-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Na6HZyP3hj2iylotYv9eVywkVPC3WLObu5GwjMPknkaK2nIpX8LY88NRqX+mN18/ i+tzhbmgC4sbaq0BY8F48w== 0000950137-03-003624.txt : 20030630 0000950137-03-003624.hdr.sgml : 20030630 20030630161105 ACCESSION NUMBER: 0000950137-03-003624 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030430 FILED AS OF DATE: 20030630 EFFECTIVENESS DATE: 20030630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST CENTRAL INDEX KEY: 0000877461 IRS NUMBER: 363779780 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06361 FILM NUMBER: 03764553 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLZ STREET 2: VAN KAMPEN INVESTMETNS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMETNS INC STREET 2: ONE PARKVIEW PLZ CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNI TRUST DATE OF NAME CHANGE: 19960102 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT CALIFORNIA QUALITY MUNICIPAL TRUST DATE OF NAME CHANGE: 19920929 N-CSR 1 c77314nvcsr.txt SEMIANNUAL 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 811-6361 Van Kampen California Quality Municipal Trust - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 Avenue of the Americas NY NY 10020 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas New York, NY 10020 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 ----------------------------- Date of fiscal year end: 10/31/03 ----------- Date of reporting period: 04/30/03 ----------- Item 1. Report of Shareholders PERFORMANCE SUMMARY RETURN HIGHLIGHTS (as of April 30, 2003) - ------------------------------ NYSE Ticker Symbol - VQC - ------------------------------
- ----------------------------------------------------------------------- Six-month total return(1) 7.71% - ----------------------------------------------------------------------- One-year total return(1) 12.80% - ----------------------------------------------------------------------- Five-year average annual total return(1) 6.86% - ----------------------------------------------------------------------- Ten-year average annual total return(1) 7.62% - ----------------------------------------------------------------------- Life-of-Trust average annual total return(1) 8.10% - ----------------------------------------------------------------------- Commencement date 09/27/91 - ----------------------------------------------------------------------- Distribution rate as a % of closing common share market price(2) 6.92% - ----------------------------------------------------------------------- Taxable-equivalent distribution rate as a % of closing common share market price(3) 12.42% - ----------------------------------------------------------------------- Preferred share market rate(4) 1.200% - ----------------------------------------------------------------------- Net asset value $17.32 - ----------------------------------------------------------------------- Closing common share market price $17.00 - ----------------------------------------------------------------------- Six-month high common share market price (01/02/03) $17.19 - ----------------------------------------------------------------------- Six-month low common share market price (04/11/03) $16.30 - -----------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE 1 (1) 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. (2) Distribution rate represents the monthly annualized distributions of the Trust at the end of the period and not the earnings of the Trust. (3) The taxable-equivalent distribution rate is calculated assuming the maximum 44.3% combined federal and state income tax rate effective for calendar year 2003, which takes into consideration the deductibility of individual state taxes paid. (4) See "Notes to Financial Statements" footnote #4, for more information concerning Preferred Share reset periods. A portion of the interest income may be taxable for those investors subject to the federal alternative minimum tax (AMT). Past performance is no guarantee of future results. Investment return, common share market price and net asset value will fluctuate and Trust shares, when sold, may be worth more or less than their original cost. An investment in the Trust is subject to investment risks, and you could lose money on your investment in the Trust. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. 2 PORTFOLIO AT A GLANCE CREDIT QUALITY (as a percentage of long-term investments)
As of April 30, 2003 AAA/Aaa........................... 61.4% AA/Aa............................. 5.4% A/A............................... 9.5% BBB/Baa........................... 11.1% Non-Rated......................... 12.6%
TOP FIVE SECTORS (as a percentage of long-term investments)
As of April 30, 2003 General Purpose................... 16.4% Tax District...................... 15.2% Public Building................... 13.1% Public Education.................. 10.4% Water & Sewer..................... 8.6%
Based upon the credit quality ratings as issued by Standard & Poor's Credit Market Services/Moody's Investor Services, respectively. Subject to change daily. NET ASSET VALUE AND COMMON SHARE MARKET PRICE (based upon quarter-end values--April 1993 through April 2003) [LINE GRAPH]
NET ASSET VALUE COMMON SHARE MARKET PRICE --------------- ------------------------- 4/93 $16.9000 $16.1250 6/93 $17.0700 $16.3750 $17.7000 $17.3750 $17.4200 $16.7500 $15.6700 $15.1250 6/94 $15.4300 $15.2500 $15.2100 $14.8750 $14.3500 $12.7500 $15.6900 $14.7500 6/95 $15.9400 $15.0000 $16.1700 $15.2500 $16.8700 $15.3750 $16.1600 $15.8750 6/96 $16.1000 $15.2500 $16.5100 $15.8750 $16.6700 $16.6250 $16.4200 $15.1250 6/97 $16.8600 $16.7500 $17.2600 $16.8125 $17.6000 $17.0625 $17.5600 $17.5000 6/98 $17.6000 $17.3125 $18.0700 $18.1875 $17.6200 $18.4375 $17.5000 $17.6875 6/99 $16.7300 $16.6250 $16.2500 $16.5625 $15.5800 $13.4375 $15.9900 $15.0000 6/00 $16.0500 $15.2500 $16.4900 $15.5625 $17.0300 $14.8750 $17.0300 $15.1000 6/01 $16.7700 $15.3000 $17.4100 $16.1600 $16.6800 $16.0000 $16.4400 $15.5000 6/02 $17.0400 $16.9000 $18.0900 $17.7400 $17.3400 $16.8300 $17.2000 $16.8200 4/03 $17.3200 $17.0000
The solid line above represents the trust's net asset value (NAV), which indicates overall changes in value among the trust's underlying securities. The trust's common share market price is represented by the dashed line, which indicates 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. 3 Q&A WITH YOUR PORTFOLIO MANAGER WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM FOR VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED THE TRUST'S RETURN DURING THE SIX MONTHS ENDED APRIL 30, 2003. JOSEPH PIRARO, PORTFOLIO MANAGER, HAS MANAGED THE TRUST SINCE 1992 AND HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1971. THE FOLLOWING DISCUSSION REFLECTS HIS VIEWS ON THE TRUST'S PERFORMANCE. Q WHAT WAS THE MARKET ENVIRONMENT OF THE PAST SIX MONTHS, AND HOW DID THE TRUST PERFORM IN THAT ENVIRONMENT? A The environment over the past six months has been defined by two major themes. The first of these was the level of interest rates. The period began with interest rates at levels not seen in over three decades and, surprisingly for many, ended with rates slightly lower. The Federal Reserve Board (the Fed) helped keep rates low with a widely anticipated rate cut in November, which was driven by economic uncertainty and geopolitical risk. The low level of rates led to a boom in issuance by municipalities seeking to lock in low financing costs. As a result, issuance reached a record level of $354 billion in 2002 and continued to be exceptional in the first quarter of 2003. The other theme in the market during the period was the relative attractiveness of municipal bonds, which produced enough demand to absorb the record issuance. Investors, wary of volatility in the equity market and in the geopolitical arena, flocked to perceived safe haven investments. Their risk aversion counteracted growing expectations for economic recovery and rising interest rates and was a key factor in keeping interest rates at historically low levels. In their ongoing preference for low-risk assets, investors bid Treasury prices up to such high levels that municipal bonds became as attractively valued as they have ever been relative to Treasuries. Insurance companies also moved heavily into municipal bonds as their mainstay corporate bond holdings became less attractive. At the same time, issuers recognized investor concerns over economic weakness by insuring roughly 50 percent of all issuance. This credit enhancement made municipal bonds even more attractive to risk-averse investors. While lower financing costs were a boon to municipal issuers, the continuing weakness in the economy had a negative impact on municipal credit quality, particularly in the first quarter of 2003. Moody's upgrades barely exceeded the number of downgrades in the first quarter, with credit quality facing continued pressure 4 from rising social service costs and weak national and regional economic conditions. As a result, many municipalities face enormous deficits in 2003, when their combined shortfall is expected to reach $90 billion. Performance along the yield curve was varied. The Fed's November rate cut fueled a rally in short-term bonds that helped pull yields lower at the front end of the curve. Despite that rally, the best performing segment of the curve was the long-intermediate portion where performance was largely driven by buying activity among institutional investors drawn to the bonds' attractive total return potential. California's economic and credit conditions deteriorated during the period. The state's $3.5 billion budget shortfall for fiscal 2003 is projected to grow to $34 billion (by far the largest of any state) in 2004 and potentially further in 2005. Governor Gray Davis has proposed measures intended to balance the budget by cutting services and raising taxes selectively, but it is too early to tell whether they will be successful. The state's unemployment level continued to be higher than average, with personal income growth also lagging the rest of the country. California's fiscal condition was also hindered by the unexpected loss of future tobacco revenues. The trust's monthly dividend of $0.0980 per share translated to a distribution rate of 6.92 percent based on the trust's closing common share market price on April 30, 2003. Based on these figures, investors would have to earn a distribution rate of 12.42 percent on a taxable investment (for an investor in the 44.30 percent combined federal and state income tax bracket) to match the tax-exempt yield provided by the trust. For the six months ended April 30, 2003, the trust produced a total return of 7.71 percent based on common share market price. By comparison, the Lehman Brothers California Municipal Bond Index posted a total return of 3.39 percent for the same period. Of course, past performance is no guarantee of future results. Investment return, common share market price and net asset value will fluctuate and trust shares, when sold, may be worth more or less than their original cost. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. The Lehman Brothers California Municipal Bond Index is an unmanaged, broad-based statistical composite of municipal bonds. Index returns do not include any sales charges or fees that would be paid by an investor purchasing the securities the index represents. Such costs would lower performance. It is not possible to invest directly in an index. For additional information, please refer to the performance summary section. Q WHAT STRATEGIES DID YOU PURSUE IN MANAGING THE TRUST? A With interest rates hovering near record lows, we focused on protecting the trust from the potential adverse effects of rising interest rates while maintaining the trust's yield. One of the main ways we did this was to adjust 5 the fund's maturity profile by shifting assets from the short end of the yield curve to securities with maturities between 18 and 22 years and a shorter call date. Our quantitative analysis showed that this segment of the yield curve offered the optimal combination of total return potential and downside protection in the form of a comfortable yield cushion and an intermediate maturity profile. We also kept the fund's duration (a broad measure of interest rate exposure) lower than that of its benchmark index to help limit the potential for damage in the event of rising interest rates. Our efforts to maintain the fund's yield largely reflected a continuation of our longstanding credit strategy. For some time now we have maintained a balance between more stable but lower-yielding high-quality bonds and lower-quality/higher-yielding securities. This balanced approach helped to ensure that the portfolio's overall credit quality remained solid without sacrificing current income. During the period nearly two-thirds of the portfolio was invested in securities rated A or better, while less than one-quarter was invested in BBB and non-rated securities. The portfolio remained well-diversified across all major sectors of the municipal bond market, with the exception of tobacco bonds. These bonds were issued by states seeking to securitize future income streams resulting from settlements from class action suits against the major tobacco companies. Recent litigation in Illinois resulted in a judge awarding billions more in a suit alleging that the companies misled smokers about the amount of nicotine in "light" cigarettes. In order to appeal, the law required the companies to put up such substantial amounts of money that some began talking about potential bankruptcy, and the tobacco bonds' credit ratings and price performance suffered accordingly. Our decision not to invest in these securities appeared to be a benefit to shareholders during the period. 6 BY THE NUMBERS YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited) THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF THE REPORTING PERIOD.
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE MUNICIPAL BONDS 141.8% CALIFORNIA 137.8% $ 1,390 Abag Fin Auth For Nonprofit Corp CA Ctf Partn Childrens Hosp Med Ctr (AMBAC Insd).............................. 5.875% 12/01/19 $ 1,595,734 500 Abag Fin Auth For Nonprofit Corp CA Ctf Partn Childrens Hosp Med Ctr (AMBAC Insd).............................. 6.000 12/01/29 577,785 1,000 Abag Fin Auth For Nonprofit Corp CA Multi- Family Rev Hsg Utd Dominion Ser A Rfdg (Asset Gty Insd).......................... 6.400 08/15/30 1,068,610 1,000 Bakersfield, CA Ctf Partn Convention Ctr Expansion Proj (MBIA Insd)................ 5.875 04/01/22 1,131,500 3,600 Benicia, CA Uni Sch Dist Cap Apprec Ser B (MBIA Insd)............................... * 08/01/25 1,137,492 1,000 Benicia, CA Uni Sch Dist Ser B (MBIA Insd)..................................... * 08/01/18 471,040 1,610 Blythe, CA Redev Agy Redev Proj No 1 Tax Alloc Ser A Rfdg.......................... 7.500 05/01/23 1,715,680 1,055 Borrego, CA Wtr Dist Ctf Partn Wtr Sys Acquisition............................... 7.000 04/01/27 1,121,148 1,000 California Edl Fac Auth Rev Pooled College & Univ Proj Ser B......................... 6.125 04/01/13 1,078,490 1,000 California Edl Fac Auth Rev Pooled College & Univ Ser B.............................. 6.625 06/01/20 1,095,560 1,670 California Edl Fac Auth Rev Student Ln CA Ln Pgm Ser A (MBIA Insd).................. 6.000 03/01/16 1,803,850 2,500 California Hlth Fac Fin Auth Rev Cedars Sinai Med Ctr Ser A....................... 6.125 12/01/19 2,715,850 1,000 California Hsg Fin Agy Rev Cap Apprec Home Mtg Ser K (MBIA Insd)..................... * 08/01/24 286,850 480 California Hsg Fin Agy Rev Home Mtg Ser E (AMBAC Insd).............................. 6.100 08/01/29 267,954 6,200 California Pollutn Ctl Fin Auth Pollutn Ctl Rev Southn CA Edison Co (AMBAC Insd)..................................... 6.000 07/01/27 6,343,654 1,310 California Rural Home Mtg Fin Auth Single Family Mtg Rev Pgm Ser B (GNMA Collateralized)........................... 6.250 12/01/31 1,194,645
See Notes to Financial Statements 7 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $ 395 California Rural Home Mtg Fin Auth Single Family Mtg Rev Ser C (GNMA Collateralized)........................... 7.800% 02/01/28 $ 347,184 1,060 California Spl Dist Assn Fin Corp Ctf Partn Spl Dist Fin Pgm Ser KK (FSA Insd)..................................... 5.800 11/01/29 1,190,147 1,000 California St (XLCA Insd)................. 5.750 05/01/10 1,153,960 1,000 California St (CIFG Insd)................. 5.000 10/01/22 1,043,860 2,655 California St Cpn Muni Rcpts.............. * 03/01/08 2,284,946 2,655 California St Cpn Muni Rcpts.............. * 09/01/09 2,125,991 1,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).............................. 5.500 05/01/15 1,132,850 2,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd).............................. 5.500 05/01/16 2,259,180 9,600 California St Prin Muni Rcpts............. * 09/01/09 7,687,200 1,000 California St Pub Wks Brd Lease Rev Dept Hlth Svcs Ser A (MBIA Insd)............... 5.750 11/01/24 1,084,640 2,340 California St Rfdg (FGIC Insd)............ 5.000 02/01/23 2,401,542 1,500 California St Univ Fresno Assn Sr Aux Organization Event Ctr.................... 6.000 07/01/26 1,554,870 2,000 California St Vet Bd Ser BH (FSA Insd).... 5.400 12/01/16 2,112,960 1,500 California St Vet Ser BJ.................. 5.700 12/01/32 988,742 2,000 California Statewide Cmntys Dev Auth Ctf Partn (a)................................. 7.250 11/01/29 2,083,560 2,000 Campbell, CA Redev Agy Tax Alloc Ctr Campbell Redev Proj Ser A................. 6.550 10/01/32 2,165,520 1,595 Cardiff, CA Sch Dist Cap Apprec (FGIC Insd)..................................... * 08/01/24 536,271 1,675 Cardiff, CA Sch Dist Cap Apprec (FGIC Insd)..................................... * 08/01/25 529,250 270 Carson, CA Impt Bond Act 1915 Assmt Dist No 92-1................................... 7.375 09/02/22 277,166 2,000 Carson, CA Redev Agy Tax Alloc Ser A Rfdg (MBIA Insd)............................... 5.000 10/01/23 2,105,820 1,085 Cathedral City, CA Pub Fin Auth Rev Cap Apprec Ser A (MBIA Insd).................. * 08/01/27 306,046 1,085 Cathedral City, CA Pub Fin Auth Rev Cap Apprec Ser A (MBIA Insd).................. * 08/01/28 289,912 2,475 Chula Vista, CA Redev Agy Tax Alloc Sr Bayfront Ser D Rfdg....................... 8.625 09/01/24 2,984,058 1,000 Coachella, CA Redev Agy Tax Alloc Proj Area No 3 Rfdg............................ 5.875 12/01/28 1,018,300 1,000 Colton, CA Redev Agy Tax Alloc Mt Vernon Corridor Redev............................ 6.300 09/01/36 1,068,330 370 Contra Costa Cnty, CA Pub Fin Auth Tax Alloc Rev Ser A........................... 7.100 08/01/22 377,937
See Notes to Financial Statements 8 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $ 2,005 Coronado, CA Uni Sch Dist Ser B (FGIC Insd)..................................... 5.375% 08/01/26 $ 2,155,355 620 Davis, CA Pub Fac Fin Auth Loc Agy Rev Mace Ranch Area Ser A..................... 6.500 09/01/15 667,951 1,000 Duarte, CA Redev Agy Tax Alloc Davis Addition Proj Area Rfdg................... 6.700 09/01/14 1,093,280 1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA Insd)............................... 5.000 06/01/21 1,048,390 2,445 East Bay, CA Muni Util Dist Wtr Sys Rev Sub....................................... 5.250 06/01/19 2,649,744 1,220 Emeryville, CA Pub Fin Auth Rev Assmt Dist Refin..................................... 5.900 09/02/21 1,244,595 1,000 Fairfield Suisun, CA Uni Sch Dist Spl Tax Cmnty Fac Dist No 5 New Sch (FSA Insd).... 5.375 08/15/29 1,070,680 1,000 Folsom, CA Spl Tax Cmnty Fac Dist No 2 Rfdg (Connie Lee Insd).................... 5.250 12/01/19 1,085,380 15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg....................... * 01/15/26 4,009,500 4,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg....................... * 01/15/30 834,720 2,500 Foothill/Eastern Corridor Agy CA Toll Rd Rev Conv Cap Apprec Rfdg (b).............. 0/5.875 01/15/27 1,782,200 2,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Conv Cap Apprec Sr Lien Ser A (Escrowed to Maturity) (b)................ 0/7.050 01/01/10 2,244,340 1,000 Glendale, CA Uni Sch Dist Ser C (FSA Insd)..................................... 5.500 09/01/19 1,111,050 2,000 Hawaii Desert, CA Mem Hlthcare Dist Rev Rfdg...................................... 5.500 10/01/19 1,814,820 1,000 Huntington Park, CA Pub Fin Auth Lease Rev Wastewtr Sys Proj Ser A................... 6.200 10/01/25 1,041,820 1,435 Irvine, CA Pub Facs & Infrastructure Auth Assmt Rev Ser B (AMBAC Insd).............. 5.000 09/02/22 1,480,203 1,500 La Quinta, CA Redev Agy Tax Redev Proj Area No 1 (AMBAC Insd).................... 5.125 09/01/32 1,565,490 3,555 Long Beach, CA Hbr Rev Ser A (FGIC Insd)..................................... 5.250 05/15/18 3,767,909 2,000 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev Prop A First Tier Sr Ser C Rfdg (AMBAC Insd).............................. 5.000 07/01/23 2,072,360 12,000 Los Angeles Cnty, CA Pension Oblig Ctf Ltd Muni Oblig Ser A (MBIA Insd).............. 6.900 06/30/08 14,566,440 1,200 Los Angeles Cnty, CA Sch Regionalized Business Serv Ctf Partn Cap Apprec Pooled Fin Ser A (AMBAC Insd).................... * 08/01/26 355,980 1,000 Los Angeles, CA Cmnty College Dist Ctf Partn City College Satellite Ser A (MBIA Insd)..................................... 5.000 08/01/26 1,027,490
See Notes to Financial Statements 9 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $ 1,000 Los Angeles, CA Ctf Partn Sr Sonnenblick Del Rio W L. A. (AMBAC Insd).............. 6.000% 11/01/19 $ 1,167,170 1,900 Los Angeles, CA Ctf Partn................. 5.700 02/01/18 1,975,373 1,468 Los Angeles, CA Multi-Family Rev Hsg Earthquake Rehab Proj Ser A (FNMA Collateralized)........................... 5.700 12/01/27 1,604,755 1,310 Los Angeles, CA Single Family Home Mtg Rev Pgm Ser A (GNMA Collateralized)........... 6.875 06/01/25 1,117,592 1,000 Los Angeles, CA Uni Sch Dist Ser A (FSA Insd)..................................... 5.250 07/01/19 1,096,100 1,000 Los Angeles, CA Wtr & Pwr Rev Sys Ser A (MBIA Insd)............................... 5.375 07/01/18 1,096,790 1,000 Los Gatos, CA Jt Uni High Sch Election of 1998 Ser C (FSA Insd)..................... 5.000 06/01/27 1,033,010 1,000 Mendocino Cnty, CA Ctf Partn Cnty Pub Fac Corp (MBIA Insd).......................... 5.250 06/01/30 1,052,110 3,720 Midpeninsula Regl Open Space Dist CA Fin Auth Rev (AMBAC Insd)..................... * 08/01/27 918,431 2,710 Modesto, CA Irr Dist Ctfs Partn Cap Impts Ser A (FSA Insd).......................... 5.250 07/01/17 2,973,656 2,000 Montclair, CA Redev Agy Mobile Home Pk Rev Hacienda Mobile Home Pk Proj (FSA Insd)... 6.000 11/15/22 1,979,520 1,000 Moorpark, CA Uni Sch Dist Ser A (FSA Insd)..................................... 5.000 08/01/23 1,044,750 1,110 Mountain View Los Altos, CA Uni High Sch Dist Cap Apprec Ser D (FSA Insd).......... * 08/01/24 373,204 2,000 Needles, CA Pub Util Auth Util Sys Acquisition Proj Ser A.................... 6.500 02/01/22 2,040,520 2,000 Oakland, CA Uni Sch Dist Alameda Cnty Ctf Partn Energy Retrofit Proj (Prerefunded @ 11/15/06) (a)............................. 6.750 11/15/14 2,383,080 1,000 Oakland, CA Uni Sch Dist Alameda Cnty Ctf Partn Om-Energy Retrofit Proj (Prerefunded @ 11/15/05) (a)........................... 7.000 11/15/11 1,157,820 2,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA Insd)..................................... 5.750 06/01/15 2,194,300 1,500 Pasadena, CA Spl Tax Cmnty Fac Dist No 1 Civic Ctr West (Escrowed to Maturity)..... * 12/01/07 1,348,320 1,040 Perris, CA Pub Fin Auth Rev Tax Alloc Ser A (MBIA Insd)............................. 5.000 10/01/24 1,088,370 1,000 Perris, CA Pub Fin Auth Rev Tax Alloc Ser A (MBIA Insd)............................. 5.000 10/01/31 1,032,940 1,375 Pittsburg, CA Redev Agy Tax Alloc Los Medanos Cmnty Dev Proj (AMBAC Insd)....... * 08/01/26 407,523
See Notes to Financial Statements 10 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $ 1,000 Port Oakland, CA Rev Ser N Rfdg (MBIA Insd)..................................... 5.000% 11/01/22 $ 1,029,350 640 Port of Oakland, CA Spl Fac Rev Mitsui O.S.K. Line Ltd Ser A (LOC: Industrial Bank of Japan)............................ 6.800 01/01/19 647,635 2,540 Rancho Mirage, CA Redev Agy Tax Alloc Redev Plan 1984 Proj Ser A-E (MBIA Insd)..................................... 5.250 04/01/33 2,662,428 1,120 Redding, CA Redev Agy Tax Alloc Mkt Str Redev Proj Ser A.......................... 6.700 09/01/23 1,163,758 1,800 Redlands, CA Redev Agy Tax Alloc Redev Proj Ser A Rfdg (MBIA Insd)............... 4.750 08/01/21 1,844,820 1,000 Redondo Beach, CA Pub Fin Auth Rev South Bay Ctr Redev Proj........................ 7.000 07/01/16 1,083,710 4,000 Redwood City, CA Sch Dist (FGIC Insd)..... 5.000 07/15/23 4,178,320 3,000 Redwood City, CA Sch Dist (FGIC Insd)..... 5.000 07/15/27 3,091,110 2,000 Richmond, CA Rev YMCA East Bay Proj Rfdg...................................... 7.250 06/01/17 2,033,180 1,900 Sacramento Cnty, CA San Dist Fin Auth Rev Ser A..................................... 5.875 12/01/27 2,114,985 2,000 Sacramento, CA City Fin Auth City Hall & Redev Proj Ser A (FSA Insd)............... 5.000 12/01/28 2,060,600 2,000 Salinas Vly, CA Solid Waste Auth Rev (AMBAC Insd).............................. 5.250 08/01/31 2,043,200 2,500 San Bernardino, CA Redev Agy Tax Alloc San Sevaine Redev Proj Ser A.................. 7.000 09/01/24 2,657,250 6,000 San Diego Cnty, CA Wtr Auth Wtr Rev Ctf Partn Ser B (Inverse Fltg) (Prerefunded @ 04/27/06) (MBIA Insd) (c)................. 11.320 04/08/21 7,862,640 2,650 San Diego, CA Indl Dev Rev San Diego Gas & Elec Ser A (MBIA Insd).................... 6.400 09/01/18 2,713,786 5,000 San Diego, CA Indl Dev Rev San Diego Gas & Elec Ser A (AMBAC Insd)................... 6.100 09/01/19 5,119,100 1,000 San Diego, CA Redev Agy Centre City Redev Proj Ser A................................ 6.400 09/01/25 1,070,040 1,000 San Francisco, CA City & Cnty Arpt Commn Intl Arpt Rev Second Ser Issue 12-A (FGIC Insd)..................................... 5.800 05/01/21 1,098,610 1,000 San Francisco, CA City & Cnty Arpt Commn Intl Arpt Second Ser 27A Rfdg (MBIA Insd)..................................... 5.250 05/01/26 1,021,280 4,000 San Francisco, CA City & Cnty Arpt Commn Intl Arpt Second Ser 27A Rfdg (MBIA Insd)..................................... 5.250 05/01/31 4,077,160 3,520 San Francisco, CA City & Cnty Redev Agy Lease Rev George Moscone.................. * 07/01/09 2,835,677 4,250 San Francisco, CA City & Cnty Redev Agy Lease Rev George Moscone.................. * 07/01/12 2,868,155
See Notes to Financial Statements 11 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE CALIFORNIA (CONTINUED) $ 2,130 San Francisco, CA City & Cnty Redev Agy Lease Rev George Moscone.................. * 07/01/14 $ 1,282,345 800 San Francisco, CA City & Cnty Redev Agy Lease Rev George Moscone (FSA Insd)....... 6.750% 07/01/15 861,656 5,000 San Jose, CA Fin Auth Lease Rev Convention Ctr Proj Ser F Rfdg (MBIA Insd)........... 5.000 09/01/17 5,371,400 1,000 San Jose, CA Single Family Mtg Rev Cap Accumulator (Escrowed to Maturity) (GEMIC Insd)..................................... * 04/01/16 557,440 1,415 San Juan, CA Basin Auth Lease Rev Ground Wtr Recovery Proj (AMBAC Insd)............ 5.250 12/01/20 1,534,101 2,000 San Leandro, CA Ctf Partn Lib & Fire Stations Fin (AMBAC Insd)................. 5.750 11/01/29 2,230,800 1,000 San Marcos, CA Pub Fac Auth Sub Tax Incrmnt Proj Area 3 Ser A................. 6.750 10/01/30 1,089,910 1,575 San Marcos, CA Redev Agy Tax Alloc........ 6.000 08/01/29 1,620,738 1,000 Santa Ana, CA Multi-Family Hsg Rev Villa Del Sol Apts Ser B (FNMA Collateralized)........................... 5.650 11/01/21 1,023,900 2,820 Santa Ana, CA Uni Sch Dist (MBIA Insd).... 5.375 08/01/27 3,012,127 1,180 Simi Vly, CA Cmnty Dev Agy Coml Sycamore Plaza II Rfdg (a)......................... 6.000 09/01/12 1,259,249 5,000 Southern CA Pub Pwr Auth Pwr Proj Rev Multi-Projs............................... 6.750 07/01/12 6,187,350 1,000 Stockton, CA Cmnty Fac Dist Spl Tax No 1-A Mello Roos-Weston Ranch Ser A............. 5.800 09/01/14 1,061,610 1,000 Stockton, CA South Stockton Cmnty Fac Dist Spl Tax No 90-1 Rfdg...................... 6.400 09/01/15 1,047,990 1,000 Ventura Cnty, CA Cmnty College Ser A (MBIA Insd)..................................... 5.500 08/01/23 1,098,690 2,000 Ventura Cnty, CA Ctf Partn Pub Fin Auth I (FSA Insd)................................ 5.250 08/15/15 2,206,340 1,000 Vista, CA Mobile Home Pk Rev Estrella De Oro Mobile Home Ser A..................... 5.875 02/01/28 970,100 1,000 Vista, CA Uni Sch Dist Ser A (FSA Insd)... 5.000 08/01/23 1,044,750 ------------ 231,228,405 ------------ PUERTO RICO 2.0% 1,000 Puerto Rico Comwlth Hwy & Tran Rev Trans Rev Sub (FGIC Insd)....................... 5.250 07/01/16 1,125,350 2,000 Puerto Rico Elec Pwr Auth Pwr Rev Ser II (XLCA Insd)............................... 5.375 07/01/17 2,246,920 ------------ 3,372,270 ------------
See Notes to Financial Statements 12 YOUR TRUST'S INVESTMENTS April 30, 2003 (Unaudited)
PAR AMOUNT MARKET (000) DESCRIPTION COUPON MATURITY VALUE U. S. VIRGIN ISLANDS 2.0% $ 1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt Taxes Ln Nt Ser A......................... 6.375% 10/01/19 $ 1,115,930 1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt Taxes Ln Nt Ser A......................... 6.500 10/01/24 1,110,400 1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt Taxes Ln Nt Ser A (ACA Insd).............. 6.125 10/01/29 1,076,230 ------------ 3,302,560 ------------ TOTAL INVESTMENTS 141.8% (Cost $215,732,822)........................................................ 237,903,235 OTHER ASSETS IN EXCESS OF LIABILITIES 2.9%.................................. 4,890,888 PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (44.7%).................. (75,036,980) ------------ NET ASSETS APPLICABLE TO COMMON SHARES 100.0%............................... $167,757,143 ============
* Zero coupon bond (a) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. (b) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (c) An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specific factor. As the floating rate rises, the coupon is reduced. Conversely, as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Trust to enhance the yield of the portfolio. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly. ACA--American Capital Access AMBAC--AMBAC Indemnity Corp. Asset Gty--Asset Guaranty Insurance Co. CIFG--CDC IXIS Financial Guaranty Connie Lee--Connie Lee Insurance Co. FGIC--Financial Guaranty Insurance Co. FNMA--Federal National Mortgage Association FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. See Notes to Financial Statements 13 FINANCIAL STATEMENTS Statement of Assets and Liabilities April 30, 2003 (Unaudited) ASSETS: Total Investments (Cost $215,732,822)....................... $237,903,235 Cash........................................................ 871,422 Receivables: Interest.................................................. 3,235,180 Investments Sold.......................................... 1,133,231 Other....................................................... 458 ------------ Total Assets............................................ 243,143,526 ------------ LIABILITIES: Payables: Investment Advisory Fee................................... 118,974 Administrative Fee........................................ 9,914 Affiliates................................................ 6,588 Trustees' Deferred Compensation and Retirement Plans........ 162,610 Accrued Expenses............................................ 51,317 ------------ Total Liabilities....................................... 349,403 Preferred Shares (including accrued distributions).......... 75,036,980 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $167,757,143 ============ NET ASSET VALUE PER COMMON SHARE ($167,757,143 divided by 9,682,997 shares outstanding)............................. $ 17.32 ============ NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 9,682,997 shares issued and outstanding).............................................. $ 96,830 Paid in Surplus............................................. 143,430,155 Net Unrealized Appreciation................................. 22,170,413 Accumulated Undistributed Net Investment Income............. 1,267,370 Accumulated Net Realized Gain............................... 792,375 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $167,757,143 ============ PREFERRED SHARES ($.01 par value, authorized 100,000,000 shares, 3,000 issued with liquidation preference of $25,000 per share)........................................ $ 75,000,000 ============ NET ASSETS INCLUDING PREFERRED SHARES....................... $242,757,143 ============
See Notes to Financial Statements 14 Statement of Operations For the Six Months Ended April 30, 2003 (Unaudited) INVESTMENT INCOME: Interest.................................................... $ 6,601,368 ----------- EXPENSES: Investment Advisory Fee..................................... 717,955 Preferred Share Maintenance................................. 99,905 Administrative Fee.......................................... 59,829 Trustees' Fees and Related Expenses......................... 26,563 Legal....................................................... 13,461 Custody..................................................... 7,312 Other....................................................... 83,807 ----------- Total Expenses.......................................... 1,008,832 Less Credits Earned on Cash Balances.................... 308 ----------- Net Expenses............................................ 1,008,524 ----------- NET INVESTMENT INCOME....................................... $ 5,592,844 =========== REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Gain........................................... $ 810,474 ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 19,831,367 End of the Period......................................... 22,170,413 ----------- Net Unrealized Appreciation During the Period............... 2,339,046 ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 3,149,520 =========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (492,508) =========== NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS................................................ $ 8,249,856 ===========
See Notes to Financial Statements 15 Statements of Changes in Net Assets (Unaudited)
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2003 OCTOBER 31, 2002 ------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.............................. $ 5,592,844 $ 11,529,306 Net Realized Gain.................................. 810,474 2,450,903 Net Unrealized Appreciation/Depreciation During the Period........................................... 2,339,046 (3,405,222) Distributions to Preferred Shareholders: Net Investment Income............................ (336,754) (758,181) Net Realized Gain................................ (155,754) (439,326) ------------ ------------ Change in Net Assets Applicable to Common Shares from Operations.................................. 8,249,856 9,377,480 Distributions to Common Shareholders: Net Investment Income............................ (5,649,662) (10,195,665) Net Realized Gain................................ (2,305,522) (1,832,023) ------------ ------------ NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM INVESTMENT ACTIVITIES................ 294,672 (2,650,208) NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of the Period............................ 167,462,471 170,112,679 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $1,267,370 and $1,660,942, respectively).................... $167,757,143 $167,462,471 ============ ============
See Notes to Financial Statements 16 Financial Highlights (Unaudited) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ------------------------------ 2003 2002 (a) 2001 2000 -------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD............ $ 17.29 $ 17.57 $ 16.58 $ 15.78 ------- ------- ------- ------- Net Investment Income.............................. .57 1.19 1.19 1.20 Net Realized and Unrealized Gain/Loss.............. .33 (.10) 1.08 .82 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income.......................... (.03) (.08) (.23) (.28) Net Realized Gain.............................. (.02) (.05) (.03) -0- ------- ------- ------- ------- Total from Investment Operations.................... .85 .96 2.01 1.74 Distributions Paid to Common Shareholders: Net Investment Income.......................... (.58) (1.05) (.91) (.94) Net Realized Gain.............................. (.24) (.19) (.11) -0- ------- ------- ------- ------- NET ASSET VALUE, END OF THE PERIOD.................. $ 17.32 $ 17.29 $ 17.57 $ 16.58 ======= ======= ======= ======= Common Share Market Price at End of the Period...... $ 17.00 $ 16.56 $ 16.40 $ 15.00 Total Return (b).................................... 7.71%* 8.74% 16.59% 4.70% Net Assets Applicable to Common Shares at End of the Period (In millions)............................... $ 167.8 $ 167.5 $ 170.1 $ 160.5 Ratio of Expenses to Average Net Assets Applicable to Common Shares (c)............................... 1.22% 1.32% 1.52% 1.62% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c).................... 6.78% 6.97% 7.01% 7.66% Portfolio Turnover.................................. 7%* 18% 15% 20% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (c)............................... .84% .91% 1.04% 1.09% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (d).................... 6.37% 6.51% 5.65% 5.85% SENIOR SECURITIES: Total Preferred Shares Outstanding.................. 3,000 3,000 3,000 3,000 Asset Coverage Per Preferred Share (e).............. $80,931 $80,823 $81,704 $78,510 Involuntary Liquidating Preference Per Preferred Share.............................................. $25,000 $25,000 $25,000 $25,000 Average Market Value Per Preferred Share............ $25,000 $25,000 $25,000 $25,000
* Non-Annualized (a) As required, effective November 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 October 31, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios and supplemental data for the periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (b) 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. (c) Ratios do not reflect the effect of dividend payments to preferred shareholders. (d) Ratios reflect the effect of dividend payments to preferred shareholders. (e) Calculated by subtracting the Trust's total liabilities (not including the preferred shares) from the Trust's total assets and dividing this by the number of preferred shares outstanding. 17
TWO MONTHS ENDED YEAR ENDED AUGUST 31, - -------------- OCTOBER 31, --------------------------------------------------------------- 1999 1998 1998 1997 1996 1995 1994 1993 - ----------------------------------------------------------------------------------------------- $ 17.93 $ 17.85 $ 17.08 $ 16.28 $ 16.13 $ 15.70 $ 17.45 $ 15.82 ------- -------- -------- -------- -------- -------- -------- -------- 1.20 .20 1.23 1.26 1.26 1.27 1.28 1.30 (1.90) .09 .85 .90 .23 .52 (1.69) 1.66 (.21) (.04) (.24) (.25) (.29) (.31) (.23) (.21) (.05) -0- (.02) (.02) -0- -0- (.01) (.03) ------- -------- -------- -------- -------- -------- -------- -------- (.96) .25 1.82 1.89 1.20 1.48 (.65) 2.72 (.99) (.17) (.99) (1.02) (1.05) (1.05) (1.05) (.98) (.20) -0- (.06) (.07) -0- -0- (.05) (.11) ------- -------- -------- -------- -------- -------- -------- -------- $ 15.78 $ 17.93 $ 17.85 $ 17.08 $ 16.28 $ 16.13 $ 15.70 $ 17.45 ======= ======== ======== ======== ======== ======== ======== ======== $ 15.25 $18.4375 $ 17.875 $16.8125 $ 16.125 $ 15.00 $ 15.50 $ 16.75 -11.34% 4.09%* 12.96% 11.45% 14.89% 3.95% -0.90% 18.66% $ 152.8 $ 172.9 $ 172.0 $ 164.4 $ 156.7 $ 155.2 $ 151.1 $ 168.0 1.56% 1.58% 1.59% 1.61% 1.64% 1.66% 1.62% 1.58% 7.02% 6.75% 7.02% 7.56% 7.70% 8.24% 7.76% 7.96% 24% 2%* 21% 17% 10% 16% 7% 26% 1.07% 1.10% 1.10% 1.10% 1.11% 1.10% 1.10% 1.07% 5.78% 5.40% 5.63% 6.05% 5.95% 6.22% 6.34% 6.70% 3,000 1,500 1,500 1,500 1,500 1,500 1,500 1,500 $75,918 $165,283 $164,687 $159,598 $154,463 $153,465 $150,717 $161,977 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements 18 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen California Quality 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, but may invest up to 20% of its assets in unrated securities which are believed to be of comparable quality to those rated investment grade. Trust commenced investment operations on September 27, 1991. 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 maintain, in a segregated account with its custodian, assets having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At April 30, 2003, the Trust had no when-issued or delayed delivery purchase commitments. 19 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond premium is amortized and discount is 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 the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. At April 30, 2003, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $215,631,626 ============ Gross tax unrealized appreciation........................... $ 22,457,486 Gross tax unrealized depreciation........................... (185,877) ------------ Net tax unrealized appreciation on investments.............. $ 22,271,609 ============
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly dividends from net investment income to common shareholders. Net realized gains, if any, are distributed annually on a pro rata basis to common and preferred shareholders. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the year ended October 31, 2002 was as follows:
2002 Distributions paid from: Ordinary income............................................. $ 99,612 Long-term capital gain...................................... 2,176,077 ---------- $2,275,689 ==========
As of October 31, 2002, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $ 127,329 Undistributed long-term capital gain........................ 2,370,406
F. EXPENSE REDUCTIONS During the six months ended April 30, 2003, the Trust's custody fee was reduced by $308 as a result of credits earned on cash balances. 20 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Trust's Investment Advisory Agreement, Van Kampen Investment Advisory Corp. (the "Adviser") will provide investment advice and facilities to the Trust for an annual fee payable monthly of .60% of the average daily net assets of the Trust. In addition, the Trust will pay a monthly administrative fee to Van Kampen Investments Inc. or its affiliates (collectively "Van Kampen"), the Trust's Administrator, at an annual rate of ..05% of the average daily net assets of the Trust. The administrative services provided by the Administrator include record keeping and reporting responsibilities with respect to the Trust's portfolio and preferred shares and providing certain services to shareholders. For the six months ended April 30, 2003, the Trust recognized expenses of approximately $6,200 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust is an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Trust. The Adviser allocates the cost of such services to each trust. For the six months ended April 30, 2003, the Trust recognized expenses of approximately $18,100 representing Van Kampen's cost of providing accounting and legal services to the Trust, which are reported as part of "Other" and "Legal" expenses, respectively, in 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 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 $15,636,788 and $19,900,318, respectively. 21 NOTES TO FINANCIAL STATEMENTS April 30, 2003 (Unaudited) 4. PREFERRED SHARES The Trust has outstanding 3,000 shares of Auction Preferred Shares ("APS"). Dividends are cumulative and the dividend rate is reset through an auction process every 28 days. The rate in effect on April 30, 2003 was 1.200% and for the six months then ended rates ranged from 0.890% to 1.760%. 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 in the Statement of Operations. The APS are redeemable at the option of the Trust in whole or in part at the liquidation value of $25,000 per share plus accumulated and unpaid dividends. The Trust is subject to certain asset coverage tests, and the APS are subject to mandatory redemptions if the tests are not met. 5. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. The Trust may seek to manage the portfolio's interest rate exposure in a changing interest rate environment by engaging in transactions involving interest rate swaps, caps, floors or collars. The Trust expects to enter into these transactions primarily as a hedge against anticipated interest rate or fixed-income market changes, for duration management purposes or for risk management purposes but may also enter into these transactions to generate additional income. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts or agreements. During the six months ended April 30, 2003, the Trust did not enter into any of these transactions. 22 DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's Common Shares, resulting in 23 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 prorata 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 24 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST BOARD OF TRUSTEES DAVID C. ARCH ROD DAMMEYER HOWARD J KERR THEODORE A. MYERS RICHARD F. POWERS, III* - Chairman HUGO F. SONNENSCHEIN WAYNE W. WHALEN* INVESTMENT ADVISER VAN KAMPEN INVESTMENT ADVISORY CORP. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY c/o EquiServe P.O. Box 43011 Providence, Rhode Island 02940-3011 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 * "Interested persons" of the Trust, as defined in the Investment Company of Act 1940, as amended. 25 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you make with us, our affiliates, or third parties. We may also collect information you provide when using our web site, and text files (a.k.a. "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com [VAN KAMPEN INVESTMENTS LOGO] Copyright (C)2003 Van Kampen Funds Inc. All rights reserved. VQC SAR 6/03 Member NASD/SIPC. 11217F03-AS-6/03 Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semi-annual reports. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable for semi-annual reports. Item 8. [Reserved.] Item 9. 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. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. Item 10. Exhibits. (a) Code of Ethics - Not applicable for semi-annual reports. (b) Certifications of Principal Executive Officer and Principal Financial Officer 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 Quality Municipal Trust ------------------------------------------------------------------- By: /s/ Ronald E. Robison ---------------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: June 23, 2003 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: June 23, 2003 By: /s/ John L. Sullivan ---------------------------------------------------------------------------- Name: John Sullivan Title: Principal Financial Officer Date: June 23, 2003 EX-99.CERT 3 c77314exv99wcert.txt CERTIFICATION I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen California Quality Municipal Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 23, 2003 /s/ Ronald E. Robison --------------------------- Principal Executive Officer 1 I, John Sullivan, certify that: 1. I have reviewed this report on Form N-CSR of Van Kampen California Quality Municipal Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 23, 2003 /s/ John L. Sullivan --------------------------- Principal Financial Officer 2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen California Quality Municipal Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended April 30, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: June 23, 2003 /s/ Ronald E. Robison ---------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement requires by Section 906 has been provided to Van Kampen California Quality Municipal Trust and will be retained by Van Kampen California Quality Municipal Trust and furnished to the Securities and Exchange Commission or its staff upon request. 3 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Van Kampen California Quality Municipal Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended April 30, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: June 23, 2003 /s/ John L. Sullivan --------------------- John Sullivan Principal Financial Officer A signed original of this written statement requires by Section 906 has been provided to Van Kampen California Quality Municipal Trust and will be retained by Van Kampen California Quality Municipal Trust and furnished to the Securities and Exchange Commission or its staff upon request. 4 -----END PRIVACY-ENHANCED MESSAGE-----