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
- ------------------------------
<Table>
<Caption>
- -----------------------------------------------------------------------
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
- -----------------------------------------------------------------------
</Table>
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)
<Table>
<Caption>
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%
</Table>
TOP FIVE SECTORS
(as a percentage of long-term investments)
<Table>
<Caption>
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%
</Table>
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]
<Table>
<Caption>
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
</Table>
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.
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements
7
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements
8
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements
9
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements
10
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements
11
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
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
------------
</Table>
See Notes to Financial Statements
12
YOUR TRUST'S INVESTMENTS
April 30, 2003 (Unaudited)
<Table>
<Caption>
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
============
</Table>
* 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)
<Table>
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
============
</Table>
See Notes to Financial Statements
14
Statement of Operations
For the Six Months Ended April 30, 2003 (Unaudited)
<Table>
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
===========
</Table>
See Notes to Financial Statements
15
Statements of Changes in Net Assets
(Unaudited)
<Table>
<Caption>
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
============ ============
</Table>
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.
<Table>
<Caption>
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
</Table>
* 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
<Table>
<Caption>
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
</Table>
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:
<Table>
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
============
</Table>
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:
<Table>
<Caption>
2002
Distributions paid from:
Ordinary income............................................. $ 99,612
Long-term capital gain...................................... 2,176,077
----------
$2,275,689
==========
</Table>
As of October 31, 2002, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $ 127,329
Undistributed long-term capital gain........................ 2,370,406
</Table>
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