<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 18
Report of Independent Accountants................ 21
Dividend Reinvestment Plan....................... 22
</TABLE>
VKC ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
(AMEX TICKER SYMBOL--VKC)
<TABLE>
<S> <C>
TOTAL RETURNS
One-year total return based on market price(1)............. (11.17%)
One-year total return based on NAV(2)...................... 1.74%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................... 5.83%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)...................................... 10.05%
SHARE VALUATIONS
Net asset value............................................ $9.93
Closing common stock price................................. $9.875
One-year high common stock price (08/18/98)................ $12.375
One-year low common stock price (06/30/99)................. $9.875
Preferred share rate(5).................................... 3.600%
</TABLE>
(1)Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common stock price at the end of the period
indicated.
(2)Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3)Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4)The taxable-equivalent distribution rate is calculated assuming a 42%
combined federal and state tax bracket, which takes into consideration the
deductibility of individual state taxes paid.
(5)See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
We recently spoke with the management team of the Van Kampen California
Municipal Trust about the key events and economic forces that shaped the markets
during the past year. The team includes Joseph A. Piraro, portfolio manager, who
has managed the Trust since May 1992 and worked in the investment industry since
1973. He is joined by and Peter W. Hegel, chief investment officer for
fixed-income investments. The following comments reflect their views on the
Trust's performance during the 12 months ended June 30, 1999.
Q HOW DID THE ECONOMY AFFECT THE MUNICIPAL MARKET DURING THE REPORTING
PERIOD?
A During the majority of the reporting period, the municipal market remained
relatively stable, even though the stock and high-yield bond markets
experienced significant volatility. Much of this stability was attributed
to the municipal market's isolation from turbulence abroad. However, the market
started to experience more volatility in yields and prices during the last three
months of the reporting period. Concerns about rising inflation--particularly
the spike in the consumer price index (CPI) in April--led to higher interest
rates (and subsequently lower bond prices) during this period.
Although inflationary concerns were fueled by strong economic growth and the
Federal Reserve's bias toward raising rates, they were moderated by a zero
growth rate for the CPI in May. In addition, the Fed's rate hike on June 30 was
coupled with the announcement that it no longer had a bias toward future rate
increases, which helped calm the markets.
Q DID THIS ECONOMIC ACTIVITY AFFECT THE SUPPLY OF MUNICIPAL BONDS?
A Yes. Throughout the reporting period, the supply of municipal bonds
declined, particularly as rates increased. As of June 30, the supply of
new and refinanced bonds was down 23 percent compared with the previous
year, partly because it was no longer economically favorable to refinance many
bonds once rates increased. Also, since municipalities had benefited from the
strong economy, many no longer needed to issue bonds for general operating
needs.
Although overall supply fell, the proportion of higher-yielding municipal
bonds increased during the period as the number of insured bonds declined.
Because bond insurers tightened their underwriting criteria, more securities
came to market without insurance and offered higher yields to compensate
bondholders for the increased credit risk. This situation benefited the Trust's
yield because it allowed our experienced research staff to seek out those
higher-yielding bonds that we felt had strong underlying quality.
4
<PAGE> 6
Q DID THE CALIFORNIA MUNICIPAL MARKET RESPOND THE SAME WAY?
A Yes. Although California was the number-one issuer of municipal bonds
during the first half of 1999, overall supply in the state fell by 22
percent from the same period in 1998, making the task of finding
attractive bonds more challenging. Because the California economy is so
strong--stronger than we've seen it in more than 10 years--we believe that
issuance will continue to decline because municipalities are so financially
healthy that they have no need to issue debt.
Q GIVEN THESE CONDITIONS, HOW DID YOU MANAGE THE TRUST?
A We continued to focus on protecting the Trust's income stream as much as
possible. Many of the bonds in the Trust offer significantly higher yields
than are available in the current marketplace, and therefore are
vulnerable to being called by the issuer and refinanced at today's lower rates.
To cushion the impact of the potential loss of these higher-yielding bonds, we
made a number of purchases when interest rates rose at the end of the reporting
period. Although the new bonds yield less than the bonds they replaced, they
offered the most attractive rates available during the reporting period.
However, the Trust's dividend still faces pressure given that many of the older,
higher-yielding bonds in the portfolio may be vulnerable to calls soon.
Q WHAT SECTORS PROVIDED ATTRACTIVE OPPORTUNITIES?
A We took advantage of a supply-and-demand imbalance in the education sector
to buy some bonds that we feel offered value relative to their prices.
Since the passage of Proposition 1A, $9.2 billion has been earmarked for
education bonds over the next four years--a significant increase in education
issuance in the state. As a result of this heavy supply, the prices of education
bonds have been low and the bonds have generally offered favorable yields and
terms. Although we don't anticipate an immediate increase in price for these
bonds, we believe they will benefit the portfolio in the long run.
In addition to the education sector, we found value in the essential
services area, which includes bonds issued to support vital community services
such as roads and water and sewer facilities. These high-quality bonds were
available at favorable prices, so we purchased them to increase the credit
quality of the portfolio. In fact, at the end of the period, 63.9 percent of the
portfolio was represented by AAA securities.
One sector that we monitored closely was health care because of increasing
financial pressures on the hospital and health-care industry. Although many
health-care bonds remain attractive, the challenges imposed by managed care and
changing Medicare reimbursement policies have led us to look to other areas of
the municipal market in recent months. For additional Trust highlights, please
refer to page 8.
5
<PAGE> 7
Q HOW DID THESE STRATEGIES AFFECT THE TRUST'S PERFORMANCE?
A The volatile market and rise in interest rates in the last few weeks of
the reporting period hurt the Trust's performance. However, the Trust's
high percentage of prerefunded bonds helped cushion the portfolio during
the interest-rate rise because these bonds typically react less strongly to
market downturns.
For the 12 months ended June 30, 1999, the Trust generated a total return of
- -11.17 percent(1) based on market price. This reflects a decrease in market
price from $12.125 on June 30, 1998, to $9.875 on June 30, 1999. Challenging
conditions affected the overall market for municipal bonds, as evidenced by the
Lehman Brothers Municipal Bond Index, which returned only 2.79 percent during
the period. The index represents the performance of a broad range of municipal
bonds and does not reflect any fees or commissions that would be paid by an
investor purchasing the securities it represents.
In addition, the Trust provided a competitive distribution rate of 5.83
percent(3) based on its closing common stock price on June 30, 1999. Because the
Trust is exempt from federal income taxes, this distribution rate is equivalent
to a yield of 10.05 percent(4) on a taxable investment for shareholders in the
42 percent combined federal and California state income tax bracket.
As we discussed earlier, the low interest-rate environment led to a
reduction in the Trust's income stream over the past year. As a result, the
Board of Trustees approved decreases in the Trust's dividend in September 1998
and June 1999. Despite the dividend decreases, we believe that the Trust offers
a competitive yield, especially when considering its exemption from federal
income taxes. Please refer to the chart and footnotes on page 3 for additional
Trust performance results.
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A Strong economic performance should continue to bolster the credit
conditions of municipal issuers, and we believe that California will fully
participate in this economic boom. We expect that this strength will
prompt municipalities to issue debt for special projects rather than for general
operating financing, keeping supply at moderate levels.
We also see the potential for changes in traditional economic activity
toward the end of the year because of investor concerns about the year 2000
computer problem. These temporary concerns, however, may result in attractive
investment opportunities that our research staff can explore to uncover
potential value.
[SIG]
Joseph A. Piraro
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
INSURED BOND: A bond that is insured against default by the bond insurer. If the
issuer defaults, the insurance company will step in and take over payments
of interest and principal when due. Once a bond is insured, it typically
carries the rating of the insurer. Most insurers are rated AAA.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from
the new bonds are generally invested in U.S. government securities.
Prerefunding typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
YIELD: The annual rate of return on an investment, expressed as a percentage.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Tax District 20.4 12.0
Single-Family Housing 15.7 17.4
Transportation 9.4 10.8
Water & Sewer 9.0 7.2
Health Care 8.4 8.8
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
JUNE 1989 THROUGH JUNE 1999
[GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Jun 1989 9.88 9.36
9.88 9.50
9.50 9.34
9.38 9.25
9.38 9.25
9.25 9.32
9.25 9.35
9.75 9.23
9.38 9.32
9.25 9.26
9.25 8.86
9.25 9.05
Jun 1990 9.13 9.10
9.63 9.28
9.13 8.89
8.88 8.83
9.00 8.99
9.13 9.33
9.50 9.44
9.50 9.41
9.63 9.50
9.50 9.43
9.50 9.55
9.88 9.61
Jun 1991 9.75 9.41
9.63 9.57
9.75 9.75
9.88 9.88
10.00 9.91
9.75 9.87
9.75 9.97
10.13 9.92
10.13 9.82
9.88 9.82
9.75 9.89
10.13 9.93
Jun 1992 9.88 10.15
10.63 10.67
10.38 10.43
10.25 10.33
10.00 10.08
10.25 10.36
10.25 10.30
10.38 10.37
10.63 10.89
10.50 10.71
Jun 1993 10.88 10.80
10.88 10.76
10.88 10.96
10.75 11.02
11.25 11.28
11.13 11.53
11.50 11.46
11.25 11.20
11.63 11.41
11.63 11.50
10.75 11.09
10.75 10.43
10.25 10.35
10.25 10.41
Jun 1994 10.63 10.30
10.38 10.46
10.50 10.46
10.50 10.21
9.63 9.95
9.63 9.58
9.63 9.70
9.75 9.97
10.50 10.29
10.25 10.34
10.50 10.29
10.75 10.57
Jun 1995 10.75 10.40
10.63 10.39
11.25 10.43
11.13 10.42
10.75 10.55
11.13 10.77
11.38 10.87
11.38 10.85
11.50 10.83
11.38 10.38
11.13 10.23
11.00 10.20
Jun 1996 10.88 10.28
11.25 10.43
11.88 10.27
11.63 10.46
11.88 10.55
12.13 10.76
11.88 10.46
11.88 10.38
11.75 10.42
11.63 10.19
11.75 10.23
11.94 10.35
Jun 1997 12.19 10.45
12.56 10.78
12.50 10.54
12.88 10.67
11.88 10.68
12.50 10.69
12.31 10.69
12.63 10.78
12.44 10.73
11.88 10.68
11.63 10.50
12.00 10.68
Jun 1998 12.13 10.67
12.25 10.64
12.00 10.84
11.69 10.99
11.69 10.88
11.69 10.90
11.50 10.50
10.88 10.57
11.00 10.45
10.88 10.42
10.88 10.37
10.69 10.22
Jun 1999 9.88 9.93
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
CREDIT QUALITY
AS OF JUNE 30, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa
------- ----- --- -------
<S> <C> <C> <C> <C>
As of June 30, 1999 63.9 10.4 15.0 10.7
</TABLE>
AS OF JUNE 30, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa
------- ----- --- -------
<S> <C> <C> <C> <C>
As of June 30, 1998 63.3 10.8 12.3 13.6
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DISTRIBUTION HISTORY
FOR THE PERIOD ENDED JUNE 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS CAPITAL GAINS
--------- -------------
<S> <C> <C>
'Jul 1998' 0.0575
'Aug 1998' 0.0575
'Sep 1998' 0.0510
'Oct 1998' 0.0510
'Nov 1998' 0.0510
'Dec 1998' 0.0510 0.3251
'Jan 1999' 0.0510
'Feb 1999' 0.0510
'Mar 1999' 0.0510
'Apr 1999' 0.0510
'May 1999' 0.0510
'Jun 1999' 0.0480
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS 99.8%
$ 790 Bay Area Govt Assn CA Rev Tax Alloc CA
Redev Agy Pool Rev Ser A (FSA Insd)... 6.000% 12/15/15 $ 835,386
500 Brea & Olinda, CA Unified Sch Dist
Ctfs Partn Sr High Sch Pgm Ser A Rfdg
(FSA Insd)............................ 6.000 08/01/09 533,300
1,000 California Edl Fac Auth Rev Student Ln
CA Ln Pgm Ser A (MBIA Insd)........... 6.000 03/01/16 1,038,160
1,500 California Hlth Fac Fin Auth Rev Saint
Joseph Hlth Sys Ser A (Prerefunded @
07/01/01)............................. 6.750 07/01/21 1,608,615
1,000 California Hsg Fin Agy Rev Home Mtg
Ser E (AMBAC Insd).................... 6.100 08/01/29 1,036,510
1,970 California Hsg Fin Agy Rev Home Mtg
Ser N................................. 6.375 02/01/27 2,091,864
2,095 California Hsg Fin Agy Rev Homeowner
Mtg Ser D............................. * 08/01/20 416,402
7,800 California Hsg Fin Agy Rev Homeowner
Mtg Ser D (AMBAC Insd)................ * 08/01/20 1,550,328
1,000 California Hsg Fin Agy Rev
Multi-Family Hsg III Ser A (MBIA
Insd)................................. 5.850 08/01/17 1,035,550
2,000 California Pollutn Ctl Fin Auth
Pollutn Ctl Rev Southn CA Edison Co
(AMBAC Insd).......................... 6.000 07/01/27 2,103,640
885 California Rural Home Mtg Fin Auth
Single Family Mtg Rev Ser C (GNMA
Collateralized)....................... 7.800 02/01/28 1,005,033
45 California St (MBIA Insd)............. 6.000 10/01/14 47,705
1,000 California St Pub Wks Brd Lease Rev
Var CA St Univ Projs Ser A
(Prerefunded @ 10/01/04).............. 6.300 10/01/10 1,107,810
1,000 California St Pub Wks Brd Lease Rev
Var CA St Univ Projs Ser A
(Prerefunded @ 10/01/04).............. 6.375 10/01/14 1,111,300
1,000 California St Veterans Ser BH (FSA
Insd)................................. 5.400 12/01/15 1,009,480
1,000 California St Veterans Ser BH (FSA
Insd)................................. 5.500 12/01/24 1,014,520
1,000 California Statewide Cmntys Dev Auth
Ctfs Partn Childrens Hosp Los
Angeles............................... 5.250 08/15/29 940,290
3,000 California Statewide Cmntys Dev Auth
Spl Fac United Airls (c).............. 5.625 10/01/34 3,009,450
785 Central Contra Costa, CA Santn Dist
Rev Wastewtr Fac Impt Proj
(Prerefunded @ 09/01/04) (MBIA
Insd)................................. 6.250 09/01/11 868,791
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$1,000 Contra Costa, CA Tran Auth Sales Tax
Rev Ser A............................. 6.875% 03/01/07 $ 1,065,620
1,280 El Cerrito, CA Redev Agy Tax Alloc
(MBIA Insd)........................... 5.250 07/01/15 1,269,747
2,000 Emeryville, CA Pub Fin Auth Rev Hsg
Increment Sub Lien Ser A (Prerefunded
@ 02/01/01)........................... 7.875 02/01/15 2,154,360
1,000 Emeryville, CA Pub Fin Auth Shellmound
Park Redev & Hsg Proj B (MBIA Insd)... 5.000 09/01/19 955,280
1,000 Folsom, CA Spl Tax Cmnty Fac Dist No 2
Rfdg (Connie Lee Insd)................ 5.250 12/01/19 987,010
1,000 Fontana, CA Redev Agy Tax Southeast
Indl Park Proj Rfdg (MBIA Insd)....... 5.000 09/01/22 948,040
5,435 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Cap Apprec Sr Lien Ser A....... * 01/01/19 1,807,627
1,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Conv Cap Apprec Sr Lien Ser A
(a)................................... 0/7.050 01/01/10 792,150
1,900 Los Angeles Cnty, CA Ctfs Partn Disney
Parking Proj Rfdg (AMBAC Insd)........ 4.750 03/01/23 1,718,322
1,150 Los Angeles Cnty, CA Tran Comm Lease
Rev Dia RR Lease Ltd (FSA Insd)....... 7.375 12/15/06 1,227,521
1,390 Metropolitan Wtr Dist Southn CA Wtrwks
Rev Ser C............................. 5.000 07/01/37 1,289,058
1,800 Mountain View Los Altos CA Union High
Sch Dist Ctfs Partn (MBIA Insd)....... 5.625 08/01/16 1,818,648
1,000 Pico Rivera, CA Wtr Auth Rev Wtr Sys
Proj Ser A (MBIA Insd)................ 5.500 05/01/19 1,019,960
1,000 Roseville, CA Fin Auth Loc Agy Rev
Northeast Cmnty Fac Dist Bond Ser A
Rfdg (FSA Insd)....................... 5.000 09/01/21 952,060
1,000 San Bernardino Cnty, CA Ctfs Partn Med
Cent Fin Proj (MBIA Insd)............. 5.000 08/01/28 935,360
1,000 San Diego, CA Hsg Auth Multi-Family
Hsg Rev (GNMA Collateralized)......... 5.000 07/20/18 971,260
1,000 San Dimas, CA Redev Agy Tax Alloc
Creative Growth Ser A (FSA Insd)...... 5.000 09/01/16 972,420
1,210 San Jose, CA Redev Tax Alloc Hsg Set
Aside Mergd Area Ser E (MBIA Insd).... 5.750 08/01/17 1,250,620
840 Santa Barbara, CA Ctfs Partn.......... 7.650 05/01/15 875,918
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$1,450 Santa Barbara, CA Ctfs Partn Wtr Sys
Impt Proj & Rfdg (AMBAC Insd)......... 6.700% 04/01/27 $ 1,548,469
1,300 Santa Clara Cnty, CA Fin Auth Lease
Rev Multiple Facs Proj Ser B (AMBAC
Insd) (b)............................. 5.500 05/15/10 1,330,810
1,170 South Gate, CA Pub Fin Auth Tax Alloc
Rev Hsg Redev Proj No 1 Ser A (MBIA
Insd)................................. 5.000 09/01/19 1,121,855
60 Southern CA Home Fin Auth Single
Family Mtg Rev Ser B (GNMA
Collateralized)....................... 7.750 03/01/24 62,246
600 Southern CA Pub Pwr Auth Pwr Proj Rev
Multi-Projs........................... 5.500 07/01/20 600,204
2,000 Westminster, CA Redev Agy Tax Alloc
Rev Coml Redev Proj No 1 Ser A Rfdg
(Prerefunded @ 08/01/01).............. 7.300 08/01/21 2,172,000
-----------
TOTAL LONG-TERM INVESTMENTS 99.8%
(Cost $49,923,371).................................................. 52,210,699
SHORT-TERM INVESTMENTS 1.5%
(Cost $800,000)..................................................... 800,000
-----------
TOTAL INVESTMENTS 101.3%
(Cost $50,723,371).................................................. 53,010,699
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3%)......................... (673,669)
-----------
NET ASSETS 100.0%.................................................... $52,337,030
===========
</TABLE>
* Zero coupon bond
(a) Security is a "step up" bond where the coupon increases or steps up at a
predetermined date.
(b) Security purchased on a when issued or delayed delivery purchase commitment.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
GNMA--GNMA Collateralized
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $50,723,371)........................ $53,010,699
Cash........................................................ 26,107
Receivables:
Interest.................................................. 902,653
Investments Sold.......................................... 35,000
Other....................................................... 7,401
-----------
Total Assets.......................................... 53,981,860
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,365,507
Investment Advisory Fee................................... 25,968
Income Distributions--Common and Preferred Shares......... 13,358
Affiliates................................................ 5,631
Accrued Expenses............................................ 129,797
Trustees' Deferred Compensation and Retirement Plans........ 104,569
-----------
Total Liabilities..................................... 1,644,830
-----------
NET ASSETS.................................................. $52,337,030
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 1,000,000
shares, 400 shares are issued and outstanding with a
liquidation preference of $50,000 per share).............. $20,000,000
-----------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 3,256,257 shares issued and
outstanding).............................................. 32,563
Paid in Surplus............................................. 29,551,943
Net Unrealized Appreciation................................. 2,287,328
Accumulated Net Realized Gain............................... 465,397
Accumulated Distributions in Excess of Net Investment
Income.................................................... (201)
-----------
Net Assets Applicable to Common Shares................ 32,337,030
-----------
NET ASSETS.................................................. $52,337,030
===========
NET ASSET VALUE PER COMMON SHARE ($32,337,030 divided by
3,256,257 shares outstanding)............................. $ 9.93
===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 3,102,802
-----------
EXPENSES:
Investment Advisory Fee..................................... 325,734
Preferred Share Maintenance................................. 94,926
Accounting Services......................................... 44,485
Trustees' Fees and Related Expenses......................... 19,095
Legal....................................................... 7,266
Custody..................................................... 6,207
Other....................................................... 74,212
-----------
Total Expenses.......................................... 571,925
-----------
NET INVESTMENT INCOME....................................... $ 2,530,877
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 752,160
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 4,251,646
End of the Period......................................... 2,287,328
-----------
Net Unrealized Depreciation During the Period............... (1,964,318)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,212,158)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,318,719
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 2,530,877 $ 2,748,965
Net Realized Gain.................................. 752,160 1,007,981
Net Unrealized Appreciation/Depreciation During the
Period........................................... (1,964,318) 658,196
----------- -----------
Change in Net Assets from Operations............... 1,318,719 4,415,142
----------- -----------
Distributions from Net Investment Income:
Common Shares.................................... (2,018,718) (2,306,556)
Preferred Shares................................. (647,848) (718,601)
----------- -----------
(2,666,566) (3,025,157)
----------- -----------
Distributions in Excess of Net Investment Income:
Common Shares.................................... (152) -0-
Preferred Shares................................. (49) -0-
----------- -----------
(201) -0-
----------- -----------
Distributions from and in Excess of Net Investment
Income........................................... (2,666,767) (3,025,157)
Distributions from Net Realized Gain--Common
Shares........................................... (1,054,081) (711,433)
----------- -----------
Total Distributions................................ (3,720,848) (3,736,590)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... (2,402,129) 678,552
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment..................................... 215,574 222,838
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS.............. (2,186,555) 901,390
NET ASSETS:
Beginning of the Period............................ 54,523,585 53,622,195
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of $(201) and
$135,689, respectively).......................... $52,337,030 $54,523,585
=========== ===========
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------
1999 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................... $10.667 $10.450 $10.283 $10.395
------- ------- -------- -------
Net Investment Income.................. .779 .851 .888 .919
Net Realized and Unrealized
Gain/Loss............................ (.369) .524 .393 (.001)
------- ------- -------- -------
Total from Investment Operations....... .410 1.375 1.281 .918
------- ------- -------- -------
Less:
Distributions from and in Excess of
Net Investment Income:
Paid to Common Shareholders........ .622 .715 .750 .750
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders..................... .199 .222 .211 .230
Distributions from Net Realized Gain
Paid to Common Shareholders........ .325 .221 .153 .050
------- ------- -------- -------
Total Distributions.................... 1.146 1.158 1.114 1.030
------- ------- -------- -------
Net Asset Value, End of the Period..... $ 9.931 $10.667 $10.450 $10.283
======= ======= ======== =======
Market Price Per Share at End of the
Period............................... $9.875 $12.125 $12.1875 $10.875
Total Investment Return at Market
Price (a)............................ (11.17%) 7.77% 21.40% 9.02%
Total Return at Net Asset Value (b).... 1.74% 11.40% 10.76% 6.62%
Net Assets at End of the Period (In
millions)............................ $52.3 $54.5 $53.6 $52.9
Ratio of Expenses to Average Net Assets
Applicable to Common Shares*......... 1.67% 1.57% 1.58% 1.65%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (c).................... 5.49% 5.91% 6.51% 6.57%
Portfolio Turnover..................... 33% 53% 30% 19%
* Ratio of Expenses to Average Net
Assets Including Preferred Shares... 1.05% .99% .99% 1.03%
** If certain expenses had not been
assumed by Van Kampen, the annualized
Ratio of Expenses to Average Net
Assets Applicable to Common Shares,
Ratio of Expenses to Average Net
Assets Including Preferred Shares and
the Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares would have been 2.06%,
1.22% and 6.80% for the year ended
June 30, 1991 and 1.31%, 1.13% and
6.21% for the year ended June 30, 1990.
</TABLE>
(a) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(b) Total Return at Net Asset Value (NAV) reflects the change in the value of
the Trust's assets with reinvestment of dividends based upon NAV.
(c) Net investment income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
16
<PAGE> 18
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
- -------------------------------------------------------------
1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$10.301 $10.963 $10.147 $ 9.408 $9.095 $9.212
------- ------- ------- ------- ------ ------
.951 .956 .968 .946 .975 .719
.111 (.740) .788 .719 .313 (.117)
------- ------- ------- ------- ------ ------
1.062 .216 1.756 1.665 1.288 .602
------- ------- ------- ------- ------ ------
.725 .712 .663 .654 .648 .648
.237 .156 .167 .245 .327 .071
.006 .010 .110 .027 -0- -0-
------- ------- ------- ------- ------ ------
.968 .878 .940 .926 .975 .719
------- ------- ------- ------- ------ ------
$10.395 $10.301 $10.963 $10.147 $9.408 $9.095
======= ======= ======= ======= ====== ======
$10.750 $10.625 $10.875 $9.875 $9.750 $9.125
8.67% 4.32% 18.49% 8.44% 14.51% (.95%)
8.47% .35% 16.19% 15.54% 10.85% 4.27%
$53.0 $52.6 $54.5 $51.9 $49.5 $48.4
1.65% 1.53% 1.57% 2.07% 1.88%** .50%**
7.02% 7.28% 7.62% 7.74% 6.98%** 7.01%**
16% 11% 18% 41% 99% 100%
1.02% .97% .98% 1.26% 1.11%** .43%**
</TABLE>
17
See Notes to Financial Statements
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
- --------------------------------------------------------------------------------
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
with safety of principal. The Trust will invest in a portfolio consisting
substantially of California municipal obligations rated investment grade at the
time of investment. The Trust commenced investment operations on November 1,
1988.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--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 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.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
At June 30, 1999, cost of long- and short-term investments for federal
income tax purposes is $50,723,371; the aggregate gross unrealized appreciation
is $2,635,990 and the aggregate gross unrealized depreciation is $348,662,
resulting in net unrealized appreciation on long- and short-term investments of
$2,287,328.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following year.
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.
Due to inherent differences in the recognition of certain expenses under
generally accepted accounting principles and federal income tax purposes, the
amount of distributed net investment income may differ for a particular period.
These differences are temporary in nature, but may result in book basis
distribution in excess of net investment income for certain periods.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. (the "Adviser") will provide investment advice and
facilities to the Trust for an annual fee payable monthly of .60% of the average
net assets of the Trust.
For the year ended June 30, 1999, the Trust recognized expenses of
approximately $1,000 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the year ended June 30, 1999, the Trust recognized expenses of
approximately $50,800 representing Van Kampen Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting, legal and certain
shareholder services to the Trust.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
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 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. CAPITAL TRANSACTIONS
At June 30, 1999 and June 30, 1998, paid in surplus related to common shares
aggregated $29,551,943 and $29,336,568, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares................... 3,236,436 3,217,303
Shares Issued Through Dividend
Reinvestment..................... 19,821 19,133
------------- -------------
Ending Shares...................... 3,256,257 3,236,436
============= =============
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $19,048,778 and $18,208,862 respectively.
5. 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, 1999, was 3.600%, and for the year then
ended rates ranged from 2.850% to 3.750%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
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 redemptions if the tests are not met.
20
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
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, 1999, and the related statement of operations for
the year then ended, the statement of changes in net assets for the two years in
the period then ended, and the financial highlights for each of the periods
presented. 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.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 1999, by correspondence with the custodian and brokers. 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, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
August 5, 1999
21
<PAGE> 23
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be re-
registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in 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
change 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
22
<PAGE> 24
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
A. THOMAS SMITH III**
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
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, 1999. The Trust designated 99.8% of the income distributions as a
tax-exempt income distribution. Additionally, during the period, the trust
paid long-term capital gains of $786,199. In January, 2000, the Trust will
provide tax information to shareholders for the 1999 calendar year.
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of
Van Kampen Funds Inc.
23
<PAGE> 25
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where
shareholders voted on the election of trustees and the ratification of KPMG LLP
as the independent public accountants and the approval of the Preferred Shares
split and simultaneous reduction of the liquidation preference per Preferred
Share of the Trust.
1) With regard to the election of the following trustees by common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
---------------------
IN FAVOR WITHHELD
- -------------------------------------------------------------------------
<S> <C> <C>
David C. Arch................................... 2,999,755 37,972
Howard J. Kerr.................................. 2,999,755 37,972
Dennis J. McDonnell............................. 2,999,755 37,972
</TABLE>
The other trustees of the Trust whose terms did not expire in 1999 are Rod
Dammeyer, Don G. Powell, Steven Muller, Theodore A. Myers, Hugo F. Sonnenschein
and Wayne W. Whalen.
2) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 2,975,306 shares voted in favor of the proposal,
10,200 shares voted against and 52,601 shares abstained.
3) With regards to the proposal to approve the Preferred Share split and
simultaneous reduction of the liquidation preference per Preferred Share, the
Meeting was adjourned until July 7, 1999 and further adjourned until July 28,
1999.
24
<PAGE> 26
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000840248
<NAME> VK CALIFORNIA MUNICIPAL TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 50,723,371
<INVESTMENTS-AT-VALUE> 53,010,699
<RECEIVABLES> 937,653
<ASSETS-OTHER> 7,401
<OTHER-ITEMS-ASSETS> 26,107
<TOTAL-ASSETS> 53,981,860
<PAYABLE-FOR-SECURITIES> 1,365,507
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 279,323
<TOTAL-LIABILITIES> 1,644,830
<SENIOR-EQUITY> 20,000,000
<PAID-IN-CAPITAL-COMMON> 29,584,506
<SHARES-COMMON-STOCK> 3,256,257
<SHARES-COMMON-PRIOR> 3,236,436
<ACCUMULATED-NII-CURRENT> (201)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 465,397
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,287,328
<NET-ASSETS> 52,337,030
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,102,802
<OTHER-INCOME> 0
<EXPENSES-NET> (571,925)
<NET-INVESTMENT-INCOME> 2,530,877
<REALIZED-GAINS-CURRENT> 752,160
<APPREC-INCREASE-CURRENT> (1,964,318)
<NET-CHANGE-FROM-OPS> 1,318,719
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,666,767)
<DISTRIBUTIONS-OF-GAINS> (1,054,081)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 19,821
<NET-CHANGE-IN-ASSETS> (2,186,555)
<ACCUMULATED-NII-PRIOR> 135,689
<ACCUMULATED-GAINS-PRIOR> 767,318
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 325,734
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 571,925
<AVERAGE-NET-ASSETS> 34,273,470
<PER-SHARE-NAV-BEGIN> 10.667
<PER-SHARE-NII> 0.779
<PER-SHARE-GAIN-APPREC> (0.369)
<PER-SHARE-DIVIDEND> (0.821)
<PER-SHARE-DISTRIBUTIONS> (0.325)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.931
<EXPENSE-RATIO> 1.67
</TABLE>
