<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 17
NOTES TO FINANCIAL STATEMENTS 22
TRUST OFFICERS AND IMPORTANT ADDRESSES 25
</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 VIC
-----------------------------------------------------------------------
Six-month total return based on market price(1) 7.49%
-----------------------------------------------------------------------
Six-month total return based on NAV(2) 3.54%
-----------------------------------------------------------------------
Distribution Rate as a % of closing common stock
price(3) 6.63%
-----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common stock price(4) 11.43%
-----------------------------------------------------------------------
Net asset value $15.13
-----------------------------------------------------------------------
Closing common stock price $14.9375
-----------------------------------------------------------------------
Six-month high common stock price (04/11/00) $15.0000
-----------------------------------------------------------------------
Six-month low common stock price (12/21/99) $13.1250
-----------------------------------------------------------------------
Preferred share rate(5) 3.50%
-----------------------------------------------------------------------
</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 income 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............ 62.8%
- AA/Aa.............. 13.0%
- A/A................ 6.0%
- BBB/Baa............ 13.7%
- Non-Rated.......... 4.5%
[PIE CHART]
<CAPTION>
As of October 31, 1999
<S> <C> <C>
- AAA/Aaa............ 71.6%
- AA/Aa.............. 7.3%
- A/A................ 5.2%
- BBB/Baa............ 10.4%
- Non-Rated.......... 5.5%
[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>
11/99 0.0825
12/99 0.0825
1/00 0.0825
2/00 0.0825
3/00 0.0825
4/00 0.0825
</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>
Retail Electric/Gas/Telephone 17.20 16.40
Transportation 13.50 17.00
General Purpose 9.20 7.40
Health Care 9.20 9.20
Industrial Revenue 8.10 6.90
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--March 1992 through April 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
3/92 14.8900 14.8900
15.1800 14.5000
15.4600 14.7500
15.4200 14.5000
3/93 16.4200 15.3750
16.9200 15.6250
17.7000 16.0000
17.5100 15.6250
3/94 15.6500 13.6250
15.4400 14.0000
15.2100 13.7500
14.2400 12.6250
3/95 15.5800 13.8750
15.8000 14.2500
16.0500 13.8750
16.8000 15.6250
3/96 16.0400 14.8750
16.0900 15.7500
16.4300 15.2500
16.5300 15.8750
3/97 16.2300 15.5000
16.6900 16.3750
17.0900 16.8120
17.2400 17.0625
3/98 17.1900 17.3125
17.2100 16.8125
17.6700 18.0000
17.1000 18.1875
3/99 16.9700 17.8125
16.2500 16.1875
15.6400 16.0625
14.9100 14.2501
15.3900 14.7500
4/00 15.1300 14.9375
</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 TRUST
FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS 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,
higher interest rates made it more
6
<PAGE> 8
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 utility and transportation sectors, each of which represented more than
13 percent of the portfolio's long-term investments.
Many of our portfolio management 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 7.49 percent based on market price. This
reflects an increase in market price from $14.3750 per share on October 31,
1999, to $14.9375 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.
The Trust's dividend remained unchanged at $0.0825 per share throughout the
reporting period. This monthly tax-exempt dividend translates to a distribution
rate of 6.63 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 11.43 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 growth, employment costs, and the
8
<PAGE> 10
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 99.6%
CALIFORNIA 97.0%
$1,020 A B C CA Uni Sch Dist Cap Apprec Ser B
(FGIC Insd).............................. * 08/01/17 $ 378,022
1,000 Abag Fin Auth for Nonprft Corp CA
Childrens Hosp Med Cent.................. 6.000% 12/01/29 1,012,850
1,000 Abag Fin Auth for Nonprft Corp CA
Multi-Family Rev Hsg Utd Dominion Ser A
Rfdg..................................... 6.400 08/15/30 1,020,950
1,800 Anaheim, CA Pub Fin Auth Lease Rev Cap
Apprec Pub Impt Proj Ser C (FSA Insd).... * 09/01/32 252,828
3,000 California Edl Fac Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd)........ * 10/01/29 464,130
3,000 California Edl Fac Auth Rev Cap Apprec
Loyola Marymount Univ (MBIA Insd)........ * 10/01/30 434,580
1,000 California Edl Fac Auth Rev Pooled
College & Univ Proj Ser B................ 5.250 04/01/24 837,090
1,000 California Edl Fac Auth Rev Student Ln CA
Ln Pgm Ser A (MBIA Insd)................. 6.000 03/01/16 1,020,170
1,000 California Edl Fac Auth Rev Univ of La
Verne.................................... 6.300 04/01/09 1,032,100
1,500 California Hlth Fac Fin Auth Rev Cedars
Sinai Med Cent Ser A..................... 6.125 12/01/19 1,493,130
1,100 California Hlth Fac Fin Auth Rev Hlth Fac
Small Fac Ln Ser A....................... 6.700 03/01/11 1,147,553
1,500 California Hlth Fac Fin Auth Rev Hlth Fac
Small Fac Ln Ser A....................... 6.750 03/01/20 1,561,695
2,500 California Hlth Fac Fin Auth Rev Insd
Hlth Fac Valleycare Ser A................ 6.125 05/01/12 2,567,700
</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)
$1,000 California Hlth Fac Fin Auth Rev Kaiser
Permanente Ser A (FSA Insd).............. 5.550% 08/15/25 $ 951,060
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).............................. 6.000 08/01/16 1,016,220
1,000 California Hsg Fin Agy Rev Home Mtg Ser E
(AMBAC Insd)............................. 5.200 08/01/19 914,180
1,000 California Hsg Fin Agy Rev Home Mtg Ser E
(AMBAC Insd)............................. 6.100 08/01/29 1,004,090
1,000 California Hsg Fin Agy Rev Home Mtg Ser M
(MBIA Insd).............................. 5.550 08/01/17 974,350
885 California Hsg Fin Agy Rev Home Mtg Ser
N........................................ 6.375 02/01/27 897,638
1,000 California Hsg Fin Agy Rev Multi-Family
Hsg III Ser A (MBIA Insd)................ 5.850 08/01/17 992,390
1,000 California Hsg Fin Agy Rev Multi-Family
Hsg III Ser A (MBIA Insd)................ 5.950 08/01/28 983,770
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).................................... 5.450 09/01/29 947,480
1,000 California St............................ 4.750 12/01/28 823,690
1,000 California St Rfdg....................... 5.000 02/01/23 883,990
1,000 California St Rfdg....................... 4.750 02/01/29 827,860
2,000 California St Veterans (AMBAC Insd)...... 6.200 02/01/16 2,000,740
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
3,000 California Statewide Cmntys Dev Auth Spl
Fac United Airls......................... 5.625 10/01/34 2,586,060
</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)
$1,700 Chula Vista, CA Indl Dev Rev San Diego
Gas & Elec Co Ser A (AMBAC Insd)......... 6.400% 12/01/27 $ 1,726,690
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
1,245 Duarte, CA Multi-Family Rev Hsg Heritage
Park Apts Ser A (FNMA Collateralized).... 5.850 05/01/30 1,189,212
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
10,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Rfdg................. * 01/15/25 2,016,600
6,455 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Cap Apprec Sr Lien Ser A............. * 01/01/23 1,680,107
3,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Sr Lien Ser A........ * 01/01/24 734,160
2,500 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Rfdg (c)............. 0/5.875 01/15/27 1,281,800
3,000 Foothill/Eastern Corridor Agy CA Toll Rd
Rev Conv Cap Apprec Sr Lien Ser A (c).... 0/7.050 01/01/10 2,523,270
2,000 Huntington Beach, CA Pub Fin Auth Rev
Huntington Beach Redev Proj.............. 7.000 08/01/10 2,062,960
1,000 Los Angeles CA Ctfs Partn Sr Sonnenblick
Del Rio W L. A. (AMBAC Insd)............. 6.000 11/01/19 1,015,360
1,000 Los Angeles CA Dept Wtr & Pwr Elec Plt
Rev...................................... 6.000 02/15/28 1,002,020
1,000 Los Angeles CA Dept Wtr & Pwr Elec Plt
Rev...................................... 6.000 02/15/30 1,001,590
</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)
$2,000 Los Angeles Cnty, CA Met Tran Auth Sales
Tax Rev (FSA Insd)....................... 4.750% 07/01/24 $ 1,681,840
1,498 Los Angeles, CA Multi-Family Rev Hsg
Earthquake Rehab Proj Ser A (FNMA
Collateralized).......................... 5.700 12/01/27 1,525,144
1,305 Marin, CA Emergency Radio Auth Rev Pub
Safety & Emergency Radio (AMBAC Insd).... 4.750 08/15/21 1,113,700
1,000 Metropolitan Wtr Dist Southn CA Wtrwks
Rev Ser A Rfdg........................... 4.750 07/01/22 843,960
1,000 Mountain View, CA Cap Impts Fin Auth Rev
City Hall/Cmnty Theatre (MBIA Insd)...... 6.500 08/01/16 1,041,080
1,930 Orange Cnty, CA Ctfs Partn Juvenile
Justice Cent Fac Rfdg (AMBAC Insd)....... 6.375 06/01/11 2,020,594
880 Paramount, CA Redev Agy Tax Alloc (MBIA
Insd).................................... 6.250 08/01/10 928,963
2,500 Port Oakland, CA Port Rev Ser E (MBIA
Insd).................................... 6.500 11/01/16 2,626,400
1,000 Redlands, CA Redev Agy Tax Alloc Redev
Proj Ser A Rfdg (MBIA Insd).............. 4.750 08/01/21 853,540
2,000 Riverside Cnty, CA Brd Edl Ctfs Partn Fin
Proj Ser A............................... 6.650 11/01/17 2,066,620
1,500 Sacramento, CA City Fin Auth Lease Rev CA
EPA Bldg Ser A (AMBAC Insd).............. 4.750 05/01/23 1,265,205
1,000 Sacramento Cnty, CA Ctfs Partn Pub Fac
Proj Rfdg (AMBAC Insd)................... 4.750 10/01/27 830,230
1,730 San Bernadino, CA Muni Wtr Dept Ctfs
Partn Swr (FGIC Insd).................... 6.250 02/01/17 1,790,169
1,000 San Bernardino Cnty, CA Ctfs Partn Med
Cent Fin Proj (MBIA Insd)................ 5.000 08/01/28 853,660
5,000 San Diego, CA Indl Dev Rev San Diego Gas
& Elec Ser A (AMBAC Insd)................ 6.100 09/01/19 5,084,150
</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)
$5,000 San Diego, CA Port Fac Rev Natl Steel &
Shipbldg Co Rfdg......................... 6.600% 12/01/02 $ 5,176,800
1,500 San Diego, CA Redev Agy Centre City Redev
Proj Ser A............................... 6.400 09/01/25 1,497,030
2,000 San Diego, CA Uni Sch Dist Cap Apprec Ser
A (FGIC Insd)............................ * 07/01/17 744,780
1,185 San Francisco, CA City & Cnty Arpt Commn
Intl Arpt Rev Second Ser Issue 15B (MBIA
Insd).................................... 4.800 05/01/17 1,057,826
1,000 San Joaquin Hills, CA Tran Corridor Agy
Toll Rd Rev Jr Lien...................... * 01/01/09 641,420
1,000 San Jose, CA Redev Agy Tax Allocation
Merged Area Redev Proj (AMBAC Insd)...... 4.750 08/01/23 842,600
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
1,500 Santa Ana, CA Multi-Family Hsg Rev Villa
Del Sol Apts Ser B (FNMA
Collateralized).......................... 5.650 11/01/21 1,521,315
1,000 Santa Ana, CA Uni Sch Dist Ctfs Partn Cap
Apprec Fin Proj (FSA Insd)............... * 04/01/36 113,010
2,250 Santa Barbara, CA Ctfs Partn Harbor Proj
Rfdg..................................... 6.750 10/01/27 2,355,773
1,000 Santa Clara Cnty, CA Fin Auth Lease Rev
Multi Fac Projs Ser B (AMBAC Insd) (a)... 5.500 05/15/09 1,031,900
2,000 South Orange Cnty, CA Pub Fin Auth
Reassmt Rev (FSA Insd)................... 5.800 09/02/18 2,025,440
595 Southern CA Home Fin Auth Single Family
Mtg Rev Ser A (GNMA Collateralized)...... 6.750 09/01/22 604,145
1,000 Stockton, CA Hlth Fac Rev Saint Joseph
Med Cent Ser A (MBIA Insd)............... 5.625 06/01/13 1,009,960
3,000 Upland, CA Ctfs Partn Wtr Sys Proj Rfdg
(FGIC Insd) (b).......................... 6.600 08/01/16 3,138,570
2,000 William S Hart CA Jt Sch Fin Auth Spl Tax
Rev Cmnty Fac Rfdg (FSA Insd)............ 6.500 09/01/14 2,128,420
------------
111,871,006
------------
</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>
GUAM 0.9%
$1,000 Guam Arpt Auth Rev Ser B................. 6.700% 10/01/23 $ 1,012,450
------------
U. S. VIRGIN ISLANDS 1.7%
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 Ser A (ACA Insd).......... 6.125 10/01/29 991,860
------------
1,994,210
------------
TOTAL INVESTMENTS 99.6%
(Cost $113,517,794).................................................. 114,877,666
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4%............................ 484,027
------------
NET ASSETS 100.0%..................................................... $115,361,693
============
</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.
(c) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $113,517,794)....................... $114,877,666
Cash........................................................ 78,053
Interest Receivable......................................... 1,783,266
Other....................................................... 8,572
------------
Total Assets............................................ 116,747,557
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,053,650
Income Distributions -- Common and Preferred Shares....... 77,854
Investment Advisory Fee................................... 61,989
Administrative Fee........................................ 19,073
Affiliates................................................ 12,063
Trustees' Deferred Compensation and Retirement Plans........ 105,594
Accrued Expenses............................................ 55,641
------------
Total Liabilities....................................... 1,385,864
------------
NET ASSETS.................................................. $115,361,693
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,800 issued with liquidation preference of
$25,000 per share)........................................ $ 45,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 4,651,948 shares issued and
outstanding).............................................. 46,519
Paid in Surplus............................................. 68,367,619
Net Unrealized Appreciation................................. 1,359,872
Accumulated Undistributed Net Investment Income............. 743,561
Accumulated Net Realized Loss............................... (155,878)
------------
Net Assets Applicable to Common Shares.................. 70,361,693
------------
NET ASSETS.................................................. $115,361,693
============
NET ASSET VALUE PER COMMON SHARE ($70,361,693 divided by
4,651,948 shares outstanding)............................. $ 15.13
============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
Statement of Operations
For the Six Months Ended April 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $3,398,435
----------
EXPENSES:
Investment Advisory Fee..................................... 372,029
Administrative Fee.......................................... 114,471
Preferred Share Maintenance................................. 66,662
Custody..................................................... 3,534
Legal....................................................... 3,188
Trustees' Fees and Related Expenses......................... 2,639
Other....................................................... 60,018
----------
Total Expenses.............................................. 622,541
Less Credits Earned on Cash Balances........................ 710
----------
Net Expenses.............................................. 621,831
----------
NET INVESTMENT INCOME....................................... $2,776,604
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 371,599
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,368,962
End of the Period......................................... 1,359,872
----------
Net Unrealized Depreciation During the Period............... (9,090)
----------
NET REALIZED AND UNREALIZED GAIN............................ $ 362,509
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $3,139,113
==========
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
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 MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 2,776,604 $ 5,510,499
Net Realized Gain/Loss............................. 371,599 (527,478)
Net Unrealized Depreciation During the Period...... (9,090) (8,521,723)
------------ ------------
Change in Net Assets from Operations............... 3,139,113 (3,538,702)
------------ ------------
Distributions from Net Investment Income:
Common Shares.................................... (2,302,714) (4,596,014)
Preferred Shares................................. (719,766) (1,012,419)
------------ ------------
(3,022,480) (5,608,433)
------------ ------------
Distributions from Net Realized Gain:
Common Shares.................................... -0- (1,568,354)
Preferred Shares................................. -0- (457,465)
------------ ------------
-0- (2,025,819)
------------ ------------
Total Distributions................................ (3,022,480) (7,634,252)
------------ ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES............................ 116,633 (11,172,954)
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment..................................... -0- 374,074
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS.............. 116,633 (10,798,880)
NET ASSETS:
Beginning of the Period............................ 115,245,060 126,043,940
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $743,561
and $989,437, respectively)...................... $115,361,693 $115,245,060
============ ============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
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
ENDED
APRIL 30, ------------------
2000 1999 1998
--------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD (A)........ $ 15.100 $17.505 $17.157
-------- ------- -------
Net Investment Income............................. .597 1.186 1.236
Net Realized and Unrealized Gain/Loss............. .078 (1.946) .705
-------- ------- -------
Total from Investment Operations.................... .675 (.760) 1.941
-------- ------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders..................... .495 .990 .990
Common Share Equivalent of Distributions Paid to
Preferred Shareholders........................ .155 .218 .280
Distributions from Net Realized Gain:
Paid to Common Shareholders..................... -0- .339 .254
Common Share Equivalent of Distributions Paid to
Preferred Shareholders........................ -0- .098 .069
-------- ------- -------
Total Distributions................................. .650 1.645 1.593
-------- ------- -------
NET ASSET VALUE, END OF THE PERIOD.................. $ 15.125 $15.100 $17.505
======== ======= =======
Market Price Per Share at End of the Period......... $14.9375 $14.375 $18.000
Total Investment Return at Market Price (b)......... 7.49%* -13.54% 15.46%
Total Return at Net Asset Value (c)................. 3.54%* - 6.64% 9.62%
Net Assets at End of the Period (In millions)....... $ 115.4 $ 115.2 $ 126.0
Ratio of Expenses to Average Net Assets Applicable
to Common Shares**................................ 1.79% 1.74% 1.71%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d)................... 5.90% 5.84% 5.54%
Portfolio Turnover.................................. 20%* 25% 27%
* Non-Annualized
** Ratio of Expenses to Average Net Assets Including
Preferred Shares................................. 1.09% 1.10% 1.10%
</TABLE>
(a) Net Asset Value at March 27, 1992, is adjusted for common and preferred
share offering costs of $.296 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 the common share equivalent of
distributions paid to preferred shareholders.
20
<PAGE> 22
<TABLE>
<CAPTION>
MARCH 27, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31 OF INVESTMENT
---------------------------------------------------- OPERATIONS) TO
1997 1996 1995 1994 1993 OCTOBER 31, 1992
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$16.584 $16.294 $14.670 $17.644 $14.878 $14.704
------- ------- ------- ------- ------- -------
1.262 1.300 1.296 1.282 1.281 .594
.839 .400 1.648 (3.002) 2.851 .098
------- ------- ------- ------- ------- -------
2.101 1.700 2.944 (1.720) 4.132 .692
------- ------- ------- ------- ------- -------
.988 .957 .924 .924 .924 .385
.273 .326 .396 .259 .258 .133
.200 .088 -0- .058 .136 -0-
.067 .039 -0- .013 .048 -0-
------- ------- ------- ------- ------- -------
1.528 1.410 1.320 1.254 1.366 .518
------- ------- ------- ------- ------- -------
$17.157 $16.584 $16.294 $14.670 $17.644 $14.878
======= ======= ======= ======= ======= =======
$16.750 $15.750 $14.750 $12.750 $16.375 $14.250
12.96% 14.14% 23.60% -16.67% 23.01% -2.50%*
9.78% 8.05% 17.86% -11.63% 26.44% 1.70%*
$ 124.3 $ 121.6 $ 120.3 $ 112.8 $ 126.5 $ 113.7
1.77% 1.80% 1.83% 1.79% 1.73% 1.70%
5.93% 5.97% 5.83% 6.31% 6.21% 5.18%
23% 16% 13% 14% 27% 51%*
1.12% 1.13% 1.12% 1.12% 1.09% 1.18%
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Trust for Investment Grade California Municipals (the "Trust") is
registered as a diversified closed-end management investment company under the
Investment Company Act of 1940, as amended. The Trust's investment objective is
to provide a high level of current income exempt from federal and California
income taxes, consistent with preservation of capital. The Trust will invest in
a portfolio consisting substantially of California municipal obligations rated
investment grade at the time of investment. The Trust commenced investment
operations on March 27, 1992.
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.
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS (CONTINUED)
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 $527,478 which will expire on October 31, 2007.
At April 30, 2000, for federal income tax purposes cost of long-term
investments is $113,517,794, the aggregate gross unrealized appreciation is
$2,969,912 and the aggregate gross unrealized depreciation is $1,610,040,
resulting in net unrealized appreciation on long-term investments of $1,359,872.
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. EXPENSES REDUCTIONS During the six months ended April 30, 2000, the Trust's
custody fee was reduced by $710 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 .65% 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 Trust recognized expenses of
approximately $700 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.
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS (CONTINUED)
April 30, 2000 (Unaudited)
For the six months ended April 30, 2000, the Trust recognized expenses of
approximately $7,800 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 $68,367,619.
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.................................. 4,651,948 4,629,683
Shares Issued Through Dividend Reinvestment....... -0- 22,265
--------- ---------
Ending Shares..................................... 4,651,948 4,651,948
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $23,113,480 and $23,056,686,
respectively.
5. PREFERRED SHARES
As of April 30, 2000, the Trust has outstanding 1,800 Auction Preferred Shares
("APS"). Dividends are cumulative and the dividend rate is currently reset every
28 days through an auction process. The rate in effect on April 30, 2000 was
3.50% and for the six months then ended, rates ranged from 2.79% to 3.75%.
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 redemption if the tests are not met.
24
<PAGE> 26
TRUST OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN TRUST FOR INVESTMENT GRADE
CALIFORNIA MUNICIPALS
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
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.
25
