UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4386
Van Kampen Tax Free Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 9/30
Date of reporting period: 3/31/04
Item 1. Reports to Shareholders.
The Trust's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Insured Tax Free Income Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of March 31, 2004.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that a mutual fund will achieve its
investment objective. Funds are subject to market risk, which is the
possibility that the market values of securities owned by the fund will
decline and that the value of fund shares may therefore be less than what
you paid for them. Accordingly, you can lose money investing in this
fund. Please see the prospectus for more complete information on
investment risks.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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</Table>
Performance Summary as of 3/31/04
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 12/14/84 since 05/03/93 since 08/13/93
- ----------------------------------------------------------------------------------------------
W/ MAX. W/ MAX. W/ MAX.
4.75% 4.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception 8.02% 7.74% 5.02% 5.02% 4.60% 4.60%
10-year 6.07 5.55 5.49 5.49 5.25 5.25
5-year 5.25 4.23 4.44 4.19 4.43 4.43
1-year 4.99 -0.01 4.20 0.21 4.26 3.26
6-month 2.57 -2.30 2.24 -1.74 2.24 1.24
- ----------------------------------------------------------------------------------------------
30-Day SEC Yield 2.45% 1.81% 1.81%
</Table>
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost.
Average annual total return with sales charges includes payment of the maximum
sales charge of 4.75 percent for Class A shares, a contingent deferred sales
charge of 4.00 percent for Class B shares (in year one and declining to zero
after year six), a contingent deferred sales charge of 1.00 percent for Class C
shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25
percent for Class A shares and 1.00 percent for Class B and C shares. The since
inception and 10-year returns for Class B shares reflect their conversion into
Class A shares seven years after purchase. The since inception returns for Class
C shares reflect their conversion into Class A shares ten years after purchase.
See footnote 3 in the Notes to Financial Statements for additional information.
Figures shown above assume reinvestment of all dividends and capital gains. SEC
yield is a calculation for determining the amount of portfolio income, excluding
non-income items as prescribed by the SEC. Yields are subject to change.
The Lehman Brothers Municipal Bond Index is generally representative of
investment-grade, tax-exempt bonds. The index is unmanaged and does not include
any sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
Van Kampen Insured Tax Free Income Fund is managed by the adviser's Municipal
Fixed-Income team. Members of the team include James F. Willison, Managing
Director; Joseph R. Arcieri, Executive Director; and Joseph A. Piraro, Vice
President.(1)
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust with Gross
Domestic Product growth topping 4% in both quarters. While this strength in
output has historically triggered fears of rising interest rates, yields
remained stubbornly low across the municipal curve. These low yields were partly
the result of the continued low levels of observed inflation in the U.S.
economy. Unfortunately, they also reflected continuing weakness in the job
market, which remained soft throughout the period. The soft job numbers, coupled
with persistently low inflation, led the Federal Open Market Committee (the Fed)
to maintain its accommodative stance throughout the period.
In keeping with the general trend for calendar year 2003, the six months under
review saw record levels of issuance as municipalities sought to take advantage
of historically low interest rates. Many cities and states moved to reduce
expenditures by refinancing existing debt and replacing it with lower-yielding
bonds. In other cases, municipalities attempted to meet current and future
funding needs by issuing new debt.
Low interest rates also had an impact on the demand for municipal bonds. Retail
and institutional investor activity slowed as holders of municipal bonds saw
little reason to sell bonds purchased at higher yield levels and reinvest at
historically low yields. However, the period was marked by rising activity among
non-traditional investors such as hedge funds and insurance companies seeking to
take advantage of the perceived attractiveness of municipal bonds relative to
taxable securities. Additionally, investors' search for yield led to significant
outperformance by lower-rated bonds with greater credit risk. Sectors such as
health care, with a preponderance of lower-rated issues, performed particularly
well.
California remained in the municipal spotlight during the period, with many
investors anxiously awaiting the result of the March 2 referendum on
Propositions 57 and 58. These two measures, which voters ultimately approved,
gave the green light to an estimated $15 billion economic-improvement bond
issuance that will begin to come to the market in early June. The passage of
these measures led the major ratings agencies to increase their outlooks (though
not their ratings) for the beleaguered state's bonds, with S&P shifting from
(1)Team members may change at any time without notice.
2
stable to positive and Moody's shifting from negative to stable. This surge in
issuance will at least partially offset the surprising decline in new debt in
the first quarter of 2004, which was one-third lower than the level for the
first quarter of last year. The majority of debt issued by the state for the
entire six-month period offered credit enhancements, with fully two-thirds
coming to market with credit insurance.
PERFORMANCE ANALYSIS
The fund returned 2.57 percent for the six months ended March 31, 2004 (Class A
shares, unadjusted for sales charges), underperforming its benchmark, the Lehman
Brothers Municipal Bond Index. (See table below). Our analysis of the economy
and interest rates indicated that the next major movement in rates was likely to
be upward, which we believed warranted a more defensive positioning. As a
result, we chose to emphasize securities that we believed provided sufficient
return potential and were most likely to hold up well in a rising interest-rate
environment. This approach led us to de-emphasize bonds from the long end of the
yield curve given their high sensitivity to interest rates and low coupons;
instead, we focused on securities with premium coupons from the 18- to 22-year
segment of the market in the belief that these bonds offered the most attractive
risk/reward profile. We also kept the fund's overall duration (a measure of
interest-rate sensitivity) below that of the benchmark. Unfortunately, the
longer segment of the yield curve outperformed strongly during the period, and
our defensive stance hampered performance.
In keeping with the fund's mandate, we maintained our long-term discipline of
only buying bonds with the highest credit ratings. Some of the securities we
purchased during the period carried the backing of XCLA, a relatively new credit
insurer. This company is rated AAA by both Moody's and S&P, and as a result its
bonds are well within the fund's investment universe.
We maintained the portfolio's diversification over the reporting period. The
fund's holdings were spread across the full spectrum of municipal bond-market
sectors in order to limit the risk of over-concentration in any one segment. At
the end of the period, the portfolio's largest sector weightings were public
education at 13.4 percent, followed by wholesale electric at 12.1 percent and
public building at 11.9 percent. We also kept the fund well diversified
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
2.57% 2.24% 2.24% 3.12%
- --------------------------------------------------------------
</Table>
The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and an
index definition.
3
geographically, with an emphasis on maintaining balanced exposure across
higher-yielding specialty states such as California and Florida.
We anticipate that rates will eventually begin to move upward. That being said,
we believe the fund is positioned to continue to provide investors with
attractive income across an array of possible market environments. We will
continue to scour the insured municipal market for attractive investment
opportunities.
<Table>
TOP 5 SECTORS AS OF 3/31/04 TOP 5 STATES AS OF 3/31/04
Public Education 13.4% Illinois 17.5%
Wholesale Electric 12.1 Texas 13.1
Public Building 11.9 California 8.6
Water & Sewer 10.9 Florida 8.2
Airport 9.0 Washington 7.8
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Van Kampen is a wholly owned subsidiary of a
global securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
4
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
MUNICIPAL BONDS 98.1%
ALABAMA 2.0%
$ 2,255 Alabama St Brd Ed Rev George C Wallace Cmnty
College (AMBAC Insd)........................... 5.250% 07/01/23 $ 2,424,937
1,760 Alabama St Brd Ed Rev Shelton St Cmnty College
Rfdg (AMBAC Insd).............................. 5.500 10/01/10 2,030,389
1,525 Alabama Wtr Pollutn Ctl Auth (AMBAC Insd)...... 5.500 08/15/13 1,742,312
1,955 Alabama Wtr Pollutn Ctl Auth Revolving Fd Ln
Ser A (AMBAC Insd)............................. 6.750 08/15/17 2,095,486
3,120 Huntsville, AL Hlthcare Auth Ser A (MBIA
Insd).......................................... 5.400 06/01/22 3,401,424
3,000 Huntsville, AL Hlthcare Auth Ser A (MBIA
Insd).......................................... 5.500 06/01/27 3,273,210
1,030 Jefferson Cnty, AL Swr Rev Cap Impt Wt
(Prerefunded @ 08/01/12) (FGIC Insd)........... 5.000 02/01/41 1,155,588
1,000 Mobile, AL Wtr & Swr Commr Wt (FGIC Insd)...... 5.250 01/01/20 1,079,420
5,500 Morgan Cnty Decatur, AL Hlthcare Auth Hosp Rev
Decatur Gen Hosp Rfdg (Connie Lee Insd)........ 6.250 03/01/13 5,630,295
2,400 Muscle Shoals, AL Util Brd Wtr & Swr Rev (FSA
Insd).......................................... 6.500 04/01/16 2,448,000
--------------
25,281,061
--------------
ALASKA 0.5%
4,130 Anchorage, AK Ser A (FGIC Insd)................ 5.500 06/01/17 4,632,662
1,425 Anchorage, AK Wtr Rev Rfdg (AMBAC Insd)........ 6.000 09/01/19 1,662,818
--------------
6,295,480
--------------
ARIZONA 0.9%
1,000 Arizona Sch Fac Brd Ctf Part Ser A (MBIA
Insd).......................................... 5.250 09/01/17 1,106,770
2,900 Arizona Tourism & Sports Auth Multi Purp Stad
Fac Ser A (MBIA Insd).......................... 5.375 07/01/22 3,190,290
895 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease
Oblig Irvington Proj Tucson Elec Pwr Co Ser A
Rfdg (FSA Insd)................................ 7.250 07/15/10 940,734
1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd)................... 6.000 09/01/12 2,130,337
1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd)................... 6.125 09/01/17 1,997,940
1,900 Tempe, AZ High Sch Dist No 213 Rfdg (FSA Insd)
(a)............................................ 3.000 07/01/09 1,949,723
--------------
11,315,794
--------------
ARKANSAS 0.7%
1,520 Arkansas Dev Fin Auth St Pk Mt Magazine Proj
(FSA Insd)..................................... 5.000 01/01/20 1,628,315
6,265 Little Rock, AR Sch Dist Ser B Rfdg (FSA
Insd).......................................... 5.500 02/01/25 6,827,472
--------------
8,455,787
--------------
</Table>
6 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
CALIFORNIA 8.4%
$ 3,270 Alhambra, CA Redev Agy Tax Indl Redev Proj Rfdg
(FSA Insd)..................................... 5.000% 05/01/19 $ 3,510,443
2,400 Anaheim, CA Uni High Sch Dist Election 2002
(MBIA Insd).................................... 5.000 08/01/27 2,506,296
2,835 Bay Area Govt Assn CA Rev Tax Alloc CA Redev
Agy Pool Rev Ser A (FSA Insd).................. 6.000 12/15/14 2,981,513
2,060 Burbank, CA Pub Fin Auth Golden State Redev
Proj Ser A (AMBAC Insd)........................ 5.250 12/01/21 2,249,973
5,000 California St (XLCA Insd)...................... 5.000 10/01/28 5,169,600
3,000 California St (CIFG Insd)...................... 5.000 02/01/29 3,092,940
10,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd) (b)...................................... 5.500 05/01/16 11,307,500
5,000 California St Dept Wtr Res Pwr Ser A (XLCA
Insd).......................................... 5.375 05/01/17 5,589,650
5,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd).......................................... 5.375 05/01/18 5,541,700
3,000 California St Pub Wks Brd UCLA Replacement Hosp
Ser A (FSA Insd)............................... 5.375 10/01/20 3,286,860
3,000 California St Pub Wks Brd UCLA Replacement Hosp
Ser A (FSA Insd)............................... 5.000 10/01/22 3,149,280
4,000 California Statewide Cmntys Dev Auth Wtr Rev
Pooled (FSA Insd).............................. 5.250 10/01/34 4,248,280
425 Earlimart, CA Elem Sch Dist Ser 1 (AMBAC
Insd).......................................... 6.700 08/01/21 551,467
3,205 El Dorado, CA Irr Dist Ctf Ser A (FGIC Insd)... 5.000 03/01/21 3,400,056
265 Golden West Sch Fin Auth CA Rev Ser A Rfdg
(MBIA Insd).................................... 5.750 08/01/19 316,908
6,500 Grossmont, CA Uni High Sch Dist Cft Part (MBIA
Insd).......................................... * 11/15/21 2,107,235
5,000 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B
(FSA Insd)..................................... 5.000 07/01/26 5,215,950
8,265 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B
(FSA Insd)..................................... 5.000 07/01/27 8,609,237
3,580 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B
(FSA Insd)..................................... 5.000 07/01/28 3,726,350
2,000 Metropolitan Wtr Dist South CA Auth Ser B 1
(FGIC Insd).................................... 5.000 10/01/29 2,086,840
5,000 Port Oakland, CA Port Rev Ser I Rfdg (MBIA
Insd).......................................... 5.600 11/01/19 5,638,850
2,525 Poway, CA Ctf Part City Office Bldg Proj (AMBAC
Insd).......................................... 5.000 01/01/23 2,651,654
2,250 Riverside, CA Ctf Part (AMBAC Insd)............ 5.000 09/01/23 2,369,925
1,245 Salinas, CA Ctf Part Monterey Str Pkg Structure
A (AMBAC Insd)................................. 5.000 09/01/28 1,293,767
9,285 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd).... 5.375 03/01/18 10,304,957
</Table>
See Notes to Financial Statements 7
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$ 2,000 Santa Rosa, CA Wastewtr Rev Cap Apprec Ser B
(AMBAC Insd)................................... * 09/01/19 $ 964,780
135 Upland, CA Pub Fin Auth Rev Lease Wtr Sys Impt
Proj (AMBAC Insd).............................. 5.000% 10/01/27 141,074
3,000 Vallejo City, CA Uni Sch Ser A Rfdg (MBIA
Insd).......................................... 5.900 08/01/25 3,611,370
2,000 William S Hart CA Jt Sch Fin Auth Spl Tax Rev
Cmnty Fac Rfdg (FSA Insd)...................... 6.500 09/01/14 2,177,880
--------------
107,802,335
--------------
COLORADO 4.5%
2,000 Arapahoe, CO Pk & Rec Dist (FGIC Insd)......... 5.250 12/01/22 2,162,440
1,035 Colorado St Colleges Brd Ser B Rfdg (MBIA
Insd).......................................... 5.000 05/15/22 1,094,347
11,850 Denver, CO City & Cnty Arpt Rev Ser A (MBIA
Insd).......................................... 5.700 11/15/25 12,727,018
3,605 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd).......................................... 5.750 11/15/16 4,168,534
4,310 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd).......................................... 5.750 11/15/17 4,972,447
4,505 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd).......................................... 5.750 11/15/18 5,181,786
5,345 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd).......................................... 5.750 11/15/20 6,106,395
3,265 Denver, CO Convention Ctr Sr Ser A (XLCA
Insd).......................................... 5.000 12/01/17 3,544,908
2,000 Denver, CO Convention Ctr Sr Ser A (XLCA
Insd).......................................... 5.000 12/01/22 2,107,240
6,320 Denver, CO Convention Ctr Sr Ser A (XLCA
Insd).......................................... 5.000 12/01/28 6,578,678
2,000 Fremont Cnty, CO Ctf Part & Impt Ser A Rfdg
(MBIA Insd).................................... 5.250 12/15/26 2,137,540
1,175 Thornton, CO Ctf Part (AMBAC Insd)............. 5.375 12/01/19 1,295,625
3,080 Thornton, CO Ctf Part (AMBAC Insd)............. 5.375 12/01/21 3,379,160
1,650 Thornton, CO Ctf Part (AMBAC Insd)............. 5.375 12/01/22 1,801,420
--------------
57,257,538
--------------
DISTRICT OF COLUMBIA 0.3%
1,000 District of Columbia Ctf Part Dist Pub Safety &
Emergency (AMBAC Insd)......................... 5.500 01/01/19 1,115,350
2,000 District of Columbia Ctf Part Dist Pub Safety &
Emergency (AMBAC Insd)......................... 5.500 01/01/20 2,218,800
--------------
3,334,150
--------------
FLORIDA 8.1%
1,000 Brevard Cnty, FL Sch Brd Ctf Part Ser A (AMBAC
Insd).......................................... 5.400 07/01/12 1,155,850
7,055 Broward Cnty, FL Sch Brd Ctf (MBIA Insd)....... 5.250 07/01/17 7,860,681
500 Dade Cnty, FL Aviation Rev Ser B (MBIA Insd)... 5.600 10/01/26 543,885
1,000 Dade Cnty, FL Ed Fac Auth Rev Exchanged From
Univ of Miami Ser B (MBIA Insd)................ 5.750 04/01/20 1,088,190
750 Dade Cnty, FL Wtr & Swr Sys Rev (FGIC Insd).... 5.375 10/01/16 834,375
</Table>
8 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 1,250 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd).......................................... 5.950% 07/01/20 $ 1,314,750
1,000 Escambia Cnty, FL Util Auth Util Sys Rev (FGIC
Insd).......................................... 5.250 01/01/24 1,061,770
1,000 Florida Intergovnmtl Fin Ser C1 (AMBAC Insd)... 5.125 02/01/31 1,040,230
575 Florida Muni Ln Council Rev Ser B (MBIA
Insd).......................................... 5.750 11/01/14 670,387
1,185 Florida St Brd of Ed Cap Outlay Pub Ed Ser C
(FGIC Insd).................................... 5.000 06/01/23 1,243,634
2,000 Florida St Brd of Ed Cap Outlay Pub Ed Ser C
(FGIC Insd).................................... 5.750 06/01/29 2,262,280
1,250 Florida St Brd of Ed Lottery Rev Ser A (FGIC
Insd).......................................... 6.000 07/01/12 1,468,362
1,000 Florida St Brd of Ed Lottery Rev Ser A (FGIC
Insd).......................................... 6.000 07/01/14 1,178,250
2,750 Florida St Brd of Ed Lottery Rev Ser B (FGIC
Insd).......................................... 5.250 07/01/13 3,074,225
750 Florida St Brd of Regt Hsg Rev (MBIA Insd)..... 5.750 07/01/14 871,680
1,365 Florida St Correctional Privatization Commn Ctf
Part (MBIA Insd)............................... 5.375 08/01/14 1,550,422
1,750 Florida St Div Bd Fin Dept Gen Svc Rev Dept
Environmental Prot Presvtn 2000 Ser A (AMBAC
Insd).......................................... 5.000 07/01/12 1,919,697
1,500 Florida St Div Bd Fin Dept Gen Svc Rev Dept
Environmental Prot Presvtn 2000 Ser B (FSA
Insd).......................................... 5.250 07/01/11 1,676,850
1,000 Florida St Muni Pwr Agy Rev Stanton Proj Rfdg
(FSA Insd)..................................... 5.500 10/01/14 1,146,740
2,080 Florida St Muni Pwr Agy Rev Stanton Proj Rfdg
(FSA Insd)..................................... 5.500 10/01/15 2,366,374
500 Gulf Breeze, FL Rev Loc Govt (Variable Rate
Coupon) (FGIC Insd)............................ 5.650 12/01/20 554,675
1,340 Gulf Breeze, FL Rev Venice Loc Govt (FGIC
Insd).......................................... 5.150 12/01/20 1,466,215
1,480 Hillsborough Cnty, FL Sch Brd (AMBAC Insd)..... 5.375 10/01/16 1,655,454
1,300 Hillsborough Cnty, FL Util Jr Lien Rfdg (AMBAC
Insd).......................................... 5.500 08/01/11 1,511,627
1,000 Indian River Cnty, FL Hosp Rev Rfdg (FSA
Insd).......................................... 6.100 10/01/18 1,120,100
1,000 Jacksonville, FL Cap Impt Rev Crossover Ser B
Rfdg (AMBAC Insd).............................. 5.250 10/01/14 1,129,830
3,210 Jacksonville, FL Cap Impt Rev Crossover Ser B
Rfdg (AMBAC Insd).............................. 5.250 10/01/15 3,593,627
1,750 Jea, FL Wtr & Swr Sys Rev Ser A (MBIA Insd).... 5.375 10/01/30 1,855,735
1,000 Key West, FL Util Brd Elec Rev Cap Apprec Ser D
(Escrowed to Maturity) (AMBAC Insd)............ * 10/01/13 704,910
1,000 Miami-Dade Cnty, FL Hlth Fac Miami Childrens
Hosp Ser A Rfdg (AMBAC Insd)................... 5.125 08/15/26 1,045,630
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 1,000 Orange Cnty, FL Sch Brd Ctfs Partn Ser A (AMBAC
Insd).......................................... 5.250% 08/01/14 $ 1,134,150
1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive
Universal Blvd Rfdg (AMBAC Insd)............... 5.125 04/01/19 1,076,730
1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive
Universal Blvd Rfdg (AMBAC Insd)............... 5.125 04/01/20 1,071,070
1,000 Palm Beach Cnty, FL Pub Impt Rev Convention Ctr
Proj (Prerefunded @ 11/01/11) (FGIC Insd)...... 5.125 11/01/30 1,138,860
1,000 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC
Insd).......................................... 5.500 08/01/16 1,124,670
4,180 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC
Insd).......................................... 5.000 08/01/18 4,531,496
800 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC
Insd).......................................... 5.125 08/01/26 840,904
4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA
Insd).......................................... 5.000 08/01/21 4,235,800
4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C (FSA
Insd).......................................... 5.000 08/01/22 4,218,520
1,000 Pembroke Pines, FL Charter Sch Ser A (MBIA
Insd).......................................... 5.000 07/01/26 1,042,120
750 Polk Cnty, FL Sch Brd Ctf Part Master Lease Ser
A (FSA Insd)................................... 5.500 01/01/16 836,512
1,700 Port Palm Beach Dist FL Rev Impt Rfdg (XLCA
Insd).......................................... * 09/01/25 577,541
1,000 Port Saint Lucie, FL Spl Assmt Rev Util Svc
Area No 3 & 4A (MBIA Insd)..................... 5.000 10/01/18 1,068,010
1,000 Reedy Creek, FL Impt Dist FL Ser 2 Rfdg (MBIA
Insd).......................................... 5.500 10/01/13 1,146,760
1,000 Reedy Creek, FL Impt Dist FL Ser A Rfdg (AMBAC
Insd).......................................... 5.500 06/01/12 1,142,910
535 Saint Johns Cnty, FL Indl Dev Auth Professional
Golf Proj Rfdg (MBIA Insd)..................... 5.250 09/01/12 606,299
1,000 Saint Lucie Cnty, FL Sch Brd Ctf Ser A (FSA
Insd).......................................... 5.000 07/01/21 1,058,450
3,245 Santa Rosa Bay Brdg Auth FL Rev Cap Apprec
(MBIA Insd).................................... * 07/01/18 1,736,789
1,515 Seminole Cnty, FL Sales Tax Rev (FGIC Insd).... 5.375 10/01/16 1,692,967
4,000 Sunrise, FL Util Sys Rev Rfdg (AMBAC Insd)..... 5.200 10/01/22 4,378,640
10,000 Tallahassee, FL Hlth Fac Rev Tallahassee Mem
Regl Med Ser A Rfdg (MBIA Insd) (b)............ 6.625 12/01/13 10,526,900
1,890 Tampa Bay, FL Sales Tax Rev Ser A (AMBAC
Insd).......................................... 5.375 10/01/17 2,106,764
1,000 Village Ctr Cmnty Dev Dist FL Ser A (MBIA
Insd).......................................... 5.200 11/01/25 1,062,590
3,735 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry
Riddle Ser B Rfdg (AMBAC Insd)................. 5.250 10/15/19 4,071,374
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 1,000 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry
Riddle Ser B Rfdg (AMBAC Insd)................. 5.250% 10/15/22 $ 1,076,330
500 Volusia Cnty, FL Hlth Fac Auth Rev Hosp Fac Mem
Hlth Impt & Rfdg (AMBAC Insd).................. 5.750 11/15/13 522,570
--------------
102,992,161
--------------
GEORGIA 3.3%
1,600 Athens, GA Hsg Auth Student East Campus Hsg
Rfdg (AMBAC Insd).............................. 5.250 12/01/18 1,764,640
4,150 Georgia Muni Elec Auth Pwr Rev Cap Apprec Gen
Ser B (BIGI Insd).............................. * 01/01/08 3,785,007
4,000 Georgia Muni Elec Auth Pwr Rev Gen Ser A (MBIA
Insd).......................................... 6.500 01/01/12 4,783,800
14,690 Georgia Muni Elec Auth Pwr Rev Ser Y (AMBAC
Insd).......................................... 6.400 01/01/13 17,788,562
9,590 Georgia Muni Elec Auth Pwr Rev Ser Y (MBIA
Insd).......................................... 6.500 01/01/17 11,862,350
860 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed
to Maturity) (AMBAC Insd)...................... 6.400 01/01/13 1,043,851
410 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed
to Maturity) (MBIA Insd)....................... 6.500 01/01/17 509,700
--------------
41,537,910
--------------
ILLINOIS 17.2%
4,480 Berwyn, IL Rfdg (AMBAC Insd)................... 5.000 12/01/13 5,049,990
2,215 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA
Insd).......................................... * 01/01/19 1,097,178
2,595 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA
Insd).......................................... * 01/01/20 1,210,619
6,225 Chicago, IL Brd of Ed Cap Apprec Sch Reform B 1
(FGIC Insd).................................... * 12/01/15 3,778,201
2,845 Chicago, IL Brd of Ed Cap Apprec Sch Reform B 1
(FGIC Insd).................................... * 12/01/19 1,353,167
1,500 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser
A (FGIC Insd).................................. * 12/01/19 713,445
1,020 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser
A (FGIC Insd).................................. * 12/01/25 338,232
8,000 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser
A (FGIC Insd).................................. * 12/01/29 2,131,520
3,250 Chicago, IL Brd of Ed Cap Apprec Sch Reform Ser
A (FGIC Insd).................................. * 12/01/30 820,300
2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA
Insd) (c)...................................... 0/5.700 01/01/25 1,936,360
2,000 Chicago, IL Lakefront Millenium Pkg Fac (MBIA
Insd) (c)...................................... 0/5.750 01/01/29 1,932,140
2,840 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/21 3,039,993
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 2,975 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.250% 01/01/22 $ 3,179,621
3,120 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/23 3,321,833
3,280 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.250 01/01/24 3,473,520
5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien Ser E Rfdg (CIFG Insd).................... 5.000 01/01/34 5,137,550
8,750 Chicago, IL O'Hare Intl Arpt Rev Rols RR II
239-2 (Acquired 8/18/03, Cost $9,456,386) (FSA
Insd) (d)...................................... 10.330 01/01/20 10,686,025
10,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II
239-3 (Acquired 8/18/03, Cost $10,715,795) (FSA
Insd) (d)...................................... 10.330 01/01/21 12,212,600
2,500 Chicago, IL Park Dist Ser C (FGIC Insd)........ 5.500 01/01/19 2,779,175
10,000 Chicago, IL Proj Ser A Rfdg (FGIC Insd)........ 5.375 01/01/34 10,682,400
5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd)........ 5.500 01/01/38 5,351,450
5,000 Chicago, IL Proj Ser A Rfdg (AMBAC Insd)....... 5.625 01/01/39 5,435,800
5,000 Chicago, IL Sales Tax Rev (Prerefunded @
01/01/09) (FGIC Insd).......................... 5.375 01/01/30 5,697,550
2,300 Chicago, IL Wtr Rev (FGIC Insd)................ 5.250 11/01/27 2,423,211
1,270 Chicago, IL Wtr Rev Cap Apprec (FGIC Insd)..... * 11/01/10 1,025,550
2,055 Cook Cnty, IL Cmnty Cons Sch Dist No 015
Palatine Cap Apprec (FSA Insd)................. * 12/01/10 1,655,179
2,895 Cook Cnty, IL Cmnty Sch Dist Ser B (FGIC
Insd).......................................... 9.000 12/01/14 4,261,179
1,505 Cook Cnty, IL Sch Dist No 100 Berwyn South (FSA
Insd).......................................... 8.200 12/01/14 2,110,823
1,775 Cook Cnty, IL Sch Dist No 100 Berwyn South (FSA
Insd).......................................... 8.100 12/01/16 2,495,384
2,605 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC
Insd).......................................... * 12/01/17 1,401,438
2,995 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC
Insd).......................................... * 12/01/18 1,513,074
4,210 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC
Insd).......................................... * 12/01/19 2,000,550
4,050 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC
Insd).......................................... * 12/01/20 1,812,699
3,000 Du Page Cnty, IL Cmnty High Sch (FSA Insd)..... 5.600 01/01/22 3,349,590
2,045 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/17 2,250,379
1,860 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/20 2,028,758
1,180 Grundy Kendall & Will Cntys (AMBAC Insd)....... 5.500 05/01/21 1,284,784
10,000 Illinois Dev Fin Auth Pollutn Ctl Rev Comwlth
Edison Co Proj Ser D Rfdg (AMBAC Insd)......... 6.750 03/01/15 10,677,300
35,000 Illinois Dev Fin Auth Pollutn Ctl Rev IL Pwr Co
Proj Ser B First Mtg Rfdg (Acquired 6/09/92,
Cost $34,692,780) (MBIA Insd) (d).............. 7.400 12/01/24 37,086,000
</Table>
12 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 2,000 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford
Sch 205 (FSA Insd)............................. 6.650% 02/01/11 $ 2,439,600
5,025 Illinois Dev Fin Auth Rev Sch Dist Pgm Rockford
Sch 205 (FSA Insd)............................. 6.650 02/01/12 5,645,085
2,000 Illinois Ed Fac Auth Rev DePaul Univ
(Prerefunded @ 10/01/10) (AMBAC Insd).......... 5.625 10/01/14 2,347,080
2,000 Illinois Med Dist (MBIA Insd).................. 5.250 06/01/32 2,111,380
3,500 Illinois Muni Elec Agy Pwr Supply Sys Rev Rfdg
(FSA Insd)..................................... 5.000 02/01/21 3,653,195
2,000 Kane Cook & Du Page Cntys IL Ser A (FGIC
Insd).......................................... 7.000 12/15/11 2,522,880
1,000 Kane Cook & Du Page Cntys IL Ser A (FGIC
Insd).......................................... 7.000 12/15/12 1,271,750
2,700 Lake Cnty, IL Cmnty Cons Sch Dist No 50
Woodland Cap Apprec Ser B (FGIC Insd).......... * 12/01/13 1,845,180
1,200 Lake Cnty, IL Cmnty Cons Sch Dist No 50
Woodland Cap Apprec Ser B (FGIC Insd).......... * 12/01/14 774,288
2,500 Lake Cnty, IL Cmnty Cons Sch Dist No 50
Woodland Ser A (FGIC Insd)..................... 6.000 12/01/20 2,840,675
3,440 Lake Cnty, IL Cmnty High Sch Dist No 117
Antioch Cap Apprec Ser B (FGIC Insd)........... * 12/01/10 2,768,890
6,790 Lake Cnty, IL Cmnty Unit Sch Dist No 60
Waukegan Cap Apprec Ser A (FSA Insd)........... * 12/01/17 3,642,156
3,175 Lake Cnty, IL Cmnty Unit Sch Dist No 95 Lake
Zurich Cap Apprec (FGIC Insd).................. * 12/01/15 1,927,924
3,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No
158 Cap Apprec (FGIC Insd)..................... * 01/01/17 1,677,840
4,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No
158 Cap Apprec (FGIC Insd)..................... * 01/01/18 2,100,440
2,080 McHenry Cnty, IL Cmnty High Sch Dist No 154 Cap
Apprec (FGIC Insd)............................. * 01/01/16 1,236,435
1,000 McHenry Cnty, IL Consv Dist Ser A (FGIC
Insd).......................................... 5.500 02/01/16 1,115,420
1,330 McHenry Cnty, IL Consv Dist Ser A (FGIC
Insd).......................................... 5.500 02/01/17 1,483,509
6,000 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev McCormick Pl Expn Ser A (MBIA Insd).... 5.250 06/15/42 6,328,740
2,000 Southern IL Univ Rev Cap Apprec Hsg & Aux Ser A
(MBIA Insd).................................... * 04/01/20 923,260
1,495 Will Cnty, IL Sch Dist No 017 (AMBAC Insd)..... 5.000 12/01/16 1,628,937
--------------
219,019,231
--------------
INDIANA 2.7%
2,000 Brownsburg, IN Sch Bldg First Mtg 1999 Ser A
(FSA Insd)..................................... 5.250 09/15/22 2,158,400
1,785 Center Grove, IN 2000 Bldg First Mtg (AMBAC
Insd).......................................... 5.500 07/15/17 2,003,056
1,885 Center Grove, IN 2000 Bldg First Mtg (AMBAC
Insd).......................................... 5.500 07/15/18 2,112,067
</Table>
See Notes to Financial Statements 13
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
INDIANA (CONTINUED)
$ 2,500 Evansville Vanderburgh, IN Pub Lease Corp First
Mtg (MBIA Insd)................................ 5.750% 07/15/18 $ 2,803,475
1,855 Hamilton Southeastern, IN Cons First Mtg (FSA
Insd).......................................... 5.500 07/15/16 2,081,607
1,075 Hamilton Southeastern, IN Cons First Mtg (FSA
Insd).......................................... 5.500 01/15/19 1,197,711
1,420 Indiana Bd Bk Spl Pgm Ser A (Escrowed to
Maturity) (AMBAC Insd)......................... 9.750 08/01/09 1,726,464
2,265 Indianapolis, IN Loc Pub Impt Ser B (FSA
Insd).......................................... 5.000 01/15/20 2,396,030
2,335 Lake Cnty, IN Bldg Corp First Mtg (MBIA
Insd).......................................... 5.750 08/01/11 2,704,374
2,670 Marion Cnty, IN Convention & Rec Lease Rent Ser
A Rfdg (AMBAC Insd)............................ 5.000 06/01/20 2,829,933
1,550 Marion Cnty, IN Convention & Rec Lease Rent Ser
A Rfdg (AMBAC Insd)............................ 5.000 06/01/21 1,634,398
1,605 Mount Vernon of Hancock Cnty First Mtg Ser B
(AMBAC Insd)................................... 5.500 07/15/16 1,801,067
1,695 Mount Vernon of Hancock Cnty First Mtg Ser B
(AMBAC Insd)................................... 5.500 07/15/17 1,902,061
4,000 New Albany Floyd Cnty, IN Sch First Mtg (FGIC
Insd).......................................... 5.750 07/15/20 4,573,760
2,130 Northwest Allen Cnty, IN First Mtg (MBIA
Insd).......................................... 5.250 07/15/19 2,330,433
--------------
34,254,836
--------------
IOWA 0.2%
2,375 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)................................ 5.750 07/01/17 2,626,631
--------------
KANSAS 1.4%
16,750 Burlington, KS Pollutn Ctl Rev KS Gas & Elec Co
Proj Rfdg (MBIA Insd).......................... 7.000 06/01/31 17,634,400
275 Dodge, KS Uni Sch Dist No 443 Rfdg (FGIC
Insd).......................................... 5.000 09/01/12 310,140
--------------
17,944,540
--------------
KENTUCKY 0.2%
3,000 Kentucky St Ppty & Bldg Commn Proj No 79
(Prerefunded @ 10/01/13) (MBIA Insd)........... 5.125 10/01/19 3,276,240
--------------
LOUISIANA 2.5%
4,065 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev
Lake Charles Mem Hosp Proj Ser A (Connie Lee
Insd).......................................... 6.375 12/01/12 4,943,121
5,530 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev
Lake Charles Mem Hosp Proj Ser A (Connie Lee
Insd).......................................... 6.500 12/01/18 6,908,353
1,375 Greater New Orleans Expwy Impt Rfdg (AMBAC
Insd).......................................... 5.250 11/01/15 1,550,931
1,450 Greater New Orleans Expwy Impt Rfdg (AMBAC
Insd).......................................... 5.250 11/01/16 1,621,840
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
LOUISIANA (CONTINUED)
$ 1,525 Greater New Orleans Expwy Impt Rfdg (AMBAC
Insd).......................................... 5.250% 11/01/17 $ 1,699,231
1,930 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375 12/01/16 2,170,169
2,035 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375 12/01/17 2,275,741
2,150 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375 12/01/18 2,385,361
2,265 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375 12/01/19 2,497,525
2,395 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd)............................... 5.375 12/01/20 2,629,447
2,000 Louisiana St Office Facs Corp Lease St Capital
Complex Pg Rfdg (MBIA Insd).................... 5.250 11/01/18 2,211,580
2,080 New Orleans, LA Home Mtg Auth Single Family Mtg
Rev 1985 Ser A (MBIA Insd)..................... * 09/15/16 576,493
--------------
31,469,792
--------------
MASSACHUSETTS 0.7%
3,000 Massachusetts Muni Whsl Elec Co Nuclear Mix 1-A
(MBIA Insd).................................... 5.250 07/01/13 3,382,980
2,500 Massachusetts Muni Whsl Elec Co Proj No 6-A
(MBIA Insd).................................... 5.250 07/01/16 2,753,700
1,010 Massachusetts St Cons Ln Ser D (Prerefunded @
11/01/11) (MBIA Insd).......................... 5.250 11/01/19 1,152,127
1,700 Massachusetts St Hlth & Ed Fac Auth Rev Mt
Auburn Hosp Ser B1 (MBIA Insd)................. 6.250 08/15/14 1,762,101
--------------
9,050,908
--------------
MICHIGAN 1.2%
2,455 Detroit, MI Wtr Supply Sys Rev Sr Lien Ser C
Rfdg (MBIA Insd)............................... 5.250 07/01/17 2,729,297
1,400 Huron, MI Sch Dist (FSA Insd).................. 5.250 05/01/21 1,506,876
1,150 Kalamazoo, MI City Sch Dist Bldg & Site (FSA
Insd).......................................... 5.250 05/01/16 1,270,704
500 Michigan St Hsg Dev Auth Rental Hsg Rev Ser B
(AMBAC Insd)................................... 4.850 04/01/04 500,000
2,500 Michigan St Strategic Fd Ltd Oblig Rev Detroit
Ed Conv Rfdg (Variable Rate Coupon) (AMBAC
Insd).......................................... 4.850 09/01/30 2,765,675
2,675 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg
(FGIC Insd).................................... 5.375 12/01/17 2,976,178
2,840 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg
(FGIC Insd).................................... 5.375 12/01/20 3,118,008
--------------
14,866,738
--------------
MINNESOTA 0.1%
1,000 Brainerd, MN Rev Evangelical Lutheran Ser B
Rfdg (FSA Insd)................................ 6.650 03/01/17 1,004,300
--------------
</Table>
See Notes to Financial Statements 15
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
MISSISSIPPI 0.4%
$ 1,450 Harrison Cnty, MS Wastewtr Mgmt & Solid
Wastewtr Treatment Fac Ser A Rfdg (FGIC
Insd).......................................... 5.500% 02/01/08 $ 1,624,247
1,175 Harrison Cnty, MS Wastewtr Mgmt & Solid
Wastewtr Treatment Fac Ser A Rfdg (FGIC
Insd).......................................... 5.500 02/01/09 1,334,788
1,165 Harrison Cnty, MS Wastewtr Mgmt & Solid
Wastewtr Treatment Fac Ser A Rfdg (FGIC
Insd).......................................... 5.500 02/01/10 1,334,845
1,000 Harrison Cnty, MS Wastewtr Mgmt & Solid
Wastewtr Treatment Fac Ser A Rfdg (FGIC
Insd).......................................... 8.500 02/01/13 1,383,110
--------------
5,676,990
--------------
MISSOURI 0.7%
1,170 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A
(FSA Insd)..................................... 5.500 03/01/16 1,305,006
1,225 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A
(FSA Insd)..................................... 5.500 03/01/17 1,366,353
3,895 Saint Louis Cnty, MO Regl Conv & Sports Complex
Auth Convtn & Sports Fac Rfdg (AMBAC Insd)..... 5.250 08/15/17 4,338,290
1,990 Saint Louis, MO Arpt Rev Cap Impt Pgm Ser A
(MBIA Insd).................................... 5.375 07/01/17 2,206,353
--------------
9,216,002
--------------
NEVADA 1.1%
10,000 Director St, NV Dept Business & Ind Las Vegas
Monorail Proj First Tier (AMBAC Insd).......... 5.625 01/01/32 11,071,000
2,500 Reno, NV Cap Impt Rev (FGIC Insd).............. 5.125 06/01/26 2,617,300
--------------
13,688,300
--------------
NEW HAMPSHIRE 0.2%
2,500 New Hampshire St Tpk Sys Rev Ser C Rfdg
(Inverse Fltg) (FGIC Insd)..................... 12.375 11/01/17 3,216,150
--------------
NEW JERSEY 2.7%
3,625 Morristown, NJ Rfdg (FSA Insd)................. 6.400 08/01/14 3,929,065
10,000 New Jersey St Trans Corp Ctf Fed Trans Admin
Grants Ser A (AMBAC Insd)...................... 5.500 09/15/13 11,654,100
6,800 New Jersey St Trans Corp Ctf Fed Trans Admin
Grants Ser A (Prerefunded @ 09/15/09) (AMBAC
Insd).......................................... 5.875 09/15/12 7,957,496
5,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser A
(AMBAC Insd)................................... 5.500 12/15/14 5,869,100
4,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser C
(FSA Insd)..................................... 5.500 06/15/20 4,472,720
--------------
33,882,481
--------------
NEW YORK 3.5%
5,000 Metropolitan Trans Auth NY Svc Contract Ser A
Rfdg (FGIC Insd)............................... 5.000 07/01/25 5,224,700
5,470 New York City Hlth & Hosp Hlth Sys Ser A (FSA
Insd).......................................... 5.000 02/15/21 5,762,372
</Table>
16 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 4,350 New York City Indl Dev Agy Civic Fac Rev USTA
Natl Tennis Cent Proj (FSA Insd)............... 6.375% 11/15/14 $ 4,567,326
14,000 New York City Muni Wtr Fin Auth Ser B (MBIA
Insd).......................................... 5.500 06/15/27 15,150,660
10,000 New York City Ser I (MBIA Insd) (a)............ 5.000 08/01/17 10,905,400
3,105 New York St Dorm Auth Rev Insd Brooklyn Law Sch
Ser B (XLCA Insd).............................. 5.375 07/01/21 3,433,447
15 New York St Med Care Fac Fin Agy Rev
(Prerefunded @ 08/15/04) (FSA Insd)............ 6.500 08/15/15 15,603
--------------
45,059,508
--------------
NORTH CAROLINA 1.3%
1,080 Dare Cnty, NC Ctf Part (AMBAC Insd)............ 5.000 06/01/23 1,131,365
1,540 North Carolina Cap Fac Fin Johnson & Wales Univ
Proj Ser A (XLCA Insd)......................... 5.000 04/01/20 1,641,655
10,000 North Carolina Muni Pwr Agy Ser A (MBIA
Insd).......................................... 5.250 01/01/18 10,988,200
2,835 North Carolina Muni Pwr Agy Ser A (MBIA
Insd).......................................... 5.250 01/01/19 3,097,578
--------------
16,858,798
--------------
NORTH DAKOTA 0.9%
5,000 Mercer Cnty, ND Pollutn Ctl Rev Antelope Vly
Station Rfdg (AMBAC Insd)...................... 7.200 06/30/13 6,280,750
5,000 Oliver Cnty, ND Pollutn Ctl Rev Square Butte
Elec Coop Ser A Rfdg (AMBAC Insd).............. 5.300 01/01/27 5,238,850
--------------
11,519,600
--------------
OHIO 0.3%
3,175 Miami Univ OH Gen Rcpt Rfdg (AMBAC Insd)....... 5.250 12/01/19 3,510,534
--------------
OKLAHOMA 2.5%
1,355 Jenks, OK Aquarium Auth Rev First Mtg
(Prerefunded @ 07/01/10) (MBIA Insd)........... 6.000 07/01/20 1,580,499
1,000 McAlester, OK Pub Wks Auth Util Cap Apprec (FSA
Insd).......................................... * 02/01/34 217,600
8,320 McAlester, OK Pub Wks Auth Util Cap Apprec Ser
A (FSA Insd)................................... * 02/01/30 2,016,269
2,680 McAlester, OK Pub Wks Auth Util Cap Apprec Ser
A (Prerefunded @ 02/01/09) (FSA Insd).......... * 02/01/30 726,709
2,100 Midwest City, OK Muni Auth (Prerefunded @
06/01/10) (FSA Insd)........................... 5.150 06/01/15 2,391,732
5,660 Mustang, OK Impt Auth Util Rev (FSA Insd)...... 5.800 10/01/30 6,435,760
2,020 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser A
(FSA Insd)..................................... 5.000 07/01/17 2,161,723
4,000 Sapulpa, OK Muni Auth Cap Impt Rev Rfdg
(Prerefunded @ 07/01/10) (FSA Insd)............ 5.750 07/01/30 4,712,000
</Table>
See Notes to Financial Statements 17
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
OKLAHOMA (CONTINUED)
$ 2,000 Tulsa, OK Cmnty College Rev (AMBAC Insd)....... 5.500% 07/01/22 $ 2,228,240
8,260 Tulsa, OK Tulsa Indl Auth Rev Univ Tulsa Ser A
(MBIA Insd).................................... 5.375 10/01/31 8,885,365
--------------
31,355,897
--------------
OREGON 1.1%
1,000 Emerald Peoples Util Dist Ser A Rfdg (FSA
Insd).......................................... 5.250 11/01/21 1,094,910
2,000 Oregon St Dept Admin Ser A Rfdg (FSA Insd)..... 5.000 04/01/14 2,266,640
4,835 Oregon St Dept Admin Ser B Rfdg (MBIA Insd).... 5.250 05/01/17 5,328,412
1,300 Portland, OR Arpt Rev Ser 15 Intl Arpt Ser A
Rfdg (FGIC Insd)............................... 5.000 07/01/13 1,436,591
3,250 Salem-Keizer, OR Sch Dist Rfdg (FSA Insd)...... 5.000 06/15/17 3,564,210
--------------
13,690,763
--------------
PENNSYLVANIA 3.7%
5,000 Allegheny Cnty, PA Hosp Dev Auth Rev Insd Hlth
Sys Ser A (MBIA Insd).......................... 6.500 11/15/30 5,849,000
4,875 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh
Mercy Hlth Sys Inc (Escrowed to Maturity)
(AMBAC Insd)................................... 5.625 08/15/26 5,328,716
10,000 Harrisburg, PA Res Gtd Sub Ser D 2 (FSA
Insd).......................................... 5.000 12/01/33 11,028,300
3,000 Lycoming Cnty, PA Auth College Rev PA College
of Technology (AMBAC Insd)..................... 5.350 07/01/26 3,188,610
1,375 Pennsylvania St Higher Ed Fac Auth Rev St Sys
Higher Ed Ser P (AMBAC Insd)................... 5.000 12/15/16 1,491,050
4,340 Philadelphia, PA Gas Wks Rev 1975 Gen Ordinance
17th Ser (FSA Insd)............................ 5.375 07/01/17 4,970,559
2,990 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance
4th Ser (FSA Insd)............................. 5.250 08/01/18 3,316,687
4,555 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance
4th Ser (FSA Insd)............................. 5.250 08/01/21 4,974,197
2,000 Philadelphia, PA Sch Dist Ser A (FSA Insd)..... 5.500 02/01/26 2,169,820
5,000 State Pub Sch Bldg Auth PA Sch Lease
Philadelphia Sch Dist Proj (FSA Insd).......... 5.250 06/01/26 5,350,550
--------------
47,667,489
--------------
SOUTH CAROLINA 0.7%
2,430 Columbia, SC Ctf Part Tourism Dev Fee Pledge
(AMBAC Insd)................................... 5.250 06/01/19 2,662,016
6,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec
& Gas Co Proj Ser A (AMBAC Insd)............... 5.200 11/01/27 6,885,320
--------------
9,547,336
--------------
</Table>
18 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
SOUTH DAKOTA 1.0%
$ 1,455 Rapid City, SD Sales Tax Rev Rfdg (AMBAC
Insd).......................................... 5.500% 06/01/12 $ 1,662,934
5,205 South Dakota St Lease Rev Tr Ctf Ser A (FSA
Insd).......................................... 6.625 09/01/12 6,432,235
4,000 South Dakota St Lease Rev Tr Ctf Ser A (FSA
Insd).......................................... 6.700 09/01/17 5,101,680
--------------
13,196,849
--------------
TEXAS 12.9%
1,165 Alamo, TX Cmnty College Dist Combined Fee Rfdg
(FSA Insd)..................................... 5.000 11/01/22 1,212,660
7,120 Austin, TX Arpt Sys Rev Pr Lien Rfdg (MBIA
Insd).......................................... 5.000 11/15/12 7,935,596
2,150 Austin, TX Cft Oblig (MBIA Insd)............... 5.375 09/01/18 2,384,888
2,250 Austin, TX Ctf Oblig (MBIA Insd)............... 5.375 09/01/19 2,481,008
4,455 Austin, TX Hotel Occupancy Tax Rfdg (FSA
Insd).......................................... 5.000 11/15/15 4,899,253
4,680 Austin, TX Hotel Occupancy Tax Rfdg (FSA
Insd).......................................... 5.000 11/15/16 5,099,328
2,460 Austin, TX Hotel Occupancy Tax Rfdg (FSA
Insd).......................................... 5.000 11/15/17 2,663,959
2,585 Austin, TX Hotel Occupancy Tax Rfdg (FSA
Insd).......................................... 5.000 11/15/18 2,782,184
2,715 Austin, TX Hotel Occupancy Tax Rfdg (FSA
Insd).......................................... 5.000 11/15/19 2,904,208
7,865 Austin, TX Util Sys Rev Rfdg (FSA Insd)........ 5.000 11/15/11 8,591,647
12,500 Austin, TX Util Sys Rev Ser A Rfdg (MBIA
Insd).......................................... * 11/15/10 10,085,750
5,000 Brazos Riv Auth, TX Rev Houston Ind Inc Proj
Ser C (Variable Rate Coupon) (AMBAC Insd)...... 5.125 05/01/19 5,343,250
2,000 Colorado Riv, TX Muni Wtr Dist Sys Rfdg (AMBAC
Insd).......................................... 5.375 01/01/19 2,206,660
1,400 Corpus Christi, TX Util Sys Rev Impt & Rfdg
(FSA Insd)..................................... 5.250 07/15/17 1,546,034
15,400 Dallas Cnty, TX Util & Reclamation Dist Ser B
Rfdg (AMBAC Insd).............................. 5.875 02/15/29 15,940,848
5,000 El Paso, TX Ctf Oblig (FSA Insd)............... 5.750 08/15/25 5,476,050
4,500 Harris Cnty, TX Toll Rd Sr Lien Rfdg (MBIA
Insd).......................................... 5.125 08/15/17 4,896,090
4,605 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)... 5.500 07/01/17 5,185,230
2,000 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd)... 5.500 07/01/18 2,238,440
5,000 Houston, TX Hotel Occupancy Convention & Entmt
Ser A Rfdg (AMBAC Insd)........................ 5.375 09/01/14 5,679,250
2,000 Houston, TX Pub Impt Ser B Rfdg (FSA Insd)..... 5.500 03/01/18 2,232,060
12,400 Houston, TX Wtr & Swr Sys Rev Cap Apprec Ser A
Rfdg (FSA Insd)................................ * 12/01/20 5,533,748
1,790 Laredo, TX Cmnty College Dist Combined Fee Rev
Bldg Rfdg (AMBAC Insd)......................... 5.300 08/01/26 1,906,082
4,335 North Harris Cnty, TX Regl Wtr Sr Lien (FGIC
Insd).......................................... 5.250 12/15/19 4,761,564
2,220 Raven Hills, TX Higher Ed Corp Cardinal Vlg Llc
Lamar Univ A (MBIA Insd)....................... 5.500 08/01/28 2,409,566
1,000 San Antonio, TX Indpt Sch Dist Pub Fac Corp
Lease Rev (AMBAC Insd)......................... 5.850 10/15/10 1,109,860
1,730 San Antonio, TX Muni Drain Util (MBIA Insd).... 5.000 02/01/21 1,827,901
</Table>
See Notes to Financial Statements 19
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$ 1,750 Tarrant Cnty, TX Hlth Fac Dev Corp Hlth Sys Rev
Ser B (Escrowed to Maturity) (FGIC Insd)....... 5.000% 09/01/15 $ 1,953,490
1,060 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA
Insd).......................................... 5.250 03/01/18 1,164,770
2,000 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA
Insd).......................................... 5.250 03/01/20 2,174,160
10,000 Texas St Tpk Auth Cent TX Tpk First Tier Ser A
(AMBAC Insd)................................... 5.500 08/15/39 10,741,900
26,905 Texas St Tpk Auth Dallas Northtwy Rev George
Bush Tpk (FGIC Insd)........................... 5.250 01/01/23 28,535,443
--------------
163,902,877
--------------
UTAH 0.2%
2,140 Murray City, UT Swr & Wtr Rev (AMBAC Insd)..... 5.250 10/01/23 2,311,928
660 Provo, UT Elec Rev 1984 Ser A Rfdg (Escrowed to
Maturity) (AMBAC Insd)......................... 10.375 09/15/15 942,071
--------------
3,253,999
--------------
VIRGINIA 0.1%
1,595 Virginia St Hsg Dev Auth Comwlth Mtg Ser J
Subser J-1 (MBIA Insd)......................... 5.200 07/01/19 1,656,009
--------------
WASHINGTON 7.7%
4,115 Chelan Cnty, WA Sch Dist No 246 (FSA Insd)..... 5.000 12/01/21 4,341,819
1,930 Clark Cnty, WA Pub Util Dist No 001 Elec Rev
Rfdg (AMBAC Insd).............................. 5.500 01/01/12 2,223,148
2,990 Clark Cnty, WA Pub Util Dist No 001 Wtr Rev
(FSA Insd)..................................... 5.125 01/01/20 3,202,619
11,340 Energy Northwest WA Elec Rev Columbia
Generating Ser A Rfdg (FSA Insd)............... 5.500 07/01/17 12,618,245
4,040 Energy Northwest WA Elec Rev Columbia
Generating Ser F (MBIA Insd)................... 5.250 07/01/16 4,488,036
4,500 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (FSA Insd)................................ 5.500 07/01/17 5,007,240
10,000 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (XLCA Insd)............................... 5.500 07/01/17 11,294,000
14,500 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (FSA Insd)................................ 5.500 07/01/18 16,105,150
5,000 Energy Northwest WA Elec Rev Proj No 3 Ser B
Rfdg (FSA Insd)................................ 6.000 07/01/16 5,841,450
1,365 Energy Northwest WA Wind Proj (AMBAC Insd)..... 5.000 07/01/23 1,420,583
2,335 Grant Cnty, WA Pub Util Dist No 2 Rev Second
Ser C Rfdg (AMBAC Insd)........................ 6.000 01/01/17 2,592,410
1,025 Grant Cnty, WA Pub Util Dist No 2 Rev Second
Ser C Rfdg (AMBAC Insd)........................ 6.000 01/01/17 1,137,996
350 Pierce Cnty, WA Swr Rev Ser A (Escrowed to
Maturity) (MBIA Insd).......................... 9.000 02/01/05 372,838
2,000 Seattle, WA Muni Lt & Pwr Rev Impt & Rfdg (FSA
Insd).......................................... 5.500 03/01/18 2,230,780
4,100 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.000 12/01/21 4,363,671
</Table>
20 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
WASHINGTON (CONTINUED)
$ 2,565 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.500% 12/01/23 $ 2,802,468
145 Snohomish Cnty, WA Pub Util 1 (FSA Insd)....... 5.000 12/01/24 150,728
2,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/25 2,261,920
2,420 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.750 12/01/26 2,732,785
3,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd)..... 5.250 09/01/33 3,192,750
1,965 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC
Insd).......................................... 5.375 12/01/18 2,175,255
2,075 Tacoma, WA Solid Waste Util Rev Rfdg (AMBAC
Insd).......................................... 5.375 12/01/19 2,282,811
3,090 Washington St Pub Pwr Supply Sys Nuclear Proj
No 1 Rev Ser A Rfdg (AMBAC Insd)............... 5.700 07/01/09 3,409,475
1,600 Washington St Ser R 99A Rfdg (FGIC Insd)....... 5.000 01/01/17 1,708,800
--------------
97,956,977
--------------
WEST VIRGINIA 0.1%
1,530 West Virginia Econ Dev Auth Lease Rev
Correctional Juvenile & Pub-A (MBIA Insd)...... 5.500 06/01/19 1,714,870
--------------
WISCONSIN 1.2%
1,350 Plover, WI Wtr Sys Rev (AMBAC Insd)............ 5.400 12/01/16 1,512,405
1,500 Plover, WI Wtr Sys Rev (AMBAC Insd)............ 5.500 12/01/18 1,683,720
1,270 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd)...... 5.250 09/01/14 1,427,798
1,405 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd)...... 5.250 09/01/16 1,558,538
3,950 Two Rivs, WI Pub Sch Dist Rfdg (Prerefunded @
03/01/10) (FSA Insd)........................... 6.000 03/01/18 4,651,678
3,920 University of WI Hosp & Clinics Auth Rev (FSA
Insd).......................................... 6.200 04/01/29 4,566,447
--------------
15,400,586
--------------
WYOMING 0.2%
2,000 Laramie Cnty, WY Hosp Rev Mem Hosp Proj (AMBAC
Insd).......................................... 6.700 05/01/12 2,028,340
--------------
</Table>
See Notes to Financial Statements 21
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
PUERTO RICO 0.7%
$ 5,000 Puerto Rico Comwlth Hwy & Tran Sub (FGIC
Insd).......................................... 5.250% 07/01/18 $ 5,612,550
3,000 Puerto Rico Indl Tourist Ed Med & Environmental
Ctl Fac Hosp Aux (MBIA Insd)................... 6.250 07/01/16 3,166,530
--------------
8,779,080
--------------
TOTAL LONG-TERM INVESTMENTS 98.1%
(Cost $1,155,705,789)....................................................... 1,250,564,867
SHORT-TERM INVESTMENTS 1.8%
(Cost $22,400,000).......................................................... 22,400,000
--------------
TOTAL INVESTMENTS 99.9%
(Cost $1,178,105,789)....................................................... 1,272,964,867
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1%................................... 1,636,694
--------------
NET ASSETS 100.0%............................................................ $1,274,601,561
==============
</Table>
* Zero coupon bond
(a) Security purchased on a when-issued or delayed delivery basis.
(b) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(c) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(d) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 4.71% of net
assets.
AMBAC--AMBAC Indemnity Corp.
BIGI--Bond Investor Guaranty Inc.
CIFG--CDC IXIS Financial Guaranty
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
XLCA--XL Capital Assurance Inc.
22 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $1,178,105,789)..................... $1,272,964,867
Cash........................................................ 84,055
Receivables:
Interest.................................................. 16,338,707
Investments Sold.......................................... 6,815,368
Fund Shares Sold.......................................... 580,086
Other....................................................... 244,910
--------------
Total Assets............................................ 1,297,027,993
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 17,743,798
Fund Shares Repurchased................................... 1,453,042
Income Distributions...................................... 1,015,155
Distributor and Affiliates................................ 654,547
Investment Advisory Fee................................... 552,931
Variation Margin on Futures............................... 517,375
Trustees' Deferred Compensation and Retirement Plans........ 308,730
Accrued Expenses............................................ 180,854
--------------
Total Liabilities....................................... 22,426,432
--------------
NET ASSETS.................................................. $1,274,601,561
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,175,008,304
Net Unrealized Appreciation................................. 93,443,930
Accumulated Net Realized Gain............................... 4,114,650
Accumulated Undistributed Net Investment Income............. 2,034,677
--------------
NET ASSETS.................................................. $1,274,601,561
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,172,859,904 and 61,198,302 shares of
beneficial interest issued and outstanding)............. $ 19.16
Maximum sales charge (4.75%* of offering price)......... .96
--------------
Maximum offering price to public........................ $ 20.12
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $77,887,581 and 4,069,113 shares of
beneficial interest issued and outstanding)............. $ 19.14
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $23,854,076 and 1,247,128 shares of
beneficial interest issued and outstanding)............. $ 19.13
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 23
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $31,258,868
-----------
EXPENSES:
Investment Advisory Fee..................................... 3,254,304
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,437,059, $399,020 and $119,516,
respectively)............................................. 1,955,595
Shareholder Services........................................ 410,733
Custody..................................................... 49,056
Legal....................................................... 41,662
Trustees' Fees and Related Expenses......................... 16,956
Other....................................................... 266,089
-----------
Total Expenses.......................................... 5,994,395
Less Credits Earned on Cash Balances.................... 4,273
-----------
Net Expenses............................................ 5,990,122
-----------
NET INVESTMENT INCOME....................................... $25,268,746
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 7,201,459
Futures................................................... (7,821,697)
-----------
Net Realized Loss........................................... (620,238)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... $85,171,911
-----------
End of the Period:
Investments............................................. 94,859,078
Futures................................................. (1,415,148)
-----------
93,443,930
-----------
Net Unrealized Appreciation During the Period............... 8,272,019
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 7,651,781
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $32,920,527
===========
</Table>
24 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Changes in Net Assets (Unaudited)
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 25,268,746 $ 52,180,180
Net Realized Gain/Loss................................. (620,238) 20,955,240
Net Unrealized Appreciation/Depreciation During the
Period............................................... 8,272,019 (37,035,786)
-------------- --------------
Change in Net Assets from Operations................... 32,920,527 36,099,634
-------------- --------------
Distributions from Net Investment Income:
Class A Shares....................................... (22,900,564) (47,030,700)
Class B Shares....................................... (1,234,929) (2,660,042)
Class C Shares....................................... (369,736) (760,360)
-------------- --------------
(24,505,229) (50,451,102)
-------------- --------------
Distributions from Net Realized Gain:
Class A Shares....................................... (13,949,578) (11,285,930)
Class B Shares....................................... (936,852) (786,390)
Class C Shares....................................... (284,764) (214,972)
-------------- --------------
(15,171,194) (12,287,292)
-------------- --------------
Total Distributions.................................... (39,676,423) (62,738,394)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (6,755,896) (26,638,760)
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 39,813,673 323,995,612
Net Asset Value of Shares Issued Through Dividend
Reinvestment......................................... 31,154,345 47,057,129
Cost of Shares Repurchased............................. (106,135,212) (381,484,901)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (35,167,194) (10,432,160)
-------------- --------------
TOTAL DECREASE IN NET ASSETS........................... (41,923,090) (37,070,920)
NET ASSETS:
Beginning of the Period................................ 1,316,524,651 1,353,595,571
-------------- --------------
End of the Period (Including accumulated undistributed
net investment income of $2,034,677 and $1,271,160,
respectively)........................................ $1,274,601,561 $1,316,524,651
============== ==============
</Table>
See Notes to Financial Statements 25
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS A SHARES MARCH 31, -------------------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
---------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF THE PERIOD............ $ 19.27 $ 19.65 $ 19.22 $ 18.27 $ 18.08 $ 19.96
-------- -------- -------- -------- -------- --------
Net Investment Income.... .38 .77 .81 .86 .91 .91
Net Realized and
Unrealized Gain/Loss... .11 (.23) .87 .98 .17 (1.64)
-------- -------- -------- -------- -------- --------
Total from Investment
Operations............... .49 .54 1.68 1.84 1.08 (.73)
-------- -------- -------- -------- -------- --------
Less:
Distributions from Net
Investment Income...... .37 .74 .81 .89 .88 .92
Distributions from Net
Realized Gain.......... .23 .18 .44 -0- .01 .23
-------- -------- -------- -------- -------- --------
Total Distributions........ .60 .92 1.25 .89 .89 1.15
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD................... $ 19.16 $ 19.27 $ 19.65 $ 19.22 $ 18.27 $ 18.08
======== ======== ======== ======== ======== ========
Total Return (b)........... 2.57%* 2.90% 9.28% 10.28% 6.13% -3.80%
Net Assets at End of the
Period (In millions)..... $1,172.9 $1,209.9 $1,244.3 $1,129.6 $1,086.6 $1,178.3
Ratio of Expenses to
Average Net Assets....... .87% .86% .87% .90% .90% .92%
Ratio of Net Investment
Income to Average Net
Assets................... 3.97% 4.02% 4.30% 4.55% 5.10% 4.77%
Portfolio Turnover......... 13%* 61% 54% 80% 69% 92%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01, and increase the ratio of net
investment income to average net assets from 4.27% to 4.30%. Per share,
ratios and supplemental data for the periods prior to September 30, 2002
have not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
26 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS B SHARES MARCH 31, ------------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $19.24 $19.63 $19.20 $18.26 $18.08 $19.96
------ ------ ------ ------ ------ ------
Net Investment Income........... .31 .63 .66 .70 .78 .76
Net Realized and Unrealized
Gain/Loss..................... .12 (.24) .88 .99 .15 (1.64)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .43 .39 1.54 1.69 .93 (.88)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net
Investment Income............. .30 .60 .67 .75 .74 .77
Distributions from Net Realized
Gain.......................... .23 .18 .44 -0- .01 .23
------ ------ ------ ------ ------ ------
Total Distributions............... .53 .78 1.11 .75 .75 1.00
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $19.14 $19.24 $19.63 $19.20 $18.26 $18.08
====== ====== ====== ====== ====== ======
Total Return (b).................. 2.24%* 2.08% 8.47% 9.42% 5.25% -4.60%
Net Assets at End of the Period
(In millions)................... $ 77.9 $ 82.6 $ 87.2 $ 49.2 $ 43.0 $ 56.8
Ratio of Expenses to Average Net
Assets.......................... 1.63% 1.62% 1.63% 1.69% 1.68% 1.68%
Ratio of Net Investment Income to
Average Net Assets.............. 3.22% 3.26% 3.53% 3.76% 4.34% 3.99%
Portfolio Turnover................ 13%* 61% 54% 80% 69% 92%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01, and increase the ratio of net
investment income to average net assets from 3.50% to 3.53%. Per share,
ratios and supplemental data for the periods prior to September 30, 2002
have not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within one year of purchase and declining to 0% after the sixth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of 1% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
See Notes to Financial Statements 27
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS C SHARES MARCH 31, ------------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $19.23 $19.62 $19.19 $18.25 $18.08 $19.95
------ ------ ------ ------ ------ ------
Net Investment Income........... .31 .63 .67 .69 .79 .76
Net Realized and Unrealized
Gain/Loss..................... .12 (.24) .87 1.00 .13 (1.63)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .43 .39 1.54 1.69 .92 (.87)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net
Investment Income............. .30 .60 .67 .75 .74 .77
Distributions from Net Realized
Gain.......................... .23 .18 .44 -0- .01 .23
------ ------ ------ ------ ------ ------
Total Distributions............... .53 .78 1.11 .75 .75 1.00
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $19.13 $19.23 $19.62 $19.19 $18.25 $18.08
====== ====== ====== ====== ====== ======
Total Return (b).................. 2.24%* 2.08% 8.48% 9.42% 5.19% -4.55%
Net Assets at End of the Period
(In millions)................... $ 23.9 $ 24.1 $ 22.1 $ 11.2 $ 5.4 $ 8.3
Ratio of Expenses to Average Net
Assets.......................... 1.63% 1.62% 1.63% 1.65% 1.68% 1.68%
Ratio of Net Investment Income to
Average Net Assets.............. 3.21% 3.25% 3.53% 3.80% 4.35% 3.99%
Portfolio Turnover................ 13%* 61% 54% 80% 69% 92%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01, and increase the ratio of net
investment income to average net assets from 3.50% to 3.53%. Per share,
ratios and supplemental data for the periods prior to September 30, 2002
have not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
28 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Insured Tax Free Income Fund (the "Fund") is organized as a series of
the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as
a diversified open-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment
objective is to provide investors a high level of current income exempt from
federal income taxes, with liquidity and safety of principal, primarily through
investment in a diversified portfolio of insured municipal securities. The Fund
commenced investment operations on December 14, 1984. The distribution of the
Fund's Class B and Class C Shares commenced on May 3, 1993 and August 13, 1993,
respectively. Effective November 30, 2003, the Fund's investment adviser, Van
Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset
Management.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded. 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
Fund 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 Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At March 31, 2004, the Fund had $17,743,798 of when-issued and
delayed delivery purchase commitments.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security. Income and expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute
29
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required.
At March 31, 2004, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $1,177,123,923
==============
Gross tax unrealized appreciation........................... $ 96,503,372
Gross tax unrealized depreciation........................... (662,428)
--------------
Net tax unrealized appreciation on investments.............. $ 95,840,944
==============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and a portion of futures gains, which are
included as ordinary income for tax purposes.
The tax character of distributions paid during the year ended September 30,
2003 was as follows:
<Table>
<Caption>
2003
Distributions paid from:
Ordinary Income........................................... $ 4,974,664
Long-term capital gain.................................... 7,723,917
-----------
$12,698,581
===========
</Table>
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $ 264,854
Undistributed long-term capital gain........................ 11,838,027
</Table>
F. INSURANCE EXPENSES The Fund typically invests in insured bonds. Any portfolio
securities not specifically covered by a primary insurance policy are insured
secondarily through the Fund's portfolio insurance policy. Insurance premiums
are based on the daily balances of uninsured bonds in the portfolio of
investments and are charged to expense on an accrual basis. The insurance policy
guarantees the timely payment of principal and interest on the securities in the
Fund's portfolio.
G. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's
custody fee was reduced by $4,273 as a result of credits earned on cash
balances.
30
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") will provide investment advice and facilities to the
Fund for an annual fee payable monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .525%
Next $500 million........................................... .500%
Next $500 million........................................... .475%
Over $1.5 billion........................................... .450%
</Table>
For the six months ended March 31, 2004, the Fund recognized expenses of
approximately $24,800 representing legal expenses provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Fund. The Adviser
allocates the cost of such services to each fund. For the six months ended March
31, 2004, the Fund recognized expenses of approximately $70,300 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, which are reported as part
of "Other" and "Legal" expenses, respectively, in the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
March 31, 2004, the Fund recognized expenses of approximately $322,100,
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund 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.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $223,109 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2004.
Appreciation/ depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligations and do not affect the net asset value of the Fund. Benefits under
the retirement plan are payable upon retirement for a ten-year period and are
based upon each trustee's years of service to the Fund. The maximum annual
benefit per trustee under the plan is $2,500.
31
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2004, capital aggregated $1,074,997,858, $75,986,852 and
$24,023,594 for Classes A, B and C, respectively. For the six months ended March
31, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,767,076 $ 33,981,788
Class B................................................... 167,932 3,223,624
Class C................................................... 136,030 2,608,261
---------- -------------
Total Sales................................................. 2,071,038 $ 39,813,673
========== =============
Dividend Reinvestment:
Class A................................................... 1,524,654 $ 29,243,679
Class B................................................... 75,432 1,444,607
Class C................................................... 24,351 466,059
---------- -------------
Total Dividend Reinvestment................................. 1,624,437 $ 31,154,345
========== =============
Repurchases:
Class A................................................... (4,894,554) $ (94,024,893)
Class B................................................... (464,908) (8,926,077)
Class C................................................... (165,732) (3,184,242)
---------- -------------
Total Repurchases........................................... (5,525,194) $(106,135,212)
========== =============
</Table>
At September 30, 2003, capital aggregated $1,105,797,284, $80,244,698 and
$24,133,516 for Classes A, B and C, respectively. For the year ended September
30, 2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 15,358,941 $ 294,205,218
Class B................................................... 997,166 19,179,849
Class C................................................... 552,551 10,610,545
----------- -------------
Total Sales................................................. 16,908,658 $ 323,995,612
=========== =============
Dividend Reinvestment:
Class A................................................... 2,306,810 $ 44,213,876
Class B................................................... 112,868 2,160,427
Class C................................................... 35,696 682,826
----------- -------------
Total Dividend Reinvestment................................. 2,455,374 $ 47,057,129
=========== =============
Repurchases:
Class A................................................... (18,180,737) $(348,581,095)
Class B................................................... (1,260,175) (24,097,852)
Class C................................................... (461,820) (8,805,954)
----------- -------------
Total Repurchases........................................... (19,902,732) $(381,484,901)
=========== =============
</Table>
32
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received on such shares, automatically convert
to Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares seven years after the end of the calendar month in
which the shares were purchased. For the six months ended March 31, 2004 and the
year ended September 30, 2003, 6,626 and 177,637 Class B Shares converted to
Class A Shares, respectively, and are shown in the above tables as sales of
Class A Shares and repurchases of Class B Shares. Class C Shares purchased
before January 1, 1997, and any dividend reinvestment plan Class C Shares
received on such shares, automatically convert to Class A Shares ten years after
the end of the calendar month in which such shares were purchased. Class C
Shares purchased on or after January 1, 1997 do not possess a conversion
feature. For the six months ended March 31, 2004 and the year ended September
30, 2003, no Class C Shares converted to Class A Shares. Class B and Class C
Shares are offered without a front end sales charge, but are subject to a
contingent deferred sales charge (CDSC). The CDSC for Class B and Class C Shares
will be imposed on most redemptions made within six years of the purchase for
Class B and one year of the purchase for Class C as detailed in the following
schedule.
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 3.75% None
Third....................................................... 3.50% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth....................................................... 1.00% None
Seventh and Thereafter...................................... None None
</Table>
For the six months ended March 31, 2004, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $81,300 and CDSC on redeemed shares of approximately $88,600.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $167,874,434 and $220,796,086,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage
33
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
the portfolio's effective yield, maturity and duration. All of the Fund's
portfolio holdings, including derivative instruments, are marked to market each
day with the change in value reflected in unrealized appreciation/depreciation.
Upon disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures contracts on U.S. Treasury
Notes and typically closes the contract prior to the delivery date. Upon
entering into futures contracts, the Fund maintains an amount of cash or liquid
securities with a value equal to a percentage of the contract amount with either
a futures commission merchant pursuant to rules and regulations promulgated
under the 1940 Act, as amended, or with its custodian in an account in the
broker's name. This amount is known as initial margin. During the period the
futures contract is open, payments are received from or made to the broker based
upon changes in the value of the contract (the variation margin). The risk of
loss associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts, for the six months ended March 31, 2004,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2003........................... 1,750
Futures Opened.............................................. 2,245
Futures Closed.............................................. (2,766)
------
Outstanding at March 31, 2004............................... 1,229
======
</Table>
The futures contracts outstanding as of March 31, 2004, and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures June 2004
(Current Notional Value of $115,406 per contract)......... 217 $ (316,232)
U.S. Treasury Notes 5-Year Futures June 2004
(Current Notional Value of $113,563 per contract)......... 1,012 (1,098,916)
----- -----------
1,229 $(1,415,148)
===== ===========
</Table>
B. INVERSE FLOATING RATE SECURITIES An Inverse Floating Rate security is one
where the coupon is inversely indexed to a short-term floating interest rate
multiplied by a specified factor. As the floating rate rises, the coupon is
reduced. Conversely as the floating rate declines, the coupon is increased. The
price of these securities may be more volatile than the
34
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
price of a comparable fixed rate security. These instruments are typically used
by the Fund to enhance the yield of the portfolio.
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and maintenance of shareholder accounts
with respect to such classes of shares.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and 1.00% each of Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A Shares are paid quarterly and the
annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $2,125,000 and $65,400
for Class B and Class C Shares, respectively. This amount may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be
refunded to the Fund on a quarterly basis.
Included in the fees for the six months ended March 31, 2004, are payments
retained by Van Kampen of approximately $433,500 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $52,100.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, certain officers of such
affiliates and certain investment companies advised by the Adviser or its
affiliates, including the Fund, are named as defendants in a number of similar
class action complaints which were recently consolidated. This consolidated
action also names as defendants certain individual Trustees and Directors of the
named investment companies advised by affiliates of the Adviser; the complaint
does not, however, name the individual Trustees of any Van Kampen funds. The
consolidated amended complaint generally alleges that defendants violated their
statutory disclosure obligations and fiduciary duties by failing properly to
disclose (i) that the Adviser and certain affiliates of the Adviser allegedly
offered economic incentives to brokers and others to recommend the funds advised
by the Adviser or its affiliates to investors rather than funds managed by other
companies, and (ii) that the funds advised by the Adviser or its affiliates,
including the Fund, allegedly paid excessive commissions to brokers in return
for their efforts to recommend these funds to investors. The complaint seeks,
among other things, unspecified compensatory damages, rescissionary damages,
fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid
35
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
excessive commissions to Morgan Stanley DW Inc. in connection with the sales of
the funds. The complaint seeks, among other things, the removal of the current
Trustees of the Van Kampen funds, rescission of the management contracts for the
Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary
damages. This complaint will be coordinated with the consolidated complaint.
The defendants intend to move to dismiss these actions and otherwise
vigorously to defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
36
VAN KAMPEN INSURED TAX FREE INCOME FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1173
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
37
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen Funds
Inc. All rights reserved.
Member NASD/SIPC. 32, 332, 532
TFIN SAR 5/04 RN04-00414P-Y03/04
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Strategic Municipal Income Fund performed during the semiannual period.
The portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of March 31, 2004.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that a mutual fund will achieve its
investment objective. Funds are subject to market risk, which is the
possibility that the market values of securities owned by the fund will
decline and that the value of fund shares may therefore be less than what
you paid for them. Accordingly, you can lose money investing in this
fund. Please see the prospectus for more complete information on
investment risks.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 3/31/04
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 06/28/85 since 04/30/93 since 08/13/93
- ------------------------------------------------------------------------------------------
W/MAX. W/MAX. W/MAX.
4.75% 4.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception 6.59% 6.32% 4.64% 4.64% 4.16% 4.16%
10-year 5.09 4.58 4.51 4.51 4.36 4.36
5-year 3.32 2.31 2.53 2.28 2.67 2.67
1-year 7.27 2.13 6.46 2.46 6.49 5.49
6-month 3.61 -1.31 3.22 -0.78 3.27 2.27
- ------------------------------------------------------------------------------------------
SEC Yield 5.15% 4.65% 4.60%
</Table>
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost.
Average annual total return with sales charges includes payment of the maximum
sales charge of 4.75 percent for Class A shares, a contingent deferred sales
charge of 4.00 percent for Class B shares (in year one and declining to zero
after year five), a contingent deferred sales charge of 1.00 percent for Class C
shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25
percent for Class A shares and 1.00 percent for Class B and C shares. The
since-inception and 10-year returns for Class B shares reflect the conversion of
Class B shares into Class A shares seven years after purchase. The since
inception returns for Class C shares reflect the conversion of Class C shares
into Class A shares ten years after purchase. See footnote 3 in the Notes to
Financial Statements for additional information. Figures shown above assume
reinvestment of all dividends and capital gains. SEC yield is a calculation for
determining the amount of portfolio income, excluding non-income items as
prescribed by the SEC. Yields are subject to change.
The Lehman Brothers Municipal Bond Index is generally representative of
investment-grade, tax-exempt bonds. The index is unmanaged and does not include
any sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
Van Kampen Strategic Municipal Income Fund is managed by the adviser's Municipal
Fixed Income team. Members of the team include Wayne D. Godlin and Dennis S.
Pietrzak, Executive Directors, and James D. Phillips, Vice President.(1)
MARKET CONDITIONS
Economic growth continued to be positive throughout the reporting period.
Despite this growth, however, the economy failed to produce a significant
increase in job creation and inflation remained low, which led the Fed to
maintain its bias toward keeping interest rates low. As a result, yields
remained low across the entire municipal yield curve.
Early in the reporting period, the market had built-in expectations of Fed
tightening (increasing interest rates) in early 2004. When it became apparent
that higher rates were unlikely to materialize as anticipated, market consensus
reversed, bonds rallied, and credit spreads (the incremental yield difference
between lower- and higher-rated bonds) in the municipal market began to tighten.
The rally continued until March, when the municipal market started to lose
momentum and give up some of its prior gains.
The supply of new municipal bond issuance continued to be very high during the
reporting period. Many municipalities sought to take advantage of historically
low interest rates--either by issuing new debt or by refinancing existing debt
that carried higher rates. At the same time, demand for municipal bonds grew as
investors searching for yield were attracted to the bonds' potential tax
advantages. The high-yield segment of the municipal market generally
outperformed higher-rated bonds, particularly in the latter part of the period,
as investors seemed willing to take on greater credit risk in exchange for
higher yields.
PERFORMANCE ANALYSIS
During the six-month period ended March 31, the fund returned 3.61 percent
(Class A shares, unadjusted for sales charge), outpacing its benchmark, the
Lehman Brothers Municipal Bond Index. (See table below.)
TOTAL RETURN FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------------
LEHMAN BROTHERS MUNICIPAL
CLASS A CLASS B CLASS C BOND INDEX
3.61% 3.22% 3.27% 3.12%
- ------------------------------------------------------------------
</Table>
The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information.
(1)Team members may change without notice at any time.
2
The portfolio's structure is commonly referred to as a "barbell" structure--
where holdings are more heavily weighted in the high- and low-grade sectors of
the credit spectrum. This type of structure offers the dual benefits of
potentially higher yields (from the lower-rated portion) and added balance (from
the lower-risk/higher-rated portion).
In the first three months of the period, the portfolio's holdings in
higher-rated bonds drove the fund's positive performance. This outperformance
was due in part to a decline in the overall supply of higher-rated bonds in the
marketplace, which contributed to a rally in this sector.
In the last three months, however, tightening credit spreads led to stronger
relative performance for high-yield bonds. The fund enjoyed gains as a result,
due to its greater concentration in this segment of the market during the
period. As of March 31, 68 percent of the portfolio's long-term holdings were in
high-yield bonds, down slightly from 74 percent as of September 30, 2003.
Within high-yield, our emphasis on health-care and continuing-care bonds--the
fund's top two sectors--was particularly additive to performance due to spread
tightening in these sectors. Holdings in tax-district bonds also helped boost
fund returns. We continued to focus investments in these and other essential-
services sectors of the municipal market because they tend to be less cyclical
and therefore, less affected by changing economic conditions.
We continued to keep the portfolio highly diversified, and maintained its lower
duration (sensitivity to interest-rate changes) to help minimize interest-rate
risk. Keeping the fund's duration in the target range proved more challenging
during the reporting period; with interest rates so low, it was increasingly
difficult to find higher-coupon bonds to add to the portfolio, which have a
lower duration than low-coupon bonds. A lower duration could serve the fund well
if interest rates do begin to rise.
3
Looking ahead, we believe demand for municipal bonds should continue to be
strong--especially if the economy continues to improve and interest rates remain
low. As always, we will pursue our disciplined investment approach, monitoring
the markets carefully for opportunities to add value to the portfolio.
<Table>
RATINGS ALLOCATION AS OF 3/31/04
AAA 12.2%
AA 5.3
A 7.2
BBB 7.6
BB 2.5
B 4.7
CC 0.1
Non-Rated 60.4
</Table>
<Table>
TOP 5 SECTORS AS OF 3/31/04 TOP 5 STATES AS OF 3/31/04
Continuing Care 17.7% Illinois 9.9%
Health Care 15.5 Florida 8.9
Industrial Revenue 13.7 Texas 8.8
Tax District 10.9 Pennsylvania 8.5
General Purpose 7.6 New York 6.8
</Table>
Subject to change daily. All percentages are as a percentage of long-term
investments. Provided for informational purposes only and should not be deemed
as a recommendation to buy securities in the sectors shown above. Ratings
allocations are based upon ratings as issued by Standard and Poor's. Ratings
allocation percentages are as a percentage of corporate-debt obligations. Van
Kampen is a wholly owned subsidiary of a global securities firm which is engaged
in a wide range of financial services including, for example, securities trading
and brokerage activities, investment banking, research and analysis, financing
and financial advisory services.
4
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
MUNICIPAL BONDS 93.7%
ALABAMA 1.4%
$ 1,000 Alabama Drinking Wtr Fin Auth Revolving Fd
Ln Ser C (AMBAC Insd)...................... 5.750% 08/15/18 $ 1,135,680
2,000 Alabama Drinking Wtr Fin Auth Revolving Fd
Ln Ser C (AMBAC Insd)...................... 5.375 08/15/23 2,156,860
2,000 Alabama Wtr Pollutn Ctl Auth (AMBAC
Insd)...................................... 5.750 08/15/18 2,258,340
1,500 Colbert Cnty Northwest Auth Hlth Care
Facs....................................... 5.750 06/01/27 1,478,160
2,500 Huntsville/Carlton Cove, AL Carlton Cove
Inc Proj Ser A............................. 7.000 11/15/17 1,812,500
3 Mobile, AL Indl Dev Brd Solid Waste Disp
Rev Mobile Energy Svc Co Proj Rfdg (a)
(b)........................................ 6.950 01/01/20 21
1,395 Valley, AL Spl Care Fac Fin Auth Rev Lanier
Mem Hosp Ser A............................. 5.600 11/01/16 1,365,007
1,750 Valley, AL Spl Care Fac Fin Auth Rev Lanier
Mem Hosp Ser A............................. 5.650 11/01/22 1,651,562
------------
11,858,130
------------
ALASKA 0.7%
1,630 Alaska Indl Dev & Expt Auth Williams Lynxs
AK Cargoport (Acquired 05/17/01, Cost
$1,630,000) (c)............................ 7.800 05/01/14 1,683,774
4,000 Juneau, AK City & Borough Rev Saint Anns
Care Ctr Proj.............................. 6.875 12/01/25 4,017,200
------------
5,700,974
------------
ARIZONA 3.3%
2,000 Arizona Hlth Fac Auth Hosp John C Lincoln
Hlth Network............................... 6.375 12/01/37 2,118,140
1,000 Arizona Hlth Fac Auth Rev Terraces Proj Ser
A.......................................... 7.500 11/15/23 1,015,840
1,250 Arizona Hlth Fac Auth Rev Terraces Proj Ser
A.......................................... 7.750 11/15/33 1,280,025
1,480 Cochise Cnty, AZ Indl Dev Sierra Vista
Cmnty Hosp Ser A Rfdg...................... 6.750 12/01/26 1,524,548
1,000 Flagstaff, AZ Indl Dev Auth Rev Sr Living
Cmnty Northn AZ Proj....................... 7.500 03/01/35 1,075,050
500 Flagstaff, AZ Indl Dev Auth Rev Sr Living
Cmnty Northn Cmnty Proj.................... 6.300 09/01/38 481,110
1,000 Maricopa Cnty, AZ Indl Dev Auth AZ Charter
Sch Proj 1 Ser A........................... 6.625 07/01/20 1,027,320
1,000 Maricopa Cnty, AZ Indl Dev Auth Horizon
Cmnty Learning Ctr Proj 1 Ser A............ 7.125 06/01/10 1,031,470
4,000 Maricopa Cnty, AZ Indl Dev Auth
Multi-Family Hsg Rev Natl Hlth Fac II Proj
Ser B (Acquired 01/15/98, Cost $4,000,000)
(c)........................................ 6.625 07/01/33 3,074,160
2,605 Maricopa Cnty, AZ Indl Dev Christian Care
Mesa Inc Proj Ser A........................ 7.750 04/01/15 2,733,296
</Table>
6 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
ARIZONA (CONTINUED)
$ 2,000 Maricopa Cnty, AZ Indl Dev Christian Care
Mesa Inc Proj Ser A........................ 7.875% 04/01/27 $ 2,072,780
1,500 Peoria, AZ Indl Dev Auth Rev Sierra Winds
Life Ser A Rfdg............................ 6.375 08/15/29 1,451,400
2,500 Phoenix, AZ Indl Dev Auth Mtg Christian
Care Apt Proj Ser A Rfdg................... 6.500 01/01/26 2,573,700
1,355 Pima Cnty, AZ Indl Dev Auth Dev Radisson
City Ctr Proj Rfdg (Acquired 03/28/02, Cost
$1,355,000) (c)............................ 7.000 12/02/12 1,344,431
800 Pima Cnty, AZ Indl Dev Auth Fac Skyline
Tech High Sch Proj......................... 7.500 02/01/34 798,456
1,000 Pima Cnty, AZ Indl Dev Auth Rev La Posada
at Park Ctr Ser A.......................... 7.000 05/15/27 1,019,470
520 Pima Cnty, AZ Indl Dev Auth Ser A.......... 7.250 11/15/18 511,675
500 Pima Cnty, AZ Indl Dev Auth Ser A.......... 8.250 11/15/22 514,175
1,110 Red Hawk Canyon Cmnty Fac Dist No 2 AZ Dist
Assmt Rev.................................. 6.500 12/01/12 1,188,366
2,150 Tucson, AZ Multi-Family Rev Hsg Catalina
Asstd Living Ser A......................... 6.500 07/01/31 1,910,597
------------
28,746,009
------------
CALIFORNIA 3.0%
1,000 Abag Fin Auth Nonprofit Corp CA American
Baptist Homes Ser A Rfdg................... 5.850 10/01/27 964,050
2,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)...................................... 5.500 05/01/16 2,261,500
1,000 California Statewide Cmnty Dev Auth Elder
Care Alliance Ser A........................ 8.250 11/15/32 1,004,050
975 California Statewide Cmnty Dev Auth Multi-
Family Rev Hsg Heritage Pointe Sr Apt Ser
QQ (Acquired 02/19/02, Cost $972,563)
(c)........................................ 7.500 10/01/26 955,324
1,000 California Statewide Cmnty Dev Auth San
Francisco Art Institute (Acquired 06/28/02,
Cost $1,000,000) (c)....................... 7.375 04/01/32 1,011,260
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg
Rev (Escrowed to Maturity) (MBIA Insd)..... * 09/01/17 2,657,400
2,300 Foothill/Eastern Tran Corridor Agy CA Toll
Rd Rev (MBIA Insd)......................... * 01/15/18 1,130,519
1,460 Healdsburg, CA Ctf Part Nuestro Hosp Inc
(Acquired 11/13/98, Cost
$1,437,739) (a) (b) (c).................... 6.375 11/01/28 58,400
1,750 Huntington Beach, CA Cmnty No 2003 1
Huntington Ctr............................. 5.800 09/01/23 1,750,000
920 Indio, CA Pub Fin Auth Rev Tax Increment... 6.500 08/15/27 961,014
1,900 Lake Elsinore, CA Pub Fin Auth Loc Agy Rev
Ser F...................................... 7.100 09/01/20 2,034,558
1,750 Los Angeles, CA Regl Arpt Impt Corp Lease
Rev Fac Sublease LA Intl Ser A-1 Rfdg...... 7.125 12/01/24 1,487,552
</Table>
See Notes to Financial Statements 7
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$ 4,075 Los Angeles, CA Regl Arpt Impt Corp Lease
Rev Ser C.................................. 7.500% 12/01/24 $ 3,463,668
1,455 Millbrae, CA Residential Fac Rev Magnolia
of Millbrae Proj Ser A..................... 7.375 09/01/27 1,492,801
1,000 Perris, CA Cmnty Fac Dist Spl Tax No 01-2
Ser A...................................... 6.375 09/01/32 1,020,520
1,240 Simi Vly, CA Cmnty Dev Agy Coml Sycamore
Plaza II Rfdg (Acquired 07/28/98, Cost
$1,240,000) (c)............................ 6.000 09/01/12 1,310,990
1,965 Vallejo, CA Ctf Part Touro Univ............ 7.250 06/01/16 2,069,361
------------
25,632,967
------------
COLORADO 2.0%
1,000 Bromley Pk Met Dist CO No 2 Ser B.......... 8.050 12/01/32 1,022,980
975 Colorado Ed & Cultural Fac Charter Sch
Frontier Academy........................... 7.250 06/01/20 1,025,924
2,000 Colorado Hlth Fac Auth Rev Baptist Home
Assn Ser A................................. 6.375 08/15/24 1,631,080
1,060 Colorado Hlth Fac Auth Rev Christian Living
Campus Proj................................ 7.050 01/01/19 1,073,738
6,200 Colorado Hlth Fac Auth Rev Christian Living
Campus Proj (Prerefunded @ 01/01/05)....... 9.000 01/01/25 6,666,116
2,500 Elk Vly, CO Pub Impt Fee Ser A............. 7.300 09/01/22 2,615,825
710 Lafayette, CO Indl Dev Rev Rocky Mtn Instr
Proj Ser A................................. 6.750 10/01/14 417,523
1,985 Lafayette, CO Indl Dev Rev Rocky Mtn Instr
Proj Ser A................................. 7.000 10/01/18 1,163,984
1,774 Skyland Metro Dist CO Gunnison Cnty Rfdg... 6.750 12/01/22 1,775,845
------------
17,393,015
------------
CONNECTICUT 0.4%
1,500 Connecticut St Dev Auth Indl Afco Cargo Bdl
LLC Proj................................... 8.000 04/01/30 1,579,125
2,000 Mohegan Tribe Indians CT Pub Impt Priority
Dist (Acquired 09/27/01, Cost $1,956,551)
(c)........................................ 6.250 01/01/31 2,132,800
------------
3,711,925
------------
DELAWARE 0.1%
1,120 Wilmington, DE Multi-Family Rent Rev Hsg
Electra Arms Sr Assoc Proj................. 6.250 06/01/28 988,400
------------
DISTRICT OF COLUMBIA 0.1%
1,000 District of Columbia Rev Methodist Home
Issue...................................... 6.000 01/01/29 903,610
85 District of Columbia Ser A-1 (Escrowed to
Maturity) (MBIA Insd)...................... 6.500 06/01/10 102,915
------------
1,006,525
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
FLORIDA 8.3%
$ 3,590 Escambia Cnty, FL Rev ICF/MR Pensacola Care
Dev Ctr.................................... 10.250% 07/01/11 $ 3,607,735
1,520 Escambia Cnty, FL Rev ICF/MR Pensacola Care
Dev Ctr Ser A.............................. 10.250 07/01/11 1,527,509
80 Fishhawk Cmnty Dev Dist of FL Spl Assmt
Rev........................................ 6.650 05/01/07 80,868
1,390 Fishhawk Cmnty Dev Dist of FL Spl Assmt
Rev........................................ 7.625 05/01/18 1,481,921
3,705 Florida Hsg Fin Corp Rev Hsg Beacon Hill
Apt Ser C.................................. 6.610 07/01/38 3,517,601
7,210 Florida Hsg Fin Corp Rev Hsg Cypress Trace
Apt Ser G.................................. 6.600 07/01/38 6,806,600
4,905 Florida Hsg Fin Corp Rev Hsg Westchase Apt
Ser B...................................... 6.610 07/01/38 4,365,058
320 Heritage Harbor Cmnty Dev Dist FL Rev
Recntl..................................... 7.750 05/01/23 305,158
850 Heritage Harbor Cmnty Dev Dist FL Rev Spl
Assmt Ser A................................ 6.700 05/01/19 878,492
1,500 Hillsborough Cnty, FL Hsg Fin Hsg Clipper
Cove Apt Proj Ser A........................ 7.375 07/01/40 1,474,140
815 Lake Saint Charles, FL Cmnty Dev Dist Spl
Assmt Rev.................................. 7.875 05/01/17 848,513
2,000 Lee Cnty, FL Indl Dev Auth Hlthcare Fac Rev
Cypress Cove Hlthpk Ser A.................. 6.750 10/01/32 2,051,400
3,550 Leon Cnty, FL Ed Fac Auth Rev Southgate
Residence Hall Ser A Rfdg.................. 6.750 09/01/28 3,285,134
1,295 Lexington Cmnty Dev Dist FL................ 6.125 05/01/34 1,311,550
250 Marshall Creek Cmnty Dev FL Spl Assmt Ser
B.......................................... 6.750 05/01/07 252,290
2,500 Meadow Woods Cmnty Dev Dist FL Ser A....... 6.050 05/01/35 2,527,000
1,325 Miromar Lakes Cmnty Dev Dist Ser B......... 7.250 05/01/12 1,404,977
950 Northern Palm Beach Cnty Dist FL Impt Wtr
Ctl & Impt Unit Dev No 16 Rfdg............. 7.500 08/01/24 1,020,528
2,050 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg.................. 8.625 07/01/20 2,145,468
2,250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg.................. 8.750 07/01/26 2,327,512
1,560 Orange Cnty, FL Hlth Fac Auth Rev Hosp
Adventist Hlth Sys......................... 5.875 11/15/11 1,784,765
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp
Adventist Hlth Sys......................... 6.375 11/15/20 1,106,170
2,000 Orange Cnty, FL Hlth Fac Auth Rev
Westminster Cmnty Care..................... 6.600 04/01/24 1,569,860
2,340 Pinellas Cnty, FL Ed Fac Auth Rev College
Harbor Proj Ser A.......................... 8.250 12/01/21 2,441,252
</Table>
See Notes to Financial Statements 9
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 1,685 Pinellas Cnty, FL Ed Fac Auth Rev College
Harbor Proj Ser A.......................... 8.500% 12/01/28 $ 1,764,920
3,000 Pinellas Cnty, FL Hlth Fac Auth Oaks of
Clearwater Proj............................ 6.250 06/01/34 3,016,950
990 Saddlebrook, FL Cmnty Ser A................ 6.900 05/01/33 1,045,371
2,000 Saint John's Cnty, FL Indl Dev Auth
Hlthcare Rev Bayview Proj Ser A............ 7.100 10/01/26 2,010,200
6,000 Sarasota Cnty, FL Hlth Fac Auth Hlth Fac
Sunnyside Pptys............................ 6.700 07/01/25 3,999,060
2,015 Silver Palms Cmnty Dev Dist (d)............ 5.900 05/01/34 2,002,245
440 Stoneybrook West Cmnty Dev Dist FL Spl
Assmt Rev Ser B............................ 6.450 05/01/10 448,928
19,341 Sun N Lake of Sebring, FL Impt Dist Spl
Assmt Ser A (Acquired 12/08/89, Cost
$19,331,366) (a) (c) (e)................... 10.000 12/15/11 4,305,420
680 Tampa Palms, FL Open Space & Trans Cmnty
Dev Dist Rev Cap Impt Area 7 Proj.......... 8.500 05/01/17 695,082
342 Tara Cmnty Dev Dist 1 FL Cap Impt Rev Ser B
(Acquired 08/03/00, Cost $342,000) (c)..... 6.750 05/01/10 349,739
1,787 University Square Cmnty Dev Dist FL Cap
Impt Rev (Acquired 10/07/99, Cost
$1,785,270) (c)............................ 6.750 05/01/20 1,893,380
74 Vista Lakes Cmnty Dev Dist FL Cap Impt Rev
Ser B...................................... 6.350 05/01/05 74,290
2,000 Volusia Cnty, FL Indl Dev Auth Bishops Glen
Proj Rfdg (Prerefunded @ 11/01/06)......... 7.625 11/01/26 2,335,380
------------
72,062,466
------------
GEORGIA 2.1%
2,000 Atlanta, GA Tax Alloc Atlantic Sta Proj.... 7.750 12/01/14 2,100,580
2,400 Atlanta, GA Urban Residential Fin Auth
Multi-Family Rev John Eagan Proj Ser A..... 6.750 07/01/30 2,339,256
2,750 De Kalb Cnty, GA Residential Care Fac Kings
Bridge Ser A............................... 8.250 07/01/26 2,882,852
4,000 Fulton Cnty, GA Hsg Auth Multi-Family Hsg
Rev Azalea Manor Proj Ser A (Acquired
02/18/98, Cost $4,000,000) (c)............. 6.500 02/01/28 2,920,000
1,800 Fulton Cnty, GA Residential Care Canterbury
Court Proj Ser A........................... 6.000 02/15/22 1,791,846
2,000 Fulton Cnty, GA Residential Care Sr Lien
RHA Asstd Living Ser A..................... 7.000 07/01/29 1,964,860
1,000 Private Colleges & Univ Auth GA Mercer Hsg
Corp Proj Ser A............................ 6.000 06/01/21 1,043,470
2,930 Renaissance on Peachtree Unit Invt Tr Ctf
GA Custody Ctf............................. 12.374 10/01/25 3,376,268
------------
18,419,132
------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
HAWAII 0.9%
$ 3,000 Hawaii St Dept Budget & Fin Spl Purp Rev
Kahala Nui Proj Ser A...................... 8.000% 11/15/33 $ 3,049,470
1,820 Hawaii St Dept Trans Spl Fac Rev
Continental Airl Inc....................... 5.625 11/15/27 1,330,930
2,825 Kuakini, HI Hlth Sys Spl Ser A............. 6.375 07/01/32 2,946,927
------------
7,327,327
------------
IDAHO 0.1%
1,000 Idaho Hlth Fac Auth Rev Vly Vista Care Ser
A Rfdg..................................... 7.875 11/15/29 979,930
------------
ILLINOIS 9.3%
2,500 Bolingbrook, IL Cap Apprec Ser B (MBIA
Insd)...................................... * 01/01/29 644,625
1,993 Bolingbrook, IL Spl Svc Area No 01-1....... 7.375 07/01/31 2,147,956
1,500 Bolingbrook, IL Spl Svc Area No 1 Spl Tax
Augusta Vlg Proj (Acquired 11/13/02, Cost
$1,500,000) (c)............................ 6.750 03/01/32 1,566,540
1,910 Bolingbrook, IL Spl Svc Area No 3 Lakewood
Ridge Proj................................. 7.050 03/01/31 2,040,682
992 Cary, IL Spl Tax Svc Area No 1 Cambridge
Ser A...................................... 7.625 03/01/30 1,085,466
3,000 Chicago, IL Lakefront Millenium Pkg Fac
(MBIA Insd) (f)............................ 0/5.700 01/01/25 2,904,540
7,750 Chicago, IL O'Hare Intl Arpt Rev RR II R
239-1 (Variable Rate Coupon) (FSA Insd)
(Acquired 08/18/03, Cost $8,446,825) (c)... 10.370 01/01/19 9,543,117
3,600 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airl Inc Proj Ser B Rfdg (a) (b).... 6.100 11/01/35 1,080,000
5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd).... 5.500 01/01/38 5,351,450
4,000 Chicago, IL Spl Assmt Lakeshore East
Proj....................................... 6.625 12/01/22 4,036,040
880 Chicago, IL Tax Increment Alloc Read
Dunning Ser B (ACA Insd)................... 7.250 01/01/14 965,730
2,000 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A........................... 6.500 12/01/05 2,126,640
3,000 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A (ACA Insd)................ 6.500 12/01/06 3,335,610
1,925 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A (ACA Insd)................ 6.500 12/01/08 2,222,701
1,000 Clay Cnty, IL Hosp Rev..................... 5.900 12/01/28 941,710
1,295 Gilberts, IL Spl Svc Area No 9 Spl Tax Big
Timber Proj................................ 7.375 03/01/11 1,377,569
1,245 Gilberts, IL Spl Svc Area No 9 Spl Tax Big
Timber Proj................................ 7.750 03/01/27 1,366,599
1,500 Godfrey, IL Rev United Methodist Vlg Ser
A.......................................... 5.875 11/15/29 1,234,350
2,700 Hoopeston, IL Hosp Cap Impt Rev Hoopeston
Cmnty Mem Hosp Rfdg........................ 6.550 11/15/29 2,507,625
</Table>
See Notes to Financial Statements 11
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 1,810 Huntley, IL Increment Alloc Rev Huntley
Redev Proj Ser A........................... 8.500% 12/01/15 $ 1,925,351
253 Huntley, IL Spl Svc Area No 10 Spl Tax Ser
A.......................................... 6.250 03/01/09 257,200
2,621 Huntley, IL Spl Svc Area No 10 Spl Tax Ser
A.......................................... 6.500 03/01/29 2,687,442
1,405 Illinois Dev Fin Auth Rev Cmnty Fac Clinic
Altgeld Proj............................... 8.000 11/15/16 1,164,773
1,000 Illinois Hlth Fac Auth Rev Cent Baptist
Home Proj.................................. 7.125 11/15/29 975,210
2,500 Illinois Hlth Fac Auth Rev Decatur Mem
Hosp....................................... 5.750 10/01/24 2,618,450
3,000 Illinois Hlth Fac Auth Rev Fairview Oblig
Group Ser A Rfdg........................... 7.400 08/15/23 3,011,790
1,000 Illinois Hlth Fac Auth Rev Lifelink Corp
Oblig Group Ser B (Prerefunded @
02/15/05).................................. 8.000 02/15/25 1,059,390
650 Illinois Hlth Fac Auth Rev Loyola Univ Hlth
Sys Ser A.................................. 6.000 07/01/21 682,415
1,200 Illinois Hlth Fac Auth Rev Lutheran Sr
Ministries Oblig Ser A..................... 7.375 08/15/31 1,209,516
1,500 Illinois Hlth Fac Auth Rev Peace Mem
Ministries Proj (Prerefunded @ 08/15/06)... 7.500 08/15/26 1,721,100
1,545 Illinois Hlth Fac Auth Rev Proctor Cmnty
Hosp Proj.................................. 7.500 01/01/11 1,545,973
250 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.200 08/15/23 252,910
1,125 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.400 08/15/33 1,140,469
700 Illinois Hlth Fac Auth Rev Silver Cross
Hosp & Med Rfdg............................ 5.500 08/15/19 724,143
2,375 Lake Cnty, IL Fst Presv Dist Ld Acquisition
& Dev...................................... 5.750 12/15/16 2,778,512
675 Lake Cnty, IL Fst Presv Dist Ld Acquisition
& Dev...................................... 5.750 12/15/17 787,090
80 Lake, Cook, Kane & McHenry Cntys, IL Cmnty
Unit Sch Dist No 22 (FGIC Insd)............ 5.750 12/01/19 91,351
1,233 Montgomery, IL Spl Assmt Impt Lakewood
Creek Proj................................. 7.750 03/01/30 1,375,559
1,800 Peoria, IL Spl Tax Weaverridge Spl Svc
Area....................................... 8.050 02/01/17 1,926,270
2,000 Plano, IL Spl Svc Area No 1 Lakewood
Springs Proj Ser A......................... 6.200 03/01/34 2,000,700
2,095 Regional Tran Auth IL Ser B (AMBAC Insd)... 8.000 06/01/17 2,921,079
960 Sterling, IL Rev Hoosier Care Proj Ser A... 7.125 06/01/34 889,306
------------
80,224,949
------------
INDIANA 1.5%
825 Crawfordsville, IN Redev Cmnty Redev Dist
Tax Increment Rev (Acquired 10/15/97, Cost
$825,000) (c).............................. 7.000 02/01/12 843,661
1,925 Indiana Hlth Fac Fin Auth Rev Hoosier Care
Proj Ser A................................. 7.125 06/01/34 1,785,129
</Table>
12 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
INDIANA (CONTINUED)
$ 5,000 Indiana Hlth Fac Hosp Rev Cmnty Fndtn
Northwest IN Ser A......................... 6.000% 03/01/34 $ 4,965,250
3,000 Indianapolis, IN Arpt Auth Rev Spl Fac Fed
Express Corp Proj.......................... 7.100 01/15/17 3,110,400
2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr &
Lt......................................... 6.375 11/01/29 2,119,660
------------
12,824,100
------------
IOWA 0.5%
2,000 Estherville, IA Hosp Rev Avera Holy Family
Proj....................................... 6.250 07/01/26 2,148,960
2,000 Iowa Fin Auth Hlth Care Facs Care
Initiatives Proj Rfdg...................... 9.250 07/01/25 2,382,280
------------
4,531,240
------------
KANSAS 0.8%
955 Lawrence, KS Coml Dev Rev Holiday Inn Sr
Ser A Rfdg................................. 8.000 07/01/16 893,603
1,000 Lenexa, KS Hlthcare Fac Rev Lakeview Vlg
Inc Ser B.................................. 6.250 05/15/26 1,012,730
960 Manhattan, KS Coml Dev Rev Holiday Inn Sr
Ser A Rfdg................................. 8.000 07/01/16 898,282
2,000 Olathe, KS Sr Living Fac Rev Aberdeen Vlg
Inc Ser A.................................. 8.000 05/15/30 2,198,720
1,500 Overland Pk, KS Dev Corp Rev First Tier
Overland Park Ser A........................ 7.375 01/01/32 1,512,660
------------
6,515,995
------------
KENTUCKY 0.4%
1,000 Kenton Cnty, KY Arpt Brd Spl Fac Rev Mesaba
Aviation Inc Proj Ser A.................... 6.700 07/01/29 800,960
3,000 Newport, KY Pub Pptys Corp Rev First Mtg
Pub Pkg & Plaza Ser A 1.................... 8.500 01/01/27 2,924,670
------------
3,725,630
------------
LOUISIANA 1.0%
2,135 Louisiana Hsg Fin Agy Rev Multi-Family Hsg
Plantation Ser A........................... 7.125 01/01/28 2,098,705
2,000 Louisiana Loc Govt Environment Fac Hlthcare
Saint James Place Ser A Rfdg............... 8.000 11/01/29 1,722,960
1,000 Louisiana Pub Fac Auth Rev Progressive
Hlthcare................................... 6.375 10/01/20 877,390
1,000 Louisiana Pub Fac Auth Rev Progressive
Hlthcare................................... 6.375 10/01/28 826,600
3,354 Louisiana St Univ & Agric & Mechanical
College Univ Rev Master Agreement (Acquired
11/30/98, Cost $3,354,341) (c)............. 5.750 10/30/18 3,215,270
------------
8,740,925
------------
</Table>
See Notes to Financial Statements 13
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
MAINE 0.0%
$ 25 Maine Hlth & Higher Ed Fac Auth Rev Ser B
(Prerefunded @ 07/01/04) (FSA Insd)........ 7.000% 07/01/24 $ 25,872
------------
MARYLAND 1.2%
1,000 Baltimore Cnty, MD Mtg Rev Shelter Elder
Care Ser A................................. 7.250 11/01/29 971,640
730 Maryland St Econ Dev Corp Air Cargo Rev
Afco Cargo BWI II LLC Proj................. 6.250 07/01/07 718,787
1,200 Maryland St Econ Dev Corp MD Golf Course
Sys........................................ 8.250 06/01/28 1,138,008
1,000 Maryland St Hlth & Higher Medstar Hlth
Rfdg....................................... 5.500 08/15/33 1,016,130
3,000 Montgomery Cnty, MD Econ Dev Editorial Proj
In Ed Ser A (Acquired 09/28/98, Cost
$3,002,660) (c)............................ 6.400 09/01/28 2,892,330
3,000 Prince Georges Cnty, MD Spl Oblig Spl Assmt
Woodview Ser A............................. 8.000 07/01/26 3,280,200
------------
10,017,095
------------
MASSACHUSETTS 3.7%
1,000 Massachusetts St Dev Fin Agy Briarwood Ser
B.......................................... 8.000 12/01/22 1,061,260
910 Massachusetts St Dev Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 07/27/00, Cost
$910,000) (c).............................. 7.750 06/01/18 942,705
1,965 Massachusetts St Dev Fin Agy Rev Hillcrest
Ed Ctr Inc................................. 6.375 07/01/29 1,906,070
3,000 Massachusetts St Dev Fin Agy Rev Hlthcare
Fac Alliance Ser A......................... 7.100 07/01/32 2,985,030
1,000 Massachusetts St Dev Fin Agy Rev MCHSP
Human Svc Providers Ser A (Prerefunded @
07/01/10).................................. 8.000 07/01/20 1,279,060
3,765 Massachusetts St Dev Fin Agy Rev New
England Ctr For Children................... 6.000 11/01/19 3,788,682
3,100 Massachusetts St Hlth & Ed Civic
Investments Ser B.......................... 9.150 12/15/23 3,622,505
1,000 Massachusetts St Hlth & Ed Nichols College
Issue Ser C................................ 6.000 10/01/17 1,042,550
1,929 Massachusetts St Hsg Fin Agy Hsg Rev Insd
Rental Ser A (AMBAC Insd).................. 6.650 07/01/19 1,976,058
1,940 Massachusetts St Indl Fin Agy Assisted
Living Fac Rev Marina Bay LLC Proj......... 7.500 12/01/27 1,985,532
1,000 Massachusetts St Indl Fin Agy Assisted
Living Fac Rev Newton Group Pptys LLC
Proj....................................... 8.000 09/01/27 1,064,590
645 Massachusetts St Indl Fin Agy Rev First Mtg
GF/Pilgrim Inc Proj........................ 6.500 10/01/15 590,085
</Table>
14 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
MASSACHUSETTS (CONTINUED)
$ 2,000 Massachusetts St Indl Fin Agy Rev First Mtg
GF/Pilgrim Inc Proj........................ 6.750% 10/01/28 $ 1,767,140
795 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/98, Cost
$795,000) (c).............................. 6.200 06/01/08 773,376
2,900 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/98, Cost
$2,900,000) (c)............................ 6.375 06/01/18 2,784,377
4,500 Massachusetts St Indl Fin Agy Rev Swr Fac
Res Ctl Composting (Acquired 08/10/89, Cost
$4,500,000) (c)............................ 9.250 06/01/10 4,513,410
------------
32,082,430
------------
MICHIGAN 1.3%
895 Detroit, MI Loc Dev Fin Auth Tax Increment
Sub Ser C (Acquired 09/08/97, Cost
$895,000) (c).............................. 6.850 05/01/21 879,481
1,700 Hillsdale, MI Hosp Fin Hillsdale Cmnty Hlth
Ctr........................................ 5.000 05/15/13 1,655,834
2,390 Meridian, MI Econ Dev Corp Ltd Oblig Rev
First Mtg Burcham Hills Ser A Rfdg......... 7.500 07/01/13 2,457,565
3,430 Meridian, MI Econ Dev Corp Ltd Oblig Rev
First Mtg Burcham Hills Ser A Rfdg......... 7.750 07/01/19 3,539,074
995 Michigan Muni Bd Auth Rev Pub Sch Academy
Fac Pgm.................................... 8.125 10/01/31 973,110
11,084 Michigan St Strategic Fd Ltd Oblig Rev
Great Lakes Pulp & Fiber Proj (a) (g)...... 8.000 12/01/27 1,618,198
------------
11,123,262
------------
MINNESOTA 3.1%
2,000 Aitkin, MN Hlth Fac Rev Riverwood Hlthcare
Ctr Proj................................... 7.750 02/01/31 2,007,260
1,000 Cambridge, MN Hsg & Hlthcare Fac Rev
Grandview West Proj Ser B.................. 6.000 10/01/33 850,810
2,000 Carlton, MN Hlth & Hsg Fac Intermediate
Faith Social Svc Inc Proj.................. 7.500 04/01/19 2,094,080
1,000 Dakota Cnty, MN Hsg & Redev................ 6.250 05/01/29 918,460
2,500 Duluth, MN Econ Dev Auth Benedictine Hlth
Sys Saint Marys............................ 5.250 02/15/33 2,558,850
1,500 Duluth, MN Econ Dev Auth Saint Lukes Hosp.. 7.250 06/15/32 1,585,755
2,000 Glencoe, MN Hlthcare Fac Rev............... 7.500 04/01/31 2,167,660
6,890 Minneapolis & Saint Paul, MN Met Northwest
Airl Proj Ser A............................ 7.000 04/01/25 6,497,408
1,000 Minneapolis & Saint Paul, MN Met Northwest
Airl Proj Ser B............................ 6.500 04/01/25 946,770
1,425 Ramsey, MN Lease Rev Pact Charter Sch Proj
Ser A...................................... 6.750 12/01/33 1,416,678
</Table>
See Notes to Financial Statements 15
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
MINNESOTA (CONTINUED)
$ 1,500 Saint Cloud, MN Hsg & Redev Auth Sterling
Heights Apt Proj........................... 7.550% 04/01/39 $ 1,480,005
1,225 Saint Paul, MN Hsg & Redev Auth Hosp Rev
Healtheast Proj Ser A Rfdg................. 6.625 11/01/17 1,243,265
1,000 Saint Paul, MN Hsg & Redev Cmnty of Peace
Academy Proj Ser A......................... 7.875 12/01/30 1,102,020
1,500 Saint Paul, MN Port Auth Hotel Fac Rev
Radisson Kellogg Proj Ser 2 Rfdg........... 7.375 08/01/29 1,532,235
------------
26,401,256
------------
MISSOURI 4.2%
1,000 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Proj Rfdg........................... 6.125 10/01/21 1,032,060
1,000 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Proj Rfdg........................... 7.000 10/01/21 1,088,510
320 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj........................... 7.250 04/01/07 326,144
3,095 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj........................... 7.625 04/01/17 3,307,874
484 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj........................... 7.625 04/01/18 515,775
1,525 Jefferson Cnty, MO Jr College Dist Student
Hsg Sys Rev Jefferson College.............. 7.250 07/01/31 1,507,783
992 Kansas City, MO Indl Dev Auth Multi-Family
Hsg Rev Brentwood Manor Apt Proj Ser B..... 7.250 10/15/38 983,260
1,831 Kansas City, MO Multi-Family Hsg Rev
Northwoods Apts Proj Ser A................. 6.450 05/01/40 1,831,000
960 Kansas City, MO Multi-Family Hsg Rev Vlg
Green Apt Proj............................. 6.250 04/01/30 605,597
3,000 Kansas City, MO Indl Dev Plaza Lib Proj
(d)........................................ 5.900 03/01/24 2,939,310
10,820 Missouri St Hlth & Edl Fac Rev Drivers Ser
362 (Acquired 07/21/03, Cost $12,117,239)
(c)........................................ 9.160 05/15/11 12,465,614
2,220 Nevada, MO Hosp Rev Nevada Regional Med
Ctr........................................ 6.750 10/01/22 2,306,425
5,000 Saline Cnty, MO Indl Dev Auth Hlth Fac Rev
(Acquired 01/12/99, Cost $4,909,673) (c)... 6.500 12/01/28 5,112,900
1,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd)..... 6.000 06/01/15 1,214,400
1,305 Three Riv Jr College Dist MO Cmnty
College.................................... 7.000 09/01/18 1,188,698
------------
36,425,350
------------
NEVADA 0.1%
1,000 Clark Cnty, NV Pollutn Ctl Rev Southn Calif
Rfdg....................................... 3.250 06/01/31 998,400
------------
</Table>
16 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
NEW HAMPSHIRE 0.7%
$ 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev
Havenwood-Heritage Heights................. 7.350% 01/01/18 $ 2,044,840
2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev
Havenwood-Heritage Heights................. 7.450 01/01/25 2,038,120
1,000 New Hampshire Hlth & Ed Fac Auth Rev NH
College Issue.............................. 7.500 01/01/31 1,085,070
1,000 New Hampshire St Business Fin Auth Rev
Alice Peck Day Hlth Sys Ser A.............. 6.875 10/01/19 1,009,020
------------
6,177,050
------------
NEW JERSEY 4.9%
2,240 Camden Cnty, NJ Impt Auth Lease Rev
Dockside Refrig (Acquired 01/29/97, Cost
$2,333,391) (a) (b) (c).................... 8.400 04/01/24 1,836,800
1,940 New Jersey Econ Dev Auth Asstd Living
Rev........................................ 6.750 08/01/30 1,742,702
2,000 New Jersey Econ Dev Auth Cedar Crest Vlg
Inc Fac Ser A.............................. 7.000 11/15/16 2,043,960
2,000 New Jersey Econ Dev Auth Continental Airl
Inc Proj................................... 6.250 09/15/19 1,694,120
2,000 New Jersey Econ Dev Auth First Mtg
Franciscan Oaks Proj....................... 5.700 10/01/17 1,859,840
1,000 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.000 11/15/15 1,081,800
1,000 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.125 11/15/18 1,058,690
1,440 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.125 11/15/23 1,556,323
1,000 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06).................................. 8.500 11/01/16 1,181,550
1,500 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06).................................. 8.625 11/01/25 1,776,855
1,580 New Jersey Econ Dev Auth Rev Kullman Assoc
Proj Ser A................................. 6.125 06/01/18 1,352,606
2,000 New Jersey Econ Dev Auth Rev Sr Living Fac
Esplanade Bear............................. 7.000 06/01/39 1,675,160
3,000 New Jersey Econ Dev Auth Rev Sr Mtg Arbor
Glen Proj Ser A (Prerefunded @ 05/15/06)... 8.750 05/15/26 3,503,670
4,030 New Jersey Econ Dev Auth Spl Fac Rev
Continental Airl Inc Proj.................. 6.400 09/15/23 3,367,871
4,000 New Jersey Econ Dev Auth Spl Fac Rev
Continental Airl Inc Proj.................. 6.250 09/15/29 3,218,080
10,000 New Jersey Econ Dev Auth Tics Ser 1 (AMBAC
Insd) (Acquired 01/21/04, Cost $11,423,683)
(c)........................................ 8.837 03/01/11 11,353,500
</Table>
See Notes to Financial Statements 17
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
NEW JERSEY (CONTINUED)
$ 1,010 New Jersey Hlthcare Fac Fin Auth Rev
Raritan Bay Med Ctr Issue Rfdg............. 7.250% 07/01/14 $ 1,045,401
1,060 New Jersey St Ed Fac Auth Rev Felician
College of Lodi Ser D (Acquired 11/07/97,
Cost $1,060,000) (c)....................... 7.375 11/01/22 1,074,851
------------
42,423,779
------------
NEW MEXICO 0.6%
4,155 Albuquerque, NM Retirement Fac Rev La Vida
Llena Proj Ser B Rfdg...................... 6.600 12/15/28 4,114,489
1,030 New Mexico Hsg Auth Region III Sr Brentwood
Gardens Apt Ser A.......................... 6.850 12/01/31 1,000,068
------------
5,114,557
------------
NEW YORK 6.4%
985 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van
Allen Proj Ser A........................... 6.875 06/01/39 889,997
1,400 Brookhaven, NY Indl Dev Agy Sr Residential
Hsg Rev Woodcrest Estates Fac Ser A........ 6.375 12/01/37 1,306,746
3,500 Dutchess Cnty, NY Indl Dev Agy Saint
Francis Hosp Ser A Rfdg (d)................ 7.500 03/01/29 3,484,040
2,220 Monroe Cnty, NY Indl Dev Agy Woodland Vlg
Proj....................................... 8.000 11/15/15 2,373,469
3,000 New York City Indl Dev Agy JFK Intl Arpt
Proj Ser B................................. 8.500 08/01/28 2,400,000
10,000 New York City Muni Wtr Fin Fiscal 2004 Ser
C.......................................... 5.000 06/15/22 10,593,900
5,000 New York City Ser A........................ 7.000 08/01/07 5,606,450
2,130 New York City Ser D........................ 8.000 02/01/05 2,247,001
870 New York City Ser D (Escrowed to
Maturity).................................. 8.000 02/01/05 920,025
5,000 New York City Ser I (MBIA Insd) (d)........ 5.000 08/01/17 5,452,700
5,000 New York City Transitional Drivers Ser 386
(Acquired 02/02/04, Cost $5,451,630) (c)... 8.660 02/01/12 5,593,000
2,500 New York St Energy Resh & Dev Auth Gas Fac
Rev (Inverse Fltg) (h)..................... 11.509 04/01/20 3,207,875
1,980 Saratoga Cnty, NY Indl Dev Agy Sr Hsg Rev
Highpointe at Malta Proj Ser A............. 6.875 06/01/39 1,815,759
1,000 Suffolk Cnty, NY Indl Dev Agy Continuing
Care Retirement Cmnty Rev.................. 7.250 11/01/28 1,051,590
980 Suffolk Cnty, NY Indl Dev Agy Eastern Long
Is Hosp Assoc Ser A........................ 7.750 01/01/22 993,269
1,400 Suffolk Cnty, NY Indl Dev Agy Indl Dev Rev
Spellman High Voltage Fac Ser A............ 6.375 12/01/17 1,256,556
1,445 Suffolk Cnty, NY Indl Dev Agy Peconic
Landing Ser A.............................. 8.000 10/01/20 1,506,384
1,000 Syracuse, NY Indl Dev Agy Rev First Mtg
Jewish Home Ser A.......................... 7.375 03/01/31 1,027,810
</Table>
18 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 2,315 Utica, NY Indl Dev Agy Civic Utica College
Civic Fac.................................. 6.750% 12/01/21 $ 2,340,071
1,000 Westchester Cnty, NY Indl Dev Hebrew Hosp
Sr Hsg Inc Ser A........................... 7.375 07/01/30 1,068,270
------------
55,134,912
------------
NORTH CAROLINA 1.6%
2,000 North Carolina Med Care Commn First Mtg
United Methodist Homes..................... 7.000 10/01/17 2,081,280
10,000 North Carolina St Rites PA 1246 (Acquired
03/16/04, Cost $11,851,983) (c)............ 8.761 03/01/12 11,428,700
------------
13,509,980
------------
NORTH DAKOTA 0.3%
2,000 Grand Forks, ND Sr Hsg Rev Spl Term 4000
Vly Square Proj............................ 6.250 12/01/34 1,885,720
960 Grand Forks, ND Sr Hsg Rev Spl Term 4000
Vly Square Proj............................ 6.375 12/01/34 920,698
------------
2,806,418
------------
OHIO 2.6%
5,000 Athens Cnty, OH Hosp Fac Rev Impt O'Bleness
Mem Ser A Rfdg............................. 7.125 11/15/33 5,111,450
3,000 Cleveland-Cuyahoga Cnty, OH Spl Assmt/ Tax
Increment.................................. 7.000 12/01/18 3,148,860
623 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park
Lane Apts Ser A1 Rfdg (f).................. 6.000/7.625 10/01/37 463,561
1,081 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park
Lane Apts Ser A2 Rfdg (a).................. 5.460 10/01/37 24,330
5,000 Cuyahoga Cnty, OH Rev Ser A Rfdg........... 6.000 01/01/32 5,422,100
1,760 Dayton, OH Spl Fac Rev Afco Cargo Day LLC
Proj....................................... 6.300 04/01/22 1,536,797
2,650 Erie Cnty, OH Hosp Fac Rev Firelands Regl
Med Ctr Ser A.............................. 5.625 08/15/32 2,774,365
1,500 Lucas Cnty, OH Hlthcare & Impt Sunset
Retirement Rfdg............................ 6.500 08/15/20 1,605,645
2,905 Madison Cnty, OH Hosp Impt Rev Madison Cnty
Hosp Proj Rfdg............................. 6.400 08/01/28 2,715,797
------------
22,802,905
------------
OKLAHOMA 1.7%
685 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A............................ 7.000 08/01/10 685,774
750 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A............................ 7.400 08/01/17 742,080
1,000 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A............................ 7.625 08/01/20 995,230
1,000 Oklahoma Cnty, OK Fin Auth Epworth Villa
Proj Ser A Rfdg............................ 7.000 04/01/25 1,012,990
</Table>
See Notes to Financial Statements 19
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
OKLAHOMA (CONTINUED)
$ 1,065 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg.................... 5.750% 08/15/12 $ 955,443
1,000 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg.................... 5.750 08/15/15 873,120
4,000 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg.................... 5.625 08/15/19 3,347,680
3,250 Tulsa Cnty, OK Pub Fac Auth (AMBAC Insd)... 6.250 11/01/22 3,856,808
3,000 Tulsa, OK Muni Arpt Tr Rev Amern Airl Proj
Rfdg....................................... 6.250 06/01/20 2,590,290
------------
15,059,415
------------
OREGON 0.9%
2,000 Clackamas Cnty, OR Hosp Fac Willamette View
Inc Proj Ser A............................. 7.500 11/01/29 2,130,480
2,145 Clatsop Care Ctr Hlth Dist OR Rev Sr Hsg... 6.875 08/01/28 2,161,645
3,878 Oregon St Hlth Hsg Ed & Cultural Fac
Auth....................................... 7.250 06/01/28 3,811,893
------------
8,104,018
------------
PENNSYLVANIA 7.9%
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/15 2,215,500
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/22 2,215,500
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/30 2,215,500
2,000 Allegheny Cnty, PA Indl Dev Auth Lease
Rev........................................ 6.625 09/01/24 1,841,820
6,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl
Rev Collateral Toledo Edison Co Proj Ser A
Rfdg....................................... 7.750 05/01/20 6,615,120
1,000 Berks Cnty, PA Muni Auth Rev Phoebe Berks
Vlg Inc Proj Rfdg (Prerefunded @
05/15/06).................................. 7.700 05/15/22 1,141,600
1,000 Bucks Cnty, PA Indl Dev Auth Rev First Mtg
Hlthcare Fac Chandler...................... 6.200 05/01/19 960,790
1,500 Chester Cnty, PA Hlth & Ed Fac Chester Cnty
Hosp Ser A................................. 6.750 07/01/31 1,492,200
2,500 Cliff House Ctf Trust Var Sts Ctf Part Ser
A.......................................... 6.625 06/01/27 2,038,600
2,000 Cumberland Cnty, PA Indl Dev Auth Rev First
Mtg Woods Cedar Run Ser A Rfdg (a)......... 6.500 11/01/28 1,410,600
5,000 Dauphin Cnty, PA Gen Auth Rev Hotel & Conf
Ctr Hyatt Regency (Acquired 08/04/98, Cost
$4,876,575) (c)............................ 6.200 01/01/29 3,406,300
3,000 Dauphin Cnty, PA Gen Auth Rev Office & Pkg
Riverfront Office.......................... 6.000 01/01/25 2,764,470
1,000 Lancaster Cnty, PA Hosp Auth Rev Hlth Ctr
Saint Anne's Home.......................... 6.625 04/01/28 1,003,870
1,200 Lehigh Cnty, PA Gen Purp Auth First Mtg
Bible Fellowship Church.................... 7.625 11/01/21 1,305,048
2,000 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace
Oblig Group Rfdg........................... 6.000 11/01/23 2,003,420
1,000 Lehigh Cnty, PA Indl Dev Auth Hlth Fac Rev
Lifepath Inc Proj.......................... 6.100 06/01/18 900,730
</Table>
20 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
$ 2,000 Montgomery Cnty, PA Higher Ed & Temple
Continuing Care Ctr (a).................... 6.750% 07/01/29 $ 401,800
500 Montgomery Cnty, PA Indl Dev Auth Rev First
Mtg The Meadowood Corp Rfdg................ 7.000 12/01/10 520,545
2,500 Montgomery Cnty, PA Indl Dev Auth Rev First
Mtg The Meadowood Corp Rfdg................ 7.250 12/01/15 2,540,475
6,000 Montgomery Cnty, PA Indl Dev Auth Rev First
Mtg The Meadowood Corp Rfdg................ 7.400 12/01/20 6,112,560
925 Montgomery Cnty, PA Indl Dev Auth Rev
Wordsworth Academy......................... 7.750 09/01/24 933,501
1,435 Northeastern PA Hosp & Ed Auth Hlthcare
Rev........................................ 7.125 10/01/29 1,405,310
3,000 Pennsylvania Econ Dev Fin Auth Res Recovery
Rev Colver Proj Ser D...................... 7.050 12/01/10 3,119,550
5,675 Pennsylvania St Drivers Ser 396 (Acquired
03/01/04, Cost $6,920,703) (c)............. 9.180 10/15/09 6,743,716
980 Pennsylvania St Higher Ed Student Assn Inc
Proj Ser A................................. 6.750 09/01/32 1,024,923
2,150 Philadelphia, PA Auth Indl Dev Rev Coml Dev
Rfdg....................................... 7.750 12/01/17 2,183,196
4,105 Philadelphia, PA Gas Wks Rev Drivers Ser
384 (FSA Insd) (Acquired 01/20/04, Cost
$4,938,634) (c)............................ 9.380 07/01/11 4,917,585
1,500 Scranton Lackawanna, PA Hlth & Welfare Auth
Rev Rfdg................................... 7.250 01/15/17 1,485,015
2,000 Scranton Lackawanna, PA Hlth & Welfare Auth
Rev Rfdg................................... 7.350 01/15/22 1,976,260
1,500 Westmoreland Cnty, PA Indl Dev Hlthcare Fac
Redstone Ser B............................. 8.000 11/15/23 1,627,485
------------
68,522,989
------------
RHODE ISLAND 0.3%
1,825 Rhode Island St Econ Dev Corp Rev Oblig
Providence Place........................... 7.250 07/01/20 1,791,128
1,000 Rhode Island St Health & Ed Hosp Fin Ser
A.......................................... 6.000 09/15/33 1,016,530
------------
2,807,658
------------
SOUTH CAROLINA 0.4%
115 Charleston Cnty, SC Ctf Part Ser B (MBIA
Insd)...................................... 7.000 06/01/19 118,380
1,000 Oconee Cnty, SC Indl Rev Bond Johnson Ctl
Inc Ser 84................................. 3.198 06/15/04 1,014,250
2,000 South Carolina Jobs Econ Dev First Mtg
Westley Commons Proj....................... 7.750 10/01/24 1,850,120
------------
2,982,750
------------
</Table>
See Notes to Financial Statements 21
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
SOUTH DAKOTA 0.4%
$ 355 Keystone, SD Econ Dev Rev Wtr Quality Mgmt
Corp Ser A................................. 5.500% 12/15/08 $ 341,837
1,760 Keystone, SD Econ Dev Rev Wtr Quality Mgmt
Corp Ser A................................. 6.000 12/15/18 1,583,648
1,500 Sioux Falls, SD Multi-Family Hsg Inn
Westport Proj Ser A (Acquired 01/26/04,
Cost $1,508,197) (c)....................... 7.500 12/01/34 1,519,590
------------
3,445,075
------------
TENNESSEE 2.0%
3,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg
(MBIA Insd)................................ 7.750 07/01/29 3,930,900
1,000 Johnson City, TN Hlth & Ed First Mtg Mtn
States Hlth Ser A Rfdg..................... 7.500 07/01/33 1,152,800
2,965 SCA Tax Exempt Trust Multi-Family Mtg
Memphis Hlth Ed Rev Ser A6 (FSA Insd)...... 7.350 01/01/30 3,077,018
5,495 Sullivan Cnty, TN Hlth Ed & Hsg Fac Brd
Rev........................................ 8.410 11/01/19 5,499,836
2,900 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj
Ser A (Acquired 06/08/89, Cost
$2,900,000) (c)............................ 10.000 11/01/19 3,097,983
1,160 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj
Ser B (Acquired 06/08/89, Cost $1,160,000)
(a) (b) (c)................................ 10.000 11/01/20 116,000
------------
16,874,537
------------
TEXAS 8.3%
680 Abia Dev Corp TX Arpt Fac Rev Austin Belly
Port Dev LLC Proj Ser A.................... 6.250 10/01/08 661,110
3,000 Abia Dev Corp TX Arpt Fac Rev Austin Belly
Port Dev LLC Proj Ser A.................... 6.500 10/01/23 2,715,030
1,000 Atlanta, TX Hosp Auth Fac Rev.............. 6.700 08/01/19 973,770
2,035 Atlanta, TX Hosp Auth Fac Rev.............. 6.750 08/01/29 1,956,164
1,000 Austin-Bergstorm Landhost Enterprises Inc
TX Arpt Hotel Sr Ser A..................... 6.750 04/01/27 619,970
1,960 Bell Cnty, TX Indl Dev Corp Solid Waste
Disposal Rev............................... 7.600 12/01/17 683,903
1,000 Bexar Cnty, TX Hsg Fin Corp Multi-Family
Hsg Rev Woodland Ridge Apt Proj Ser A...... 7.000 01/01/39 983,210
2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp..... 5.375 01/01/32 2,048,620
735 Comal Cnty, TX Hlth Fac Dev Hlthcare Sys
McKenna Mem Proj Ser A..................... 6.250 02/01/32 761,857
1,825 Dallas Cnty, TX Flood Ctl Dist No 1 Cap
Apprec Rfdg (Acquired 08/28/89, Cost
$973,952) (c).............................. * 08/01/11 1,058,701
3,445 Dallas Cnty, TX Flood Ctl Dist No 1 Rfdg... 7.250 04/01/32 3,584,488
2,970 Dallas, TX Wtrwks & Swr Sys Rev Rfdg....... 5.750 10/01/17 3,411,847
2,500 Garland, TX Indl Dev Auth Rev Bond Ashland
Oil Proj Ser 84 Rfdg....................... 8.920 04/01/04 2,500,000
</Table>
22 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$ 6,400 Houston, TX Arpt Sys Rev Spl Fac
Continental Airl Ser B..................... 6.125% 07/15/17 $ 5,327,104
3,000 Houston, TX Arpt Sys Rev Spl Fac
Continental Airl Ser C..................... 5.700 07/15/29 2,187,390
1,750 Houston, TX Arpt Sys Rev Sub Lien Ser A
(FSA Insd)................................. 5.125 07/01/32 1,787,993
1,000 Houston, TX Hlth Facs Dev Corp Buckingham
Sr Living Cmnty Ser A...................... 7.125 02/15/34 1,013,470
8,880 Lower CO River Auth TX Rev Ser A Rfdg
(Inverse Fltg) (FSA Insd) (Acquired
10/20/99, Cost $9,026,585) (c)............. 10.389 05/15/14 11,622,588
3,750 Lower CO River Auth TX Rev Ser A Rfdg
(Inverse Fltg) (FSA Insd) (Acquired
10/20/99, Cost $3,784,875) (c)............. 10.389 05/15/15 4,886,063
1,445 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg
Carillon Proj Ser A........................ 6.500 07/01/19 1,098,951
2,295 Meadow Parc Dev Inc TX Multi-Family Rev Hsg
Meadow Parc Apt Proj....................... 6.500 12/01/30 2,130,953
2,500 Metropolitan Hlth Fac Dev Corp TX Wilson N
Jones Mem Hosp Proj........................ 7.250 01/01/31 2,413,375
2,880 Midlothian, TX Dev Auth Tax Increment
Contract Rev............................... 6.700 11/15/23 2,961,619
2,000 Midlothian, TX Dev Auth Tax Increment
Contract Rev............................... 7.875 11/15/26 2,229,080
250 San Antonio, TX Hlth Fac Dev Corp Rev
Encore Nursing Ctr Part.................... 8.250 12/01/19 253,233
1,732 Texas Gen Svcs Comm Part Interests......... 7.250 08/01/11 1,763,273
2,450 Texas St Dept Hsg & Cmnty Affairs Home Mtg
Rev (Inverse Fltg) (h) (GNMA
Collateralized)............................ 6.900 07/02/24 2,536,853
465 Texas St Higher Ed Coordinating Brd College
Student Ln Rev............................. 7.849 10/01/25 465,721
1,500 Texas St Student Hsg Corp MSU Proj
Midwestern St Univ......................... 6.500 09/01/34 1,598,535
1,750 Tomball, TX Hosp Auth Rev Hosp Tomball Regl
Hosp....................................... 6.000 07/01/29 1,796,830
985 Wichita Cnty,TX Hlth Fac Rolling Meadows
Fac Ser A Rfdg............................. 6.250 01/01/28 980,656
2,500 Woodhill Pub Fac Corp TX Hsg-Woodhill Apt
Proj....................................... 7.500 12/01/29 2,474,350
------------
71,486,707
------------
UTAH 0.1%
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (a)................................... 7.800 09/01/15 313,750
1,165 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (a)................................... 8.000 09/01/20 365,519
</Table>
See Notes to Financial Statements 23
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
UTAH (CONTINUED)
$ 1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (a)................................... 7.800% 09/01/25 $ 313,750
140 Utah St Hsg Fin Agy Single Family Mtg Mezz
A1 (AMBAC Insd)............................ 6.100 07/01/13 147,385
------------
1,140,404
------------
VERMONT 0.3%
1,015 Vermont Ed & Hlth Bldg Fin Agy Rev Hlthcare
Fac Copley Manor Proj (a).................. 6.250 04/01/29 455,644
1,000 Vermont Ed & Hlth Bldg Fin Agy Rev VT
Council Dev Mental Hlth Ser A.............. 6.000 12/15/09 1,123,660
1,000 Vermont Ed & Hlth Bldg Fin Bennington
College Proj............................... 6.625 10/01/29 1,014,220
------------
2,593,524
------------
VIRGINIA 1.6%
1,000 Greensville Cnty, VA Indl Dev Wheeling
Steel Proj Ser A........................... 7.000 04/01/14 675,610
2,500 Henrico Cnty, VA Econ Dev Auth Residential
Care Fac Rev Utd Methodist Ser A Rfdg...... 6.500 06/01/22 2,561,050
6,000 Peninsula Port Auth VA Residential Care Fac
Rev VA Baptist Homes Ser A................. 7.375 12/01/32 6,340,800
1,500 Pittsylvania Cnty, VA Indl Dev Auth Rev
Exempt Fac Ser A (Acquired 04/15/97, Cost
$1,534,146) (c)............................ 7.450 01/01/09 1,490,550
1,000 Roanoke Cnty, VA Indl Dev Auth Glebe Inc
Ser A...................................... 6.300 07/01/35 1,022,220
1,700 Virginia Small Business Fin Auth Rev Indl
Dev SIL Clean Wtr Proj..................... 7.250 11/01/24 1,698,402
------------
13,788,632
------------
WASHINGTON 1.3%
6,580 Energy Northwest WA Elec Rev Proj No 3 Ser
A Rfdg (FSA Insd).......................... 5.500 07/01/17 7,321,698
1,000 King Cnty, WA Pub Hosp Dist No 004
Snoqualmie Vly Hosp........................ 7.250 12/01/15 1,039,000
1,000 Port Seattle, WA Spl Fac Rev Northwest Airl
Proj....................................... 7.125 04/01/20 945,870
2,000 Port Seattle, WA Spl Fac Rev Northwest Airl
Proj....................................... 7.250 04/01/30 1,843,000
------------
11,149,568
------------
WISCONSIN 1.2%
800 Baldwin, WI Hosp Rev Mtg Ser A............. 6.125 12/01/18 801,864
1,000 Baldwin, WI Hosp Rev Mtg Ser A............. 6.375 12/01/28 1,003,930
1,750 Milwaukee, WI Rev Sr Air Cargo............. 6.500 01/01/25 1,803,883
3,000 Wisconsin St Hlth & Ed Fac Auth Rev
Milwaukee Catholic Home Inc Proj........... 7.500 07/01/26 3,032,370
</Table>
24 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
WISCONSIN (CONTINUED)
$ 1,000 Wisconsin St Hlth & Ed Fac Auth Rev Oakwood
Vlg Proj Ser A............................. 7.625% 08/15/30 $ 1,042,140
1,000 Wisconsin St Hlth & Ed Fac Divine Savior
Hlthcare Ser C............................. 7.500 05/01/32 1,053,050
1,500 Wisconsin St Hlth & Ed Fac Southwest Hlth
Ctr Ser A (d).............................. 6.125 04/01/24 1,482,810
------------
10,220,047
------------
WYOMING 0.2%
1,500 Teton Cnty, WY Hosp Dist Hosp Saint Johns
Med Ctr.................................... 6.750 12/01/27 1,525,005
------------
PUERTO RICO 0.2%
2,465 Puerto Rico Port Auth Rev Spl Fac Amern
Airl Ser A................................. 6.250 06/01/26 1,756,386
------------
U. S. VIRGIN ISLANDS 0.3%
2,500 Northern Mariana Islands Ser A............. 7.375 06/01/30 2,592,050
------------
TOTAL MUNICIPAL BONDS 93.7%
(Cost $833,830,295)........................................................... 809,481,670
------------
Description
EQUITIES 0.0%
Mobile Energy Services Co. LLC (795 Common Shares) (c) (e)...................... 0
------------
TOTAL LONG-TERM INVESTMENTS 93.7%
(Cost $833,830,295)........................................................... 809,481,670
------------
SHORT-TERM INVESTMENTS 7.3%
9,650 Atlanta, GA Wtr & Wastewtr Rev Ser C (FSA
Insd) (i).................................. 1.100 11/01/41 9,650,000
3,800 Farmington, NM Pollutn Ctl Rev AZ Pub Svc
Co Ser B Rfdg (i).......................... 1.100 09/01/24 3,800,000
5,700 Hapeville, GA Dev Auth Indl Dev Rev
Hapeville Hotel Ltd (i).................... 1.080 11/01/15 5,700,000
1,900 Illinois Dev Fin Auth Rev Saint Augustine
College Proj (i)........................... 1.100 11/01/31 1,900,000
3,100 Long Island Pwr Auth NY Elec Sub Ser 2
(i)........................................ 1.100 05/01/33 3,100,000
14,320 Massachusetts St Hlth & Ed Fac Auth Rev
Assets Prog Ser D (MBIA Insd) (i).......... 1.080 01/01/35 14,320,000
3,600 Nebraska Ed Fin Auth Rev Creighton Univ
Proj (AMBAC Insd) (i)...................... 1.120 03/01/33 3,600,000
</Table>
See Notes to Financial Statements 25
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONTINUED)
$ 2,500 New York City Adj Ser H Sub Ser H 3 (FSA
Insd) (i).................................. 1.100% 08/01/23 $ 2,500,000
1,500 New York City Muni Wtr Fin Auth Wtr & Swr
Sys Rev Adj Ser G (FGIC Insd) (i).......... 1.100 06/15/24 1,500,000
10,000 New York City Var Sub Ser A-7 (i).......... 1.100 08/01/20 10,000,000
1,600 Orange Cnty, FL Sch Brd Ctfs Ser B (MBIA
Insd) (i).................................. 1.100 08/01/27 1,600,000
2,000 South Dakota St Health & Ed Rapid City
Regional Hosp (MBIA Insd) (i).............. 1.120 09/01/27 2,000,000
3,400 Uinta Cnty, WY Pollutn Ctl Rev Chevron USA
Inc Proj Rfdg (i).......................... 1.100 08/15/20 3,400,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $63,070,000)............................................................ 63,070,000
------------
TOTAL INVESTMENTS 101.0%
(Cost $896,900,295)........................................................... 872,551,670
LIABILITIES IN EXCESS OF OTHER ASSETS (1.0%)................................... (8,996,579)
------------
NET ASSETS 100.0%.............................................................. $863,555,091
============
</Table>
* Zero coupon bond
(a) Non-income producing security.
(b) This borrower has filed for protection in federal bankruptcy court.
(c) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 15.8% of net
assets.
(d) Securities purchased on a when-issued or delayed delivery basis.
(e) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(f) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(g) Payment-in-kind security.
(h) An Inverse Floating Rate security is one where the coupon is inversely
indexed to a short-term floating interest rate multiplied by a specific
factor. As the floating rate rises, the coupon is reduced. Conversely, as
the floating rate declines, the coupon is increased. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. These instruments are typically used by the Fund to enhance the
yield of the portfolio. All of the Fund's portfolio holdings including
derivative instruments, are marked to market each day with the change in
value reflected in the
26 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
unrealized appreciation/depreciation. Upon disposition a realized gain or
loss is recognized accordingly.
(i) Security includes a put feature allowing the fund to periodically put the
security back to the issuer at amortized cost on specified put dates. The
interest rate shown represents the current interest rate earned by the Fund
based on the most recent reset date.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements 27
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $896,900,295)....................... $872,551,670
Cash........................................................ 131,181
Receivables:
Fund Shares Sold.......................................... 17,498,428
Interest.................................................. 16,050,822
Investments Sold.......................................... 1,189,000
Other....................................................... 151,748
------------
Total Assets............................................ 907,572,849
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 40,219,005
Fund Shares Repurchased................................... 1,315,824
Income Distributions...................................... 1,263,292
Distributor and Affiliates................................ 521,230
Investment Advisory Fee................................... 325,983
Trustees' Deferred Compensation and Retirement Plans........ 208,406
Accrued Expenses............................................ 164,018
------------
Total Liabilities....................................... 44,017,758
------------
NET ASSETS.................................................. $863,555,091
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $977,262,762
Accumulated Undistributed Net Investment Income............. 4,140,044
Net Unrealized Depreciation................................. (24,348,625)
Accumulated Net Realized Loss............................... (93,499,090)
------------
NET ASSETS.................................................. $863,555,091
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $675,285,804 and 51,473,713 shares of
beneficial interest issued and outstanding)............. $ 13.12
Maximum sales charge (4.75%* of offering price)......... .65
------------
Maximum offering price to public........................ $ 13.77
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $124,830,467 and 9,520,246 shares of
beneficial interest issued and outstanding)............. $ 13.11
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $63,438,820 and 4,803,733 shares of
beneficial interest issued and outstanding)............. $ 13.21
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
28 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 24,933,298
------------
EXPENSES:
Investment Advisory Fee..................................... 1,770,329
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $702,451, $577,907 and $193,682,
respectively)............................................. 1,474,040
Legal....................................................... 271,760
Shareholder Services........................................ 232,109
Custody..................................................... 30,657
Trustees' Fees and Related Expenses......................... 14,163
Other....................................................... 214,705
------------
Total Expenses.......................................... 4,007,763
------------
NET INVESTMENT INCOME....................................... $ 20,925,535
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (9,856,461)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (37,860,779)
End of the Period......................................... (24,348,625)
------------
Net Unrealized Appreciation During the Period............... 13,512,154
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 3,655,693
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 24,581,228
============
</Table>
See Notes to Financial Statements 29
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 20,925,535 $ 43,426,498
Net Realized Loss.................................... (9,856,461) (3,546,709)
Net Unrealized Appreciation/Depreciation During the
Period............................................. 13,512,154 (11,454,464)
------------ -------------
Change in Net Assets from Operations................. 24,581,228 28,425,325
------------ -------------
Distributions from Net Investment Income:
Class A Shares..................................... (16,496,418) (31,090,893)
Class B Shares..................................... (2,878,869) (6,152,493)
Class C Shares..................................... (974,251) (1,735,013)
------------ -------------
Total Distributions.................................. (20,349,538) (38,978,399)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 4,231,690 (10,553,074)
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 187,001,977 55,882,726
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 13,117,286 24,291,545
Cost of Shares Repurchased........................... (51,572,953) (125,918,977)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 148,546,310 (45,744,706)
------------ -------------
TOTAL INCREASE/DECREASE IN NET ASSETS................ 152,778,000 (56,297,780)
NET ASSETS:
Beginning of the Period.............................. 710,777,091 767,074,871
------------ -------------
End of the Period (Including accumulated
undistributed net investment income of $4,140,044
and $3,564,047, respectively)...................... $863,555,091 $ 710,777,091
============ =============
</Table>
30 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS A SHARES MARCH 31, ------------------------------------------------
2004 2003 2002 (A) 2001 2000 1999
-------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $13.03 $13.21 $13.25 $13.27 $13.91 $15.08
------ ------ ------ ------ ------ ------
Net Investment Income............ .38 .79 .78 .77 .77 .81
Net Realized and Unrealized
Gain/Loss...................... .09 (.25) (.11) (.05) (.63) (1.17)
------ ------ ------ ------ ------ ------
Total from Investment Operations... .47 .54 .67 .72 .14 (.36)
Less Distributions from Net
Investment Income................ .38 .72 .71 .74 .78 .81
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD........................... $13.12 $13.03 $13.21 $13.25 $13.27 $13.91
====== ====== ====== ====== ====== ======
Total Return (b)................... 3.61%* 4.21% 5.28% 5.46% 1.27% -2.51%
Net Assets at End of the Period (In
millions)........................ $675.3 $560.9 $579.1 $607.1 $621.5 $745.2
Ratio of Expenses to Average Net
Assets........................... .94% .89% .86% .87% .91% .96%
Ratio of Net Investment Income to
Average Net Assets............... 5.88% 6.07% 5.99% 5.88% 5.91% 5.46%
Portfolio Turnover................. 11%* 14% 14% 22% 37% 77%
</Table>
* Non-Annualized
(a) As required, effective October 31, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01 and increase the ratio of net
investment income to average net assets from 5.95% to 5.99%. Per share,
ratios and supplemental data for periods prior to September 30, 2002 have
not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees of up to .25% and do not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares.
See Notes to Financial Statements 31
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS B SHARES MARCH 31, -------------------------------------------------
2004 (c) 2003 (c) 2002 (a) 2001 2000 1999
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $13.02 $13.20 $13.24 $13.27 $13.90 $15.07
------ ------ ------ ------ ------ ------
Net Investment Income........... .33 .69 .70 .68 .69 .69
Net Realized and Unrealized
Gain/Loss..................... .09 (.25) (.12) (.06) (.64) (1.16)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .42 .44 .58 .62 .05 (.47)
Less Distributions from Net
Investment Income............... .33 .62 .62 .65 .68 .70
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $13.11 $13.02 $13.20 $13.24 $13.27 $13.90
====== ====== ====== ====== ====== ======
Total Return (b).................. 3.22%* 3.42% 4.49% 4.71% .48% -3.25%
Net Assets at End of the Period
(In millions)................... $124.8 $115.6 $149.5 $176.5 $221.4 $282.5
Ratio of Expenses to Average Net
Assets.......................... 1.69% 1.64% 1.62% 1.63% 1.67% 1.73%
Ratio of Net Investment Income to
Average Net Assets.............. 5.14% 5.32% 5.23% 5.12% 5.15% 4.70%
Portfolio Turnover................ 11%* 14% 14% 22% 37% 77%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01, and increase the ratio of net
investment income to average net assets from 5.19% to 5.23%. Per share,
ratios and supplemental data for periods prior to September 30, 2002 have
not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4% charged on certain redemptions
made within one year of purchase and declining to 0% after the sixth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of up to 1% and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) Based on average shares outstanding.
32 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS C SHARES MARCH 31, -------------------------------------------------
2004 (d) 2003 (d) 2002 (a) 2001 2000 1999
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $13.11 $13.20 $13.24 $13.27 $13.90 $15.07
------ ------ ------ ------ ------ ------
Net Investment Income........... .32 .79 .70 .68 .69 .69
Net Realized and Unrealized
Gain/Loss..................... .10 (.26) (.12) (.06) (.64) (1.16)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .42 .53 .58 .62 .05 (.47)
Less Distributions from Net
Investment Income............... .32 .62 .62 .65 .68 .70
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $13.21 $13.11 $13.20 $13.24 $13.27 $13.90
====== ====== ====== ====== ====== ======
Total Return (b).................. 3.27%*(e) 4.10%(c) 4.49% 4.71% .48% -3.25%
Net Assets at End of the Period
(In millions)................... $ 63.4 $ 34.3 $ 38.5 $ 44.4 $ 49.1 $ 61.5
Ratio of Expenses to Average Net
Assets.......................... 1.70%(e) 1.64% 1.62% 1.62% 1.67% 1.73%
Ratio of Net Investment Income to
Average Net Assets.............. 5.10%(e) 6.00%(c) 5.23% 5.13% 5.15% 4.69%
Portfolio Turnover................ 11%* 14% 14% 22% 37% 77%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01, and increase the ratio of net
investment income to average net assets from 5.19% to 5.23%. Per share,
ratios and supplemental data for periods prior to September 30, 2002 have
not been restated to reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .68% and .69%, respectively.
(d) Based on average shares outstanding.
(e) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect the refund of certain 12b-1
fees during the period.
See Notes to Financial Statements 33
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Strategic Municipal Income Fund (the "Fund") is organized as a series
of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered
as a diversified, open-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment
objective is to provide investors a high level of current income exempt from
federal income tax primarily through investment in a diversified portfolio of
medium- and lower-grade municipal securities. The Fund commenced investment
operations on June 28, 1985. The distribution of the Fund's Class B and Class C
shares commenced on April 30, 1993 and August 13, 1993, respectively. Effective
November 30, 2003, the Fund's investment adviser, Van Kampen Investment Advisory
Corp. merged into its affiliate, Van Kampen Asset Management.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund 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 Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At March 31, 2004, the Fund had $40,219,055 of when-issued or
delayed delivery purchase commitments.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security. Income and expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund'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.
34
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
The Fund 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 these losses against any future realized capital
gains. At September 30, 2003, the Fund had an accumulated capital loss
carryforward for tax purposes of $78,989,131 which expires between September 30,
2004 and September 30, 2011. Of this amount, $9,606,294 will expire on September
30, 2004.
At March 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $898,681,907
============
Gross tax unrealized appreciation........................... $ 31,851,313
Gross tax unrealized depreciation........................... (57,981,550)
------------
Net tax unrealized depreciation on investments.............. $(26,130,237)
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes.
The tax character of distributions paid during the year ended September 30,
2003 was as follows:
<Table>
Distributions paid from:
Ordinary income........................................... $113,206
Long-term capital gain.................................... -0-
--------
$113,206
========
</Table>
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $103,011
</Table>
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses related to wash sale
transactions and the capitalization of reorganization and restructuring costs,
and losses recognized for tax purposes but not for book purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") will provide investment advice and facilities to the
Fund for an annual fee payable monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .50%
Over $500 million........................................... .45%
</Table>
35
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
For the six months ended March 31, 2004, the Fund recognized expenses of
approximately $14,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Fund. The Adviser
allocates the cost of such services to each fund. For the six months ended March
31, 2004, the Fund recognized expenses of approximately $57,200 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, which are reported as part
of "Other" and "Legal" expenses in the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the six months ended
March 31, 2004, the Fund recognized expenses of approximately $180,100
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund 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.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $131,937 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2004.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
36
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2004, capital aggregated $765,522,169, $144,443,539 and $67,297,054
for Classes A, B and C, respectively. For the six months ended March 31, 2004,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 10,368,220 $136,506,460
Class B................................................... 1,456,399 19,131,733
Class C................................................... 2,366,535 31,363,784
---------- ------------
Total Sales................................................. 14,191,154 $187,001,977
========== ============
Dividend Reinvestment:
Class A................................................... 828,766 $ 10,844,479
Class B................................................... 125,091 1,635,510
Class C................................................... 48,367 637,297
---------- ------------
Total Dividend Reinvestment................................. 1,002,224 $ 13,117,286
========== ============
Repurchases:
Class A................................................... (2,776,249) $(36,287,800)
Class B................................................... (938,348) (12,259,069)
Class C................................................... (229,832) (3,026,084)
---------- ------------
Total Repurchases........................................... (3,944,429) $(51,572,953)
========== ============
</Table>
At September 30, 2003, capital aggregated $654,459,030, $135,935,365 and
$38,322,057 for Classes A, B and C, respectively. For the year ended September
30, 2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 3,764,226 $ 48,895,391
Class B................................................... 330,503 4,299,420
Class C................................................... 205,707 2,687,915
---------- -------------
Total Sales................................................. 4,300,436 $ 55,882,726
========== =============
Dividend Reinvestment:
Class A................................................... 1,530,608 $ 19,879,267
Class B................................................... 256,324 3,326,662
Class C................................................... 83,177 1,085,616
---------- -------------
Total Dividend Reinvestment................................. 1,870,109 $ 24,291,545
========== =============
Repurchases:
Class A................................................... (6,076,868) $ (78,875,948)
Class B................................................... (3,037,630) (39,421,866)
Class C................................................... (584,518) (7,621,163)
---------- -------------
Total Repurchases........................................... (9,699,016) $(125,918,977)
========== =============
</Table>
37
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Class B Shares purchased on or after June 1, 1996 and any dividend
reinvestment plan Class B Shares received on such shares, automatically convert
to Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares seven years after the end of the calendar month in
which the shares were purchased. For the six months ended March 31, 2004 and the
year ended September 30, 2003, 42,486 and 740,191 Class B Shares automatically
converted to Class A Shares, respectively, and are shown in the above tables as
sales of Class A Shares and repurchases of Class B Shares. Class C Shares
purchased before January 1, 1997, and any dividend reinvestment plan Class C
Shares received thereon, automatically convert to Class A Shares ten years after
the end of the calendar month in which the shares are purchased. Class C Shares
purchased on or after January 1, 1997 do not possess a conversion feature. For
the six months ended March 31, 2004 and the year ended September 30, 2003, no
Class C Shares converted to Class A Shares. Class B and C Shares are offered
without a front end sales charge, but are subject to a contingent deferred sales
charge (CDSC). The CDSC for Class B and C Shares will be imposed on most
redemptions made within six years of the purchase for Class B Shares and one
year of the purchase for Class C Shares as detailed in the following schedule.
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 3.75% None
Third....................................................... 3.50% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth....................................................... 1.00% None
Seventh and Thereafter...................................... None None
</Table>
For the six months ended March 31, 2004, Van Kampen, as distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $290,500 and CDSC on redeemed shares of approximately $76,200.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $188,269,030 and $81,270,159,
respectively.
38
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
5. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and maintenance of shareholder accounts
with respect to such classes of shares.
Annual fees under the Plans of up to 0.25% of Class A average daily net
assets and 1.00% each for Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A Shares are paid quarterly and the
annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $2,069,200 and $52,000
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be
refunded to the Fund on a quarterly basis.
Included in these fees for the six months ended March 31, 2004, are payments
retained by Van Kampen of approximately $484,100 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $36,400.
6. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, certain officers of such
affiliates and certain investment companies advised by the Adviser or its
affiliates, including the Fund, are named as defendants in a number of similar
class action complaints which were recently consolidated. This consolidated
action also names as defendants certain individual Trustees and Directors of the
named investment companies advised by affiliates of the Adviser; the complaint
does not, however, name the individual Trustees of any Van Kampen funds. The
consolidated amended complaint generally alleges that defendants violated their
statutory disclosure obligations and fiduciary duties by failing properly to
disclose (i) that the Adviser and certain affiliates of the Adviser allegedly
offered economic incentives to brokers and others to recommend the funds advised
by the Adviser or its affiliates to investors rather than funds managed by other
companies, and (ii) that the funds advised by the Adviser or its affiliates,
including the Fund, allegedly paid excessive commissions to brokers in return
for their efforts to recommend these funds to investors. The complaint seeks,
among other things, unspecified compensatory damages, rescissionary damages,
fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley DW Inc. in connection with the
sales of the funds. The complaint seeks, among other things, the removal of the
current Trustees of the
39
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Van Kampen funds, rescission of the management contracts for the Van Kampen
funds, disgorgement of profits by Morgan Stanley and monetary damages. This
complaint will be coordinated with the consolidated complaint.
The defendants intend to move to dismiss these actions and otherwise
vigorously to defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
40
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, NY 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, NY 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
41
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 39, 399, 539
STMI SAR
5/04 RN04-00366P-Y03/04
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
California Insured Tax Free Fund performed during the semiannual period.
The portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of March 31, 2004.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that a mutual fund will achieve its
investment objective. Funds are subject to market risk, which is the
possibility that the market values of securities owned by the fund will
decline and that the value of fund shares may therefore be less than what
you paid for them. Accordingly, you can lose money investing in this
fund. Please see the prospectus for more complete information on
investment risks.
Income may subject certain individuals to the Federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 3/31/04
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 12/13/85 since 04/30/93 since 08/13/93
- -------------------------------------------------------------------------------------------
W/MAX. W/MAX. W/MAX.
3.25% 3.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception 7.26% 7.07% 5.24% 5.24% 4.71% 4.71%
10-year 6.27 5.92 5.80 5.80 5.49 5.49
5-year 5.27 4.58 4.56 4.56 4.51 4.51
1-year 4.99 1.59 4.37 1.37 4.15 3.15
6-month 3.09 -0.25 2.92 -0.08 2.70 1.70
- -------------------------------------------------------------------------------------------
30-Day SEC Yield 2.52% 1.85% 1.85%
</Table>
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost.
Average annual total return with sales charges includes payment of the maximum
sales charge of 3.25 percent for Class A shares, a contingent deferred sales
charge of 3.00 percent for Class B shares (in year one and declining to zero
after year four), a contingent deferred sales charge of 1.00 percent for Class C
shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25
percent for Class A shares and 1.00 percent for Class B and C shares. The since
inception and 10-year returns for Class B shares reflect their conversion of
Class B shares into Class A shares six years after purchase. The since inception
returns for Class C shares reflect the conversion of Class C shares into Class A
shares ten years after purchase. See footnote 3 in the Notes to Financial
Statements for additional information. Figures shown above assume reinvestment
of all dividends and capital gains. SEC yield is a calculation for determining
the amount of portfolio income, excluding non-income items as prescribed by the
SEC. Yields are subject to change.
The Lehman Brothers Municipal Bond Index is generally representative of
investment-grade, tax-exempt bonds. The index is unmanaged and does not include
any sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
Van Kampen California Insured Tax Free Fund is managed by the adviser's
Municipal Fixed-Income team. Members of the team include Dennis S. Pietrzak,
Executive Director; John R. Reynoldson, Executive Director; and Joseph A.
Piraro, Vice President.(1)
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust with Gross
Domestic Product growth topping 4% in both quarters. While this strength in
output has historically triggered fears of rising interest rates, yields
remained stubbornly low across the municipal curve. These low yields were partly
the result of the continued low levels of observed inflation in the U.S.
economy. Unfortunately, they also reflected continuing weakness in the job
market, which remained soft throughout the period. The soft job numbers, coupled
with persistently low inflation, led the Federal Open Market Committee (the Fed)
to maintain its accommodative stance throughout the period.
In keeping with the general trend for calendar year 2003, the six months under
review saw record levels of issuance as municipalities sought to take advantage
of historically low interest rates. Many cities and states moved to reduce
expenditures by refinancing existing debt and replacing it with lower-yielding
bonds. In other cases, municipalities attempted to meet current and future
funding needs by issuing new debt.
Low interest rates also had an impact on the demand for municipal bonds. Retail
and institutional investor activity slowed as holders of municipal bonds saw
little reason to sell bonds purchased at higher yield levels and reinvest at
historically low yields. However, the period was marked by rising activity among
non-traditional investors such as hedge funds and insurance companies seeking to
take advantage of the perceived attractiveness of municipal bonds relative to
taxable securities. Additionally, investors' search for yield led to significant
outperformance by lower-rated bonds with greater credit risk. Sectors such as
health care, with a preponderance of lower-rated issues, performed particularly
well.
California remained in the municipal spotlight during the period, with many
investors anxiously awaiting the result of the March 2nd referendum on
Propositions 57 and 58. These two measures, which voters ultimately approved,
gave the green light to an estimated $15 billion economic-improvement bond
issuance that will begin to come to the market in early June. The passage of
these measures led the major ratings agencies to improve their outlooks (though
(1)Team members may change at any time without notice.
2
not their ratings) for the beleaguered state's bonds, with S&P shifting from
stable to positive and Moody's shifting from negative to stable. This surge in
issuance will at least partially offset the surprising decline in new debt in
the first quarter of 2004, which was one-third lower than the level for the
first quarter of last year. The majority of debt issued by the state for the
entire six-month period offered credit enhancements, with fully two-thirds
coming to market with credit insurance.
PERFORMANCE ANALYSIS
The fund returned 3.09 percent for the six months ended March 31, 2004 (Class A
shares, unadjusted for sales charges), performing roughly in line with its
benchmark, the Lehman Brothers Municipal Bond Index. (See table below). One of
our primary strategies in managing the fund was to adjust its interest-rate
sensitivity. Our analysis of the economy and interest rates indicated that the
next major movement in rates was likely to be upward, which we believed
warranted a more defensive positioning. As a result, we chose to emphasize
securities that we believed provided sufficient return potential and were most
likely to hold up well in a rising interest-rate environment. This approach led
us to de-emphasize bonds from the long end of the yield curve, given their high
sensitivity to interest rates and low coupons; instead, we focused on securities
with premium coupons from the 18- to 22-year segment of the market in the belief
that these bonds offered the most attractive risk/reward profile. We also kept
the fund's overall duration (a measure of interest-rate sensitivity) below that
of the benchmark.
We funded our purchases of intermediate bonds with the proceeds of sales from
elsewhere in the portfolio. These sales included several of the fund's
intermediate securities, which met our performance targets during the period and
were sold at a profit. The fund also benefited from pre-refundings of several
securities, which helped support the portfolio's net asset value (NAV).
We also maintained the portfolio's diversification over the reporting period.
The fund's holdings were spread across the full spectrum of municipal-bond
market sectors in order to limit the risk of over-concentration in any one
segment. At the end of the period, the portfolio's largest sector weightings
were tax districts at 23 percent, followed by public education at 18 percent and
public building at 15 percent.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
3.09% 2.92% 2.70% 3.12%
- --------------------------------------------------------------
</Table>
The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and an
index definition.
3
We anticipate that rates will eventually begin to move upward. That being said,
we believe the fund is positioned to continue to provide investors with
attractive income across an array of possible market environments. We will
continue to monitor the California market for attractive investment
opportunities.
<Table>
TOP 5 SECTORS AS OF 3/31/04
Tax District 22.6%
Public Education 18.0
Public Building 14.9
General Purpose 12.8
Water & Sewer 8.8
</Table>
Subject to change daily. All information is provided for informational purposes
only and should not be deemed as a recommendation to buy or sell securities in
the sectors shown above. Securities are classified by sectors that represent
broad groupings of related industries. All percentages are as a percentage of
long-term investments. Van Kampen is a wholly owned subsidiary of a global
securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
4
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS 99.1%
$1,925 Alhambra, CA City Elem Sch Dist Cap Apprec Ser A
(FSA Insd)...................................... * 09/01/20 $ 873,026
2,900 Anaheim, CA Pub Fin Auth Rev Elec Sys Generation
Ser B Rfdg (FSA Insd)........................... 5.000% 10/01/16 3,158,477
2,000 Anaheim, CA Pub Fin Auth Tax Alloc Rev (Inverse
Fltg) (MBIA Insd)............................... 11.720 12/28/18 2,674,060
4,070 Anaheim, CA Uni High Sch Dist Ser A (FSA
Insd)........................................... 5.000 08/01/25 4,254,493
1,430 Bay Area Govt Assn CA Lease Rev Cap Proj Ser A
(AMBAC Insd).................................... 5.250 07/01/17 1,580,121
3,000 Bay Area Govt Assn CA Rev Tax Alloc CA Redev Agy
Pool Ser A2 (FSA Insd).......................... 6.400 12/15/14 3,163,410
1,730 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA
Insd)........................................... 5.500 08/01/17 1,950,679
1,850 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA
Insd)........................................... 5.500 08/01/18 2,073,295
2,445 Calexico, CA Cmnty Redev Agy Tax Alloc Merged
Cent Bus & Residential Ser C (AMBAC Insd)....... 5.000 08/01/28 2,555,783
7,000 California Edl Fac Auth Rev Univ Of The Pacific
(MBIA Insd)..................................... 5.875 11/01/20 8,053,640
3,000 California Infrastructure & Econ Dev Bk Rev Bay
Area Toll Brdgs First Lien A (AMBAC Insd)....... 5.000 07/01/33 3,127,260
2,000 California Infrastructure & Econ Dev Bk Rev Bay
Area Toll Brdgs First Lien Ser A (FGIC Insd).... 5.000 07/01/29 2,084,840
1,050 California Spl Dist Assn Fin Corp Ctf Partn Pgm
Ser DD (FSA Insd)............................... 5.625 01/01/27 1,154,202
1,250 California St (FGIC Insd)....................... 6.250 09/01/12 1,511,362
2,450 California St (FGIC Insd)....................... 5.000 10/01/14 2,651,341
2,385 California St (XLCA Insd)....................... 6.250 09/01/12 2,887,567
1,000 California St (XLCA Insd)....................... 5.000 10/01/28 1,033,920
1,200 California St Dept Transn Ctf Ser A Rfdg (MBIA
Insd)........................................... 5.250 03/01/16 1,316,568
2,000 California St Dept Vet Affairs Ser A (AMBAC
Insd)........................................... 5.300 12/01/21 2,135,240
2,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.500 05/01/16 2,261,500
1,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.375 05/01/18 1,108,340
2,500 California St Dept Wtr Res Pwr Supply Rev Rite
Ser B (Var Rate Cpn) (MBIA Insd) (Acquired
9/8/03, Cost $2,709,650) (a).................... 9.270 05/01/21 2,972,525
1,000 California St Pub Wks Brd Dept Corrections Ser E
Rfdg (XLCA Insd) (b)............................ 5.000 06/01/18 1,080,640
2,500 California St Pub Wks Brd Lease Dept Corrections
Ten Admin Ser A (AMBAC Insd).................... 5.250 03/01/17 2,725,225
4,125 California St Pub Wks Brd Lease Rev CA St Univ
Ser A Rfdg (AMBAC Insd)......................... 5.500 10/01/14 4,564,601
7,750 California St Rfdg (FGIC Insd).................. 5.000 02/01/23 7,965,295
</Table>
6 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$1,000 California St Univ Rev & Colleges Systemwide Ser
A (AMBAC Insd).................................. 5.375% 11/01/18 $ 1,113,630
2,000 California Statewide Cmntys Dev Auth Wtr Rev
Pooled Fin Pgm Ser C (FSA Insd)................. 5.250 10/01/24 2,157,420
1,000 Carson, CA Redev Agy Redev Proj Area No 1 Tax
Alloc (MBIA Insd)............................... 5.500 10/01/15 1,159,720
2,000 Castaic Lake Wtr Agy CA Ctf Partn Wtr Sys Impt
Proj Ser A Rfdg (MBIA Insd)..................... 7.000 08/01/12 2,543,060
3,000 Castaic Lake Wtr Agy CA Rev Ctf Partn Ser A
(MBIA Insd)..................................... 5.250 08/01/23 3,210,600
2,335 Chaffey, CA Uni High Sch Dist Ser B (FGIC
Insd)........................................... 5.500 08/01/16 2,644,434
1,205 Channel Islands Beach, CA Cmnty Svcs Dist Ctf
Partn CA Spl Dist Fin Proj BB (FSA Insd)........ 5.700 09/01/21 1,359,987
5,165 Corona, CA Redev Agy Tax Alloc Redev Proj Area
Ser A Rfdg (FGIC Insd).......................... 6.250 09/01/13 5,368,346
1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA
Insd)........................................... 5.000 06/01/21 1,054,390
1,300 Folsom Cordova, CA Uni Sch Dist Sch Fac Impt
Dist No 2 Ser A (MBIA Insd)..................... 5.375 10/01/17 1,455,155
1,360 Folsom, CA Pub Fin Auth City Hall & Cmnty Ctr
Rfdg (FSA Insd)................................. 5.000 10/01/16 1,489,431
1,480 Fontana, CA Redev Agy Tax Alloc Dwntwn Redev
Proj Rfdg (MBIA Insd)........................... 5.000 09/01/21 1,548,065
650 Fresno, CA Jt Pwrs Fin Auth Ser A (FSA Insd).... 5.000 06/01/17 701,629
590 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd)........................................... 5.900 08/01/17 714,006
630 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd)........................................... 5.900 08/01/18 762,892
675 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd)........................................... 5.900 08/01/19 817,681
720 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA
Insd)........................................... 5.900 08/01/20 870,552
2,000 Glendale, CA Redev Agy Tax Ctr Glendale Redev
Proj (MBIA Insd)................................ 5.250 12/01/20 2,191,800
2,425 Glendora, CA Pub Fin Auth Tax Alloc Proj No 1
Ser A (MBIA Insd)............................... 5.000 09/01/24 2,544,674
20,000 Grossmont, CA Uni High Sch Dist Ctf Partn (MBIA
Insd)........................................... * 11/15/21 6,483,800
1,750 Hacienda La Puente, CA Uni Sch Dist Ser A (MBIA
Insd)........................................... 5.500 08/01/20 1,950,777
1,250 Hemet, CA Uni Sch Dist Ctf Partn Nutrition Ctr
Proj (FSA Insd)................................. 5.875 04/01/27 1,404,312
2,000 Imperial Irr Dist CA Ctf Partn Elec Sys Proj
(FSA Insd)...................................... 5.250 11/01/23 2,166,660
1,950 Imperial Irr Dist CA Ctf Partn Wtr Sys Proj
(AMBAC Insd).................................... 5.000 07/01/19 2,065,771
2,000 Inglewood, CA Redev Agy Tax Alloc Merged Redev
Proj Ser A Rfdg (AMBAC Insd).................... 5.250 05/01/23 2,240,020
</Table>
See Notes to Financial Statements 7
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$1,715 Irvine, CA Pub Fac & Infrastructure Ser B (AMBAC
Insd)........................................... 5.000% 09/02/23 $ 1,769,486
2,250 La Mesa Spring Vly, CA Sch Dist Ser A (FGIC
Insd)........................................... 5.000 08/01/26 2,344,005
2,000 La Quinta, CA Redev Agy Tax Alloc Redev Proj
Area No 1 (AMBAC Insd).......................... 5.000 09/01/22 2,125,980
1,000 Livermore-Amador Vly Wtr Mgmt Agy CA Swr Rev Ser
A (AMBAC Insd).................................. 5.250 08/01/16 1,108,180
1,000 Long Beach, CA Bond Fin Auth Lease Rev Rainbow
Harbor Refin Proj Ser A (AMBAC Insd)............ 5.250 05/01/24 1,059,820
1,260 Long Beach, CA Bond Fin Auth Pub Lease Safety
Fac Proj (AMBAC Insd)........................... 5.250 11/01/16 1,405,895
1,545 Long Beach, CA Bond Fin Auth Pub Lease Safety
Fac Proj (AMBAC Insd)........................... 5.250 11/01/20 1,681,161
2,740 Los Angeles Cnty, CA Ctf Partn Antelope Vly
Courthouse Ser A (AMBAC Insd)................... 5.750 11/01/16 3,165,440
1,000 Los Angeles Cnty, CA Ctf Partn Disney Pkg Proj
Rfdg (AMBAC Insd)............................... 4.750 03/01/23 1,015,710
1,000 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev
Prop A First Tier Sr Ser C Rfdg (AMBAC Insd).... 5.000 07/01/23 1,037,670
1,235 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev
Prop C Second Tier Sr Ser A Rfdg (FGIC Insd).... 5.000 07/01/15 1,346,175
1,000 Los Angeles Cnty, CA Met Tran Auth Sales Tax Rev
Prop C Second Tier Sr Ser A Rfdg (FGIC Insd).... 5.000 07/01/16 1,084,100
1,265 Los Angeles Cnty, CA Schs Regionalized Business
Svcs Ctf Partn Cap Apprec Pooled Fin Ser A
(AMBAC Insd).................................... * 08/01/24 446,735
301 Los Angeles Cnty, CA Tran Comm Lease Rev Dia RR
Lease Ltd (FSA Insd)............................ 7.375 12/15/06 304,648
1,975 Los Angeles, CA Ctf Partn Real Ppty Pgm Ser T
(MBIA Insd)..................................... 5.000 02/01/19 2,103,178
2,380 Los Angeles, CA Mtg Rev FHA Security 8 Asstd
Proj Ser A Rfdg (MBIA Insd)..................... 6.100 07/01/25 2,411,178
1,375 Los Angeles, CA Spl Assmt Landscaping & Ltg Dist
No 96 Ser 1 (AMBAC Insd)........................ 5.000 03/01/21 1,450,763
1,000 Los Angeles, CA Uni Sch Dist 1997 Election Ser E
(MBIA Insd)..................................... 5.500 07/01/17 1,131,470
2,860 Los Angeles, CA Wtr & Pwr Rev Pwr Sys Ser B (FSA
Insd)........................................... 5.000 07/01/26 2,983,523
1,000 Lynwood, CA Uni Sch Dist 2002 Election Ser A
(FSA Insd)...................................... 5.000 08/01/27 1,044,290
1,500 Modesto, CA Irr Dist Ctfs Partn Cap Impts Ser A
(FSA Insd)...................................... 5.250 07/01/18 1,642,635
1,105 Monrovia, CA Fin Auth Lease Rev Hillside
Wilderness Preserve (AMBAC Insd)................ 5.000 12/01/20 1,189,676
</Table>
8 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$2,000 Montclair, CA Redev Agy Tax Redev Proj No V Rfdg
(MBIA Insd)..................................... 5.000% 10/01/20 $ 2,127,360
1,000 Mount Pleasant, CA Elem Sch Dist 1998 Election
Ser C (FSA Insd)................................ 5.500 03/01/26 1,094,060
1,570 Mountain View, CA Shoreline Tax Alloc Ser A
(MBIA Insd)..................................... 5.250 08/01/16 1,740,408
370 M-S-R Pub Pwr Agy CA San Juan Proj Rev Adj Sub
Lien Ser E (MBIA Insd).......................... 6.000 07/01/22 381,248
2,000 Natomas, CA Uni Sch Dist Rfdg (FGIC Insd)....... 5.250 09/01/16 2,217,580
1,250 North City West, CA Sch Fac Fin Auth Spl Tax Ser
B Rfdg (FSA Insd)............................... 5.750 09/01/15 1,385,425
3,915 Oak Grove, CA Sch Dist 1995 Election (FGIC
Insd)........................................... 5.250 08/01/25 4,126,410
1,000 Oakland, CA Uni Sch Dist Alameda Cnty (FSA
Insd)........................................... 5.000 08/01/17 1,053,720
1,300 Oceanside, CA Ctf Partn Ser A Rfdg (AMBAC
Insd)........................................... 5.200 04/01/23 1,394,484
1,930 Ontario, CA Redev Fin Auth Rev Proj No 1 Ctr
City & Cimarron (MBIA Insd)..................... 5.250 08/01/15 2,152,510
3,025 Orange Cnty, CA Pub Fin Auth Lease Rev Juvenile
Justice Ctr Fac Rfdg (AMBAC Insd)............... 5.375 06/01/17 3,384,552
5,000 Orange Cnty, CA Recovery Ctfs Partn Ser A (MBIA
Insd)........................................... 5.800 07/01/16 5,522,250
1,340 Palm Springs, CA Fin Lease Rev Convention Ctr
Proj Ser A Rfdg (MBIA Insd)..................... 5.250 11/01/19 1,459,796
1,000 Perris, CA Sch Dist Ctf Partn Rfdg (FSA Insd)... 6.100 03/01/16 1,023,870
2,020 Pomona, CA Pub Fin Auth Rev Merged Redev Proj
Ser AD (MBIA Insd).............................. 5.000 02/01/15 2,192,407
1,110 Pomona, CA Pub Fin Auth Rev Merged Redev Proj
Ser AD (MBIA Insd).............................. 5.000 02/01/16 1,202,086
1,360 Port Hueneme, CA Ctf Partn Cap Impt Pgm Rfdg
(MBIA Insd)..................................... 6.000 04/01/19 1,643,111
1,055 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj
(AMBAC Insd).................................... 5.375 06/15/20 1,159,930
3,000 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj
Ser A (MBIA Insd)............................... 5.000 06/15/33 3,112,980
3,000 Rancho Cucamonga, CA Redev Agy Rancho Redev Proj
(MBIA Insd)..................................... 5.375 09/01/25 3,203,820
1,680 Rancho, CA Wtr Dist Spl Tax Cmnty Fac Dist 883
Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/17 1,817,626
1,000 Redding, CA Elec Sys Rev Ctf Partn (Inverse
Fltg) (Escrowed to Maturity) (MBIA Insd)........ 11.539 07/01/22 1,437,300
1,600 Redding, CA Jt Pwrs Auth Wtr Ser A Rfdg (AMBAC
Insd)........................................... 5.000 06/01/21 1,697,280
1,400 Redding, CA Redev Agy Tax Alloc Canby Hilltop
Cypress Redev Ser A (MBIA Insd)................. 5.000 09/01/23 1,481,298
</Table>
See Notes to Financial Statements 9
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$2,000 Rialto, CA Spl Tax Cmnty Fac Dist 87-1 Rfdg (FSA
Insd)........................................... 5.625% 09/01/18 $ 2,209,300
1,000 Riverside Cnty, CA Ctf Partn Historic Courthouse
Proj (MBIA Insd)................................ 5.875 11/01/27 1,132,040
1,755 Rohnert Pk, CA Cmnty Dev Agy Tax Alloc Rohnert
Redev Proj (MBIA Insd).......................... * 08/01/31 410,670
1,755 Rohnert Pk, CA Cmnty Dev Agy Tax Alloc Rohnert
Redev Proj (MBIA Insd).......................... * 08/01/33 368,217
1,755 Rohnert Pk, CA Cmnty Dev Agy Tax Alloc Rohnert
Redev Proj (MBIA Insd).......................... * 08/01/35 330,010
1,310 Rowland, CA Uni Sch Dist Ser A (FSA Insd)....... 5.500 09/01/20 1,460,820
1,000 Sacramento, CA City Fin Auth Rev Cap Impt (AMBAC
Insd)........................................... 5.000 12/01/33 1,039,180
1,000 San Diego, CA Indl Dev Rev San Diego Gas & Elec
Ser A (MBIA Insd)............................... 6.400 09/01/18 1,014,240
3,000 San Francisco, CA City & Cnty George R Moscone
Ctr Rfdg (FSA Insd)............................. 5.000 07/01/17 3,240,000
1,500 San Francisco, CA City & Cnty Redev Fin Auth Tax
Alloc San Francisco Redev Proj Ser A (FSA
Insd)........................................... 5.000 08/01/15 1,630,110
2,000 San Francisco, CA City & Cnty Second Ser Issue
26B (FGIC Insd)................................. 5.000 05/01/22 2,095,620
2,000 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd)..... 5.375 03/01/17 2,235,420
2,675 San Jose, CA Fin Auth Lease Rev Convention Ctr
Proj Ser F Rfdg (MBIA Insd)..................... 5.000 09/01/17 2,879,263
1,000 San Leandro, CA Ctf Part Lib & Fire Stations Fin
(AMBAC Insd).................................... 5.750 11/01/29 1,116,400
1,000 San Leandro, CA Jt Proj Area Fin (MBIA Insd).... 5.100 12/01/26 1,047,060
1,260 San Luis, CA Wtr Dists Rev Ctf Partn Cap Impt
Proj Rfdg (AMBAC Insd).......................... 5.500 11/01/16 1,394,404
1,460 San Marcos, CA Redev Agy Tax Alloc (FSA Insd)... 5.375 08/01/25 1,560,536
2,000 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc
Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/20 2,196,520
2,065 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc
Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/21 2,257,644
1,000 Shasta, CA Jt Pwrs Fin Auth Cnty Admin Bldg Proj
Ser A (MBIA Insd)............................... 5.250 04/01/22 1,082,310
1,000 South Gate, CA Pub Fin Auth South Gate Redev
Proj No 1 (XLCA Insd)........................... 5.750 09/01/22 1,127,260
2,750 Southern CA Pub Pwr Transmission Rev Southn
Transmission Sub Ser A Rfdg (FSA Insd).......... 5.250 07/01/16 3,061,685
1,135 Sweetwater, CA Auth Wtr Rev (FSA Insd).......... 5.250 04/01/15 1,261,553
1,195 Sweetwater, CA Auth Wtr Rev (FSA Insd).......... 5.250 04/01/16 1,321,993
2,150 Temecula, CA Redev Agy Tax Alloc Rev Temecula
Redev Proj No 1 (MBIA Insd)..................... 5.125 08/01/27 2,227,400
1,000 University of CA Rev Gen Ser A (AMBAC Insd)..... 5.000 05/15/26 1,045,020
</Table>
10 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$1,000 University of CA Rev Multi Purp Proj Ser F (FGIC
Insd)........................................... 5.000% 09/01/16 $ 1,074,280
1,000 University of CA Rev Multi Purp Proj Ser M (FGIC
Insd)........................................... 5.125 09/01/17 1,089,770
1,000 University of CA Rev Resh Fac Ser E (AMBAC
Insd)........................................... 5.000 09/01/19 1,061,880
1,540 Vallejo City, CA Uni Sch Dist Ser A Rfdg (MBIA
Insd)........................................... 5.900 02/01/20 1,849,001
1,390 Ventura Cnty, CA Ctf Partn Pub Fin Auth II (FSA
Insd)........................................... 5.250 08/15/19 1,529,765
2,000 Ventura Cnty, CA Ctf Partn Pub Fin Auth Ser I
(FSA Insd)...................................... 5.250 08/15/16 2,213,200
------------
TOTAL LONG-TERM INVESTMENTS 99.1%
(Cost $233,052,668)......................................................... 252,362,022
SHORT-TERM INVESTMENT 0.7%
(Cost $1,800,000)........................................................... 1,800,000
------------
TOTAL INVESTMENTS 99.8%
(Cost $234,852,668)......................................................... 254,162,022
OTHER ASSETS IN EXCESS OF LIABILITIES 0.2%................................... 543,348
------------
NET ASSETS 100.0%............................................................ $254,705,370
============
</Table>
* Zero coupon bond
(a) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 1.17% on net
assets.
(b) Securities purchased on a when-issued or delayed delivery basis.
AMBAC--AMBAC Indemnity Corp.
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
XLCA--XL Capital Assurance Inc.
See Notes to Financial Statements 11
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $234,852,668)....................... $254,162,022
Cash........................................................ 288,047
Receivables:
Interest.................................................. 2,983,101
Fund Shares Sold.......................................... 240,826
Other....................................................... 125,053
------------
Total Assets............................................ 257,799,049
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 1,250,296
Investments Purchased..................................... 1,087,883
Income Distributions...................................... 214,863
Distributor and Affiliates................................ 168,994
Investment Advisory Fee................................... 102,606
Trustees' Deferred Compensation and Retirement Plans........ 179,615
Accrued Expenses............................................ 89,422
------------
Total Liabilities....................................... 3,093,679
------------
NET ASSETS.................................................. $254,705,370
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $234,570,176
Net Unrealized Appreciation................................. 19,309,354
Accumulated Net Realized Gain............................... 514,321
Accumulated Undistributed Net Investment Income............. 311,519
------------
NET ASSETS.................................................. $254,705,370
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $193,016,625 and 10,128,103 shares of
beneficial interest issued and outstanding)............. $ 19.06
Maximum sales charge (3.25%* of offering price)......... .64
------------
Maximum offering price to public........................ $ 19.70
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $46,242,511 and 2,423,955 shares of
beneficial interest issued and outstanding)............. $ 19.08
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $15,446,234 and 811,042 shares of
beneficial interest issued and outstanding)............. $ 19.04
============
</Table>
* On sales of $25,000 or more, the sales charge will be reduced.
12 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 6,277,547
-----------
EXPENSES:
Investment Advisory Fee..................................... 604,662
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $238,428, $154,834 and $84,380,
respectively)............................................. 477,642
Shareholder Services........................................ 79,299
Legal....................................................... 14,436
Trustees' Fees and Related Expenses......................... 11,964
Custody..................................................... 9,748
Other....................................................... 105,199
-----------
Total Expenses.......................................... 1,302,950
Less Credits Earned on Cash Balances.................... 675
-----------
Net Expenses............................................ 1,302,275
-----------
NET INVESTMENT INCOME....................................... $ 4,975,272
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 883,763
Futures................................................... (640,951)
-----------
Net Realized Gain........................................... 242,812
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 16,847,748
End of the Period......................................... 19,309,354
-----------
Net Unrealized Appreciation During the Period............... 2,461,606
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 2,704,418
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 7,679,690
===========
</Table>
See Notes to Financial Statements 13
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 4,975,272 $ 10,073,099
Net Realized Gain.................................... 242,812 257,251
Net Unrealized Appreciation/Depreciation During the
Period............................................. 2,461,606 (6,703,034)
------------ ------------
Change in Net Assets from Operations................. 7,679,690 3,627,316
------------ ------------
Distributions from Net Investment Income:
Class A Shares..................................... (3,634,508) (7,904,427)
Class B Shares..................................... (724,292) (1,686,177)
Class C Shares..................................... (254,328) (557,298)
------------ ------------
(4,613,128) (10,147,902)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares..................................... -0- (1,755,292)
Class B Shares..................................... -0- (460,678)
Class C Shares..................................... -0- (133,437)
------------ ------------
-0- (2,349,407)
------------ ------------
Total Distributions.................................. (4,613,128) (12,497,309)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 3,066,562 (8,869,993)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 15,406,603 48,488,523
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 3,259,261 8,957,796
Cost of Shares Repurchased........................... (30,249,012) (53,753,503)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (11,583,148) 3,692,816
------------ ------------
TOTAL DECREASE IN NET ASSETS......................... (8,516,586) (5,177,177)
NET ASSETS:
Beginning of the Period.............................. 263,221,956 268,399,133
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $311,519 and
($50,625), respectively)........................... $254,705,370 $263,221,956
============ ============
</Table>
14 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS A SHARES MARCH 31, --------------------------------------------
2004 2003 2002 (c) 2001 2000 1999
---------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.............................. $18.84 $19.45 $18.64 $17.67 $17.28 $18.77
------ ------ ------ ------ ------ ------
Net Investment Income............... .38 .74 .77 .81 .82 .83
Net Realized and Unrealized
Gain/Loss......................... .20 (.44) .85 .94 .38 (1.45)
------ ------ ------ ------ ------ ------
Total from Investment Operations...... .58 .30 1.62 1.75 1.20 (.62)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income............................ .36 .75 .78 .78 .81 .87
Distributions from Net Realized
Gain.............................. -0- .16 .03 -0- -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions................... .36 .91 .81 .78 .81 .87
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.... $19.06 $18.84 $19.45 $18.64 $17.67 $17.28
====== ====== ====== ====== ====== ======
Total Return (a)...................... 3.09%* 1.67% 9.01% 10.09% 7.20% -3.44%
Net Assets at End of the Period (In
millions)........................... $193.0 $195.4 $200.4 $174.9 $152.5 $162.0
Ratio of Expenses to Average Net
Assets (b).......................... .89% .87% .87% .89% .98% .92%
Ratio of Net Investment Income to
Average Net Assets.................. 3.98% 3.93% 4.18% 4.43% 4.79% 4.52%
Portfolio Turnover.................... 4%* 25% 32% 39% 52% 44%
</Table>
* Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 3.25% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended September 30,
2000.
(c) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01 and increase the ratio of net
investment income to average net assets from 4.16% to 4.18%. Per share,
ratios and supplemental data for periods prior to September 30, 2002 have
not been restated to reflect this change in presentation.
See Notes to Financial Statements 15
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS B SHARES MARCH 31, --------------------------------------------
2004 2003 2002 (c) 2001 2000 1999
---------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.............................. $18.82 $19.44 $18.65 $17.69 $17.26 $18.76
------ ------ ------ ------ ------ ------
Net Investment Income............... .34 .60 .63 .67 .68 .68
Net Realized and Unrealized
Gain/Loss......................... .21 (.45) .84 .94 .43 (1.45)
------ ------ ------ ------ ------ ------
Total from Investment Operations...... .55 .15 1.47 1.61 1.11 (.77)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income............................ .29 .61 .65 .65 .68 .73
Distributions from Net Realized
Gain.............................. -0- .16 .03 -0- -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions................... .29 .77 .68 .65 .68 .73
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.... $19.08 $18.82 $19.44 $18.65 $17.69 $17.26
====== ====== ====== ====== ====== ======
Total Return (a)...................... 2.92%(d)* 0.87% 8.16% 9.27% 6.63% -4.20%
Net Assets at End of the Period (In
millions)........................... $ 46.2 $ 49.8 $ 53.0 $ 47.7 $ 38.3 $ 45.3
Ratio of Expenses to Average Net
Assets (b).......................... 1.46%(d) 1.62% 1.63% 1.65% 1.74% 1.68%
Ratio of Net Investment Income to
Average Net Assets.................. 3.40%(d) 3.18% 3.42% 3.67% 4.03% 3.76%
Portfolio Turnover.................... 4%* 25% 32% 39% 52% 44%
</Table>
* Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 3%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fourth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of 1% and do not
reflect the deduction of taxes that a shareholder would pay on the Fund
distributions or the redemption of Fund shares.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended September 30,
2000.
(c) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01 and increase the ratio of net
investment income to average net assets from 3.40% to 3.42%. Per share,
ratios and supplemental data for periods prior to September 30, 2002 have
not been restated to reflect this change in presentation.
(d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect the refund of certain 12b-1
fees during the period.
16 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS C SHARES MARCH 31, -----------------------------------------------
2004 2003 2002 (C) 2001 2000 1999
------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................. $18.82 $19.43 $18.64 $17.68 $17.26 $18.75
------ ------ ------ ------ ------ ------
Net Investment Income.............. .30 .61 .64 .68 .68 .69
Net Realized and Unrealized
Gain/Loss........................ .21 (.45) .83 .93 .42 (1.45)
------ ------ ------ ------ ------ ------
Total from Investment Operations..... .51 .16 1.47 1.61 1.10 (.76)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income........................... .29 .61 .65 .65 .68 .73
Distributions from Net Realized
Gain............................. -0- .16 .03 -0- -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions.................. .29 .77 .68 .65 .68 .73
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD... $19.04 $18.82 $19.43 $18.64 $17.68 $17.26
====== ====== ====== ====== ====== ======
Total Return (a)..................... 2.70%* 0.92%(d) 8.16% 9.27% 6.57% -4.15%
Net Assets at End of the Period (In
millions).......................... $ 15.4 $ 18.1 $ 15.0 $ 11.0 $ 6.6 $ 7.4
Ratio of Expenses to Average Net
Assets (b)......................... 1.64% 1.62% 1.63% 1.65% 1.74% 1.69%
Ratio of Net Investment Income to
Average Net Assets................. 3.22% 3.20%(d) 3.41% 3.67% 4.03% 3.75%
Portfolio Turnover................... 4%* 25% 32% 39% 52% 44%
</Table>
* Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1% charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended September 30,
2000.
(c) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01 and increase the ratio of net
investment income to average net assets from 3.39% to 3.41%. Per share,
ratios and supplemental data for periods prior to September 30, 2002 have
not been restated to reflect this change in presentation.
(d) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .03%.
See Notes to Financial Statements 17
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen California Insured Tax Free Fund (the "Fund") is organized as a
series of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's
investment objective is to provide only California investors with a high level
of current income exempt from federal and California income taxes, with
liquidity and safety of principal, primarily through investment in a diversified
portfolio of insured California municipal securities. The Fund commenced
investment operations on December 13, 1985. The distribution of the Fund's Class
B Shares and Class C Shares commenced on April 30, 1993 and August 13, 1993,
respectively. Effective November 30, 2003, the Fund's investment adviser, Van
Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset
Management.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded. 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
Fund 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 Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At March 31, 2004, the Fund had $1,087,883 of when-issued and
delayed delivery purchase commitment.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security. Income and expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute
18
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax law which
allow it to carry 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 September 30, 2003, the Fund had an
accumulated capital loss carryforward for tax purposes of $29,472, which will
expire on September 30, 2011.
At March 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $234,735,729
============
Gross tax unrealized appreciation........................... $ 19,466,313
Gross tax unrealized depreciation........................... (40,020)
------------
Net tax unrealized appreciation on investments.............. $ 19,426,293
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, and a portion of futures gains, which are
included in ordinary income for tax purposes.
The tax character of distributions paid during the year ended September 30,
2003 was as follows:
<Table>
<Caption>
2003
Distributions paid from:
Ordinary income........................................... $ 58,761
Long-term capital gain.................................... 2,326,272
----------
$2,385,033
==========
</Table>
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $6,520
</Table>
F. INSURANCE EXPENSE The Fund typically invests in insured bonds. Any portfolio
securities not specifically covered by a primary insurance policy are insured
secondarily through the Fund's portfolio insurance policy. Insurance premiums
are based on the daily balances of uninsured bonds in the portfolio of
investments and are charged to expense on an accrual basis. The insurance policy
guarantees the timely payment of principal and interest on the securities in the
Fund's portfolio.
G. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's
custody fee was reduced by $675 as a result of credits earned on cash balances.
19
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") will provide investment advice and facilities to the
Fund for an annual fee payable monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $100 million.......................................... .500%
Next $150 million........................................... .450%
Next $250 million........................................... .425%
Over $500 million........................................... .400%
</Table>
For the six months ended March 31, 2004, the Fund recognized expenses of
approximately $5,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
Under separate Accounting Services and Legal Services Agreements, the
Adviser provides accounting and legal services to the Fund. The Adviser
allocates the cost of such services to each fund. For the six months ended March
31, 2004, the Fund recognized expenses of approximately $26,500 representing Van
Kampen Investment Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, which are reported as part
of "Other" and "Legal" expenses, respectively, in the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
March 31, 2004, the Fund recognized expenses of approximately $58,400
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund 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.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $107,434 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2004.
Appreciation/ depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
20
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2004, capital aggregated $175,018,735, $44,215,879 and
$15,335,562 for Classes A, B and C, respectively. For the six months ended March
31, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 613,183 $ 11,693,687
Class B................................................... 130,105 2,457,703
Class C................................................... 65,846 1,255,213
---------- ------------
Total Sales................................................. 809,134 $ 15,406,603
========== ============
Dividend Reinvestment:
Class A................................................... 136,137 $ 2,583,882
Class B................................................... 26,908 510,395
Class C................................................... 8,701 164,984
---------- ------------
Total Dividend Reinvestment................................. 171,746 $ 3,259,261
========== ============
Repurchases:
Class A................................................... (993,018) $(18,825,322)
Class B................................................... (379,702) (7,188,170)
Class C................................................... (222,748) (4,235,520)
---------- ------------
Total Repurchases........................................... (1,595,468) $(30,249,012)
========== ============
</Table>
At September 30, 2003, capital aggregated $179,566,488, $48,435,951 and
$18,150,885 for Classes A, B and C, respectively. For the year ended September
30, 2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,661,438 $ 31,350,394
Class B................................................... 428,696 8,090,363
Class C................................................... 480,104 9,047,766
---------- ------------
Total Sales................................................. 2,570,238 $ 48,488,523
========== ============
Dividend Reinvestment:
Class A................................................... 366,301 $ 6,890,766
Class B................................................... 83,899 1,577,306
Class C................................................... 26,042 489,724
---------- ------------
Total Dividend Reinvestment................................. 476,242 $ 8,957,796
========== ============
Repurchases:
Class A................................................... (1,957,587) $(36,611,996)
Class B................................................... (593,532) (11,117,759)
Class C................................................... (320,896) (6,023,748)
---------- ------------
Total Repurchases........................................... (2,872,015) $(53,753,503)
========== ============
</Table>
21
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Class B Shares purchased on or after June 1, 1996 and any dividend
reinvestment plan Class B Shares received on such shares, automatically convert
to Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the six months ended March 31, 2004 and the year
ended September 30, 2003, 2,412 and 44,998 Class B Shares automatically
converted to Class A Shares, respectively, and are shown in the above tables as
sales of Class A Shares and repurchases of Class B Shares. Class C Shares
purchased before January 1, 1997, and any dividend reinvestment plan Class C
Shares received on such shares, automatically convert to Class A Shares ten
years after the end of the calendar month in which such shares were purchased.
Class C Shares purchased on or after January 1, 1997 do not possess a conversion
feature. For the six months ended March 31, 2004 and the year ended September
30, 2003, no Class C Shares converted to Class A Shares. Classes B and C Shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge (CDSC). The CDSC will be imposed on most redemptions made
within four years of the purchase for Class B Shares and one year of the
purchase for Class C Shares as detailed in the following schedule.
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 3.00% 1.00%
Second...................................................... 2.50% None
Third....................................................... 2.00% None
Fourth...................................................... 1.00% None
Fifth and Thereafter........................................ None None
</Table>
For the six months ended March 31, 2004, Van Kampen as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $16,200 and CDSC on redeemed shares of approximately $41,300.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $9,198,093 and $27,843,907, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, to manage the portfolio's effective yield, maturity and duration, or
generate potential gain. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the
22
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
change in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
Summarized below are the different types of derivative financial instruments
used by the Fund.
A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures on U.S. Treasury Bonds and
Notes and typically closes the contract prior to delivery date. Upon entering
into futures contracts, the Fund maintains an amount of cash or liquid
securities with a value equal to a percentage of the contract amount with either
a futures commission merchant pursuant to rules and regulations promulgated
under the 1940 Act, as amended, or with its custodian in an account in the
broker's name. This amount is known as initial margin. During the period the
futures contract is open, payments are received from or made to the broker based
upon changes in the value of the contract (the variation margin).
Transactions in futures contracts for the six months ended March 31, 2004,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2003........................... 252
Futures Closed.............................................. (252)
----
Outstanding at March 31, 2004............................... -0-
====
</Table>
B. INDEXED SECURITY An inverse floating rate security is one where the coupon is
inversely indexed to a short-term floating interest rate multiplied by a
specific factor. As the floating rate rises, the coupon is reduced. Conversely,
as the floating rate declines, the coupon is increased. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. These instruments are typically used by the Fund to enhance the yield
of the portfolio. These instruments are identified in the portfolio of
investments.
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and maintenance of shareholder accounts
with respect to such classes of shares.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and 1.00% each of Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A Shares are paid quarterly and the
annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $0 and $0 for Class B
and Class C Shares, respectively. These amounts may be recovered from future
payments under
23
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
the distribution plan or CDSC. To the extent the unreimbursed receivable has
been fully recovered, any excess 12b-1 fees will be refunded to the Fund on a
quarterly basis.
Included in the fees for the six months ended March 31, 2004 are payments
retained by Van Kampen of approximately $142,200 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $24,800.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, certain officers of such
affiliates and certain investment companies advised by the Adviser or its
affiliates, including the Fund, are named as defendants in a number of similar
class action complaints which were recently consolidated. This consolidated
action also names as defendants certain individual Trustees and Directors of the
named investment companies advised by affiliates of the Adviser; the complaint
does not, however, name the individual Trustees of any Van Kampen funds. The
consolidated amended complaint generally alleges that defendants violated their
statutory disclosure obligations and fiduciary duties by failing properly to
disclose (i) that the Adviser and certain affiliates of the Adviser allegedly
offered economic incentives to brokers and others to recommend the funds advised
by the Adviser or its affiliates to investors rather than funds managed by other
companies, and (ii) that the funds advised by the Adviser or its affiliates,
including the Fund, allegedly paid excessive commissions to brokers in return
for their efforts to recommend these funds to investors. The complaint seeks,
among other things, unspecified compensatory damages, rescissionary damages,
fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley DW Inc. in connection with the
sales of the funds. The complaint seeks, among other things, the removal of the
current Trustees of the Van Kampen funds, rescission of the management contracts
for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary
damages. This complaint will be coordinated with the consolidated complaint.
The defendants intend to move to dismiss these actions and otherwise
vigorously to defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
24
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
25
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 41, 341, 541
CAI SAR 5/04 RN04-00395P-Y03/04
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Municipal Income Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of March 31, 2004.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that a mutual fund will achieve its
investment objective. Funds are subject to market risk, which is the
possibility that the market values of securities owned by the fund will
decline and that the value of fund shares may therefore be less than what
you paid for them. Accordingly, you can lose money investing in this
fund. Please see the prospectus for more complete information on
investment risks.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 3/31/04
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 8/01/90 since 8/24/92 since 8/13/93
- --------------------------------------------------------------------------------------------------
W/MAX. W/MAX. W/MAX.
AVERAGE ANNUAL W/O SALES 4.75% SALES W/O SALES 4.00% SALES W/O SALES 1.00% SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception 6.30% 5.92% 4.97% 4.97% 4.10% 4.10%
10-year 5.57 5.05 5.12 5.12 4.76 4.76
5-year 4.33 3.32 3.54 3.29 3.54 3.54
1-year 5.65 0.61 4.87 0.87 4.88 3.88
6-month 2.84 -2.04 2.46 -1.54 2.47 1.47
- --------------------------------------------------------------------------------------------------
30-Day SEC Yield 3.08% 2.48% 2.48%
</Table>
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost.
Average annual total return with sales charges includes payment of the maximum
sales charge of 4.75 percent for Class A shares, a contingent deferred sales
charge of 4.00 percent for Class B shares (in year one and declining to zero
after year six), a contingent deferred sales charge of 1.00 percent for Class C
shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25
percent for Class A shares and 1.00 percent for Class B and C shares. The since
inception and 10-year returns for Class B shares reflect their conversion of
Class B shares into Class A shares six years after purchase. The since inception
returns for Class C shares reflect the conversion of Class C shares into Class A
shares ten years after purchase. See footnote 3 in the Notes to Financial
Statements for additional information. Figures shown above assume reinvestment
of all dividends and capital gains. SEC yield is a calculation for determining
the amount of portfolio income, excluding non-income items as prescribed by the
SEC. Yields are subject to change.
The Lehman Brothers Municipal Bond Index is generally representative of
investment-grade, tax-exempt bonds. The index is unmanaged and does not include
any sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
Van Kampen Municipal Income Fund is managed by the adviser's Municipal Fixed
Income team. Current members of the team include James F. Willison, Managing
Director; Joseph R. Arcieri, Executive Director; and Timothy D. Haney, Vice
President.(1)
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust with Gross
Domestic Product growth topping 4% in both quarters. While this strength in
output has historically triggered fears of rising interest rates, yields
remained low across the municipal curve. These low yields were partly the result
of the continued low levels of observed inflation in the U.S. economy.
Unfortunately, they also reflected continuing weakness in the job market, which
remained soft throughout the period. The soft job numbers, coupled with
persistently low inflation, led the Federal Open Market Committee (the Fed) to
maintain its accommodative stance throughout the period.
In keeping with the general trend for calendar 2003, the six months under review
saw high levels of issuance as municipalities sought to take advantage of
historically low interest rates. Many cities and states moved to reduce
expenditures by refinancing existing debt and replacing it with lower-yielding
bonds. In other cases, municipalities attempted to meet current and future
funding needs by issuing new debt.
Low interest rates also had an impact on the demand for municipal bonds. Retail
and institutional investor activity slowed as holders of municipal bonds saw
little reason to sell bonds purchased at higher yield levels and reinvest at
lower yields. However, the period was marked by rising activity among non-
traditional investors such as hedge funds and insurance companies seeking to
take advantage of the attractiveness of municipal bonds relative to taxable
securities. Additionally, investors' search for yield led to significant
outperformance by lower-rated bonds with greater credit risk. Sectors such as
health care, with a preponderance of lower-rated issues, performed particularly
well.
(1)Team members may change at any time without notice.
2
PERFORMANCE ANALYSIS
The fund returned 2.84 percent for the six months ended March 31, 2004 (Class A
shares, unadjusted for sales charge), underperforming its benchmark, the Lehman
Brothers Municipal Bond Index. (See table below.) Our analysis of the economy
and interest rates indicated that the next major movement in rates was likely to
be upward, which we believed warranted a more defensive positioning. As a
result, we chose to emphasize securities that provided sufficient return
potential and were most likely to hold up well in a rising interest-rate
environment. This approach led us to de-emphasize bonds from the long end of the
curve given their high sensitivity to interest rates and low coupons; instead,
we focused on securities with premium coupons from the intermediate segment of
the market (15 to 22 years) in the belief that these bonds offered the most
attractive risk/reward profile. While we maintained this strategy through the
end of the period, investors seemed to prefer bonds with longer maturities, and
our approach limited the fund's ability to participate in their gains. We also
kept the fund's overall duration (a measure of interest-rate sensitivity) below
that of the benchmark, with a particular underweight in the 5- to 10-year
maturity range. We expect this area of the yield curve to underperform if the
Fed begins to raise rates again.
While we focused our purchases on intermediate bonds, we also took advantage of
short-term relative-value opportunities on the long end of the market. We
focused such trading in liquid, high-quality bonds in an effort to maximize
liquidity. Our high-quality bias was reflected in the portfolio as a whole,
which ended the period with 78.7 percent of its assets invested in securities
rated AA or higher.
We also maintained the portfolio's diversification over the reporting period.
The fund's holdings were spread across a broad spectrum of municipal-bond market
sectors in order to limit the risk of over-concentration in any one segment. At
the end of the period, the portfolio's largest sector weightings were
transportation at 14.7 percent, followed by general purpose at 12.8 percent and
public education at 12.6 percent.
We will continue to scour state and local markets across the country for
attractive investment opportunities.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
2.84% 2.46% 2.47% 3.12%
- --------------------------------------------------------------
</Table>
The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and an
index definition.
3
<Table>
TOP 5 SECTORS AS OF 3/31/04 RATINGS ALLOCATION AS OF 3/31/04
Transportation 14.7% AAA 64.9%
General Purpose 12.8 AA 13.8
Public Education 12.6 A 3.4
Wholesale Electric 10.2 BBB 4.4
Water & Sewer 7.9 BB 0.8
B 0.3
TOP 5 STATES AS OF 3/31/04 CCC 0.0
New York 14.1% CC 0.3
New Jersey 10.7 NR 12.1
California 9.6
Texas 8.2
Illinois 8.2
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Ratings allocations based upon ratings as
issued by Standard and Poor's. Van Kampen is a wholly owned subsidiary of a
global securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
4
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
MUNICIPAL BONDS 98.9%
ALABAMA 0.7%
$1,865 Alabama St Univ Rev Gen Tuition & Fee Ser B
(MBIA Insd)..................................... 5.250% 03/01/33 $ 1,976,881
2,930 Alabama Wtr Pollutn Ctl Auth Revolving Fd Ln Ser
A (AMBAC Insd) (a).............................. 6.750 08/15/17 3,140,550
3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev
Mobile Energy Svc Co Proj Rfdg (b) (c).......... 6.950 01/01/20 21
------------
5,117,452
------------
ARIZONA 3.7%
8,685 Arizona Sch Fac Brd Ctf Ser B (FGIC Insd)....... 5.250 09/01/17 9,655,636
4,250 Maricopa Cnty, AZ Indl Dev Waste Mgmt Inc
Proj............................................ 4.800 12/01/31 4,330,580
5,000 Phoenix, AZ Civic Impt Corp Amt Sr Lien Ser B
(FGIC Insd)..................................... 5.250 07/01/32 5,194,550
2,500 Phoenix, AZ Indl Dev Auth Mtg Christian Care Apt
Proj Ser A Rfdg................................. 6.500 01/01/26 2,573,700
500 Scottsdale, AZ Indl Dev Auth Rev First Mtg
Westminster Vlg Ser A Rfdg...................... 8.250 06/01/15 548,790
1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp
Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/12 2,130,337
1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp
Ser A Rfdg (AMBAC Insd)......................... 6.125 09/01/17 1,997,940
------------
26,431,533
------------
ARKANSAS 0.5%
1,400 Jackson Cnty, AR Hlthcare Fac Brd First Mtg Hosp
Rev Newport Hosp & Clinic Inc................... 7.375 11/01/11 1,408,372
2,102 Maumelle, AR Dogwood Addition Prd Muni Ppty
Owners Rfdg..................................... 7.500 03/01/06 2,090,279
------------
3,498,651
------------
CALIFORNIA 9.5%
4,870 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec
Sub Pub Impts Proj C (FSA Insd)................. * 09/01/20 2,198,074
305 California Infrastructure & Econ Dev Bk Rev Bay
Area Toll Brdgs 1st Lien A (FSA Insd)........... 5.250 07/01/20 334,835
5,000 California Infrastructure & Econ Dev Bk Rev
Rites-PA-1202R (Inverse Fltg) (FSA Insd)
(Acquired 09/10/03, Cost $5,484,100) (d) (h).... 9.159 07/01/11 5,978,200
10,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.500 05/01/16 11,307,500
5,000 California St Dept Wtr Res Pwr Ser A (XLCA
Insd)........................................... 5.375 05/01/17 5,589,650
6,575 California St Dept Wtr Res Pwr Supply Rev Rites-
PA-1201R (Inverse Fltg) (MBIA Insd) (Acquired
09/08/03, Cost $7,143,277) (d) (h).............. 9.159 05/01/11 7,771,979
2,640 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC
Insd)........................................... * 09/01/13 1,570,958
5,430 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC
Insd)........................................... * 09/01/14 3,016,365
</Table>
6 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$3,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg (MBIA Insd)......................... * 01/15/17 $ 1,573,740
21,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg..................................... * 01/15/24 6,678,210
15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg..................................... * 01/15/30 3,280,350
5,500 Monterey Cnty, CA Ctf Part Master Plan Fing
(MBIA Insd)..................................... 5.000% 08/01/32 5,672,920
6,695 San Francisco, CA City & Cnty Second Ser Issue
29 B Rfdg (FGIC Insd)........................... 5.125 05/01/20 7,223,972
5,000 West Contra Costa CA Uni Election of 2002 Ser B
(FSA Insd)...................................... 5.000 08/01/26 5,208,900
------------
67,405,653
------------
COLORADO 6.3%
2,840 Adams Cnty, CO Single Family Mtg Rev Ser A
(Escrowed to Maturity).......................... 8.875 08/01/10 3,807,361
3,985 Adams Cnty, CO Single Family Mtg Rev Ser A
(Escrowed to Maturity).......................... 8.875 08/01/12 5,556,764
5,000 Arapahoe Cnty, CO Wtr & Waste Proj Ser A (MBIA
Insd)........................................... 5.125 12/01/32 5,246,800
5,000 Colorado Dept Trans Rev Rev Antic Nts Ser A
(AMBAC Insd).................................... 5.250 12/15/16 5,607,350
1,000 Colorado Ed & Cultural Fac Impt Charter Sch Rfdg
(XLCA Insd)..................................... 5.000 12/01/33 1,034,420
5,000 Colorado Springs, CO Utils Rev Sys Sub Lien Ser
A Impt & Rfdg................................... 5.000 11/15/21 5,239,750
6,500 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B
(MBIA Insd)..................................... * 09/01/20 2,940,795
15,000 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B
(MBIA Insd)..................................... * 09/01/20 6,819,150
1,320 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/14 779,896
1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/15 790,869
1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/16 741,496
1,330 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/18 610,590
3,690 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity).................................... 11.500 09/01/12 5,809,425
------------
44,984,666
------------
CONNECTICUT 1.8%
2,785 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg)
(FGIC Insd) (Acquired 07/09/02, Cost $3,177,971)
(d) (h)......................................... 9.580 08/15/15 3,493,086
2,950 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg)
(FGIC Insd) (Acquired 07/09/02, Cost $3,323,232)
(d) (h)......................................... 9.580 08/15/16 3,683,134
</Table>
See Notes to Financial Statements 7
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
CONNECTICUT (CONTINUED)
$2,530 Mashantucket Western Pequot Tribe CT Spl Rev Ser
A, 144A-Private Placement (e)................... 6.400% 09/01/11 $ 2,746,391
2,470 Mashantucket Western Pequot Tribe CT Spl Rev Ser
A, 144A-Private Placement (Prerefunded @
09/01/07) (e)................................... 6.400 09/01/11 2,827,137
------------
12,749,748
------------
DISTRICT OF COLUMBIA 1.2%
5,150 District Columbia Tax Incrmnt Gallary Place Proj
(FSA Insd)...................................... 5.250 07/01/27 5,428,975
3,000 Metropolitan Washington DC Arpts Auth Sys Ser A
(FGIC Insd)..................................... 5.250 10/01/32 3,110,490
------------
8,539,465
------------
FLORIDA 6.3%
5,000 Broward Cnty, FL Arpt Sys Rev Ser J-I (AMBAC
Insd)........................................... 5.250 10/01/26 5,206,900
9,000 Dade Cnty, FL Gtd Entitlement Rev Cap Apprec Ser
A Rfdg (MBIA Insd).............................. * 02/01/18 4,289,490
5,000 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd)........................................... 5.950 07/01/20 5,259,000
5,700 Florida St Brd of Ed Pub Ed Ser B............... 5.000 06/01/17 6,244,464
6,385 Lake Cnty, FL Sch Brd Ctf Part (AMBAC Insd)..... 5.375 07/01/16 7,136,642
500 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 523,285
595 Orange Cnty, FL Tourist Dev Tax Rev (Escrowed to
Maturity) (AMBAC Insd).......................... 6.000 10/01/16 596,077
12,860 Orlando, FL Utils Commn Wtr Rfdg................ 5.250 10/01/19 14,062,667
675 Tampa Palms, FL Open Space & Tran Cmnty Dev Dist
Rev Cap Impt Area 7 Proj........................ 8.500 05/01/17 689,971
818 Tampa Palms, FL Open Space & Tran Cmnty Dev Dist
Rev Cap Impt Area 7 Proj........................ 7.500 05/01/18 850,213
------------
44,858,709
------------
GEORGIA 1.2%
2,000 Fulton Cnty, GA Hsg Auth Multi-Family Hsg Rev
Azalea Manor Proj Ser A (Acquired 02/18/98, Cost
$2,000,000) (d)................................. 6.500 02/01/28 1,460,000
6,315 Municipal Elec Auth GA Combustion Turbine Proj
Ser A (MBIA Insd)............................... 5.250 11/01/17 7,012,365
------------
8,472,365
------------
HAWAII 0.4%
1,475 Hawaii St Harbor Cap Impt Rev (FGIC Insd)....... 6.350 07/01/07 1,510,503
1,560 Hawaii St Harbor Cap Impt Rev (FGIC Insd)....... 6.400 07/01/08 1,597,627
------------
3,108,130
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
ILLINOIS 8.1%
$5,000 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd)..................................... * 12/01/20 $ 2,238,650
3,000 Chicago, IL Lakefront Millennium Pkg Fac (MBIA
Insd) (f)....................................... 0/5.650% 01/01/19 2,982,870
1,000 Chicago, IL Metro Wtr Reclamation Dist Gtr
Chicago (Escrowed to Maturity).................. 7.000 01/01/11 1,223,950
8,050 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien C-2 Rfdg (XLCA Insd)....................... 5.250 01/01/34 8,376,508
5,100 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Proj Ser B (b) (c)........................ 5.200 04/01/11 1,581,000
900 Chicago, IL O'Hare Intl Arpt Spl United Airl
Proj Ser A (b) (c).............................. 5.350 09/01/16 279,000
3,210 Chicago, IL Proj & Rfdg Ser C (FGIC Insd)....... 5.750 01/01/16 3,680,971
230 Chicago, IL Single Family Mtg Rev Ser A (GNMA
Collateralized)................................. 7.000 09/01/27 231,191
125 Chicago, IL Tax Increment Alloc Santn Drain &
Ship Canal Ser A................................ 7.375 01/01/05 125,956
1,000 Chicago, IL Tax Increment Alloc Santn Drain &
Ship Canal Ser A................................ 7.750 01/01/14 1,051,640
2,000 Chicago, IL Tax Increment Alloc Sub Cent Loop
Redev Ser A..................................... 6.500 12/01/05 2,126,640
1,000 Cook Cnty, IL Cmnty College Dist No 508 Chicago
Ctf Part (FGIC Insd)............................ 8.750 01/01/07 1,179,830
2,265 Cook Cnty, IL Cons High Sch Dist No 200 Oak Park
(FSA Insd)...................................... * 12/01/11 1,730,347
5,000 Cook Cnty, IL Ser A (FGIC Insd)................. 5.500 11/15/31 5,449,600
1,500 Hodgkins, IL Tax Increment Ser A Rfdg........... 7.625 12/01/13 1,611,120
1,365 Huntley, IL Increment Alloc Rev Huntley Redev
Proj Ser A...................................... 8.500 12/01/15 1,451,991
250 Illinois Dev Fin Auth Rev Cmnty Fac Clinic
Altgeld Proj.................................... 8.000 11/15/06 219,165
5,000 Illinois St First Ser (FSA Insd)................ 5.250 12/01/21 5,409,900
9,250 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev Cap Apprec McCormick Rfdg (MBIA Insd)... * 06/15/19 6,694,595
3,555 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev Cap Apprec McCormick Ser A Rfdg (MBIA
Insd)........................................... * 12/15/15 2,160,516
2,800 Regional Trans Auth IL Ser A (AMBAC Insd)....... 8.000 06/01/17 3,904,068
1,200 Saint Charles, IL Indl Dev Rev Tri-City Ctr Proj
(Acquired 11/17/93, Cost $1,200,000) (d)........ 7.500 11/01/13 1,200,708
4,270 Will Cnty, IL Fst Presv Dist Ser B (FGIC
Insd)........................................... * 12/01/15 2,590,481
------------
57,500,697
------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
INDIANA 1.3%
$2,500 Indiana Bd Bk Spl Pgm Hendricks Redev
(Prerefunded @ 02/01/07) (LOC--Canadian Imperial
Bank)........................................... 6.200% 02/01/23 $ 2,850,575
1,930 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj
Ser A........................................... 7.125 06/01/34 1,789,766
550 Indianapolis, IN Loc Pub Impt Bd Bk Ser D
(Escrowed to Maturity).......................... 6.750 02/01/14 681,191
140 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B....................................... * 06/30/11 81,575
140 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B....................................... * 06/30/12 75,565
135 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B....................................... * 06/30/13 67,500
130 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B....................................... * 06/30/14 60,211
130 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B....................................... * 06/30/15 55,775
135 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B....................................... * 06/30/16 53,654
225 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B....................................... * 06/30/17 82,836
3,295 Vigo Cnty, IN Elem Sch Bldg First Mtg Impt &
Rfdg (FSA Insd)................................. 5.250 01/10/22 3,535,271
------------
9,333,919
------------
IOWA 0.5%
640 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)................................. 6.000 07/01/07 718,746
2,400 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)................................. 5.750 07/01/17 2,654,280
------------
3,373,026
------------
KANSAS 1.1%
6,600 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita
(MBIA Insd)..................................... 5.625 09/01/13 7,637,586
------------
LOUISIANA 0.3%
420 Louisiana St Hlth Ed Auth Rev Lambeth House Ser
A Rfdg.......................................... 5.250 01/01/05 420,462
1,400 West Feliciana Parish, LA Pollutn Ctl Rev Gulf
States Util Co Proj Ser A....................... 7.500 05/01/15 1,419,516
------------
1,839,978
------------
MASSACHUSETTS 3.6%
7,500 Massachusetts St Fed Hwy Ser A.................. 5.750 06/15/14 8,758,350
3,500 Massachusetts St Hlth & Ed Fac Auth Rev (MBIA
Insd)........................................... 5.000 07/01/13 3,598,000
</Table>
10 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
MASSACHUSETTS (CONTINUED)
$1,500 Massachusetts St Indl Fin Agy Hillcrest Ed Ctr
Inc Proj (Prerefunded @ 07/01/05)............... 8.450% 07/01/18 $ 1,642,035
5,355 Massachusetts St Indl Fin Agy Rev First Mtg
Reeds Landing Proj.............................. 7.100 10/01/28 5,379,044
5,000 Massachusetts St Rol-R 143-Ser II (Inverse Fltg)
(MBIA Insd) (Acquired 11/26/01, Cost $5,345,326)
(d) (h)......................................... 9.330 11/01/16 6,407,250
------------
25,784,679
------------
MICHIGAN 4.0%
875 Detroit, MI Loc Dev Fin Auth Tax Increment Ser C
(Acquired 09/08/97, Cost $875,000) (d).......... 6.850 05/01/21 859,828
5,000 Detroit, MI Sew Disp Rev Sr Lien Ser A Rfdg
(FGIC Insd)..................................... 5.125 07/01/31 5,215,350
1,400 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale
Cmnty Hlth Cent................................. 5.250 05/15/26 1,259,426
5,000 Michigan St Bldg Auth Rev Fac Prog Ser II....... 5.500 10/15/16 5,629,300
5,000 Michigan St Strategic Fd Detroit Edison Co Proj
C Rfdg (XLCA Insd).............................. 5.450 12/15/32 5,278,550
1,270 Michigan St Strategic Fd Detroit Edison Pollutn
Ctl Ser B Rfdg.................................. 5.650 09/01/29 1,320,737
9,739 Michigan St Strategic Fd Ltd Oblig Rev Great
Lakes Pulp & Fiber Proj (b) (g)................. 8.000 12/01/27 1,421,966
1,935 Michigan St Strategic Fd Solid Genesee Pwr Sta
Proj Rfdg....................................... 7.500 01/01/21 1,665,842
5,000 Western Townships, MI Util Sew Rfdg (MBIA
Insd)........................................... 5.250 01/01/16 5,522,300
------------
28,173,299
------------
MISSOURI 1.6%
3,000 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 3,123,780
2,835 Kansas City, MO Port Auth Fac Riverfront Park
Proj Ser A...................................... 5.750 10/01/06 2,894,393
3,935 Macon, MO Ctf Part (MBIA Insd).................. 5.250 08/01/17 4,327,870
595 Saint Louis, MO Tax Increment Rev Scullin Redev
Area Ser A...................................... 10.000 08/01/10 714,440
------------
11,060,483
------------
NEBRASKA 0.8%
5,435 Nebraska Pub Pwr Dist Rev Ser A (AMBAC Insd).... 5.000 01/01/18 5,875,452
------------
NEW HAMPSHIRE 0.8%
1,555 New Hampshire Higher Ed & Hlth Fac Auth Rev..... 8.800 06/01/09 1,666,043
890 New Hampshire Higher Ed & Hlth Fac Auth Rev
Daniel Webster College Issue Rfdg............... 6.100 07/01/09 952,718
795 New Hampshire St Business Fin Auth Elec Fac Rev
Plymouth Cogeneration (Acquired 06/29/93, Cost
$781,447) (d)................................... 7.750 06/01/14 797,298
</Table>
See Notes to Financial Statements 11
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
NEW HAMPSHIRE (CONTINUED)
$1,000 New Hampshire St Business Fin Auth Rev Alice
Peck Day Hlth Sys Ser A......................... 6.875% 10/01/19 $ 1,009,020
1,000 New Hampshire St Tpk Sys Rev Ser A Rfdg (FGIC
Insd)........................................... 6.750 11/01/11 1,140,340
------------
5,565,419
------------
NEW JERSEY 10.6%
2,000 Camden Cnty, NJ Impt Auth Lease Rev Dockside
Refrig (Acquired 01/29/97, Cost $2,074,739) (b)
(c) (d)......................................... 8.400 04/01/24 1,640,000
3,250 Landis, NJ Sew Auth Swr Rev (Inverse Fltg) (FGIC
Insd) (h)....................................... 10.070 09/19/19 4,260,165
6,130 Middlesex Cnty, NJ Util Auth Swr Rev Ser A Rfdg
(MBIA Insd)..................................... 6.250 08/15/10 7,085,054
9,725 New Jersey Econ Dev Auth Drivers Ser 365
(Inverse Fltg) (FGIC Insd) (Acquired 08/04/03,
Cost $10,450,265) (d) (h)....................... 9.200 06/15/11 11,667,277
2,000 New Jersey Econ Dev Auth Holt Hauling & Warehsg
Rev Ser G Rfdg (b) (c).......................... 8.400 12/15/15 1,640,000
1,900 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06)....................................... 8.500 11/01/16 2,244,945
350 New Jersey Econ Dev Auth Rev RWJ Hlthcare Corp
(FSA Insd)...................................... 6.250 07/01/14 360,976
1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes
(Prerefunded @ 07/01/05)........................ 7.500 07/01/20 1,094,480
1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes
(Prerefunded @ 07/01/05)........................ 7.500 07/01/25 1,094,480
8,000 New Jersey Econ Dev Auth Sch Fac Constr Ser F
(FGIC Insd)..................................... 5.250 06/15/17 8,929,760
755 New Jersey St Tpk Auth Tpk Rev Ser C (MBIA
Insd)........................................... 6.500 01/01/16 938,405
2,725 New Jersey St Tpk Auth Tpk Rev Ser C (Escrowed
to Maturity) (MBIA Insd)........................ 6.500 01/01/16 3,376,166
5,710 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt
Ser A (AMBAC Insd).............................. 5.750 09/15/10 6,516,309
10,000 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt
Ser B (Prerefunded @ 09/15/10) (AMBAC Insd)..... 6.000 09/15/15 11,867,300
5,500 New Jersey St Trans Tr Fd Auth Rols RR II R 236
(Inverse Fltg) (FSA Insd) (Acquired 07/30/03,
Cost $6,391,317) (d) (h)........................ 9.810 06/15/20 6,799,980
5,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser C
(FSA Insd)...................................... 5.500 06/15/16 5,698,550
------------
75,213,847
------------
NEW YORK 14.0%
10,000 Nassau Cnty, NY Interim Fin Auth Ser A
(Prerefunded @ 11/15/10)........................ 5.750 11/15/14 11,651,900
5,000 New York City Ser A............................. 7.000 08/01/07 5,606,450
21,860 New York City Ser B (MBIA Insd)................. 5.875 08/01/15 25,449,412
1,420 New York City Ser D............................. 8.000 02/01/05 1,498,001
</Table>
12 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$5,000 New York City Ser D (MBIA Insd)................. 5.200% 08/01/14 $ 5,523,800
5,000 New York City Transitional Drivers Ser 307
(Inverse Fltg) (AMBAC Insd) (Acquired 11/06/02,
Cost $5,439,826) (d) (h)........................ 9.120 08/01/19 5,933,450
2,285 New York St Dorm Auth Rev Mental Hlth Ser A..... 5.750 02/15/11 2,528,695
10 New York St Dorm Auth Rev Mental Hlth Ser A
(Prerefunded @ 02/15/07)........................ 5.750 02/15/11 11,307
2,275 New York St Dorm Auth Rev Mental Hlth Svc Fac
Ser A........................................... 5.750 02/15/12 2,517,629
5 New York St Dorm Auth Rev Mental Hlth Svc Fac
Ser A (Prerefunded @ 02/15/07).................. 5.750 02/15/12 5,654
2,500 New York St Energy Resh & Dev Auth Gas Fac Rev
(Inverse Fltg) (h).............................. 11.387 04/01/20 3,207,875
3,000 New York St Energy Resh & Dev Auth Gas Fac Rev
Brooklyn Union Gas Ser B (Inverse Fltg) (h)..... 12.504 07/01/26 3,645,630
2,000 New York St Energy Resh & Dev Auth Pollutn Ctl
Rev Niagara Mohawk Pwr Corp Ser A Rfdg (FGIC
Insd)........................................... 7.200 07/01/29 2,067,400
10,725 New York St Environmental Fac Rev Fds-2nd
Resolution...................................... 5.000 06/15/20 11,488,084
2,000 New York St Twy Auth Svc Ctl Rol-R 142 Ser II
(Inverse Fltg) (Acquired 11/26/01, Cost
$2,109,732) (d) (h)............................. 9.280 04/01/16 2,569,880
3,000 New York St Twy Auth Svc Ctl Rol-R 142 Ser II
(Inverse Fltg) (Acquired 11/26/01, Cost
$3,102,316) (d) (h)............................. 9.280 04/01/18 3,854,820
1,200 Port Auth NY & NJ Cons 95th Ser................. 6.125 07/15/22 1,227,240
10,000 Triborough Brdg & Tunl Auth NY Gen Ser B Rfdg... 5.000 11/15/22 10,525,200
------------
99,312,427
------------
NORTH CAROLINA 1.3%
8,700 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 9,505,794
------------
OHIO 0.1%
1,000 Ohio St Air Quality Dev Auth Rev JMG Funding Ltd
Part Proj Rfdg (AMBAC Insd)..................... 6.375 04/01/29 1,042,270
------------
OKLAHOMA 0.1%
520 Oklahoma Hsg Fin Agy Single Family Rev Mtg Class
B (GNMA Collateralized)......................... 7.997 08/01/18 552,157
------------
OREGON 2.5%
5,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA
Insd)........................................... 5.250 07/01/22 5,405,500
1,000 Port Morrow, OR Pollutn Ctl Portland Gen A
Rfdg............................................ 5.200 05/01/33 1,063,510
10,000 Portland, OR Swr Sys Rev Ser A (FGIC Insd)...... 5.750 08/01/18 11,470,000
------------
17,939,010
------------
</Table>
See Notes to Financial Statements 13
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
PENNSYLVANIA 1.6%
$5,000 Chester Cnty, PA Hlth & Ed Fac Auth Hlth Sys Rev
(AMBAC Insd).................................... 5.650% 05/15/20 $ 5,120,350
740 Lehigh Cnty, PA Indl Dev Auth Rev Rfdg.......... 8.000 08/01/12 734,480
5,250 Philadelphia, PA Auth Indl Ser B (FSA Insd)..... 5.500 10/01/16 5,869,133
------------
11,723,963
------------
RHODE ISLAND 0.5%
1,490 Rhode Island St Econ Dev Corp Rev............... 7.250 07/01/10 1,502,233
2,000 Rhode Island St Hlth & Ed Bldg Higher Ed Johnson
& Wales Rfdg (XLCA Insd)........................ 5.375 04/01/19 2,213,300
------------
3,715,533
------------
SOUTH CAROLINA 0.1%
1,070 Piedmont Muni Pwr Agy SC Elec Rev............... 5.000 01/01/25 1,036,349
------------
SOUTH DAKOTA 0.1%
1,000 South Dakota St Hlth & Ed Fac Auth Rev Huron
Regl Med Ctr.................................... 7.250 04/01/20 1,023,350
------------
TENNESSEE 1.1%
4,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg
(MBIA Insd)..................................... 7.750 07/01/29 5,241,200
2,000 Springfield, TN Hlth & Ed Jesse Holman Jones
Hosp Proj (Prerefunded @ 04/01/06).............. 8.500 04/01/24 2,311,040
------------
7,552,240
------------
TEXAS 8.1%
1,955 Bell Cnty, TX Indl Dev Corp Solid Waste Disposal
Rev............................................. 7.600 12/01/17 682,158
500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev St.
Luke's Lutheran Hosp (Escrowed to Maturity)..... 7.000 05/01/21 651,755
4,000 Brazos River Auth TX Pollutn Ctl Rev Adj Elec Co
Proj Ser C Rfdg................................. 5.750 05/01/36 4,337,840
90 Coastal Wtr Auth TX Conveyance Sys Rev (Escrowed
to Maturity) (AMBAC Insd)....................... 6.250 12/15/17 90,171
5,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser
A Rfdg (FGIC Insd).............................. 5.500 11/01/31 5,199,750
7,350 Grapevine Colleyville Indpt Sch Dist TX (PSFG
Insd)........................................... * 08/15/11 5,674,641
10,000 Houston, TX Hotel Occupancy Tax Convtn &
Entertnmnt Ser B (AMBAC Insd)................... 5.750 09/01/14 11,635,600
7,500 Lower CO River Auth TX Rev Ser A Rfdg (Inverse
Fltg) (FSA Insd) (Acquired 10/20/99, Cost
$7,623,805) (d) (h)............................. 10.389 05/15/14 9,816,375
6,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse
Fltg) (FSA Insd) (Acquired 10/20/99, Cost
$6,312,134) (d) (h)............................. 10.389 05/15/15 8,143,438
</Table>
14 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$3,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse
Fltg) (FSA Insd) (Acquired 10/20/99, Cost
$3,254,875) (d) (h)............................. 10.389% 05/15/16 $ 4,234,588
2,000 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones
Mem Hosp Proj................................... 7.200 01/01/21 1,980,520
500 Texas Gen Svc Cmnty Part Int Office Bldg & Land
Acquisition Proj................................ 7.000 08/01/19 507,330
500 Texas Gen Svc Cmnty Part Int Office Bldg & Land
Acquisition Proj................................ 7.000 08/01/24 507,165
659 Texas Gen Svc Cmnty Part Lease Purch Ctf........ 7.500 02/15/13 670,637
2,575 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev
Coll Ser C Rfdg (Inverse Fltg) (GNMA
Collateralized) (h)............................. 12.552 07/02/24 2,757,696
625 Texas St Higher Ed Coordinating Brd College
Student Ln Rev.................................. 7.849 10/01/25 625,969
------------
57,515,633
------------
UTAH 2.0%
1,340 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj
(b)............................................. 7.800 09/01/15 420,425
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj
(b)............................................. 8.000 09/01/20 313,750
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj
(b)............................................. 7.800 09/01/25 313,750
11,000 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg... 6.150 02/15/12 13,001,890
50 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A1
(FHA Gtd)....................................... 7.100 07/01/14 51,869
65 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A2
(FHA Gtd)....................................... 7.200 01/01/27 67,222
------------
14,168,906
------------
VERMONT 0.1%
1,000 Vermont Ed & Hlth Bldg Fing Agy Rev Bennington
College Proj.................................... 6.625 10/01/29 1,014,220
------------
WASHINGTON 2.2%
5,000 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg............................................ 5.500 07/01/17 5,647,000
8,000 King Cnty, WA Sch Dist No 411 (FGIC Insd)....... 5.250 12/01/20 8,731,760
1,250 Washington St Pub Pwr Supply Sys Nuclear Proj No
1 Rev (FGIC Insd)............................... 7.125 07/01/16 1,618,213
------------
15,996,973
------------
WEST VIRGINIA 0.8%
1,500 West Virginia St Hosp Fin Auth Hosp Rev Bears &
Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 1,505,310
4,000 West Virginia St Hosp Fin Auth Hosp Rev Bears &
Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 4,014,320
------------
5,519,630
------------
</Table>
See Notes to Financial Statements 15
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
WISCONSIN 0.0%
$ 75 Wisconsin St Hlth & Ed Fac Auth Rev Hess Mem
Hosp Assn (ACA Insd)............................ 7.200% 11/01/05 $ 78,530
------------
TOTAL INVESTMENTS 98.9%
(Cost $663,162,372)........................................................ 704,221,742
OTHER ASSETS IN EXCESS OF LIABILITIES 1.1%.................................. 7,777,654
------------
NET ASSETS 100.0%........................................................... $711,999,396
============
</Table>
* Zero coupon bond
(a) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(b) Non-income producing security.
(c) This borrower has filed for protection in federal bankruptcy court.
(d) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 12.1% of net
assets.
(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 those
transactions with qualified institutional buyers.
(f) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(g) Payment-in-kind security.
(h) An Inverse Floating Rate security is one where the coupon is inversely
indexed to a short-term floating interest rate multiplied by a specific
factor. As the floating rate rises, the coupon is reduced. Conversely, as
the floating rate declines, the coupon is increased. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. These instruments are typically used by the Trust to enhance the
yield of the portfolio. All of the Trust's portfolio holdings, including
derivative instruments, are marked to market each day with the change in
value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
PSFG--Permanent School Fund Guaranty
XLCA--XL Capital Assurance Inc.
16 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $663,162,372)....................... $704,221,742
Receivables:
Interest.................................................. 9,935,151
Investments Sold.......................................... 580,029
Fund Shares Sold.......................................... 379,171
Other....................................................... 180,165
------------
Total Assets............................................ 715,296,258
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 965,378
Income Distributions...................................... 801,484
Distributor and Affiliates................................ 477,560
Investment Advisory Fee................................... 297,715
Variation Margin on Futures............................... 262,484
Custodian Bank............................................ 87,198
Trustees' Deferred Compensation and Retirement Plans........ 233,198
Accrued Expenses............................................ 171,845
------------
Total Liabilities....................................... 3,296,862
------------
NET ASSETS.................................................. $711,999,396
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $703,271,454
Net Unrealized Appreciation................................. 39,888,552
Accumulated Undistributed Net Investment Income............. 560,697
Accumulated Net Realized Loss............................... (31,721,307)
------------
NET ASSETS.................................................. $711,999,396
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $639,511,914 and 42,814,834 shares of
beneficial interest issued and outstanding)............. $ 14.94
Maximum sales charge (4.75%* of offering price)......... .75
------------
Maximum offering price to public........................ $ 15.69
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $55,421,285 and 3,715,136 shares of
beneficial interest issued and outstanding)............. $ 14.92
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $17,066,197 and 1,145,558 shares of
beneficial interest issued and outstanding)............. $ 14.90
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 17
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................. $19,251,527
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,754,459
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $807,323, $284,565 and $85,987,
respectively)............................................. 1,177,875
Shareholder Services........................................ 234,265
Legal....................................................... 234,256
Custody..................................................... 26,781
Trustees' Fees and Related Expenses......................... 13,501
Other....................................................... 204,202
-----------
Total Expenses............................................ 3,645,339
Less Credits Earned on Cash Balances...................... 529
-----------
Net Expenses.............................................. 3,644,810
-----------
NET INVESTMENT INCOME....................................... $15,606,717
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(3,369,967)
Futures................................................... (1,418,973)
-----------
Net Realized Loss........................................... (4,788,940)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 30,747,521
End of the Period:
Investments............................................. 41,059,370
Futures................................................. (1,170,818)
-----------
39,888,552
-----------
Net Unrealized Appreciation During the Period............... 9,141,031
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 4,352,091
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $19,958,808
===========
</Table>
18 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 15,606,717 $ 33,414,534
Net Realized Gain/Loss............................... (4,788,940) 11,327,363
Net Unrealized Appreciation/Depreciation During the
Period............................................. 9,141,031 (21,838,216)
------------ -------------
Change in Net Assets from Operations................. 19,958,808 22,903,681
------------ -------------
Distributions from Net Investment Income:
Class A Shares..................................... (13,877,227) (30,423,796)
Class B Shares..................................... (1,001,321) (2,325,118)
Class C Shares..................................... (303,276) (700,757)
------------ -------------
Total Distributions.................................. (15,181,824) (33,449,671)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 4,776,984 (10,545,990)
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 24,263,731 127,051,831
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 10,199,179 22,094,872
Cost of Shares Repurchased........................... (61,109,535) (184,959,736)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... (26,646,625) (35,813,033)
------------ -------------
TOTAL DECREASE IN NET ASSETS......................... (21,869,641) (46,359,023)
NET ASSETS:
Beginning of the Period.............................. 733,869,037 780,228,060
------------ -------------
End of the Period (Including accumulated
undistributed net investment income of $560,697 and
$135,804, respectively)............................ $711,999,396 $ 733,869,037
============ =============
</Table>
See Notes to Financial Statements 19
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS A SHARES MARCH 31, --------------------------------------------------
2004 (a) 2003 (a) 2002 (c) 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD......................... $14.84 $15.03 $14.56 $14.06 $14.50 $15.99
------ ------ ------ ------ ------ ------
Net Investment Income.......... .33 .67 .71 .74 .79 .82
Net Realized and Unrealized
Gain/Loss.................... .09 (.19) .46 .49 (.42) (1.46)
------ ------ ------ ------ ------ ------
Total from Investment
Operations..................... .42 .48 1.17 1.23 .37 (.64)
Less Distributions from Net
Investment Income.............. .32 .67 .70 .73 .81 .85
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD......................... $14.94 $14.84 $15.03 $14.56 $14.06 $14.50
====== ====== ====== ====== ====== ======
Total Return (b)................. 2.84%* 3.31% 8.35% 8.93% 2.69% -4.25%
Net Assets at End of the Period
(In millions).................. $639.5 $658.5 $696.4 $701.5 $688.3 $777.5
Ratio of Expenses to Average Net
Assets......................... .93% .88% .87% .83% .89% .88%
Ratio of Interest Expense to
Average Net Assets............. N/A N/A N/A N/A .01% .17%
Ratio of Net Investment Income to
Average Net Assets............. 4.38% 4.53% 4.89% 5.16% 5.58% 5.34%
Portfolio Turnover............... 5%* 46% 49% 31% 45% 116%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deductions of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by $.01, decrease net realized and unrealized gains and
losses by $.01 and increase the ratio of net investment income to average
net assets from 4.85% to 4.89%. Per share, ratios and supplemental data for
periods prior to September 30, 2002 have not been restated to reflect this
change in presentation.
N/A=Not Applicable.
20 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS B SHARES MARCH 31, -----------------------------------------------
2004 (a) 2003 (a) 2002 (c) 2001 2000 1999
------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD......................... $14.82 $15.02 $14.54 $14.05 $14.49 $ 15.98
------ ------ ------ ------ ------ -------
Net Investment Income.......... .27 .56 .60 .63 .68 .71
Net Realized and Unrealized
Gain/Loss.................... .09 (.20) .48 .48 (.42) (1.47)
------ ------ ------ ------ ------ -------
Total from Investment
Operations..................... .36 .36 1.08 1.11 .26 (.76)
Less Distributions from Net
Investment Income.............. .26 .56 .60 .62 .70 .73
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD......................... $14.92 $14.82 $15.02 $14.54 $14.05 $ 14.49
====== ====== ====== ====== ====== =======
Total Return (b)................. 2.46%* 2.48% 7.64% 8.06% 1.90% -4.95%
Net Assets at End of the Period
(In millions).................. $ 55.4 $ 58.4 $ 65.0 $ 66.6 $ 69.5 $ 106.6
Ratio of Expenses to Average Net
Assets......................... 1.68% 1.63% 1.62% 1.59% 1.67% 1.63%
Ratio of Interest Expense to
Average Net Assets............. N/A N/A N/A N/A .01% .17%
Ratio of Net Investment Income to
Average Net Assets............. 3.63% 3.78% 4.13% 4.40% 4.86% 4.57%
Portfolio Turnover............... 5%* 46% 49% 31% 45% 116%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within one year of purchase and declining to 0% after the sixth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of 1% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by $.01, decrease net realized and unrealized gains and
losses by $.01 and increase the ratio of net investment income to average
net assets from 4.09% to 4.13%. Per share, ratios and supplemental data for
periods prior to September 30, 2002 have not been restated to reflect this
change in presentation.
N/A=Not Applicable.
See Notes to Financial Statements 21
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS C SHARES MARCH 31, --------------------------------------------------
2004 (a) 2003 (a) 2002 (c) 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD......................... $14.80 $15.00 $14.52 $14.04 $14.48 $15.96
------ ------ ------ ------ ------ ------
Net Investment Income.......... .27 .56 .60 .63 .68 .70
Net Realized and Unrealized
Gain/Loss.................... .09 (.20) .48 .47 (.42) (1.45)
------ ------ ------ ------ ------ ------
Total from Investment
Operations..................... .36 .36 1.08 1.10 .26 (.75)
Less Distributions from Net
Investment Income.............. .26 .56 .60 .62 .70 .73
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD......................... $14.90 $14.80 $15.00 $14.52 $14.04 $14.48
====== ====== ====== ====== ====== ======
Total Return (b)................. 2.47%* 2.48% 7.65% 8.00% 1.91% -4.90%
Net Assets at End of the Period
(In millions).................. $ 17.1 $ 17.0 $ 18.8 $ 17.4 $ 13.8 $ 17.5
Ratio of Expenses to Average Net
Assets......................... 1.68% 1.63% 1.62% 1.62% 1.66% 1.63%
Ratio of Interest Expense to
Average Net Assets............. N/A N/A N/A N/A .01% .17%
Ratio of Net Investment Income to
Average Net Assets............. 3.63% 3.78% 4.13% 4.37% 4.84% 4.55%
Portfolio Turnover............... 5%* 46% 49% 31% 45% 116%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by $.01, decrease net realized and unrealized gains and
losses by $.01 and increase the ratio of net investment income to average
net assets from 4.09% to 4.13%. Per share, ratios and supplemental data for
periods prior to September 30, 2002 have not been restated to reflect this
change in presentation.
N/A=Not Applicable.
22 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Municipal Income Fund (the "Fund") is organized as a series of the
Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered as a
diversified open-end management investment company under the Investment Company
Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to
provide a high level of current income exempt from federal income tax,
consistent with preservation of capital. The Fund commenced investment
operations on August 1, 1990. The distribution of the Fund's Class B and Class C
shares commenced on August 24, 1992 and August 13, 1993, respectively. Effective
November 30, 2003, the Fund's investment adviser, Van Kampen Investment Advisory
Corp. merged into its affiliate, Van Kampen Asset Management (the "Adviser").
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund 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 Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At March 31, 2004, the Fund had no when-issued and delayed
delivery purchase commitments.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security. Income and expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund'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.
23
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
The Fund 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 these losses against any future realized capital
gains. At September 30, 2003, the Fund had an accumulated capital loss
carryforward for tax purposes of $28,396,676 which will expire between September
30, 2008 and September 30, 2010.
At March 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $662,914,635
============
Gross tax unrealized appreciation........................... $ 56,707,456
Gross tax unrealized depreciation........................... (15,400,349)
------------
Net tax unrealized appreciation investments................. $ 41,307,107
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included in ordinary income for
tax purposes.
The tax character of distributions paid during the year ended September 30,
2003 was as follows:
<Table>
<Caption>
2003
Distribution paid from:
Ordinary Income........................................... $239,149
Long-term capital gain.................................... --
--------
$239,149
========
</Table>
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $141,325
</Table>
F. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's
custody fee was reduced by $529 as a result of credits earned on cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .50%
Over $500 million........................................... .45%
</Table>
For the six months ended March 31, 2004, the Fund recognized expenses of
approximately $15,500 representing legal services provided by Skadden, Arps,
Slate,
24
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund is an
affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Fund. The Adviser
allocates the cost of such services to each fund. For the six months ended March
31, 2004, the Fund recognized expenses of approximately $53,400 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, which are reported as part
of "Other" and "Legal" expenses, respectively, in the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS) an affiliate of the Adviser, serves
as the shareholder servicing agent for the Fund. For the six months ended March
31, 2004, the Fund recognized expenses of approximately $182,800 representing
transfer agency fees paid to VKIS. Transfer agency fees are determined through
negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund 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.
Amounts deferred are retained by the Fund and, to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of approximately $156,700
are included in "Other" assets on the Statements of Assets and Liabilities at
March 31, 2004. Appreciation/depreciation and distributions received from these
investments are recorded with an offsetting increase/decrease in the deferred
compensation obligation and do not affect the net asset value of the Fund.
Benefits under the retirement plan are payable upon retirement for a ten-year
period and are based upon each trustee's years of service to the Fund. The
maximum annual benefit per trustee under the plan is $2,500.
25
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2004, capital aggregated $628,396,348, $57,332,238 and $17,542,868
for Classes A, B and C, respectively. For the six months ended March 31, 2004,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,424,459 $ 21,208,426
Class B................................................... 99,672 1,484,724
Class C................................................... 106,317 1,570,581
---------- ------------
Total Sales................................................. 1,630,448 $ 24,263,731
========== ============
Dividend Reinvestment:
Class A................................................... 629,679 $ 9,380,991
Class B................................................... 41,277 614,088
Class C................................................... 13,734 204,100
---------- ------------
Total Dividend Reinvestment................................. 684,690 $ 10,199,179
========== ============
Repurchases:
Class A................................................... (3,612,271) $(53,839,317)
Class B................................................... (364,434) (5,432,006)
Class C................................................... (123,590) (1,838,212)
---------- ------------
Total Repurchases........................................... (4,100,295) $(61,109,535)
========== ============
</Table>
At September 30, 2003, capital aggregated $651,646,248, $60,665,432 and
$17,606,399 for Classes A, B and C, respectively. For the year ended September
30, 2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 7,801,000 $ 114,651,871
Class B................................................... 503,655 7,411,147
Class C................................................... 338,633 4,988,813
----------- -------------
Total Sales................................................. 8,643,288 $ 127,051,831
=========== =============
Dividend Reinvestment:
Class A................................................... 1,375,257 $ 20,229,463
Class B................................................... 96,732 1,421,035
Class C................................................... 30,289 444,374
----------- -------------
Total Dividend Reinvestment................................. 1,502,278 $ 22,094,872
=========== =============
Repurchases:
Class A................................................... (11,127,622) $(163,537,726)
Class B................................................... (988,417) (14,485,338)
Class C................................................... (474,542) (6,936,672)
----------- -------------
Total Repurchases........................................... (12,590,581) $(184,959,736)
=========== =============
</Table>
26
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received on such shares, automatically convert
to Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the six months ended March 31, 2004 and year
ended September 30, 2003, 22,388 and 155,348 Class B Shares converted to Class A
Shares, respectively and are shown in the above tables as sales of Class A
Shares and repurchases of Class B Shares. Class C Shares purchased before
January 1, 1997, and any dividend reinvestment plan Class C Shares received on
such shares, automatically convert to Class A Shares ten years after the end of
the calendar month in which such shares were purchased. Class C Shares purchased
on or after January 1, 1997 do not possess a conversion feature. For the six
months ended March 31, 2004 and year ended September 30, 2003, 2,500 and 0 Class
C Shares automatically convert to Class A Shares and are shown in the above
table as sales of Class A Shares and repurchases of Class C Shares.
Class B and C Shares are offered without a front end sales charges, but are
subject to a contingent deferred sale charge (CDSC). The CDSC will be imposed on
most redemptions made within six years of the purchase for Class B and one year
of the purchase for Class C as detailed in the following schedule.
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 3.75% None
Third....................................................... 3.50% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth....................................................... 1.00% None
Seventh and Thereafter...................................... None None
</Table>
For the six months ended March 31, 2004, Van Kampen as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $39,700 and CDSC on redeemed shares of approximately $28,800.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $32,048,795 and $45,997,684,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
27
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, to manage the portfolio's effective yield, maturity and duration, or
generate potential gain. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change in value
reflected in unrealized appreciation/depreciation. Upon disposition, a realized
gain or loss is recognized accordingly, except when taking delivery of a
security underlying a future contract. In this instance, the recognition of gain
or loss is postponed until the disposal of the security underlying the future
contract.
Summarized below are the different types of derivative financial instruments
used by the Fund.
FUTURES CONTRACT A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in futures on U.S. Treasury Notes. Upon entering into futures
contracts, the Fund maintains an amount of cash or liquid securities with a
value equal to a percentage of the contract amount with either a futures
commission merchant pursuant to rules and regulations promulgated under the 1940
Act, as amended, or with its custodian in an account in the broker's name. This
amount is known as initial margin. During the period the futures contract is
open, payments are received from or made to the broker based upon changes in the
value of the contract (the variation margin). The risk of loss associated with a
futures contract is in excess of the variation margin reflected on the statement
of Assets and Liabilities.
Transactions in futures contracts for the six months ended March 31, 2004,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2003........................... 276
Futures Opened.............................................. 885
Futures Closed.............................................. (537)
----
Outstanding at March 31, 2004............................... 624
====
</Table>
The futures contracts outstanding as of March 31, 2004, and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures June 2004 (Current
Notional Value of $115,406 per contract).................. 109 $ (259,337)
U.S. Treasury Notes 5-Year Futures June 2004 (Current
Notional Value of $113,563 per contract).................. 515 (911,481)
--- -----------
624 $(1,170,818)
=== ===========
</Table>
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively, the "Plans").
The Plans govern payments for: the
28
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
distribution of the Fund's Class A Shares, Class B Shares and Class C Shares;
the provision of ongoing shareholder services with respect to such classes of
shares; and the maintenance of shareholder accounts with respect to such classes
of shares.
Annual fees under the Plans of up to 0.25% of Class A average daily net
assets and 1.00% each for Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A Shares are paid quarterly and the
annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $2,928,300 and $182,800
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be
refunded to the Fund on a quarterly basis.
Included in these fees for the six months ended March 31, 2004, are payments
retained by Van Kampen of approximately $35,400 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $234,800.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, certain officers of such
affiliates and certain investment companies advised by the Adviser or its
affiliates, including the Fund, are named as defendants in a number of similar
class action complaints which were recently consolidated. This consolidated
action also names as defendants certain individual Trustees and Directors of the
named investment companies advised by affiliates of the Adviser; the complaint
does not, however, name the individual Trustees of any Van Kampen funds. The
consolidated amended complaint generally alleges that defendants violated their
statutory disclosure obligations and fiduciary duties by failing properly to
disclose (i) that the Adviser and certain affiliates of the Adviser allegedly
offered economic incentives to brokers and others to recommend the funds advised
by the Adviser or its affiliates to investors rather than funds managed by other
companies, and (ii) that the funds advised by the Adviser or its affiliates,
including the Fund, allegedly paid excessive commissions to brokers in return
for their efforts to recommend these funds to investors. The complaint seeks,
among other things, unspecified compensatory damages, rescissionary damages,
fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley DW Inc. in connection with the
sales of the funds. The complaint seeks, among other things, the removal of the
current Trustees of the Van Kampen funds, rescission of the management contracts
for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary
damages. This complaint will be coordinated with the consolidated complaint.
The defendants intend to move to dismiss these actions and otherwise
vigorously to defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
29
VAN KAMPEN MUNICIPAL INCOME FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
30
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 49, 349, 549
MIF SAR 5/04 RN04-00365P-Y03/04
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Intermediate Term Municipal Income Fund performed during the semiannual
period. The portfolio management team will provide an overview of the
market conditions and discuss some of the factors that affected
investment performance during the reporting period. In addition, this
report includes the fund's financial statements and a list of fund
investments as of March 31, 2004.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that a mutual fund will achieve its
investment objective. Funds are subject to market risk, which is the
possibility that the market values of securities owned by the fund will
decline and that the value of fund shares may therefore be less than what
you paid for them. Accordingly, you can lose money investing in this
fund. Please see the prospectus for more complete information on
investment risks.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
PERFORMANCE SUMMARY as of 3/31/04
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 5/28/1993 since 5/28/1993 since 10/19/1993
- ------------------------------------------------------------------------------------------
W/MAX. W/MAX. W/MAX.
3.25% 3.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception 5.71% 5.38% 5.29% 5.29% 4.45% 4.45%
10-year 5.84 5.50 5.38 5.38 5.08 5.08
5-year 4.74 4.05 4.08 4.08 3.99 3.99
1-year 4.68 1.28 3.90 0.90 3.92 2.92
6-month 2.35 -0.96 2.06 -0.94 2.07 1.07
- ------------------------------------------------------------------------------------------
30-Day SEC Subsidized
Yield 2.60% 1.93% 1.94%
30-Day SEC Yield 2.50 1.83 1.84
- ------------------------------------------------------------------------------------------
</Table>
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost. The returns shown in this report do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares.
Average annual total return with sales charges includes payment of the maximum
sales charge of 3.25 percent for Class A shares, a contingent deferred sales
charge of 3.00 percent for Class B shares (in year one and declining to zero
after year four), a contingent deferred sales charge of 1.00 percent for Class C
shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25
percent for Class A shares and 1.00 percent for Class B and C shares. The since
inception and 10-year returns for Class B shares reflect its conversion into
Class A shares six years after purchase. The since inception returns for Class C
shares reflect the conversion of Class C shares into Class A shares ten years
after purchase. See footnote 3 in the Notes to Financial Statements for
additional information. Figures shown above assume reinvestment of all dividends
and capital gains. The fund's adviser has waived or reimbursed fees and expenses
from time to time; absent such waivers/reimbursements the fund's returns would
have been lower. SEC yield is a calculation for determining the amount of
portfolio income, excluding non-income items as prescribed by the SEC. The
subsidized SEC yields reflect some or all of the expenses that the adviser had
voluntarily waived. Yields are subject to change.
The Lehman Brothers Municipal Bond Index is generally representative of
investment-grade, tax-exempt bonds. The index is unmanaged and does not include
any sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
Van Kampen Intermediate Term Municipal Income Fund is managed by the adviser's
Municipal Fixed Income team, which includes Timothy D. Haney, Vice President.(1)
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust with Gross
Domestic Product growth topping 4% in both quarters. While this strength in
output has historically triggered fears of rising interest rates, yields
remained persistently low across the municipal curve. These low yields were
partly the result of the continued low levels of observed inflation in the U.S.
economy. Unfortunately, they also reflected continuing weakness in the job
market, which remained soft throughout the period. The soft job numbers, coupled
with persistently low inflation, led the Federal Open Market Committee (the Fed)
to maintain its accommodative stance throughout the period.
In keeping with the general trend for calendar 2003, the six months under review
saw high levels of issuance as municipalities sought to take advantage of
historically low interest rates. Many cities and states moved to reduce
expenditures by refinancing existing debt and replacing it with lower-yielding
bonds. In other cases, municipalities attempted to meet current and future
funding needs by issuing new debt.
Low interest rates also had an impact on the demand for municipal bonds. Retail
and institutional investor activity slowed as holders of municipal bonds saw
little reason to sell bonds purchased at higher yield levels and reinvest at
lower yields. However, the period was marked by rising activity among non-
traditional investors such as hedge funds and insurance companies seeking to
take advantage of the attractiveness of municipal bonds relative to taxable
securities. Additionally, investors' search for yield led to significant
outperformance by lower-rated bonds with greater credit risk. Sectors such as
health care, with a preponderance of lower-rated issues, performed particularly
well.
2
PERFORMANCE ANALYSIS
The fund returned 2.35 percent for the six months ended March 31, 2004 (Class A
shares, unadjusted for sales charge), underperforming its benchmark, the Lehman
Brothers Municipal Bond Index. (See table below.) The period saw a flattening of
the yield curve, as short rates rose slightly and long rates declined. As a
result, bonds in the longest segment of the yield curve performed most strongly.
The fund's investment strategy is focused on the more conservative,
intermediate-maturity portion of the yield curve, limiting the fund's ability to
participate in this trend. This was the key driver of the fund's
underperformance relative to its benchmark index, which is broader and includes
a significant weighting of more-volatile, long-maturity bonds.
The most significant change in the fund's portfolio was in its aggregate credit
quality. With interest rates at such low levels, we focused our purchases on
well-researched securities in the middle tiers of the investment-grade market
that our analysis indicated offered the most attractive return potential. As a
result of this activity, the fund's holdings of securities rated A and AA
climbed by 10 percent, while its holdings of AAA rated bonds declined.
Our interest-rate strategy during the period was driven by our assessment of the
economy and interest rates. With yields at such low levels, we believed that the
next movement in interest rates was likely to be upward. This led us to position
the portfolio defensively by purchasing securities with attractive total-return
potential that are likely to perform well in the event of rising interest rates.
Many of these securities were intermediate bonds with premium coupons and
attractive structural characteristics. At the same time, we de-emphasized the
five- to 10-year portion of the curve, which our analysis showed was likely to
suffer most in a rising interest-rate environment.
We also maintained the portfolio's diversification over the reporting period.
The fund's holdings were spread across the full spectrum of municipal-bond
market sectors in order to limit the risk of over-concentration in any one
segment. At the end of the period, the portfolio's largest sector weightings
were general purpose at 16.2 percent, followed by public building at 14.0
percent and public education at 13.1 percent.
We will continue to scour state and local markets across the country for
attractive investment opportunities.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
<Table>
<Caption>
- ----------------------------------------------------------
LEHMAN BROTHERS
MUNICIPAL BOND
CLASS A CLASS B CLASS C INDEX
2.35% 2.06% 2.07% 3.12%
- ----------------------------------------------------------
</Table>
The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and an
index definition.
3
<Table>
TOP 5 SECTORS AS OF 3/31/04 RATINGS ALLOCATION AS OF 3/31/04
General Purpose 16.2% AAA/Aaa 65.4%
Public Building 14.0 AA/Aa 10.4
Public Education 13.1 A/A 13.3
Retail Elec/Gas/Telephone 10.2 BBB/Baa 4.2
Airport 8.5 B/B 0.1
Non-Rated 6.6
TOP 5 STATES AS OF 3/31/04
Missouri 8.4%
California 8.1
Ohio 6.1
Pennsylvania 6.1
Florida 5.9
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Ratings allocations based upon ratings as
issued by Standard and Poor's, Moody's and Fitch's. Van Kampen is a wholly owned
subsidiary of a global securities firm which is engaged in a wide range of
financial services including, for example, securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
4
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
MUNICIPAL BONDS 97.0%
ALABAMA 1.4%
$1,260 Dothan Houston Cnty, AL Arpt Auth (MBIA Insd)... 5.400% 12/01/15 $ 1,377,571
305 West Jefferson Cnty, AL Amusement & Pub Park
Auth (Prerefunded @ 12/01/06)................... 7.500 12/01/08 342,558
------------
1,720,129
------------
ARIZONA 0.6%
30 Maricopa Cnty, AZ Indl Dev Auth Sr Living Fac
Rev Christian Care Mesa Inc Proj A.............. 7.250 04/01/05 30,446
675 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig
Irvington Proj Tucson Ser A Rfdg (FSA Insd)..... 7.250 07/15/10 709,492
------------
739,938
------------
ARKANSAS 0.9%
1,000 Arkansas St Fed Hwy Grant Antic Ser A........... 5.500 08/01/06 1,093,000
------------
CALIFORNIA 7.9%
175 California Edl Fac Auth Rev Pacific Grad Sch.... 6.950 11/01/07 186,366
1,000 California St (AMBAC Insd) (a).................. 6.400 09/01/08 1,175,280
1,500 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.375 05/01/18 1,662,510
3,000 Los Angeles, CA Uni Sch Dist Elec of 1997 Ser F
(FSA Insd)...................................... 5.000 07/01/17 3,279,630
1,715 Modesto, CA Irr Dist Ctfs Partn Cap Impts Ser A
Rfdg (MBIA Insd)................................ 5.000 07/01/16 1,879,057
1,100 Santa Clara, CA Elec Rev Sub Ser A (MBIA
Insd)........................................... 5.250 07/01/20 1,203,147
------------
9,385,990
------------
COLORADO 5.0%
1,750 Adams & Arapahoe Cntys, CO Sch Dist 28 Ser C.... 5.200 12/01/11 1,928,972
1,000 Boulder Cnty, CO Dev Rev Univ Corp for
Atmospheric Resh (AMBAC Insd)................... 5.000 09/01/19 1,076,570
210 Colorado Hlth Fac Auth Rev Sr Living Fac Eaton
Ter Ser A....................................... 6.800 07/01/09 213,202
1,560 Colorado Springs, CO Utils Rev Sys Sub Lien Impt
Ser A........................................... 5.000 11/15/19 1,678,997
1,000 Denver, CO City & Cnty Arpt Rev Ser A........... 7.400 11/15/04 1,034,060
------------
5,931,801
------------
CONNECTICUT 4.5%
145 Mashantucket Western Pequot Tribe, 144A--Private
Placement (Escrowed to Maturity) (b)............ 6.500 09/01/06 161,924
565 New Britain, CT................................. 5.000 04/15/04 565,847
560 New Britain, CT................................. 5.000 04/15/05 582,310
305 New Haven, CT Indl Fac Rev Adj Govt Ctr Thermal
Energies........................................ 7.250 07/01/09 299,123
1,000 New Haven, CT Ser B Rfdg (FGIC Insd)............ 5.250 11/01/11 1,150,180
</Table>
6 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CONNECTICUT (CONTINUED)
$1,250 New Haven, CT Ser B Rfdg (FGIC Insd)............ 5.375% 11/01/12 $ 1,446,612
1,000 Regional Sch Dist No 16 CT Rfdg (AMBAC Insd).... 5.000 03/15/13 1,135,430
------------
5,341,426
------------
DISTRICT OF COLUMBIA 0.9%
1,000 District of Columbia Rev Friendship Pub Charter
Sch Inc (ACA Insd).............................. 5.000 06/01/13 1,078,920
------------
FLORIDA 5.7%
2,000 Broward Cnty, FL Arpt Sys Rev Ser E Rfdg (MBIA
Insd) (a)....................................... 5.375 10/01/13 2,191,700
1,150 Florida Hsg Fin Agy Hsg Maitland Club Apts Ser
B-1 (AMBAC Insd)................................ 6.750 08/01/14 1,193,091
500 Highlands Cnty, FL Hlth Facs Hosp Adventist
Health.......................................... 3.350 11/15/32 511,205
190 Lee Cnty, FL Indl Dev Auth Econ Rev Encore
Nursing Ctr Part Rfdg........................... 8.125 12/01/07 193,741
115 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg....................... 8.125 07/01/06 118,448
250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 261,643
1,825 Orange Cnty, FL Sch Brd Ctfs Partn Ser A (AMBAC
Insd)........................................... 5.250 08/01/14 2,069,824
300 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj
Rfdg (Escrowed to Maturity)..................... 7.125 11/01/06 324,579
------------
6,864,231
------------
GEORGIA 1.5%
1,355 De Kalb Cnty, GA Hsg Auth Multi-Family Hsg Rev
North Hill Apts Proj Rfdg (FNMA Collateralized)
(Variable Rate Coupon).......................... 6.625 01/01/25 1,397,764
360 Forsyth Cnty, GA Hosp Auth Rev Antic Ctfs GA
Baptist Hlthcare Sys Proj (Escrowed to
Maturity)....................................... 6.000 10/01/08 395,582
------------
1,793,346
------------
ILLINOIS 3.3%
150 Bedford Park, IL Tax Increment 71st & Cicero
Proj Rfdg....................................... 7.000 01/01/06 154,205
1,325 Bedford Park, IL Wtr Rev Ser B (ACA Insd)....... 6.000 12/15/08 1,474,407
125 Chicago, IL Tax Increment Alloc Santn Drain &
Ship Canal Ser A................................ 7.375 01/01/05 125,956
250 Chicago, IL Tax Increment Alloc Sub Cent Loop
Redev Ser A..................................... 6.500 12/01/05 265,830
545 Clay Cnty, IL Hosp Rev.......................... 5.500 12/01/10 540,166
135 Huntley, IL Spl Svc Area No 7 Spl Tax........... 6.000 03/01/09 144,432
</Table>
See Notes to Financial Statements 7
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 225 Peoria, IL Spl Tax Weaverridge Spl Svc Area..... 7.625% 02/01/08 $ 237,447
1,000 Round Lake Beach, IL Tax........................ 4.650 12/15/13 1,032,090
------------
3,974,533
------------
INDIANA 2.3%
1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg
(AMBAC Insd).................................... 5.500 01/01/18 1,113,830
1,400 Indiana Bd Bk Spl Prog Hendricks Redev Ser B
(Prerefunded @ 02/01/07)........................ 6.000 02/01/12 1,588,622
------------
2,702,452
------------
KANSAS 2.3%
500 Burlington, KS Envrn Impt Rev................... 4.750 09/01/15 534,910
1,000 Shawnee Cnty, KS Sch Dist 501 Topeka............ 5.000 02/01/20 1,061,450
320 Wyandotte Cnty, KS City KS Univ Brd of Public
Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/11 361,040
710 Wyandotte Cnty, KS City KS Univ Brd of Public
Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/12 789,548
------------
2,746,948
------------
KENTUCKY 0.9%
1,000 Louisville & Jefferson Cnty, KY Ser C (FSA
Insd)........................................... 5.500 07/01/17 1,099,130
------------
LOUISIANA 1.2%
235 Louisiana Hsg Fin Agy Rev Multi-Family Hsg
Plantation Ser A................................ 7.200 01/01/06 234,394
1,065 Louisiana Loc Govt Envir Pkg Facs Garage Proj
Ser A (AMBAC Insd).............................. 5.000 10/01/12 1,182,182
------------
1,416,576
------------
MARYLAND 0.6%
625 Maryland St Economic Dev Corp Univ MD College
Park Proj....................................... 5.750 06/01/13 692,269
------------
MASSACHUSETTS 0.3%
95 Massachusetts St Indl Fin Agy East Boston
Neighborhood Proj............................... 7.250 07/01/06 94,752
295 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/1998, Cost $295,000)
(c)............................................. 6.200 06/01/08 286,976
------------
381,728
------------
MICHIGAN 3.3%
1,000 Brighton, MI Area Sch Dist Rfdg................. 5.250 05/01/18 1,106,020
1,000 Brighton, MI Area Sch Dist Rfdg................. 5.250 05/01/20 1,093,190
335 John Tolfree Hlth Sys Corp MI Mtg Rev Rfdg...... 5.450 09/15/06 344,273
1,000 Michigan Higher Ed Facs Auth Ltd Oblig Kalamazoo
College Proj Rfdg............................... 5.250 12/01/16 1,078,950
250 Michigan St Strategic Fd Ltd Oblig Rev United
Waste Sys Proj.................................. 5.200 04/01/10 270,153
------------
3,892,586
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
MINNESOTA 0.5%
$ 480 Dakota Cnty, MN Hsg & Redev Auth Multi-Family
Hsg Rev Affordable Hsg View Pointe Proj......... 6.000% 11/01/09 $ 474,163
130 Minneapolis, MN Multi-Family Rev Hsg Belmont
Apts Proj....................................... 7.000 11/01/06 131,482
------------
605,645
------------
MISSOURI 8.1%
1,500 Kansas City, MO Arpt Rev Genl Impt Ser A (FSA
Insd)........................................... 7.000 09/01/12 1,546,545
1,350 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 1,405,701
1,000 Macon, MO Ctfs Partn (MBIA Insd)................ 5.250 08/01/17 1,099,840
2,125 O' Fallon, MO Ctfs Partn (MBIA Insd)............ 5.375 02/01/18 2,347,828
2,000 St. Charles, MO Ctfs Partn Ser B................ 5.500 05/01/18 2,136,160
1,000 St. Louis, MO Arpt Rev Arpt Dev Prog Ser A (MBIA
Insd)........................................... 5.500 07/01/09 1,137,470
------------
9,673,544
------------
MONTANA 0.4%
400 Crow Fin Auth, MT Tribal Purp Rev (Acquired
12/11/1997, Cost $400,000) (c).................. 5.400 10/01/07 429,140
------------
NEBRASKA 2.4%
1,545 Nebraska Pub Pwr Dist Rev Ser B (AMBAC Insd).... 5.000 01/01/15 1,698,125
1,100 Omaha, NE Rfdg.................................. 5.000 11/01/16 1,208,988
------------
2,907,113
------------
NEW JERSEY 4.5%
500 Camden Cnty, NJ Impt Auth Lease Rev Kaighn Pt
Marine Terminal A (d) (e) (f)................... 7.375 06/01/07 31,000
1,400 Essex Cnty, NJ Impt Auth Lease Gtd Cnty
Correctional Fac Proj (FGIC Insd)............... 5.750 10/01/30 1,584,058
460 Middlesex Cnty, NJ Impt Auth Street Student Hsg
Proj Ser A...................................... 2.500 08/15/06 465,308
400 New Jersey Econ Dev Auth First Mtg Winchester
Ser A Rfdg...................................... 3.000 11/01/06 402,848
130 New Jersey Econ Dev Auth Rev Sr Mtg Arbor Glen
Proj Ser A (Escrowed to Maturity)............... 8.000 05/15/04 131,096
800 New Jersey Hlthcare Fac Fin Auth Rev Christ Hosp
Group Issue (Connie Lee Insd)................... 7.000 07/01/06 893,656
670 New Jersey St Edl Facs Auth Fairleigh Dickinson
Univ Ser D (ACA Insd)........................... 5.000 07/01/05 699,473
455 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.500 02/15/16 515,369
565 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.600 02/15/17 643,038
------------
5,365,846
------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
NEW MEXICO 1.5%
$1,000 Jicarilla, NM Apache Nation Rev Ser A (Acquired
10/23/2003, Cost $1,020,034) (c)................ 5.500% 09/01/23 $ 1,055,550
700 Jicarilla, NM Apache Nation Ser A (Acquired
10/23/2003, Cost $726,360) (c).................. 4.000 09/01/08 735,280
------------
1,790,830
------------
NEW YORK 5.5%
285 Brookhaven, NY Indl Dev Agy Sr Residential Hsg
Rev Woodcrest Estates Fac Ser A................. 5.875 12/01/09 297,395
1,000 Long Island Pwr Auth NY Elec Gen Ser C.......... 5.500 09/01/17 1,103,080
1,000 Metropolitan Trans Auth NY Svc Contract Ser B
(MBIA Insd)..................................... 5.500 07/01/14 1,174,250
265 New Jersey Economic Dev Auth First Mtg
Winchester Ser A Rfdg........................... 2.600 11/01/05 266,065
500 New York City Ser A............................. 7.000 08/01/07 560,645
1,000 New York St Med Care Fac Fin Agy Rev NY Hosp Mtg
Ser A (Prerefunded @ 02/15/05) (AMBAC Insd)..... 6.200 08/15/05 1,064,350
5 Niagara Falls, NY Pub Impt (MBIA Insd).......... 6.900 03/01/20 5,123
1,000 Tobacco Settlement Fin Corp Asset Backed Ser
C............................................... 5.250 06/01/13 1,078,320
1,000 United Nations Dev Corp NY Rev Ser A Rfdg....... 5.250 07/01/19 1,035,840
------------
6,585,068
------------
NORTH CAROLINA 3.4%
1,040 Buncombe Cnty, NC Met Swr Dist Rfdg (MBIA
Insd)........................................... 5.000 07/01/18 1,126,798
630 North Carolina Eastn Mun Pwr Agy Pwr Sys Rev Ser
D............................................... 6.450 01/01/14 718,257
1,000 North Carolina Infrastructure Correctional Fac
Proj............................................ 5.000 10/01/16 1,095,360
1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 1,092,620
------------
4,033,035
------------
OHIO 5.9%
2,130 Akron, OH Impt (FGIC Insd)...................... 5.000 12/01/18 2,314,394
500 Athens Cnty, OH Hosp Facs Rev & Impt O' Bleness
Mem Ser A Rfdg.................................. 6.250 11/15/13 516,040
110 Cleveland-Cuyahoga Cnty, OH Port Auth Rev
Dev-Port Cleveland Bd Fd Ser B.................. 6.500 05/15/05 110,319
500 Dayton, OH Spl Facs Rev Afco Cargo Day LLC
Proj............................................ 6.000 04/01/09 469,105
1,160 Sugarcreek, OH Loc Sch Dist Sch Impt Rfdg (MBIA
Insd)........................................... 5.250 12/01/18 1,291,474
1,210 Toledo, OH Swr Sys Rev (AMBAC Insd)............. 5.000 11/15/18 1,314,363
1,000 University of Cincinnati Gen Ser C (FGIC
Insd)........................................... 5.000 06/01/18 1,082,840
------------
7,098,535
------------
OKLAHOMA 1.4%
1,500 University of Oklahoma Rev Multiple Fac (MBIA
Insd)........................................... 5.000 06/01/19 1,620,960
------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
OREGON 3.3%
$2,575 Emerald Peoples Util Dist OR Ser A Rfdg (FSA
Insd)........................................... 5.250% 11/01/16 $ 2,888,970
1,000 Port Morrow, OR Pollutn Ctl Portland Gen A
Rfdg............................................ 5.200 05/01/33 1,063,510
------------
3,952,480
------------
PENNSYLVANIA 5.9%
1,320 Canon McMillan Sch Dist PA Ser A Rfdg (MBIA
Insd)........................................... 5.000 12/15/15 1,465,042
900 Philadelphia, PA Gas Wks Rev Third Ser (FSA
Insd)........................................... 5.000 08/01/10 1,012,752
2,000 Philadelphia, PA Redev Auth Rev Neighborhood
Trans A (FGIC Insd)............................. 5.500 04/15/16 2,269,000
2,070 York Cnty, PA Sch Technology (FGIC Insd)........ 5.375 02/15/16 2,315,978
------------
7,062,772
------------
RHODE ISLAND 2.5%
1,835 Rhode Island St Cons Cap Dev Ln Ser A
(Prerefunded @ 08/01/04)........................ 5.000 08/01/12 1,877,627
1,000 Rhode Island St Econ Dev Grant Antic RI Dept
Trans Ser A (FSA Insd).......................... 5.000 06/15/15 1,106,760
------------
2,984,387
------------
SOUTH CAROLINA 1.9%
1,020 Berkeley Cnty, SC Impt & Rfdg (FSA Insd)........ 5.000 09/01/17 1,113,993
1,065 Lexington, SC Wtr & Swr Rev & Impt Comb Ser A
Rfdg (MBIA Insd)................................ 5.000 04/01/14 1,167,975
------------
2,281,968
------------
TENNESSEE 1.6%
1,050 Franklin, TN Spl Sch Dist Cap Apprec (FSA
Insd)........................................... * 06/01/15 668,094
1,105 Gatlinburg, TN Pub Bldg Auth Rfdg (AMBAC
Insd)........................................... 5.750 12/01/11 1,303,646
------------
1,971,740
------------
TEXAS 1.6%
1,000 Austin, TX Util Sys Rev Comb Ser A Rfdg (MBIA
Insd)........................................... 5.375 11/15/05 1,018,300
500 Brazos River Auth TX Pollutn Ctl Rev Elec Proj
Ser C Rfdg (Variable Rate Coupon)............... 5.750 05/01/36 542,230
300 San Antonio, TX Hsg Fin Corp Multi-Family Hsg
Rev Beverly Oaks Arpt Proj Ser A................ 7.500 02/01/10 302,199
------------
1,862,729
------------
UTAH 0.1%
110 Utah St Hsg Fin Agy Single Family Mtg Mezz Ser A
(FHA/VA Gtd).................................... 7.150 07/01/12 114,114
------------
VIRGINIA 1.4%
500 Pittsylvania Cnty, VA Indl Dev Auth Rev Exempt
Fac Ser A (Acquired 04/15/1997, Cost $511,382)
(c)............................................. 7.450 01/01/09 496,850
1,000 Portsmouth, VA Rfdg (FSA Insd).................. 5.000 07/01/15 1,120,430
------------
1,617,280
------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
WEST VIRGINIA 1.3%
$1,500 West Virginia St Hosp Fin Auth (MBIA Insd)...... 6.100% 01/01/18 $ 1,505,310
------------
WISCONSIN 1.2%
1,415 Milwaukee Cnty, WI Arpt Rev Ser A (AMBAC
Insd)........................................... 5.000 12/01/17 1,488,424
------------
TOTAL LONG-TERM INVESTMENTS 97.0%
(Cost $111,667,680)....................................................... 115,805,923
SHORT-TERM INVESTMENT 0.8%
(Cost $1,000,000)......................................................... 1,000,000
------------
TOTAL INVESTMENTS 97.8%
(Cost $112,667,680)....................................................... 116,805,923
OTHER ASSETS IN EXCESS OF LIABILITIES 2.2%................................. 2,645,263
------------
NET ASSETS 100.0%.......................................................... $119,451,186
============
</Table>
* Zero coupon bond
(a) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(b) 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 those
transactions with qualified institutional buyers.
(c) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 2.5% of net
assets.
(d) Non-income producing security.
(e) This borrower has filed for protection in federal bankruptcy court.
(f) Security is in default.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FHA/VA--Federal Housing Administration/Department of Veterans Affairs
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
12 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $112,667,680)....................... $116,805,923
Cash........................................................ 17,495
Receivables:
Interest.................................................. 1,672,788
Fund Shares Sold.......................................... 1,103,468
Investments Sold.......................................... 365,000
Other....................................................... 115,319
------------
Total Assets............................................ 120,079,993
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 139,077
Distributor and Affiliates................................ 86,343
Income Distributions...................................... 81,195
Variation Margin on Futures............................... 54,734
Investment Advisory Fee................................... 40,602
Trustees' Deferred Compensation and Retirement Plans........ 155,009
Accrued Expenses............................................ 71,847
------------
Total Liabilities....................................... 628,807
------------
NET ASSETS.................................................. $119,451,186
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $115,468,688
Net Unrealized Appreciation................................. 3,894,145
Accumulated Undistributed Net Investment Income............. 46,484
Accumulated Net Realized Gain............................... 41,869
------------
NET ASSETS.................................................. $119,451,186
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $75,345,452 and 7,005,878 shares of
beneficial interest issued and outstanding)............. $ 10.75
Maximum sales charge (3.25%* of offering price)......... .36
------------
Maximum offering price to public........................ $ 11.11
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $22,588,629 and 2,095,767 shares of
beneficial interest issued and outstanding)............. $ 10.78
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $21,517,105 and 2,005,722 shares of
beneficial interest issued and outstanding)............. $ 10.73
============
</Table>
* On sales of $25,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 13
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $2,600,888
----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $92,560, $117,434 and $105,859,
respectively)............................................. 315,853
Investment Advisory Fee..................................... 296,981
Legal....................................................... 13,542
Trustees' Fees and Related Expenses......................... 9,298
Custody..................................................... 5,619
Other....................................................... 130,358
----------
Total Expenses.......................................... 771,651
Investment Advisory Fee Reduction....................... 59,396
Less Credits Earned on Cash Balances.................... 260
----------
Net Expenses............................................ 711,995
----------
NET INVESTMENT INCOME....................................... $1,888,893
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 689,426
Futures................................................... (830,503)
----------
Net Realized Loss........................................... (141,077)
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,900,450
End of the Period:
Investments............................................. 4,138,243
Futures................................................. (244,098)
----------
3,894,145
----------
Net Unrealized Appreciation During the Period............... 993,695
----------
NET REALIZED AND UNREALIZED GAIN............................ $ 852,618
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $2,741,511
==========
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 1,888,893 $ 3,398,661
Net Realized Gain/Loss................................ (141,077) 1,078,053
Net Unrealized Appreciation/Depreciation During the
Period.............................................. 993,695 (1,143,711)
------------ ------------
Change in Net Assets from Operations.................. 2,741,511 3,333,003
------------ ------------
Distributions from Net Investment Income:
Class A Shares...................................... (1,259,282) (2,298,933)
Class B Shares...................................... (311,065) (666,166)
Class C Shares...................................... (281,477) (558,258)
------------ ------------
(1,851,824) (3,523,357)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares...................................... (559,168) (246,892)
Class B Shares...................................... (168,772) (92,417)
Class C Shares...................................... (151,088) (78,490)
------------ ------------
(879,028) (417,799)
------------ ------------
Total Distributions................................... (2,730,852) (3,941,156)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... 10,659 (608,153)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................. 22,098,618 65,586,619
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................ 1,987,895 2,827,927
Cost of Shares Repurchased............................ (20,121,564) (36,079,223)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.... 3,964,949 32,335,323
------------ ------------
TOTAL INCREASE IN NET ASSETS.......................... 3,975,608 31,727,170
NET ASSETS:
Beginning of the Period............................... 115,475,578 83,748,408
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $46,484 and $9,415,
respectively)....................................... $119,451,186 $115,475,578
============ ============
</Table>
See Notes to Financial Statements 15
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS A SHARES MARCH 31, --------------------------------------------
2004 2003 2002 (b) 2001 2000 1999
---------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $10.76 $10.86 $10.42 $10.14 $10.22 $10.73
------ ------ ------ ------ ------ ------
Net Investment Income............ .18 .38 .42 .49 .46 .47
Net Realized and Unrealized
Gain/Loss...................... .07 (.03) .44 .23 (.05) (.48)
------ ------ ------ ------ ------ ------
Total from Investment Operations... .25 .35 .86 .72 .41 (.01)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income......................... .18 .40 .42 .43 .49 .50
Distributions from Net Realized
Gain........................... .08 .05 -0- .01 -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions................ .26 .45 .42 .44 .49 .50
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD........................... $10.75 $10.76 $10.86 $10.42 $10.14 $10.22
====== ====== ====== ====== ====== ======
Total Return* (a).................. 2.35%** 3.33% 8.48% 7.19% 4.13% -0.10%
Net Assets at End of the Period (In
millions)........................ $ 75.3 $ 70.1 $ 53.5 $ 29.1 $ 26.6 $ 29.5
Ratio of Expenses to Average Net
Assets*.......................... .92% .84% .85% .77% 1.44% 1.28%
Ratio of Net Investment Income to
Average Net Assets*.............. 3.46% 3.55% 4.08% 4.78% 4.65% 4.49%
Portfolio Turnover................. 36%** 35% 75% 106% 85% 65%
* If certain expenses had not been voluntarily assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets........................ 1.02% 1.04% 1.14% 1.23% N/A N/A
Ratio of Net Investment Income
to Average Net Assets......... 3.36% 3.35% 3.79% 4.32% N/A N/A
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 3.25% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charge was included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(b) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01 and increase the ratio of net
investment income to average net assets by .01%. Per share, ratios and
supplemental data for periods prior to September 30, 2002 have not been
restated to reflect this change in presentation.
N/A=Not Applicable.
16 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS B SHARES MARCH 31, ---------------------------------------------
2004 2003 2002 (b) 2001 2000 1999
----------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $10.78 $10.84 $10.41 $10.13 $10.20 $10.71
------ ------ ------ ------ ------ ------
Net Investment Income............ .15 .32 .35 .42 .38 .39
Net Realized and Unrealized
Gain/Loss...................... .07 (.01) .42 .22 (.04) (.47)
------ ------ ------ ------ ------ ------
Total from Investment Operations... .22 .31 .77 .64 .34 (.08)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income......................... .14 .32 .34 .35 .41 .43
Distributions from Net Realized
Gain........................... .08 .05 -0- .01 -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions................ .22 .37 .34 .36 .41 .43
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD........................... $10.78 $10.78 $10.84 $10.41 $10.13 $10.20
====== ====== ====== ====== ====== ======
Total Return* (a).................. 2.06%** 2.96%(c) 7.61% 6.42% 3.46% -0.81%
Net Assets at End of the Period (In
millions)........................ $ 22.6 $ 23.9 $ 17.1 $ 11.1 $ 8.6 $ 10.4
Ratio of Expenses to Average Net
Assets*.......................... 1.67% 1.59% 1.60% 1.52% 2.20% 1.97%
Ratio of Net Investment Income to
Average Net Assets*.............. 2.71% 3.08%(c) 3.34% 4.02% 3.90% 3.80%
Portfolio Turnover................. 36%** 35% 75% 106% 85% 65%
* If certain expenses had not been voluntarily assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets........................ 1.77% 1.79% 1.89% 1.98% N/A N/A
Ratio of Net Investment Income
to Average Net Assets......... 2.61% 2.88%(c) 3.05% 3.56% N/A N/A
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 3%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fourth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of 1% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(b) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01 and increase the ratio of net
investment income to average net assets by .01%. Per share, ratios and
supplemental data for periods prior to September 30, 2002 have not been
restated to reflect this change in presentation.
(c) Certain non-recurring payments were made to Class B Shares, resulting in an
increase to the Ratio of Net Investment Income to Average Net Assets and
Total Return of .28%.
N/A=Not Applicable.
See Notes to Financial Statements 17
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS C SHARES MARCH 31, ---------------------------------------------
2004 2003 2002 (b) 2001 2000 1999
----------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $10.73 $10.82 $10.40 $10.12 $10.20 $10.71
------ ------ ------ ------ ------ ------
Net Investment Income............ .15 .30 .34 .42 .39 .40
Net Realized and Unrealized
Gain/Loss...................... .07 (.02) .42 .22 (.06) (.48)
------ ------ ------ ------ ------ ------
Total from Investment Operations... .22 .28 .76 .64 .33 (.08)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income......................... .14 .32 .34 .35 .41 .43
Distributions from Net Realized
Gain........................... .08 .05 -0- .01 -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions................ .22 .37 .34 .36 .41 .43
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD........................... $10.73 $10.73 $10.82 $10.40 $10.12 $10.20
====== ====== ====== ====== ====== ======
Total Return* (a).................. 2.07%** 2.69%(c) 7.52% 6.42% 3.36% -0.81%
Net Assets at End of the Period (In
millions)........................ $ 21.5 $ 21.4 $ 13.2 $ 8.6 $ 6.4 $ 5.6
Ratio of Expenses to Average Net
Assets*.......................... 1.67% 1.59% 1.60% 1.52% 2.20% 2.02%
Ratio of Net Investment Income to
Average Net Assets*.............. 2.71% 2.84%(c) 3.33% 4.02% 3.90% 3.75%
Portfolio Turnover................. 36%** 35% 75% 106% 85% 65%
* If certain expenses had not been voluntarily assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets........................ 1.77% 1.79% 1.89% 1.98% N/A N/A
Ratio of Net Investment Income
to Average Net Assets......... 2.61% 2.64%(c) 3.04% 3.56% N/A N/A
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1.00%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(b) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended September 30, 2002 was to increase net investment
income per share by less than $.01, decrease net realized and unrealized
gains and losses per share by less than $.01 and increase the ratio of net
investment income to average net assets by .01%. Per share, ratios and
supplemental data for periods prior to September 30, 2002 have not been
restated to reflect this change in presentation.
(c) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Ratio of Net Investment Income to Average Net Assets and
Total Return of .06%.
N/A=Not Applicable.
18 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Intermediate Term Municipal Income Fund (the "Fund") is organized as
a series of the Van Kampen Tax Free Trust (the "Trust"), a Delaware statutory
trust, and is registered as a diversified, open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"), as amended.
The Fund's investment objective is to provide investors with a high level of
current income exempt from federal income tax, consistent with preservation of
capital. The Fund commenced investment operations on May 28, 1993 with two
classes of common shares, Class A and Class B shares. The distribution of the
Fund's Class C shares commenced on October 19, 1993. Effective November 30,
2003, the Fund's investment adviser, Van Kampen Investment Advisory Corp. merged
into its affiliate, Van Kampen Asset Management.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services are valued at fair value
using procedures established in good faith by the Board of Trustees. Futures
contracts are valued at the settlement price established each day on the
exchange on which they are traded. 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
Fund 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 Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At March 31, 2004, the Fund had no when-issued and delayed
delivery purchase commitments.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security. Income and expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute
19
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
substantially all of its taxable income, if any, to its shareholders. Therefore,
no provision for federal income taxes is required.
At March 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $112,654,795
------------
Gross tax unrealized appreciation........................... $ 4,743,251
Gross tax unrealized depreciation........................... (592,123)
------------
Net tax unrealized appreciation on investments.............. $ 4,151,128
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short term capital gains, which are included in ordinary income for
tax purposes.
The tax character of distributions paid during the year ended September 30,
2003 was as follows:
<Table>
<Caption>
2003
Distributions paid from:
Ordinary Income........................................... $318,534
Long Term Capital Gain.................................... 113,705
</Table>
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $213,183
Undistributed long-term capital gain........................ $167,866
</Table>
F. EXPENSE REDUCTIONS During the six months ended March 31, 2004, the Fund's
custody fee was reduced by $260 as a result of credits earned on cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") will provide investment advice and facilities to the
Fund for an annual fee payable monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .50%
Over $500 million........................................... .45%
</Table>
For the six months ended March 31, 2004, the Adviser waived $59,396 of its
investment advisory fee. This represents .10% of its average net assets for the
period. This waiver is voluntary in nature and can be discontinued at the
Adviser's discretion.
For the six months ended March 31, 2004, the Fund recognized expenses of
approximately $3,000 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
20
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Fund. The Adviser
allocates the cost of such services to each fund. For the six months ended March
31, 2004, the Fund recognized expenses of approximately $23,100 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, which are reported as part
of "Other" and "Legal" expenses, respectively, on the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
March 31, 2004, the Fund recognized expenses of approximately $24,900,
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund 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.
Amounts deferred are retained by the Fund, and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of approximately $101,800
are included in "Other" assets on the Statement of Assets and Liabilities at
March 31, 2004. Appreciation/depreciation and distributions received from these
investments are recorded with an offsetting increase/decrease in the deferred
compensation obligation and do not affect the net asset value of the Fund.
Benefits under the retirement plan are payable upon retirement for a ten-year
period and are based upon each trustee's years of service to the Fund. The
maximum annual benefit per trustee under the plan is $2,500.
21
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2004, capital aggregated $73,393,157, $21,353,010 and $20,722,521
for Classes A, B and C, respectively. For the six months ended March 31, 2004,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,494,359 $ 16,069,983
Class B................................................... 261,698 2,819,568
Class C................................................... 298,156 3,209,067
---------- ------------
Total Sales................................................. 2,054,213 $ 22,098,618
========== ============
Dividend Reinvestment:
Class A................................................... 132,621 $ 1,425,761
Class B................................................... 26,847 289,198
Class C................................................... 25,455 272,936
---------- ------------
Total Dividend Reinvestment................................. 184,923 $ 1,987,895
========== ============
Repurchases:
Class A................................................... (1,140,480) $(12,313,454)
Class B................................................... (409,709) (4,428,184)
Class C................................................... (314,932) (3,379,926)
---------- ------------
Total Repurchases........................................... (1,865,121) $(20,121,564)
========== ============
</Table>
At September 30, 2003, capital aggregated $68,210,867, $22,672,428 and
$20,620,444 for Classes A, B and C, respectively. For the year ended September
30, 2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 3,510,100 $ 37,536,509
Class B................................................... 1,307,031 14,035,027
Class C................................................... 1,310,574 14,015,083
---------- ------------
Total Sales................................................. 6,127,705 $ 65,586,619
========== ============
Dividend Reinvestment:
Class A................................................... 184,280 $ 1,971,012
Class B................................................... 41,458 444,020
Class C................................................... 38,700 412,895
---------- ------------
Total Dividend Reinvestment................................. 264,438 $ 2,827,927
========== ============
Repurchases:
Class A................................................... (2,098,791) $(22,416,093)
Class B................................................... (707,557) (7,574,011)
Class C................................................... (572,938) (6,089,119)
---------- ------------
Total Repurchases........................................... (3,379,286) $(36,079,223)
========== ============
</Table>
22
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received thereon, automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received thereon, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the six months ended March 31, 2004 and the year
ended September 30, 2003, 10,467 and 49,940 Class B Shares converted to Class A
Shares and are shown in the above tables as sales of Class A Shares and
repurchases of Class B Shares. Class C Shares purchased before January 1, 1997,
and any dividend reinvestment plan Class C Shares received thereon,
automatically convert to Class A Shares ten years after the end of the calendar
month in which such shares were purchased. Class C Shares purchased on or after
January 1, 1997 do not possess a conversion feature. For the six months ended
March 31, 2004 and the year ended September 30, 2003, no Class C Shares
converted to Class A Shares.
Class B and C Shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and
Class C Shares will be imposed on most redemptions made within four years of the
purchase for Class B Shares and one year of the purchase for Class C Shares as
detailed in the following schedule.
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 3.00% 1.00%
Second...................................................... 2.50% None
Third....................................................... 2.00% None
Fourth...................................................... 1.00% None
Fifth and Thereafter........................................ None None
</Table>
For the six months ended March 31, 2004, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $8,800 and CDSC on redeemed shares of approximately $24,600. Sales
charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $43,410,867 and $41,983,888 respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund'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,
23
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
except when taking delivery of a security underlying a futures contract. In
these instances, the recognition of gain or loss is postponed until the disposal
of the security underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in exchange traded futures contracts on U.S. Treasury Bonds
and typically closes the contract prior to delivery date. These contracts are
generally used to manage the Fund's effective maturity and duration. Upon
entering into futures contracts, the Fund maintains, an amount of cash or liquid
securities with a value equal to a percentage of the contract amount with either
a future commission merchant pursuant to rules and regulations promulgated in
the 1940 Act, as amended, or with its custodian in an account in the broker's
name. This amount is known as initial margin. During the period the futures
contract is open, payments are received from or made to the broker based upon
changes in the value of the contract (the variation margin). The risk of loss
associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended March 31, 2004,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2003........................... 162
Futures Opened.............................................. 283
Futures Closed.............................................. (315)
----
Outstanding at March 31, 2004............................... 130
====
</Table>
The futures contracts outstanding as of March 31, 2004, and the description and
unrealized appreciation/depreciation were as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 5 year futures, June 2004............. 107 $(189,376)
(Current Notional Value of $113,563 per contract)
U.S. Treasury Notes 10 year futures, June 2004............ 23 $ (54,722)
(Current Notional Value of $115,406 per contract).......
--- ---------
130 $(244,098)
=== =========
</Table>
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares, and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively, the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and the maintenance of shareholder
accounts with respect to such classes of shares.
24
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Annual fees under the Plans of up to .25% of Class A average daily net
assets and 1.00% each of Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A shares are paid quarterly and the
annual fees for Class C shares are paid monthly. For Class B shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $1,296,800, and
$34,200, for Class B and Class C shares, respectively. These amounts may be
recovered from future payments under the distribution plan or CDSC. To the
extent the unreimbursed receivable has been fully recovered, any excess 12b-1
fees will be refunded to the Fund on a quarterly basis.
Included in these fees for the six months ended March 31, 2004, are payments
retained by Van Kampen of approximately $149,200, and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $11,600.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, certain officers of such
affiliates and certain investment companies advised by the Adviser or its
affiliates, including the Fund, are named as defendants in a number of similar
class action complaints which were recently consolidated. This consolidated
action also names as defendants certain individual Trustees and Directors of the
named investment companies advised by affiliates of the Adviser; the complaint
does not, however, name the individual Trustees of any Van Kampen funds. The
consolidated amended complaint generally alleges that defendants violated their
statutory disclosure obligations and fiduciary duties by failing properly to
disclose (i) that the Adviser and certain affiliates of the Adviser allegedly
offered economic incentives to brokers and others to recommend the funds advised
by the Adviser or its affiliates to investors rather than funds managed by other
companies, and (ii) that the funds advised by the Adviser or its affiliates,
including the Fund, allegedly paid excessive commissions to brokers in return
for their efforts to recommend these funds to investors. The complaint seeks,
among other things, unspecified compensatory damages, rescissionary damages,
fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley DW Inc. in connection with the
sales of the funds. The complaint seeks, among other things, the removal of the
current Trustees of the Van Kampen funds, rescission of the management contracts
for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary
damages. This complaint will be coordinated with the consolidated complaint.
The defendants intend to move to dismiss these actions and otherwise
vigorously to defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
25
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS, INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
26
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 138, 338, 538
INF SAR 5/04 RN04-00397P-Y03/04
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen New
York Tax Free Income Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of March 31, 2004.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that a mutual fund will achieve its
investment objective. Funds are subject to market risk, which is the
possibility that the market values of securities owned by the fund will
decline and that the value of fund shares may therefore be less than what
you paid for them. Accordingly, you can lose money investing in this
fund. Please see the prospectus for more complete information on
investment risks.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 3/31/04
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 7/29/94 since 7/29/94 since 7/29/94
- --------------------------------------------------------------------------------------------------
W/MAX. W/MAX. W/MAX.
AVERAGE ANNUAL W/O SALES 4.75% SALES W/O SALES 4.00% SALES W/O SALES 1.00% SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception 6.80% 6.26% 6.23% 6.23% 6.02% 6.02%
5-year 5.59 4.57 4.81 4.56 4.84 4.84
1-year 6.10 1.06 5.32 1.32 5.25 4.25
6-months 3.02 -1.89 2.64 -1.36 2.64 1.64
- --------------------------------------------------------------------------------------------------
30-Day SEC
Subsidized Yield 2.89% 2.28% 2.28%
30-Day
SEC Yield 2.55 1.93 1.93
</Table>
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost.
Average annual total return with sales charges includes payment of the maximum
sales charge of 4.75 percent for Class A shares, a contingent deferred sales
charge of 4.00 percent for Class B shares (in year one and declining to zero
after year six), a contingent deferred sales charge of 1.00 percent for Class C
shares in year one and combined Rule 12b-1 fees and service fees of up to 0.25
percent for Class A shares and 1.00 percent for Class B and C shares. The since
inception return for Class B shares reflect its conversion into Class A shares
seven years after purchase. See footnote 3 in the Notes to Financial Statements
for additional information Figures shown above assume reinvestment of all
dividends and capital gains. The fund's adviser has waived or reimbursed fees
and expenses from time to time; absent such waivers/reimbursements the fund's
returns would have been lower. SEC yield is a calculation for determining the
amount of portfolio income, excluding non-income items as prescribed by the SEC.
The subsidized SEC yields reflect some or all of the expenses that the adviser
had voluntarily waived. Yields are subject to change.
The Lehman Brothers Municipal Bond Index is generally representative of
investment-grade, tax-exempt bonds. The index is unmanaged and does not include
any sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
Van Kampen New York Tax Free Income Fund is managed by the adviser's Municipal
Fixed Income team. Members of the team include Dennis S. Pietrzak, Executive
Director; John R. Reynoldson, Executive Director; and Timothy D. Haney, Vice
President.(1)
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust with Gross
Domestic Product growth topping 4% in both quarters. While this strength in
output has historically triggered fears of rising interest rates, yields
remained stubbornly low across the municipal yield curve. These low yields were
partly the result of the continued low levels of observed inflation in the U.S.
economy. Unfortunately, they also reflected continuing weakness in the job
market, which remained soft throughout the period. The soft job numbers, coupled
with persistently low inflation, led the Federal Open Market Committee (the Fed)
to maintain its accommodative stance throughout the period.
In keeping with the general trend for calendar 2003, the six months under review
saw record levels of issuance as municipalities sought to take advantage of
historically low interest rates. Many cities and states moved to reduce
expenditures by refinancing existing debt and replacing it with lower-yielding
bonds. In other cases, municipalities attempted to meet current and future
funding needs by issuing new debt.
Low interest rates also had an impact on the demand for municipal bonds. Retail
and institutional investor activity slowed as holders of municipal bonds saw
little reason to sell bonds purchased at higher yield levels and reinvest at
historically low yields. However, the period was marked by rising activity among
non-traditional investors, such as hedge funds and insurance companies seeking
to take advantage of the attractiveness of municipal bonds relative to taxable
securities. Additionally, investors' search for yield led to significant
outperformance by lower-rated bonds with greater credit risk. Sectors such as
health care, with a preponderance of lower-rated issues, performed particularly
well.
The New York economy continued to struggle with fiscal problems during the
period, and the executive and legislative branches of the state government
remained locked in their perennial budget battle. Signs of economic improvement
in the rest of the country, however, did bode particularly well for New York,
since the state's tax revenues are in large part driven by revenues from the
financial sector. The state continued to be among the country's largest
(1)Team members may change at any time without notice.
2
municipal-bond issuers as local- and state-level projects sought funding for
their ongoing operations.
PERFORMANCE ANALYSIS
The fund returned 3.02 percent for the six months ended March 31, 2004 (Class A
shares, unadjusted for sales charges), modestly underperforming its benchmark,
the Lehman Brothers Municipal Bond Index. (See table below.) Our analysis of the
economy and interest rates indicated that the next major movement in rates was
likely to be upward, which to our thinking warranted a more defensive
positioning. As a result, we chose to emphasize securities that provided
sufficient return potential and were most likely to hold up well in a rising
interest-rate environment. We de-emphasized low-coupon bonds from the long end
of the yield curve given their high sensitivity to interest rates, focusing
instead on securities with premium coupons from the 15- to 22-year segment of
the market in the belief that these bonds offered the most attractive
risk/reward profile. We also kept the fund's overall duration (a measure of
interest-rate sensitivity) below that of the benchmark. Unfortunately, the
longer segment of the curve outperformed during the period, and our defensive
stance hampered performance slightly.
We funded our purchases of intermediate bonds with the proceeds of sales from
elsewhere in the portfolio. These sales included several of the fund's longer-
dated positions as well as some of its income-oriented positions that had met
their performance targets during the period. The fund also benefited from
pre-refundings of several securities, which helped support the portfolio's net
asset value (NAV). We generally limited our purchases to liquid, high-quality
bonds. Our high-quality bias was reflected in the portfolio as a whole, which
ended the period with more than 80 percent of its assets invested in securities
rated AA or higher.
We also maintained the portfolio's diversification over the reporting period.
The fund's holdings were spread across the full spectrum of municipal-bond
market sectors in order to limit the risk of over-concentration in any one
segment. At the end of the period, the portfolio's largest sector weightings
were general
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 2004
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
3.02% 2.64% 2.64% 3.12%
- --------------------------------------------------------------
</Table>
The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
The fund's adviser has waived or reimbursed fees and expenses from time to time;
absent such waivers/reimbursements the fund's returns would have been lower.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and an
index definition.
3
purpose at approximate 24 percent, followed by higher education at approximate
19 percent and health care at approximate 9 percent.
We anticipate that rates may eventually begin to move upward. That being said,
we believe the fund is positioned to continue to provide investors with
attractive income across an array of possible market environments. We will
continue to actively explore the New York market for attractive investment
opportunities.
<Table>
TOP 5 SECTORS AS OF 3/31/04 RATINGS ALLOCATION AS OF 3/31/04
General Purpose 23.8% AAA 46.7%
Higher Education 19.5 AA 35.9
Health Care 9.2 A 12.7
Public Education 8.0 BBB 2.7
Water & Sewer 6.9 NR 2.0
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Ratings allocations based upon ratings as
issued by Standard and Poor's. Van Kampen is a wholly owned subsidiary of a
global securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
4
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MUNICIPAL BONDS 98.7%
NEW YORK 97.8%
$ 330 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van
Allen Proj Ser A............................ 6.875% 06/01/39 $ 298,171
1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City
of Buffalo Proj (FSA Insd).................. 5.750 05/01/21 1,420,662
1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City
of Buffalo Proj (FSA Insd).................. 5.750 05/01/22 1,415,450
1,250 Hempstead Town, NY Indl Dev Adelphi Univ
Civic Fac................................... 5.750 06/01/22 1,378,612
500 Islip, NY Cmnty Dev Agy Cmnty Dev Rev NY
Institute of Technology Rfdg (Prerefunded @
03/01/06)................................... 7.500 03/01/26 565,480
1,290 Islip, NY Res Recovery Agy Res 1985 Fac Ser
E (FSA Insd)................................ 5.750 07/01/22 1,406,539
1,250 Long Island Pwr Auth, NY Elec Sys Rev Gen
Ser A (AMBAC Insd).......................... 5.500 12/01/09 1,436,325
2,000 Long Island Pwr Auth, NY Elec Sys Rev Gen
Ser C....................................... 5.500 09/01/19 2,180,120
1,000 Metropolitan Trans Auth NY Rev Ser A Rfdg
(AMBAC Insd)................................ 5.500 11/15/19 1,121,210
1,000 Metropolitan Trans Auth NY Svc Contract Ser
A Rfdg...................................... 5.125 01/01/29 1,041,560
1,000 Monroe Cnty, NY Indl Dev Agy Nazareth
College Rochester Proj (MBIA Insd).......... 5.250 10/01/21 1,085,370
1,155 Monroe Cnty, NY Indl Dev Agy Saint John
Fisher College Proj (Radian Insd) (a)....... 5.375 06/01/09 1,303,140
2,510 Nassau Cnty, NY Interim Fin Auth Sales Tax
Secd Ser A (Prerefunded @ 11/15/10)......... 5.750 11/15/13 2,924,627
1,000 Nassau Cnty, NY Interim Fin Auth Sales Tax
Secd Ser A1 (AMBAC Insd).................... 5.375 11/15/16 1,119,480
2,425 New York City Fiscal 2003 Ser I............. 5.750 03/01/15 2,739,595
1,500 New York City Hlth & Hosp Corp Rev Hlth Sys
Ser A (FSA Insd)............................ 5.500 02/15/18 1,665,450
1,000 New York City Hlth & Hosp Corp Rev Hlth Sys
Ser A (FSA Insd)............................ 5.500 02/15/19 1,104,370
1,000 New York City Hsg Dev Corp Ser A............ 5.500 11/01/34 1,057,380
475 New York City Indl Dev Agy Civic Fac Rev
Cmnty Res Developmentally Disabled.......... 7.500 08/01/26 485,241
500 New York City Indl Dev Agy Civic Fac Rev
College of New Rochelle Proj................ 5.750 09/01/17 532,670
1,800 New York City Indl Dev Agy Civic Fac Rev New
York Inst of Technology Proj (MBIA Insd).... 5.250 03/01/18 1,986,462
500 New York City Indl Dev Agy Civic Fac Rev
YMCA Greater NY Proj........................ 6.000 08/01/07 557,940
1,015 New York City Indl Dev Agy Fac Rev Royal
Charter-NY Presbyterian (FSA Insd).......... 5.250 12/15/11 1,165,758
</Table>
6 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,405 New York City Indl Dev Agy Fac Rev Royal
Charter-NY Presbyterian (FSA Insd).......... 5.375% 12/15/16 $ 1,582,128
1,440 New York City Indl Dev Agy Spl Fac Rev
Terminal One Group Assn Proj................ 6.100 01/01/09 1,470,960
500 New York City Muni Wtr Fin Ser B............ 6.000 06/15/33 587,060
825 New York City Muni Wtr Fin Ser B
(Prerefunded @ 06/15/10).................... 6.000 06/15/33 985,182
2,500 New York City Ser A......................... 5.500 08/01/20 2,737,525
1,000 New York City Ser A Rfdg.................... 5.250 03/15/14 1,119,650
1,000 New York City Ser A Rfdg.................... 5.250 03/15/15 1,102,990
1,000 New York City Ser B (MBIA Insd)............. 5.875 08/01/15 1,164,200
1,000 New York City Ser H (FGIC Insd)............. 6.000 08/01/12 1,189,410
1,000 New York City Transitional Fin Auth Rev
Future Tax Secd Ser A Rfdg (b).............. 5.500/14.000 11/01/26 1,142,740
1,500 New York City Transitional Fin Auth Rev
Future Tax Secd Ser C (AMBAC Insd).......... 5.250 08/01/21 1,625,595
1,000 New York City Transitional Fin Auth Rev
Future Tax Secd Ser D (MBIA Insd)........... 5.250 02/01/19 1,098,050
1,540 New York City Transitional Future Tax Secd
Ser B....................................... 5.500 02/01/15 1,722,382
2,000 New York St Dorm Auth Lease Rev Court Fac
Ser A....................................... 5.500 05/15/20 2,181,780
510 New York St Dorm Auth Lease Rev Insd St
Judicial Inst At Pace (AMBAC Insd).......... 5.500 07/01/09 585,766
600 New York St Dorm Auth Lease Rev Insd St
Judicial Inst At Pace (AMBAC Insd).......... 5.500 07/01/10 693,570
1,060 New York St Dorm Auth Lease Rev Master Boces
Prog (FSA Insd)............................. 5.250 08/15/22 1,150,153
1,500 New York St Dorm Auth Lease Rev Muni Hlth
Fac Impt Pg Ser 1 (FSA Insd)................ 5.500 01/15/14 1,694,430
1,000 New York St Dorm Auth Lease Rev St Univ Dorm
Fac......................................... 5.375 07/01/16 1,107,970
1,000 New York St Dorm Auth Rev City Univ Cons
Third Ser 1 (FGIC Insd)..................... 5.250 07/01/25 1,060,270
1,230 New York St Dorm Auth Rev City Univ Ser D
Rfdg (FSA Insd)............................. 5.750 07/01/12 1,441,757
750 New York St Dorm Auth Rev City Univ Sys Cons
Ser A....................................... 5.625 07/01/16 870,630
1,000 New York St Dorm Auth Rev City Univ Sys Cons
Ser B....................................... 6.000 07/01/14 1,174,210
1,890 New York St Dorm Auth Rev Dept Ed........... 5.250 07/01/21 2,062,840
1,000 New York St Dorm Auth Rev Insd Brooklyn Law
Sch Ser B (XLCA Insd)....................... 5.375 07/01/23 1,098,480
1,055 New York St Dorm Auth Rev Insd NY St Rehab
Assn Ser A (AMBAC Insd)..................... 5.500 07/01/13 1,207,627
</Table>
See Notes to Financial Statements 7
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,040 New York St Dorm Auth Rev Insd NY St Rehab
Assn Ser A (AMBAC Insd)..................... 5.500% 07/01/15 $ 1,178,601
1,500 New York St Dorm Auth Rev Mem Sloan-
Kettering Ctr Ser 1 (MBIA Insd)............. 5.000 07/01/20 1,597,620
2,805 New York St Dorm Auth Rev Mental Hlth Fac
Impt Ser B.................................. 5.250 02/15/20 3,032,626
605 New York St Dorm Auth Rev Mental Hlth Svc
Fac Impt Ser B (MBIA Insd).................. 5.250 08/15/31 628,172
1,200 New York St Dorm Auth Rev Miriam Osborn Mem
Home Ser B (ACA Insd)....................... 6.375 07/01/29 1,328,028
750 New York St Dorm Auth Rev Nursing Home
Menorah Campus (FHA Gtd).................... 5.950 02/01/17 807,690
1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm
Ser C (MBIA Insd)........................... 5.250 10/01/16 1,111,780
1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm
Ser D (MBIA Insd)........................... 5.500 10/01/17 1,133,370
1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm
Ser I (MBIA Insd)........................... 5.750 10/01/18 1,150,940
1,000 New York St Dorm Auth Rev Secd Hosp North
Gen Hosp Rfdg (MBIA Insd)................... 5.750 02/15/17 1,146,060
1,000 New York St Dorm Auth Rev Secd Hosp North
Gen Hosp Rfdg............................... 5.750 02/15/18 1,132,370
1,000 New York St Dorm Auth Rev Second Hosp
Interfaith Med Cent Ser D (FSA Insd)........ 5.750 02/15/08 1,125,310
1,000 New York St Dorm Auth Rev St Personal Income
Tax Ed Ser A................................ 5.375 03/15/20 1,101,440
1,000 New York St Dorm Auth Rev St Univ Ed Fac
1989 Res (MBIA Insd)........................ 6.000 05/15/15 1,175,070
1,140 New York St Dorm Auth Rev St Univ Ed Fac Ser
A (FSA Insd)................................ 5.875 05/15/17 1,364,933
1,000 New York St Dorm Auth Rev St Univ Ed Fac Ser
A........................................... 5.250 05/15/21 1,108,460
1,665 New York St Dorm Auth Rev St Univ Ed Fac Ser
B (FSA Insd)................................ 5.250 05/15/13 1,913,235
500 New York St Energy Resh & Dev Auth Gas Fac
Rev Brooklyn Union Gas Ser B (Inverse Fltg)
(c)......................................... 12.504 07/01/26 607,605
2,500 New York St Environ Fac Corp St Clean Wtr &
Drinking Revolving Fds...................... 5.000 06/15/21 2,666,000
1,000 New York St Environ Fac Corp St Clean Wtr &
Drinking Revolving Fds Pooled Fin Pgm I..... 5.250 09/15/19 1,098,310
1,890 New York St Environ Fac Corp St Clean Wtr &
Drinking Revolving Fds Ser B................ 5.000 12/15/21 2,004,024
1,000 New York St Hsg Fin Agy St Personal Income
Tax Rev Econ Dev & Hsg Ser A................ 5.250 09/15/19 1,085,970
2,280 New York St Loc Govt Assist Corp Ser E
Rfdg........................................ 6.000 04/01/14 2,743,570
</Table>
8 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,500 New York St Med Care Fac Fin Hosp & Nursing
Home Ser D Agy Rev (FHA Gtd)................ 6.200% 02/15/28 $ 1,582,935
1,000 New York St Mtg Agy Rev Homeowner Mtg Ser
71.......................................... 5.400 04/01/29 1,038,420
1,290 New York St Mtg Agy Rev Homeowner Mtg Ser
82.......................................... 5.650 04/01/30 1,380,984
995 New York St Mtg Agy Rev Ser 101............. 5.400 04/01/32 1,043,208
1,885 New York St Ser C Rfdg...................... 5.000 04/15/19 2,017,176
1,000 New York St Twy Auth Svc Contract Rev Loc
Hwy & Brdg.................................. 6.000 04/01/07 1,114,830
460 New York St Twy Auth Svc Contract Rev Loc
Hwy & Brdg.................................. 5.500 04/01/16 517,969
500 New York St Urban Dev Corp Rev Correctional
Fac Ser A Rfdg.............................. 5.500 01/01/14 567,115
1,400 New York St Urban Dev Corp Rev Personal
Income Tax St Fac Ser A..................... 5.375 03/15/18 1,542,562
325 Oneida Cnty, NY Indl Dev Agy Civic Fac Saint
Elizabeth Med Ser A......................... 5.875 12/01/29 291,226
200 Port Auth NY & NJ Spl Oblig................. 7.000 10/01/07 208,962
1,000 Rockland Cnty, NY Solid Waste Ser B (AMBAC
Insd)....................................... 5.000 12/15/23 1,066,870
1,000 Rondout Vly Cent Sch Dist NY Accord Ser A
Rfdg (FGIC Insd)............................ 5.000 03/01/19 1,066,200
1,320 Sodus, NY Cent Sch Dist Rfdg (FGIC Insd).... 5.125 06/15/18 1,432,055
110 Syracuse, NY Hsg Auth Rev Sub Proj Loretto
Rest Ser B.................................. 7.500 08/01/10 111,066
250 Syracuse, NY Indl Dev Agy Rev First Mtg
Jewish Home Ser A........................... 7.375 03/01/21 258,630
2,000 Tobacco Settlement Fin Corp NY Ser C-1...... 5.500 06/01/22 2,190,420
2,000 Triborough Brdg & Tunl Auth NY Rev Gen Purp
Ser A....................................... 5.250 01/01/18 2,182,460
1,000 Triborough Brdg & Tunl Auth NY Rev Gen Purp
Ser A....................................... 5.000 01/01/32 1,032,010
1,000 Ulster Cnty, NY Res Recovery Agy Solid Waste
Sys Rev Rfdg (AMBAC Insd)................... 5.250 03/01/18 1,102,800
1,000 United Nations Dev Corp NY Rev Ser A Rfdg... 5.250 07/01/19 1,035,840
1,000 Upper Mohawk Vly Regl Wtr Fin Auth NY Wtr
Sys Rev (AMBAC Insd)........................ 5.750 04/01/20 1,137,730
380 Utica, NY Indl Dev Agy Civic Fac Rev Utica
College Proj Ser A.......................... 5.750 08/01/28 367,650
500 Westchester Cnty, NY Indl Dev Agy Mtg Kendal
on Hudson Proj Ser A........................ 6.375 01/01/24 510,855
1,000 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty
Dev Ppty Yonkers Inc Ser A.................. 6.625 02/01/26 1,087,270
------------
121,977,394
------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
U. S. VIRGIN ISLANDS 0.9%
$1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt
Taxes Ln Nt Ser A........................... 6.375% 10/01/19 $ 1,131,150
------------
TOTAL INVESTMENTS 98.7%
(Cost $115,760,195)......................................................... 123,108,544
OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%................................... 1,605,077
------------
NET ASSETS 100.0%............................................................ $124,713,621
============
</Table>
(a) All or a portion of this security has been physically segregated in
connection with open futures contracts.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) An Inverse Floating Rate security is one where the coupon is inversely
indexed to a short-term floating interest rate multiplied by a specific
factor. As the floating rate rises, the coupon is reduced. Conversely, as
the floating rate declines, the coupon is increased. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. These instruments are typically used by the Trust to enhance the
yield of the portfolio. All of the Trust's portfolio holdings, including
derivative instruments, are marked to market each day with the change in
value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
Radian--Radian Asset Assurance
XLCA--XL Capital Assurance Inc.
10 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $115,760,195)....................... $123,108,544
Cash........................................................ 79,191
Receivables:
Interest.................................................. 1,667,462
Fund Shares Sold.......................................... 237,953
Investments Sold.......................................... 70,000
Other....................................................... 69,810
------------
Total Assets............................................ 125,232,960
------------
LIABILITIES:
Payables:
Income Distributions...................................... 110,910
Distributor and Affiliates................................ 96,613
Variation Margin on Futures............................... 68,094
Fund Shares Repurchased................................... 44,082
Investment Advisory Fee................................... 26,721
Trustees' Deferred Compensation and Retirement Plans........ 100,081
Accrued Expenses............................................ 72,838
------------
Total Liabilities....................................... 519,339
------------
NET ASSETS.................................................. $124,713,621
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $117,905,747
Net Unrealized Appreciation................................. 7,044,568
Accumulated Undistributed Net Investment Income............. 157,103
Accumulated Net Realized Loss............................... (393,797)
------------
NET ASSETS.................................................. $124,713,621
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $65,912,434 and 3,975,764 shares of
beneficial interest issued and outstanding)............. $ 16.58
Maximum sales charge (4.75%* of offering price)......... .83
------------
Maximum offering price to public........................ $ 17.41
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $40,298,835 and 2,433,988 shares of
beneficial interest issued and outstanding)............. $ 16.56
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $18,502,352 and 1,116,707 shares of
beneficial interest issued and outstanding)............. $ 16.57
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 11
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $2,860,435
----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $80,181, $201,613 and $90,359,
respectively)............................................. 372,153
Investment Advisory Fee..................................... 368,633
Shareholder Services........................................ 35,561
Custody..................................................... 11,407
Legal....................................................... 10,529
Trustees' Fees and Related Expenses......................... 9,334
Other....................................................... 72,813
----------
Total Expenses.......................................... 880,430
Investment Advisory Fee Reduction....................... 215,036
----------
Net Expenses............................................ 665,394
----------
NET INVESTMENT INCOME....................................... $2,195,041
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 472,857
Futures................................................... (812,593)
----------
Net Realized Loss........................................... (339,736)
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 5,479,882
End of the Period:
Investments............................................. 7,348,349
Futures................................................. (303,781)
----------
7,044,568
----------
Net Unrealized Appreciation During the Period............... 1,564,686
----------
NET REALIZED AND UNREALIZED GAIN............................ $1,224,950
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $3,419,991
==========
</Table>
12 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 2,195,041 $ 4,179,882
Net Realized Gain/Loss............................... (339,736) 989,815
Net Unrealized Appreciation/Depreciation During the
Period............................................. 1,564,686 (1,642,930)
------------ ------------
Change in Net Assets from Operations................. 3,419,991 3,526,767
------------ ------------
Distributions from Net Investment Income:
Class A Shares..................................... (1,215,948) (2,244,033)
Class B Shares..................................... (612,907) (1,406,581)
Class C Shares..................................... (274,189) (484,424)
------------ ------------
Total Distributions.................................. (2,103,044) (4,135,038)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 1,316,947 (608,271)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 10,090,546 44,156,929
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 1,441,832 2,899,936
Cost of Shares Repurchased........................... (9,963,613) (24,649,019)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 1,568,765 22,407,846
------------ ------------
TOTAL INCREASE IN NET ASSETS......................... 2,885,712 21,799,575
NET ASSETS:
Beginning of the Period.............................. 121,827,909 100,028,334
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $157,103 and
$65,106, respectively)............................. $124,713,621 $121,827,909
============ ============
</Table>
See Notes to Financial Statements 13
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX
MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS A SHARES MAR. 31, --------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
-------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD................................ $16.40 $16.49 $15.76 $14.91 $14.94 $16.22
------ ------ ------ ------ ------ ------
Net Investment Income................. .32 .69 .74 .73 .77 .79
Net Realized and Unrealized
Gain/Loss........................... .17 (.10) .73 .88 (.07) (1.19)
------ ------ ------ ------ ------ ------
Total from Investment Operations........ .49 .59 1.47 1.61 .70 (.40)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.............................. .31 .68 .74 .76 .73 .79
Distributions from Net Realized
Gain................................ -0- -0- -0- -0- -0- .09
------ ------ ------ ------ ------ ------
Total Distributions..................... .31 .68 .74 .76 .73 .88
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD...... $16.58 $16.40 $16.49 $15.76 $14.91 $14.94
====== ====== ====== ====== ====== ======
Total Return* (b)....................... 3.02%** 3.69% 9.63% 10.97% 4.91% -2.61%
Net Assets at End of the Period (In
millions)............................. $ 65.9 $ 63.6 $ 47.5 $ 43.5 $ 29.0 $ 36.6
Ratio of Expenses to Average Net
Assets*............................... .73% .55% .38% .53% .61% .33%
Ratio of Net Investment Income to
Average Net Assets*................... 3.93% 4.19% 4.68% 4.74% 5.26% 5.03%
Portfolio Turnover...................... 13%** 27% 43% 30% 58% 67%
* If certain expenses had not been voluntarily assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets............................. 1.08% 1.06% 1.07% 1.13% 1.32% 1.23%
Ratio of Net Investment Income to
Average Net Assets................. 3.58% 3.68% 3.99% 4.14% 4.56% 4.13%
</Table>
** Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting discount on fixed income securities. The effect of this change for
the year ended September 30, 2002 was to increase net investment income per
share by less than $.01, decrease net realized and unrealized gains and
losses per share by less than $.01 and increase the ratio of net investment
income to average net assets by .01%. Per share, ratios and supplemental
data for periods prior to September 30, 2002 have not been restated to
reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include Rule 12b-1 fees of up to .25% and do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption
of Fund shares.
14 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX
MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS B SHARES MAR. 31, --------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
-------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD................................ $16.38 $16.47 $15.74 $14.90 $14.92 $16.21
------ ------ ------ ------ ------ ------
Net Investment Income................. .26 .56 .62 .62 .66 .68
Net Realized and Unrealized
Gain/Loss........................... .17 (.09) .73 .86 (.06) (1.20)
------ ------ ------ ------ ------ ------
Total from Investment Operations........ .43 .47 1.35 1.48 .60 (.52)
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.............................. .25 .56 .62 .64 .62 .68
Distributions from Net Realized
Gain................................ -0- -0- -0- -0- -0- .09
------ ------ ------ ------ ------ ------
Total Distributions..................... .25 .56 .62 .64 .62 .77
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD...... $16.56 $16.38 $16.47 $15.74 $14.90 $14.92
====== ====== ====== ====== ====== ======
Total Return* (b)....................... 2.64%** 2.93% 8.83% 10.09% 4.17% -3.34%
Net Assets at End of the Period (In
millions)............................. $ 40.3 $ 40.5 $ 40.5 $ 35.0 $ 28.8 $ 28.2
Ratio of Expenses to Average Net
Assets*............................... 1.48% 1.29% 1.13% 1.28% 1.36% 1.08%
Ratio of Net Investment Income to
Average Net Assets*................... 3.18% 3.45% 3.92% 3.99% 4.51% 4.27%
Portfolio Turnover...................... 13%** 27% 43% 30% 58% 67%
* If certain expenses had not been voluntarily assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets............................. 1.83% 1.80% 1.82% 1.88% 2.07% 1.98%
Ratio of Net Investment Income to
Average Net Assets................. 2.83% 2.94% 3.24% 3.39% 3.81% 3.37%
</Table>
** Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting discount on fixed income securities. The effect of this change for
the year ended September 30, 2002 was to increase net investment income per
share by less than $.01, decrease net realized and unrealized gains and
losses per share by less than $.01 and increase the ratio of net investment
income to average net assets by .01%. Per share, ratios and supplemental
data for periods prior to September 30, 2002 have not been restated to
reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within one year of purchase and declining to 0% after the sixth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees of 1% and do not reflect the
reduction of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares.
See Notes to Financial Statements 15
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX
MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS C SHARES MAR. 31, ---------------------------------------------
2004 2003 2002 (a) 2001 2000 1999
--------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD................................ $16.39 $16.48 $15.75 $14.91 $14.92 $ 16.20
------ ------ ------ ------ ------ -------
Net Investment Income................. .26 .56 .62 .60 .68 .68
Net Realized and Unrealized
Gain/Loss........................... .17 (.09) .73 .88 (.07) (1.19)
------ ------ ------ ------ ------ -------
Total from Investment Operations........ .43 .47 1.35 1.48 .61 (.51)
------ ------ ------ ------ ------ -------
Less:
Distributions from Net Investment
Income.............................. .25 .56 .62 .64 .62 .68
Distributions from Net Realized
Gain................................ -0- -0- -0- -0- -0- .09
------ ------ ------ ------ ------ -------
Total Distributions..................... .25 .56 .62 .64 .62 .77
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE PERIOD...... $16.57 $16.39 $16.48 $15.75 $14.91 $ 14.92
====== ====== ====== ====== ====== =======
Total Return* (b)....................... 2.64%** 2.92%(c) 8.83% 10.09% 4.24% -3.28%
Net Assets at End of the Period (In
millions)............................. $ 18.5 $ 17.7 $ 12.0 $ 7.3 $ 4.6 $ 5.1
Ratio of Expenses to Average Net
Assets*............................... 1.48% 1.30% 1.13% 1.30% 1.36% 1.08%
Ratio of Net Investment Income to
Average Net Assets*................... 3.18% 3.45%(c) 3.92% 3.97% 4.52% 4.28%
Portfolio Turnover...................... 13%** 27% 43% 30% 58% 67%
* If certain expenses had not been voluntarily assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets............................. 1.83% 1.81% 1.82% 1.90% 2.07% 1.98%
Ratio of Net Investment Income to
Average Net Assets................. 2.83% 2.94%(c) 3.23% 3.37% 3.81% 3.38%
</Table>
** Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting discount on fixed income securities. The effect of this change for
the year ended September 30, 2002 was to increase net investment income per
share by less than $.01, decrease net realized and unrealized gains and
losses per share by less than $.01 and increase the ratio of net investment
income to average net assets by .01%. Per share, ratios and supplemental
data for periods prior to September 30, 2002 have not been restated to
reflect this change in presentation.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1% charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
services fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .03%.
16 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen New York Tax Free Income Fund (the "Fund") is organized as a series
of the Van Kampen Tax Free Trust, a Delaware statutory trust, and is registered
as a non-diversified, open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's
investment objective is to provide investors with a high level of current income
exempt from federal, New York State and New York City income taxes, consistent
with preservation of capital. The Fund seeks to achieve its investment objective
by investing at least 80% of its total assets in a portfolio of New York
municipal securities that are rated investment grade at the time of purchase.
The Fund commenced investment operations on July 29, 1994, with three classes of
common shares, Class A, Class B and Class C. Effective November 30, 2003, the
Fund's investment adviser, Van Kampen Investment advisory Corp. merged into its
affiliate, Van Kampen Asset Management.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund 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 Fund will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payments is made. At March 31, 2004, the Fund had no when-issued and delayed
delivery purchase commitments.
C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security. Income and expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute
17
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
substantially all of its taxable income, if any, to its shareholders. Therefore,
no provision for federal income taxes is required.
The Fund 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 September 30, 2003, the Fund had an accumulated capital loss
carryforward for tax purposes of $733,829 which will expire on September 30,
2009.
At March 31, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $115,802,777
============
Gross tax unrealized appreciation........................... $ 7,403,879
Gross tax unrealized depreciation........................... (98,112)
------------
Net tax unrealized appreciation on investments.............. $ 7,305,767
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes.
The tax character of distributions paid during the year ended September 30,
2003 was as follows:
<Table>
Distributions paid from:
Ordinary Income........................................... $6,501
Long-term capital gain.................................... -0-
------
$6,501
======
</Table>
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $11,191
</Table>
Net realized gains and losses may differ for financial reporting purposes
primarily as a result of the deferral of losses relating to wash sale
transactions.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser"), will provide investment advice and facilities to the
Fund for an annual fee payable monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... 0.60%
Over $500 million........................................... 0.50%
</Table>
18
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
For the six months ended March 31, 2004, the Adviser waived approximately
$215,000 of its advisory fees. This represents .35% of its average net assets
for the period. This waiver is voluntary and can be discontinued at any time.
For the six months ended March 31, 2004, the Fund recognized expenses of
approximately $3,100, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Fund. The Adviser
allocates the cost of such services to each fund. For the six months ended March
31, 2004, the Fund recognized expenses of approximately $19,900 representing Van
Kampen Investments or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, which are reported as part
of "Other" and "Legal" expenses, respectively, in the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
March 31, 2004, the Fund recognized expenses of approximately $25,400
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund 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.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $55,170 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2004.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
19
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2004, capital aggregated $62,983,244, $37,115,788 and $17,806,715
for Classes A, B and C, respectively. For the six months ended March 31, 2004,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 418,104 $ 6,907,352
Class B................................................... 89,331 1,477,969
Class C................................................... 103,239 1,705,225
-------- -----------
Total Sales................................................. 610,674 $10,090,546
======== ===========
Dividend Reinvestment:
Class A................................................... 50,094 $ 828,421
Class B................................................... 25,698 424,406
Class C................................................... 11,438 189,005
-------- -----------
Total Dividend Reinvestment................................. 87,230 $ 1,441,832
======== ===========
Repurchases:
Class A................................................... (371,558) $(6,112,679)
Class B................................................... (154,253) (2,544,397)
Class C................................................... (79,441) (1,306,537)
-------- -----------
Total Repurchases........................................... (605,252) $(9,963,613)
======== ===========
</Table>
At September 30, 2003, capital aggregated $61,360,150, $37,757,810 and
$17,219,022 for Classes A, B and C, respectively. For the year ended September
30, 2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,655,466 $ 27,062,415
Class B................................................... 519,637 8,452,098
Class C................................................... 531,210 8,642,416
---------- ------------
Total Sales................................................. 2,706,313 $ 44,156,929
========== ============
Dividend Reinvestment:
Class A................................................... 96,700 $ 1,569,395
Class B................................................... 60,400 978,904
Class C................................................... 21,673 351,637
---------- ------------
Total Dividend Reinvestment................................. 178,773 $ 2,899,936
========== ============
Repurchases:
Class A................................................... (751,111) $(12,180,934)
Class B................................................... (568,107) (9,209,533)
Class C................................................... (200,158) (3,258,552)
---------- ------------
Total Repurchases........................................... (1,519,376) $(24,649,019)
========== ============
</Table>
20
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
Class B Shares purchased on or after June 1, 1996 and any dividend
reinvestment plan Class B Shares received on such shares, automatically convert
to Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares seven years after the end of the calendar month in
which the shares were purchased. For the six months ended March 31, 2004 and
year ended September 30, 2003, 880 and 49,822 Class B Shares automatically
converted to Class A Shares, respectively, and are shown in the above tables as
sales of Class A Shares and repurchases of Class B Shares. Class C Shares
purchased before January 1, 1997, and any dividend reinvestment plan Class C
Shares received on such shares, automatically convert to Class A Shares ten
years after the end of the calendar month in which the shares are purchased.
Class C Shares purchased on or after January 1, 1997 do not possess a conversion
feature. For the six months ended March 31, 2004 and year ended September 30,
2003, no Class C Shares converted to Class A Shares. Class B and Class C Shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge (CDSC). The CDSC for Class B and Class C Shares will be
imposed on most redemptions made within six years of the purchase for Class B
Shares and one year of the purchase for Class C Shares as detailed in the
following schedule.
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
First....................................................... 4.00% 1.00%
Second...................................................... 3.75% None
Third....................................................... 3.50% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.50% None
Sixth....................................................... 1.00% None
Seventh and Thereafter...................................... None None
</Table>
For the six months ended March 31, 2004, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $21,100 and CDSC on redeemed shares of approximately $34,800.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $16,753,974 and $15,674,378,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate
21
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
potential gain. All of the Fund'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, except when taking delivery of a security
underlying a futures contract. In these instances, the recognition of gain or
loss is postponed until the disposal of the security underlying the futures
contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in exchange traded futures contracts on U.S. Treasury Bonds
and typically closes the contract prior to the delivery date. These contracts
are generally used to manage the Fund's effective maturity and duration. Upon
entering into futures contracts, the Fund maintains an amount of cash or liquid
securities with a value equal to percentage of the contract amount with either a
future commission merchant pursuant to rules and regulations promulgated in the
1940 Act, as amended, or with its custodian in an account in the broker's name.
This amount is known as initial margin. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the values of the contract (variation margin). The risk of loss associated with
a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended March 31, 2004,
are as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2003........................... 172
Futures Opened.............................................. 287
Futures Closed.............................................. (297)
----
Outstanding at March 31, 2004............................... 162
====
</Table>
The futures contracts outstanding as of March 31, 2004, and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures June 2004 (Current
Notional Value of $115,406 per contract).................. 28 (66,619)
U.S. Treasury Notes 5-Year Futures June 2004 (Current
Notional Value of $113,563 per contract).................. 134 (237,162)
--- ---------
162 $(303,781)
=== =========
</Table>
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of
22
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
ongoing shareholder services with respect to such classes of shares; and the
maintenance of shareholder accounts with respect to such classes of shares.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and 1.00% each for Class B and Class C average daily net assets are
accrued daily. The annual fees for Class A Shares are paid quarterly and the
annual fees for Class C Shares are paid monthly. For Class B Shares, 75% of the
annual fees are paid monthly, while 25% of the annual fees are paid quarterly.
The amount of distribution expenses incurred by Van Kampen and not yet
reimbursed ("unreimbursed receivable") was approximately $725,600 and $15,300
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be
refunded to the Fund on a quarterly basis.
Included in these fees for the six months ended March 31, 2004, are payments
retained by Van Kampen of approximately $193,400 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $17,900.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, certain officers of such
affiliates and certain investment companies advised by the Adviser or its
affiliates, including the Fund, are named as defendants in a number of similar
class action complaints which were recently consolidated. This consolidated
action also names as defendants certain individual Trustees and Directors of the
named investment companies advised by affiliates of the Adviser; the complaint
does not, however, name the individual Trustees of any Van Kampen funds. The
consolidated amended complaint generally alleges that defendants violated their
statutory disclosure obligations and fiduciary duties by failing properly to
disclose (i) that the Adviser and certain affiliates of the Adviser allegedly
offered economic incentives to brokers and others to recommend the funds advised
by the Adviser or its affiliates to investors rather than funds managed by other
companies, and (ii) that the funds advised by the Adviser or its affiliates,
including the Fund, allegedly paid excessive commissions to brokers in return
for their efforts to recommend these funds to investors. The complaint seeks,
among other things, unspecified compensatory damages, rescissionary damages,
fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley DW Inc. in connection with the
sales of the funds. The complaint seeks, among other things, the removal of the
current Trustees of the Van Kampen funds, rescission of the management contracts
for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary
damages. This complaint will be coordinated with the consolidated complaint.
23
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2004 (UNAUDITED) continued
The defendants intend to move to dismiss these actions and otherwise
vigorously to defend them. While the Fund believes that it has meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
24
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, NY 10020
DISTRIBUTOR
VAN KAMPEN FUNDS, INC.
1221 Avenue of the Americas
New York, NY 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
25
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 235, 325, 425
NYTF SAR
5/04 RN04-00398P-Y03/04
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) Code of Ethics -- Not applicable for semi-annual reports.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Tax Free Trust
-------------------------------------
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: May 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: May 18, 2004
By: /s/ John L. Sullivan
--------------------
Name: John L. Sullivan
Title: Principal Financial Officer
Date: May 18, 2004