UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-5662
Van Kampen California Municipal Trust
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 6/30
Date of reporting period: 6/30/04
Item 1. Reports to Shareholders.
The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
California Municipal Trust performed during the annual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the trust's financial statements and a list of trust investments
as of June 30, 2004.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the trust will achieve its investment
objective. The trust is subject to market risk, which is the possibility
that the market values of securities owned by the trust will decline and
that the value of the trust shares may therefore be less than what you
paid for them. Accordingly, you can lose money investing in this trust.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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</Table>
Performance Summary as of 6/30/04
<Table>
<Caption>
CALIFORNIA MUNICIPAL TRUST
SYMBOL: VKC
- ------------------------------------------------------------
AVERAGE ANNUAL BASED BASED ON
TOTAL RETURNS ON NAV MARKET PRICE
Since Inception (11/01/88) 7.42% 6.51%
10-year 7.30 5.55
5-year 7.22 4.50
1-year -0.01 -10.03
- ------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET
ASSET VALUE (NAV) AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
The NAV per share is determined by dividing the value of the trust's portfolio
securities, cash and other assets, less all liabilities, by the total number of
common shares outstanding. The common share market price is the price the market
is willing to pay for shares of the trust at a given time. Common share market
price is influenced by a range of factors, including supply and demand and
market conditions. Total return assumes an investment at the beginning of the
period, reinvestment of all distributions for the period in accordance with the
trust's dividend reinvestment plan, and sale of all shares at the end of the
period.
The Lehman Brothers California Municipal Bond Index is a broad-based statistical
composite of California municipal bonds. The index does not include any
expenses, fees or sales charges, which would lower performance. The index is
unmanaged and should not be considered an investment. It is not possible to
invest directly in an index. Source for index performance: Bloomberg L.P.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2004
Van Kampen California Municipal Trust is managed by the Adviser's Municipal
Fixed Income team. Current members include Joseph Piraro and Robert Wimmel, Vice
Presidents of the Adviser; and John Reynoldson, Executive Director of the
Adviser.(1)
MARKET CONDITIONS
The municipal-bond market continued to be volatile during the review period,
driven by investors' widely varying expectations for the state of the economy.
The period began with yields rising rapidly in the third quarter of 2003 on
fears that the long-term period of low interest rates was likely to come to an
end. Those fears abated somewhat in the fourth quarter of 2003 when it became
apparent that employment growth remained anemic, thus easing the inflationary
pressures that might otherwise induce the Federal Reserve Bank's Federal Open
Market Committee (the Fed) to raise the target federal funds rate.
Yields remained low through the first quarter of 2004 until April, when a
surprisingly strong employment report for March spooked investors. This report,
coupled with sustained high commodity (especially oil) prices, led the market to
factor in a far more rapid rate hike by the Fed than had previously been
expected. Yields continued to rise in May, when it became clear that most
investors expected the Fed to act at its June 30, 2004 meeting. It did so,
raising the federal funds rate by 25 basis points--the first rate hike since
2000.
Supply of new municipal bonds in calendar 2003 hit record levels as
municipalities moved to take advantage of historically low interest rates. Many
cities and states moved to reduce expenditures by refinancing existing debt and
replacing it with lower-yielding bonds. In other cases, municipalities attempted
to meet current and future funding needs by issuing new debt. This activity
slowed in 2004, though California continued to lead the nation in issuance
thanks to its $11 billion deficit financing.
The low interest rates that prevailed over much of the period also had an impact
on the demand for municipal bonds. Retail and institutional investor activity
slowed as holders of municipal bonds saw little reason to sell bonds purchased
at higher yield levels and reinvest at historically low yields. However, the
period was marked by rising activity among non-traditional investors, such as
hedge funds and insurance companies seeking to take advantage of the
attractiveness of municipal bonds relative to taxable securities. Additionally,
investors' search for yield led to significant outperformance by lower-rated
bonds with greater credit risk. Sectors such as health care, with a
preponderance of lower-rated issues, performed particularly well.
(1)Team members may change without notice at any time.
2
Investors in the California municipal-bond market experienced a roller-coaster
ride for much of the year. The market entered the period in the doldrums, with
the state's general debt carrying the lowest investment-grade rating from both
Moody's and Standard & Poor's. The market took a turn for the better with the
widely publicized election of Arnold Schwarzenegger as governor, and improved
further as the new governor successfully implemented new policy initiatives
aimed at easing the state's financial woes. Key among these measures was $7.9
billion in economic-recovery bonds, intended to both refinance some existing
debt and to raise further capital to cover the state's budget shortfalls. This
deal was highly successful, and was heavily oversubscribed. Yields spreads
between California and national levels declined measurably for all maturities,
producing outperformance for the state relative to national averages.
PERFORMANCE ANALYSIS
Closed-end fund returns can be calculated upon either the market price or the
net asset value (NAV) of its shares. NAV per share is determined by dividing the
value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding, while market
price reflects the supply and demand for the shares. As a result, the two
returns can differ significantly, as they did for this reporting year. On both
an NAV basis and a market-price basis, the trust underperformed its benchmark,
the Lehman Brothers California Municipal Bond Index. (See table below.)
The trust often uses leverage to enhance its dividend to common shareholders.
The trust borrows money at short-term rates through the issuance of preferred
shares. The proceeds are typically reinvested in longer-term securities, taking
advantage of the difference between short- and longer-term rates. With short-
term rates at historic lows for much of the period, the difference between short
and longer-term rates was relatively high. This made using leverage a beneficial
approach during the period, and added to the trust's returns. As yields rose
toward the end of the period, however, the prices of bonds declined. The trust's
use of leverage magnified this negative price movement, which contributed to the
portfolio's underperformance relative to the benchmark.
One of our primary strategies in managing the trust was to keep its duration (a
measure of interest-rate sensitivity) below that of the benchmark. This
positioning was driven by a combination of our analysis of the macroeconomic
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2004
<Table>
<Caption>
- ----------------------------------------------------------------
BASED ON BASED ON LEHMAN BROTHERS CALIFORNIA
NAV MARKET PRICE MUNICIPAL BOND INDEX
-0.01% -10.03% 1.22%
- ----------------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, net asset
value and common share market price will fluctuate and trust shares, when sold,
may be worth more or less than their original cost. See Performance Summary for
additional performance information and index definition.
3
environment as well as the level of interest rates, which for most of the period
hovered at or near multi-decade lows. The combination of an improving economy
and low interest rates led us to anticipate that the next significant shift in
rates would likely be upward, and as a result would be more damaging for
longer-duration paper. The resulting below-market interest-rate sensitivity
hampered the trust's performance for most of the period as interest rates edged
downward more often than they rose. That said, the approach was more beneficial
in the final months of the period as interest rates rose in anticipation of the
Fed's June 30th meeting, and the trust ended the period well-positioned for
widely anticipated further rate increases.
In keeping with its longstanding bias, we maintained the trust's high credit
quality during the period. The portfolio had 88 percent exposure to bonds rated
AAA at the end of the period, two percentage points higher than at the beginning
of the trust's fiscal year. We also added selectively to the trust's holdings of
bonds rated BBB in order to support the trust's yield. These holdings remained
modest, at six percent of the portfolio.
The trust's portfolio remained well diversified during the period, with its
holdings spread across all major municipal-bond sectors. This longstanding
strategy can help to minimize the risk of over-concentration in any single
sector, while also giving the portfolio exposure to many potential sources of
return as possible. Within this diversified framework, we remained focused on
bonds backed by revenues from essential services in an effort to avoid any
potential weakness in tax receipts. The three largest sector exposures at the
end of the period were public education at 23 percent of long-term investments,
and water and sewer and tax districts at 13 percent each.
The volatile interest-rate environment in the opening months of the period
provided several opportunities to harvest tax losses on key holdings. We
reinvested the proceeds from these sales, as well as those from bonds that were
called away by their issuers, in attractively priced securities which our
analysis
<Table>
TOP 5 SECTORS AS OF 6/30/04 RATINGS ALLOCATION AS OF 6/30/04
Public Education 23.0% AAA/Aaa 88.4%
Tax District 12.9 AA/Aa 2.0
Water & Sewer 12.9 A/A 3.2
Public Building 9.9 BBB/Baa 6.4
General Purpose 6.6
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Ratings allocation based upon ratings as issued
by Standard and Poor's and Moody's, respectively. Van Kampen is a wholly owned
subsidiary of a global securities firm which is engaged in a wide range of
financial services including, for example, securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
4
indicated offered greater total-return potential. Many of these securities were
in the intermediate portion of the yield curve, especially in the 18- to 22-year
maturity range, and offered premium coupons.
As mentioned above, the portfolio's below-market duration served it well when
interest rates rose sharply in the final weeks of the period. While it is
impossible to forecast with certainty how far interest rates are likely to rise,
we do believe that the coming months are likely to offer significantly more
opportunities to invest in securities with more attractive yield
characteristics.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen trust provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
trust's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to trust shareholders, and makes these reports available on its
public web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public web site, each trust files a
complete schedule of portfolio holdings with the SEC for the trust's
first and third fiscal quarters on Form N-Q. Van Kampen does not deliver
the reports for the first and third fiscal quarters to shareholders, nor
are the reports posted to the Van Kampen public web site. You may,
however, obtain the Form N-Q filings (as well as the Form N-CSR and
N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You
may also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-202-942-8090. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
In addition to filing a complete schedule of portfolio holdings with the
SEC each fiscal quarter, each Van Kampen trust makes portfolio holdings
information available by periodically providing the information on its
public web site, www.vankampen.com. Each Van Kampen trust provides a
complete schedule of portfolio holdings on the public web site on a
calendar-quarter basis approximately 30 days after the close of the
calendar quarter. Furthermore, each Van Kampen trust provides partial
lists of its portfolio holdings (such as top 10 or top 15 trust holdings)
to the public web site each with a delay of approximately 15 days.
You may obtain copies of a trust's fiscal quarter filings, or its monthly
or calendar-quarter web site postings, by contacting Van Kampen Client
Relations at 1-800-847-2424.
6
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
The trust's policies and procedures with respect to the voting of proxies
relating to the trust's portfolio securities and information on how the
trust voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by calling 1-800-847-2424 or by visiting our web site at
www.vankampen.com. This information is also available on the Securities
and Exchange Commission's web site at http://www.sec.gov.
7
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS 160.6%
$1,000 Abag Fin Auth For Nonprofit Corp CA Ctf Part
Childrens Hosp Med Ctr (AMBAC Insd).............. 5.875% 12/01/19 $ 1,110,500
1,000 Abag Fin Auth For Nonprofit Corp CA Insd Rev Ctf
Lincoln Glen Manor Sr Citizens (CA MTG Insd)..... 6.100 02/15/25 1,029,350
1,000 Abag Fin Auth For Nonprofit Corp CA Multi-Family
Rev Hsg Utd Dominion Ser A Rfdg (AMT) (GTY AGMT:
Utd Dominion Realty Tr).......................... 6.400 08/15/30 1,081,880
1,205 Alameda Cnty, CA Wtr Dist Rev Rfdg (MBIA Insd)... 4.750 06/01/20 1,205,735
1,400 Alhambra, CA City Elem Sch Dist Ser A (FSA
Insd)............................................ 5.600 09/01/24 1,480,752
290 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Agy
Pool Rev Ser A (FSA Insd)........................ 6.000 12/15/15 300,707
1,000 Bay Area Toll Auth CA Toll Brdg Rev San Francisco
Bay Area Ser D................................... 5.000 04/01/17 1,041,360
835 California Edl Fac Auth Rev Student Ln CA Ln Pgm
Ser A (AMT) (MBIA Insd).......................... 6.000 03/01/16 879,864
1,000 California Hlth Fac Fin Auth Rev Cedars Sinai Med
Ctr Ser A........................................ 6.125 12/01/19 1,074,960
1,000 California Hsg Fin Agy Rev Multi-Family Hsg III
Ser A (AMT) (MBIA Insd).......................... 5.850 08/01/17 1,036,350
1,000 California Infrastructure & Econ Dev Bk Rev (MBIA
Insd)............................................ 5.500 06/01/15 1,092,050
1,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southn CA Edison Co (AMT) (AMBAC Insd)........... 6.000 07/01/27 1,002,640
90 California Rural Home Mtg Fin Auth Single Family
Mtg Rev Ser C (AMT) (GNMA Collateralized)........ 7.800 02/01/28 94,549
2,000 California St (FGIC Insd)........................ 5.000 10/01/23 2,009,480
1,000 California St Univ Fresno Assn Inc Rev Sr Aux
Organization Event Ctr........................... 6.000 07/01/22 1,021,480
1,000 California St Vet Bd Ser BH (AMT) (FSA Insd)..... 5.400 12/01/15 1,033,980
1,000 California St Vet Bd Ser BH (AMT) (FSA Insd)..... 5.400 12/01/16 1,033,980
1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA
Insd)............................................ 5.000 06/01/21 1,017,210
1,280 El Cerrito, CA Redev Agy Tax Alloc Redev Proj
Area Ser B Rfdg (AMT) (MBIA Insd)................ 5.250 07/01/15 1,366,029
1,000 Emeryville, CA Pub Fin Auth Shellmound Pk Redev &
Hsg Proj B (MBIA Insd)........................... 5.000 09/01/19 1,024,620
1,000 Folsom, CA Spl Tax Cmnty Fac Dist No 2 Rfdg
(Connie Lee Insd)................................ 5.250 12/01/19 1,049,840
1,000 Fontana, CA Redev Agy Tax Southeast Indl Pk Proj
Rfdg (MBIA Insd)................................. 5.000 09/01/22 1,011,280
1,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg...................................... * 01/15/30 204,840
1,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Conv
Cap Apprec Sr Lien Ser A (Escrowed to Maturity)
(a).............................................. 0/7.050 01/01/10 1,147,750
1,000 Imperial Irr Dist CA Ctf Part Elec Sys Proj (FSA
Insd)............................................ 5.250 11/01/23 1,031,580
</Table>
8 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
$1,000 Irvine, CA Pub Fac & Infrastructure Auth Assmt
Rev Ser B (AMBAC Insd)........................... 5.000% 09/02/22 $ 1,016,700
800 Kern, CA Cmnty College Sch Fac Impt Dist Mammoth
Campus Ser A (AMBAC Insd)........................ 5.000 08/01/19 824,256
1,250 Los Angeles Cnty, CA Sch Regionalized Business
Svc Ctf LA Cnty Sch Pooled Fin Proj Ser A (FSA
Insd)............................................ 5.000 09/01/28 1,233,512
517 Los Angeles Cnty, CA Tran Comm Lease Rev Dia RR
Lease Ltd (FSA Insd)............................. 7.375 12/15/06 530,380
1,000 Los Angeles, CA Uni Sch Dist 1997 Election Ser E
(MBIA Insd)...................................... 5.500 07/01/17 1,086,730
1,000 Los Angeles, CA Uni Sch Dist Ser A (FSA Insd).... 5.250 07/01/20 1,050,860
1,000 Lucia Mar Uni Sch Dist Election 2004 Ser A (FGIC
Insd) (b)........................................ 5.000 08/01/25 1,003,490
1,405 Moorpark, CA Uni Sch Dist Ser A (FSA Insd)....... 5.375 08/01/18 1,503,814
1,000 Pico Rivera, CA Wtr Auth Rev Wtr Sys Proj Ser A
(MBIA Insd)...................................... 5.500 05/01/19 1,097,980
1,000 Redlands, CA Redev Agy Tax Alloc Redev Proj Ser A
Rfdg (MBIA Insd)................................. 4.750 08/01/21 987,860
955 San Diego, CA Hsg Auth Multi-Family Hsg Rev (AMT)
(GNMA Collateralized)............................ 5.000 07/20/18 970,710
1,000 San Dimas, CA Redev Agy Tax Alloc Creative Growth
Ser A (FSA Insd)................................. 5.000 09/01/16 1,046,840
1,000 San Francisco, CA City & Cnty Arpt Commn Intl
Arpt Rev Second Ser-Issue 30 (XLCA Insd)......... 5.250 05/01/16 1,067,620
2,000 San Jose, CA Fin Auth Lease Rev Convention Ctr
Proj Ser F Rfdg (MBIA Insd)...................... 5.000 09/01/17 2,076,720
1,000 Sanger, CA Uni Sch Dist Rfdg (MBIA Insd)......... 5.600 08/01/23 1,107,860
1,350 Santa Ana, CA Uni Sch Dist (MBIA Insd)........... 5.375 08/01/21 1,421,320
1,000 Semitropic Impt Wtr Storage Dist CA Wtr Ser A
(XLCA Insd)...................................... 5.125 12/01/35 996,860
1,305 South Orange Cnty, CA Pub Fin Auth Reassmt Rev
(FSA Insd)....................................... 5.800 09/02/18 1,445,927
600 Southern CA Pub Pwr Auth Pwr Proj Rev
Multi-Projs...................................... 5.500 07/01/20 603,720
1,000 State Center, CA Cmnty Elec 2002 Ser A (MBIA
Insd) (b)........................................ 5.500 08/01/28 1,050,910
1,325 Sweetwater, CA Auth Wtr Rev (FSA Insd)........... 5.500 04/01/18 1,435,916
2,080 Temecula Valley, CA Uni Sch Dist Rfdg (FSA
Insd)............................................ 5.000 08/01/19 2,205,819
1,000 University of CA Rev Multi Purp Proj Ser M (FGIC
Insd)............................................ 5.125 09/01/17 1,052,540
-----------
TOTAL LONG-TERM INVESTMENTS 160.6%
(Cost $49,576,041).......................................................... 52,201,110
-----------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2004 continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 5.6%
$1,300 California St Dept Wtr Res Pwr Supply Rev Ser B-6
(Variable Rate Coupon)........................... 1.040% 05/01/22 $ 1,300,000
500 California Statewide Cmntys Dev Auth Rev Ctf
Partn Var John Muir MT Diablo Hlth (Variable Rate
Coupon).......................................... 1.000 08/15/27 500,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,800,000)........................................................... 1,800,000
-----------
TOTAL INVESTMENTS 166.2%
(Cost $51,376,041).......................................................... 54,001,110
LIABILITIES IN EXCESS OF OTHER ASSETS (4.6%)................................. (1,498,523)
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (61.6%)................... (20,005,918)
-----------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%................................ $32,496,669
===========
</Table>
Percentages are calculated as a percentage of net assets applicable to common
shares.
* Zero coupon bond
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(b) Securities purchased on a when-issued or delayed delivery basis.
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
CA MTG--California Mortgage Insurance
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
GTY AGMT--Guaranty Agreement
MBIA--Municipal Bond Investors Assurance Corp.
XLCA--XL Capital Assurance Inc.
10 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2004
<Table>
ASSETS:
Total Investments (Cost $51,376,041)........................ $54,001,110
Cash........................................................ 48,655
Receivables:
Investments Sold.......................................... 1,955,320
Interest.................................................. 749,148
Other....................................................... 4,359
-----------
Total Assets............................................ 56,758,592
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 3,974,302
Investment Advisory Fee................................... 25,671
Income Distributions--Common Shares....................... 9,435
Other Affiliates.......................................... 5,245
Trustees' Deferred Compensation and Retirement Plans........ 191,109
Accrued Expenses............................................ 50,243
-----------
Total Liabilities....................................... 4,256,005
Preferred Shares (including accrued distributions).......... 20,005,918
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $32,496,669
===========
NET ASSET VALUE PER COMMON SHARE ($32,496,669 divided by
3,257,560 shares outstanding)............................. $ 9.98
===========
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 3,257,560 shares issued and
outstanding).............................................. $ 32,576
Paid in Surplus............................................. 29,564,418
Net Unrealized Appreciation................................. 2,625,069
Accumulated Undistributed Net Investment Income............. 225,039
Accumulated Net Realized Gain............................... 49,567
-----------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $32,496,669
===========
PREFERRED SHARES ($.01 par value, authorized 1,000,000
shares, 400 issued with liquidation preference of $50,000
per share)................................................ $20,000,000
===========
NET ASSETS INCLUDING PREFERRED SHARES....................... $52,496,669
===========
</Table>
See Notes to Financial Statements 11
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended June 30, 2004
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 2,659,290
-----------
EXPENSES:
Investment Advisory Fee..................................... 322,343
Preferred Share Maintenance................................. 69,837
Trustees' Fees and Related Expenses......................... 44,740
Legal....................................................... 15,320
Custody..................................................... 4,608
Other....................................................... 99,023
-----------
Total Expenses.......................................... 555,871
-----------
NET INVESTMENT INCOME....................................... $ 2,103,419
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 42,420
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 4,722,170
End of the Period......................................... 2,625,069
-----------
Net Unrealized Depreciation During the Period............... (2,097,101)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(2,054,681)
===========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (192,274)
===========
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ (143,536)
===========
</Table>
12 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JUNE 30, 2004 JUNE 30, 2003
------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 2,103,419 $ 2,200,161
Net Realized Gain........................................... 42,420 560,495
Net Unrealized Appreciation/Depreciation During the
Period.................................................... (2,097,101) 1,527,573
Distributions to Preferred Shareholders:
Net Investment Income..................................... (192,274) (238,566)
----------- -----------
Change in Net Assets Applicable to Common Shares from
Operations................................................ (143,536) 4,049,663
Distributions to Common Shareholders:
Net Investment Income..................................... (1,954,457) (2,061,858)
Net Realized Gain......................................... (415,571) (372,990)
----------- -----------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
INVESTMENT ACTIVITIES..................................... (2,513,564) 1,614,815
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period..................................... 35,010,233 33,395,418
----------- -----------
End of the Period (Including accumulated undistributed net
investment income of $225,039 and $272,660
respectively)............................................. $32,496,669 $35,010,233
=========== ===========
</Table>
See Notes to Financial Statements 13
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
--------------------------------
2004 2003 2002 (e)
--------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................. $ 10.75 $ 10.25 $ 9.99
-------- -------- --------
Net Investment Income.................................. .65 .67 .71
Net Realized and Unrealized Gain/Loss.................. (.63) .64 .28
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income.............................. (.06) (.07) (.11)
-------- -------- --------
Total from Investment Operations......................... (.04) 1.24 .88
Distributions Paid to Common Shareholders:
Net Investment Income................................ (.60) (.63) (.55)
Net Realized Gain.................................... (.13) (.11) (.07)
-------- -------- --------
NET ASSET VALUE, END OF THE PERIOD....................... $ 9.98 $ 10.75 $ 10.25
======== ======== ========
Common Share Market Price at End of the Period........... $ 8.73 $ 10.45 $ 10.14
Total Return (a)......................................... -10.03% 10.97% 22.39%
Net Assets Applicable to Common Shares at End of the
Period (In millions)................................... $ 32.5 $ 35.0 $ 33.4
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (b)...................................... 1.65% 1.56% 1.59%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (b)........................ 6.24% 6.38% 6.90%
Portfolio Turnover....................................... 33% 19% 24%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
Preferred Shares (b)................................... 1.03% .99% .99%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (c)........................ 5.67% 5.69% 5.86%
SENIOR SECURITIES:
Total Preferred Shares Outstanding....................... 400 400 400
Asset Coverage Per Preferred Share (d)................... $131,256 $137,533 $133,498
Involuntary Liquidating Preference Per Preferred Share... $ 50,000 $ 50,000 $ 50,000
Average Market Value Per Preferred Share................. $ 50,000 $ 50,000 $ 50,000
</Table>
* Amount is less than $.01
(a)Total return assumes an investment at the common share market price at the
beginning of the period indicated, reinvestment of all distributions for the
period in accordance with the Trust's dividend reinvestment plan, and sale of
all shares at the closing common share market price at the end of the period
indicated.
(b)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(c)Ratios reflect the effect of dividend payments to preferred shareholders.
(d)Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets and dividing by the number of
preferred shares outstanding.
(e)As required, effective July 1, 2001, the Trust has adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended June 30, 2002 was to increase the ratio of net
investment income to average net assets applicable to common shares by .06%.
Net investment income per share and net realized and unrealized gains and
losses per share were unaffected by the adjustments. Per share, ratios and
supplemental data for periods prior to June 30, 2002 have not been restated
to reflect this change in presentation.
14 See Notes to Financial Statements
<Table>
<Caption>
YEAR ENDED JUNE 30,
- -------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
$ 9.36 $ 9.93 $ 10.67 $ 10.45 $ 10.28 $ 10.40 $ 10.30
-------- -------- -------- -------- -------- -------- --------
.73 .76 .78 .85 .89 .91 .95
.58 (.44) (.37) .53 .39 -0-* .11
(.23) (.22) (.20) (.22) (.21) (.23) (.23)
-------- -------- -------- -------- -------- -------- --------
1.08 .10 .21 1.16 1.07 .68 .83
(.45) (.53) (.62) (.72) (.75) (.75) (.72)
-0-* (.14) (.33) (.22) (.15) (.05) (.01)
-------- -------- -------- -------- -------- -------- --------
$ 9.99 $ 9.36 $ 9.93 $ 10.67 $ 10.45 $ 10.28 $ 10.40
======== ======== ======== ======== ======== ======== ========
$ 8.83 $ 8.375 $ 9.875 $ 12.125 $12.1875 $ 10.875 $ 10.75
10.99% -8.14% -11.17% 7.77% 21.40% 9.02% 8.67%
32.5 $ 30.5 $ 32.3 $ 34.5 $ 33.6 $ 32.9 $ 33.0
1.65% 1.47% 1.67% 1.57% 1.58% 1.65% 1.65%
7.33% 8.25% 7.38% 8.00% 8.54% 8.76% 9.35%
16% 60% 33% 53% 30% 19% 16%
1.02% .88% 1.05% .99% .99% 1.03% 1.02%
5.02% 5.82% 5.49% 5.91% 6.51% 6.57% 7.02%
400 400 400 400 400 400 400
$131,365 $126,216 $130,843 $136,309 $134,055 $132,192 $132,521
$ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
$ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
</Table>
See Notes to Financial Statements 15
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen California Municipal Trust (the "Trust") is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended. The Trust's investment objective is to provide
a high level of current income exempt from federal and California income taxes,
consistent with preservation of capital. The Trust will invest in a portfolio
consisting substantially of California municipal obligations rated investment
grade at the time of investment. The Trust commenced investment operations on
November 1, 1988. Effective November 30, 2003, the Trust's investment adviser,
Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset
Management.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At June 30, 2004, the Trust had $3,974,302 when-issued and
delayed delivery purchase commitments.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and discounts are accreted over the expected life of each
applicable security.
D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements
of 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.
16
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004 continued
At June 30, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $51,314,686
===========
Gross tax unrealized appreciation........................... $ 2,845,054
Gross tax unrealized depreciation........................... (158,630)
-----------
Net tax unrealized appreciation on investments.............. $ 2,686,424
===========
</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 to common shareholders. Distributions from net
realized gains for book purposes may include short-term capital gains, which are
included as ordinary income for tax purposes.
The tax character of distributions paid during the years ended June 30, 2004
and 2003 was as follows:
<Table>
<Caption>
2004 2003
Distributions paid from:
Ordinary income........................................... $417,385 $ 37,415
Long-term capital gain.................................... -0- 344,219
-------- --------
$417,385 $381,634
======== ========
</Table>
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. A permanent book and
tax difference relating to book to tax accretion differences totaling $4,309 has
been reclassified from accumulated undistributed net investment income to
accumulated net realized gain.
As of June 30, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
Undistributed long-term capital gain........................ $43,111
</Table>
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") 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.
For the year ended June 30, 2004, the Trust recognized expenses of
approximately $3,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, 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 year ended June 30,
2004, the Trust recognized expenses of approximately $23,200 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively
17
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004 continued
"Van Kampen") 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 $18,026,777 and $17,736,660,
respectively.
4. REMARKETED PREFERRED SHARES
The Trust has outstanding 400 shares of Remarketed Preferred Shares ("RP").
Dividends are cumulative and the rate is reset through an auction process every
28 days. The rate in effect on June 30, 2004 was 1.350%. During the year ended
June 30, 2004, rates ranged from 0.840% to 1.350%
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 RP are redeemable at the option of the Trust in whole or in part at the
liquidation value of $50,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests, and the RP are subject to
mandatory redemption if the tests are not met.
5. INDEMNIFICATIONS
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
18
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Van Kampen California Municipal Trust
We have audited the accompanying statement of assets and liabilities of Van
Kampen California Municipal Trust (the "Trust"), including the portfolio of
investments, as of June 30, 2004, the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The Trust's financial highlights for the periods ended
prior to June 30, 2000, were audited by other auditors whose report, dated
August 5, 1999, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2004, by correspondence with the Trust's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen California Municipal Trust as of June 30, 2004, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the respective stated periods, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
August 9, 2004
19
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be
re-registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued
on the valuation date, generally at the lower of market price or net asset
value, except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value
20
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
DIVIDEND REINVESTMENT PLAN continued
of the Trust's Common Shares, resulting in the acquisition of fewer Common
Shares than if the dividend or distribution had been paid in Common Shares
issued by the Trust. All reinvestments are in full and fractional Common Shares
and are carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
21
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
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 LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
For federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Trust during its taxable year ended
June 30, 2004. The Trust designated 99.9% of the income distributions as a
tax-exempt income distribution. In January, the Trust provides tax information
to shareholders for the preceding calendar year.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
22
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 23, 2004, where
shareholders voted on the election of trustees.
With regards to the election of the following trustees by the common
shareholders of the Trust:
<Table>
<Caption>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------------------------
R. Craig Kennedy.......................................... 2,849,763 29,899
Jack E. Nelson............................................ 2,848,763 30,899
Richard F. Powers, III.................................... 2,844,413 35,249
</Table>
With regards to the election of the following trustee by the preferred
shareholders of the Trust:
<Table>
<Caption>
# OF SHARES
------------------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------------------------
Hugo F. Sonneschein....................................... 391 0
</Table>
The other trustees of the Trust whose terms did not expire in 2004 are David C.
Arch, J. Miles Branagan, Jerry D. Choate, Rod Dammeyer, Linda Hutton Heagy,
Howard J Kerr, Mitchell M. Merin, Wayne W. Whalen and Susan H. Woolsey.
23
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Trust are managed under the direction of the
Trust's Board of Trustees and the Trust's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Trust
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments
Inc. ("Van Kampen Investments"), Van Kampen Asset Management ("Asset Management"
or the "Adviser"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen
Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc.
("Investor Services"). The term "Fund Complex" includes each of the investment
companies advised by the Adviser or its affiliates as of the date of this
Statement of Additional Information. Trustees serve until reaching their
retirement age or until their successors are duly elected and qualified.
Officers are annually elected by the trustees.
INDEPENDENT TRUSTEES
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (59) Trustee Trustee Chairman and Chief 88 Trustee/Director/Managing
Blistex Inc. since 1998 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturers'
Association.
J. Miles Branagan (72) Trustee Trustee Private investor. 86 Trustee/Director/Managing
1632 Morning Mountain Road since 2003 Co-founder, and prior to General Partner of funds
Raleigh, NC 27614 August 1996, Chairman, in the Fund Complex.
Chief Executive Officer
and President, MDT
Corporation (now known as
Getinge/Castle, Inc., a
subsidiary of Getinge
Industrier AB), a company
which develops,
manufactures, markets and
services medical and
scientific equipment.
</Table>
24
<Table>
<Caption>
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jerry D. Choate (65) Trustee Trustee Prior to January 1999, 86 Trustee/Director/Managing
33971 Selva Road since 2003 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
</Table>
25
<Table>
<Caption>
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Rod Dammeyer (63) Trustee Trustee President of CAC, L.L.C., 88 Trustee/Director/Managing
CAC, L.L.C. since 1998 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Stericycle,
San Diego, CA 92122-6223 advisory services. Prior Inc., Ventana Medical
to February 2001, Vice Systems, Inc., GATX
Chairman and Director of Corporation and Trustee
Anixter International, of The Scripps Research
Inc., a global Institute and the
distributor of wire, University of Chicago
cable and communications Hospitals and Health
connectivity products, Systems. Prior to April
and IMC Global Inc., an 2004, Director of
international company TheraSense, Inc. Prior to
that mines, manufactures January 2004, Director of
and sells essential crop TeleTech Holdings Inc.
nutrients and feed and Arris Group, Inc.
ingredients to farmers. Prior to May 2002,
Prior to July 2000, Director of Peregrine
Managing Partner of Systems Inc. Prior to
Equity Group Corporate February 2001, Vice
Investment (EGI), a Chairman and Director of
company that makes Anixter International,
private investments in Inc. and IMC Global Inc.
other companies. Prior to July 2000,
Director of Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM).
</Table>
26
<Table>
<Caption>
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (56) Trustee Trustee Managing Partner of 86 Trustee/Director/Managing
Heidrick & Struggles since 2003 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1992, Executive Vice
President of La Salle
National Bank.
R. Craig Kennedy (52) Trustee Trustee Director and President of 86 Trustee/Director/Managing
1744 R Street, NW since 2003 the German Marshall Fund General Partner of funds
Washington, D.C. 20009 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (68) Trustee Trustee Prior to 1998, President 88 Trustee/Director/Managing
736 North Western Avenue since 1992 and Chief Executive General Partner of funds
P.O. Box 317 Officer of Pocklington in the Fund Complex.
Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the Marrow
Foundation.
</Table>
27
<Table>
<Caption>
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (68) Trustee Trustee President of Nelson 86 Trustee/Director/Managing
423 Country Club Drive since 2003 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (63) Trustee Trustee President Emeritus and 88 Trustee/Director/Managing
1126 E. 59th Street since 1994 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey, P.h.D. (62) Trustee Trustee Previously Chief 86 Trustee/Director/Managing
815 Cumberstone Road since 2003 Communications Officer of General Partner of funds
Harwood, MD 20776 the National Academy of in the Fund Complex.
Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute and Trustee of
Colorado College. Prior
to 1993, Executive
Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
28
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEES*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Mitchell M. Merin* (50) Trustee, Trustee President and Chief 86 Trustee/Director/Managing
1221 Avenue of the Americas President since Executive Officer of General Partner of funds
New York, NY 10020 and Chief 2003; funds in the Fund in the Fund Complex.
Executive President Complex. Chairman,
Officer and Chief President, Chief
Executive Executive Officer and
Officer Director of the Adviser
since 2002 and Van Kampen Advisors
Inc. since December 2002.
Chairman, President and
Chief Executive Officer
of Van Kampen Investments
since December 2002.
Director of Van Kampen
Investments since
December 1999. Chairman
and Director of Van
Kampen Funds Inc. since
December 2002. President,
Director and Chief
Operating Officer of
Morgan Stanley Investment
Management since December
1998. President and
Director since April 1997
and Chief Executive
Officer since June 1998
of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc.
Chairman, Chief Executive
Officer and Director of
Morgan Stanley
Distributors Inc. since
June 1998. Chairman since
June 1998, and Director
since January 1998 of
Morgan Stanley Trust.
Director of various
Morgan Stanley
subsidiaries. President
of the Morgan Stanley
Funds since May 1999.
Previously Chief
Executive Officer of Van
Kampen Funds Inc. from
December 2002 to July
2003, Chief Strategic
Officer of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc. and
Executive Vice President
of Morgan Stanley
Distributors Inc. from
April 1997 to June 1998.
Chief Executive Officer
from September 2002 to
April 2003 and Vice
President from May 1997
to April 1999 of the
Morgan Stanley Funds.
</Table>
29
<Table>
<Caption>
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Richard F. Powers, III* (58) Trustee Trustee Advisory Director of 88 Trustee/Director/Managing
1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds
P.O. Box 5555 December 2002, Chairman, in the Fund Complex.
Oakbrook Terrace, IL 60181 Director, President,
Chief Executive Officer
and Managing Director of
Van Kampen Investments
and its investment
advisory, distribution
and other subsidiaries.
Prior to December 2002,
President and Chief
Executive Officer of
funds in the Fund
Complex. Prior to May
1998, Executive Vice
President and Director of
Marketing at Morgan
Stanley and Director of
Dean Witter, Discover &
Co. and Dean Witter
Realty. Prior to 1996,
Director of Dean Witter
Reynolds Inc.
Wayne W. Whalen* (64) Trustee Trustee Partner in the law firm 88 Trustee/Director/Managing
333 West Wacker Drive since 1988 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
counsel to funds in the
Fund Complex.
</Table>
* Such trustee is an "interested person" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain
funds in the Fund Complex by reason of his firm currently acting as legal
counsel to such funds in the Fund Complex. Messrs. Merin and Powers are
interested persons of funds in the Fund Complex and the Adviser by reason of
their current or former positions with Morgan Stanley or its affiliates.
30
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TRUSTEE AND OFFICER INFORMATION continued
OFFICERS
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS
Stefanie V. Chang (37) Vice President and Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas Secretary since 2003 Vice President of funds in the Fund Complex.
New York, NY 10020
Joseph J. McAlinden (61) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas President and since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment
New York, NY 10020 Chief Investment Management Inc. and Morgan Stanley Investments LP and
Officer Director of Morgan Stanley Trust for over 5 years. Executive
Vice President and Chief Investment Officer of funds in the
Fund Complex. Managing Director and Chief Investment Officer
of Van Kampen Investments, the Adviser and Van Kampen
Advisors Inc. since December 2002.
Ronald E. Robison (65) Executive Vice Officer Chief Executive Officer and Chairman of Investor Services.
1221 Avenue of the Americas President and since 2003 Executive Vice President and Principal Executive Officer of
New York, NY 10020 Principal funds in the Fund Complex. Chief Administrative Officer and
Executive Officer Managing Director of Morgan Stanley. Managing Director and
Director of Morgan Stanley Investment Advisors Inc. and
Morgan Stanley Services Company Inc. Chief Executive Officer
and Director of Morgan Stanley Trust. Executive Vice
President and Principal Executive Officer of the Morgan
Stanley Funds. Director of Morgan Stanley SICAV. Previously,
Chief Global Operations Officer and Managing Director of
Morgan Stanley Investment Management Inc.
John L. Sullivan (48) Vice President, Officer Director and Managing Director of Van Kampen Investments,
1 Parkview Plaza Chief Financial since 1998 the Adviser, Van Kampen Advisors Inc. and certain other
P.O. Box 5555 Officer and subsidiaries of Van Kampen Investments. Vice President,
Oakbrook Terrace, IL 60181 Treasurer Chief Financial Officer and Treasurer of funds in the Fund
Complex. Head of Fund Accounting for Morgan Stanley
Investment Management. Prior to December 2002, Executive
Director of Van Kampen Investments, the Adviser and Van
Kampen Advisors Inc.
</Table>
31
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 conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our web site, and text files (also known as "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 Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., 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)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 920, 910, 106
VKC ANR 8/04 RN04-01588P-Y06/04
Item 2. Code of Ethics.
(a) The Trust has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Trust or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Trust has amended its Code of Ethics during the period covered by
the shareholder report presented in Item 1 hereto.
(d) The Trust has not granted a waiver or an implicit waiver from a
provision of its Code of Ethics.
(e) Not applicable.
(f)
(1) The Trust's Code of Ethics is attached hereto as Exhibit 11A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Trust's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: J. Miles Branagan, Jerry Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2004
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES........................ $22,800 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES.......... $400 $230,000(2)
TAX FEES.................... $1,550(3) $0(4)
ALL OTHER FEES.............. $0 $0(5)
TOTAL NON-AUDIT FEES.............. $1,950 $230,000
TOTAL............................. $24,750 $230,000
2003
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES........................ $21,476 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES.......... $3,000 $95,000(2)
TAX FEES.................... $1,500(3) $0 (4)
ALL OTHER FEES.............. $0 $0(6)
TOTAL NON-AUDIT FEES.............. $4,500 $95,000
TOTAL............................. $25,976 $95,000
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors)
and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically
attestation services provided in connection with a SAS 70
Report.
(3) Tax Fees represent tax advice and compliance services provided
in connection with the review of the Registrant's tax.
(4) Tax Fees represent tax advice services provided to Covered
Entities, including research and identification of PFIC
entities.
(5) All Other Fees represent attestation services provided in
connection with performance presentation standards.
(6) All Other Fees represent attestation services provided in
connection with performance presentation standards, general
industry education seminars provided, and a regulatory review
project performed.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider
whether such services are consistent with the SEC's rules on auditor
independence. The Audit Committee will also consider whether the Independent
Auditors are best positioned to provide the most effective and efficient
services, for reasons such as its familiarity with the Fund's business, people,
culture, accounting systems, risk profile and other factors, and whether the
service might enhance the Fund's ability to manage or control risk or improve
audit quality. All such factors will be considered as a whole, and no one factor
should necessarily be determinative.
The Audit Committee is also mindful of the relationship between fees
for audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax and All
Other services that have the general pre-approval of the Audit Committee. The
term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval
- --------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval
Policy and Procedures (the "Policy"), adopted as of the date above, supercedes
and replaces all prior versions that may have been adopted from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have
the meanings as defined in the Joint Audit Committee Charter.
from the Audit Committee. The Audit Committee will add to or subtract from the
list of general pre-approved services from time to time, based on subsequent
determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes
that implementation of the Policy will not adversely affect the Independent
Auditors' independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the
Audit Committee, the Audit Committee may grant general pre-approval to other
Audit services, which are those services that only the Independent Auditors
reasonably can provide. Other Audit services may include statutory audits and
services associated with SEC registration statements (on Forms N-1A, N-2, N-3,
N-4, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the following Audit services. All
other Audit services not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
- Statutory audits or financial audits for the Fund
- Services associated with SEC registration statements (including new
funds), periodic reports and other documents filed with the SEC or
other documents issued in connection with securities offerings (e.g.,
comfort letters for closed-end fund offerings, consents), and
assistance in responding to SEC comment letters
- Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or standard
setting bodies (Note: Under SEC rules, some consultations may be "audit
related" services rather than "audit" services)
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by
the Independent Auditors. Because the Audit Committee believes that the
provision of Audit-related services does not impair the independence of the
auditor and is consistent with the SEC's rules on auditor independence, the
Audit Committee may grant general pre-approval to Audit-related services.
Audit-related services include, among others, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as
"Audit services"; assistance with understanding and implementing new accounting
and financial reporting guidance from rulemaking authorities; agreed-upon or
expanded audit procedures related to accounting and/or billing records required
to respond to or comply with financial, accounting or regulatory reporting
matters; and assistance with internal control reporting requirements under Forms
N-SAR and/or N-CSR.
The Audit Committee has pre-approved the following Audit-related
services. All other Audit-related services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Attest procedures not required by statute or regulation (including
agreed upon procedures related to the Closed-End Fund asset coverage
tests required by the rating agencies and/or lenders)
- Due diligence services pertaining to potential fund mergers
- Issuance of SAS-70 reports on internal controls of Morgan Stanley Trust
Co. and MSIM Trade Operations
- Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or
standard-setting bodies (Note: Under SEC rules, some consultations may
be "audit" services rather than "audit-related" services)
- Information systems reviews not performed in connection with the audit
(e.g., application data center and technical reviews)
- General assistance with implementation of the requirements of SEC rules
or listing standards promulgated pursuant to the Sarbanes-Oxley Act
- Audit of record keeping services performed by Morgan Stanley Trust Fund
related to the New Jersey State Retirement Plan
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide
Tax services to the Fund and, to the extent they are Covered Services, the
Covered Entities, such as tax compliance, tax planning and tax advice without
impairing the auditor's independence, and the SEC has stated that the
Independent Auditors may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax services that have
historically been provided by the Independent Auditors, that the Audit Committee
has reviewed and believes would not impair the independence of the Independent
Auditors, and that are consistent with the SEC's rules on auditor independence.
The Audit Committee will not permit the retention of the Independent Auditors in
connection with a transaction initially recommended by the Independent Auditors,
the sole business purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code and related regulations.
The Audit Committee will consult with Director of Tax or outside counsel to
determine that the tax planning and reporting positions are consistent with this
policy.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the following Tax Services. All Tax services involving large and
complex transactions not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies):
- U.S. federal, state and local tax planning and advice
- U.S. federal, state and local tax compliance
- International tax planning and advice
- International tax compliance
- Review of federal, state, local and international income, franchise,
and other tax returns
- Identification of Passive Foreign Investment Companies
- Review of closed-end funds pro rata allocation of taxable income and
capital gains to common and preferred shares.
- Domestic and foreign tax planning, compliance, and advice
- Assistance with tax audits and appeals before the IRS and similar
state, local and foreign agencies
- Tax advice and assistance regarding statutory, regulatory or
administrative developments (e.g., excise tax reviews, evaluation of
Fund's tax compliance function)
- Review the calculations of taxable income from corporate actions
including reorganizations related to bankruptcy filings and provide
guidance related to the foregoing
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the following All Other services.
Permissible All Other services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Risk management advisory services, e.g., assessment and testing of
security infrastructure controls
The following is a list of the SEC's prohibited non-audit services. The
SEC's rules and relevant guidance should be consulted to determine the precise
definitions of these services and the applicability of exceptions to certain of
the prohibitions:
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions or
contribution-in-kind reports
- Actuarial services
- Internal audit outsourcing services
- Management functions
- Human resources
- Broker-dealer, investment adviser or investment banking services
- Legal services
- Expert services unrelated to the audit
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be
provided by the Independent Auditors will be established annually by the Audit
Committee. Any proposed services exceeding these levels or amounts will require
specific pre-approval by the Audit Committee. The Audit Committee is mindful of
the overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the
Independent Auditors that do not require specific approval by the Audit
Committee will be submitted to the Fund's Chief Financial Officer and must
include a detailed description of the services to be rendered. The Fund's Chief
Financial Officer will determine whether such services are included within the
list of services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be informed on a timely basis of any such
services rendered by the Independent Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Fund's
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer
to monitor the performance of all services provided by the Independent Auditors
and to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. Both the Fund's Chief Financial Officer
and management will immediately report to the chairman of the Audit Committee
any breach of this Policy that comes to the attention of the Fund's Chief
Financial Officer or any member of management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an
annual basis to meet its responsibility to oversee the work of the Independent
Auditors and to assure the auditor's independence from the Fund, such as
reviewing a formal written statement from the Independent Auditors delineating
all relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any
entity controlling, controlled by or under common control with the Fund's
investment adviser(s) that provides ongoing services to the Fund(s). Beginning
with non-audit service contracts entered into on or after May 6, 2003, the
Fund's audit committee must pre-approve non-audit services provided not only to
the Fund but also to the Covered Entities if the engagements relate directly to
the operations and financial reporting of the Fund. This list of Covered
Entities would include:
- Van Kampen Investments, Inc.
- Van Kampen Investment Advisory Corporation
- Van Kampen Asset Management Inc.
- Van Kampen Advisors Inc.
- Van Kampen Funds Inc.
- Van Kampen Trust Company
- Van Kampen Investor Services Inc.
- Van Kampen Management Inc.
- Morgan Stanley Investment Management Inc.
- Morgan Stanley Investments LP
- Morgan Stanley Trust Company
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Trust invests in exclusively non-voting securities and therefore this item
is not applicable to the Trust.
Item 8. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not Applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 10. Controls and Procedures
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen California Municipal Trust
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2004
By: /s/ James M. Dykas
------------------
Name: James M. Dykas
Title: Principal Financial Officer
Date: August 19, 2004