<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 3
PORTFOLIO AT A GLANCE
CREDIT QUALITY 4
SIX-MONTH DIVIDEND HISTORY 4
TOP FIVE INDUSTRIES 5
NET ASSET VALUE AND MARKET PRICE 5
Q&A WITH YOUR PORTFOLIO MANAGERS 6
GLOSSARY OF TERMS 10
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS 11
FINANCIAL STATEMENTS 19
NOTES TO FINANCIAL STATEMENTS 24
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 27
TRUST OFFICERS AND IMPORTANT ADDRESSES 28
</TABLE>
It is times like these when money- management experience may make a
difference. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
May 19, 2000
Dear Shareholder,
Whether you have held your Trust for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your Trust is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we head into the second half of 2000, count on us to
continue to draw on the wisdom of our 76 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that kicked off
this spring. The message emphasizes our depth of
investment-management history, as well as our firm belief that with the right
investments, anyone can realize life's true wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED STRONG, PRIMARILY DUE TO ACTIVE CONSUMER AND BUSINESS
SPENDING. GROSS DOMESTIC PRODUCT, THE PRIMARY MEASURE OF ECONOMIC GROWTH,
INCREASED AT AN ANNUALIZED RATE OF 5.4 PERCENT IN THE FIRST QUARTER OF 2000.
WHILE THIS FIGURE INDICATES A MODEST SLOWDOWN FROM THE PREVIOUS TWO QUARTERS, IT
NEVERTHELESS REPRESENTS A HIGH RATE OF ECONOMIC GROWTH.
CONSUMER SPENDING AND EMPLOYMENT
INFLATION FEARS CONTINUED TO MOUNT BECAUSE OF STRONG CONSUMER SPENDING AND THE
TIGHT LABOR MARKET. FOR MOST OF THE REPORTING PERIOD, RISING INTEREST RATES DID
LITTLE TO REIN IN ROBUST CONSUMER SPENDING. ALTHOUGH RETAIL SALES GROWTH
MODERATED IN APRIL, THE FACTORS UNDERPINNING CONSUMER ACTIVITY REMAINED LARGELY
UNCHANGED--RISING WAGES, LOW UNEMPLOYMENT, AND A GENERALLY FAVORABLE (THOUGH
VOLATILE) STOCK MARKET.
IN ADDITION, THE JOBLESS RATE HOVERED NEAR ITS LOWEST LEVEL IN THREE DECADES.
THE EMPLOYMENT COST INDEX ACCELERATED SHARPLY IN THE FIRST QUARTER OF 2000,
REFLECTING RISING WAGES AS EMPLOYERS VIE TO ATTRACT AND RETAIN SKILLED WORKERS.
THESE WAGE PRESSURES, IN TURN, BEGAN TO AFFECT PRICES, AS COMPANIES STARTED TO
RAISE THE COST OF GOODS AND SERVICES TO COMPENSATE FOR HIGHER LABOR COSTS.
INTEREST RATES AND INFLATION
STRONG GDP DATA, CONSUMER SPENDING, AND EMPLOYMENT PROMPTED THE FEDERAL RESERVE
BOARD TO SEEK TO SLOW THE PACE OF ECONOMIC GROWTH AND WARD OFF INFLATION. THE
FED INCREASED THE FEDERAL FUNDS RATE BY 0.25 PERCENT FIVE TIMES BETWEEN JUNE
1999 AND APRIL 2000. [EDITOR'S NOTE: THE FED RAISED RATES BY 0.50 PERCENT ON MAY
16.] DESPITE THE FED'S CONCERNS, THE CONSUMER PRICE INDEX, A MEASURE OF
INFLATION, ROSE A MODERATE 3.0 PERCENT DURING THE 12 MONTHS ENDED APRIL 30,
2000.
INTEREST RATES AND INFLATION
(April 30, 1998 - April 30, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Apr 98 5.50 1.40
5.50 1.70
5.50 1.70
Jul 98 5.50 1.70
5.50 1.60
5.25 1.50
Oct 98 5.00 1.50
4.75 1.50
4.75 1.60
Jan 99 4.75 1.70
4.75 1.60
4.75 1.70
Apr 99 4.75 2.30
4.75 2.10
5.00 2.00
Jul 99 5.00 2.10
5.25 2.30
5.25 2.60
Oct 99 5.25 2.60
5.50 2.60
5.50 2.70
Jan 00 5.50 2.70
5.75 3.20
6.00 3.70
Apr 00 6.00 3.00
</TABLE>
Interest rates are represented by the closing midline federal funds target 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 SUMMARY
RETURN HIGHLIGHTS
(as of April 30, 2000)
<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------
NYSE Ticker Symbol VQC
-----------------------------------------------------------------------
Six-month total return based on market price(1) 1.67%
-----------------------------------------------------------------------
Six-month total return based on NAV(2) 3.00%
-----------------------------------------------------------------------
Distribution rate as a % of closing common stock price(3) 6.20%
-----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 10.69%
-----------------------------------------------------------------------
Net asset value $15.76
-----------------------------------------------------------------------
Closing common stock price $15.000
-----------------------------------------------------------------------
Six-month high common stock price (11/05/99) $15.625
-----------------------------------------------------------------------
Six-month low common stock price (12/22/99) $13.250
-----------------------------------------------------------------------
Preferred share rate(5) 3.850%
-----------------------------------------------------------------------
</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 is no guarantee of 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 AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of April 30, 2000
<S> <C> <C>
- AAA/Aaa............ 44.7%
- AA/Aa.............. 15.3%
- A/A................ 7.4%
- BBB/Baa............ 12.3%
- BB/Ba.............. 0.7%
- Non-Rated.......... 19.6%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 50.7%
- AA/Aa.............. 14.0%
- A/A................ 7.9%
- BBB/Baa............ 13.7%
- Non-Rated.......... 13.7%
[PIE CHART]
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
SIX-MONTH DIVIDEND HISTORY
(for the six months ending April 30, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C> <C>
11/99 0.0825
12/99 0.0825
1/00 0.0825
2/00 0.0825
3/00 0.0775
4/00 0.0775
</TABLE>
The dividend history represents past performance of the Trust and is no
guarantee of the Trust's future dividends.
4
<PAGE> 6
TOP FIVE INDUSTRIES
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
APRIL 30, 2000 OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
General Purpose 20.10 17.00
Tax District 12.50 12.40
Retail Electric/Gas/Telephone 11.30 10.60
Multi-Family Housing 10.20 10.10
Public Building 9.50 8.70
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--September 1991 through April 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
9/91 14.8100 15.0000
15.0700 14.3750
14.9000 15.6250
15.4500 14.7500
9/92 15.7200 15.0000
15.6400 14.7500
16.7800 16.2500
17.0700 16.3750
9/93 17.7000 17.3750
17.4200 16.7500
15.6700 15.1250
15.4300 15.2500
9/94 15.2100 14.8750
14.3500 12.7500
15.6900 14.7500
15.9400 15.0000
9/95 16.1700 15.2500
16.8700 15.3750
16.1600 15.8750
16.1000 15.2500
9/96 16.5100 15.8750
16.6700 16.6250
16.4200 15.1250
16.8600 16.7500
9/97 17.2600 16.8125
17.6000 17.0625
17.5600 17.5000
17.6000 17.3125
9/98 18.0700 18.1875
17.6200 18.4375
17.5000 17.6875
16.7300 16.6250
9/99 16.2500 16.5625
15.5800 13.4375
15.9900 15.0000
4/00 15.7600 15.0000
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's 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.
5
<PAGE> 7
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE ADVISER OF THE VAN KAMPEN
CALIFORNIA QUALITY MUNICIPAL TRUST ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS DURING THE PAST SIX MONTHS. THE REPRESENTATIVES INCLUDE
JOSEPH A. PIRARO, PORTFOLIO MANAGER, WHO HAS MANAGED THE TRUST SINCE 1992 AND
WORKED IN THE INVESTMENT INDUSTRY SINCE 1971. THE FOLLOWING COMMENTS REFLECT THE
REPRESENTATIVES' VIEWS ON THE TRUST'S PERFORMANCE DURING THE SIX MONTHS ENDED
APRIL 30, 2000.
Q WHAT WERE THE MOST IMPORTANT
DEVELOPMENTS IN THE FIXED-INCOME MARKETS DURING THE REPORTING PERIOD?
A Generally higher interest rates,
sparked by inflation worries, set the tone for the fixed-income markets during
the past six months. As the economy continued its strong advance, the markets
reacted warily to signs of potential inflationary pressures--such as rising
employment costs, healthy job growth, strong consumer spending, and spikes in
commodities prices, especially oil. These concerns fueled a steady sell-off
through the fourth quarter of 1999 and into January 2000.
To slow the economy and keep prices from rising, the Federal Reserve Board
gradually pushed short-term interest rates higher, raising the fed funds rate (a
key short-term lending rate) three times between November 1999 and April 2000.
(Editor's note: On May 16, 2000, after the reporting period ended, the Fed
raised rates a fourth time.)
In times of rising interest rates, bond prices trend downward. Add to that
the lingering effects of the Year 2000 (Y2K) computer scare early in the first
quarter of 2000, and you can see why this was a challenging period for many
fixed-income investors.
Q HOW DID THE MUNICIPAL
BOND MARKET REACT TO THESE CONDITIONS?
A Not surprisingly, higher interest
rates hurt municipal bond prices, but we believe there's always opportunity in
the market. In the past few months, we've actually seen some fairly significant
price swings--both up and down--as investors tried to anticipate the Fed's next
move and the direction of interest rates. The market was weak in late 1999 and
early 2000, but we had a nice rally in February and March, which tapered off in
April.
The strong economy has bolstered the financial condition of many
municipalities across the country, so the pace of new municipal bond issuance
dropped sharply (about 40 percent) from a year ago. With their coffers full,
municipalities haven't needed to turn to the bond market for financing. Also,
6
<PAGE> 8
higher interest rates made it more difficult for issuers to refund outstanding
bond issues, which has been a source of new investment opportunities in the
past.
Q HOW WOULD YOU DESCRIBE
CALIFORNIA'S ECONOMIC AND MUNICIPAL MARKET ENVIRONMENT DURING THE PERIOD?
A A broad-based economic expansion
continued to bolster fiscal positions and led to increases in reserves.
California outpaced the rest of the country in terms of employment and income
growth.
Despite rising interest rates, there is still strong demand for housing,
driven by limited supply in the state. Lack of affordable housing remains a
long-term concern, as the average purchase price of a single-family home in
California is now 153 percent of the U.S. average, while per-capita income
levels are only 104 percent of the national average. Our analysts will continue
to monitor the housing market for signs of overbuilding or a "speculative
bubble" similar to those in the early 1990s.
In the first quarter of 2000, issuance of new California municipal bonds was
down 30 percent to $4.4 billion compared to the first quarter of 1999. However,
an additional $4.5 billion in state general-obligation bonds was approved by
voters in the March 2000 elections, and California continues to lead the nation
in the issuance of municipal bonds.
Q WHAT STRATEGIES DID YOU FOLLOW
IN MANAGING THE TRUST?
A Strategically, we've been moving in
a new direction since early this year. We made the decision to manage the Trust
relative to a new benchmark, rather than the Lipper peer group, which meant that
we needed to make some adjustments to the Trust's structure. The Trust's
benchmark is now the Lehman Brothers California Municipal Bond Index with
maturities greater than five years. Specifically, we increased the duration of
the portfolio (a measure of its sensitivity to changes in interest rates) to
more closely track the performance of the new benchmark index. The benchmark
provides the shareholder with general municipal market returns, and the
leveraged structure provides the opportunity for enhanced dividends.
Fortunately, the municipal bond market played into our hands and gave us
some excellent opportunities to implement this new strategy. Beginning in late
January, we began purchasing deeply discounted bonds for the Trust. These were
securities that were issued a year or so ago with coupons of 4.75, 5.00, or 5.25
percent. As interest rates went up over time, these bonds began selling at a
deep discount, with some priced as low as 80 cents on the dollar.
At the same time, the Trust held a number of older, prerefunded issues with
higher coupons in the 5.75 to 6.00 percent range. Such prerefunded issues tend
to decrease the duration of a portfolio because they have shorter lives than
their stated maturities. But because of their attractive coupons, these bonds
were trading at a
7
<PAGE> 9
premium, presenting us with an opportunity to capture some solid gains. Because
these bonds were scheduled to be called or refunded within the next year or two,
we chose to sell them while their demand--and therefore their market price--was
high.
This combination of buying deep-discount bonds and selling prerefunded
issues enabled us to lengthen the duration of the portfolio without drastically
altering the income stream that the Trust will be earning over time. While we've
seen a slight decline in portfolio income in the short run, the deeply
discounted bonds enabled us to purchase more par value per dollar invested.
Q WHAT AREAS OF THE MUNICIPAL
MARKET WERE MOST ATTRACTIVE TO YOU?
A Our philosophy is to seek bonds
that we feel represent the best values compared with similar offerings in the
marketplace. During the past six months, we did not specifically target one area
of the market over another, although we did maintain significant concentrations
in the general purpose and utility sectors, each of which represented more than
11 percent of the portfolio's long-term investments.
Many of our portfolio manage-ment decisions were based on pricing issues,
such as the availability of deep discounts, or structural issues, such as
extending duration or maintaining adequate call protection and diversification
for the portfolio. As always, we invested the Trust's assets selectively,
looking for solid names, sector opportunities, or attractive price to coupon
situations. For additional portfolio highlights, please refer to page 4.
Q HOW DID THE TRUST PERFORM
DURING THE PERIOD?
A For the six-month period ended
April 30, 2000, the Trust returned 1.67 percent based on market price. At the
same time, the Trust's market price decreased from $15.2500 per share on October
31, 1999, to $15.0000 per share on April 30, 2000. By comparison, the total
return of the Trust's peer group (as represented by the Lehman Brothers
California Municipal Bond Index) was 2.69 percent for the same period.
Effective in March 2000, the Trust's dividend was reduced to $0.0775 per
share, down from $0.0825 per share, reflecting a slight decrease in the Trust's
income stream. This monthly tax-exempt dividend translates to a distribution
rate of 6.20 percent based on the Trust's closing common stock price on April
30, 2000.
Because the Trust is exempt from federal and California income taxes, this
distribution rate is equivalent to a yield of 10.69 percent for an investor in
the 42 percent combined federal and state income-tax bracket. Please refer to
the chart and footnotes on page 3 for additional performance results. Past
performance is no guarantee of future results.
Q WHAT DO YOU SEE AHEAD FOR
THE ECONOMY AND THE MUNICIPAL MARKET?
A All eyes will be on the key
economic statistics, such as GDP
8
<PAGE> 10
growth, employment costs, and the unemployment rate. These figures measure the
economy's strength and rate of growth and may influence whether the Fed will
continue to raise short-term interest rates. We expect that the inflation rate
may increase, but it's likely to remain in a moderate range for the near term.
It's anticipated that the Fed will continue to increase short-term rates by the
end of the summer, perhaps by more than 0.50 percent. Higher interest rates
will, in turn, put pressure on the municipal market in the short run.
Increased stock-price volatility in April has increased investor skepticism,
but investors continue to see price pullbacks as opportunities to buy
aggressive-growth stocks. It may take a much deeper, more sustained decline in
these stocks to convince investors to rethink their asset allocation decisions.
If the stock market does fall sharply, we could see a flight to quality, as
investors pursue investments that typically carry less risk. Such conditions
might benefit investment-grade municipal bonds.
Low municipal-bond supply could continue throughout 2000, especially if
interest rates trend higher, as expected, throughout the first half of the year.
Overall, the lower supply of bonds should help to shore up prices, as demand
remains strong. Investors can tolerate periodic price swings if they keep
long-term perspectives and continue to value the steady stream of tax-exempt
income that municipal bonds provide. As always, we will rely on our strong
research efforts to evaluate opportunities in the marketplace and identify
securities that may offer superior investment potential and value over time.
9
<PAGE> 11
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
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.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest-rate
movements on its price. Typically, funds with shorter durations perform better
in rising rate environments, while funds with longer durations perform better
when rates decline.
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.
MATURITY DATE: The date a bond expires, usually at face value.
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.
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.
10
<PAGE> 12
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR TRUST AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 100.3%
CALIFORNIA 97.1%
$ 1,390 Abag Fin Auth For Nonprofit Corp CA
Childrens Hosp Med Cent................... 5.875% 12/01/19 $ 1,412,115
2,000 Abag Fin Auth For Nonprofit Corp CA
Childrens Hosp Med Cent................... 6.000 12/01/29 2,025,700
1,000 Abag Fin Auth For Nonprofit Corp CA
Multi-Family Rev Hsg Utd Dominion Ser A
Rfdg...................................... 6.400 08/15/30 1,020,950
2,000 Abag Fin Auth For Nonprofit Corps CA Rev
Ctfs Partn Channing House................. 5.500 02/15/29 1,636,620
1,000 Bakersfield, CA Ctfs Partn Convention Cent
Expansion Proj (MBIA Insd)................ 5.875 04/01/22 1,004,340
1,610 Blythe, CA Redev Agy Redev Proj No 1 Tax
Alloc Ser A Rfdg.......................... 7.500 05/01/23 1,738,172
1,055 Borrego, CA Wtr Dist Ctfs Partn
Wtr Sys Acquisition....................... 7.000 04/01/27 1,072,038
2,435 California Edl Fac Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd)......... * 10/01/29 376,719
1,000 California Edl Fac Auth Rev Pooled
Coll & Univ Projs Ser B................... 6.125 04/01/13 1,027,600
2,000 California Edl Fac Auth Rev Student Ln CA
Ln Pgm Ser A (MBIA Insd).................. 6.000 03/01/16 2,040,340
2,000 California Edl Fac Auth Rev Univ of La
Verne..................................... 6.375 04/01/13 2,046,820
3,000 California Hlth Fac Fin Cedars Sinai Med
Cent Ser A................................ 6.125 12/01/19 2,986,260
1,000 California Hsg Fin Agy Rev Cap Apprec Home
Mtg Ser K (MBIA Insd)..................... * 08/01/24 215,400
1,000 California Hsg Fin Agy Rev Home Mtg Ser B
(MBIA Insd)............................... 6.100 02/01/28 1,003,920
1,000 California Hsg Fin Agy Rev Home Mtg Ser E
(AMBAC Insd).............................. 6.100 08/01/29 1,004,090
1,090 California Hsg Fin Agy Rev Home Mtg Ser F
(FHA Gtd)................................. 6.750 08/01/11 1,119,888
2,120 California Hsg Fin Agy Rev Insd Hsg Ser E
(MBIA Insd)............................... 7.000 08/01/26 2,191,550
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 3,000 California Hsg Fin Agy Rev Multi-Unit
Rental Hsg Ser C II....................... 6.850% 08/01/15 $ 3,108,990
8,190 California Hsg Fin Agy Rev Multi-Unit
Rental Hsg Ser C II....................... 6.875 08/01/24 8,436,191
10,000 California Pollutn Ctl Fin Auth Pollutn
Ctl Rev Southn CA Edison Co (AMBAC Insd)
(b)....................................... 6.000 07/01/27 10,002,600
1,000 California Pollutn Ctl Fin Auth Pollutn
Ctl Rev Southn CA Edison Co Ser B (MBIA
Insd) (a)................................. 5.450 09/01/29 947,480
4,000 California Pollutn Ctl Fin Auth Pollutn
Ctl Rev Southn CA Edison Co Ser B (AMBAC
Insd)..................................... 6.400 12/01/24 4,081,880
6,000 California Pollutn Ctl Fin Auth Solid
Waste Disp Rev North Cnty Recycling Ser A
(Prerefunded @ 07/01/04).................. 6.750 07/01/17 6,399,360
1,500 California Rural Home Mtg Fin Mtg Bkd Secs
Pgm Ser B (GNMA Collateralized)........... 6.250 12/01/31 1,510,140
680 California Rural Home Mtg Fin Auth Single
Family Mtg Rev Ser C (GNMA
Collateralized)........................... 7.800 02/01/28 740,071
1,060 California Spl Dists Assn Fin Corp Ctfs
Partn Spl Dists Fin Pgm Ser KK (FSA
Insd)..................................... 5.800 11/01/29 1,055,537
1,275 California St (FGIC Insd)................. 4.750 04/01/20 1,099,751
1,000 California St............................. 4.750 12/01/28 823,690
3,655 California St Cpn Muni Rcpts.............. * 03/01/08 2,440,955
13,255 California St Cpn Muni Rcpts.............. * 09/01/09 8,165,351
1,000 California St Pub Wks Brd Lease Rev Dept
Hlth Svcs Ser A (MBIA Insd)............... 5.750 11/01/24 994,140
2,340 California St Rfdg (FGIC Insd)............ 5.000 02/01/23 2,068,537
1,000 California St Veterans (AMBAC Insd)....... 6.200 02/01/16 1,000,370
1,000 California St Veterans Ser BH (FSA
Insd)..................................... 5.400 12/01/15 981,870
2,000 California St Veterans Ser BH (FSA
Insd)..................................... 5.400 12/01/16 1,951,760
2,000 California St Veterans Ser BR............. 5.300 12/01/29 1,778,160
2,000 California Statewide Cmntys Dev Auth Ctfs
Partn..................................... 7.250 11/01/29 1,959,960
1,000 California Statewide Cmntys Dev Auth Spl
Fac United Airls.......................... 5.625 10/01/34 862,020
1,000 Camarillo, CA Multi-Family Hsg Park Glenn
Apts (FNMA Collateralized)................ 5.400 03/01/28 895,660
2,000 Campbell, CA Redev Agy Tax Alloc Central
Campbell Redev Proj Ser A................. 6.550 10/01/32 2,004,160
1,530 Carson, CA Impt Bond Act 1915 Assmt
Dist No 92-1.............................. 7.375 09/02/22 1,611,121
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 2,575 Chula Vista, CA Redev Agy Tax Alloc Sr
Bayfront Ser D Rfdg....................... 8.625% 09/01/24 $ 2,949,766
1,000 Coachella, CA Redev Agy Tax Alloc Proj
Area No 3 Rfdg............................ 5.875 12/01/28 896,080
1,000 Colton, CA Redev Agy Tax Alloc Mount
Vernon Corridor Redev..................... 6.300 09/01/36 968,080
370 Contra Costa Cnty, CA Pub Fin Auth Tax
Alloc Rev Ser A........................... 7.100 08/01/22 379,457
630 Davis, CA Pub Fac Fin Auth Loc Agy Rev
Mace Ranch Area Ser A..................... 6.500 09/01/15 640,282
1,000 Delano, CA Ctfs Partn Delano Regl Med
Cent...................................... 5.250 01/01/18 800,680
1,885 Delano, CA Ctfs Partn Ser A
(Prerefunded @ 01/01/03).................. 9.250 01/01/22 2,126,751
1,000 Duarte, CA Redev Agy Tax Alloc Davis
Addition Proj Area Rfdg................... 6.700 09/01/14 1,026,600
1,000 El Monte, CA Ctfs Partn Dept Pub Social
Svcs Fac (AMBAC Insd)..................... 4.750 06/01/30 822,600
1,220 Emeryville, CA Pub Fing Auth Rev
Assmt Dist Refing......................... 5.900 09/02/21 1,120,887
865 Fairfield, CA Hsg Auth Mtg Rev Creekside
Estates Proj Rfdg (Prerefunded @
08/01/02)................................. 7.875 02/01/15 939,650
1,000 Fairfield-Suisun, CA Uni Sch Dist Spl Tax
Cmnty Facs Dist No 5 New Sch (FSA Insd)... 5.375 08/15/29 934,370
1,000 Folsom, CA Spl Tax Cmnty Fac Dist No 2
Rfdg (Connie Lee Insd).................... 5.250 12/01/19 937,720
15,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Rfdg....................... * 01/15/26 2,835,150
6,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Sr Lien Ser A......... * 01/01/27 1,225,260
2,500 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Rfdg....................... * 01/15/27 1,281,800
2,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Sr Lien Ser A (c)..... 0/7.050 01/01/10 1,682,180
1,000 Glendale, CA Uni Sch Dist Ser C (FSA
Insd)..................................... 5.500 09/01/19 982,980
2,000 Hawaii Desert, CA Mem Hlthcare Dist Rev
Rfdg...................................... 5.500 10/01/19 1,706,540
1,500 Huntington Beach, CA Pub Fin Auth Rev
Huntington Beach Redev Proj............... 7.000 08/01/24 1,525,905
1,000 Huntington Park, CA Pub Fin Auth Lease Rev
Wastewtr Sys Proj Ser A................... 6.200 10/01/25 962,500
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 425 Inglewood, CA Redev Agy Tax Alloc Centy
Redev Ser B............................... 6.125% 07/01/23 $ 410,686
2,000 Los Angeles Cnty, CA Met Tran Auth Sales
Tax Rev (AMBAC Insd)...................... 5.000 07/01/23 1,766,000
1,000 Los Angeles Cnty, CA Met Tran Auth Sales
Tax Rev Prop A First Tier Sr Ser B (FSA
Insd)..................................... 4.750 07/01/24 840,920
12,000 Los Angeles Cnty, CA Pension Oblig Ctfs
Ltd Muni Oblig Ser A (MBIA Insd) (b)...... 6.900 06/30/08 13,544,880
1,200 Los Angeles Cnty, CA Sch Regionalized
Business Svcs Ctfs Partn Cap Apprec Pooled
Fin Ser A (AMBAC Insd).................... * 08/01/26 247,392
1,000 Los Angeles, CA Ctfs Partn Sr Sonnenblick
Del Rio West L.A. (AMBAC Insd)............ 6.000 11/01/19 1,015,360
1,900 Los Angeles, CA Ctfs Partn................ 5.700 02/01/18 1,766,905
1,000 Los Angeles, CA Dept Wtr & Pwr Elec Plt
Rev....................................... 6.000 02/15/28 1,002,020
1,493 Los Angeles, CA Multi-Family Rev Hsg
Earthquake Rehab Proj Ser A (FNMA
Collateralized)........................... 5.700 12/01/27 1,520,052
1,635 Los Angeles, CA Single Family Home Mtg Rev
Pgm Ser A (GNMA Collateralized)........... 6.875 06/01/25 1,664,152
2,000 Metropolitan Wtr Dist Southn CA Ser A
Rfdg...................................... 4.750 07/01/22 1,687,920
3,720 Midpeninsula Regl Open Space Dist CA Fin
Auth Rev (AMBAC Insd)..................... * 08/01/27 659,072
1,110 Mountain View Los Altos, CA Uni High Sch
Dist Cap Apprec Ser D..................... * 08/01/24 259,918
2,000 Needles, CA Pub Util Auth Util Sys
Acquisition............................... 6.500 02/01/22 1,918,960
1,500 Newport Beach, CA Spl Tax Spl Impt Dist No
95-1 Ser A................................ 6.750 09/01/20 1,535,925
1,000 Oakland, CA Uni Sch Dist Alameda Cnty Ctfs
Partn, 144-A Private Placement (e)........ 7.000 11/15/11 1,115,920
2,000 Oakland, CA Uni Sch Dist Alameda Cnty Ctfs
Partn Energy Retrofit Proj, 144-A Private
Placement (e)............................. 6.750 11/15/14 2,228,800
975 Oceanside, CA Mobile Home Pk Fin Auth
Rev....................................... 5.800 03/01/28 864,835
2,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)..................................... 5.750 06/01/15 2,033,020
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,500 Pasadena, CA Spl Tax Cmnty Fac
Dist No 1 Civic Cent West................. * 12/01/07 $ 1,022,280
2,000 Pittsburg, CA Redev Agy Tax Alloc Los
Medanos Cmnty Dev Proj (AMBAC Insd)....... * 08/01/25 435,740
1,375 Pittsburg, CA Redev Agy Tax Alloc Los
Medanos Cmnty Dev Proj (AMBAC Insd)....... * 08/01/26 282,026
1,100 Pomona, CA Redev Agy Tax Alloc Downtown No
2 Redev Proj Ser U Rfdg................... 5.750% 04/01/19 1,000,274
1,000 Port of Oakland, CA Spl Fac Rev Mitsui
O.S.K. Line Ltd Ser A (LOC: Industrial
Bank of Japan)............................ 6.800 01/01/19 1,007,070
1,190 Redding, CA Redev Agy Tax Alloc Market
Street Redev Proj Ser A................... 6.700 09/01/23 1,208,671
2,000 Redlands, CA Redev Agy Tax Alloc Redev
Proj Ser A Rfdg (MBIA Insd)............... 4.750 08/01/21 1,707,080
1,000 Redondo Beach, CA Pub Fing Auth Rev South
Bay Cent Redev Proj....................... 7.000 07/01/16 1,054,180
2,000 Richmond, CA Rev YMCA East Bay Proj Rfdg.. 7.250 06/01/17 2,051,000
2,000 Sacramento Cnty, CA Ctfs Partn Pub Fac
Proj Rfdg................................. 4.750 10/01/27 1,660,460
1,500 Sacramento, CA City Fing Auth Lease Rev CA
EPA Bldg Ser A (AMBAC Insd)............... 4.750 05/01/23 1,265,205
500 San Bernardino Cnty, CA Ctfs Partn Med
Cent Fin Proj (MBIA Insd)................. 5.000 08/01/28 426,830
2,500 San Bernardino, CA Redev Agy Tax Alloc San
Sevaine Redev Proj Ser A.................. 7.000 09/01/24 2,533,850
6,000 San Diego Cnty, CA Wtr Auth Wtr Rev Ctfs
Partn Ser 91 B (Inverse Fltg) (Prerefunded
@ 04/27/06) (MBIA Insd) (d)............... 8.220 04/08/21 7,027,500
2,000 San Diego, CA Convention Ctr Expansion
Fing Auth Lease Rev Ser A................. 4.750 04/01/28 1,661,560
2,650 San Diego, CA Indl Dev Rev San Diego Gas &
Elec Ser A (MBIA Insd).................... 6.400 09/01/18 2,781,917
5,000 San Diego, CA Indl Dev Rev San Diego Gas &
Elec Ser A (AMBAC Insd)................... 6.100 09/01/19 5,084,150
1,000 San Diego, CA Redev Agy Centre City Redev
Proj Ser A................................ 6.400 09/01/25 998,020
1,000 San Francisco, CA City & Cnty Arpt Comm
Intl Arpt Rev Second Ser Issue 12-A (FGIC
Insd)..................................... 5.800 05/01/21 986,260
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 3,000 San Francisco, CA City & Cnty Redev Agy
Lease Rev George Moscone.................. * 07/01/08 $ 1,936,770
3,520 San Francisco, CA City & Cnty Redev Agy
Lease Rev George Moscone.................. * 07/01/09 2,144,454
4,250 San Francisco, CA City & Cnty Redev Agy
Lease Rev George Moscone.................. * 07/01/12 2,135,073
2,130 San Francisco, CA City & Cnty Redev Agy
Lease Rev George Moscone.................. * 07/01/14 934,814
800 San Francisco, CA City & Cnty Redev Agy
Lease Rev George Moscone (FSA Insd)....... 6.750% 07/01/15 861,808
1,000 San Jose, CA Single Family Mtg Rev Cap
Apprec Ser A.............................. * 04/01/16 407,020
2,000 San Leandro, CA Ctfs Partn Library & Fire
Stations Fing (AMBAC Insd)................ 5.750 11/01/29 1,978,960
1,000 San Marcos, CA Pub Fac Auth Sub Tax
Increment Proj Area 3 Ser A............... 6.750 10/01/30 987,210
1,575 San Marcos, CA Redev Agy Tax Alloc........ 6.000 08/01/29 1,438,857
1,000 San Mateo Cnty, CA Jt Pwrs Auth Lease Rev
Cap Proj Ser A Rfdg (FSA Insd)............ 4.750 07/15/23 842,740
1,000 Sanger, CA Uni Sch Dist Rfdg (MBIA
Insd)..................................... 5.600 08/01/23 982,680
1,000 Santa Ana, CA Multi-Family Hsg Rev Villa
Del Sol Apts Ser B (FNMA
Collateralized)........................... 5.650 11/01/21 1,014,210
3,000 Santa Clara Cnty, CA Fin Auth Lease Rev
Multiple Facs Proj Ser B (AMBAC Insd)
(a)....................................... 5.500 05/15/10 3,087,000
2,000 Santa Clarita, CA Cmnty Fac Dist Spl Tax
No 92-1 Ser A............................. 7.450 11/15/10 2,097,920
1,000 Santa Monica-Malibu, CA Uni Sch Dist Cap
Apprec (FGIC Insd)........................ * 08/01/23 249,160
1,325 Simi Valley, CA Cmnty Dev Agy Coml
Sycamore Plaza II Rfdg.................... 6.000 09/01/12 1,346,147
1,270 Southern CA Home Fin Auth Single Family
Mtg Rev Pgm B (GNMA Collateralized)....... 6.900 10/01/24 1,300,582
5,000 Southern CA Pub Pwr Auth Pwr Proj
Rev Multi-Projs........................... 6.750 07/01/12 5,655,900
1,000 Stockton, CA Cmnty Fac Dist Spl Tax....... 5.800 09/01/14 966,780
1,000 Stockton, CA South Stockton Cmnty Facs
Dist Spl Tax No 90-1 Rfdg................. 6.400 09/01/15 1,001,920
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$ 1,000 Vista, CA Mobile Home Pk Rev Estrella De
Oro Mobile Home Ser A..................... 5.875% 02/01/28 $ 885,100
2,785 Yolo Cnty, CA Hsg Auth Mtg Rev Mtg
Waggener Ranch Proj (FHA Gtd)............. 7.000 10/01/33 2,853,984
------------
220,973,413
------------
GUAM 0.9%
2,000 Guam Arpt Auth Rev Ser B.................. 6.700 10/01/23 2,024,900
------------
PUERTO RICO 1.0%
559 Centro de Recaudaciones de Ingresos
Muni Ctfs Partn PR........................ 6.850 10/17/03 569,372
1,580 Puerto Rico Hsg Fin Single Family Mtg Rev
Portfolio 1 C (GNMA Collateralized)....... 6.850 10/15/23 1,640,498
------------
2,209,870
------------
U. S. VIRGIN ISLANDS 1.3%
1,000 Virgin Islands Pub Fin Auth Rev Gross
Rcpts Taxes Ln Nt Ser A................... 6.375 10/01/19 1,002,350
1,000 Virgin Islands Pub Fin Auth Rev Gross
Rcpts Taxes Ln Nt Ser A................... 6.500 10/01/24 1,007,550
1,000 Virgin Islands Pub Fin Auth Rev Gross
Rcpts Taxes Ln Nt Ser A (ACA Insd)........ 6.125 10/01/29 991,860
------------
3,001,760
------------
TOTAL LONG-TERM INVESTMENTS 100.3%
(Cost $220,968,397).................................................. 228,209,943
SHORT-TERM INVESTMENTS 0.2%
(Cost $600,000)...................................................... 600,000
------------
TOTAL INVESTMENTS 100.5%
(Cost $221,568,397).................................................. 228,809,943
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%).......................... (1,224,106)
------------
NET ASSETS 100.0%..................................................... $227,585,837
============
</TABLE>
* Zero coupon bond
(a) Securities purchased on a when-issued or delayed delivery basis.
(b) Assets segregated as collateral for when-issued or delayed delivery purchase
commitments.
See Notes to Financial Statements
17
<PAGE> 19
YOUR TRUST'S INVESTMENTS
April 30, 2000 (Unaudited)
(c) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
(d) An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specific factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by
the Trust to enhance the yield of the portfolio. The price of this security
may be more volatile than the price of a comparable fixed rate security. All
of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the
unrealized appreciation/depreciation. Upon disposition, a realized gain or
loss is recognized accordingly.
(e) 144A securities are those which are exempt from registration under Rule 144A
of the securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
18
<PAGE> 20
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $221,568,397)....................... $228,809,943
Cash........................................................ 77,583
Interest Receivable......................................... 3,272,618
Other....................................................... 13,329
------------
Total Assets............................................ 232,173,473
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 4,111,093
Investment Advisory Fee................................... 131,620
Income Distributions -- Common and Preferred Shares....... 95,199
Administrative Fee........................................ 37,606
Affiliates................................................ 10,133
Accrued Expenses............................................ 88,788
Trustees' Deferred Compensation and Retirement Plans........ 113,197
------------
Total Liabilities....................................... 4,587,636
------------
NET ASSETS.................................................. $227,585,837
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 3,000 issued with liquidation preference of
$25,000 per share)........................................ $ 75,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 9,682,997 shares issued and
outstanding).............................................. 96,830
Paid in Surplus............................................. 143,433,980
Net Unrealized Appreciation................................. 7,241,546
Accumulated Undistributed Net Investment Income............. 449,938
Accumulated Net Realized Gain............................... 1,363,543
------------
Net Assets Applicable to Common Shares.................. 152,585,837
------------
NET ASSETS.................................................. $227,585,837
============
NET ASSET VALUE PER COMMON SHARE ($152,585,837 divided by
9,682,997 shares outstanding)............................. $ 15.76
============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
Statement of Operations
For the Six Months Ended April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 6,972,033
-----------
EXPENSES:
Investment Advisory Fee..................................... 790,633
Administrative Fee.......................................... 225,895
Preferred Share Maintenance................................. 98,183
Legal....................................................... 5,493
Trustees' Fees and Related Expenses......................... 5,430
Custody..................................................... 4,271
Other....................................................... 71,263
-----------
Total Expenses.......................................... 1,201,168
Less Credits Earned on Cash Balances.................... 582
-----------
Net Expenses............................................ 1,200,586
-----------
NET INVESTMENT INCOME....................................... $ 5,771,447
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,562,598
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 8,725,029
End of the Period......................................... 7,241,546
-----------
Net Unrealized Depreciation During the Period............... (1,483,483)
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 79,115
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 5,850,562
===========
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
Statement of Changes in Net Assets
For The Six Months Ended April 30, 2000 and the Year Ended October 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTH
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
----------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 5,771,447 $ 11,619,011
Net Realized Gain/Loss................................ 1,562,598 (199,058)
Net Unrealized Depreciation During the Period......... (1,483,483) (18,202,739)
------------ ------------
Change in Net Assets from Operations.................. 5,850,562 (6,782,786)
------------ ------------
Distributions from Net Investment Income:
Common Shares....................................... (4,696,254) (9,570,332)
Preferred Shares.................................... (1,323,346) (2,058,702)
------------ ------------
(6,019,600) (11,629,034)
------------ ------------
Distributions from Net Realized Gain:
Common Shares....................................... -0- (1,921,647)
Preferred Shares.................................... -0- (473,423)
------------ ------------
-0- (2,395,070)
------------ ------------
Total Distributions................................... (6,019,600) (14,024,104)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (169,038) (20,806,890)
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment........................................ -0- 637,809
------------ ------------
TOTAL DECREASE IN NET ASSETS.......................... (169,038) (20,169,081)
NET ASSETS:
Beginning of the Period............................... 227,754,875 247,923,956
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $449,938 and $698,091,
respectively)....................................... $227,585,837 $227,754,875
============ ============
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED ENDED
APRIL 30, OCTOBER 31, OCTOBER 31,
2000 1999 1998
--------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD (A).... $ 15.776 $ 17.927 $ 17.846
-------- -------- --------
Net Investment Income......................... .596 1.201 .202
Net Realized and Unrealized Gain/Loss......... .008 (1.901) .084
-------- -------- --------
Total from Investment Operations................ .604 (.700) .286
-------- -------- --------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders................. .485 .990 .165
Common Share Equivalent of Distributions
Paid to Preferred Shareholders............ .137 .213 .040
Distributions from and in Excess of Net
Realized Gain:
Paid to Common Shareholders................. -0- .199 -0-
Common Share Equivalent of Distributions
Paid to Preferred Shareholders............ -0- .049 -0-
-------- -------- --------
Total Distributions............................. .622 1.451 .205
-------- -------- --------
NET ASSET VALUE, END OF THE PERIOD.............. $ 15.758 $ 15.776 $ 17.927
======== ======== ========
Market Price Per Share at End of the Period..... $15.0000 $15.2500 $18.4375
Total Investment Return at Market Price (b)..... 1.67%* -11.34% 4.09%*
Total Return at Net Asset Value (c)............. 3.00%* -5.69% 1.37%*
Net Assets at End of the Period (In millions)... $ 227.6 $ 227.8 $ 247.9
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**................. 1.62% 1.56% 1.58%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)........ 6.00% 5.78% 5.40%
Portfolio Turnover.............................. 14%* 24% 2%*
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares................... 1.08% 1.07% 1.10%
</TABLE>
(a) Net Asset Value at September 27, 1991, is adjusted for common and preferred
share offering costs of $.195 per common share.
(b) 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.
(c) 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.
(d) Net investment income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
22
<PAGE> 24
<TABLE>
<CAPTION>
SEPTEMBER 27, 1991
(COMMENCEMENT
YEAR ENDED AUGUST 31, OF INVESTMENT
--------------------------------------------------------------- OPERATIONS) TO
1998 1997 1996 1995 1994 1993 AUGUST 31, 1992
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$17.083 $ 16.283 $16.127 $15.699 $17.454 $15.816 $14.805
------- -------- ------- ------- ------- ------- -------
1.228 1.263 1.259 1.269 1.286 1.305 1.038
.852 .902 .233 .523 (1.693) 1.658 .870
------- -------- ------- ------- ------- ------- -------
2.080 2.165 1.492 1.792 (.407) 2.963 1.908
------- -------- ------- ------- ------- ------- -------
.990 1.02 1.050 1.050 1.050 .981 .698
.243 .252 .286 .311 .235 .206 .199
.067 .072 -0- .002 .054 .110 -0-
.017 .021 -0- .001 .009 .028 -0-
------- -------- ------- ------- ------- ------- -------
1.317 1.365 1.336 1.364 1.348 1.325 .897
------- -------- ------- ------- ------- ------- -------
$17.846 $ 17.083 $16.283 $16.127 $15.699 $17.454 $15.816
======= ======== ======= ======= ======= ======= =======
$17.875 $16.8125 $16.125 $15.000 $15.500 $16.750 $15.125
12.96% 11.45% 14.89% 3.95% -.90% 18.66% 5.69%*
10.99% 11.96% 7.60% 10.02% -3.81% 17.89% 11.80%*
$ 247.0 $ 239.4 $ 231.7 $ 230.2 $ 226.1 $ 243.0 $ 227.2
1.59% 1.61% 1.64% 1.66% 1.62% 1.58% 1.55%
5.63% 6.05% 5.95% 6.22% 6.34% 6.70% 6.09%
21% 17% 10% 16% 7% 26% 93%*
1.10% 1.10% 1.11% 1.10% 1.10% 1.07% 1.09%
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen California Quality Municipal Trust (the "Trust") is registered as a
diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The Trust's investment objective is to provide
a high level of current income exempt from federal and California income taxes
consistent with preservation of capital. The Trust will invest in a portfolio
consisting substantially of California municipal obligations rated investment
grade at the time of investment, but may invest up to 20% of its assets in
unrated securities which are believed to be of comparable quality to those rated
investment grade. The Trust commenced investment operations on September 27,
1991.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with 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, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and original issue discount is accreted over the expected
life of each applicable security.
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NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
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.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1999, the Trust had an accumulated capital loss
carryforward for tax purposes of $199,058 which will expire on October 31, 2007.
At April 30, 2000, for federal income tax purposes cost of long- and
short-term investments is $221,568,397; the aggregate gross unrealized
appreciation is $10,468,267 and the aggregate gross unrealized depreciation is
$3,226,721, resulting in net unrealized appreciation on long- and short-term
investments of $7,241,546.
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
F. EXPENSE REDUCTIONS During the six months ended April 30, 2000, the Trust's
custody fee was reduced by $582 as a result of credits earned on overnight cash
balances.
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 .70% of the average
net assets of the Trust. In addition, the Trust will pay a monthly
administrative fee to Van Kampen Funds Inc. or its affiliates (collectively "Van
Kampen"), the Trust's Administrator, at an annual rate of .20% of the average
net assets of the Trust. The administrative services provided by the
Administrator include record keeping and reporting responsibilities with respect
to the Trust's portfolio and preferred shares and providing certain services to
shareholders.
For the six months ended April 30, 2000 the Fund recognized expenses of
approximately $3,500 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.
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<PAGE> 27
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
For the six months ended April 30, 2000, the Fund recognized expenses of
approximately $7,500 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
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 April 30, 2000 and October 31, 1999, paid in surplus related to common shares
aggregated $143,433,980.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
<S> <C> <C>
Beginning Shares................................. 9,682,997 9,646,008
Shares Issued Through Dividend Reinvestment...... -0- 36,989
--------- ---------
Ending Shares.................................... 9,682,997 9,682,997
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $31,876,133 and $34,824,678,
respectively.
5. PREFERRED SHARES
As of April 30, 2000, the Trust has outstanding 3,000 shares of Auction
Preferred Shares ("APS"). Dividends are cumulative and the rate is reset through
an auction process every 28 days. The rate in effect on April 30, 2000, was
3.850% and for the six months then ended rates ranged from 2.88% to 4.00%.
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 APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests, and the APS are subject to
mandatory redemptions if the tests are not met.
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VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth*
Mid Cap Growth
Pace
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
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TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN CALIFORNIA QUALITY
MUNICIPAL TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, 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(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
(1) Independent accountants for the Trust perform an annual audit of the Trust's
financial statements. The Board of Trustees has engaged Deloitte & Touche LLP to
be the Trust's independent accountants.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"), ceased
being the Trust's independent accountants effective April 14, 2000. The
cessation of the client- auditor relationship between the Trust and KPMG was
based solely on a possible future business relationship by KPMG with an
affiliate of the Trust's investment adviser.
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
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