with a SAS 70 Report. (3) Tax Fees represent tax advice and compliance services provided in connection with the review of the Registrant's tax. (4) Tax Fees represent tax advice services provided to Covered Entities, including research and identification of PFIC entities. (5) All Other Fees represent attestation services provided in connection with performance presentation standards. (6) All Other Fees represent attestation services provided in connection with performance presentation standards, general industry education seminars provided, and a regulatory review project performed. (e)(1) The audit committee's pre-approval policies and procedures are as follows: JOINT AUDIT COMMITTEE AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY AND PROCEDURES OF THE VAN KAMPEN FUNDS AS ADOPTED JULY 23, 2003 AND AMENDED MAY 26, 2004(1) 1. STATEMENT OF PRINCIPLES The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor's independence from the Fund.(2) The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee's administration of the engagement of the independent auditor. The SEC's rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee ("general pre-approval"); or require the specific pre-approval of the Audit Committee ("specific pre-approval"). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC's rules on auditor independence. The Audit Committee will also consider whether the Independent Auditors are best positioned to provide the most effective and efficient services, for reasons such as its familiarity with the Fund's business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Fund's ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative. The Audit Committee is also mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services and may determine for each fiscal year, the appropriate ratio between the total amount of fees for Audit, Audit-related and Tax services for the Fund (including any Audit-related or Tax service fees for Covered Entities that were subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Fund (including any such services for Covered Entities subject to pre-approval). The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval ---------- (1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the "Policy"), amended as of the date above, supercedes and replaces all prior versions that may have been amended from time to time. (2) Terms used in this Policy and not otherwise defined herein shall have the meanings as defined in the Joint Audit Committee Charter. from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the Independent Auditors to management. The Fund's Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors' independence. 2. DELEGATION As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. 3. AUDIT SERVICES The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will monitor the Audit services engagement as necessary, but no less than on a quarterly basis, and will also approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 4. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements or, to the extent they are Covered Services, the Covered Entities' financial statements, or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR. The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 5. TAX SERVICES The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the Independent Auditors may provide such services. Hence, the Audit Committee believes it may grant general pre-approval to those Tax services that have historically been provided by the Independent Auditors, that the Audit Committee has reviewed and believes would not impair the independence of the Independent Auditors, and that are consistent with the SEC's rules on auditor independence. The Audit Committee will not permit the retention of the Independent Auditors in connection with a transaction initially recommended by the Independent Auditors, the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with Director of Tax or outside counsel to determine that the tax planning and reporting positions are consistent with this policy. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services involving large and complex transactions not listed in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated), including tax services proposed to be provided by the Independent Auditors to any executive officer or trustee/director/managing general partner of the Fund, in his or her individual capacity, where such services are paid for by the Fund (generally applicable only to internally managed investment companies). 6. ALL OTHER SERVICES The Audit Committee believes, based on the SEC's rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). A list of the SEC's prohibited non-audit services is attached to this policy as Appendix B.5. The SEC's rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions. 7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. For each fiscal year, the Audit Committee may determine the appropriate ratio between the total amount of fees for Audit, Audit-related, and Tax services for the Fund (including any Audit-related or Tax services fees for Covered Entities subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Fund (including any such services for Covered Entities subject to pre-approval). 8. PROCEDURES All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund's Chief Financial Officer and must include a detailed description of the services to be rendered. The Fund's Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund's Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Fund's Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund's Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. A sample report is included as Appendix B.7. Both the Fund's Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund's Chief Financial Officer or any member of management. 9. ADDITIONAL REQUIREMENTS The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor's independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence. 10. COVERED ENTITIES Covered Entities include the Fund's investment adviser(s) and any entity controlling, controlled by or under common control with the Fund's investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund's audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include: - Van Kampen Investments Inc. - Van Kampen Asset Management - Van Kampen Advisors Inc. - Van Kampen Funds Inc. - Van Kampen Investor Services Inc. - Morgan Stanley Investment Management Inc. - Morgan Stanley Trust Company - Morgan Stanley Investment Management Ltd. - Morgan Stanley Investment Management Company - Morgan Stanley Asset & Investment Trust Management Company Ltd. (e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee's pre-approval policies and procedures (included herein). (f) Not applicable. (g) See table above. (h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors' independence in performing audit services. Item 5. Audit Committee of Listed Registrants. (a) The Trust has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: Craig Kennedy, Jerry Choate and Rod Dammeyer. (b) Not applicable. Item 6. Schedule of Investments. Please refer to Item #1. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. The Trust invests in exclusively non-voting securities and therefore this item is not applicable to the Trust. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Applicable only for reports covering fiscal years on or after December 31, 2005. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not Applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not Applicable. Item 11. Controls and Procedures (a) The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (b)(1) A certification for the Principal Executive Officer of the registrant is attached hereto as part of EX-99.CERT. (b)(2) A certification for the Principal Financial Officer of the registrant is attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Van Kampen California Municipal Trust By: /s/ Ronald E. Robison --------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: August 23, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison --------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: August 23, 2005 By: /s/ Phillip G. Goff ------------------- Name: Phillip G. Goff Title: Principal Financial Officer Date: August 23, 2005