UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: 3/31/05
Item 1. Reports to Shareholders.
The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
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, 2005.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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.
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 3/31/05
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 12/14/84 since 5/03/93 since 8/13/93
- ---------------------------------------------------------------------------------------------
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 CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 7.74% 7.48% 4.80% 4.80% 4.41% 4.41%
10-year 5.60 5.09 5.04 5.04 4.79 4.79
5-year 6.20 5.17 5.37 5.13 5.39 5.39
1-year 2.47 -2.42 1.62 -2.28 1.62 0.65
6-month 0.84 -3.94 0.46 -3.46 0.46 -0.52
- ---------------------------------------------------------------------------------------------
SEC Yield 3.05% 2.45% 2.45%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS 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.
Performance of share classes will vary due to differences in sales charges and
expenses. 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 up to 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 nonincome 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 does not include any expenses,
fees or sales charges, which would lower performance. The index is unmanaged and
should not be considered an investment. It is not possible to invest directly in
an index. Index data source: Lipper Inc.
1
Fund Report
FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005
Van Kampen Insured Tax Free Income Fund is managed by the Adviser's Municipal
Fixed Income team.(1) Members of the team include James F. Willison, Managing
Director of the Adviser; Joseph R. Arcieri, Executive Director of the Adviser;
and Joseph A. Piraro, Vice President of the Adviser.
MARKET CONDITIONS
The six-month period ended March 31, 2005, was characterized by continued
short-term interest rate increases, and the specter of rising inflation
resulting from record-high crude oil prices. The Federal Open Market Committee
(the "Fed") raised the federal funds target rate 100 basis points during the
period through a series of four, "measured" 0.25 percent tightenings to 2.75
percent by the end of March. Although rates in the short and intermediate areas
of the yield curve shifted upward as the Fed tightened, long-term interest rates
fell as buyers did not seem deterred by the prospect of rising inflation. As a
result, the yield curve (the difference between short and longer-term yields)
flattened and the long end of the municipal market handily outperformed the
shorter end.
The municipal market in total posted positive returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a slightly negative showing. Within the investment-grade segment of the
market, yield differentials between BBB-rated municipals and AAA-rated
securities were flat to slightly wider, though BBB-rated securities still
outperformed high grades due to their higher coupons, while securities rated
below investment grade strongly outperformed as investors sought out their
higher yields.
The Fed's interest rate hikes did not dampen investors' appetites for municipal
bonds, as net inflows into municipal bond funds topped $700 million during the
period. The supply of new issues was modest during the closing months of 2004
(the first half of the period) before soaring in the opening months of 2005 as
long-term issuers rushed to bring securities to market in anticipation of
additional interest rate increases in the near term.
(1)Team members may change at any time without notice.
2
PERFORMANCE ANALYSIS
The fund returned 0.84 percent for the six months ended March 31, 2005 (Class A
shares, unadjusted for sales charge). In comparison, the fund's benchmark index,
the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
0.84% 0.46% 0.46% 1.21%
- --------------------------------------------------------------
</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
INDEX DEFINITIONS.
One of our primary strategies in managing the fund was to take advantage of
compelling opportunities in the 25- to 30-year segment of the market. We focused
here on purchasing securities with premium (that is, above-market) coupons and
moderate interest rate sensitivity. Our purchases of these securities were
funded by the proceeds of sales of several shorter-maturity positions, many of
which had been refunded during the period. This was part of our ongoing strategy
of positioning the fund for an environment of rising short-term interest rates
by limiting the fund's exposure to that segment of the market.
In terms of purchases, we continued to favor the essential services segments of
the market, such as education and transportation. In turn, we avoided the
housing sector out of concerns about those bonds' structural characteristics. We
also avoided zero coupon bonds. The fund remained well diversified
geographically, with no one state or region dominating the portfolio. Many of
our purchases were from states with either high taxes, and thus strong ongoing
demand for the bonds, or a lack of dual tax-exempt status, such as Illinois.
Because the fund focuses on bonds that offer the credit enhancement of
insurance, the entire portfolio was rated AAA at the close of the period.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the fund in the future.
3
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05
Illinois 15.0%
Texas 12.9
California 10.3
Washington 8.8
Florida 6.8
Colorado 4.4
Pennsylvania 4.2
Indiana 3.3
Louisiana 2.8
Oklahoma 2.8
Georgia 2.6
Alabama 2.4
New Jersey 2.2
Michigan 2.1
Arizona 2.0
North Carolina 1.7
Nevada 1.6
New York 1.5
South Dakota 1.3
District of Columbia 1.1
Wisconsin 1.1
North Dakota 0.9
South Carolina 0.8
Arkansas 0.8
Ohio 0.5
Missouri 0.5
Massachusetts 0.5
Oregon 0.4
Alaska 0.4
West Virginia 0.4
Utah 0.3
Puerto Rico 0.3
New Hampshire 0.2
Iowa 0.2
Nebraska 0.2
Mississippi 0.1
Virginia 0.1
-----
Total Long-Term Investments 97.5%
Short-Term Investments 4.4
-----
Total Investments 101.9
Liabilities in Excess of Other Assets -1.9
-----
Net Assets 100.0%
</Table>
<Table>
<Caption>
CREDIT QUALITY AS OF MARCH 31, 2005
AAA/Aaa 98.7%
Not Rated 1.3
</Table>
Based upon the highest quality ratings as issued by Standard & Poor's or
Moody's.
4
<Table>
<Caption>
TOP FIVE SECTORS AS OF MARCH 31, 2005
Public Education 17.0%
Public Building 11.3
Wholesale Electric 11.1
Airport 10.9
General Purpose 9.8
</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 industries shown above. Sectors are as a percentage of
long-term investments. Summary of investments by state classification are as a
percentage of net assets. Credit quality is based on 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.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public Web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's Web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
6
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 1-800-341-2911 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 AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our Web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
7
Expense Example
As a shareholder of the Fund, you incur two types of costs : (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charge on redemptions of Class B and C Shares; and
(2) ongoing costs, including management fees; distribution and service (12b-1)
fees; and other Fund expenses. This example is intended to help you understand
your ongoing cost (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 10/01/04 - 3/31/05.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the second line
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
-------------------------------------------------
10/1/04 3/31/05 10/1/04-3/31/05
Class A
Actual..................................... $1,000.00 $1,008.44 $4.41
Hypothetical............................... 1,000.00 1,020.53 4.43
(5% annual return before expenses)
Class B
Actual..................................... 1,000.00 1,004.56 8.15
Hypothetical............................... 1,000.00 1,016.83 8.20
(5% annual return before expenses)
Class C
Actual..................................... 1,000.00 1,004.56 8.15
Hypothetical............................... 1,000.00 1,016.83 8.20
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.88%, 1.63%,
and 1.63% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period).
Assumes all dividends and distributions were reinvested.
8
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MUNICIPAL BONDS 97.5%
ALABAMA 2.4%
$ 1,385 Alabama St Brd Ed Rev Calhoun Cmnty College
(AMBAC Insd).................................. 5.000% 05/01/21 $ 1,460,704
1,000 Alabama St Brd Ed Rev Calhoun Cmnty College
(AMBAC Insd).................................. 5.000 05/01/22 1,051,310
2,255 Alabama St Brd Ed Rev George C Wallace Cmnty
College (AMBAC Insd) (a)...................... 5.250 07/01/23 2,414,609
1,760 Alabama St Brd Ed Rev Shelton St Cmnty College
Rfdg (AMBAC Insd)............................. 5.500 10/01/10 1,943,656
1,250 Alabama Wtr Pollution Ctl Auth (AMBAC Insd)... 5.500 08/15/13 1,368,075
2,530 Bessemer, AL Wt (XLCA Insd) (a)............... 5.000 02/01/29 2,607,797
2,145 Birmingham, AL Wtrwks & Swr Brd Ser A
(FGIC Insd) (a)............................... 5.000 01/01/21 2,249,397
4,255 Hoover, AL Wt (XLCA Insd) (a)................. 5.000 03/01/14 4,590,549
3,120 Huntsville, AL Hlthcare Auth Ser A (MBIA
Insd)......................................... 5.400 06/01/22 3,360,396
2,500 Huntsville, AL Hlthcare Auth Ser A (MBIA
Insd)......................................... 5.500 06/01/27 2,704,675
1,740 Mobile Cnty, AL Impt Wt & Rfdg (FSA Insd)..... 5.250 08/01/18 1,884,664
2,260 Mobile Cnty, AL Impt Wt & Rfdg (FSA Insd)..... 5.250 08/01/19 2,440,642
--------------
28,076,474
--------------
ALASKA 0.4%
2,000 Alaska St Hsg Fin Corp Gen Hsg Ser A
(FGIC Insd)................................... 5.000 12/01/30 2,053,100
1,000 Alaska St Hsg Fin Corp Gen Hsg Ser A
(FGIC Insd)................................... 5.250 12/01/41 1,043,450
1,425 Anchorage, AK Wtr Rev Rfdg (AMBAC Insd)....... 6.000 09/01/19 1,584,571
--------------
4,681,121
--------------
ARIZONA 2.0%
1,940 Arizona St Univ Ctf Part Resh Infrastructure
Proj (AMBAC Insd)............................. 5.250 09/01/23 2,072,890
1,225 Arizona St Univ Ctf Part Resh Infrastructure
Proj (AMBAC Insd)............................. 5.250 09/01/24 1,305,005
2,900 Arizona Tourism & Sports Auth Multi Purp Stad
Fac Ser A (MBIA Insd)......................... 5.375 07/01/22 3,147,950
7,500 Phoenix, AZ Civic Impt Corp Trans Excise Tax
Rev Light Rail Proj (AMBAC Insd).............. 5.000 07/01/20 7,923,075
4,000 Phoenix, AZ Civic Impt Corp Waste Wtr Sys Rev
Jr Lien (MBIA Insd)........................... 5.000 07/01/27 4,157,360
755 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease
Oblig Irvington Proj Tucson Elec Pwr Co Ser A
Rfdg (FSA Insd)............................... 7.250 07/15/10 789,579
1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd).................. 6.000 09/01/12 2,027,212
1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem
Hosp Ser A Rfdg (AMBAC Insd).................. 6.125 09/01/17 1,895,442
--------------
23,318,513
--------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
ARKANSAS 0.8%
$ 2,500 Arkansas St Dev Fin Auth Rev St Agy Fac
Donaghey Plaza Proj (FSA Insd)................ 5.000% 06/01/29 $ 2,573,000
6,265 Little Rock, AR Sch Dist Ser B Rfdg (FSA
Insd)......................................... 5.500 02/01/25 6,705,179
--------------
9,278,179
--------------
CALIFORNIA 10.3%
4,000 Bay Area Govt Assn CA Rev Tax Alloc CA Redev
Pool Ser A (XLCA Insd)........................ 5.250 09/01/35 4,204,520
1,800 California Ed Fac Auth Rev Occidental College
Ser A (MBIA Insd) (b)......................... 5.000 10/01/33 1,869,318
3,500 California Ed Fac Auth Rev Occidental College
Ser A (MBIA Insd) (b)......................... 5.000 10/01/36 3,620,575
10,000 California St Dept Wtr Res Pwr Ser A
(AMBAC Insd) (c).............................. 5.500 05/01/16 11,064,900
5,000 California St Dept Wtr Res Pwr Ser A
(XLCA Insd)................................... 5.375 05/01/17 5,431,600
3,000 California St Pub Wks Brd UCLA Replacement
Hosp Ser A (FSA Insd)......................... 5.375 10/01/20 3,215,820
3,000 California St Pub Wks Brd UCLA Replacement
Hosp Ser A (FSA Insd)......................... 5.000 10/01/22 3,111,030
5,000 California Stwide Cmnty Depooled Fin Pg Ser
2004A (FSA Insd).............................. 5.250 10/01/24 5,317,100
3,000 California Stwide Cmnty Pooled Fin Pg Ser
2004A (FSA Insd).............................. 5.000 10/01/29 3,097,350
4,000 California Stwide Cmnty Pooled Fin Pg Ser
2004A (FSA Insd).............................. 5.250 10/01/34 4,202,760
2,980 California Stwide Cmnty Pooled Fin Pg Ser
2004C (FSA Insd) (a).......................... 5.000 10/01/29 3,069,758
4,020 Chaffey, CA Un High Sch Dist Rfdg
(FGIC Insd) (a)............................... 5.000 08/01/19 4,285,400
425 Earlimart, CA Elem Sch Dist Ser 1
(AMBAC Insd).................................. 6.700 08/01/21 541,165
3,105 El Dorado, CA Irr Dist Ctf Ser A (FGIC
Insd)......................................... 5.000 03/01/21 3,233,547
265 Golden West Sch Fin Auth CA Rev Ser A Rfdg
(MBIA Insd) (a)............................... 5.750 08/01/19 309,035
690 Jurupa, CA Univ Sch Dist Election 2001
(FGIC Insd)................................... 5.000 08/01/26 715,896
1,190 Lancaster, CA Redev Agy Tax Alloc Comb Fire
Prot Fac Proj Rfdg (XLCA Insd) (a)............ 5.250 12/01/18 1,280,035
1,245 Lancaster, CA Redev Agy Tax Alloc Proj Areas
Sheriffs Fac (XLCA Insd) (a).................. 5.250 12/01/17 1,344,314
1,375 Lancaster, CA Redev Agy Tax Alloc Proj Areas
Sheriffs Fac (XLCA Insd) (a).................. 5.250 12/01/19 1,473,409
3,000 Long Beach, CA Bd Fin Auth Rev Redev Hsg Gas
Util Ser A1 (AMBAC Insd)...................... 5.000 08/01/40 3,053,880
4,000 Los Angeles Cnty, CA Pub Wk Master Proj Ser A
Rfdg (MBIA Insd).............................. 5.000 12/01/26 4,159,120
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$ 2,000 Los Angeles, CA Cmnty College Election 2001
Ser A Rfdg (FSA Insd)......................... 5.000% 08/01/25 $ 2,092,740
10,000 Los Angeles, CA Cmnty College Election 2001
Ser A Rfdg (FSA Insd)......................... 5.000 06/01/26 10,446,800
2,165 North Monterey Cnty, CA Uni Sch Dist Election
2002 Ser B (FGIC Insd)........................ 4.750 08/01/29 2,186,910
2,070 Pacifica, CA Wastewtr Rev Rfdg
(AMBAC Insd) (a).............................. 5.250 10/01/23 2,206,247
5,000 Palm Springs, CA Fin Lease Rev Convention Ctr
Proj Ser A (MBIA Insd)........................ 5.500 11/01/29 5,497,350
2,475 Poway, CA Ctf Part City Office Bldg Proj
(AMBAC Insd).................................. 5.000 01/01/23 2,562,417
2,250 Riverside, CA Ctf Part (AMBAC Insd) (a)....... 5.000 09/01/23 2,335,207
3,770 San Diego Cnty, CA Ctf Part Edgemont Proj &
Regl Sys Rfdg (AMBAC Insd) (a)................ 5.000 02/01/21 3,956,426
9,085 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd)... 5.375 03/01/18 9,862,585
3,000 San Marcos, CA Pub Fac Auth Rev Sr Tax
Increment Proj Area 3-A (AMBAC Insd).......... 5.000 10/01/34 3,078,750
2,785 Santa Monica, CA Cmnty College Ser A Rfdg
(AMBAC Insd).................................. 5.000 02/01/27 2,872,087
2,000 South Tahoe CA Jt Pwr Fin Redev Proj Area No 1
Ser A Rfdg (AMBAC Insd) (b)................... 5.000 10/01/35 2,010,980
1,950 Vallejo City, CA Uni Sch Ser A Rfdg (MBIA
Insd)......................................... 5.900 08/01/25 2,292,361
2,000 William S Hart CA Jt Sch Fin Auth Spl Tax Rev
Cmnty Fac Rfdg (Prerefunded @ 9/01/05) (FSA
Insd)......................................... 6.500 09/01/14 2,072,620
--------------
122,074,012
--------------
COLORADO 4.4%
3,745 Colorado Ed & Cultural Fac Charter Sch Aurora
Academy (XLCA Insd) (a)....................... 5.250 02/15/34 3,927,456
11,850 Denver, CO City & Cnty Arpt Rev Ser A (MBIA
Insd)......................................... 5.700 11/15/25 12,268,542
3,605 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd)......................................... 5.750 11/15/16 4,006,885
4,310 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd)......................................... 5.750 11/15/17 4,774,058
4,305 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd)......................................... 5.750 11/15/18 4,758,704
5,145 Denver, CO City & Cnty Arpt Rev Ser B (XLCA
Insd)......................................... 5.750 11/15/20 5,675,501
3,165 Denver, CO Convention Ctr Sr Ser A
(XLCA Insd)................................... 5.000 12/01/17 3,331,890
2,000 Fremont Cnty, CO Ctf Part & Impt Ser A Rfdg
(MBIA Insd)................................... 5.250 12/15/26 2,118,000
4,300 Mesa Cnty, CO Vly Sch Dist No 51 Grand Jct
Ser A (MBIA Insd)............................. 5.000 12/01/20 4,554,990
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$ 1,175 Thornton, CO Ctf Part (AMBAC Insd)............ 5.375% 12/01/19 $ 1,273,277
3,080 Thornton, CO Ctf Part (AMBAC Insd) (a)........ 5.375 12/01/21 3,326,030
1,650 Thornton, CO Ctf Part (AMBAC Insd)............ 5.375 12/01/22 1,778,667
--------------
51,794,000
--------------
DISTRICT OF COLUMBIA 1.1%
1,000 District of Columbia Ctf Part Dist Pub Safety
& Emergency (AMBAC Insd)...................... 5.500 01/01/19 1,082,500
2,000 District of Columbia Ctf Part Dist Pub Safety
& Emergency (AMBAC Insd)...................... 5.500 01/01/20 2,161,980
10,000 Metropolitan WA DC Arpt Auth Ser A (AMT)
(MBIA Insd) (b)............................... 5.000 10/01/35 10,048,400
--------------
13,292,880
--------------
FLORIDA 6.8%
1,000 Brevard Cnty, FL Sch Brd Ctf Part Ser A (AMBAC
Insd)......................................... 5.400 07/01/12 1,107,510
500 Dade Cnty, FL Aviation Rev Ser B (MBIA
Insd)......................................... 5.600 10/01/26 525,990
1,000 Dade Cnty, FL Ed Fac Auth Rev Exchanged From
Univ of Miami Ser B (MBIA Insd)............... 5.750 04/01/20 1,047,430
750 Dade Cnty, FL Wtr & Swr Sys Rev (FGIC Insd)... 5.375 10/01/16 803,655
1,250 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd)......................................... 5.950 07/01/20 1,273,500
1,000 Escambia Cnty, FL Util Auth Util Sys Rev (FGIC
Insd)......................................... 5.250 01/01/24 1,060,010
1,000 Florida Intergovnmtl Fin Ser C1 (AMBAC
Insd)......................................... 5.125 02/01/31 1,027,820
575 Florida Muni Ln Council Rev Ser B
(MBIA Insd)................................... 5.750 11/01/14 641,688
1,185 Florida St Brd Ed Cap Outlay Pub Ed Ser C
(FGIC Insd)................................... 5.000 06/01/23 1,228,229
2,000 Florida St Brd Ed Cap Outlay Pub Ed Ser C
(Prerefunded @ 6/01/10) (FGIC Insd)........... 5.750 06/01/29 2,243,540
1,250 Florida St Brd Ed Lottery Rev Ser A (FGIC
Insd)......................................... 6.000 07/01/12 1,406,150
1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC
Insd)......................................... 6.000 07/01/14 1,124,920
2,750 Florida St Brd Ed Lottery Rev Ser B (FGIC
Insd)......................................... 5.250 07/01/13 2,934,607
750 Florida St Brd Regt Hsg Rev (MBIA Insd)....... 5.750 07/01/14 834,015
1,365 Florida St Correctional Privatization Commn
Ctf Part (MBIA Insd).......................... 5.375 08/01/14 1,494,156
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 1,835,820
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 1,600,695
1,340 Gulf Breeze, FL Rev Loc Govt (FGIC Insd)
(d)........................................... 5.150 12/01/20 1,434,577
500 Gulf Breeze, FL Rev Loc Govt (Variable Rate
Coupon) (FGIC Insd)........................... 5.650 12/01/20 530,475
1,000 Indian River Cnty, FL Hosp Rev Rfdg (FSA
Insd)......................................... 6.100 10/01/18 1,063,120
</Table>
12 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 1,750 Jea, FL Wtr & Swr Sys Rev Ser A (MBIA Insd)... 5.375% 10/01/30 $ 1,810,970
1,000 Key West, FL Util Brd Elec Rev Cap Apprec Ser
D (Escrowed to Maturity) (AMBAC Insd)......... * 10/01/13 681,590
1,000 Miami-Dade Cnty, FL Hlth Fac Miami Childrens
Hosp Ser A Rfdg (AMBAC Insd).................. 5.125 08/15/26 1,035,930
1,000 Orange Cnty, FL Sch Brd Ctf Ser A
(AMBAC Insd).................................. 5.250 08/01/14 1,091,660
4,000 Orange Cnty, FL Sch Brd Ctf Ser B
(AMBAC Insd).................................. 5.000 08/01/25 4,148,520
1,000 Orlando, FL Cmnty Redev Agy Tax Rep Drive
Universal Blvd Rfdg (AMBAC Insd).............. 5.125 04/01/20 1,059,890
4,180 Palm Beach Cnty, FL Sch Brd Ctf Ser A
(AMBAC Insd) (a).............................. 5.000 08/01/18 4,412,826
800 Palm Beach Cnty, FL Sch Brd Ctf Ser A (AMBAC
Insd)......................................... 5.125 08/01/26 831,144
1,000 Palm Beach Cnty, FL Sch Brd Ctf Ser A
(Prerefunded @ 6/01/11) (AMBAC Insd).......... 5.500 08/01/16 1,114,190
2,000 Palm Beach Cnty, FL Sch Brd Ctf Ser A Rfdg
(FSA Insd).................................... 5.000 08/01/21 2,108,020
1,500 Palm Beach Cnty, FL Sch Brd Ctf Ser A Rfdg
(FSA Insd).................................... 5.000 08/01/22 1,575,900
4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C
(FSA Insd).................................... 5.000 08/01/21 4,153,880
4,000 Palm Beach Cnty, FL Sch Brd Ctf Ser C
(FSA Insd).................................... 5.000 08/01/22 4,143,720
750 Polk Cnty, FL Sch Brd Ctf Part Master Lease
Ser A (FSA Insd).............................. 5.500 01/01/16 818,332
1,000 Port Saint Lucie, FL Spl Assmt Rev Util Svc
Area No 3 & 4A (MBIA Insd).................... 5.000 10/01/18 1,052,050
1,000 Reedy Creek, FL Impt Dist FL Ser 2 Rfdg (MBIA
Insd)......................................... 5.500 10/01/13 1,093,130
535 Saint Johns Cnty, FL Indl Dev Auth
Professional Golf Proj Rfdg (MBIA Insd)....... 5.250 09/01/12 586,130
1,000 Saint Lucie Cnty, FL Sch Brd Ctf Ser A
(FSA Insd).................................... 5.000 07/01/21 1,038,090
3,245 Santa Rosa Bay Brdg Auth FL Rev Cap Apprec
(MBIA Insd) (a)............................... * 07/01/18 1,752,300
4,000 Sunrise, FL Util Sys Rev Rfdg (AMBAC Insd).... 5.200 10/01/22 4,362,800
10,000 Tallahassee, FL Hlth Fac Rev Tallahassee Mem
Regl Med Ser A Rfdg (MBIA Insd) (c)........... 6.625 12/01/13 10,232,800
1,000 Village Ctr Cmnty Dev Dist FL Ser A
(MBIA Insd)................................... 5.200 11/01/25 1,051,860
3,735 Volusia Cnty, FL Ed Fac Auth Rev Ed Fac Embry
Riddle Ser B Rfdg (AMBAC Insd)................ 5.250 10/15/19 4,014,864
</Table>
See Notes to Financial Statements 13
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 1,069,030
500 Volusia Cnty, FL Hlth Fac Auth Rev Hosp Fac
Mem Hlth Impt & Rfdg (AMBAC Insd)............. 5.750 11/15/13 511,275
--------------
80,968,808
--------------
GEORGIA 2.6%
1,460 Athens, GA Hsg Auth Student East Campus Hsg
Rfdg (AMBAC Insd)............................. 5.250 12/01/18 1,574,800
14,690 Georgia Muni Elec Auth Pwr Rev Ser Y (AMBAC
Insd)......................................... 6.400 01/01/13 16,882,336
9,590 Georgia Muni Elec Auth Pwr Rev Ser Y
(MBIA Insd)................................... 6.500 01/01/17 11,400,112
860 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed
to Maturity) (AMBAC Insd)..................... 6.400 01/01/13 990,066
410 Georgia Muni Elec Auth Pwr Rev Ser Y (Escrowed
to Maturity) (MBIA Insd)...................... 6.500 01/01/17 488,888
--------------
31,336,202
--------------
ILLINOIS 15.0%
4,230 Berwyn, IL Rfdg (AMBAC Insd).................. 5.000 12/01/13 4,563,366
1,715 Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA
Insd)......................................... * 01/01/19 879,058
2,595 Bolingbrook, IL Cap Apprec Ser C Rfdg
(MBIA Insd) (a)............................... * 01/01/20 1,257,926
5,775 Chicago, IL Brd Ed Cap Apprec Sch Reform B 1
(FGIC Insd)................................... * 12/01/15 3,558,959
2,845 Chicago, IL Brd Ed Cap Apprec Sch Reform B 1
(FGIC Insd)................................... * 12/01/19 1,396,724
1,500 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd)................................... * 12/01/19 736,410
1,020 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd)................................... * 12/01/25 351,074
8,000 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd)................................... * 12/01/29 2,203,600
3,250 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd)................................... * 12/01/30 849,615
2,000 Chicago, IL Lakefront Millenium Pkg Fac
(MBIA Insd) (e)............................... 0/5.700 01/01/25 2,024,900
2,000 Chicago, IL Lakefront Millenium Pkg Fac
(MBIA Insd) (e)............................... 0/5.750 01/01/29 2,016,960
5,925 Chicago, IL Midway Arpt Rev Second Lien Ser B
Rfdg (AMBAC Insd) (a)......................... 5.000 01/01/21 6,172,961
6,220 Chicago, IL Midway Arpt Rev Second Lien Ser B
Rfdg (AMBAC Insd) (a)......................... 5.000 01/01/22 6,460,341
1,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
Third Lien Ser A Rfdg (MBIA Insd)............. 5.000 01/01/29 1,025,140
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 2,840 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
Third Lien Ser E Rfdg (CIFG Insd) (a)......... 5.250% 01/01/21 $ 3,010,372
2,975 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
Third Lien Ser E Rfdg (CIFG Insd) (a)......... 5.250 01/01/22 3,144,634
3,120 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
Third Lien Ser E Rfdg (CIFG Insd)............. 5.250 01/01/23 3,293,254
3,280 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
Third Lien Ser E Rfdg (CIFG Insd) (a)......... 5.250 01/01/24 3,452,430
5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt
Third Lien Ser E Rfdg (CIFG Insd)............. 5.000 01/01/34 5,090,050
8,750 Chicago, IL O'Hare Intl Arpt Rev Rols RR II
239-2 (Inverse Fltg) (Acquired 08/18/03, Cost
$9,383,563) (AMT) (FSA Insd) (f).............. 9.070 01/01/20 10,415,825
10,000 Chicago, IL O'Hare Intl Arpt Rev Rols RR II
239-3 (Inverse Fltg) (Acquired 08/18/03, Cost
$10,642,295) (AMT) (FSA Insd) (a) (f)......... 9.070 01/01/21 11,858,300
2,500 Chicago, IL Pk Dist Ser C (FGIC Insd)......... 5.500 01/01/19 2,730,675
2,000 Chicago, IL Proj Ser A Rfdg (FSA Insd)........ 5.000 01/01/23 2,086,920
2,495 Chicago, IL Proj Ser A Rfdg (FSA Insd)........ 5.000 01/01/24 2,595,424
4,185 Chicago, IL Proj Ser A Rfdg (FSA Insd) (a).... 5.000 01/01/26 4,330,010
10,000 Chicago, IL Proj Ser A Rfdg (FGIC Insd)....... 5.375 01/01/34 10,582,600
5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd)....... 5.500 01/01/38 5,388,750
5,000 Chicago, IL Proj Ser A Rfdg (AMBAC Insd)...... 5.625 01/01/39 5,486,850
1,000 Cicero, IL Tax Increment Ser A (XLCA Insd).... 5.250 01/01/21 1,067,960
2,055 Cook Cnty, IL Cmnty Cons Sch Dist No 015
Palatine Cap Apprec (FSA Insd)................ * 12/01/10 1,654,994
1,505 Cook Cnty, IL Sch Dist No 100 Berwyn South
(FSA Insd) (a)................................ 8.200 12/01/14 2,005,518
1,775 Cook Cnty, IL Sch Dist No 100 Berwyn South
(FSA Insd) (a)................................ 8.100 12/01/16 2,396,960
2,605 Cook Cnty, IL Sch Dist No 122 Cap Apprec
(FGIC Insd) (a)............................... * 12/01/17 1,426,706
2,995 Cook Cnty, IL Sch Dist No 122 Cap Apprec
(FGIC Insd) (a)............................... * 12/01/18 1,551,710
4,210 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC
Insd) (a)..................................... * 12/01/19 2,063,910
4,050 Cook Cnty, IL Sch Dist No 122 Cap Apprec (FGIC
Insd)......................................... * 12/01/20 1,876,851
3,000 Du Page Cnty, IL Cmnty High Sch (FSA Insd).... 5.600 01/01/22 3,316,950
2,000 Du Page Cnty, IL Cmnty High Sch Rfdg
(FSA Insd).................................... 5.000 12/01/17 2,128,380
1,860 Grundy Kendall & Will Cntys (AMBAC Insd)...... 5.500 05/01/20 2,013,450
1,180 Grundy Kendall & Will Cntys (AMBAC Insd)...... 5.500 05/01/21 1,277,350
2,000 Illinois Dev Fin Auth Rev Sch Dist Pgm
Rockford Sch 205 (FSA Insd)................... 6.650 02/01/11 2,316,540
</Table>
See Notes to Financial Statements 15
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 5,025 Illinois Dev Fin Auth Rev Sch Dist Pgm
Rockford Sch 205 (FSA Insd)................... 6.650% 02/01/12 $ 5,346,299
4,800 Illinois Fin Auth Rev Swedish American Hosp
(AMBAC Insd).................................. 5.000 11/15/31 4,910,160
2,000 Illinois Med Dist (MBIA Insd)................. 5.250 06/01/32 2,073,160
3,500 Illinois Muni Elec Agy Pwr Supply Sys Rev Rfdg
(FSA Insd).................................... 5.000 02/01/21 3,640,105
555 Kane Cook & Du Page Cntys IL Ser A
(FGIC Insd)................................... 7.000 12/15/11 662,082
1,000 Lake Cnty, IL Cmnty Cons Sch Dist No 50
Woodland (FGIC Insd).......................... 5.000 01/01/20 1,052,360
1,200 Lake Cnty, IL Cmnty Cons Sch Dist No 50
Woodland Cap Apprec Ser B (FGIC Insd)......... * 12/01/14 779,220
6,790 Lake Cnty, IL Cmnty Unit Sch Dist No 60
Waukegan Cap Apprec Ser A (FSA Insd).......... * 12/01/17 3,718,747
3,025 Lake Cnty, IL Cmnty Unit Sch Dist No 95 Lake
Zurich Cap Apprec (FGIC Insd)................. * 12/01/15 1,860,345
1,000 Madison & St Clair Cnty, IL Sch Dist No 10
Collinsville Rfdg (FGIC Insd)................. 5.000 02/01/21 1,048,640
3,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No
158 Cap Apprec (FGIC Insd).................... * 01/01/17 1,716,210
4,000 McHenry & Kane Cnty, IL Cmnty Cons Sch Dist No
158 Cap Apprec (FGIC Insd).................... * 01/01/18 2,165,840
2,080 McHenry Cnty, IL Cmnty High Sch Dist No 154
Cap Apprec (FGIC Insd)........................ * 01/01/16 1,261,000
1,000 McHenry Cnty, IL Consv Dist Ser A (Prerefunded
@ 2/01/11) (FGIC Insd)........................ 5.500 02/01/16 1,106,760
1,330 McHenry Cnty, IL Consv Dist Ser A (Prerefunded
@ 2/01/11) (FGIC Insd)........................ 5.500 02/01/17 1,471,991
6,000 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev McCormick Pl Expn Ser A (MBIA Insd)... 5.250 06/15/42 6,274,920
1,000 Southern IL Univ Rev Cap Apprec Hsg & Aux
Ser A (MBIA Insd)............................. * 04/01/20 479,540
5,000 University IL Univ Rev Aux Fac Sys Ser A (MBIA
Insd)......................................... 5.000 04/01/26 5,177,150
1,495 Will Cnty, IL Sch Dist No 017 (AMBAC Insd)
(a)........................................... 5.000 12/01/16 1,581,112
--------------
178,386,048
--------------
INDIANA 3.3%
1,000 Ball St Univ IN Rev Student Fee Ser L
(FSA Insd).................................... 5.500 07/01/20 1,134,940
2,000 Brownsburg, IN Sch Bldg First Mtg 1999 Ser A
(FSA Insd).................................... 5.250 09/15/22 2,142,840
1,785 Center Grove, IN 2000 Bldg First Mtg
(AMBAC Insd) (a).............................. 5.500 07/15/17 1,955,842
1,885 Center Grove, IN 2000 Bldg First Mtg
(AMBAC Insd) (a).............................. 5.500 07/15/18 2,063,189
</Table>
16 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 2,742,125
1,855 Hamilton Southeastern, IN Cons First Mtg
(FSA Insd) (a)................................ 5.500 07/15/16 2,034,712
1,075 Hamilton Southeastern, IN Cons First Mtg
(FSA Insd) (a)................................ 5.500 01/15/19 1,175,620
1,215 Indiana Bd Bk Spl Pgm Ser A (Escrowed to
Maturity) (AMBAC Insd)........................ 9.750 08/01/09 1,396,594
2,335 Lake Cnty, IN Bldg Corp First Mtg
(MBIA Insd) (a)............................... 5.750 08/01/11 2,578,657
1,550 Marion Cnty, IN Convention & Rec Lease Rent
Ser A Rfdg (AMBAC Insd)....................... 5.000 06/01/21 1,611,520
1,605 Mount Vernon of Hancock Cnty First Mtg Ser B
(AMBAC Insd) (a).............................. 5.500 07/15/16 1,760,492
1,695 Mount Vernon of Hancock Cnty First Mtg Ser B
(AMBAC Insd) (a).............................. 5.500 07/15/17 1,857,228
4,000 New Albany Floyd Cnty, IN Sch First Mtg (FGIC
Insd)......................................... 5.750 07/15/20 4,443,880
9,400 New Albany Floyd Cnty, IN Sch First Mtg (FGIC
Insd)......................................... 5.125 01/15/27 9,777,598
2,130 Northwest Allen Cnty, IN First Mtg (MBIA
Insd)......................................... 5.250 07/15/19 2,292,924
--------------
38,968,161
--------------
IOWA 0.2%
2,375 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)............................... 5.750 07/01/17 2,540,419
--------------
LOUISIANA 2.8%
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 4,597,312
5,530 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp
Rev Lake Charles Mem.......................... 6.500 12/01/18 6,709,660
Hosp Proj Ser A (Connie Lee Insd)
1,295 Lafayette, LA Pub Impt Sales Tax Rfdg (MBIA
Insd)......................................... 5.000 03/01/20 1,368,051
8,345 Lafayette, LA Util Rev (MBIA Insd)............ 5.250 11/01/24 8,911,292
1,730 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd).............................. 5.375 12/01/16 1,888,606
2,035 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd) (a).......................... 5.375 12/01/17 2,218,761
2,150 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd) (a).......................... 5.375 12/01/18 2,339,415
2,265 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd) (a).......................... 5.375 12/01/19 2,459,564
2,395 Louisiana Loc Govt Environment BRCC Fac Corp
Proj (MBIA Insd) (a).......................... 5.375 12/01/20 2,594,001
</Table>
See Notes to Financial Statements 17
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
LOUISIANA (CONTINUED)
$ 1,625 New Orleans, LA Home Mtg Auth Single Family
Mtg Rev 1985 Ser A (MBIA Insd)................ * 09/15/16 $ 493,854
--------------
33,580,516
--------------
MASSACHUSETTS 0.5%
2,800 Massachusetts Muni Whsl Elec Co Nuclear
Mix 1-A (MBIA Insd)........................... 5.250% 07/01/13 3,047,324
175 Massachusetts Muni Whsl Elec Co Proj No 6-A
(MBIA Insd)................................... 5.250 07/01/16 187,707
2,500 Massachusetts St Dev Fin Agy Rev Clg Pharmacy
& Allied Hlth Ser D (AGL Insd)................ 5.000 07/01/20 2,603,650
--------------
5,838,681
--------------
MICHIGAN 2.1%
2,385 Caledonia, MI Cmnty Sch Rfdg (MBIA Insd)
(b)........................................... 5.000 05/01/25 2,489,558
2,650 Chippewa Valley, MI Sch Bldg & Site (FSA
Insd)......................................... 5.000 05/01/20 2,805,953
3,000 Chippewa Valley, MI Sch Bldg & Site (FSA
Insd)......................................... 4.750 05/01/29 3,027,420
1,000 Detroit, MI Ser A-1 (AMBAC Insd).............. 5.250 04/01/24 1,060,700
2,000 Detroit, MI Wtr Supply Sys Rev Sr Lien Ser A
(FGIC Insd)................................... 5.000 07/01/26 2,078,760
1,400 Huron, MI Sch Dist (FSA Insd)................. 5.250 05/01/21 1,492,848
2,500 Michigan St Strategic Fd Detroit Edison Conv
Rfdg (Variable Rate Coupon) (AMBAC Insd)...... 4.850 09/01/30 2,619,850
2,565 Rockford, MI Pub Sch Rfdg (FSA Insd) (a)...... 5.000 05/01/27 2,671,114
1,175 Waverly, MI Cmnty Sch Rfdg (FSA Insd)......... 5.000 05/01/20 1,244,149
2,675 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg
(FGIC Insd)................................... 5.375 12/01/17 2,898,202
2,840 Wayne Charter Cnty, MI Arpt Rev Ser C Rfdg
(FGIC Insd)................................... 5.375 12/01/20 3,061,066
--------------
25,449,620
--------------
MISSISSIPPI 0.1%
1,000 Harrison Cnty, MS Wastewtr Mgmt & Solid
Wastewtr Treatment Fac Ser A Rfdg (FGIC
Insd)......................................... 8.500 02/01/13 1,309,660
--------------
MISSOURI 0.5%
1,170 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A
(FSA Insd).................................... 5.500 03/01/16 1,274,785
1,225 Mehlville, MO Sch Dist No R-9 Ctf Part Ser A
(FSA Insd).................................... 5.500 03/01/17 1,333,364
1,630 Saint Louis Cnty MO Regl Conv & Sports Complex
Auth Convtn & Sports Fac Rfdg (AMBAC Insd).... 5.250 08/15/17 1,750,278
1,590 Saint Louis, MO Arpt Rev Cap Impt Pgm Ser A
(MBIA Insd)................................... 5.375 07/01/17 1,718,520
--------------
6,076,947
--------------
NEBRASKA 0.2%
1,680 Dodge Cnty, NE Sch Dist No 001 Rfdg (FSA
Insd)......................................... 5.000 12/15/17 1,790,947
--------------
</Table>
18 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
NEVADA 1.6%
$ 5,020 Clark Cnty, NV Arpt Rev Rols RR II 292-3
(Inverse Fltg) (Acquired 06/30/04, Cost
$5,469,977) (AMT) (FGIC Insd) (f)............. 5.125% 07/01/22 $ 5,752,468
10,000 Director St, NV Dept Business & Ind Las Vegas
Monorail Proj First Tier (AMBAC Insd)......... 5.625 01/01/32 10,911,800
2,500 Reno, NV Cap Impt Rev (FGIC Insd)............. 5.125 06/01/26 2,589,550
--------------
19,253,818
--------------
NEW HAMPSHIRE 0.2%
2,500 New Hampshire St Tpk Sys Rev Ser C Rfdg
(Inverse Fltg) (FGIC Insd).................... 11.401 11/01/17 2,882,575
--------------
NEW JERSEY 2.2%
4,000 Essex Cnty, NJ Impt Auth Rev Cnty Gtd Proj
Consldtn Rfdg (MBIA Insd)..................... 5.125 10/01/22 4,237,560
3,625 Morristown, NJ Rfdg (FSA Insd)................ 6.400 08/01/14 3,743,465
4,000 New Jersey Econ Dev Auth Rev Motor Vehicle Sur
Rev Ser A (MBIA Insd)......................... 5.000 07/01/23 4,191,360
10,000 New Jersey St Trans Corp Ctf Fed Trans Admin
Grants Ser A (AMBAC Insd)..................... 5.500 09/15/13 11,110,900
2,760 Newark, NJ Hsg Auth Port Auth Newark Marine
Term (MBIA Insd).............................. 5.500 01/01/28 3,000,258
--------------
26,283,543
--------------
NEW YORK 1.5%
5,470 New York City Hlth & Hosp Hlth Sys Ser A (FSA
Insd)......................................... 5.000 02/15/21 5,669,108
3,000 New York City Ser H (CIFG Insd)............... 5.000 08/01/14 3,224,820
5,000 New York City Ser I (MBIA Insd)............... 5.000 08/01/17 5,323,850
3,105 New York St Dorm Auth Rev Insd Brooklyn Law
Sch Ser B (XLCA Insd) (a)..................... 5.375 07/01/21 3,382,494
--------------
17,600,272
--------------
NORTH CAROLINA 1.7%
940 North Carolina Cap Fac Fin Johnson & Wales
Univ Proj Ser A (XLCA Insd)................... 5.000 04/01/20 979,941
10,000 North Carolina Muni Pwr Agy Ser A (MBIA
Insd)......................................... 5.250 01/01/18 10,785,200
2,835 North Carolina Muni Pwr Agy Ser A (MBIA
Insd)......................................... 5.250 01/01/19 3,048,816
5,285 University NC Sys Pool Rev Ser A
(AMBAC Insd) (b).............................. 5.000 04/01/22 5,558,974
--------------
20,372,931
--------------
NORTH DAKOTA 0.9%
5,000 Mercer Cnty, ND Pollutn Ctl Rev Antelope Vly
Station Rfdg (AMBAC Insd)..................... 7.200 06/30/13 5,949,100
5,000 Oliver Cnty, ND Pollutn Ctl Rev Square Butte
Elec Coop Ser A Rfdg (AMBAC Insd)............. 5.300 01/01/27 5,243,150
--------------
11,192,250
--------------
</Table>
See Notes to Financial Statements 19
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
OHIO 0.5%
$ 1,000 Chillicothe, OH City Sch Dist Sch
Impt (FGIC Insd).............................. 5.250% 12/01/26 $ 1,067,500
5,000 Columbus, OH City Sch Dist Sch Fac Constr &
Impt (FSA Insd)............................... 5.250 12/01/27 5,341,550
--------------
6,409,050
--------------
OKLAHOMA 2.8%
2,990 Jenks, OK Aquarium Auth Rev Rfdg (MBIA
Insd)......................................... 5.250 07/01/19 3,237,991
1,480 Jenks, OK Aquarium Auth Rev Rfdg (MBIA
Insd)......................................... 5.250 07/01/33 1,576,984
1,000 McAlester, OK Pub Wks Auth Util Cap Apprec
(FSA Insd).................................... * 02/01/34 229,010
8,320 McAlester, OK Pub Wks Auth Util Cap Apprec
Ser A (FSA Insd).............................. * 02/01/30 2,105,459
5,660 Mustang, OK Impt Auth Util Rev (FSA Insd)..... 5.800 10/01/30 6,276,487
2,020 Oklahoma City, OK Arpt Tr Jr Lien 27th Ser A
(FSA Insd).................................... 5.000 07/01/17 2,118,576
2,400 Oklahoma City, OK Pub Ppty Auth Hotel Tax Rev
(FGIC Insd) (b)............................... 5.250 10/01/29 2,508,120
2,000 Oklahoma Colleges Brd Regt Stad Univ Cent OK
Ser B (AMBAC Insd)............................ 5.500 06/01/24 2,190,420
1,750 Sapulpa, OK Muni Auth Cap Impt Rev Rfdg
(Prerefunded @ 07/01/10) (FSA Insd)........... 5.750 07/01/30 1,940,715
2,000 Tulsa, OK Cmnty College Rev (AMBAC Insd)...... 5.500 07/01/22 2,195,040
8,260 Tulsa, OK Tulsa Indl Auth Rev Univ Tulsa Ser A
(MBIA Insd)................................... 5.375 10/01/31 8,819,945
--------------
33,198,747
--------------
OREGON 0.4%
4,835 Oregon St Dept Admin Ser B Rfdg (MBIA Insd)... 5.250 05/01/17 5,196,416
--------------
PENNSYLVANIA 4.2%
5,000 Allegheny Cnty, PA Hosp Dev Auth Rev Insd Hlth
Sys Ser A (MBIA Insd)......................... 6.500 11/15/30 5,748,650
4,875 Allegheny Cnty, PA Hosp Dev Auth Rev
Pittsburgh Mercy Hlth Sys Inc (Escrowed to
Maturity) (AMBAC Insd)........................ 5.625 08/15/26 5,110,706
10,000 Harrisburg, PA Auth Res Gtd Sub Ser D-2
(Variable Rate Coupon) (FSA Insd)............. 5.000 12/01/33 10,682,000
3,000 Lycoming Cnty, PA Auth College Rev PA College
of Technology (AMBAC Insd).................... 5.350 07/01/26 3,187,020
1,375 Pennsylvania St Higher Ed Fac Auth Rev St Sys
Higher Ed Ser P (AMBAC Insd).................. 5.000 12/15/16 1,435,046
2,990 Philadelphia, PA Gas Wks Rev 1998 Gen
Ordinance 4th Ser (FSA Insd).................. 5.250 08/01/18 3,201,064
4,555 Philadelphia, PA Gas Wks Rev 1998 Gen
Ordinance 4th Ser (FSA Insd).................. 5.250 08/01/21 4,840,371
1,485 Philadelphia, PA Gas Wks Rev Eighteenth Ser
(AGL Insd).................................... 5.250 08/01/20 1,570,774
</Table>
20 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
$ 3,665 Philadelphia, PA Gas Wks Rev Fifth Ser A-1
(AGL Insd) (a)................................ 5.250% 09/01/17 $ 3,895,638
5,000 Philadelphia, PA Redev Auth Rev Neighborhood
Transformation Ser C (FGIC Insd).............. 5.000 04/15/29 5,157,250
5,000 State Pub Sch Bldg Auth PA Sch Lease
Philadelphia Sch Dist Proj (FSA Insd)......... 5.250 06/01/26 5,286,850
--------------
50,115,369
--------------
SOUTH CAROLINA 0.8%
2,430 Columbia, SC Ctf Part Tourism Dev Fee Pledge
(AMBAC Insd) (a).............................. 5.250 06/01/19 2,606,807
6,500 South Carolina Jobs Econ Dev Auth Indl Rev
Elec & Gas Co Proj Ser A (AMBAC Insd)......... 5.200 11/01/27 6,805,500
--------------
9,412,307
--------------
SOUTH DAKOTA 1.3%
1,065 Minnehaha Cnty, SD Ctf Ltd Tax (FSA Insd)
(a)........................................... 5.000 12/01/14 1,146,984
1,245 Minnehaha Cnty, SD Ctf Ltd Tax (FSA Insd)
(a)........................................... 5.000 12/01/15 1,341,986
1,455 Rapid City, SD Sales Tax Rev Rfdg
(AMBAC Insd).................................. 5.500 06/01/12 1,603,366
5,205 South Dakota St Lease Rev Tr Ctf Ser A
(FSA Insd).................................... 6.625 09/01/12 6,043,005
4,000 South Dakota St Lease Rev Tr Ctf Ser A
(FSA Insd).................................... 6.700 09/01/17 4,936,480
--------------
15,071,821
--------------
TEXAS 12.9%
1,165 Alamo, TX Cmnty College Dist Combined Fee Rfdg
(FSA Insd).................................... 5.000 11/01/22 1,203,527
2,120 Austin, TX Arpt Sys Rev Pr Lien Rfdg
(MBIA Insd)................................... 5.000 11/15/12 2,272,110
2,680 Austin, TX Util Sys Rev Rfdg (FSA Insd)....... 5.000 11/15/11 2,795,160
8,765 Austin, TX Util Sys Rev Ser A Rfdg (MBIA
Insd)......................................... * 11/15/10 7,093,164
5,000 Brazos Riv Auth TX Rev Houston Ind Inc Proj
Ser C (Variable Rate Coupon) (AMBAC Insd)..... 5.125 05/01/19 5,217,450
2,000 Colorado Riv, TX Muni Wtr Dist Sys Rfdg (AMBAC
Insd)......................................... 5.375 01/01/19 2,157,100
3,055 Dallas Fort Worth, TX Intl Arpt Rols RR II
291-1 (Inverse Fltg) (Acquired 07/19/04, Cost
$3,426,838) (AMT) (FSA Insd) (a) (f).......... 8.563 11/01/19 3,523,698
2,000 Dallas Fort Worth, TX Intl Arpt Rols RR II
291-2 (Inverse Fltg) (Acquired 07/19/04, Cost
$2,155,544) (AMT) (FSA Insd) (a) (f).......... 8.309 11/01/21 2,235,700
5,000 El Paso, TX Ctf Oblig (FSA Insd).............. 5.750 08/15/25 5,251,750
4,500 Harris Cnty, TX Toll Rd Sr Lien Rfdg
(MBIA Insd)................................... 5.125 08/15/17 4,719,375
4,605 Houston, TX Arpt Sys Rev Sub Lien (FSA
Insd)......................................... 5.500 07/01/17 5,034,186
2,000 Houston, TX Arpt Sys Rev Sub Lien (FSA
Insd)......................................... 5.500 07/01/18 2,183,780
</Table>
See Notes to Financial Statements 21
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$ 5,000 Houston, TX Hotel Occupancy Convention & Entmt
Ser A Rfdg (AMBAC Insd)....................... 5.375% 09/01/14 $ 5,451,050
2,000 Houston, TX Pub Impt Ser A Rfdg (MBIA Insd)... 5.375 03/01/18 2,172,420
22,500 Houston, TX Util Sys Rev First Lien Ser A Rfdg
(FGIC Insd)................................... 5.250 05/15/23 23,914,350
12,400 Houston, TX Wtr & Swr Sys Rev Cap Apprec
Ser A Rfdg (Escrowed to Maturity) (FSA
Insd)......................................... * 12/01/20 5,888,760
7,930 Lancaster, TX Indpt Sch Dist Rfdg (FSA
Insd)......................................... 5.750 02/15/30 8,773,356
1,790 Laredo, TX Cmnty College Dist Combined Fee Rev
Bldg Rfdg (AMBAC Insd)........................ 5.300 08/01/26 1,886,696
4,335 North Harris Cnty, TX Regl Wtr Sr Lien
(FGIC Insd) (a)............................... 5.250 12/15/19 4,653,926
5,000 Port Arthur TX Indpt Sch Dist Sch Bldg
(FGIC Insd) (b)............................... 5.250 02/15/35 5,243,600
2,220 Raven Hills, TX Higher Ed Corp Cardinal Vlg
Llc Lamar Univ A (MBIA Insd).................. 5.500 08/01/28 2,397,356
2,000 San Antonio, TX Hotel Occupancy Rev Sub Lien
Ser A Rfdg (AMBAC Insd)....................... 5.000 08/15/29 2,041,280
1,000 San Antonio, TX Indpt Sch Dist Pub Fac Corp
Lease Rev (AMBAC Insd)........................ 5.850 10/15/10 1,058,250
1,750 Tarrant Cnty, TX Hlth Fac Dev Corp Hlth Sys
Rev Ser B (Escrowed to Maturity) (FGIC
Insd)......................................... 5.000 09/01/15 1,884,995
1,060 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA
Insd)......................................... 5.250 03/01/18 1,135,737
2,000 Tarrant Regl Wtr Dist TX Impt Rfdg (FSA
Insd)......................................... 5.250 03/01/20 2,135,120
10,000 Texas St Tpk Auth Cent TX Tpk First Tier Ser A
(AMBAC Insd).................................. 5.500 08/15/39 10,732,500
26,905 Texas St Tpk Auth Dallas Northtwy Rev George
Bush Tpk (FGIC Insd).......................... 5.250 01/01/23 27,865,239
1,800 Tyler, TX Indpt Sch Dist (FSA Insd) (a)....... 5.000 02/15/27 1,860,138
--------------
152,781,773
--------------
UTAH 0.3%
2,140 Murray City, UT Swr & Wtr Rev (AMBAC Insd).... 5.250 10/01/23 2,293,074
630 Provo, UT Elec Rev 1984 Ser A Rfdg (Escrowed
to Maturity) (AMBAC Insd)..................... 10.375 09/15/15 849,234
--------------
3,142,308
--------------
VIRGINIA 0.1%
880 Virginia St Hsg Dev Auth Comwlth Mtg Ser J
Subser J-1 (MBIA Insd)........................ 5.200 07/01/19 892,487
--------------
WASHINGTON 8.8%
4,115 Chelan Cnty, WA Sch Dist No 246 (FSA Insd).... 5.000 12/01/21 4,285,649
2,990 Clark Cnty, WA Pub Util Dist No 001 Wtr Rev
(FSA Insd).................................... 5.125 01/01/20 3,146,945
11,340 Energy Northwest WA Elec Rev Columbia
Generating Ser A Rfdg (FSA Insd).............. 5.500 07/01/17 12,364,796
</Table>
22 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
WASHINGTON (CONTINUED)
$ 4,500 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (FSA Insd)............................... 5.500% 07/01/17 $ 4,906,665
10,000 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (XLCA Insd).............................. 5.500 07/01/17 10,894,200
14,500 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (FSA Insd)............................... 5.500 07/01/18 15,773,535
5,000 Energy Northwest WA Elec Rev Proj No 3 Ser B
Rfdg (FSA Insd)............................... 6.000 07/01/16 5,645,400
1,365 Energy Northwest WA Wind Proj (AMBAC Insd).... 5.000 07/01/23 1,408,011
5,240 Energy Northwest WA Wind Proj Rfdg
(MBIA Insd) (a)............................... 5.000 07/01/22 5,454,211
1,215 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)........ 5.000 04/01/24 1,260,004
1,975 Fife, WA Wtr & Swr Rev (MBIA Insd)............ 5.125 04/01/24 1,995,046
1,160 Fife, WA Wtr & Swr Rev (MBIA Insd) (a)........ 5.000 04/01/29 1,191,726
4,520 Goat Hill Ppty WA Lease Rev Govt Office Bldg
Proj (MBIA Insd) (a).......................... 5.000 12/01/24 4,679,149
2,370 Goat Hill Ppty WA Lease Rev Govt Office Bldg
Proj (MBIA Insd).............................. 5.000 12/01/25 2,445,959
2,500 Goat Hill Ppty WA Lease Rev Govt Office Bldg
Proj (MBIA Insd).............................. 5.000 12/01/33 2,554,650
2,335 Grant Cnty, WA Pub Util Dist No 2 Rev Second
Ser C Rfdg (AMBAC Insd) (a)................... 6.000 01/01/17 2,469,613
1,025 Grant Cnty, WA Pub Util Dist No 2 Rev Second
Ser C Rfdg (AMBAC Insd) (a)................... 6.000 01/01/17 1,084,091
2,000 Seattle, WA Muni Lt & Pwr Rev Impt & Rfdg (FSA
Insd)......................................... 5.500 03/01/18 2,170,300
2,565 Snohomish Cnty, WA Pub Util 1 (FSA Insd)...... 5.500 12/01/23 2,791,310
145 Snohomish Cnty, WA Pub Util 1 (FSA Insd)...... 5.000 12/01/24 149,601
2,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd).... 5.750 12/01/25 2,247,400
2,420 Spokane, WA Pub Fac Dist Hotel (MBIA Insd).... 5.750 12/01/26 2,717,079
3,000 Spokane, WA Pub Fac Dist Hotel (MBIA Insd).... 5.250 09/01/33 3,147,720
1,965 Tacoma, WA Solid Waste Util Rev Rfdg
(AMBAC Insd) (a).............................. 5.375 12/01/18 2,125,206
2,075 Tacoma, WA Solid Waste Util Rev Rfdg
(AMBAC Insd) (a).............................. 5.375 12/01/19 2,239,008
3,090 Washington St Pub Pwr Supply Sys Nuclear Proj
No 1 Rev Ser A Rfdg (AMBAC Insd).............. 5.700 07/01/09 3,258,281
1,600 Washington St Ser R 99A Rfdg (FGIC Insd)...... 5.000 01/01/17 1,669,552
--------------
104,075,107
--------------
WEST VIRGINIA 0.4%
1,530 West Virginia Econ Dev Auth Lease Rev
Correctional Juvenile & Pub-A (MBIA Insd)..... 5.500 06/01/19 1,677,890
2,570 West Virginia Univ Rev Impt WV Univ Proj Ser C
(FGIC Insd)................................... 5.000 10/01/26 2,673,494
--------------
4,351,384
--------------
</Table>
See Notes to Financial Statements 23
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
WISCONSIN 1.1%
$ 1,350 Plover, WI Wtr Sys Rev (AMBAC Insd)........... 5.400% 12/01/16 $ 1,458,581
1,500 Plover, WI Wtr Sys Rev (AMBAC Insd)........... 5.500 12/01/18 1,624,365
1,405 Racine, WI Wtrwks Rev Sys Mtg (MBIA Insd)..... 5.250 09/01/16 1,519,578
3,920 University WI Hosp & Clinics Auth Rev
(FSA Insd).................................... 6.200 04/01/29 4,382,913
1,985 Waunakee, WI Cmnty Sch Dist Ser A Rfdg (FGIC
Insd)......................................... 5.250 04/01/24 2,105,490
1,215 Wilmont, WI Un High Sch Dist Ser B Rfdg (FSA
Insd)......................................... 5.000 03/01/24 1,273,381
750 Wilmot, WI Un High Sch Dist Ser B Rfdg (FSA
Insd)......................................... 5.000 03/01/23 788,865
--------------
13,153,173
--------------
PUERTO RICO 0.3%
3,000 Puerto Rico Indl Tourist Ed Med &
Environmental Ctl Fac Hosp Aux (MBIA Insd).... 6.250 07/01/16 3,068,190
--------------
TOTAL LONG-TERM INVESTMENTS 97.5%
(Cost $1,101,901,091)...................................................... 1,157,214,709
SHORT-TERM INVESTMENTS 4.4%
(Cost $52,450,000)......................................................... 52,450,000
--------------
TOTAL INVESTMENTS 101.9%
(Cost $1,154,351,091)...................................................... 1,209,664,709
LIABILITIES IN EXCESS OF OTHER ASSETS (1.9%)................................ (22,619,860)
--------------
NET ASSETS 100.0%........................................................... $1,187,044,849
==============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) The Fund owns 100% of the bond issuance.
(b) Security converts to a fixed coupon rate at a predetermined date.
(c) Securities purchased on a when-issued or delayed delivery basis.
(d) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(e) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(f) 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 2.8% of net
assets.
24 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
AGL--Assured Guaranty Ltd.
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
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.
See Notes to Financial Statements 25
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $1,154,351,091)..................... $1,209,664,709
Cash........................................................ 58,302
Receivables:
Interest.................................................. 14,606,904
Fund Shares Sold.......................................... 775,953
Investments Sold.......................................... 30,837
Other....................................................... 250,817
--------------
Total Assets............................................ 1,225,387,522
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 33,336,090
Fund Shares Repurchased................................... 1,463, 805
Variation Margin on Futures............................... 964,437
Income Distributions...................................... 938,833
Distributor and Affiliates................................ 615,751
Investment Advisory Fee................................... 515,022
Trustees' Deferred Compensation and Retirement Plans........ 319,522
Accrued Expenses............................................ 189,213
--------------
Total Liabilities....................................... 38,342,673
--------------
NET ASSETS.................................................. $1,187,044,849
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,119,031,878
Net Unrealized Appreciation................................. 57,063,810
Accumulated Net Realized Gain............................... 9,780,642
Accumulated Undistributed Net Investment Income............. 1,168,519
--------------
NET ASSETS.................................................. $1,187,044,849
==============
NET ASSET VALUE PER COMMON SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,107,155,767 and 59,248,776 shares of
beneficial interest issued and outstanding)............. $ 18.69
Maximum sales charge (4.75%* of offering price)......... .93
--------------
Maximum offering price to public........................ $ 19.62
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $60,123,320 and 3,221,347 shares of
beneficial interest issued and outstanding)............. $ 18.66
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $19,765,762 and 1,059,742 shares of
beneficial interest issued and outstanding)............. $ 18.65
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
26 See Notes to Financial Statements
VAN KAMPEN INSURED TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 28,743,750
------------
EXPENSES:
Investment Advisory Fee..................................... 3,062,035
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,365,814, $317,445 and $99,192,
respectively)............................................. 1,782,451
Shareholder Services........................................ 389,455
Legal....................................................... 54,790
Custody..................................................... 48,966
Trustees' Fees and Related Expenses......................... 15,531
Other....................................................... 259,294
------------
Total Expenses.......................................... 5,612,522
Less Credits Earned on Cash Balances.................... 11,729
------------
Net Expenses............................................ 5,600,793
------------
NET INVESTMENT INCOME....................................... $ 23,142,957
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 6,671,043
Futures................................................... 2,320,717
------------
Net Realized Gain........................................... 8,991,760
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 78,986,208
End of the Period:
Investments............................................. 55,313,618
Futures................................................. 1,750,192
------------
57,063,810
------------
Net Unrealized Depreciation During the Period............... (21,922,398)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(12,930,638)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 10,212,319
============
</Table>
See Notes to Financial Statements 27
VAN KAMPEN INSURED 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, 2005 SEPTEMBER 30, 2004
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 23,142,957 $ 49,280,969
Net Realized Gain...................................... 8,991,760 7,034,093
Net Unrealized Depreciation During the Period.......... (21,922,398) (6,185,703)
-------------- --------------
Change in Net Assets from Operations................... 10,212,319 50,129,359
-------------- --------------
Distributions from Net Investment Income:
Class A Shares....................................... (22,480,271) (45,586,240)
Class B Shares....................................... (1,022,241) (2,382,337)
Class C Shares....................................... (319,614) (699,272)
-------------- --------------
(23,822,126) (48,667,849)
-------------- --------------
Distributions from Net Realized Gain:
Class A Shares....................................... (10,259,399) (13,949,578)
Class B Shares....................................... (577,204) (936,852)
Class C Shares....................................... (180,088) (284,764)
-------------- --------------
(11,016,691) (15,171,194)
-------------- --------------
Total Distributions.................................... (34,838,817) (63,839,043)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (24,626,498) (13,709,684)
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 36,017,020 72,538,790
Net Asset Value of Shares Issued Through Dividend
Reinvestment......................................... 27,407,223 49,356,828
Cost of Shares Repurchased............................. (75,228,646) (201,234,835)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (11,804,403) (79,339,217)
-------------- --------------
TOTAL DECREASE IN NET ASSETS........................... (36,430,901) (93,048,901)
NET ASSETS:
Beginning of the Period................................ 1,223,475,750 1,316,524,651
-------------- --------------
End of the Period (Including accumulated undistributed
net investment income of $1,168,519 and $1,847,688,
respectively)........................................ $1,187,044,849 $1,223,475,750
============== ==============
</Table>
28 See Notes to Financial Statements
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, ----------------------------------------------------
2005 2004 2003 2002 (a) 2001 2000
-----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $ 19.07 $ 19.27 $ 19.65 $ 19.22 $ 18.27 $ 18.08
-------- -------- -------- -------- -------- --------
Net Investment Income............ .37 .76 .77 .81 .86 .91
Net Realized and Unrealized
Gain/Loss...................... (.20) .02 (.23) .87 .98 .17
-------- -------- -------- -------- -------- --------
Total from Investment Operations... .17 .78 .54 1.68 1.84 1.08
-------- -------- -------- -------- -------- --------
Less:
Distributions from Net Investment
Income......................... .38 .75 .74 .81 .89 .88
Distributions from Net Realized
Gain........................... .17 .23 .18 .44 -0- .01
-------- -------- -------- -------- -------- --------
Total Distributions................ .55 .98 .92 1.25 .89 .89
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD........................... $ 18.69 $ 19.07 $ 19.27 $ 19.65 $ 19.22 $ 18.27
======== ======== ======== ======== ======== ========
Total Return (b)................... 0.84%* 4.22% 2.90% 9.28% 10.28% 6.13%
Net Assets at End of the Period (In
millions)........................ $1,107.2 $1,137.2 $1,209.9 $1,244.3 $1,129.6 $1,086.6
Ratio of Expenses to Average Net
Assets........................... .88% .87% .86% .87% .90% .90%
Ratio of Net Investment Income to
Average Net Assets............... 3.88% 3.99% 4.02% 4.30% 4.55% 5.10%
Portfolio Turnover................. 25%* 40% 61% 54% 80% 69%
</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 eighteen months of purchases.
With respect to shares purchased prior to December 1, 2004, 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.
See Notes to Financial Statements 29
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, --------------------------------------------
2005 2004 2003 2002 (a) 2001 2000
---------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD................................ $19.05 $19.24 $19.63 $19.20 $18.26 $18.08
------ ------ ------ ------ ------ ------
Net Investment Income................. .29 .62 .63 .66 .70 .78
Net Realized and Unrealized
Gain/Loss........................... (.21) .02 (.24) .88 .99 .15
------ ------ ------ ------ ------ ------
Total from Investment Operations........ .08 .64 .39 1.54 1.69 .93
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.............................. .30 .60 .60 .67 .75 .74
Distributions from Net Realized
Gain................................ .17 .23 .18 .44 -0- .01
------ ------ ------ ------ ------ ------
Total Distributions..................... .47 .83 .78 1.11 .75 .75
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD...... $18.66 $19.05 $19.24 $19.63 $19.20 $18.26
====== ====== ====== ====== ====== ======
Total Return (b)........................ 0.46%* 3.43% 2.08% 8.47% 9.42% 5.25%
Net Assets at End of the Period (In
millions)............................. $ 60.1 $ 66.4 $ 82.6 $ 87.2 $ 49.2 $ 43.0
Ratio of Expenses to Average Net
Assets................................ 1.63% 1.63% 1.62% 1.63% 1.69% 1.68%
Ratio of Net Investment Income to
Average Net Assets.................... 3.12% 3.23% 3.26% 3.53% 3.76% 4.34%
Portfolio Turnover...................... 25%* 40% 61% 54% 80% 69%
</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 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.
30 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 C SHARES MARCH 31, --------------------------------------------
2005 2004 2003 2002 (a) 2001 2000
---------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD................................ $19.04 $19.23 $19.62 $19.19 $18.25 $18.08
------ ------ ------ ------ ------ ------
Net Investment Income................. .29 .62 .63 .67 .69 .79
Net Realized and Unrealized
Gain/Loss........................... (.21) .02 (.24) .87 1.00 .13
------ ------ ------ ------ ------ ------
Total from Investment Operations........ .08 .64 .39 1.54 1.69 .92
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.............................. .30 .60 .60 .67 .75 .74
Distributions from Net Realized
Gain................................ .17 .23 .18 .44 -0- .01
------ ------ ------ ------ ------ ------
Total Distributions..................... .47 .83 .78 1.11 .75 .75
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD...... $18.65 $19.04 $19.23 $19.62 $19.19 $18.25
====== ====== ====== ====== ====== ======
Total Return (b)........................ 0.46%* 3.43% 2.08% 8.48% 9.42% 5.19%
Net Assets at End of the Period (In
millions)............................. $ 19.8 $ 19.9 $ 24.1 $ 22.1 $ 11.2 $ 5.4
Ratio of Expenses to Average Net
Assets................................ 1.63% 1.63% 1.62% 1.63% 1.65% 1.68%
Ratio of Net Investment Income to
Average Net Assets.................... 3.11% 3.23% 3.25% 3.53% 3.80% 4.35%
Portfolio Turnover...................... 25%* 40% 61% 54% 80% 69%
</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 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.
See Notes to Financial Statements 31
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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. The Fund registered Class I Shares on August 31, 2004. There were
no sales of Class I Shares for the period ended March 31, 2005.
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 U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services 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, 2005, the Fund had $33,336,090 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
incremental 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 Subchapter M of the Internal Revenue Code applicable to regulated investment
companies
32
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At March 31, 2005, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $1,153,299,884
==============
Gross tax unrealized appreciation........................... $ 59,622,580
Gross tax unrealized depreciation........................... (3,257,755)
--------------
Net tax unrealized appreciation on investments.............. $ 56,364,825
==============
</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,
2004 was as follows:
<Table>
Distributions paid from:
Ordinary Income........................................... $ 1,429,233
Long-term capital gain.................................... 14,007,249
-----------
$15,436,482
-----------
</Table>
As of September 30, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $1,832,228
Undistributed long-term capital gain........................ 9,263,391
</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, 2005, the Fund's
custody fee was reduced by $11,729 as a result of credits earned on cash
balances.
33
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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.......................................... 0.525
Next $500 million........................................... 0.500
Next $500 million........................................... 0.475
Over $1.5 billion........................................... 0.450
</Table>
For the six months ended March 31, 2005, the Fund recognized expenses of
approximately $28,300 representing legal expenses provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
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, 2005, the Fund recognized expenses of approximately $51,900 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, 2005, the Fund recognized expenses of approximately $296,400,
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 also
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 $229,011 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2005.
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.
34
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2005, capital aggregated $1,038,383,599, $60,053,399, and
$20,594,880 for Classes A, B and C, respectively. For the six months ended March
31, 2005, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,653,284 $ 31,426,119
Class B................................................... 111,438 2,114,031
Class C................................................... 130,385 2,476,870
---------- ------------
Total Sales................................................. 1,895,107 $ 36,017,020
========== ============
Dividend Reinvestment:
Class A................................................... 1,372,482 $ 25,978,071
Class B................................................... 56,994 1,077,366
Class C................................................... 18,622 351,786
---------- ------------
Total Dividend Reinvestment................................. 1,448,098 $ 27,407,223
========== ============
Repurchases:
Class A................................................... (3,394,292) $(64,477,230)
Class B................................................... (431,715) (8,205,539)
Class C................................................... (134,189) (2,545,877)
---------- ------------
Total Repurchases........................................... (3,960,196) $(75,228,646)
========== ============
</Table>
At September 30, 2004, capital aggregated $1,045,456,639, $65,067,541 and
$20,312,101 for Classes A, B and C, respectively. For the year ended September
30, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 3,340,579 $ 63,441,645
Class B................................................... 247,730 4,719,271
Class C................................................... 229,874 4,377,874
----------- -------------
Total Sales................................................. 3,818,183 $ 72,538,790
=========== =============
Dividend Reinvestment:
Class A................................................... 2,446,565 $ 46,521,567
Class B................................................... 113,357 2,154,207
Class C................................................... 35,848 681,054
----------- -------------
Total Dividend Reinvestment................................. 2,595,770 $ 49,356,828
=========== =============
Repurchases:
Class A................................................... (8,970,968) $(170,303,857)
Class B................................................... (1,167,114) (22,050,635)
Class C................................................... (473,277) (8,880,343)
----------- -------------
Total Repurchases........................................... (10,611,359) $(201,234,835)
=========== =============
</Table>
35
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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, 2005 and the
year ended September 30, 2004, 147,343 and 106,142 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, 2005 and the year ended September
30, 2004, 30,727 and 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, 2005, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $93,700 and CDSC on redeemed shares of approximately $54,700.
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 $293,546,145 and $303,661,724,
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
36
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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, 2005,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2004........................... 1,435
Futures Opened.............................................. 5,162
Futures Closed.............................................. (4,223)
------
Outstanding at March 31, 2005............................... 2,374
======
</Table>
The futures contracts outstanding as of March 31, 2005, and the descriptions
and unrealized appreciation/depreciation are a follows:
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION
SHORT CONTRACTS:
US Treasury Notes 5-Year Futures, June 2005 (Current
Notional Value of $107,094 per contract).................. 2,374 $1,750,192
</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 price of a comparable
fixed rate security. These instruments are typically used by the Fund to enhance
the yield of the portfolio.
37
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
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 up to 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 $1,573,500 and $59,800
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, 2005, are payments
retained by Van Kampen of approximately $362,300 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $45,300.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, 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. The consolidated action also names as defendants certain
individual Trustees and Directors of certain 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 steer investors to the funds advised by the Adviser or its
affiliates 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 alleged efforts to steer
investors to these funds. The complaint seeks, among other things, unspecified
compensatory damages, rescissionary damages, fees and costs.
The Adviser and certain affiliates of the Adviser are also named as
defendants in a derivative suit which additionally names as defendants certain
individual Trustees of certain Van Kampen funds; the named investment companies,
including the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of proprietary mutual funds. The
complaint also alleges that the Van Kampen funds paid excessive commissions to
Morgan Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current Trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
complaint has been coordinated with
38
VAN KAMPEN INSURED TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
the consolidated complaint described in the preceding paragraph. Plaintiff has
sought leave to file a second amended derivative compliant that alleges that the
Adviser permitted or recklessly disregarded market timing and late trading in
its proprietary mutual funds in order to increase assets under management and
fees. However, pursuant to an agreement between the parties, that plaintiff's
proposed second amended derivative complaint was withdrawn and the allegations
regarding market timing and late trading asserted therein were filed in a
separate complaint and coordinated with other cases related to market timing
that have been centralized in a federal court.
The defendants have moved to dismiss each of these actions and otherwise
intend to defend them vigorously. While the defendants believe that they have
meritorious defenses, the ultimate outcome of these matters is not presently
determinable at this early stage of litigation, and no provision has been made
in the Fund's financial statements for the effect, if any, of these matters.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
39
VAN KAMPEN INSURED TAX FREE INCOME FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN* - President and
Chief Executive Officer
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
Executive Vice President and Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
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 REGISTERED
PUBLIC ACCOUNTING FIRM
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.
40
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC. 32, 332, 532
TFIN SAR 5/05 RN05-01058P-Y03/05
(VAN KAMPEN INVESTMENTS LOGO)
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Strategic Municipal Income Fund performed during the semi-annual period.
The portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of March 31, 2005.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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.
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 3/31/05
<Table>
<Caption>
A SHARES B SHARES C SHARES
6/28/85 4/30/93 8/13/93
- --------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL W/O SALES W/MAX 4.75% W/O SALES W/MAX 4.00% W/O SALES W/MAX 1.00%
TOTAL RETURNS CHARGES SALES CHARGES CHARGES SALES CHARGES CHARGES SALES CHARGES
Since Inception 6.58% 6.31% 4.77% 4.77% 4.34% 4.34%
10-year 5.03 4.52 4.46 4.46 4.30 4.30
5-year 5.34 4.32 4.54 4.29 4.68 4.68
1-year 6.24 1.23 5.44 1.44 5.40 4.40
6-month 3.98 -0.97 3.59 -0.41 3.56 2.56
- --------------------------------------------------------------------------------------------------------
SEC Yield 4.96% 4.45% 4.41%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS 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 up to 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 does not include any expenses,
fees or sales charges, which would lower performance. The index is unmanaged and
should not be considered an investment. It is not possible to invest directly in
an index. Index data source: Lipper Inc.
1
Fund Report
FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005
Van Kampen Strategic Municipal Income Fund is managed by the Adviser's Municipal
Fixed Income team.(1) Members of the team include Wayne D. Godlin, Managing
Director of the Adviser; and Dennis S. Pietrzak and James D. Phillips, Executive
Directors of the Adviser.
MARKET CONDITIONS
The six-month period ended March 31, 2005, was characterized by continued
short-term interest rate increases, and the specter of rising inflation
resulting from record-high crude oil prices. The Federal Open Market Committee
(the "Fed") raised the federal funds target rate 100 basis points during the
period through a series of four, "measured" 0.25 percent tightenings to 2.75
percent by the end of March. Although rates in the short and intermediate areas
of the yield curve shifted upward as the Fed tightened, long-term interest rates
fell as buyers did not seem deterred by the prospect of rising inflation. As a
result, the yield curve (the difference between short and longer-term yields)
flattened and the long end of the municipal market handily outperformed the
shorter end.
The municipal market in total posted positive returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a slightly negative showing. Within the investment-grade segment of the
market, yield differentials between BBB-rated municipals and AAA-rated
securities were flat to slightly wider, though BBB-rated securities still
outperformed high grades due to their higher coupons, while securities rated
below investment grade strongly outperformed as investors sought out their
higher yields.
The Fed's interest rate hikes did not dampen investors' appetites for municipal
bonds, as net inflows into municipal bond funds topped $700 million during the
period. The supply of new issues was modest during the closing months of 2004
(the first half of the period) before soaring in the opening months of 2005 as
long-term issuers rushed to bring securities to market in anticipation of
additional interest rate increases in the near term.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
The fund returned 3.98 percent for the six months ended March 31, 2005 (Class A
shares, unadjusted for sales charge). In comparison, the fund's benchmark index,
the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
3.98% 3.59% 3.56% 1.21%
- --------------------------------------------------------------
</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
INDEX DEFINITIONS.
The fund's relative outperformance was largely the result of its focus on
higher-yielding municipal bonds. Despite ongoing increases to the federal funds
target rate, yields on intermediate- and longer-maturity bonds remained
relatively low for much of the period. As a result, investors hungry for yield
income bid up the prices of higher-yielding securities over the period. This
trend was a benefit to the fund, especially given its benchmark's lack of
exposure to non-rated securities.
During the first quarter of 2005, the fund also benefited from taking an initial
limited position in tobacco bonds. We added these securities based on our
evaluation of reduced litigation risk for the industry just prior to favorable
developments in the federal courts. The sector appreciated early in 2005, and
the portfolio gained as a result of its exposure.
Not all of the fund's positions were so favorable. Based on our analysis of
interest rates, the fund's duration (a measure of interest-rate exposure) was
below that of its benchmark index over the period. While this stance supported
returns in those weeks when rates rose, it was not uniformly helpful across the
period.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the fund in the future.
3
<Table>
<Caption>
RATING ALLOCATIONS AS OF 3/31/05
AAA/Aaa 10.8%
AA/Aa 4.9
A/A 5.9
BBB/Baa 13.5
BB/Ba 3.2
B/B 5.1
Non-Rated 56.6
<Caption>
TOP 5 SECTORS AS OF 3/31/05
Health Care 20.2%
Continuing Care 18.1
Industrial Revenue 16.4
Tax District 14.7
General Purpose 5.5
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05
Florida 10.6%
Texas 7.2
California 7.1
Illinois 6.9
Pennsylvania 6.3
New York 6.2
New Jersey 5.7
Missouri 4.8
Ohio 3.5
Massachusetts 3.1
Arizona 3.1
Minnesota 3.0
Colorado 2.8
Oklahoma 2.3
Georgia 2.2
Michigan 2.1
Maryland 1.9
Washington 1.7
Wisconsin 1.4
Tennessee 1.4
North Carolina 1.3
South Carolina 1.1
Oregon 1.1
Alabama 1.0
New Hampshire 1.0
Virginia 1.0
Puerto Rico 1.0
Indiana 1.0
Iowa 0.9
Nevada 0.9
South Dakota 0.9
Louisiana 0.8
Kansas 0.7
Hawaii 0.6
</Table>
<Table>
(continued on next page)
</Table>
4
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05
(continued from previous page)
New Mexico 0.6
Connecticut 0.6
District of Columbia 0.5
Rhode Island 0.5
Alaska 0.4
Maine 0.4
U. S. Virgin Islands 0.3
Utah 0.3
North Dakota 0.2
Vermont 0.2
Wyoming 0.1
Idaho 0.1
Delaware 0.1
Mississippi 0.1
-----
Total Investments 101.0%
Liabilities in Excess of Other Assets -1.0
-----
Total Net Assets 100.0%
</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. Ratings allocations & sectors are as a
percentage of long-term investments. Summary of investments by state
classification is as a percentage of total net assets. 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. Rating allocations based upon ratings as issued by
Standard and Poor's and Moody's, respectively.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public Web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's Web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
6
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 1-800-341-2911 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 AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our website at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
7
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charge on redemptions of Class B and Class C
Shares; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other Fund expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 10/1/04 - 3/31/05.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the second line
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your cost would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
--------------------------------------------------
10/1/04 3/31/05 10/1/04-3/31/05
Class A
Actual.................................... $1,000.00 $1,039.78 $4.27
Hypothetical.............................. 1,000.00 1,020.73 4.23
(5% annual return before expenses)
Class B
Actual.................................... 1,000.00 1,035.94 8.07
Hypothetical.............................. 1,000.00 1,017.03 8.00
(5% annual return before expenses)
Class C
Actual.................................... 1,000.00 1,035.64 8.07
Hypothetical.............................. 1,000.00 1,017.03 8.00
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.84%, 1.60%,
and 1.59% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period).
Assumes all dividends and distributions were reinvested.
8
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MUNICIPAL BONDS 100.4%
ALABAMA 1.0%
$1,000 Alabama Drinking Wtr Fin Auth Revolving Fd
Ln Ser C (AMBAC Insd)...................... 5.750% 08/15/18 $ 1,104,770
2,000 Alabama Drinking Wtr Fin Auth Revolving Fd
Ln Ser C (AMBAC Insd)...................... 5.375 08/15/23 2,144,720
2,000 Alabama Wtr Pollutn Ctl Auth (AMBAC
Insd)...................................... 5.750 08/15/18 2,198,480
1,000 Butler, AL Indl Dev Brd Solid GA Pacific
Corp Proj Rfdg (AMT)....................... 5.750 09/01/28 1,007,680
1,500 Colbert Cnty Northwest Auth Hlthcare Fac... 5.750 06/01/27 1,511,235
2,500 Huntsville/Carlton Cove, AL Carlton Cove
Inc Proj Ser A............................. 7.000 11/15/17 1,494,725
3 Mobile, AL Indl Dev Brd Solid Waste Disp
Rev Mobile Energy Svc Co Proj Rfdg......... 6.950 01/01/20 59
1,395 Valley, AL Spl Care Fac Fin Auth Rev Lanier
Mem Hosp Ser A............................. 5.600 11/01/16 1,394,456
1,750 Valley, AL Spl Care Fac Fin Auth Rev Lanier
Mem Hosp Ser A............................. 5.650 11/01/22 1,738,537
--------------
12,594,662
--------------
ALASKA 0.4%
1,520 Alaska Indl Dev & Expt Auth Williams Lynxs
AK Cargoport (AMT) (Acquired 05/17/01, Cost
$1,520,000) (a)............................ 7.800 05/01/14 1,588,643
4,000 Juneau, AK City & Borough Rev Saint Anns
Care Ctr Proj.............................. 6.875 12/01/25 3,611,280
--------------
5,199,923
--------------
ARIZONA 3.1%
2,000 Arizona Hlth Fac Auth Hosp John C Lincoln
Hlth Network............................... 6.375 12/01/37 2,158,380
1,000 Arizona Hlth Fac Auth Rev Terraces Proj Ser
A.......................................... 7.500 11/15/23 1,011,830
1,250 Arizona Hlth Fac Auth Rev Terraces Proj Ser
A.......................................... 7.750 11/15/33 1,268,975
5,880 Cochise Cnty, AZ Indl Dev Sierra Vista
Cmnty Hosp Ser A Rfdg...................... 6.750 12/01/26 5,986,193
1,000 Flagstaff, AZ Indl Dev Auth Rev Sr Living
Cmnty Northn AZ Proj....................... 7.500 03/01/35 1,062,410
500 Flagstaff, AZ Indl Dev Auth Rev Sr Living
Cmnty Northn AZ Proj....................... 6.300 09/01/38 475,515
4,000 Maricopa Cnty, AZ Hlth Fac Rev Catholic
Hlthcare West Ser A........................ 5.500 07/01/26 4,182,520
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)
(a)........................................ 6.625 07/01/33 2,855,760
2,460 Maricopa Cnty, AZ Indl Dev Christian Care
Mesa Inc Proj Ser A........................ 7.750 04/01/15 2,555,891
</Table>
See Notes to Financial Statements 9
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 2,055,960
1,500 Peoria, AZ Indl Dev Auth Rev Sierra Winds
Life Ser A Rfdg............................ 6.375 08/15/29 1,504,905
2,500 Phoenix, AZ Indl Dev Auth Mtg Christian
Care Apt Proj Ser A Rfdg................... 6.500 01/01/26 2,593,225
2,750 Pima Cnty, AZ Indl Dev Auth Ed Rev Horizon
Cmnty Learning Ctr Rfdg.................... 5.250 06/01/35 2,750,192
1,865 Pima Cnty, AZ Indl Dev Auth Fac Ed Rev
Milestones Charter Sch Proj................ 6.750 11/01/33 1,870,054
800 Pima Cnty, AZ Indl Dev Auth Fac Skyline
Tech High Sch Proj......................... 7.500 02/01/34 804,000
1,000 Pima Cnty, AZ Indl Dev Auth Rev La Posada
at Park Ctr Ser A.......................... 7.000 05/15/27 1,013,270
1,040 Red Hawk Canyon Cmnty Fac Dist No 2 AZ Dist
Assmt Rev.................................. 6.500 12/01/12 1,121,432
2,150 Tucson, AZ Multi-Family Rev Hsg Catalina
Asstd Living Ser A (AMT)................... 6.500 07/01/31 1,895,612
--------------
37,166,124
--------------
CALIFORNIA 7.1%
1,000 Abag Fin Auth Nonprofit Corp CA American
Baptist Homes Ser A Rfdg................... 5.850 10/01/27 948,100
1,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.600 09/01/25 985,010
2,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.650 09/01/30 1,990,540
2,000 Beaumont, CA Fin Auth Loc Agy Ser A........ 5.700 09/01/35 1,984,180
1,000 Beaumont, CA Fin Auth Loc Agy Ser D........ 5.800 09/01/35 1,003,670
1,000 Blythe, CA Redev Agy Proj.................. 5.750 05/01/34 992,260
1,000 Brentwood, CA Infrastructure Auth Rev...... 5.875 09/02/34 1,018,270
4,500 California Hlth Fac Fin Auth Rev Adventist
Hlth Sys Ser A............................. 5.000 03/01/33 4,489,740
3,000 California Pollutn Ctl Fin Auth Solid Waste
Disp Rev Solid Waste Mgmt Inc Proj Ser A 2
(AMT) (b).................................. 5.400 04/01/25 3,047,280
1,675 California Statewide Cmnty Dev Auth
Daughters of Charity Hlth A................ 5.250 07/01/35 1,705,435
1,250 California Statewide Cmnty Dev Auth
Daughters of Charity Hlth Ser A............ 5.000 07/01/39 1,238,562
1,000 California Statewide Cmnty Dev Auth Elder
Care Alliance Ser A........................ 8.250 11/15/32 1,028,560
960 California Statewide Cmnty Dev Auth Multi-
Family Rev Hsg Heritage Pointe Sr Apt Ser
QQ (AMT) (Acquired 02/19/02, Cost $952,613)
(a)........................................ 7.500 10/01/26 927,782
1,000 California Statewide Cmnty Dev Auth San
Francisco Art Institute (Acquired 07/05/02,
Cost $1,000,000) (a)....................... 7.375 04/01/32 1,000,970
1,000 Chino, CA Cmnty Fac Dist No 03 Impt Area
1.......................................... 5.700 09/01/29 1,001,750
</Table>
10 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg
Rev (Escrowed to Maturity) (MBIA Insd)..... * 09/01/17 $ 2,330,300
1,500 Corona-Norco, CA Univ Sch Dist Pub Fin Auth
Spl Tax Rev Ser A.......................... 5.800% 09/01/35 1,510,185
2,300 Foothill/Eastern Tran Corridor Agy CA Toll
Rd Rev (MBIA Insd)......................... * 01/15/18 1,179,371
10,000 Golden St Tob Securitization Corp CA Tob
Settlement Enhanced Asset Bkd B (FSA
Insd)...................................... 5.000 06/01/43 10,109,600
1,750 Huntington Beach, CA Cmnty No 2003 1
Huntington Ctr............................. 5.800 09/01/23 1,777,160
905 Indio, CA Pub Fin Auth Rev Tax Increment
(Prerefunded @ 08/15/06)................... 6.500 08/15/27 953,336
2,000 Indio, CA Redev Agy Tax Alloc Sub Merged
Proj Area Ser B............................ 6.375 08/15/33 2,065,300
500 Indio, CA Redev Agy Tax Alloc Sub Merged
Proj Area Ser B............................ 6.500 08/15/34 521,135
1,000 Jurupa, CA Cmnty Svc Dist Spl Cmnty Fac
Dist No 4 Ser A............................ 5.700 09/01/34 1,010,470
1,865 Lake Elsinore, CA Pub Fin Auth Loc Agy Rev
Ser F...................................... 7.100 09/01/20 2,025,446
1,000 Lee Lake Wtr Dist CA Cmnty Fac Dist No 1
Spl Tax Sycamore Creek..................... 6.000 09/01/33 1,055,020
1,000 Lincoln, CA Spl Tax Cmnty Fac Dist No 2003
Ser 1...................................... 6.000 09/01/34 1,026,820
1,750 Los Angeles, CA Regl Arpt Impt Corp Lease
Rev Fac Sublease LA Intl Ser A-1 Rfdg...... 7.125 12/01/24 1,759,450
8,440 Los Angeles, CA Regl Arpt Impt Corp Lease
Rev Ser C (AMT)............................ 7.500 12/01/24 8,598,841
1,440 Millbrae, CA Residential Fac Rev Magnolia
of Millbrae Proj Ser A (AMT)............... 7.375 09/01/27 1,467,374
1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks
Impt Area A................................ 5.900 09/01/27 1,040,590
1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks
Impt Area A................................ 6.000 09/01/34 1,043,410
1,000 Murrieta, CA Cmnty Fac Dist No 2 the Oaks
Impt Area B................................ 6.000 09/01/27 1,051,700
2,000 Orange Cnty, CA Cmnty Fac Tax No 04-1
Ladera Ranch Ser A......................... 5.150 08/15/29 2,000,020
1,000 Palmdale, CA Spl Tax Cmnty Fac 03-1
Anaverde A................................. 5.350 09/01/30 995,140
1,100 Palmdale, CA Spl Tax Cmnty Fac 03-1
Anaverde A................................. 5.400 09/01/35 1,091,013
1,000 Perris, CA Cmnty Fac Dist Spl Tax No 01-2
Ser A...................................... 6.375 09/01/32 1,026,250
2,000 Riverside, CA Univ Sch Dist Tax Cmnty Fac
Dist 15 Impt Area 1........................ 5.550 09/01/30 2,009,360
</Table>
See Notes to Financial Statements 11
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$2,000 San Marcos, CA Pub Fac Auth Spl Tax Rev Ser
A.......................................... 5.650% 09/01/36 $ 2,005,300
1,135 Simi Vly, CA Cmnty Dev Agy Coml Sycamore
Plaza II Rfdg (Acquired 07/28/98,
$1,135,000) (a)............................ 6.000 09/01/12 1,178,016
1,000 Upland, CA Cmnty Fac Dist 2003 San Antonio
Impt 1 A................................... 5.900 09/01/24 1,047,520
1,500 Upland, CA Cmnty Fac Dist 2003 San Antonio
Impt 1 A................................... 6.000 09/01/34 1,559,640
1,965 Vallejo, CA Ctf Partn Touro Univ........... 7.250 06/01/16 2,107,423
970 Vallejo, CA Pub Fin Auth Loc Hiddenbrooke
Impt Dist Ser A............................ 5.800 09/01/31 988,624
1,000 Woodland, CA Spl Tax Cmnty Fac Dist 1
Spring Lake................................ 6.250 09/01/34 1,001,960
1,800 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/31 1,852,704
3,000 Yuba City, CA Redev Agy Tax Proj Ser A..... 6.000 09/01/39 3,063,630
--------------
85,814,217
--------------
COLORADO 2.8%
1,000 Bromley Pk Met Dist CO No 2 Ser B.......... 8.050 12/01/32 1,015,180
975 Colorado Ed & Cultural Fac Charter Sch
Frontier Academy........................... 7.250 06/01/20 1,007,058
2,000 Colorado Hlth Fac Auth Rev Baptist Home
Assn Ser A................................. 6.375 08/15/24 1,728,060
2,000 Colorado Hlth Fac Auth Rev Baptist Home
Assn Ser B................................. 7.500 08/15/27 1,992,260
1,060 Colorado Hlth Fac Auth Rev Christian Living
Campus Proj................................ 7.050 01/01/19 1,097,418
5,560 Colorado Hlth Fac Auth Rev Hosp Poudre Vly
Hlthcare F................................. 5.000 03/01/25 5,533,368
3,425 Denver, CO Hlth & Hosp Auth Ser A Rfdg..... 6.250 12/01/33 3,661,667
2,500 Elk Vly, CO Pub Impt Fee Ser A............. 7.300 09/01/22 2,684,475
5,000 Jefferson Cnty, CO Sch Dist No R-001
Drivers Ser 674 (Inverse Fltg) (Acquired
12/22/04, Cost $5,654,960) (FSA Insd) (a)
(c) (d).................................... 7.840 12/15/12 5,489,550
710 Lafayette, CO Indl Dev Rev Rocky Mtn Instr
Proj Ser A (e)............................. 6.750 10/01/14 398,395
1,985 Lafayette, CO Indl Dev Rev Rocky Mtn Instr
Proj Ser A (AMT) (e)....................... 7.000 10/01/18 1,114,240
4,825 Lake Creek Affordable Hsg Corp Hsg Proj Ser
A Rfdg..................................... 6.250 12/01/23 4,420,134
500 Neu Towne, CO Met Dist..................... 7.250 12/01/34 496,010
1,000 Serenity Ridge, CO Met Dist No 2........... 7.500 12/01/34 995,720
1,725 Skyland Metro Dist CO Gunnison Cnty Rfdg... 6.750 12/01/22 1,713,373
1,000 Southlands Met Dist No 1 CO................ 7.000 12/01/24 1,093,550
--------------
34,440,458
--------------
</Table>
12 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
CONNECTICUT 0.6%
$1,500 Connecticut St Dev Auth Indl Afco Cargo Bdl
LLC Proj (AMT)............................. 8.000% 04/01/30 $ 1,583,505
2,000 Mohegan Tribe Indians CT Pub Impt Priority
Dist (Acquired 09/27/01, Cost $1,957,202)
(a)........................................ 6.250 01/01/31 2,127,020
3,500 Mohegan Tribe Indians CT Pub Impt Priority
Dist (Acquired 11/03/04, Cost $3,419,074)
(a)........................................ 5.250 01/01/33 3,509,695
--------------
7,220,220
--------------
DELAWARE 0.1%
1,100 Wilmington, DE Multi-Family Rent Rev Hsg
Electra Arms Sr Assoc Proj (AMT)........... 6.250 06/01/28 940,753
--------------
DISTRICT OF COLUMBIA 0.5%
1,000 District of Columbia Rev Methodist Home
Issue...................................... 6.000 01/01/29 926,730
85 District of Columbia Ser A-1 (Escrowed to
Maturity) (MBIA Insd)...................... 6.500 06/01/10 97,549
5,000 Metropolitan WA DC Arpt Auth Sys Ser A
(AMT) (MBIA Insd).......................... 5.000 10/01/35 5,024,200
--------------
6,048,479
--------------
FLORIDA 10.3%
1,000 Anthem Pk Cmnty Dev Dist FL Cap Impt Rev... 5.800 05/01/36 1,000,500
1,000 Bellalago Ed Fac Benefits Ser A............ 6.000 05/01/33 1,027,050
1,000 Bellalago Ed Fac Benefits Ser B............ 5.800 05/01/34 1,012,470
4,315 Bloomingdale, FL Cmnty Dev Dist Spl Assmt
Rev........................................ 5.875 05/01/36 4,402,853
1,000 Bluewaters Cmnty Dev Dist of FL............ 6.000 05/01/35 1,005,570
2,500 Bonnet Creek Resort Cmnty Dev.............. 7.500 05/01/34 2,677,100
795 Caribe Palm Cmnty Dev Dist FL Spl Assmt Ser
A.......................................... 5.850 05/01/35 809,556
3,280 Escambia Cnty, FL Rev ICF/MR Pensacola Care
Dev Ctr.................................... 10.250 07/01/11 3,304,338
1,390 Escambia Cnty, FL Rev ICF/MR Pensacola Care
Dev Ctr Ser A.............................. 10.250 07/01/11 1,400,314
1,390 Fishhawk Cmnty Dev Dist of FL Spl Assmt Rev
(Prerefunded @ 05/01/06)................... 7.625 05/01/18 1,480,489
3,675 Florida Hsg Fin Corp Rev Hsg Beacon Hill
Apt Ser C (AMT)............................ 6.610 07/01/38 3,425,945
7,150 Florida Hsg Fin Corp Rev Hsg Cypress Trace
Apt Ser G (AMT)............................ 6.600 07/01/38 6,764,257
4,850 Florida Hsg Fin Corp Rev Hsg Westchase Apt
Ser B (AMT)................................ 6.610 07/01/38 4,214,698
3,505 Hammock Bay Cmnty Dev Dist FL Spl Assmt Rev
Ser A...................................... 6.125 05/01/35 3,521,579
1,500 Harbour Isles Cmnty Dev Dist of FL......... 6.125 05/01/35 1,519,605
310 Heritage Harbor Cmnty Dev Dist FL Rev
Recntl..................................... 7.750 05/01/23 287,209
</Table>
See Notes to Financial Statements 13
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$ 850 Heritage Harbor Cmnty Dev Dist FL Rev Spl
Assmt Ser A................................ 6.700% 05/01/19 $ 871,377
1,435 Highlands Cnty, FL Hlth Fac Hosp Adventist
Hlth Sys................................... 5.250 11/15/28 1,464,704
1,500 Hillsborough Cnty, FL Hsg Fin Hsg Clipper
Cove Apt Proj Ser A (AMT).................. 7.375 07/01/40 1,474,470
2,500 Hillsborough Cnty, FL Indl Dev Auth Hosp
Rev Tampa Gen Hosp Proj Ser B.............. 5.250 10/01/34 2,544,750
1,000 Islands at Doral III Cmnty 2004 Ser A...... 5.900 05/01/35 1,009,850
1,000 Islands at Doral NE Cmnty Dev.............. 6.250 05/01/34 1,038,190
6,410 Jea, FL Wtr & Swr Sys Rev Drivers Ser 805
(Acquired 03/22/05, Cost $6,268,702) (MBIA
Insd) (a).................................. 4.750 10/01/12 6,305,645
1,480 Kendall Breeze West Cmnty Dev Dist FL Spl
Assmt...................................... 5.875 05/01/34 1,471,742
2,000 Keys Cove Cmnty Dev Dist FL Assmt Rev...... 5.875 05/01/35 1,996,240
780 Lake Saint Charles, FL Cmnty Dev Dist Spl
Assmt Rev.................................. 7.875 05/01/17 798,767
2,000 Lee Cnty, FL Indl Dev Auth Hlthcare Fac Rev
Cypress Cove Hlthpk Ser A.................. 6.750 10/01/32 2,037,740
3,535 Leon Cnty, FL Ed Fac Auth Rev Southgate
Residence Hall Ser A Rfdg.................. 6.750 09/01/28 3,546,418
1,290 Lexington Cmnty Dev Dist FL................ 6.125 05/01/34 1,312,240
105 Marshall Creek Cmnty Dev FL Spl Assmt Ser
B.......................................... 6.750 05/01/07 105,607
2,500 Meadow Woods Cmnty Dev Dist FL Ser A....... 6.050 05/01/35 2,523,325
1,000 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med
Ctr FL Proj................................ 5.375 11/15/28 910,750
2,500 Miami Beach, FL Hlth Fac Hosp Mt Sinai Med
Ctr Rfdg (Acquired 04/26/04, Cost
$2,412,826) (a)............................ 6.750 11/15/29 2,683,150
3,000 Midtown Miami, FL Cmnty Dev Dist Ser A..... 6.000 05/01/24 3,091,890
1,195 Miromar Lakes Cmnty Dev Dist Ser B......... 7.250 05/01/12 1,257,236
930 Northern Palm Beach Cnty Dist FL Impt Wtr
Ctl & Impt Unit Dev No 16 Rfdg............. 7.500 08/01/24 989,669
1,775 Oak Creek Cmnty Dev Dist FL Spl Assmt...... 5.800 05/01/35 1,756,203
2,050 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg.................. 8.625 07/01/20 2,231,199
2,250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg.................. 8.750 07/01/26 2,448,877
1,560 Orange Cnty, FL Hlth Fac Auth Rev Hosp
Adventist Hlth Sys (d)..................... 5.875 11/15/11 1,717,544
1,000 Orange Cnty, FL Hlth Fac Auth Rev Hosp
Adventist Hlth Sys......................... 6.375 11/15/20 1,099,740
2,000 Orange Cnty, FL Hlth Fac Auth Rev
Westminster Cmnty Care..................... 6.600 04/01/24 1,753,500
</Table>
14 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
$1,000 Overoaks, FL Cmnty Dev Dist CA Ser A....... 6.125% 05/01/35 $ 1,004,410
1,000 Parklands Lee Cmnty Dev Dist FL Spl Assmt
Ser A...................................... 5.800 05/01/35 991,640
1,000 Pine Is Cmnty Dev Dist FL Spl Assmt........ 5.750 05/01/35 1,005,400
2,280 Pinellas Cnty, FL Ed Fac Auth Rev College
Harbor Proj Ser A.......................... 8.250 12/01/21 2,366,024
1,685 Pinellas Cnty, FL Ed Fac Auth Rev College
Harbor Proj Ser A.......................... 8.500 12/01/28 1,749,755
3,000 Pinellas Cnty, FL Hlth Fac Auth Oaks of
Clearwater Proj............................ 6.250 06/01/34 3,085,500
1,000 Reunion East Cmnty Dev Dist................ 5.800 05/01/36 1,009,430
2,000 Reunion West Cmnty Dev Dist................ 6.250 05/01/36 2,060,560
980 Saddlebrook, FL Cmnty Ser A................ 6.900 05/01/33 1,027,638
500 Saint John's Cnty, FL Indl Dev Auth
Hlthcare Glenmoor Saint John's Proj Ser
A.......................................... 8.000 01/01/17 529,120
1,400 Saint John's Cnty, FL Indl Dev Auth
Hlthcare Glenmoor Saint John's Proj Ser
A.......................................... 8.000 01/01/30 1,481,536
2,000 Saint John's Cnty, FL Indl Dev Auth
Hlthcare Rev Bayview Proj Ser A............ 7.100 10/01/26 2,003,300
6,000 Sarasota Cnty, FL Hlth Fac Auth Hlth Fac
Sunnyside Ppty............................. 6.700 07/01/25 5,508,420
1,995 Silver Palms Cmnty Dev Dist................ 5.900 05/01/34 1,974,352
1,300 South Dade Venture Cmnty Dev............... 6.125 05/01/34 1,327,365
1,500 South Vlg Cmnty Dev Dist FL Cap Impt Rev
Ser A...................................... 5.700 05/01/35 1,508,115
175 Stoneybrook West Cmnty Dev Dist FL Spl
Assmt Rev Ser B............................ 6.450 05/01/10 177,989
22 Tara Cmnty Dev Dist 1 FL Cap Impt Rev Ser
B.......................................... 6.750 05/01/10 22,390
1,500 Town Ctr Palm Coast Cmnty Dev Dist FL Cap
Impt Rev................................... 6.000 05/01/36 1,509,510
1,500 Turnbull Creek Cmnty Dev Dist FL Spl
Assmt...................................... 5.800 05/01/35 1,504,635
1,787 University Square Cmnty Dev Dist FL Cap
Impt Rev (Acquired 10/07/99, Cost
$1,720,270) (a)............................ 6.750 05/01/20 1,877,994
2,000 Volusia Cnty, FL Indl Dev Auth Bishops Glen
Proj Rfdg (Prerefunded @ 11/01/06)......... 7.625 11/01/26 2,187,180
1,000 World Commerce Cmnty Dev Dist Ser A1....... 6.250 05/01/22 1,006,250
1,715 World Commerce Cmnty Dev Dist Ser A2....... 6.125 05/01/35 1,739,353
--------------
124,952,222
--------------
GEORGIA 2.2%
2,000 Atlanta, GA Tax Alloc Atlantic Sta Proj.... 7.750 12/01/14 2,184,240
2,365 Atlanta, GA Urban Residential Fin Auth
Multi-Family Rev John Eagan Proj Ser A
(AMT)...................................... 6.750 07/01/30 2,186,277
4,335 Atlanta, GA Wtr & Wastwtr Rev (FSA Insd)... 5.000 11/01/37 4,442,638
2,750 De Kalb Cnty, GA Residential Care Fac Kings
Bridge Ser A............................... 8.250 07/01/26 2,847,130
</Table>
See Notes to Financial Statements 15
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
GEORGIA (CONTINUED)
$1,000 Effingham Cnty, GA Dev Auth Solfort James
Proj (AMT)................................. 5.625% 07/01/18 $ 1,017,750
1,800 Fulton Cnty, GA Residential Care Canterbury
Court Proj Ser A........................... 6.000 02/15/22 1,809,774
650 Fulton Cnty, GA Residential Care Canterbury
Court Proj Ser A........................... 6.125 02/15/34 640,763
3,500 Fulton Cnty, GA Residential Care Sr Lien
RHA Asstd Living Ser A..................... 7.000 07/01/29 3,333,680
4,000 Milledgeville Baldwin Cnty GA College & St
Univ Fndtn................................. 5.625 09/01/30 4,141,320
1,000 Private Colleges & Univ Auth GA Mercer Hsg
Corp Proj Ser A............................ 6.000 06/01/21 1,048,180
2,930 Renaissance on Peachtree Unit Invt Tr Ctf
GA Custody Ctf (Variable Rate Coupon)...... 12.334 10/01/25 2,692,816
--------------
26,344,568
--------------
HAWAII 0.6%
3,000 Hawaii St Dept Budget & Fin Spl Purp Rev
Kahala Nui Proj Ser A...................... 8.000 11/15/33 3,277,680
1,820 Hawaii St Dept Trans Spl Fac Rev
Continental Airl Inc (AMT)................. 5.625 11/15/27 1,288,778
2,825 Kuakini, HI Hlth Sys Spl Ser A............. 6.375 07/01/32 2,923,084
--------------
7,489,542
--------------
IDAHO 0.1%
1,000 Idaho Hlth Fac Auth Rev Vly Vista Care Ser
A Rfdg..................................... 7.875 11/15/29 977,050
--------------
ILLINOIS 6.9%
2,500 Bolingbrook, IL Cap Apprec Ser B (MBIA
Insd)...................................... * 01/01/29 682,150
1,993 Bolingbrook, IL Spl Svc Area No 01-1....... 7.375 07/01/31 2,145,664
1,500 Bolingbrook, IL Spl Svc Area No 1 Spl Tax
Augusta Vlg Proj (Acquired 11/13/02, Cost
$1,500,000) (a)............................ 6.750 03/01/32 1,552,650
1,665 Bolingbrook, IL Spl Svc Area No 1 Spl Tax
Ser 2004 Augusta Vlg Proj.................. 6.250 03/01/32 1,666,948
1,901 Bolingbrook, IL Spl Svc Area No 3 Lakewood
Ridge Proj................................. 7.050 03/01/31 2,009,262
964 Cary, IL Spl Tax Svc Area No 1 Cambridge
Ser A...................................... 7.625 03/01/30 1,040,773
7,750 Chicago, IL O'Hare Intl Arpt Rev RR II R
239-1 (AMT) (Inverse Fltg) (Acquired
08/18/03, Cost $8,374,505) (FSA Insd) (a)
(c) (d).................................... 9.070 01/01/19 9,225,445
3,600 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airl Inc Proj Ser B Rfdg (AMT) (f)
(g)........................................ 6.100 11/01/35 612,000
5,000 Chicago, IL Proj Ser A Rfdg (MBIA Insd).... 5.500 01/01/38 5,388,750
4,000 Chicago, IL Spl Assmt Lakeshore East
Proj....................................... 6.625 12/01/22 4,136,480
</Table>
16 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 840 Chicago, IL Tax Increment Alloc Read
Dunning Ser B (ACA Insd)................... 7.250% 01/01/14 $ 893,332
2,000 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A........................... 6.500 12/01/05 2,048,740
3,000 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A (ACA Insd)................ 6.500 12/01/06 3,155,610
1,925 Chicago, IL Tax Increment Alloc Sub Cent
Loop Redev Ser A (ACA Insd)................ 6.500 12/01/08 2,104,853
1,000 Clay Cnty, IL Hosp Rev..................... 5.900 12/01/28 930,970
1,228 Gilberts, IL Spl Svc Area No 9 Spl Tax Big
Timber Proj (d)............................ 7.375 03/01/11 1,386,093
1,245 Gilberts, IL Spl Svc Area No 9 Spl Tax Big
Timber Proj................................ 7.750 03/01/27 1,386,444
1,500 Godfrey, IL Rev Utd Methodist Vlg Ser A.... 5.875 11/15/29 1,311,465
2,700 Hoopeston, IL Hosp Cap Impt Rev Hoopeston
Cmnty Mem Hosp Rfdg........................ 6.550 11/15/29 2,501,604
1,740 Huntley, IL Increment Alloc Rev Huntley
Redev Proj Ser A........................... 8.500 12/01/15 1,804,832
225 Huntley, IL Spl Svc Area No 10 Spl Tax Ser
A (d)...................................... 6.250 03/01/09 227,313
2,621 Huntley, IL Spl Svc Area No 10 Spl Tax Ser
A.......................................... 6.500 03/01/29 2,668,335
1,405 Illinois Fin Auth Rev Cmnty Fac Clinic
Altgeld Proj............................... 8.000 11/15/16 1,264,711
500 Illinois Fin Auth Rev Fairview Oblig Grp
Ser A Rfdg................................. 6.000 08/15/20 501,670
500 Illinois Fin Auth Rev Fairview Oblig Grp
Ser A Rfdg................................. 6.125 08/15/27 494,260
3,000 Illinois Fin Auth Rev Northwestern Mem Hosp
Ser A...................................... 5.500 08/15/43 3,169,110
1,000 Illinois Hlth Fac Auth Rev Ctr Baptist Home
Proj....................................... 7.125 11/15/29 976,670
2,500 Illinois Hlth Fac Auth Rev Decatur Mem
Hosp....................................... 5.750 10/01/24 2,592,725
3,000 Illinois Hlth Fac Auth Rev Fairview Oblig
Grp Ser A Rfdg (Prerefunded @ 08/15/06).... 7.400 08/15/23 3,231,030
650 Illinois Hlth Fac Auth Rev Loyola Univ Hlth
Sys Ser A.................................. 6.000 07/01/21 674,752
1,200 Illinois Hlth Fac Auth Rev Lutheran Sr
Ministries Oblig Ser A..................... 7.375 08/15/31 1,273,440
1,500 Illinois Hlth Fac Auth Rev Peace Mem
Ministries Proj (Prerefunded @ 08/15/06)... 7.500 08/15/26 1,617,420
1,365 Illinois Hlth Fac Auth Rev Proctor Cmnty
Hosp Proj.................................. 7.500 01/01/11 1,365,846
250 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.200 08/15/23 252,812
1,125 Illinois Hlth Fac Auth Rev Ser A Rfdg...... 6.400 08/15/33 1,138,691
</Table>
See Notes to Financial Statements 17
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$ 700 Illinois Hlth Fac Auth Rev Silver Cross
Hosp & Med Rfdg............................ 5.500% 08/15/19 $ 715,218
2,375 Lake Cnty, IL Fst Presv Dist Ld Acquisition
& Dev...................................... 5.750 12/15/16 2,652,329
675 Lake Cnty, IL Fst Presv Dist Ld Acquisition
& Dev...................................... 5.750 12/15/17 753,820
80 Lake, Cook, Kane & McHenry Cntys, IL Cmnty
Unit Sch Dist No 22 (FGIC Insd)............ 5.750 12/01/19 88,202
1,000 Minooka, IL Spl Assmt Impt Lakewood Trls
Unit 2 Proj................................ 6.375 03/01/34 1,002,270
1,207 Montgomery, IL Spl Assmt Impt Lakewood
Creek Proj................................. 7.750 03/01/30 1,335,533
1,800 Peoria, IL Spl Tax Weaverridge Spl Svc
Area....................................... 8.050 02/01/17 1,893,312
2,000 Plano, IL Spl Svc Area No 1 Lakewood
Springs Proj Ser A......................... 6.200 03/01/34 2,010,100
2,095 Regional Tran Auth IL Ser B (AMBAC Insd)... 8.000 06/01/17 2,831,560
950 Sterling, IL Rev Hoosier Care Proj Ser A... 7.125 06/01/34 873,525
2,000 Yorkville, IL Utd City Spl Svc Area Spl Tax
No 4 104 Mpi Grade Resv Proj............... 6.375 03/01/34 1,996,180
--------------
83,584,899
--------------
INDIANA 1.0%
825 Crawfordsville, IN Redev Cmnty Redev Dist
Tax Increment Rev (Acquired 10/15/97, Cost
$825,000) (a) (d).......................... 7.000 02/01/12 838,002
1,905 Indiana Hlth Fac Fin Auth Rev Hoosier Care
Proj Ser A................................. 7.125 06/01/34 1,753,476
6,500 Indiana Hlth Fac Hosp Rev Cmnty Fndtn
Northwest IN Ser A......................... 6.000 03/01/34 6,796,270
2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt
(AMT)...................................... 6.375 11/01/29 2,132,560
--------------
11,520,308
--------------
IOWA 0.9%
2,000 Estherville, IA Hosp Rev Avera Holy Family
Proj....................................... 6.250 07/01/26 2,129,440
375 Evansdale, IA Hlthcare Western Home Proj... 6.000 11/01/26 367,822
3,400 Evansdale, IA Hlthcare Western Home Proj
Ser A (d).................................. 6.000 11/01/26 3,334,924
1,975 Iowa Fin Auth Hlth Care Fac Care
Initiatives Proj Rfdg...................... 9.250 07/01/25 2,377,228
500 Iowa Fin Auth Retirement Cmnty Friendship
Haven Proj Ser A........................... 5.750 11/15/19 491,435
500 Iowa Fin Auth Retirement Cmnty Friendship
Haven Proj Ser A........................... 6.000 11/15/24 495,355
</Table>
18 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
IOWA (CONTINUED)
$ 800 Iowa Fin Auth Retirement Cmnty Friendship
Haven Proj Ser A........................... 6.125% 11/15/32 $ 773,896
1,000 Polk Cnty, IA Hlthcare Fac Rev Luther Pk
Hlth Ctr Inc Proj.......................... 6.150 10/01/36 974,630
--------------
10,944,730
--------------
KANSAS 0.7%
910 Lawrence, KS Coml Dev Rev Holiday Inn Sr
Ser A Rfdg................................. 8.000 07/01/16 857,238
1,000 Lenexa, KS Hlthcare Fac Rev Lakeview Vlg
Inc Ser B.................................. 6.250 05/15/26 1,014,780
915 Manhattan, KS Coml Dev Rev Holiday Inn Sr
Ser A Rfdg................................. 8.000 07/01/16 861,948
2,000 Olathe, KS Sr Living Fac Rev Aberdeen Vlg
Inc Ser A.................................. 8.000 05/15/30 2,416,960
1,500 Olathe, KS Sr Living Fac Rev Aberdeen Vlg
Inc Ser A Rfdg (Prerefunded @ 05/15/10)
(b)........................................ 5.600 05/15/28 1,479,615
1,500 Overland Pk, KS Dev Corp Rev First Tier
Overland Park Ser A........................ 7.375 01/01/32 1,636,920
--------------
8,267,461
--------------
LOUISIANA 0.8%
1,990 Louisiana Hsg Fin Agy Rev Azalea Estates
Ser A Rfdg (AMT) (GNMA Collateralized)..... 5.375 10/20/39 2,022,676
2,135 Louisiana Hsg Fin Agy Rev Multi-Family Hsg
Plantation Ser A........................... 7.125 01/01/28 1,486,024
1,600 Louisiana Loc Govt Environment Fac Hlthcare
Saint James Place A Rfdg................... 7.000 11/01/29 1,444,704
1,000 Louisiana Pub Fac Auth Rev Progressive
Hlthcare................................... 6.375 10/01/20 939,650
1,000 Louisiana Pub Fac Auth Rev Progressive
Hlthcare................................... 6.375 10/01/28 894,740
3,208 Louisiana St Univ & Agric & Mechanical
College Univ Rev Master Agreement (Acquired
11/30/98, Cost $3,208,383) (a)............. 5.750 10/30/18 3,033,333
--------------
9,821,127
--------------
MAINE 0.4%
4,480 Jay, ME Solid Waste Disp Rev Intl Paper Co
Proj Ser A Rfdg (AMT)...................... 4.900 11/01/17 4,497,158
--------------
MARYLAND 1.9%
2,000 Annapolis, MD Spl Oblig Park Pl Proj Ser
A.......................................... 5.350 07/01/34 1,984,040
1,000 Baltimore Cnty, MD Mtg Rev Shelter Elder
Care Ser A................................. 7.250 11/01/29 972,250
4,000 Frederick Cnty, MD Spl Oblig Urbana Cmnty
Dev Auth Ser A............................. 5.950 07/01/30 4,013,680
</Table>
See Notes to Financial Statements 19
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MARYLAND (CONTINUED)
$1,000 Frederick Cnty, MD Spl Oblig Urbana Cmnty
Dev Auth Ser B............................. 6.250% 07/01/30 $ 1,004,130
595 Maryland St Econ Dev Corp Air Cargo Rev
Afco Cargo BWI II LLC Proj (AMT) (d)....... 6.250 07/01/07 593,786
1,200 Maryland St Econ Dev Corp MD Golf Course
Sys........................................ 8.250 06/01/28 1,169,484
1,540 Maryland St Hlth & Higher Ed Calvert Hlth
Sys........................................ 5.500 07/01/36 1,597,842
1,000 Maryland St Hlth & Higher Ed Medstar Hlth
Rfdg....................................... 5.500 08/15/33 1,019,370
3,000 Montgomery Cnty, MD Econ Dev Editorial Proj
In Ed Ser A (Acquired 09/28/98, Cost
$3,002,660) (a)............................ 6.400 09/01/28 2,885,610
1,652 Prince Georges Cnty, MD Rev................ 8.000 04/01/16 1,620,182
3,000 Prince Georges Cnty, MD Spl Oblig Spl Assmt
Woodview Ser A............................. 8.000 07/01/26 3,212,370
1,000 Westminster, MD Econ Dev Carroll Lutheran
Vlg Ser A.................................. 6.000 05/01/24 1,022,550
1,500 Westminster, MD Econ Dev Carroll Lutheran
Vlg Ser A.................................. 6.250 05/01/34 1,548,435
--------------
22,643,729
--------------
MASSACHUSETTS 3.1%
1,000 Massachusetts St Dev Fin Agy Briarwood Ser
B (Prerefunded @ 12/01/10)................. 8.000 12/01/22 1,223,640
250 Massachusetts St Dev Fin Agy Rev Evergreen
Ctr Inc. .................................. 5.000 01/01/24 236,447
500 Massachusetts St Dev Fin Agy Rev Evergreen
Ctr Inc. .................................. 5.500 01/01/35 483,620
880 Massachusetts St Dev Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 07/27/00, Cost
$880,000) (a).............................. 7.750 06/01/18 944,478
1,930 Massachusetts St Dev Fin Agy Rev Hillcrest
Ed Ctr Inc................................. 6.375 07/01/29 1,855,058
2,970 Massachusetts St Dev Fin Agy Rev Hlthcare
Fac Alliance Ser A......................... 7.100 07/01/32 2,882,623
1,000 Massachusetts St Dev Fin Agy Rev MCHSP
Human Svc Providers Ser A (Prerefunded @
07/01/10) (k).............................. 8.000 07/01/20 1,208,700
3,710 Massachusetts St Dev Fin Agy Rev New
England Ctr For Children................... 6.000 11/01/19 3,734,783
3,100 Massachusetts St Hlth & Ed Civic
Investments Ser B.......................... 9.150 12/15/23 3,569,867
4,475 Massachusetts St Hlth & Ed Fac Auth Rev
Caritas Christi Oblig Grp Ser A............ 5.625 07/01/20 4,532,593
1,000 Massachusetts St Hlth & Ed Nichols College
Issue Ser C................................ 6.000 10/01/17 1,059,820
</Table>
20 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MASSACHUSETTS (CONTINUED)
$1,000 Massachusetts St Hlth & Ed Northern
Berkshire Hlth Ser B....................... 6.250% 07/01/24 $ 998,990
1,895 Massachusetts St Indl Fin Agy Assisted
Living Fac Rev Marina Bay LLC Proj (AMT)... 7.500 12/01/27 1,994,942
990 Massachusetts St Indl Fin Agy Assisted
Living Fac Rev Newton Grp Pptys LLC Proj
(AMT)...................................... 8.000 09/01/27 1,047,351
605 Massachusetts St Indl Fin Agy Rev First Mtg
GF/Pilgrim Inc Proj........................ 6.500 10/01/15 578,447
2,000 Massachusetts St Indl Fin Agy Rev First Mtg
GF/Pilgrim Inc Proj........................ 6.750 10/01/28 1,845,760
2,000 Massachusetts St Indl Fin Agy Rev First Mtg
Reeds Landing Proj (h)..................... 7.100/7.350 10/01/28 1,960,420
2,900 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/98, Cost
$2,900,000) (a)............................ 6.375 06/01/18 2,978,039
655 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/98, Cost
$655,000) (a).............................. 6.200 06/01/08 674,650
4,000 Massachusetts St Indl Fin Agy Rev Swr Fac
Res Ctl Composting (AMT) (Acquired
08/10/89, Cost $4,000,00) (a).............. 9.250 06/01/10 4,011,400
--------------
37,821,628
--------------
MICHIGAN 2.1%
2,500 Chelsea, MI Econ Dev Corp Rev Utd Methodist
Retirement Rfdg............................ 5.400 11/15/27 2,357,900
875 Detroit, MI Loc Dev Fin Auth Tax Increment
Sub Ser C (Acquired 09/08/97, Cost
$875,000) (a).............................. 6.850 05/01/21 895,020
1,000 Gaylord, MI Hosp Fin Auth Ltd Oblig Rev
Otsego Mem Hosp Rfdg....................... 6.500 01/01/31 975,490
1,700 Hillsdale, MI Hosp Fin Hillsdale Cmnty Hlth
Ctr........................................ 5.000 05/15/13 1,664,062
2,940 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser
A (b)...................................... 6.000 07/01/35 3,121,898
4,000 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser
A (b)...................................... 6.250 07/01/40 4,294,200
2,390 Meridian, MI Econ Dev Corp Ltd Oblig Rev
First Mtg Burcham Hills Ser A Rfdg......... 7.500 07/01/13 2,438,374
3,430 Meridian, MI Econ Dev Corp Ltd Oblig Rev
First Mtg Burcham Hills Ser A Rfdg......... 7.750 07/01/19 3,509,061
3,045 Michigan St Hosp Fin Auth Rev Hosp Pontiac
Osteopathic Ser A Rfdg..................... 6.000 02/01/14 3,045,670
</Table>
See Notes to Financial Statements 21
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MICHIGAN (CONTINUED)
$1,500 Michigan St Hosp Fin Auth Rev Hosp Pontiac
Osteopathic Ser A Rfdg..................... 6.000% 02/01/24 $ 1,445,355
11,084 Michigan St Strategic Fd Ltd Oblig Rev
Great Lakes Pulp & Fiber Proj (AMT) (f)
(i)........................................ 8.000 12/01/27 1,633,160
--------------
25,380,190
--------------
MINNESOTA 3.0%
2,000 Aitkin, MN Hlth Fac Rev Riverwood Hlthcare
Ctr Proj................................... 7.750 02/01/31 2,064,780
1,000 Cambridge, MN Hsg & Hlthcare Fac Rev
Grandview West Proj Ser B.................. 6.000 10/01/33 903,320
2,000 Carlton, MN Hlth & Hsg Fac Intermediate
Faith Social Svc Inc Proj.................. 7.500 04/01/19 2,128,080
2,000 Carlton, MN Hlth & Hsg Fac Intermediate
Faith Social Svc Inc Proj.................. 7.750 04/01/29 2,131,600
1,500 Duluth, MN Econ Dev Auth Saint Lukes
Hosp....................................... 7.250 06/15/32 1,569,495
1,000 Duluth, MN Econ Dev Hlth Care Saint Lukes
Hosp....................................... 6.000 06/15/12 1,004,530
2,000 Glencoe, MN Hlthcare Fac Rev............... 7.500 04/01/31 2,138,780
1,500 Minneapolis & Saint Paul, MN Met Northwest
Airl Proj (AMT)............................ 7.375 04/01/25 1,427,970
6,890 Minneapolis & Saint Paul, MN Met Northwest
Airl Proj Ser A (AMT)...................... 7.000 04/01/25 6,300,698
1,000 Minneapolis & Saint Paul, MN Met Northwest
Airl Proj Ser B (AMT) (Prefunded @
04/01/05).................................. 6.500 04/01/25 1,000,000
900 Minnesota Agric & Econ Dev Brd Rev Hlthcare
Benedictine Proj Ser A..................... 5.500 08/01/23 881,514
875 Minnesota Agric & Econ Dev Brd Rev Hlthcare
Benedictine Proj Ser A..................... 5.750 02/01/30 850,596
1,500 Oakdale, MN Rev Sr Hsg Oak Meadows Proj
Rfdg....................................... 6.250 04/01/34 1,537,620
1,425 Ramsey, MN Lease Rev Pact Charter Sch Proj
Ser A...................................... 6.750 12/01/33 1,438,723
1,500 Saint Cloud, MN Hsg & Redev Auth Sterling
Heights Apt Proj (AMT)..................... 7.550 04/01/39 1,454,625
1,000 Saint Paul, MN Hsg & Redev Auth Higher
Ground Academy Ser A Rfdg.................. 6.625 12/01/23 1,014,460
1,170 Saint Paul, MN Hsg & Redev Auth Hosp Rev
Hltheast Proj Ser A Rfdg................... 6.625 11/01/17 1,176,634
1,000 Saint Paul, MN Hsg & Redev Cmnty of Peace
Academy Proj Ser A......................... 7.875 12/01/30 1,050,790
2,250 Saint Paul, MN Port Auth Hotel Fac Rev
Radisson Kellogg Proj Ser 2 Rfdg........... 7.375 08/01/29 2,350,012
1,000 Shakopee, MN Hlthcare Saint Francis Regl
Med Ctr.................................... 5.250 09/01/34 1,010,320
1,000 Vadnais Heights, MN Lease Rev Agric & Food
Sciences Ser A............................. 6.375 12/01/24 988,850
</Table>
22 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MINNESOTA (CONTINUED)
$1,000 Vadnais Heights, MN Lease Rev Agric & Food
Sciences Ser A............................. 6.600% 12/01/34 $ 983,900
1,450 Winona, MN Hlthcare Winona Hlth Ser A...... 6.000 07/01/34 1,492,441
--------------
36,899,738
--------------
MISSISSIPPI 0.1%
615 Mississippi Bus Fin Corp (AMT)............. 7.250 07/01/34 624,127
--------------
MISSOURI 4.8%
1,250 Cole Cnty, MO Indl Dev Auth Sr Living Fac
Rev Lutheran Svcs Heisinger Proj........... 5.500 02/01/35 1,284,213
1,000 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Proj Rfdg........................... 6.125 10/01/21 1,024,730
1,000 Fenton, MO Tax Increment Rev & Impt Gravois
Bluffs Proj Rfdg........................... 7.000 10/01/21 1,076,450
225 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj (Escrowed to Maturity).... 7.250 04/01/07 233,172
3,095 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj (Prerefunded @
04/01/07).................................. 7.625 04/01/17 3,411,588
209 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj (Prerefunded @
04/01/07).................................. 7.625 04/01/18 230,379
1,440 Ferguson, MO Tax Increment Rev Crossings at
Halls Ferry Proj Rfdg...................... 5.000 04/01/17 1,406,376
1,500 Folk Ave South Transn Dist MO Transn Sales
Tax Rev Dev MO............................. 5.625 11/01/31 1,477,140
3,000 Joplin, MO Indl Dev Auth Hlth Fac Rev
Freeman Hlth Sys Proj...................... 5.500 02/15/29 3,026,880
2,000 Kansas City, MO Indl Dev Auth First Mtg
Bishop Spencer Ser A....................... 6.250 01/01/24 2,027,440
1,500 Kansas City, MO Indl Dev Auth First Mtg
Bishop Spencer Ser A....................... 6.500 01/01/35 1,522,185
984 Kansas City, MO Indl Dev Auth Multi-Family
Hsg Rev Brentwood Manor Apt Proj Ser B
(AMT)...................................... 7.250 10/15/38 958,042
3,000 Kansas City, MO Indl Dev Plaza Lib Proj.... 5.900 03/01/24 2,974,860
1,831 Kansas City, MO Multi-Family Hsg Rev
Northwoods Apts Proj Ser A (AMT)........... 6.450 05/01/40 1,804,597
945 Kansas City, MO Multi-Family Hsg Rev Vlg
Green Apt Proj (AMT)....................... 6.250 04/01/30 628,453
3,785 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev
BJC Hlth Sys Ser A (b)..................... 5.000 05/15/18 3,968,724
2,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev
BJC Hlth Sys Ser A (b)..................... 5.000 05/15/19 2,087,100
2,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev
BJC Hlth Sys Ser A (b)..................... 5.000 05/15/20 2,080,480
2,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev
BJC Hlth Sys Ser A (b)..................... 5.000 05/15/21 2,075,540
</Table>
See Notes to Financial Statements 23
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MISSOURI (CONTINUED)
$3,000 Missouri St Hlth & Ed Fac Auth Hlth Fac Rev
BJC Hlth Sys Ser A (b)..................... 5.000% 05/15/22 $ 3,103,470
10,820 Missouri St Hlth & Edl Fac Rev Drivers Ser
362 (Inverse Fltg) (Acquired 07/21/03, Cost
$11,969,879) (a) (c) (d)................... 8.570 05/15/11 12,071,658
2,220 Nevada, MO Hosp Rev Neveda Regional Med
Ctr........................................ 6.750 10/01/22 2,288,998
500 Saint Joseph, MO Indl Dev Auth Tax
Increment Rev Shoppes at North Vlg Proj Ser
A.......................................... 5.100 11/01/19 490,655
1,000 Saint Joseph, MO Indl Dev Auth Tax
Increment Rev Shoppes at North Vlg Proj Ser
A.......................................... 5.500 11/01/27 984,450
4,915 Saline Cnty, MO Indl Dev Auth Hlth Fac Rev
(Acquired 01/12/99, Cost $4,827,725) (a)... 6.500 12/01/28 4,990,347
1,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd)..... 6.000 06/01/15 1,170,950
--------------
58,398,877
--------------
NEVADA 0.9%
3,500 Clark Cnty, NV Indl Dev Southwest Gas Corp
Proj Ser D1 (AMT) (FGIC Insd).............. 5.250 03/01/38 3,591,665
1,000 Clark Cnty, NV Pollutn Ctl Rev Southn CA
Rfdg (AMT)................................. 3.250 06/01/31 975,780
2,000 Director St NV Dept Business & Industry
Las Ventanas Retirement Proj Ser A......... 7.000 11/15/34 2,049,820
3,000 Henderson, NV Hlthcare Fac Rev Catholic
Hlthcare West Ser A........................ 5.625 07/01/24 3,164,520
1,000 Las Vegas, NV Loc Impt Bds Spl Impt Dist No
607........................................ 6.000 06/01/19 1,030,480
--------------
10,812,265
--------------
NEW HAMPSHIRE 1.0%
1,500 New Hampshire Higher Ed & Hlth Brewster
Academy.................................... 6.750 06/01/25 1,505,520
2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev
Havenwood-Heritage Heights................. 7.350 01/01/18 2,067,080
2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev
Havenwood-Heritage Heights................. 7.450 01/01/25 2,067,080
1,690 New Hampshire Hlth & Ed Fac Auth Rev
Huntington At Nashua Ser A................. 6.875 05/01/33 1,729,445
1,000 New Hampshire Hlth & Ed Fac Auth Rev NH
College Issue.............................. 7.500 01/01/31 1,078,770
1,500 New Hampshire Hlth & Ed Fac Hlthcare Sys
Covenant Hlth.............................. 5.500 07/01/34 1,535,130
1,500 New Hampshire Hlth & Ed Fac Speare Mem
Hosp....................................... 5.875 07/01/34 1,516,875
1,000 New Hampshire St Business Fin Auth Rev
Alice Peck Day Hlth Sys Ser A.............. 6.875 10/01/19 1,006,490
--------------
12,506,390
--------------
</Table>
24 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
NEW JERSEY 5.7%
$2,240 Camden Cnty, NJ Impt Auth Lease Rev
Dockside Refrig (Acquired 01/29/97, Cost
$2,298,570) (a) (e)........................ 8.400% 04/01/24 $ 2,140,589
1,000 Middlesex Cnty, NJ Pollutn Ctl Pollutn Ctl
Amerada Rfdg............................... 6.050 09/15/34 1,060,910
2,000 New Jersey Econ Dev Auth Cedar Crest Vlg
Inc Fac Ser A.............................. 7.000 11/15/16 2,056,220
2,500 New Jersey Econ Dev Auth Econ Dev Rev Utd
Methodist Homes Ser A-1.................... 6.000 07/01/18 2,530,325
2,000 New Jersey Econ Dev Auth First Mtg
Franciscan Oaks Proj....................... 5.700 10/01/17 1,986,420
1,000 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.000 11/15/15 1,072,820
1,000 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.125 11/15/18 1,047,980
1,440 New Jersey Econ Dev Auth Retirement Cmnty
Rev Ser A.................................. 8.125 11/15/23 1,547,741
1,000 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06).................................. 8.500 11/01/16 1,107,860
1,500 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06).................................. 8.625 11/01/25 1,664,595
1,510 New Jersey Econ Dev Auth Rev Kullman Assoc
Proj Ser A (AMT)........................... 6.125 06/01/18 1,287,683
2,000 New Jersey Econ Dev Auth Rev Sr Living Fac
Esplanade Bear (AMT)....................... 7.000 06/01/39 1,661,600
3,000 New Jersey Econ Dev Auth Rev Sr Mtg Arbor
Glen Proj Ser A (Prerefunded @ 05/15/06)... 8.750 05/15/26 3,258,450
2,000 New Jersey Econ Dev Auth Spl Fac Rev
Continental Airl Inc Proj (AMT)............ 6.250 09/15/19 1,645,980
9,030 New Jersey Econ Dev Auth Spl Fac Rev
Continental Airl Inc Proj (AMT)............ 6.400 09/15/23 7,430,606
9,500 New Jersey Econ Dev Auth Spl Fac Rev
Continental Airl Inc Proj (AMT)............ 6.250 09/15/29 7,342,550
3,500 New Jersey Econ Dev Auth Utd Methodist
Homes NJ Oblig............................. 5.750 07/01/29 3,459,050
3,000 New Jersey Hlth Care Fac Fingcare Inst Inc.
Cherry Hill Proj........................... 8.000 07/01/27 3,151,950
3,225 New Jersey Hlthcare Fac Fin Auth Rev Cap
Hlth Sys Oblig Grp Ser A................... 5.375 07/01/33 3,294,725
810 New Jersey Hlthcare Fac Fin Auth Rev
Raritan Bay Med Ctr Issue Rfdg............. 7.250 07/01/14 854,510
1,030 New Jersey St Ed Fac Auth Rev Felician
College of Lodi Ser D (Acquired 11/07/97,
Cost $1,030,000) (a)....................... 7.375 11/01/22 1,036,438
</Table>
See Notes to Financial Statements 25
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
NEW JERSEY (CONTINUED)
$8,535 Tobacco Settlement Fin Corp NJ............. 6.750% 06/01/39 $ 8,990,428
5,000 Tobacco Settlement Fin Corp NJ............. 6.250 06/01/43 5,045,550
5,000 Tobacco Settlement Fin Corp NJ Asset Bkd... 6.000 06/01/37 4,988,900
--------------
69,663,880
--------------
NEW MEXICO 0.6%
4,110 Albuquerque, NM Retirement Fac Rev La Vida
Llena Proj Ser B Rfdg...................... 6.600 12/15/28 4,022,786
1,505 Cabezon Pub Impt Dist NM Spl Levg Rev...... 6.000 09/01/24 1,500,636
1,020 New Mexico Hsg Auth Region III Sr Brentwood
Gardens Apt Ser A (AMT).................... 6.850 12/01/31 1,041,094
750 Ventana West Pub Impt Dist NM.............. 6.875 08/01/33 761,505
--------------
7,326,021
--------------
NEW YORK 6.2%
975 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van
Allen Proj Ser A........................... 6.875 06/01/39 915,476
1,000 Brookhaven, NY Indl Dev Agy Mem Hosp Med
Ctr Inc Ser A.............................. 8.125 11/15/20 1,079,440
1,400 Brookhaven, NY Indl Dev Agy Sr Residential
Hsg Rev Woodcrest Estates Fac Ser A
(AMT)...................................... 6.375 12/01/37 1,373,456
3,460 Dutchess Cnty, NY Indl Dev Agy Saint
Francis Hosp Ser A Rfdg.................... 7.500 03/01/29 3,573,696
2,105 Monroe Cnty, NY Indl Dev Agy Woodland Vlg
Proj....................................... 8.000 11/15/15 2,260,265
3,000 New York City Indl Dev Agy JFK Intl Arpt
Proj Ser B (AMT)........................... 8.500 08/01/28 2,438,130
5,000 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Ser A...................... 6.250 03/01/15 5,071,000
15,000 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Ser A...................... 6.500 03/01/35 15,325,050
5,000 New York City Muni Wtr Fin Drivers Ser 786
(Inverse Fltg) (Acquired 03/15/05, Cost
$5,308,509) (a) (c) (d).................... 7.411 12/15/12 5,260,800
4,800 New York City Ser A........................ 7.000 08/01/07 5,112,672
200 New York City Ser A
(Prerefunded @ 08/01/06)................... 7.000 08/01/07 214,270
6,000 New York City Ser D........................ 5.000 11/01/26 6,167,700
5,000 New York City Transitional Drivers Ser 386
(Inverse Fltg) (Acquired 02/02/04, Cost
$5,406,301) (a) (c)........................ 7.421 02/01/12 5,468,200
1,360 New York St Dorm Auth Revs NY Methodist
Hosp....................................... 5.250 07/01/24 1,419,119
2,000 New York St Dorm Auth Revs NY Methodist
Hosp....................................... 5.250 07/01/33 2,070,980
2,500 New York St Energy Resh & Dev Auth Gas Fac
Rev (Inverse Fltg) (c)..................... 11.509 04/01/20 3,011,325
</Table>
26 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,965 Saratoga Cnty, NY Indl Dev Agy Sr Hsg Rev
Highpointe at Malta Proj Ser A............. 6.875% 06/01/39 $ 1,845,037
1,000 Suffolk Cnty, NY Gurwin Jewish Phase II.... 6.700 05/01/39 1,020,940
1,000 Suffolk Cnty, NY Indl Dev Agy Continuing
Care Retirement Cmnty Rev.................. 7.250 11/01/28 1,058,640
970 Suffolk Cnty, NY Indl Dev Agy Eastern Long
Is Hosp Assoc Ser A........................ 7.750 01/01/22 1,013,029
1,400 Suffolk Cnty, NY Indl Dev Agy Indl Dev Rev
Spellman High Voltage Fac Ser A (AMT)...... 6.375 12/01/17 1,254,960
1,445 Suffolk Cnty, NY Indl Dev Agy Peconic
Landing Ser A.............................. 8.000 10/01/20 1,569,126
1,000 Syracuse, NY Indl Dev Agy Rev First Mtg
Jewish Home Ser A.......................... 7.375 03/01/31 1,049,000
2,700 Ulster Cnty, NY Indl Dev Agy Civic Fac Rev
Benedictine Hosp Proj Ser A................ 6.450 06/01/24 2,467,422
2,315 Utica, NY Indl Dev Agy Civic Utica College
Civic Fac.................................. 6.750 12/01/21 2,383,501
1,000 Westchester Cnty, NY Indl Dev Hebrew Hosp
Sr Hsg Inc Ser A........................... 7.375 07/01/30 1,057,550
--------------
75,480,784
--------------
NORTH CAROLINA 1.3%
2,000 North Carolina Med Care Commn First Mtg Utd
Methodist Homes (Prerefunded @ 10/01/09)... 7.000 10/01/17 2,180,320
2,600 North Carolina Med Care Commn Retirement
Fac Rev First Mtg Ser A 05................. 5.500 10/01/35 2,534,740
10,000 North Carolina St Rites PA 1246 (Inverse
Fltg) (Acquired 03/16/04, Cost $11,658,213)
(a) (c).................................... 7.077 03/01/12 11,125,800
--------------
15,840,860
--------------
NORTH DAKOTA 0.2%
2,000 Grand Forks, ND Sr Hsg Rev Spl Term 4000
Vly Square Proj............................ 6.250 12/01/34 1,905,680
950 Grand Forks, ND Sr Hsg Rev Spl Term 4000
Vly Square Proj............................ 6.375 12/01/34 917,558
--------------
2,823,238
--------------
OHIO 3.5%
5,000 Athens Cnty, OH Hosp Fac Rev Impt O'Bleness
Mem Ser A Rfdg............................. 7.125 11/15/33 5,218,050
3,000 Cleveland-Cuyahoga Cnty, OH Spl Assmt/Tax
Increment.................................. 7.000 12/01/18 3,194,910
1,000 Cuyahoga Cnty, OH Hlthcare Fac Franciscan
Cnty OH Inc Proj Ser C..................... 6.250 05/15/32 997,320
623 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park
Lane Apts Ser A1 Rfdg (h).................. 6.000/7.625 10/01/37 419,260
</Table>
See Notes to Financial Statements 27
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
OHIO (CONTINUED)
$1,081 Cuyahoga Cnty, OH Multi-Family Rev Hsg Park
Lane Apts Ser A2 Rfdg (f) (j).............. 5.460% 10/01/37 $ 0
5,000 Cuyahoga Cnty, OH Rev Ser A Rfdg........... 6.000 01/01/32 5,459,500
1,760 Dayton, OH Spl Fac Rev Air Freight Cargo
Day LLC Proj (AMT)......................... 6.300 04/01/22 1,595,722
7,510 Erie Cnty, OH Hosp Fac Rev Firelands Regl
Med Ctr Ser A.............................. 5.625 08/15/32 7,733,648
5,955 Franklin Cnty, OH Hlthcare Fac Rev & Impt
Lutheran Sr City Proj Rfdg................. 6.125 12/15/28 5,686,132
2,600 Franklin Cnty, OH Hlthcare Fac Rev Impt OH
Presbyterian Svcs Ser A.................... 5.125 07/01/35 2,561,650
1,500 Lucas Cnty, OH Hlthcare & Impt Sunset
Retirement Rfdg............................ 6.500 08/15/20 1,584,255
750 Lucas Cnty, OH Port Auth Rev Saint Mary
Woods Proj Ser A........................... 6.000 05/15/24 746,055
2,250 Lucas Cnty, OH Port Auth Rev Saint Mary
Woods Proj Ser A........................... 6.000 05/15/34 2,174,220
2,875 Madison Cnty, OH Hosp Impt Rev Madison Cnty
Hosp Proj Rfdg............................. 6.400 08/01/28 2,681,455
2,000 Ohio St Environmental Fac Rev Ford Motor Co
Proj (AMT)................................. 5.750 04/01/35 2,014,520
--------------
42,066,697
--------------
OKLAHOMA 2.3%
1,000 Citizen Potawatomi Nation, OK Ser A........ 6.500 09/01/16 1,010,280
605 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A............................ 7.000 08/01/10 608,515
750 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A............................ 7.400 08/01/17 755,565
1,000 Langston, OK Econ Dev Langston Cmnty Dev
Corp Proj Ser A............................ 7.625 08/01/20 1,011,560
1,000 Oklahoma Cnty, OK Fin Auth Epworth Villa
Proj Ser A Rfdg............................ 7.000 04/01/25 1,006,210
2,000 Oklahoma Cnty, OK Fin Auth Rev Epworth
Villa Proj Rfdg............................ 6.000 04/01/18 1,986,660
1,065 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg (Prerefunded @
08/15/09).................................. 5.750 08/15/12 1,171,383
1,000 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg (Prerefunded @
08/15/09).................................. 5.750 08/15/15 1,099,890
4,000 Oklahoma Dev Fin Auth Rev Hillcrest
Hlthcare Sys Ser A Rfdg (Prerefunded @
08/15/09).................................. 5.625 08/15/19 4,379,440
3,250 Tulsa Cnty, OK Pub Fac Auth (AMBAC Insd)... 6.250 11/01/22 3,694,145
</Table>
28 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
OKLAHOMA (CONTINUED)
$3,000 Tulsa, OK Muni Arpt Tr Rev Amern Airl Proj
Rfdg....................................... 6.250% 06/01/20 $ 2,517,810
8,855 Tulsa, OK Muni Arpt Tr Rev Ser A Rfdg
(AMT)...................................... 7.750 06/01/35 8,955,416
--------------
28,196,874
--------------
OREGON 1.1%
2,000 Clackamas Cnty, OR Hosp Fac Willamette View
Inc Proj Ser A............................. 7.500 11/01/29 2,119,200
2,145 Clatsop Care Ctr Hlth Dist OR Rev Sr Hsg... 6.875 08/01/28 2,153,730
2,500 Multnomah Cnty, OR Hosp Fac Auth Rev
Terwilliger Plaza Proj Rfdg (Acquired
05/21/04, Cost $2,442,200) (a)............. 6.500 12/01/29 2,540,175
5,178 Oregon St Hlth Hsg Ed & Cultural Fac Auth
(AMT)...................................... 7.250 06/01/28 5,203,439
995 Oregon St Hlth Hsg Ed Auth Ore Baptist
Retirement Homes Ser A..................... 8.000 11/15/26 1,036,651
--------------
13,053,195
--------------
PENNSYLVANIA 6.3%
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/15 2,351,580
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/22 2,351,580
2,000 Allegheny Cnty, PA Hosp Dev Hlth Sys Ser
B.......................................... 9.250 11/15/30 2,351,580
2,000 Allegheny Cnty, PA Indl Dev Auth Lease Rev
(AMT)...................................... 6.625 09/01/24 1,887,720
1,500 Allegheny, PA Rev Auth Pittsburgh Mills
Proj....................................... 5.600 07/01/23 1,574,490
6,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl
Rev Collateral Toledo Edison Co Proj Ser A
Rfdg....................................... 7.750 05/01/20 6,305,700
1,000 Berks Cnty, PA Muni Auth Rev Phoebe Berks
Vlg Inc Proj Rfdg (Prerefunded @
05/15/06).................................. 7.700 05/15/22 1,071,680
550 Blair Cnty, PA Indl Dev Auth Vlg PA St Proj
Ser A...................................... 6.900 01/01/22 581,708
1,000 Bucks Cnty, PA Indl Dev Auth Rev First Mtg
Hlthcare Fac Chandler...................... 6.200 05/01/19 1,015,230
1,500 Chester Cnty, PA Hlth & Ed Fac Chester Cnty
Hosp Ser A................................. 6.750 07/01/31 1,585,455
2,500 Cliff House Ctf Trust Var Sts Ctf Part Ser
A (AMT).................................... 6.625 06/01/27 1,901,550
2,000 Cumberland Cnty, PA Indl Dev Auth Rev First
Mtg Woods Cedar Run Ser A Rfdg (e)......... 6.500 11/01/28 668,080
3,000 Dauphin Cnty, PA Gen Auth Rev Office & Pkg
Riverfront Office.......................... 6.000 01/01/25 2,699,490
2,200 Indiana Cnty, PA Indl Dev Auth PSEG Pwr LLC
Proj Rfdg (AMT)............................ 5.850 06/01/27 2,302,916
1,000 Lancaster Cnty, PA Hosp Auth Rev Hlth Ctr
Saint Anne's Home.......................... 6.625 04/01/28 1,000,960
1,200 Lehigh Cnty, PA Gen Purp Auth First Mtg
Bible Fellowship Church.................... 7.625 11/01/21 1,306,500
</Table>
See Notes to Financial Statements 29
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
$3,000 Lehigh Cnty, PA Gen Purp Auth Rev Good
Shepherd Grp Ser A......................... 5.500% 11/01/24 $ 3,073,260
2,000 Lehigh Cnty, PA Gen Purp Auth Rev Kidspeace
Oblig Grp Rfdg............................. 6.000 11/01/23 1,735,840
1,000 Lehigh Cnty, PA Indl Dev Auth Hlth Fac Rev
Lifepath Inc Proj.......................... 6.100 06/01/18 898,670
500 Montgomery Cnty, PA Indl Dev Auth Rev First
Mtg The Meadowood Corp Rfdg (Prerefunded @
12/01/05).................................. 7.000 12/01/10 523,580
2,500 Montgomery Cnty, PA Indl Dev Auth Rev First
Mtg The Meadowood Corp Rfdg (Prerefunded @
12/01/05).................................. 7.250 12/01/15 2,621,975
6,000 Montgomery Cnty, PA Indl Dev Auth Rev First
Mtg The Meadowood Corp Rfdg (Prerefunded @
12/01/05).................................. 7.400 12/01/20 6,298,440
1,085 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care Proj.................. 6.000 02/01/21 1,102,935
4,500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care Proj.................. 6.250 02/01/35 4,595,580
1,415 Northeastern PA Hosp & Ed Auth Hlthcare
Rev........................................ 7.125 10/01/29 1,396,464
1,500 Pennsylvania Econ Dev Fin Auth Reliant
Energy Ser A (AMT)......................... 6.750 12/01/36 1,607,565
3,000 Pennsylvania Econ Dev Fin Auth Reliant
Energy Seward Ser A (AMT).................. 6.750 12/01/36 3,215,130
3,000 Pennsylvania Econ Dev Fin Auth Res Recovery
Rev Colver Proj Ser D (AMT)................ 7.050 12/01/10 3,070,080
980 Pennsylvania St Higher Ed Student Assn Inc
Proj Ser A................................. 6.750 09/01/32 1,024,247
2,150 Philadelphia, PA Auth Indl Dev Rev Coml Dev
Rfdg....................................... 7.750 12/01/17 2,196,956
4,105 Philadelphia, PA Gas Wks Rev Drivers Ser
384 (Inverse Fltg) (Acquired 01/20/04, Cost
$4,842,024) (FSA Insd) (a) (c)............. 8.171 07/01/11 4,697,721
2,140 Philadelphia, PA Hosp & Higher Ed Fac Auth
Rev Centralized Comp Human Svcs Ser A...... 6.125 01/01/13 2,118,343
1,500 Scranton Lackawanna, PA Hlth & Welfare Auth
Rev Rfdg (Prerefunded @ 01/15/07).......... 7.250 01/15/17 1,631,730
2,000 Scranton Lackawanna, PA Hlth & Welfare Auth
Rev Rfdg (Prerefunded @ 01/15/07).......... 7.350 01/15/22 2,178,940
1,500 Westmoreland Cnty, PA Indl Dev Hlthcare Fac
Redstone Ser B............................. 8.000 11/15/23 1,606,095
--------------
76,549,770
--------------
</Table>
30 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
RHODE ISLAND 0.5%
$1,825 Rhode Island St Econ Dev Corp Rev Oblig
Providence Place........................... 7.250% 07/01/20 $ 1,774,466
1,000 Rhode Island St Hlth & Ed Hosp Fin Ser A... 6.000 09/15/33 1,011,600
3,000 Tobacco Settlement Fin Corp RI Asset Bkd
Ser A...................................... 6.000 06/01/23 3,031,860
--------------
5,817,926
--------------
SOUTH CAROLINA 1.1%
1,570 South Carolina Jobs Econ Dev Auth Hosp Fac
Rev Impt Palmetto Hlth Alliance Ser A
Rfdg....................................... 6.250 08/01/31 1,684,045
2,965 South Carolina Jobs Econ Dev Auth Student
Hdg Rev Drivers Ser 650 (Inverse Fltg)
(Acquired 12/17/04, Cost $3,421,808) (MBIA
Insd) (a) (c).............................. 7.381 08/01/12 3,386,890
1,000 South Carolina Jobs Econ Dev Episcopal Home
Still Proj A............................... 6.000 05/15/17 1,014,270
2,000 South Carolina Jobs Econ Dev First Mtg
Westley Commons Proj....................... 7.750 10/01/24 2,150,860
2,000 South Carolina Jobs Econ Dev First Mtg
Westley Commons Proj....................... 8.000 10/01/31 2,164,060
3,000 Tobacco Settlement Rev Mgmt Auth SC Tob
Settlement Rev Ser B....................... 6.375 05/15/28 3,061,560
--------------
13,461,685
--------------
SOUTH DAKOTA 0.6%
1,010 Keystone, SD Econ Dev Rev Wtr Quality Mgmt
Corp Ser A (AMT)........................... 6.000 12/15/18 1,004,213
5,490 Sioux Falls, SD Multi-Family Hsg Inn
Westport Proj Ser A (Acquired 01/26/04,
Cost $5,647,856) (a)....................... 7.500 12/01/34 5,695,326
1,050 South Dakota St Hlth & Ed Fac Auth Rev
Sioux VY Hosp & Hlth Sys Ser A............. 5.250 11/01/34 1,066,307
--------------
7,765,846
--------------
TENNESSEE 1.4%
3,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Rfdg
(MBIA Insd)................................ 7.750 07/01/29 3,745,380
1,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev
First Mtg Mtn States Hlth Ser A Rfdg....... 7.500 07/01/33 1,181,450
1,000 Johnson City, TN Hlth & Ed Facs Brd
Retirement Fac Rev Appalachian Christian
Vlg Proj Ser A............................. 6.250 02/15/32 987,090
1,000 Shelby Cnty, TN Hlth & Ed Germantown Vlg
Ser A...................................... 7.000 12/01/23 1,021,730
1,000 Shelby Cnty, TN Hlth & Ed Germantown Vlg
Ser A...................................... 7.250 12/01/34 1,025,550
5,320 Sullivan Cnty, TN Hlth Ed & Hsg
Fac Brd Rev................................ 8.410 11/01/19 5,456,830
</Table>
See Notes to Financial Statements 31
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
TENNESSEE (CONTINUED)
$2,815 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj
Ser A (Acquired 06/08/89, Cost $2,815,000)
(a)........................................ 10.000% 11/01/19 $ 3,026,322
1,160 Trenton, TN Hlth & Ed Fac Brd Rev Inc Proj
Ser B (Acquired 06/08/89, Cost $1,160,000)
(a) (f) (g)................................ 10.000 11/01/20 123,737
--------------
16,568,089
--------------
TEXAS 7.2%
560 Abia Dev Corp TX Arpt Fac Rev Austin Belly
Port Dev LLC Proj Ser A (AMT).............. 6.250 10/01/08 557,749
3,000 Abia Dev Corp TX Arpt Fac Rev Austin Belly
Port Dev LLC Proj Ser A (AMT).............. 6.500 10/01/23 2,841,270
1,000 Atlanta, TX Hosp Auth Fac Rev.............. 6.700 08/01/19 972,120
2,035 Atlanta, TX Hosp Auth Fac Rev.............. 6.750 08/01/29 1,950,527
1,000 Austin-Bergstorm Landhost Enterprises Inc
TX Arpt Hotel Sr Ser A (e)................. 6.750 04/01/27 477,890
995 Bexar Cnty, TX Hsg Fin Corp Multi-Family
Hsg Rev Woodland Ridge Apt Proj Ser A...... 7.000 01/01/39 960,603
2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp..... 5.375 01/01/32 2,028,400
735 Comal Cnty, TX Hlth Fac Dev Hlthcare Sys
McKenna Mem Proj Ser A..................... 6.250 02/01/32 756,168
1,825 Dallas Cnty, TX Flood Ctl Dist No 1 Cap
Apprec Rfdg (Acquired 08/28/89, Cost
$1,062,379) (a)............................ * 08/01/11 1,131,993
3,445 Dallas Cnty, TX Flood Ctl Dist No 1 Rfdg... 7.250 04/01/32 3,549,073
2,970 Dallas, TX Wtrwks & Swr Sys Rev Rfdg
(Prerefunded @ 10/01/10)................... 5.750 10/01/17 3,311,906
2,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth
Sys Ser A.................................. 7.000 09/01/25 2,679,550
3,500 Decatur, TX Hosp Auth Hosp Wise Regl Hlth
Sys Ser A.................................. 7.125 09/01/34 3,743,775
6,400 Houston, TX Arpt Sys Rev Spl Fac
Continental Airl Ser B (AMT)............... 6.125 07/15/17 5,302,656
3,000 Houston, TX Arpt Sys Rev Spl Fac
Continental Airl Ser C (AMT)............... 5.700 07/15/29 2,143,350
6,580 Houston, TX Arpt Sys Rev Spl Fac
Continental Airl Ser E (AMT)............... 6.750 07/01/29 5,448,635
1,750 Houston, TX Arpt Sys Rev Sub Lien Ser A
(AMT) (FSA Insd)........................... 5.125 07/01/32 1,777,598
3,000 Houston, TX Hlth Fac Dev Corp Buckingham Sr
Living Cmnty Ser A......................... 7.125 02/15/34 3,210,720
3,750 Lower CO River Auth TX Rev Ser A Rfdg
(Inverse Fltg) (Acquired 10/20/99, Cost
$3,784,875) (FSA Insd) (a) (c)............. 8.793 05/15/15 4,500,488
</Table>
32 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$8,880 Lower CO River Auth TX Rev Ser A Rfdg
(Inverse Fltg) (Acquired 10/20/99, Cost
$9,015,323) (FSA Insd) (a) (c)............. 8.793% 05/15/14 $ 10,650,672
1,445 Lubbock, TX Hlth Fac Dev Corp Rev First Mtg
Carillon Proj Ser A (e).................... 6.500 07/01/19 1,201,084
2,270 Lufkin, TX Hlth Fac Dev Corp Hlth Sys Rev
Mem Hlth Sys of East TX Rfdg............... 5.700 02/15/28 2,309,952
2,275 Meadow Parc Dev Inc TX Multi-Family Rev Hsg
Meadow Parc Apt Proj....................... 6.500 12/01/30 2,078,417
2,500 Metropolitan Hlth Fac Dev Corp TX Wilson N
Jones Mem Hosp Proj........................ 7.250 01/01/31 2,476,000
2,820 Midlothian, TX Dev Auth Tax Increment
Contract Rev............................... 6.700 11/15/23 2,908,153
2,000 Midlothian, TX Dev Auth Tax Increment
Contract Rev............................... 7.875 11/15/26 2,210,380
1,500 Midlothian, TX Dev Auth Tax Increment
Contract Rev (Acquired 12/02/04, Cost
$1,500,000) (a)............................ 6.200 11/15/29 1,502,340
1,000 Richardson, TX Hosp Auth Rev Baylor &
Richardson Impt Rfdg....................... 5.625 12/01/28 1,027,140
250 San Antonio, TX Hlth Fac Dev Corp Rev
Encore Nursing Ctr Part.................... 8.250 12/01/19 251,203
1,549 Texas Gen Svcs Comm Part Interests......... 7.250 08/01/11 1,570,738
1,850 Texas St Dept Hsg & Cmnty Affairs Home Mtg
Rev (AMT) (GNMA Collateralized)............ 6.900 07/02/24 1,868,297
30 Texas St Higher Ed Coordinating Brd College
Student Ln Rev (AMT)....................... 7.849 10/01/25 30,183
1,675 Texas St Pub Fin Auth Sch Excellence Ed
Proj Ser A (Acquired 12/02/04, Cost
$1,654,253) (a)............................ 7.000 12/01/34 1,658,250
1,500 Texas St Student Hsg Corp MSU Proj
Midwestern St Univ......................... 6.500 09/01/34 1,574,055
2,950 Tomball, TX Hosp Auth Rev Hosp Tomball Regl
Hosp....................................... 6.000 07/01/29 2,960,325
965 Wichita Cnty, TX Hlth Fac Rolling Meadows
Fac Ser A Rfdg............................. 6.250 01/01/28 954,491
2,500 Woodhill Pub Fac Corp TX Hsg-Woodhill Apt
Proj....................................... 7.500 12/01/29 2,498,225
--------------
87,074,376
--------------
UTAH 0.3%
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (f)................................... 7.800 09/01/15 205,000
1,165 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (f)................................... 8.000 09/01/20 238,825
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac
Proj (f)................................... 7.800 09/01/25 205,000
</Table>
See Notes to Financial Statements 33
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
UTAH (CONTINUED)
$2,430 Utah St Hsg Fin Agy Rev RHA Cmnty Svc Proj
Ser A...................................... 6.875% 07/01/27 $ 2,363,637
80 Utah St Hsg Fin Agy Single Family Mtg Mezz
A1 (AMBAC Insd)............................ 6.100 07/01/13 82,534
--------------
3,094,996
--------------
VERMONT 0.2%
1,015 Vermont Ed & Hlth Bldg Fin Agy Rev Hlthcare
Fac Copley Manor Proj (e).................. 6.250 04/01/29 711,799
1,000 Vermont Ed & Hlth Bldg Fin Agy Rev VT
Council Dev Mental Hlth Ser A.............. 6.000 12/15/09 1,071,610
1,000 Vermont Ed & Hlth Bldg Fin Bennington
College Proj............................... 6.625 10/01/29 1,012,170
--------------
2,795,579
--------------
VIRGINIA 1.0%
930 Greensville Cnty, VA Indl Dev Wheeling
Steel Proj Ser A (AMT)..................... 7.000 04/01/14 656,599
2,500 Henrico Cnty, VA Econ Dev Auth Residential
Care Fac Rev Utd Methodist Ser A Rfdg...... 6.500 06/01/22 2,625,225
6,000 Peninsula Port Auth VA Residential Care Fac
Rev VA Baptist Homes Ser A................. 7.375 12/01/32 6,286,320
1,000 Roanoke Cnty, VA Indl Dev Auth Glebe Inc
Ser A...................................... 6.300 07/01/35 1,013,860
1,700 Virginia Small Business Fin Auth Rev Indl
Dev SIL Clean Wtr Proj (AMT)............... 7.250 11/01/24 1,693,166
--------------
12,275,170
--------------
WASHINGTON 1.7%
6,580 Energy Northwest WA Elec Rev Proj No 3 Ser
A Rfdg (FSA Insd).......................... 5.500 07/01/17 7,174,635
1,000 King Cnty, WA Pub Hosp Dist No 004
Snoqualmie Vly Hosp........................ 7.250 12/01/15 1,032,710
1,000 Port Seattle, WA Spl Fac Rev Northwest Airl
Proj (AMT)................................. 7.125 04/01/20 949,790
2,000 Port Seattle, WA Spl Fac Rev Northwest Airl
Proj (AMT)................................. 7.250 04/01/30 1,882,920
8,830 Tobacco Settlement Auth WA Asset Bkd....... 6.625 06/01/32 9,138,079
--------------
20,178,134
--------------
WISCONSIN 1.4%
800 Baldwin, WI Hosp Rev Mtg Ser A............. 6.125 12/01/18 800,792
1,000 Baldwin, WI Hosp Rev Mtg Ser A............. 6.375 12/01/28 1,002,190
1,745 Milwaukee, WI Rev Sr Air Cargo (AMT)....... 6.500 01/01/25 1,827,940
2,000 Wisconsin St Hlth & Ed Fac Auth Rev Aurora
Hlthcare Inc Ser A......................... 5.600 02/15/29 2,032,180
3,000 Wisconsin St Hlth & Ed Fac Auth Rev
Milwaukee Catholic Home Inc Proj........... 7.500 07/01/26 3,062,790
</Table>
34 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (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 $ 1,033,430
1,000 Wisconsin St Hlth & Ed Fac Divine Savior
Hlthcare Ser C............................. 7.500 05/01/32 1,046,170
2,000 Wisconsin St Hlth & Ed Fac Fort Hlthcare
Inc Proj................................... 6.100 05/01/34 2,093,520
1,500 Wisconsin St Hlth & Ed Fac Southwest Hlth
Ctr Ser A.................................. 6.125 04/01/24 1,476,540
750 Wisconsin Hlth & Ed Fac Eastcastle Place
Inc Proj................................... 6.000 12/01/24 747,015
1,500 Wisconsin St Hlth & Ed Fac Beaver Dam Cmnty
Hosp Inc Ser A............................. 6.750 08/15/34 1,541,430
--------------
16,663,997
--------------
WYOMING 0.1%
1,500 Teton Cnty, WY Hosp Dist Hosp Saint Johns
Med Ctr.................................... 6.750 12/01/27 1,514,985
--------------
PUERTO RICO 1.0%
5,000 Puerto Rico Elec Pwr Auth Ser RR (FGIC
Insd) (b).................................. 5.000 07/01/35 5,221,950
2,465 Puerto Rico Port Auth Rev Spl Fac Amern
Airl Ser A (AMT)........................... 6.250 06/01/26 1,733,782
5,000 Puerto Rico Pub Bldg Auth Rev Govt Fac Ser
I.......................................... 5.250 07/01/33 5,246,100
--------------
12,201,832
--------------
U.S. VIRGIN ISLANDS 0.3%
2,500 Northern Mariana Islands Ser A............. 7.375 06/01/30 2,705,150
1,000 Virgin Islands Pub Fin Auth Resr
Secd-Hovensa Refinery (AMT)................ 5.875 07/01/22 1,061,190
--------------
3,766,340
--------------
TOTAL LONG-TERM INVESTMENTS 100.4%
(Cost $1,212,683,020)...................................................... 1,217,091,119
SHORT-TERM INVESTMENTS 0.6%
(Cost $6,800,000).......................................................... 6,800,000
--------------
TOTAL INVESTMENTS 101.0%
(Cost $1,219,483,020)...................................................... 1,223,891,119
LIABILITIES IN EXCESS OF OTHER ASSETS (1.0%)................................ (12,108,808)
--------------
NET ASSETS 100.0%........................................................... $1,211,782,311
==============
</Table>
See Notes to Financial Statements 35
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
Percentages are calculated as a percentage of net assets.
* 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 11.4% of net
assets.
(b) Securities purchased on a when-issued or delayed delivery basis.
(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 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 unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly.
(d) The Fund owns 100% of the bond issuance.
(e) Interest is accruing at less than the stated coupon.
(f) Non-income producing security.
(g) This borrower has filed for protection in federal bankruptcy court.
(h) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(i) Payment-in-kind security.
(j) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(k) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
36 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $1,219,483,020)..................... $1,223,891,119
Cash........................................................ 130,600
Receivables:
Interest.................................................. 21,939,647
Fund Shares Sold.......................................... 7,009,566
Investments Sold.......................................... 899,000
Other....................................................... 158,889
--------------
Total Assets............................................ 1,254,028,821
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 36,171,073
Fund Shares Repurchased................................... 2,237,390
Income Distributions...................................... 1,820,940
Distributor and Affiliates................................ 679,058
Investment Advisory Fee................................... 477,518
Variation Margin on Futures............................... 470,713
Trustees' Deferred Compensation and Retirement Plans........ 220,430
Accrued Expenses............................................ 169,388
--------------
Total Liabilities....................................... 42,246,510
--------------
NET ASSETS.................................................. $1,211,782,311
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,313,106,149
Net Unrealized Appreciation................................. 3,731,262
Accumulated Undistributed Net Investment Income............. 47,024
Accumulated Net Realized Loss............................... (105,102,124)
--------------
NET ASSETS.................................................. $1,211,782,311
==============
MAXIMUM OFFERING PRICE PER COMMON SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $953,452,128 and 72,634,596 shares of
beneficial interest issued and outstanding)............. $ 13.13
Maximum sales charge (4.75%* of offering price)......... .65
--------------
Maximum offering price to public........................ $ 13.78
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $133,464,620 and 10,172,080 shares of
beneficial interest issued and outstanding)............. $ 13.12
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $124,865,563 and 9,446,280 shares of
beneficial interest issued and outstanding)............. $ 13.22
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 37
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 34,370,809
------------
EXPENSES:
Investment Advisory Fee..................................... 2,548,118
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,042,491, $645,976 and $512,465,
respectively)............................................. 2,200,932
Shareholder Services........................................ 267,940
Legal....................................................... 85,992
Custody..................................................... 43,120
Trustees' Fees and Related Expenses......................... 14,731
Other....................................................... 232,805
------------
Total Expenses.......................................... 5,393,638
Less Credits Earned on Cash Balances.................... 20,072
------------
Net Expenses............................................ 5,373,566
------------
NET INVESTMENT INCOME....................................... $ 28,997,243
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (6,389,436)
Futures................................................... 2,575,122
------------
Net Realized Loss........................................... (3,814,314)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (10,959,084)
------------
End of the Period:
Investments............................................. 4,408,099
Futures................................................. (676,837)
------------
3,731,262
------------
Net Unrealized Appreciation During the Period............... 14,690,346
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 10,876,032
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 39,873,275
============
</Table>
38 See Notes to Financial Statements
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, 2005 SEPTEMBER 30, 2004
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 28,997,243 $ 45,887,234
Net Realized Loss.................................... (3,814,314) (27,452,425)
Net Unrealized Appreciation During the Period........ 14,690,346 26,901,695
-------------- -------------
Change in Net Assets from Operations................. 39,873,275 45,336,504
-------------- -------------
Distributions from Net Investment Income:
Class A Shares..................................... (24,626,335) (38,473,790)
Class B Shares..................................... (3,287,099) (6,237,920)
Class C Shares..................................... (2,577,704) (2,997,702)
-------------- -------------
Total Distributions.................................. (30,491,138) (47,709,412)
-------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 9,382,137 (2,372,908)
-------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 330,117,823 368,145,718
Net Asset Value of Shares Issued Through
Dividend Reinvestment.............................. 20,123,288 30,424,886
Cost of Shares Repurchased........................... (121,727,116) (133,088,608)
-------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 228,513,995 265,481,996
-------------- -------------
TOTAL INCREASE IN NET ASSETS......................... 237,896,132 263,109,088
NET ASSETS:
Beginning of the Period.............................. 973,886,179 710,777,091
-------------- -------------
End of the Period (Including accumulated
undistributed net investment income of $47,024 and
$1,540,919, respectively).......................... $1,211,782,311 $ 973,886,179
============== =============
</Table>
See Notes to Financial Statements 39
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, ------------------------------------------------
2005 2004 2003 2002 (A) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $13.00 $13.03 $13.21 $13.25 $13.27 $13.91
------ ------ ------ ------ ------ ------
Net Investment Income........... .36(c) .74(c) .79 .78 .77 .77
Net Realized and Unrealized
Gain/Loss..................... .15 -0- (.25) (.11) (.05) (.63)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .51 .74 .54 .67 .72 .14
Less Distributions from Net
Investment Income............... .38 .77 .72 .71 .74 .78
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $13.13 $13.00 $13.03 $13.21 $13.25 $13.27
====== ====== ====== ====== ====== ======
Total Return (b).................. 3.98%* 5.87% 4.21% 5.28% 5.46% 1.27%
Net Assets at End of the Period
(In millions)................... $953.5 $766.1 $560.9 $579.1 $607.1 $621.5
Ratio of Expenses to Average Net
Assets.......................... .84% .91% .89% .86% .87% .91%
Ratio of Net Investment Income to
Average Net Assets.............. 5.53% 5.74% 6.07% 5.99% 5.88% 5.91%
Portfolio Turnover................ 22%* 16% 14% 14% 22% 37%
</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 eighteen months of purchase. With
respect to shares purchased prior to December 1, 2004, 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.
(c) Based on average shares outstanding.
40 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 B SHARES MARCH 31, ------------------------------------------------
2005 2004 2003 2002 (A) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $12.99 $13.02 $13.20 $13.24 $13.27 $13.90
------ ------ ------ ------ ------ ------
Net Investment Income........... .31(c) .65(c) .69(c) .70 .68 .69
Net Realized and Unrealized
Gain/Loss..................... .15 (.01) (.25) (.12) (.06) (.64)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .46 .64 .44 .58 .62 .05
Less Distributions from Net
Investment Income............... .33 .67 .62 .62 .65 .68
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $13.12 $12.99 $13.02 $13.20 $13.24 $13.27
====== ====== ====== ====== ====== ======
Total Return (b).................. 3.59%* 5.07% 3.42% 4.49% 4.71% .48%
Net Assets at End of the Period
(In millions)................... $133.5 $123.8 $115.6 $149.5 $176.5 $221.4
Ratio of Expenses to Average Net
Assets.......................... 1.60% 1.67% 1.64% 1.62% 1.63% 1.67%
Ratio of Net Investment Income to
Average Net Assets.............. 4.78% 5.00% 5.32% 5.23% 5.12% 5.15%
Portfolio Turnover................ 22%* 16% 14% 14% 22% 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 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.
See Notes to Financial Statements 41
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, ------------------------------------------------
2005 2004 2003 2002 (A) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $13.09 $13.11 $13.20 $13.24 $13.27 $13.90
------ ------ ------ ------ ------ ------
Net Investment Income........... .31(d) .64(d) .79(d) .70 .68 .69
Net Realized and Unrealized
Gain/Loss..................... .15 .01 (.26) (.12) (.06) (.64)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .46 .65 .53 .58 .62 .05
Less Distributions from Net
Investment Income............... .33 .67 .62 .62 .65 .68
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $13.22 $13.09 $13.11 $13.20 $13.24 $13.27
====== ====== ====== ====== ====== ======
Total Return (b).................. 3.56%* 5.10%(e) 4.10%(c) 4.49% 4.71% .48%
Net Assets at End of the Period
(In millions)................... $124.9 $ 84.0 $ 34.3 $ 38.5 $ 44.4 $ 49.1
Ratio of Expenses to Average Net
Assets.......................... 1.59% 1.65%(e) 1.64% 1.62% 1.62% 1.67%
Ratio of Net Investment Income to
Average Net Assets.............. 4.77% 4.94%(e) 6.00%(c) 5.23% 5.13% 5.15%
Portfolio Turnover................ 22%* 16% 14% 14% 22% 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 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 actual 12b-1 fees of less
that 1% (See footnote 6).
42 See Notes to Financial Statements
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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. The Fund
registered Class I Shares on December 30, 2004. There were no sales of Class I
Shares for the period ended March 31, 2005.
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 U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services 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.
Legal expenditures that are expected to result in the restructuring of or a plan
of reorganization for an investment are recorded as realized losses. 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, 2005, the Fund had $30,480,257 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
incremental transfer agency costs which are unique to each class of shares.
43
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The 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, 2004, the Fund had an accumulated capital loss
carryforward for tax purposes of $72,989,958, which will expire according to the
following schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$ 9,854,061................................................. September 30, 2005
1,076,939................................................. September 30, 2006
9,610,374................................................. September 30, 2008
10,147,307................................................. September 30, 2009
16,221,240................................................. September 30, 2010
22,472,916................................................. September 30, 2011
3,607,121................................................. September 30, 2012
</Table>
At March 31, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $1,219,115,003
==============
Gross tax unrealized appreciation........................... $ 39,849,348
Gross tax unrealized depreciation........................... (35,073,232)
--------------
Net tax unrealized appreciation on investments.............. $ 4,776,116
==============
</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,
2004 is as follows:
<Table>
<Caption>
2004
Distributions paid from:
Ordinary income........................................... $115,296
Long-term capital gain.................................... -0-
--------
$115,296
========
</Table>
As of September 30, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $1,403
</Table>
44
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
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.
F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's
custody fee was reduced by $20,072 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, 2005, the Fund recognized expenses of
approximately $6,200 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is a partner of such firm and he and his law firm provide legal services as
legal counsel to the Fund.
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, 2005, the Fund recognized expenses of approximately $44,600 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, 2005, the Fund recognized expenses of approximately $222,300
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 also
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 $138,024 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2005.
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.
45
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2005, capital aggregated $1,034,009,310, $151,726,739 and
$127,370,100 for Classes A, B and C, respectively. For the six months ended
March 31, 2005, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 19,272,508 $ 252,873,528
Class B................................................... 1,971,217 25,816,152
Class C................................................... 3,892,543 51,428,143
---------- -------------
Total Sales................................................. 25,136,268 $ 330,117,823
========== =============
Dividend Reinvestment:
Class A................................................... 1,266,657 $ 16,616,131
Class B................................................... 155,665 2,040,382
Class C................................................... 111,042 1,466,775
---------- -------------
Total Dividend Reinvestment................................. 1,533,364 $ 20,123,288
========== =============
Repurchases:
Class A................................................... (6,840,481) $ (89,410,422)
Class B................................................... (1,482,100) (19,416,641)
Class C................................................... (978,262) (12,900,053)
---------- -------------
Total Repurchases........................................... (9,300,843) $(121,727,116)
========== =============
</Table>
At September 30, 2004, capital aggregated $853,930,073, $143,286,846 and
$87,375,235 for Classes A, B and C, respectively. For the year ended September
30, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 20,778,883 $ 270,278,898
Class B................................................... 2,866,387 37,221,319
Class C................................................... 4,630,792 60,645,501
----------- -------------
Total Sales................................................. 28,276,062 $ 368,145,718
=========== =============
Dividend Reinvestment:
Class A................................................... 1,924,479 $ 24,925,465
Class B................................................... 282,301 3,654,185
Class C................................................... 141,730 1,845,236
----------- -------------
Total Dividend Reinvestment................................. 2,348,510 $ 30,424,886
=========== =============
Repurchases:
Class A................................................... (6,820,426) $ (88,176,943)
Class B................................................... (2,498,494) (32,303,015)
Class C................................................... (970,228) (12,608,650)
----------- -------------
Total Repurchases........................................... (10,289,148) $(133,088,608)
=========== =============
</Table>
46
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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, 2005 and the
year ended September 30, 2004, 662,592 and 351,113 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, 2005 and the year ended September 30, 2004,
45,914 and 0 Class C 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 C 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, 2005, Van Kampen, as distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $627,000 and CDSC on redeemed shares of approximately $110,000.
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 $488,841,428 and $234,092,284,
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.
47
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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 futures contract. In this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
futures contract. Risks may arise as a result of the potential inability of the
counter parties to meet the terms of their contracts.
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
Securities 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 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, 2005,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2004........................... -0-
Futures Opened.............................................. 2,700
Futures Closed.............................................. (1,850)
------
Outstanding at March 31, 2005............................... 850
======
</Table>
The futures contracts outstanding as of March 31, 2005, and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Bonds Futures June 2005 (Current Notional
Value of $111,375 per contract)........................... 450 $(453,362)
U.S. Treasury Notes 10-Year Futures June 2005 (Current
Notional Value of $109,266 per contract).................. 400 (223,475)
--- ---------
850 $(676,837)
=== =========
</Table>
48
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
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 0.25% of Class A average daily net
assets and up to 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 $2,710,700 and $325,900
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 the fees for the six months ended March 31, 2005, are payments
retained by Van Kampen of approximately $816,800 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $38,100.
7. LEGAL MATTERS.
The Adviser, certain affiliates of the Adviser, 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. The consolidated action also names as defendants certain
individual Trustees and Directors of certain 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 steer investors to the funds advised by the Adviser or its
affiliates 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 alleged efforts to steer
investors to these funds. The complaint seeks, among other things, unspecified
compensatory damages, rescissionary damages, fees and costs.
The Adviser and certain affiliates of the Adviser are also named as
defendants in a derivative suit which additionally names as defendants certain
individual Trustees of certain Van Kampen funds; the named investment companies,
including the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of proprietary mutual funds. The
complaint also alleges that the Van Kampen funds paid excessive commissions to
Morgan Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current Trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
complaint has been coordinated with
49
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
the consolidated complaint described in the preceding paragraph. Plaintiff has
sought leave to file a second amended derivative complaint that alleges that the
Adviser permitted or recklessly disregarded market timing and later trading in
its proprietary mutual funds in order to increase assets under management and
fees. However, pursuant to an agreement between the parties, the plaintiff's
proposed second amended derivative complaint was withdrawn and the allegations
regarding market timing and late trading asserted therein were filed in a
separate complaint and coordinated with other cases related to market timing
that have been centralized in a federal court.
The defendants have moved to dismiss each of these actions and otherwise
intend to defend them vigorously. While the defendants believe that they have
meritorious defenses, the ultimate outcome of these matters is not presently
determinable at this early stage of litigation, and no provision has been made
in the Fund's financial statements for the effect, if any, of these matters.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
50
VAN KAMPEN STRATEGIC MUNICIPAL INCOME FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN* - President and Chief Executive Officer
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
Executive Vice President and Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
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 REGISTERED
PUBLIC ACCOUNTING FIRM
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.
51
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC. 139, 399, 539
STMI SAR 5/05 RN05-01068P-Y03/05
(VAN KAMPEN INVESTMENTS LOGO)
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, 2005.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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.
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 3/31/05
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 12/13/85 since 4/30/93 since 8/13/93
- --------------------------------------------------------------------------------------------
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 7.00% 6.82% 5.00% 5.00% 4.51% 4.51%
10-year 5.87 5.52 5.41 5.41 5.11 5.11
5-year 6.10 5.40 5.51 5.51 5.33 5.33
1-year 2.39 -0.94 2.43 -0.53 1.74 0.76
6-month 1.08 -2.23 1.08 -1.89 0.71 -0.28
- --------------------------------------------------------------------------------------------
SEC Yield 2.97% 2.29% 2.32%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS 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.
Performance of share classes will vary due to differences in sales charges and
expenses. 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 up to 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 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 does not include any expenses,
fees or sales charges, which would lower performance. The index is unmanaged and
should not be considered an investment. It is not possible to invest directly in
an index. Source for index performance: Lipper Inc.
1
Fund Report
FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005
Van Kampen California Insured Tax Free Fund is managed by the Adviser's
Municipal Fixed-Income team.(1) Members of the team include Dennis S. Pietrzak
and John R. Reynoldson, Executive Directors of the Adviser; and Joseph A.
Piraro, Vice President of the Adviser.
MARKET CONDITIONS
The six-month period ended March 31, 2005, was characterized by continued
short-term interest rate increases, and the specter of rising inflation
resulting from record-high crude oil prices. The Federal Open Market Committee
(the "Fed") raised the federal funds target rate 100 basis points during the
period through a series of four, "measured" 0.25 percent tightenings to 2.75
percent by the end of March. Although rates in the short and intermediate areas
of the yield curve shifted upward as the Fed tightened, long-term interest rates
fell as buyers did not seem deterred by the prospect of rising inflation. As a
result, the yield curve (the difference between short and longer-term yields)
flattened and the long end of the municipal market handily outperformed the
shorter end.
The municipal market in total posted positive returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a slightly negative showing. Within the investment-grade segment of the
market, yield differentials between BBB-rated municipals and AAA-rated
securities were flat to slightly wider, though BBB-rated securities still
outperformed high grades due to their higher coupons, while securities rated
below investment grade strongly outperformed as investors sought out their
higher yields.
The Fed's interest rate hikes did not dampen investors' appetites for municipal
bonds, as net inflows into municipal bond funds topped $700 million during the
period. The supply of new issues was modest during the closing months of 2004
(the first half of the period) before soaring in the opening months of 2005 as
long-term issuers rushed to bring securities to market in anticipation of
additional interest rate increases in the near term.
From a credit perspective, the state of California has made some positive
strides. The California government's measures to stem current and projected
budget deficits have been met with broad approval by investors. This in turn has
resulted in improved demand for California bonds and a general rise in bond
prices. During the period, the state maintained its position as the leading
issuer of new municipal debt. More than half of the new issuance which came to
market was protected by credit insurance, which was helpful for us as we
attempted to put cash to work.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
The fund returned 1.08 percent for the six months ended March 31, 2005 (Class A
shares, unadjusted for sales charge). In comparison, the fund's benchmark index,
the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
<Table>
<Caption>
- ------------------------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
1.08% 1.08% 0.71% 1.21%
- ------------------------------------------------------------------------------
</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
INDEX DEFINITIONS.
The fund's performance relative to its benchmark was in large part the result of
its positioning along the yield curve. One of our primary strategies in managing
the fund was to take advantage of compelling opportunities in the 25- to 30-year
segment of the market. We focused here on purchasing securities with premium
(that is, above-market) coupons and moderate interest rate sensitivity. While we
believe these securities offer strong total return potential, they did boost the
fund's exposure during the period to a segment of the California market which
underperformed relative to the broader, national benchmark.
Our purchases of these securities were funded by the proceeds of sales of
several shorter-maturity positions, many of which had been refunded during the
period. This was part of our ongoing strategy of positioning the fund for an
environment of rising short-term interest rates by limiting the fund's exposure
to that segment of the market.
In terms of purchases, we continued to favor the essential services segments of
the market, such as education and transportation. In turn, we avoided the
housing sector out of concerns about those bonds' structural characteristics. We
also avoided zero coupon bonds. This approach resulted in a portfolio that
remained well diversified across the major segments of the California municipal
bond market. Tax districts, public education, higher education, public building
and general purpose represented the portfolio's top exposures. Because the fund
focuses on bonds that offer the credit enhancement of insurance, the entire
portfolio was rated AAA at the close of the period.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the fund in the future.
3
<Table>
RATINGS ALLOCATIONS AS OF 3/31/05 TOP 5 SECTORS AS OF 3/31/05
AAA/Aaa 100% Tax District 21.8%
Public Education 18.9
Higher Education 13.6
Public Building 13.4
General Purpose 12.3
</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 industries shown above. Ratings allocations is as a percentage
of total investments. Top 5 sectors 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. Ratings allocations based
upon ratings as issued by Standard & Poor's and Moody's, respectively.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public Web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's Web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
You can also request copies of these materials, upon payment of a
duplicating fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
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 1-800-341-2911 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.
5
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our Web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov
6
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
cost, including sales charges (loads) on purchase payments of Class A Shares and
contingent deferred sales charge on redemptions of Class B and C Shares; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other Fund expenses. This example is intended to help you understand your
ongoing cost (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 10/01/04 - 03/31/05.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, and $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the second line
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
-------------------------------------------------
10/1/04 3/31/05 10/1/04-3/31/05
Class A
Actual..................................... $1,000.00 $1,010.79 $ 4.51
Hypothetical............................... 1,000.00 1,020.43 4.53
(5% annual return before expenses)
Class B
Actual..................................... 1,000.00 1,010.75 4.56
Hypothetical............................... 1,000.00 1,021.03 4.58
(5% annual return before expenses)
Class C
Actual..................................... 1,000.00 1,007.07 7.76
Hypothetical............................... 1,000.00 1,017.23 7.80
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.90%, 0.91%,
and 1.55% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period).
Assumes all dividends and distributions were reinvested.
7
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS 100.3%
$1,925 Alhambra, CA City Elem Sch Dist Cap Apprec Ser A
(FSA Insd) (a).................................. * 09/01/20 $ 903,787
1,000 Anaheim, CA Pub Fin Auth Rev Elec Sys Generation
Ser B Rfdg (FSA Insd)........................... 5.000% 10/01/16 1,060,590
2,000 Anaheim, CA Pub Fin Auth Tax Alloc Rev (MBIA
Insd) (b)....................................... 11.021 12/28/18 2,421,440
1,430 Bay Area Govt Assn CA Lease Rev Cap Proj Ser A
(AMBAC Insd) (a)................................ 5.250 07/01/17 1,543,356
2,735 Bay Area Govt Assn CA Lease West Sacramento Ser
A (XLCA Insd) (a)............................... 5.000 09/01/29 2,801,980
1,070 Bonita, CA Uni Sch Dist Election 2004 Ser A
(MBIA Insd)..................................... 5.250 08/01/24 1,141,893
1,000 Bonita, CA Uni Sch Dist Election 2004 Ser A
(MBIA Insd)..................................... 5.000 08/01/28 1,038,860
1,730 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA
Insd) (a)....................................... 5.500 08/01/17 1,902,879
1,850 Brea & Olinda, CA Uni Sch Dist Ser A Rfdg (FSA
Insd) (a)....................................... 5.500 08/01/18 2,030,708
455 Calexico, CA Cmnty Redev Agy Tax Alloc Merged
Cent Bus & Residential Ser C (AMBAC Insd)....... 5.000 08/01/28 470,374
7,000 California Edl Fac Auth Rev Univ Of The Pacific
(MBIA Insd)..................................... 5.875 11/01/20 7,780,080
2,000 California Infrastructure & Econ Dev Bk Rev Bay
Area Toll Brdgs First Lien Ser A (FGIC Insd).... 5.000 07/01/29 2,068,840
1,050 California Spl Dist Assn Fin Corp Ctf Part Pgm
Ser DD (FSA Insd) (a)........................... 5.625 01/01/27 1,108,180
1,250 California St (FGIC Insd)....................... 6.250 09/01/12 1,456,375
2,385 California St (XLCA Insd) (a)................... 6.250 09/01/12 2,768,675
1,200 California St Dept Trans Ctf Ser A Rfdg (MBIA
Insd)........................................... 5.250 03/01/16 1,269,252
2,000 California St Dept Vet Affairs Ser A (AMBAC
Insd)........................................... 5.300 12/01/21 2,088,060
1,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.500 05/01/16 1,106,490
1,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.375 05/01/18 1,086,320
2,500 California St Dept Wtr Res Pwr Supply Rev Rite
Ser B (MBIA Insd) (Acquired 09/08/03, Cost
$2,676,175) (a) (b) (c)......................... 7.816 05/01/11 2,925,450
2,500 California St Pub Wks Brd Lease Dept Corrections
Ten Admin Ser A (AMBAC Insd).................... 5.250 03/01/17 2,661,475
4,125 California St Pub Wks Brd Lease Rev CA St Univ
Ser A Rfdg (AMBAC Insd) (a)..................... 5.500 10/01/14 4,365,034
7,750 California St Rfdg (FGIC Insd).................. 5.000 02/01/23 8,014,662
1,000 California St Univ Rev & Colleges Systemwide Ser
A (AMBAC Insd).................................. 5.375 11/01/18 1,090,920
</Table>
8 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$1,000 California St Univ Rev Systemwise Ser A (AMBAC
Insd) (d)....................................... 5.000% 11/01/28 $ 1,041,370
1,000 Carson, CA Redev Agy Redev Proj Area No 1 Tax
Alloc (MBIA Insd)............................... 5.500 10/01/15 1,121,200
2,000 Castaic Lake Wtr Agy CA Ctf Part Wtr Sys Impt
Proj Ser A Rfdg (MBIA Insd)..................... 7.000 08/01/12 2,421,800
3,000 Castaic Lake Wtr Agy CA Rev Ctf Part Ser A (MBIA
Insd)........................................... 5.250 08/01/23 3,178,140
1,415 Cerritos, CA Cmnty College Election 2004 Ser A
(MBIA Insd)..................................... 5.000 08/01/26 1,468,897
1,735 Cerritos, CA Cmnty College Election 2004 Ser A
(MBIA Insd)..................................... 5.000 08/01/28 1,797,061
1,205 Channel Islands Beach, CA Cmnty Svcs Dist Ctf
Part CA Spl Dist Fin Proj BB (FSA Insd) (a)..... 5.700 09/01/21 1,295,929
1,160 Coachella, CA Fin Auth Tax Proj 1 & 2 Ser A Rfdg
(XLCA Insd) (a)................................. 5.250 12/01/30 1,222,396
3,400 Contra Costa, CA Cmnty College Election 2002
(MBIA Insd)..................................... 5.000 08/01/29 3,529,506
1,000 East Bay, CA Muni Util Dist Wtr Sys Rev (MBIA
Insd)........................................... 5.000 06/01/21 1,041,690
1,300 Folsom Cordova, CA Uni Sch Dist Sch Fac Impt
Dist No 2 Ser A (MBIA Insd)..................... 5.375 10/01/17 1,421,160
1,360 Folsom, CA Pub Fin Auth City Hall & Cmnty Ctr
Rfdg (FSA Insd) (a)............................. 5.000 10/01/16 1,449,814
1,480 Fontana, CA Redev Agy Tax Alloc Dwntwn Redev
Proj Rfdg (MBIA Insd)........................... 5.000 09/01/21 1,528,381
1,040 Fontana, CA Uni Sch Dist Rfdg (MBIA Insd)....... 5.250 05/01/20 1,119,685
1,850 Franklin McKinley CA Sch Dist Election 2004 Ser
A (FGIC Insd) (d)............................... 5.000 08/01/29 1,905,426
650 Fresno, CA Jt Pwrs Fin Auth Ser A (FSA Insd).... 5.000 06/01/17 686,666
590 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)
(a)............................................. 5.900 08/01/17 692,153
630 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)
(a)............................................. 5.900 08/01/18 741,491
675 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)
(a)............................................. 5.900 08/01/19 797,026
720 Fresno, CA Uni Sch Dist Ser C Rfdg (MBIA Insd)
(a)............................................. 5.900 08/01/20 853,243
2,000 Glendale, CA Redev Agy Tax Ctr Glendale Redev
Proj (MBIA Insd)................................ 5.250 12/01/20 2,140,680
2,425 Glendora, CA Pub Fin Auth Tax Alloc Proj No 1
Ser A (MBIA Insd)............................... 5.000 09/01/24 2,511,669
1,750 Hacienda La Puente, CA Uni Sch Dist Ser A (MBIA
Insd)........................................... 5.500 08/01/20 1,909,547
2,230 Hanford, CA High Sch Dist Election 1998 Ser C
(MBIA Insd) (a)................................. 5.700 08/01/28 2,486,851
</Table>
See Notes to Financial Statements 9
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$1,250 Hemet, CA Uni Sch Dist Ctf Part Nutrition Ctr
Proj (FSA Insd)................................. 5.875% 04/01/27 $ 1,333,588
2,500 Huntington Beach, CA High Election 2004 (FSA
Insd)........................................... 5.000 08/01/26 2,602,975
2,000 Imperial Irr Dist CA Ctf Part Elec Sys Proj (FSA
Insd)........................................... 5.250 11/01/23 2,119,620
1,950 Imperial Irr Dist CA Ctf Part Wtr Sys Proj
(AMBAC Insd) (a)................................ 5.000 07/01/19 2,037,575
2,000 Inglewood, CA Redev Agy Tax Alloc Merged Redev
Proj Ser A Rfdg (AMBAC Insd).................... 5.250 05/01/23 2,199,080
1,715 Irvine, CA Pub Fac & Infrastructure Ser B (AMBAC
Insd) (a)....................................... 5.000 09/02/23 1,773,722
2,000 La Canada, CA Uni Sch Dist Election 2004 Ser A
(MBIA Insd)..................................... 5.500 08/01/28 2,188,420
2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.250 09/01/24 2,130,620
2,000 La Quinta, CA Fin Auth Loc Ser A (AMBAC Insd)... 5.000 09/01/29 2,070,560
2,000 La Quinta, CA Redev Agy Tax Alloc Redev Proj
Area No 1 (AMBAC Insd).......................... 5.000 09/01/22 2,089,280
1,000 Livermore-Amador Vly Wtr Mgmt Agy CA Swr Rev Ser
A (AMBAC Insd).................................. 5.250 08/01/16 1,083,520
1,500 Long Beach Ca Bd Fin Auth Rev Redev Hsg & Gas
Util Fing A 1 (AMBAC Insd)...................... 5.000 08/01/35 1,539,495
1,000 Long Beach, CA Bd Fin Auth Lease Rev Rainbow
Harbor Refin Proj Ser A (AMBAC Insd)............ 5.250 05/01/24 1,063,030
1,260 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac
Proj (AMBAC Insd) (a)........................... 5.250 11/01/16 1,370,263
1,545 Long Beach, CA Bd Fin Auth Pub Lease Safety Fac
Proj (AMBAC Insd) (a)........................... 5.250 11/01/20 1,654,340
2,740 Los Angeles Cnty, CA Ctf Part Antelope Vly
Courthouse Ser A (AMBAC Insd)................... 5.750 11/01/16 3,033,290
1,000 Los Angeles Cnty, CA Ctf Part Disney Pkg Proj
Rfdg (AMBAC Insd)............................... 4.750 03/01/23 1,005,420
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 1,034,900
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 1,312,570
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 1,061,240
1,265 Los Angeles Cnty, CA Schs Regionalized Business
Svcs Ctf Partn Cap Apprec Pooled Fin Ser A
(AMBAC Insd).................................... * 08/01/24 465,798
237 Los Angeles Cnty, CA Tran Comm Lease Rev RR
Lease Ltd (FSA Insd)............................ 7.375 12/15/06 239,387
3,000 Los Angeles, CA Cmnty College Election 2001 Ser
A Rfdg (FSA Insd)............................... 5.000 08/01/25 3,139,110
1,975 Los Angeles, CA Ctf Part Real Ppty Pgm Ser T
(MBIA Insd) (a)................................. 5.000 02/01/19 2,061,347
</Table>
10 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$2,000 Los Angeles, CA Dept Wtr & Pwr Sys Ser C (MBIA
Insd)........................................... 5.000% 07/01/26 $ 2,067,960
2,380 Los Angeles, CA Mtg Rev FHA Security 8 Asstd
Proj Ser A Rfdg (MBIA Insd)..................... 6.100 07/01/25 2,386,831
1,375 Los Angeles, CA Spl Assmt Landscaping & Ltg Dist
No 96 Ser 1 (AMBAC Insd) (a).................... 5.000 03/01/21 1,425,765
1,000 Lynwood, CA Uni Sch Dist 2002 Election Ser A
(FSA Insd)...................................... 5.000 08/01/27 1,036,120
1,500 Modesto, CA Irr Dist Ctf Part Cap Impts Ser A
(FSA Insd)...................................... 5.250 07/01/18 1,610,415
1,105 Monrovia, CA Fin Auth Lease Rev Hillside
Wilderness Preserve (AMBAC Insd)................ 5.000 12/01/20 1,165,145
2,000 Montclair, CA Redev Agy Tax Redev Proj No V Rfdg
(MBIA Insd)..................................... 5.000 10/01/20 2,082,440
1,000 Mount Pleasant, CA Elem Sch Dist 1998 Election
Ser C (FSA Insd)................................ 5.500 03/01/26 1,081,760
1,570 Mountain View, CA Shoreline Tax Alloc Ser A
(MBIA Insd) (a)................................. 5.250 08/01/16 1,702,806
370 M-S-R Pub Pwr Agy CA San Juan Proj Rev Adj Sub
Lien Ser E (MBIA Insd).......................... 6.000 07/01/22 375,624
1,105 National City, CA Cmnty Dev Com Redev Proj Ser B
Rfdg (AMBAC Insd)............................... 5.250 08/01/32 1,168,670
2,000 Natomas, CA Uni Sch Dist Rfdg (FGIC Insd)....... 5.250 09/01/16 2,157,640
1,250 North City West, CA Sch Fac Fin Auth Spl Tax Ser
B Rfdg (FSA Insd)............................... 5.750 09/01/15 1,324,288
2,000 North Orange Cnty, CA Cmnty Rfdg (MBIA Insd)
(d)............................................. 5.000 08/01/23 2,101,200
1,000 Novato, CA Uni Sch Dist (FSA Insd) (d).......... 5.000 08/01/28 1,038,860
3,915 Oak Grove, CA Sch Dist 1995 Election (FGIC
Insd)........................................... 5.250 08/01/25 4,141,052
1,000 Oakland, CA Uni Sch Dist Alameda Cnty (FSA
Insd)........................................... 5.000 08/01/17 1,046,710
1,300 Oceanside, CA Ctf Part Ser A Rfdg (AMBAC
Insd)........................................... 5.200 04/01/23 1,367,613
1,930 Ontario, CA Redev Fin Auth Rev Proj No 1 Ctr
City & Cimarron (MBIA Insd)..................... 5.250 08/01/15 2,091,097
3,025 Orange Cnty, CA Pub Fin Auth Lease Rev Juvenile
Justice Ctr Fac Rfdg (AMBAC Insd)............... 5.375 06/01/17 3,299,428
5,000 Orange Cnty, CA Recovery Ctf Part Ser A (MBIA
Insd)........................................... 5.800 07/01/16 5,279,000
1,145 Pacifica, CA Wastewtr Rev Rfdg (AMBAC Insd)..... 5.000 10/01/25 1,189,312
1,340 Palm Springs, CA Fin Lease Rev Convention Ctr
Proj Ser A Rfdg (MBIA Insd)..................... 5.250 11/01/19 1,439,616
2,500 Perris, CA Uni High Sch Dist Ser A (FGIC
Insd)........................................... 5.000 09/01/26 2,604,000
2,020 Pomona, CA Pub Fin Auth Rev Merged Redev Proj
Ser AD (MBIA Insd) (a).......................... 5.000 02/01/15 2,139,685
1,110 Pomona, CA Pub Fin Auth Rev Merged Redev Proj
Ser AD (MBIA Insd) (a).......................... 5.000 02/01/16 1,175,768
</Table>
See Notes to Financial Statements 11
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$1,360 Port Hueneme, CA Ctf Part Cap Impt Pgm Rfdg
(MBIA Insd)..................................... 6.000% 04/01/19 $ 1,606,813
1,055 Poway, CA Redev Agy Tax Alloc Paguay Redev Proj
(AMBAC Insd) (a)................................ 5.375 06/15/20 1,137,723
3,000 Rancho Cucamonga, CA Redev Agy Rancho Redev Proj
(MBIA Insd)..................................... 5.375 09/01/25 3,193,920
1,680 Rancho, CA Wtr Dist Spl Tax Cmnty Fac Dist 883
Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/17 1,735,843
1,000 Redding, CA Elec Sys Rev Ctf Part (Escrowed to
Maturity) (MBIA Insd) (b)....................... 10.546 07/01/22 1,425,630
1,400 Redding, CA Redev Agy Tax Alloc Canby Hilltop
Cypress Redev Ser A (MBIA Insd)................. 5.000 09/01/23 1,462,104
2,000 Rialto, CA Spl Tax Cmnty Fac Dist 87-1 Rfdg (FSA
Insd)........................................... 5.625 09/01/18 2,111,960
1,000 Riverside Cnty, CA Ctf Part Historic Courthouse
Proj (MBIA Insd)................................ 5.875 11/01/27 1,079,010
1,310 Rowland, CA Uni Sch Dist Ser A (FSA Insd)....... 5.500 09/01/20 1,430,821
1,000 Sacramento, CA City Fin Auth Rev Cap Impt (AMBAC
Insd)........................................... 5.000 12/01/33 1,024,310
1,500 San Diego Cnty, CA Ctf Part Edgemoor Proj & Regl
Sys Rfdg (AMBAC Insd)........................... 5.000 02/01/23 1,564,425
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 1,570,170
2,000 San Francisco, CA City & Cnty Second Ser Issue
26B (FGIC Insd)................................. 5.000 05/01/22 2,070,080
1,000 San Jose, CA Arpt Rev Ser A Rfdg (FSA Insd)..... 5.375 03/01/17 1,089,330
2,675 San Jose, CA Fin Auth Lease Rev Convention Ctr
Proj Ser F Rfdg (MBIA Insd)..................... 5.000 09/01/17 2,823,115
1,000 San Leandro, CA Ctf Part Lib & Fire Stations Fin
(AMBAC Insd).................................... 5.750 11/01/29 1,104,890
1,000 San Leandro, CA Jt Proj Area Fin (MBIA Insd).... 5.100 12/01/26 1,036,580
1,460 San Marcos, CA Redev Agy Tax Alloc (FSA Insd)... 5.375 08/01/25 1,553,659
1,340 Sanger, CA Uni Sch Dist Ctf Cap Impt Prog (FSA
Insd) (a)....................................... 5.000 03/01/25 1,380,602
2,000 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc
Ser A Rfdg (MBIA Insd) (a)...................... 5.375 09/01/20 2,149,220
2,065 Santa Fe Springs, CA Cmnty Dev Comm Tax Alloc
Ser A Rfdg (MBIA Insd).......................... 5.375 09/01/21 2,219,070
2,450 Santa Monica, CA Cmnty College Ser A Rfdg (AMBAC
Insd) (a)....................................... 5.250 02/01/23 2,599,989
1,000 Shasta, CA Jt Pwrs Fin Auth Cnty Admin Bldg Proj
Ser A (MBIA Insd)............................... 5.250 04/01/22 1,058,530
1,000 South Gate, CA Pub Fin Auth South Gate Redev
Proj No 1 (XLCA Insd)........................... 5.750 09/01/22 1,117,660
2,750 Southern CA Pub Pwr Transmission Rev Southn
Transmission Sub Ser A Rfdg (FSA Insd).......... 5.250 07/01/16 2,981,413
1,195 Sweetwater, CA Auth Wtr Rev (FSA Insd).......... 5.250 04/01/16 1,289,931
</Table>
12 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$2,150 Temecula, CA Redev Agy Tax Alloc Rev Temecula
Redev Proj No 1 (MBIA Insd)..................... 5.125% 08/01/27 $ 2,202,396
1,000 University of CA Rev Multi Purp Proj Ser F (FGIC
Insd)........................................... 5.000 09/01/16 1,035,800
1,000 University of CA Rev Multi Purp Proj Ser M (FGIC
Insd)........................................... 5.125 09/01/17 1,068,830
1,000 University of CA Rev Resh Fac Ser E (AMBAC
Insd)........................................... 5.000 09/01/19 1,049,270
1,540 Vallejo City, CA Uni Sch Dist Ser A Rfdg (MBIA
Insd)........................................... 5.900 02/01/20 1,814,567
2,000 Ventura Cnty, CA Ctf Part Pub Fin Auth Ser I
(FSA Insd)...................................... 5.250 08/15/16 2,141,080
------------
TOTAL LONG-TERM INVESTMENTS 100.3%
(Cost $222,990,266)....................................................... 235,704,157
SHORT-TERM INVESTMENTS 1.5%
(Cost $3,615,000)......................................................... 3,615,000
------------
TOTAL INVESTMENTS 101.8%
(Cost $226,605,266)....................................................... 239,319,157
LIABILITIES IN EXCESS OF OTHER ASSETS (1.8%)............................... (4,203,754)
------------
NET ASSETS 100.0%.......................................................... $235,115,403
============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) The Fund owns 100% of the bond issuance.
(b) 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 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.
(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 1.24% of net
assets.
(d) Security purchased on a when-issued or delayed delivery basis.
See Notes to Financial Statements 13
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
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.
14 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $226,605,266)....................... $239,319,157
Cash........................................................ 73,425
Receivables:
Interest.................................................. 2,597,102
Fund Shares Sold.......................................... 329,515
Other....................................................... 129,521
------------
Total Assets............................................ 242,448,720
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 6,079,743
Fund Shares Repurchased................................... 505,932
Income Distributions...................................... 223,692
Distributor and Affiliates................................ 172,242
Investment Advisory Fee................................... 94,584
Trustees' Deferred Compensation and Retirement Plans........ 190,644
Accrued Expenses............................................ 66,480
------------
Total Liabilities....................................... 7,333,317
------------
NET ASSETS.................................................. $235,115,403
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $220,589,447
Net Unrealized Appreciation................................. 12,713,891
Accumulated Net Realized Gain............................... 1,111,055
Accumulated Undistributed Net Investment Income............. 701,010
------------
NET ASSETS.................................................. $235,115,403
============
NET ASSET VALUE PER COMMON SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $186,356,817 and 10,000,321 shares of
beneficial interest issued and outstanding)............. $ 18.64
Maximum sales charge (3.25%* of offering price)......... .63
------------
Maximum offering price to public........................ $ 19.27
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $37,397,036 and 1,989,061 shares of
beneficial interest issued and outstanding)............. $ 18.80
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $11,361,550 and 609,487 shares of
beneficial interest issued and outstanding)............. $ 18.64
============
</Table>
* On sales of $25,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 15
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 5,647,637
-----------
EXPENSES:
Investment Advisory Fee..................................... 556,160
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $228,529, $50,234 and $52,730,
respectively)............................................. 331,493
Shareholder Services........................................ 70,756
Legal....................................................... 23,550
Trustees' Fees and Related Expenses......................... 12,749
Custody..................................................... 10,054
Other....................................................... 102,866
-----------
Total Expenses.......................................... 1,107,628
Less Credits Earned on Cash Balances.................... 1,583
-----------
Net Expenses............................................ 1,106,045
-----------
NET INVESTMENT INCOME....................................... $ 4,541,592
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,149,501
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 16,035,924
End of the Period......................................... 12,713,891
-----------
Net Unrealized Depreciation During the Period............... (3,322,033)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(2,172,532)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 2,369,060
===========
</Table>
16 See Notes to Financial Statements
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, 2005 SEPTEMBER 30, 2004
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 4,541,592 $ 9,754,874
Net Realized Gain...................................... 1,149,501 1,219,512
Net Unrealized Depreciation During the Period.......... (3,322,033) (811,824)
------------ ------------
Change in Net Assets from Operations................... 2,369,060 10,162,562
------------ ------------
Distributions from Net Investment Income:
Class A Shares....................................... (3,633,687) (7,229,603)
Class B Shares....................................... (629,669) (1,397,557)
Class C Shares....................................... (190,141) (466,320)
------------ ------------
(4,453,497) (9,093,480)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares....................................... (1,194,255) -0-
Class B Shares....................................... (256,541) -0-
Class C Shares....................................... (76,525) -0-
------------ ------------
(1,527,321) -0-
------------ ------------
Total Distributions.................................... (5,980,818) (9,093,480)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (3,611,758) 1,069,082
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 15,226,868 29,982,107
Net Asset Value of Shares Issued Through Dividend
Reinvestment......................................... 4,268,217 6,394,383
Cost of Shares Repurchased............................. (17,427,359) (64,008,093)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... 2,067,726 (27,631,603)
------------ ------------
TOTAL DECREASE IN NET ASSETS........................... (1,544,032) (26,562,521)
NET ASSETS:
Beginning of the Period................................ 236,659,435 263,221,956
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $701,010 and $612,915,
respectively)........................................ $235,115,403 $236,659,435
============ ============
</Table>
See Notes to Financial Statements 17
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, ------------------------------------------------
2005 2004 2003 2002 (c) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................... $18.93 $18.84 $19.45 $18.64 $17.67 $17.28
------ ------ ------ ------ ------ ------
Net Investment Income......... .36 .75 .74 .77 .81 .82
Net Realized and Unrealized
Gain/Loss................... (.16) .06 (.44) .85 .94 .38
------ ------ ------ ------ ------ ------
Total from Investment
Operations.................... .20 .81 .30 1.62 1.75 1.20
------ ------ ------ ------ ------ ------
Less:
Distributions from Net
Investment Income........... .37 .72 .75 .78 .78 .81
Distributions from Net
Realized Gain............... .12 -0- .16 .03 -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions............. .49 .72 .91 .81 .78 .81
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD........................ $18.64 $18.93 $18.84 $19.45 $18.64 $17.67
====== ====== ====== ====== ====== ======
Total Return (a)................ 1.08%* 4.42% 1.67% 9.01% 10.09% 7.20%
Net Assets at End of the Period
(In millions)................. $186.4 $183.0 $195.4 $200.4 $174.9 $152.5
Ratio of Expenses to Average Net
Assets (b).................... .90% .89% .87% .87% .89% .98%
Ratio of Net Investment Income
to Average Net Assets......... 3.88% 4.00% 3.93% 4.18% 4.43% 4.79%
Portfolio Turnover.............. 7%* 16% 25% 32% 39% 52%
</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 eighteen months of purchases.
With respect to shares purchased prior to December 1, 2004, 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.
18 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 B SHARES MARCH 31, ----------------------------------------------------
2005 2004 2003 2002 (c) 2001 2000
------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD......................... $19.03 $18.82 $19.44 $18.65 $17.69 $17.26
------ ------ ------ ------ ------ ------
Net Investment Income.......... .37 .72 .60 .63 .67 .68
Net Realized and Unrealized
Gain/Loss.................... (.18) .07 (.45) .84 .94 .43
------ ------ ------ ------ ------ ------
Total from Investment
Operations..................... .19 .79 .15 1.47 1.61 1.11
------ ------ ------ ------ ------ ------
Less:
Distributions from Net
Investment Income............ .30 .58 .61 .65 .65 .68
Distributions from Net Realized
Gain......................... .12 -0- .16 .03 -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions.............. .42 .58 .77 .68 .65 .68
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD......................... $18.80 $19.03 $18.82 $19.44 $18.65 $17.69
====== ====== ====== ====== ====== ======
Total Return (a)................. 1.08%*(d) 4.29%(d) 0.87% 8.16% 9.27% 6.63%
Net Assets at End of the Period
(In millions).................. $ 37.4 $ 41.1 $ 49.8 $ 53.0 $ 47.7 $ 38.3
Ratio of Expenses to Average Net
Assets (b)..................... .91%(d) 1.09%(d) 1.62% 1.63% 1.65% 1.74%
Ratio of Net Investment Income to
Average Net Assets............. 3.88%(d) 3.80%(d) 3.18% 3.42% 3.67% 4.03%
Portfolio Turnover............... 7%* 16% 25% 32% 39% 52%
</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 up to 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 actual 12b-1 fees of less
than 1% (See footnote 5).
See Notes to Financial Statements 19
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, --------------------------------------------------
2005 2004 2003 2002 (c) 2001 2000
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $18.93 $18.82 $19.43 $18.64 $17.68 $17.26
------ ------ ------ ------ ------ ------
Net Investment Income........... .30 .61 .61 .64 .68 .68
Net Realized and Unrealized
Gain/Loss..................... (.17) .08 (.45) .83 .93 .42
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .13 .69 .16 1.47 1.61 1.10
------ ------ ------ ------ ------ ------
Less:
Distributions from Net
Investment Income............. .30 .58 .61 .65 .65 .68
Distributions from Net Realized
Gain.......................... .12 -0- .16 .03 -0- -0-
------ ------ ------ ------ ------ ------
Total Distributions............... .42 .58 .77 .68 .65 .68
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $18.64 $18.93 $18.82 $19.43 $18.64 $17.68
====== ====== ====== ====== ====== ======
Total Return (a).................. 0.71%*(e) 3.75%(e) 0.92%(d) 8.16% 9.27% 6.57%
Net Assets at End of the Period
(In millions)................... $ 11.4 $ 12.6 $ 18.1 $ 15.0 $ 11.0 $ 6.6
Ratio of Expenses to Average Net
Assets (b)...................... 1.55%(e) 1.59%(e) 1.62% 1.63% 1.65% 1.74%
Ratio of Net Investment Income to
Average Net Assets.............. 3.24%(e) 3.30%(e) 3.20%(d) 3.41% 3.67% 4.03%
Portfolio Turnover................ 7%* 16% 25% 32% 39% 52%
</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 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) 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%.
(e) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect actual 12b-1 fees of less
than 1% (See footnote 5).
20 See Notes to Financial Statements
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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. The Fund registered Class I Shares on September 1, 2004. There
were no sales of Class I Shares for the period ended March 31, 2005.
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, 2005, the Fund had $6,079,743 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
incremental 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 Subchapter M of the Internal Revenue Code applicable to regulated investment
companies
21
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At March 31, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $226,456,917
============
Gross tax unrealized appreciation........................... $ 13,036,211
Gross tax unrealized depreciation........................... (173,971)
------------
Net tax unrealized appreciation on investments.............. $ 12,862,240
============
</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,
2004 was as follows:
<Table>
Distributions paid from:
Ordinary income........................................... $6,710
Long-term capital gain.................................... -0-
------
$6,710
======
</Table>
As of September 30, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $ 543
Undistributed long-term capital gain........................ 1,481,141
</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, 2005, the Fund's
custody fee was reduced by $1,583 as a result of credits earned on cash
balances.
22
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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.......................................... 0.500
Next $150 million........................................... 0.450
Next $250 million........................................... 0.425
Over $500 million........................................... 0.400
</Table>
For the six months ended March 31, 2005, the Fund recognized expenses of
approximately $8,500 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
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, 2005, the Fund recognized expenses of approximately $26,300 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, 2005, the Fund recognized expenses of approximately $54,300
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 also
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 $112,160 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2005.
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.
23
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2005, capital aggregated $172,941,063, $36,078,739 and $11,569,645
for Classes A, B and C, respectively. For the six months ended March 31, 2005,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 712,878 $ 13,514,922
Class B................................................... 42,057 803,145
Class C................................................... 47,941 908,801
-------- ------------
Total Sales................................................. 802,876 $ 15,226,868
======== ============
Dividend Reinvestment:
Class A................................................... 183,473 $ 3,466,348
Class B................................................... 33,396 635,853
Class C................................................... 8,784 166,016
-------- ------------
Total Dividend Reinvestment................................. 225,653 $ 4,268,217
======== ============
Repurchases:
Class A................................................... (561,775) $(10,637,366)
Class B................................................... (244,141) (4,658,724)
Class C................................................... (112,327) (2,131,269)
-------- ------------
Total Repurchases........................................... (918,243) $(17,427,359)
======== ============
</Table>
At September 30, 2004, capital aggregated $166,597,159, $39,298,465 and
$12,626,097 for Classes A, B and C, respectively. For the year ended September
30, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,321,299 $ 24,855,999
Class B................................................... 171,104 3,223,210
Class C................................................... 100,371 1,902,898
---------- ------------
Total Sales................................................. 1,592,774 $ 29,982,107
========== ============
Dividend Reinvestment:
Class A................................................... 273,238 $ 5,131,435
Class B................................................... 51,748 973,315
Class C................................................... 15,415 289,633
---------- ------------
Total Dividend Reinvestment................................. 340,401 $ 6,394,383
========== ============
Repurchases:
Class A................................................... (2,300,593) $(42,956,763)
Class B................................................... (711,747) (13,334,011)
Class C................................................... (409,940) (7,717,319)
---------- ------------
Total Repurchases........................................... (3,422,280) $(64,008,093)
========== ============
</Table>
24
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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, 2005 and the year
ended September 30, 2004, 46,522 and 28,194 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, 2005 and the year ended September
30, 2004, 103,741 and 0 Class C Shares converted to Class A Shares, respectively
and are shown in the above table as sales of Class A Shares and repurchases of
Class B 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>
Class B Shares purchased on or after June 1, 2005 are subject to the
following CDSC schedule:
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT TO CHARGE
YEAR SINCE PURCHASE -------------------
First....................................................... 4.00%
Second...................................................... 4.00%
Third....................................................... 3.00%
Fourth...................................................... 2.50%
Fifth....................................................... 1.50%
Sixth and After............................................. 0.00%
</Table>
25
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
For the six months ended March 31, 2005, Van Kampen as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $18,800 and CDSC on redeemed shares of approximately $15,700.
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 $20,468,005 and $16,831,226,
respectively.
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 .25% of Class A average daily net
assets and up to 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.
At March 31, 2005, there were no distribution expenses incurred by Van Kampen
and not yet reimbursed ("unreimbursed receivable") for Class B and Class C
Shares. Any unreimbursed receivables 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, 2005 are payments
retained by Van Kampen of approximately $19,400 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $23,100.
6. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, 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 certain 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 steer investors to 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 alleged
efforts to steer investors to these funds. The complaint seeks, among other
things, unspecified compensatory damages, rescissionary damages, fees and costs.
The Adviser and certain affiliates of the Adviser are also named as
defendants in a derivative suit which additionally names as defendants certain
individual Trustees of the
26
VAN KAMPEN CALIFORNIA INSURED TAX FEE FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
Van Kampen funds; the named investment companies, including the Fund, are listed
as nominal defendants. The complaint alleges that defendants caused the Van
Kampen funds to pay economic incentives to a proprietary sales force to promote
the sale of proprietary mutual funds. The complaint also alleges that the Van
Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in
connection with the sales of the funds. The complaint seeks, among other things,
the removal of the current Trustees of the funds, rescission of the management
contracts for the funds, disgorgement of profits by Morgan Stanley and its
affiliates and monetary damages. This complaint has been coordinated with the
consolidated complaint described in the preceding paragraph. Plaintiff has
sought leave to file a second amended derivative compliant that alleges that the
Adviser permitted or recklessly disregarded market timing and late trading in
its proprietary mutual funds in order to increase assets under management and
fees. However, pursuant to an agreement between the parties, that plaintiff's
proposed second amended derivative complaint was withdrawn and the allegations
regarding market timing and late trading asserted therein were filed in a
separate complaint and coordinated with other cases related to market timing
that have been centralized in a federal court.
The defendants have moved to dismiss each of these actions and otherwise
intend to defend them vigorously. While the defendants believe that they have
meritorious defenses, the ultimate outcome of these matters is not presently
determinable at this early stage of litigation, and no provision has been made
in the Fund's financial statements for the effect, if any, of these matters.
7. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
27
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN* - President and Chief Executive Officer
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
Executive Vice President and
Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and
Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
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 REGISTERED
PUBLIC ACCOUNTING FIRM
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.
28
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC. 41 341, 541
CAI SAR 5/05 RN05-01060P-Y03/05
(VAN KAMPEN INVESTMENTS LOGO)
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, 2005.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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.
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 3/31/05
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 8/01/90 since 8/24/92 since 8/13/93
- ---------------------------------------------------------------------------------------------
AVERAGE ANNUAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 6.00% 5.65% 4.73% 4.73% 3.91% 3.91%
10-year 5.00 4.49 4.52 4.52 4.20 4.20
5-year 5.55 4.54 4.75 4.50 4.75 4.75
1-year 1.96 -2.91 1.20 -2.70 1.21 0.23
6-month 0.63 -4.15 0.26 -3.67 0.27 -0.72
- ---------------------------------------------------------------------------------------------
30-Day SEC Yield 3.23% 2.64% 2.65%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS 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.
Performance of share classes will vary due to differences in sales charges and
expenses. 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 up to 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 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 does not include any expenses,
fees or sales charges, which would lower performance. The index is unmanaged and
should not be considered an investment. It is not possible to invest directly in
an index. Index data source: Lipper Inc.
1
Fund Report
FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005
Van Kampen Municipal Income Fund is managed by the Adviser's Municipal Fixed
Income team.(1) Current members of the team include James F. Willison, Managing
Director of the Adviser; Joseph R. Arcieri, Executive Director of the Adviser;
and Timothy D. Haney, Vice President of the Adviser.
MARKET CONDITIONS
The six-month period ended March 31, 2005, was characterized by continued
short-term interest rate increases, and the specter of rising inflation
resulting from record-high crude oil prices. The Federal Open Market Committee
(the "Fed") raised the federal funds target rate 100 basis points during the
period through a series of four, "measured" 0.25 percent tightenings to 2.75
percent by the end of March. Although rates in the short and intermediate areas
of the yield curve shifted upward as the Fed tightened, long-term interest rates
fell as buyers did not seem deterred by the prospect of rising inflation. As a
result, the yield curve (the difference between short and longer-term yields)
flattened and the long end of the municipal market handily outperformed the
shorter end.
The municipal market in total posted positive returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a slightly negative showing. Within the investment-grade segment of the
market, yield differentials between BBB-rated municipals and AAA-rated
securities were flat to slightly wider, though BBB-rated securities still
outperformed high grades due to their higher coupons, while securities rated
below investment grade strongly outperformed as investors sought out their
higher yields.
The Fed's interest rate hikes did not dampen investors' appetites for municipal
bonds, as net inflows into municipal bond funds topped $700 million during the
period. The supply of new issues was modest during the closing months of 2004
(the first half of the period) before soaring in the opening months of 2005 as
long-term issuers rushed to bring securities to market in anticipation of
additional interest rate increases in the near term.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
The fund returned 0.63 percent for the six months ended March 31, 2005 (Class A
shares, unadjusted for sales charge). In comparison, the fund's benchmark index,
Lehman Brothers Municipal Bond Index returned 1.21 percent for the period.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
0.63% 0.26% 0.27% 1.21%
- --------------------------------------------------------------
</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
INDEX DEFINITION.
The fund's underperformance relative to its benchmark was largely the result of
its exposure to bonds with maturities in the five- to 10-year range. These
securities were especially hard hit by rising interest rates during the period,
and the fund's above-market exposure meant that it suffered more than did the
broader market benchmark from their poor performance. We trimmed many of these
holdings as part of an ongoing strategy to position the fund for continued
increases in short-term interest rates. This strategy also included adding
selectively to the fund's holdings of bonds with longer maturities but moderate
interest rate characteristics. Finally, we kept the fund's duration (a measure
of overall interest-rate sensitivity) below that of its benchmark.
We continued to focus on relative-value trading between liquid, high-quality
securities to capture relative value opportunities identified by our analysts.
The fund's overall credit exposure remained tilted toward higher-quality
securities, with more than 81 percent of its exposure at the end of the period
in bonds rated AA or better. That said, the portfolio also had approximately 14
percent of its exposure in bonds rated BBB or lower. These positions benefited
from the ongoing outperformance by lower-rated bonds, and were beneficial to the
fund's returns. The fund's portfolio remained well diversified across the major
sectors of the municipal bond market, with its top three sectors at the end of
the period being general purpose, transportation and wholesale electric.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the fund in the future.
3
<Table>
<Caption>
RATINGS ALLOCATIONS AS OF 3/31/05
AAA 68.5%
AA 13.0
A 5.0
BBB 4.8
BB 0.9
B 0.3
NR 7.5
<Caption>
TOP 5 SECTORS AS OF 3/31/05
General Purpose 17.6%
Transportation 11.7
Wholesale Electric 10.4
Public Education 10.3
Water & Sewer 9.1
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05
New York 15.6%
California 12.8
Texas 8.4
Illinois 8.1
New Jersey 7.9
Colorado 6.0
Florida 5.9
Michigan 3.9
Arizona 3.4
Massachusetts 3.3
Oregon 2.7
Washington 2.2
Utah 2.0
Connecticut 1.9
Missouri 1.8
North Carolina 1.4
Indiana 1.4
District of Columbia 1.3
Kansas 1.1
Tennessee 1.1
Georgia 1.1
Pennsylvania 1.1
West Virginia 0.9
New Hampshire 0.8
Alabama 0.6
Rhode Island 0.5
Iowa 0.5
Oklahoma 0.4
South Dakota 0.4
Arkansas 0.3
Louisiana 0.2
</Table>
<Table>
(continued on next page)
</Table>
4
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 3/31/05
(continued from previous page)
Vermont 0.2
South Carolina 0.1
-----
Total Investments 99.3%
Other Assets in Excess of Liabilities 0.7
-----
Total Net Assets 100.0%
</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. Ratings allocations and sectors are as a
percentage of long-term investments. Summary of investments by state
classification is as a percentage of net assets. 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. Rating allocations based upon ratings as issued by
Standard and Poor's and Moody's, respectively.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public Web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's Web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
6
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 1-800-341-2911 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 AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our Web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
7
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charge on redemptions of Class B and C Shares; and
(2) ongoing costs, including management fees; distribution and service (12b-1)
fees; and other Fund expenses. This example is intended to help you understand
your ongoing cost (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 10/1/04 - 3/31/05.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the second line
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
-----------------------------------------------------
10/1/04 3/31/05 10/1/04-3/31/05
Class A
Actual.................................... $1,000.00 $1,006.35 $4.35
Hypothetical.............................. 1,000.00 1,020.53 4.38
(5% annual return before expenses)
Class B
Actual.................................... 1,000.00 1,002.65 8.14
Hypothetical.............................. 1,000.00 1,016.83 8.20
(5% annual return before expenses)
Class C
Actual.................................... 1,000.00 1,002.65 8.14
Hypothetical.............................. 1,000.00 1,016.83 8.20
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.87%, 1.63%,
and 1.63% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period).
Assumes all dividends and distributions were reinvested.
8
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MUNICIPAL BONDS 99.2%
ALABAMA 0.6%
$ 2,930 Alabama Wtr Pollutn Ctl Auth Revolving Fd Ln Ser
A (Prerefunded @ 08/15/05) (AMBAC Insd) (a)..... 6.750% 08/15/17 $ 2,977,818
1,000 Jefferson Cnty, AL Ltd Oblig Sch Wt Ser A....... 5.000 01/01/24 1,019,090
3 Mobile, AL Indl Dev Brd Solid Waste Disp Rev
Mobile Energy Svc Co Proj Rfdg.................. 6.950 01/01/20 59
------------
3,996,967
------------
ARIZONA 3.4%
8,685 Arizona Sch Fac Brd Ctf Ser B (Prerefunded @
09/01/13) (FGIC Insd)........................... 5.250 09/01/17 9,592,496
5,000 Phoenix, AZ Civic Impt Corp Sr Lien Ser B (AMT)
(FGIC Insd)..................................... 5.250 07/01/32 5,160,750
2,500 Phoenix, AZ Indl Dev Auth Mtg Christian Care Apt
Proj Ser A Rfdg................................. 6.500 01/01/26 2,593,225
500 Scottsdale, AZ Indl Dev Auth Rev First Mtg
Westminster Vlg Ser A Rfdg (Prerefunded @
06/01/05)....................................... 8.250 06/01/15 514,540
1,875 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp
Ser A Rfdg (AMBAC Insd)......................... 6.000 09/01/12 2,027,212
1,750 Scottsdale, AZ Indl Dev Hosp Scottsdale Mem Hosp
Ser A Rfdg (AMBAC Insd)......................... 6.125 09/01/17 1,895,442
------------
21,783,665
------------
ARKANSAS 0.3%
1,270 Jackson Cnty, AR Hlthcare Fac Brd First Mtg Hosp
Rev Newport Hosp & Clinic Inc................... 7.375 11/01/11 897,776
1,089 Maumelle, AR Dogwood Addition Prd Muni Ppty
Owners Rfdg (Acquired 03/14/01, Cost $1,089,187)
(b)............................................. 7.500 03/01/06 1,089,187
------------
1,986,963
------------
CALIFORNIA 12.8%
4,870 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec
Sub Pub Impt Proj C (FSA Insd).................. * 09/01/20 2,283,007
305 California Infrastructure & Econ Dev Bk Rev Bay
Area Toll Brdgs First Lien A (FSA Insd)......... 5.250 07/01/20 327,665
5,000 California Infrastructure & Econ Dev Bk Rev
Rites-PA-1202R (Inverse Fltg) (Acquired
09/10/03, Cost $5,484,100) (FSA Insd) (b) (c)
(d)............................................. 7.566 07/01/11 5,743,200
5,725 California St (FSA Insd)........................ 5.000 02/01/29 5,895,662
1,350 California St Cmntys Dev Auth Rev Daughters of
Charity Hlth Ser A.............................. 5.000 07/01/39 1,337,647
10,000 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.500 05/01/16 11,064,900
6,575 California St Dept Wtr Res Pwr Supply Rev
Rites-PA-1201R (Inverse Fltg) (Acquired
09/08/03, Cost $7,143,277) (MBIA Insd) (b)
(c)............................................. 7.566 05/01/20 7,603,001
</Table>
See Notes to Financial Statements 9
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
$ 5,000 California St Dept Wtr Res Pwr Supply Rev Ser A
(XLCA Insd)..................................... 5.375% 05/01/17 $ 5,431,600
7,500 California St Drivers Ser 482 (Inverse Fltg)
(Acquired 07/19/04, Cost $8,325,750) (XLCA Insd)
(b) (c) (d)..................................... 7.911 10/01/10 8,626,950
3,500 California St Pub Wks Brd Lease Rev Dept
Corrections Ser C............................... 5.250 06/01/28 3,662,155
2,640 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC
Insd)........................................... * 09/01/13 1,588,963
5,430 Escondido, CA Jt Pwrs Fin Auth Lease Rev (AMBAC
Insd)........................................... * 09/01/14 3,050,900
3,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg (MBIA Insd)......................... * 01/15/17 1,637,790
21,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg..................................... * 01/15/24 6,946,170
15,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg..................................... * 01/15/30 3,458,250
6,695 San Francisco, CA City & Cnty Second Ser Issue
29 B Rfdg (FGIC Insd)........................... 5.125 05/01/20 7,070,857
1,600 Turlock, CA Hlth Fac Rev Ctf Partn Emanuel Med
Ctr Inc......................................... 5.375 10/15/34 1,621,056
5,000 West Contra Costa CA Uni Election of 2002 Ser B
(FSA Insd)...................................... 5.000 08/01/26 5,168,600
------------
82,518,373
------------
COLORADO 6.0%
2,840 Adams Cnty, CO Single Family Mtg Rev Ser A
(Escrowed to Maturity) (d)...................... 8.875 08/01/10 3,561,332
5,000 Arapahoe Cnty, CO Wtr & Waste Proj Ser A (MBIA
Insd)........................................... 5.125 12/01/32 5,193,500
5,000 Colorado Ed & Cultural Fac Auth Rev Impt Charter
Sch Peak to Peak Rfdg (XLCA Insd)............... 5.250 08/15/34 5,235,200
1,000 Colorado Hlth Fac Auth Rev Evangelical Lutheran
Ser A........................................... 5.250 06/01/34 1,015,410
5,000 Colorado Springs, CO Utils Rev Sys Sub Lien Ser
A Impt & Rfdg................................... 5.000 11/15/21 5,212,500
6,500 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B
(MBIA Insd)..................................... * 09/01/20 3,058,640
15,000 E 470 Pub Hwy Auth Co Rev Cap Apprec Sr Ser B
(MBIA Insd)..................................... * 09/01/20 7,069,050
1,320 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/14 784,727
1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd) (d)........ * 12/15/15 795,754
1,420 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd) (d)........ * 12/15/16 746,082
</Table>
10 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$ 1,330 El Paso Cnty, CO Sch Dist No 003 Widefield Ser A
(Prerefunded @ 12/15/05) (MBIA Insd)............ * 12/15/18 $ 614,367
3,690 Jefferson Cnty, CO Residential Mtg Rev (Escrowed
to Maturity) (d)................................ 11.500% 09/01/12 5,436,034
------------
38,722,596
------------
CONNECTICUT 1.9%
2,785 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg)
(Acquired 07/09/02, Cost $3,177,971) (FGIC Insd)
(b) (c) (d)..................................... 8.369 08/15/15 3,289,976
2,950 Bridgeport, CT Rol Ser II R 182 (Inverse Fltg)
(Acquired 07/09/02, Cost $3,323,232) (FGIC Insd)
(b) (c) (d)..................................... 8.369 08/15/16 3,480,941
2,530 Mashantucket Western Pequot Tribe CT Spl Rev Ser
A, 144A--Private Placement (e).................. 6.400 09/01/11 2,662,901
2,470 Mashantucket Western Pequot Tribe CT Spl Rev Ser
A, 144A--Private Placement (Prerefunded @
09/01/07) (e)................................... 6.400 09/01/11 2,668,366
------------
12,102,184
------------
DISTRICT OF COLUMBIA 1.3%
5,150 District Columbia Tax Incrmnt Gallary Place Proj
(FSA Insd)...................................... 5.250 07/01/27 5,391,483
3,000 Metropolitan Washington DC Arpt Auth Sys Ser A
(AMT) (FGIC Insd)............................... 5.250 10/01/32 3,093,330
------------
8,484,813
------------
FLORIDA 5.9%
5,000 Broward Cnty, FL Arpt Sys Rev Ser J-I (AMT)
(AMBAC Insd).................................... 5.250 10/01/26 5,189,750
1,100 Capital Tr Agy FL Rev Ft Lauderdale Proj
(AMT)........................................... 5.750 01/01/32 1,095,424
9,000 Dade Cnty, FL Gtd Entitlement Rev Cap Apprec Ser
A Rfdg (MBIA Insd).............................. * 02/01/18 4,351,680
5,000 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC
Insd)........................................... 5.950 07/01/20 5,094,000
6,385 Lake Cnty, FL Sch Brd Ctf Part (AMBAC Insd)..... 5.375 07/01/16 6,934,493
500 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 544,195
595 Orange Cnty, FL Tourist Dev Tax Rev (Escrowed to
Maturity) (AMBAC Insd).......................... 6.000 10/01/16 609,691
12,860 Orlando, FL Utils Commn Wtr Rfdg................ 5.250 10/01/19 13,827,201
808 Tampa Palms, FL Open Space & Tran Cmnty Dev Dist
Rev Cap Impt Area 7 Proj (Prerefunded @
05/01/05)....................................... 7.500 05/01/18 827,311
------------
38,473,745
------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
GEORGIA 1.1%
$ 6,310 Municipal Elec Auth GA Combustion Turbine Ser A
(MBIA Insd)..................................... 5.250% 11/01/17 $ 6,821,741
5 Municipal Elec Auth GA Combustion Turbine Ser A
(Prerefunded @ 11/01/12) (MBIA Insd)............ 5.250 11/01/17 5,508
------------
6,827,249
------------
ILLINOIS 8.1%
5,000 Chicago, IL Brd Ed Cap Apprec Sch Reform Ser A
(FGIC Insd)..................................... * 12/01/20 2,320,650
3,000 Chicago, IL Lakefront Millennium Pkg Fac (MBIA
Insd) (f)....................................... 0/5.650 01/01/19 3,083,940
1,000 Chicago, IL Metro Wtr Reclamation Dist Gtr
Chicago (Escrowed to Maturity).................. 7.000 01/01/11 1,158,110
8,050 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third
Lien C-2 Rfdg (AMT) (XLCA Insd)................. 5.250 01/01/34 8,326,115
5,100 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airl Proj Ser B Rfdg (AMT) (g) (h).............. 5.200 04/01/11 867,000
3,210 Chicago, IL Proj & Rfdg Ser C (FGIC Insd) (d)... 5.750 01/01/16 3,550,099
135 Chicago, IL Single Family Mtg Rev Ser A (AMT)
(GNMA Collateralized)........................... 7.000 09/01/27 135,579
1,000 Chicago, IL Tax Increment Alloc Santn Drain &
Ship Canal Ser A................................ 7.750 01/01/14 1,039,100
2,000 Chicago, IL Tax Increment Alloc Sub Cent Loop
Redev Ser A..................................... 6.500 12/01/05 2,048,740
1,000 Cook Cnty, IL Cmnty College Dist No 508 Chicago
Ctf Part (FGIC Insd)............................ 8.750 01/01/07 1,097,150
2,265 Cook Cnty, IL Cons High Sch Dist No 200 Oak Park
(FSA Insd) (d).................................. * 12/01/11 1,733,382
5,000 Cook Cnty, IL Ser A (FGIC Insd)................. 5.500 11/15/31 5,370,900
1,500 Hodgkins, IL Tax Increment Ser A Rfdg........... 7.625 12/01/13 1,577,220
1,310 Huntley, IL Increment Alloc Rev Huntley Redev
Proj Ser A...................................... 8.500 12/01/15 1,358,811
170 Illinois Dev Fin Auth Rev Cmnty Fac Clinic
Altgeld Proj.................................... 8.000 11/15/06 165,027
5,000 Illinois St First Ser (FSA Insd)................ 5.250 12/01/21 5,363,850
9,250 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev Cap Apprec McCormick Rfdg (MBIA Insd)
(f)............................................. 0/5.400 06/15/19 6,925,197
3,555 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev Cap Apprec McCormick Ser A Rfdg (MBIA
Insd)........................................... * 12/15/15 2,193,399
1,120 Saint Charles, IL Indl Dev Rev Tri-City Ctr Proj
(Acquired 11/17/93, Cost $1,120,000) (b)........ 7.500 11/01/13 1,117,939
4,270 Will Cnty, IL Fst Presv Dist Ser B (FGIC
Insd)........................................... * 12/01/15 2,631,473
------------
52,063,681
------------
</Table>
12 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
INDIANA 1.4%
$ 2,500 Indiana Bd Bk Spl Pgm Hendricks Redev
(Prerefunded @ 02/01/07) (LOC--Canadian Imperial
Bank)........................................... 6.200% 02/01/23 $ 2,693,950
1,910 Indiana Hlth Fac Fin Auth Rev Hoosier Care Proj
Ser A........................................... 7.125 06/01/34 1,758,079
550 Indianapolis, IN Loc Pub Impt Bd Bk Ser D....... 6.750 02/01/14 647,636
140 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B (d)................................... * 06/30/11 87,532
140 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B (d)................................... * 06/30/12 81,084
135 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B (d)................................... * 06/30/13 72,429
130 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B (d)................................... * 06/30/14 64,609
130 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B (d)................................... * 06/30/15 59,849
135 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B (d)................................... * 06/30/16 57,588
225 Saint Joseph Cnty, IN Redev Dist Tax Increment
Rev Ser B (d)................................... * 06/30/17 88,909
3,295 Vigo Cnty, IN Elem Sch Bldg First Mtg Impt &
Rfdg (FSA Insd)................................. 5.250 01/10/22 3,478,630
------------
9,090,295
------------
IOWA 0.5%
640 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)................................. 6.000 07/01/07 665,581
2,400 Iowa Fin Auth Hosp Fac Rev Trinity Regl Hosp
Proj (FSA Insd)................................. 5.750 07/01/17 2,567,160
------------
3,232,741
------------
KANSAS 1.1%
6,600 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita
(Prerefunded @ 09/01/10) (MBIA Insd) (d)........ 5.625 09/01/13 7,326,924
------------
LOUISIANA 0.2%
1,400 West Feliciana Parish, LA Pollutn Ctl Rev Gulf
States Util Co Proj Ser A....................... 7.500 05/01/15 1,406,244
------------
MASSACHUSETTS 3.3%
7,500 Massachusetts St Fed Hwy Ser A.................. 5.750 06/15/14 8,255,100
3,500 Massachusetts St Hlth & Ed Fac Auth Rev Ser G
(MBIA Insd)..................................... 5.000 07/01/13 3,576,650
1,500 Massachusetts St Indl Fin Agy Hillcrest Ed Ctr
Inc Proj (Prerefunded @ 07/01/05)............... 8.450 07/01/18 1,535,895
</Table>
See Notes to Financial Statements 13
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MASSACHUSETTS (CONTINUED)
$ 2,770 Massachusetts St Indl Fin Agy Rev First Mtg
Reeds Landing Proj (Variable Rate Coupon)....... 7.100% 10/01/28 $ 2,715,182
5,000 Massachusetts St Rites PA 1290 (Inverse Fltg)
(Acquired 03/23/05, Cost $5,458,000) (FSA Insd)
(b) (c) (d)..................................... 7.750 03/01/24 5,448,950
------------
21,531,777
------------
MICHIGAN 3.9%
840 Detroit, MI Loc Dev Fin Auth Tax Increment Sub
Ser C (Acquired 09/08/97, Cost $840,000) (b).... 6.850 05/01/21 859,219
5,000 Detroit, MI Sew Disp Rev Sr Lien Ser A Rfdg
(FGIC Insd)..................................... 5.125 07/01/31 5,117,900
5,000 Michigan St Bldg Auth Rev Fac Prog Ser II....... 5.500 10/15/16 5,495,550
5,000 Michigan St Strategic Fd Detroit Edison Co Proj
C Rfdg (AMT) (XLCA Insd)........................ 5.450 12/15/32 5,241,700
9,739 Michigan St Strategic Fd Ltd Oblig Rev Great
Lakes Pulp & Fiber Proj (AMT) (h) (i)........... 8.000 12/01/27 1,435,114
1,935 Michigan St Strategic Fd Solid Genesee Pwr Sta
Proj Rfdg (AMT)................................. 7.500 01/01/21 1,833,490
5,000 Western Townships, MI Util Sew Rfdg (MBIA
Insd)........................................... 5.250 01/01/16 5,337,850
------------
25,320,823
------------
MISSOURI 1.8%
3,000 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 3,146,460
2,835 Kansas City, MO Port Auth Fac Riverfront Park
Proj Ser A (d).................................. 5.750 10/01/06 2,894,733
3,935 Macon, MO Ctf Part (MBIA Insd).................. 5.250 08/01/17 4,189,083
1,000 Missouri St Dev Fin Brd Infrastructure Fac Rev
Crackerneck Creek Proj Ser C.................... 5.000 03/01/26 970,910
530 Saint Louis, MO Tax Increment Rev Scullin Redev
Area Ser A...................................... 10.000 08/01/10 601,380
------------
11,802,566
------------
NEW HAMPSHIRE 0.8%
1,555 New Hampshire Higher Ed & Hlth Fac Auth Rev
(d)............................................. 8.800 06/01/09 1,644,086
760 New Hampshire Higher Ed & Hlth Fac Auth Rev
Daniel Webster College Issue Rfdg (d)........... 6.100 07/01/09 803,404
750 New Hampshire St Business Fin Auth Elec Fac Rev
Plymouth Cogeneration (AMT) (Acquired 06/29/93,
Cost $734,079) (b).............................. 7.750 06/01/14 766,320
1,000 New Hampshire St Business Fin Auth Rev Alice
Peck Day Hlth Sys Ser A......................... 6.875 10/01/19 1,006,490
1,000 New Hampshire St Tpk Sys Rev Ser A Rfdg (FGIC
Insd)........................................... 6.750 11/01/11 1,078,640
------------
5,298,940
------------
</Table>
14 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW JERSEY 7.9%
$ 2,000 Camden Cnty, NJ Impt Auth Lease Rev Dockside
Refrig (Acquired 01/29/97, Cost $2,074,739) (b)
(j)............................................. 8.400% 04/01/24 $ 1,911,240
3,250 Landis, NJ Sew Auth Swr Rev (Inverse Fltg) (FGIC
Insd) (c)....................................... 8.720 09/19/19 3,980,600
6,130 Middlesex Cnty, NJ Util Auth Swr Rev Ser A Rfdg
(MBIA Insd)..................................... 6.250 08/15/10 6,706,220
2,000 New Jersey Econ Dev Auth Cigarette Tax.......... 5.750 06/15/34 2,096,640
2,000 New Jersey Econ Dev Auth Holt Hauling & Warehsg
Rev Ser G Rfdg (h).............................. 8.400 12/15/15 1,590,600
1,900 New Jersey Econ Dev Auth Rev First Mtg
Winchester Gardens Ser A (Prerefunded @
11/01/06)....................................... 8.500 11/01/16 2,104,934
350 New Jersey Econ Dev Auth Rev RWJ Hlthcare Corp
(FSA Insd)...................................... 6.250 07/01/14 358,043
1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes
(Prerefunded @ 07/01/05)........................ 7.500 07/01/20 1,031,860
1,000 New Jersey Econ Dev Auth Rev Utd Methodist Homes
(Prerefunded @ 07/01/05)........................ 7.500 07/01/25 1,031,860
8,000 New Jersey Econ Dev Auth Sch Fac Constr Ser F
(Prerefunded @ 06/15/13) (FGIC Insd)............ 5.250 06/15/17 8,851,680
755 New Jersey St Tpk Auth Tpk Rev Ser C (MBIA
Insd)........................................... 6.500 01/01/16 897,363
2,725 New Jersey St Tpk Auth Tpk Rev Ser C (Escrowed
to Maturity) (MBIA Insd)........................ 6.500 01/01/16 3,222,558
5,710 New Jersey St Trans Corp Ctf Fed Trans Admin Gnt
Ser A (AMBAC Insd).............................. 5.750 09/15/10 6,230,238
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 11,298,900
------------
51,312,736
------------
NEW YORK 15.5%
5,000 Metropolitan Trans Auth NY Rev Ser B (FGIC
Insd)........................................... 5.250 11/15/18 5,418,000
10,000 Nassau Cnty, NY Interim Fin Auth Ser A
(Prerefunded @ 11/15/10)........................ 5.750 11/15/14 11,233,800
4,250 New York City Indl Dev Agy Rev Liberty 7 World
Trade Ctr Proj Ser A............................ 6.250 03/01/15 4,310,350
5,000 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev Rites PA 1289 (Inverse Fltg) (Acquired
03/09/05, Cost $5,451,150) (MBIA Insd) (b)
(c)............................................. 7.100 06/15/27 5,425,700
4,800 New York City Ser A............................. 7.000 08/01/07 5,112,672
21,860 New York City Ser B (MBIA Insd)................. 5.875 08/01/15 24,438,824
5,000 New York City Ser D (MBIA Insd)................. 5.200 08/01/14 5,369,950
5,000 New York City Transitional Drivers Ser 307
(Inverse Fltg) (Acquired 11/06/02, Cost
$5,439,826) (AMBAC Insd) (b) (c) (d)............ 7.921 08/01/19 5,768,750
695 New York St Dorm Auth Rev Mental Hlth Ser A..... 5.750 02/15/11 738,451
680 New York St Dorm Auth Rev Mental Hlth Ser A..... 5.750 02/15/12 722,514
1,590 New York St Dorm Auth Rev Mental Hlth Ser A
(Prerefunded @ 02/15/07)........................ 5.750 02/15/11 1,702,826
</Table>
See Notes to Financial Statements 15
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 1,595 New York St Dorm Auth Rev Mental Hlth Ser A
(Prerefunded @ 02/15/07)........................ 5.750% 02/15/12 $ 1,708,181
2,500 New York St Energy Resh & Dev Auth Gas Fac Rev
(Inverse Fltg) (c).............................. 10.282 04/01/20 3,011,325
3,000 New York St Energy Resh & Dev Auth Gas Fac Rev
Brooklyn Union Gas Ser B (Inverse Fltg) (AMT)
(c)............................................. 11.592 07/01/26 3,381,330
10,725 New York St Environmental Fac Rev Fds-Second
Resolution (d).................................. 5.000 06/15/20 11,349,838
10,000 Triborough Brdg & Tunl Auth NY Gen Ser B Rfdg... 5.000 11/15/22 10,394,300
------------
100,086,811
------------
NORTH CAROLINA 1.4%
8,700 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 9,356,154
------------
OKLAHOMA 0.4%
2,250 Oklahoma City, OK Pub Ppty Auth Hotel Tax Rev
(FGIC Insd)..................................... 5.250 10/01/29 2,351,362
385 Oklahoma Hsg Fin Agy Single Family Rev Mtg Class
B (AMT) (GNMA Collateralized)................... 7.997 08/01/18 395,491
------------
2,746,853
------------
OREGON 2.7%
5,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA
Insd)........................................... 5.250 07/01/22 5,359,600
1,000 Port Morrow, OR Pollutn Ctl Portland Gen A Rfdg
(Variable Rate Coupon).......................... 5.200 05/01/33 1,045,110
10,000 Portland, OR Swr Sys Rev Ser A (FGIC Insd)...... 5.750 08/01/18 10,996,100
------------
17,400,810
------------
PENNSYLVANIA 1.1%
1,000 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care............................ 6.250 02/01/35 1,021,240
5,250 Philadelphia, PA Auth Indl Ser B (FSA Insd)..... 5.500 10/01/16 5,781,773
------------
6,803,013
------------
RHODE ISLAND 0.5%
1,305 Rhode Island St Econ Dev Corp Rev (d)........... 7.250 07/01/10 1,308,054
2,000 Rhode Island St Hlth & Ed Bldg Higher Ed Johnson
& Wales Rfdg (XLCA Insd)........................ 5.375 04/01/19 2,144,940
------------
3,452,994
------------
SOUTH CAROLINA 0.1%
700 Piedmont Muni Pwr Agy SC Elec Rev Rfdg.......... 5.000 01/01/25 682,787
------------
SOUTH DAKOTA 0.4%
1,000 South Dakota St Hlth & Ed Fac Auth Rev Huron
Regl Med Ctr.................................... 7.250 04/01/20 1,013,300
1,250 South Dakota St Hlth & Ed Fac Auth Rev Sioux VY
Hosp & Hlth Sys Ser A........................... 5.250 11/01/34 1,269,413
------------
2,282,713
------------
</Table>
16 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
TENNESSEE 1.1%
$ 4,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp Ser
B Impt & Rfdg (MBIA Insd)....................... 7.750% 07/01/29 $ 4,993,840
2,000 Springfield, TN Hlth & Ed Jesse Holman Jones
Hosp Proj (Prerefunded @ 04/01/06).............. 8.500 04/01/24 2,153,580
------------
7,147,420
------------
TEXAS 8.4%
500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev Saint
Luke's Lutheran Hosp (Escrowed to Maturity)..... 7.000 05/01/21 642,300
3,170 Brazos River Auth TX Pollutn Ctl Rev Adj Elec Co
Proj Ser C Rfdg (Variable Rate Coupon) (AMT).... 5.750 05/01/36 3,373,070
90 Coastal Wtr Auth TX Conveyance Sys Rev (Escrowed
to Maturity) (AMBAC Insd)....................... 6.250 12/15/17 90,154
5,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A
Impt & Rfdg (AMT) (FGIC Insd)................... 5.500 11/01/31 5,222,600
7,350 Grapevine Colleyville Indpt Sch Dist TX (PSF
Gtd)............................................ * 08/15/11 5,714,184
10,000 Houston, TX Hotel Occupancy Tax Convtn &
Entertnmnt Ser B (AMBAC Insd)................... 5.750 09/01/14 11,120,000
7,500 Lower CO River Auth TX Rev Ser A Rfdg (Inverse
Fltg) (Acquired 10/20/99, Cost $7,623,805) (FSA
Insd) (b) (c)................................... 8.793 05/15/14 8,995,500
6,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse
Fltg) (Acquired 10/20/99, Cost $6,312,134) (FSA
Insd) (b) (c)................................... 8.793 05/15/15 7,500,813
3,250 Lower CO River Auth TX Rev Ser A Rfdg (Inverse
Fltg) (Acquired 10/20/99, Cost $3,254,875) (FSA
Insd) (b) (c) (d)............................... 8.793 05/15/16 3,900,423
2,000 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones
Mem Hosp Proj................................... 7.200 01/01/21 2,007,120
500 Texas Gen Svc Cmnty Part Int Office Bldg & Land
Acquisition Proj................................ 7.000 08/01/19 506,650
500 Texas Gen Svc Cmnty Part Int Office Bldg & Land
Acquisition Proj................................ 7.000 08/01/24 506,655
605 Texas Gen Svc Cmnty Part Lease Purch Ctf........ 7.500 02/15/13 613,209
1,925 Texas St Dept Hsg & Cmnty Affairs Home Mtg Rev
Coll Ser C-2 Rfdg (Inverse Fltg) (AMT) (GNMA
Collateralized) (c)............................. 11.437 07/02/24 1,963,192
40 Texas St Higher Ed Coordinating Brd College
Student Ln Rev (AMT)............................ 7.849 10/01/25 40,244
2,220 Wylie, TX Indpt Sch Dist Rfdg (PSF Gtd)......... 5.000 08/15/30 2,259,250
------------
54,455,364
------------
UTAH 2.0%
1,340 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj
(h)............................................. 7.800 09/01/15 274,700
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj
(h)............................................. 8.000 09/01/20 205,000
1,000 Hildale, UT Elec Rev Gas Turbine Elec Fac Proj
(h)............................................. 7.800 09/01/25 205,000
11,000 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg... 6.150 02/15/12 12,436,160
</Table>
See Notes to Financial Statements 17
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
UTAH (CONTINUED)
$ 20 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A1
(AMT) (FHA Gtd)................................. 7.100% 07/01/14 $ 20,429
30 Utah St Hsg Fin Agy Single Family Mtg Sr Ser A2
(AMT) (FHA Gtd)................................. 7.200 01/01/27 30,636
------------
13,171,925
------------
VERMONT 0.2%
1,000 Vermont Ed & Hlth Bldg Fing Agy Rev Bennington
College Proj.................................... 6.625 10/01/29 1,012,170
------------
WASHINGTON 2.2%
5,000 Energy Northwest WA Elec Rev Proj No 3 Ser A
Rfdg (XLCA Insd)................................ 5.500 07/01/17 5,447,100
8,000 King Cnty, WA Sch Dist No 411 (FGIC Insd) (d)... 5.250 12/01/20 8,605,520
------------
14,052,620
------------
WEST VIRGINIA 0.9%
1,500 West Virginia St Hosp Fin Auth Hosp Rev Bears &
Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 1,503,765
4,000 West Virginia St Hosp Fin Auth Hosp Rev Bears &
Bulls WV Univ Med Corp Rfdg (MBIA Insd)......... 6.100 01/01/18 4,010,080
------------
5,513,845
------------
TOTAL LONG-TERM INVESTMENTS 99.2%
(Cost $622,077,834)......................................................... 641,448,761
SHORT-TERM INVESTMENT 0.1%
(Cost $600,000)............................................................. 600,000
------------
TOTAL INVESTMENTS 99.3%
(Cost $622,677,834)......................................................... 642,048,761
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%................................... 4,344,233
------------
NET ASSETS 100.0%............................................................ $646,392,994
============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) Asset segregated as collateral for open futures transactions.
(b) 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 11.1% of net
assets.
(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.
18 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
Conversely, as the floating rate declines, the coupon is increased. These
instruments are typically used by the Fund to enhance the yield of the
portfolio. The price of these securities may be more volatile than the price
of a comparable fixed rate security. 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.
(d) The Fund owns 100% of the bond issuance.
(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) This borrower has filed for protection in federal bankruptcy court.
(h) Non-income producing security.
(i) Payment-in-kind security.
(j) Interest is accruing at less than the stated coupon.
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
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.
PSF--Public School Fund
XLCA--XL Capital Assurance Inc.
See Notes to Financial Statements 19
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $622,677,834)....................... $642,048,761
Cash........................................................ 80,968
Receivables:
Interest.................................................. 8,526,817
Fund Shares Sold.......................................... 398,803
Investments Sold.......................................... 265,000
Other....................................................... 183,616
------------
Total Assets............................................ 651,503,965
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,354,972
Fund Shares Repurchased................................... 926,862
Income Distributions...................................... 736,006
Distributor and Affiliates................................ 365,399
Investment Advisory Fee................................... 270,781
Variation Margin on Futures............................... 74,062
Trustees' Deferred Compensation and Retirement Plans........ 245,313
Accrued Expenses............................................ 137,576
------------
Total Liabilities....................................... 5,110,971
------------
NET ASSETS.................................................. $646,392,994
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $654,736,852
Net Unrealized Appreciation................................. 19,417,105
Accumulated Undistributed Net Investment Income............. 1,302,754
Accumulated Net Realized Loss............................... (29,063,717)
------------
NET ASSETS.................................................. $646,392,994
============
NET ASSET VALUE PER COMMON SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $591,005,845 and 40,547,265 shares of
beneficial interest issued and outstanding)............. $ 14.58
Maximum sales charge (4.75%* of offering price)......... .73
------------
Maximum offering price to public........................ $ 15.31
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $42,683,255 and 2,932,309 shares of
beneficial interest issued and outstanding)............. $ 14.56
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $12,703,894 and 873,921 shares of
beneficial interest issued and outstanding)............. $ 14.54
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
20 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 17,607,578
------------
EXPENSES:
Investment Advisory Fee..................................... 1,615,790
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $750,613, $229,470 and $66,181,
respectively)............................................. 1,046,264
Shareholder Services........................................ 211,836
Legal....................................................... 35,973
Custody..................................................... 30,278
Trustees' Fees and Related Expenses......................... 13,761
Other....................................................... 173,147
------------
Total Expenses.......................................... 3,127,049
Less Credits Earned on Cash Balances.................... 5,228
------------
Net Expenses............................................ 3,121,821
------------
NET INVESTMENT INCOME....................................... $ 14,485,757
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 546,230
Futures................................................... 190,657
------------
Net Realized Gain........................................... 736,887
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 30,728,214
------------
End of the Period:
Investments............................................. 19,370,927
Futures................................................. 46,178
------------
19,417,105
------------
Net Unrealized Depreciation During the Period............... (11,311,109)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(10,574,222)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,911,535
============
</Table>
See Notes to Financial Statements 21
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, 2005 SEPTEMBER 30, 2004
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 14,485,757 $ 30,700,407
Net Realized Gain/Loss................................. 736,887 (2,789,110)
Net Unrealized Depreciation During the Period.......... (11,311,109) (19,307)
------------ -------------
Change in Net Assets from Operations................... 3,911,535 27,891,990
------------ -------------
Distributions from Net Investment Income:
Class A Shares....................................... (13,294,305) (27,226,749)
Class B Shares....................................... (842,415) (1,926,469)
Class C Shares....................................... (243,094) (565,309)
------------ -------------
Total Distributions.................................... (14,379,814) (29,718,527)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (10,468,279) (1,826,537)
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 20,488,249 37,955,532
Net Asset Value of Shares Issued Through Dividend
Reinvestment......................................... 9,884,731 20,108,172
Cost of Shares Repurchased............................. (45,401,196) (118,216,715)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (15,028,216) (60,153,011)
------------ -------------
TOTAL DECREASE IN NET ASSETS........................... (25,496,495) (61,979,548)
NET ASSETS:
Beginning of the Period................................ 671,889,489 733,869,037
------------ -------------
End of the Period (Including accumulated undistributed
net investment income of $1,302,754 and $1,196,811,
respectively)........................................ $646,392,994 $ 671,889,489
============ =============
</Table>
22 See Notes to Financial Statements
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, ------------------------------------------------
2005 2004 2003 2002 (c) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $14.81 $14.84 $15.03 $14.56 $14.06 $14.50
------ ------ ------ ------ ------ ------
Net Investment Income........... .33(a) .66(a) .67(a) .71 .74 .79
Net Realized and Unrealized
Gain/Loss..................... (.23) (.05) (.19) .46 .49 (.42)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .10 .61 .48 1.17 1.23 .37
Less Distributions from Net
Investment Income............... .33 .64 .67 .70 .73 .81
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $14.58 $14.81 $14.84 $15.03 $14.56 $14.06
====== ====== ====== ====== ====== ======
Total Return (b).................. .63%* 4.20% 3.31% 8.35% 8.93% 2.69%
Net Assets at End of the Period
(In millions)................... $591.0 $609.4 $658.5 $696.4 $701.5 $688.3
Ratio of Expenses to Average Net
Assets.......................... .87% .89% .88% .87% .83% .89%
Ratio of Interest Expense to
Average Net Assets.............. N/A N/A N/A N/A N/A .01%
Ratio of Net Investment Income to
Average Net Assets.............. 4.44% 4.46% 4.53% 4.89% 5.16% 5.58%
Portfolio Turnover................ 16%* 15% 46% 49% 31% 45%
</Table>
(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 of more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. With
respect to shares purchased prior to December 1, 2004, 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.
(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.
* Non-Annualized
N/A=Not Applicable.
See Notes to Financial Statements 23
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, ------------------------------------------------
2005 2004 2003 2002 (c) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $14.79 $14.82 $15.02 $14.54 $14.05 $14.49
------ ------ ------ ------ ------ ------
Net Investment Income........... .27(a) .55(a) .56(a) .60 .63 .68
Net Realized and Unrealized
Gain/Loss..................... (.23) (.05) (.20) .48 .48 (.42)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .04 .50 .36 1.08 1.11 .26
Less Distributions from Net
Investment Income............... .27 .53 .56 .60 .62 .70
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $14.56 $14.79 $14.82 $15.02 $14.54 $14.05
====== ====== ====== ====== ====== ======
Total Return (b).................. .26%* 3.41% 2.48% 7.64% 8.06% 1.90%
Net Assets at End of the Period
(In millions)................... $ 42.7 $ 48.8 $ 58.4 $ 65.0 $ 66.6 $ 69.5
Ratio of Expenses to Average Net
Assets.......................... 1.63% 1.64% 1.63% 1.62% 1.59% 1.67%
Ratio of Interest Expense to
Average Net Assets.............. N/A N/A N/A N/A N/A .01%
Ratio of Net Investment Income to
Average Net Assets.............. 3.68% 3.71% 3.78% 4.13% 4.40% 4.86%
Portfolio Turnover................ 16%* 15% 46% 49% 31% 45%
</Table>
(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 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) 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.
* Non-Annualized
N/A=Not Applicable
24 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 C SHARES MARCH 31, ------------------------------------------------
2005 2004 2003 2002 (c) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $14.77 $14.80 $15.00 $14.52 $14.04 $14.48
------ ------ ------ ------ ------ ------
Net Investment Income........... .27(a) .55(a) .56(a) .60 .63 .68
Net Realized and Unrealized
Gain/Loss..................... (.23) (.05) (.20) .48 .47 (.42)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .04 .50 .36 1.08 1.10 .26
Less Distributions from Net
Investment Income............... .27 .53 .56 .60 .62 .70
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $14.54 $14.77 $14.80 $15.00 $14.52 $14.04
====== ====== ====== ====== ====== ======
Total Return (b).................. .27%* 3.43% 2.48% 7.65% 8.00% 1.91%
Net Assets at End of the Period
(In millions)................... $ 12.7 $ 13.7 $ 17.0 $ 18.8 $ 17.4 $ 13.8
Ratio of Expenses to Average Net
Assets.......................... 1.63% 1.64% 1.63% 1.62% 1.62% 1.66%
Ratio of Interest Expense to
Average Net Assets.............. N/A N/A N/A N/A N/A .01%
Ratio of Net Investment Income to
Average Net Assets.............. 3.68% 3.71% 3.78% 4.13% 4.37% 4.84%
Portfolio Turnover................ 16%* 15% 46% 49% 31% 45%
</Table>
(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 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) 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.
* Non-Annualized
N/A=Not Applicable.
See Notes to Financial Statements 25
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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. The Fund
registered Class I Shares on September 1, 2004. There were no sales of Class I
Shares for the period ended March 31, 2005.
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 U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Future 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.
Legal expenditures that are expected to result in the restructuring of or a plan
of reorganization for an investment are recorded as realized losses. 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, 2005, 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
incremental 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 Subchapter M of the Internal Revenue Code applicable to regulated investment
companies
26
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
and to distribute 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 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, 2004, the Fund had an accumulated capital loss
carryforward for tax purposes of $27,985,150 which will expire according to the
following schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$11,008,462................................................. September 30, 2008
9,728,055................................................. September 30, 2009
7,248,633................................................. September 30, 2010
</Table>
At March 31, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $622,451,621
============
Gross tax unrealized appreciation........................... $ 33,982,194
Gross tax unrealized depreciation........................... (14,385,054)
------------
Net tax unrealized appreciation investments................. $ 19,597,140
============
</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,
2004 was as follows:
<Table>
Distribution paid from:
Ordinary Income........................................... $291,037
Long-term capital gain.................................... -0-
--------
$291,037
========
</Table>
As of September 30, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $117,235
</Table>
F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's
custody fee was reduced by $5,228 as a result of credits earned on cash
balances.
27
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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.......................................... .50%
Over $500 million........................................... .45%
</Table>
For the six months ended March 31, 2005, the Fund recognized expenses of
approximately $15,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
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, 2005, the Fund recognized expenses of approximately $37,200 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, 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, 2005, the Fund recognized expenses of approximately $166,700
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 also
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 $161,615 are included in
"Other" assets on the Statements of Assets and Liabilities at March 31, 2005.
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.
28
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2005, capital aggregated $595,265,452, $45,885,915 and $13,585,485
for Classes A, B and C, respectively. For the six months ended March 31, 2005,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,194,612 $ 17,673,067
Class B................................................... 98,759 1,462,901
Class C................................................... 91,984 1,352,281
---------- ------------
Total Sales................................................. 1,385,355 $ 20,488,249
========== ============
Dividend Reinvestment:
Class A................................................... 621,272 $ 9,175,759
Class B................................................... 35,811 528,253
Class C................................................... 12,268 180,719
---------- ------------
Total Dividend Reinvestment................................. 669,351 $ 9,884,731
========== ============
Repurchases:
Class A................................................... (2,413,441) $(35,703,003)
Class B................................................... (502,182) (7,411,565)
Class C................................................... (155,131) (2,286,628)
---------- ------------
Total Repurchases........................................... (3,070,754) $(45,401,196)
========== ============
</Table>
At September 30, 2004, capital aggregated $604,119,629, $51,306,326 and
$14,339,113 for Classes A, B and C, respectively. For the year ended September
30, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 2,289,405 $ 33,797,656
Class B................................................... 160,379 2,372,126
Class C................................................... 121,130 1,785,750
---------- -------------
Total Sales................................................. 2,570,914 $ 37,955,532
========== =============
Dividend Reinvestment:
Class A................................................... 1,256,987 $ 18,523,059
Class B................................................... 80,748 1,188,399
Class C................................................... 26,991 396,714
---------- -------------
Total Dividend Reinvestment................................. 1,364,726 $ 20,108,172
========== =============
Repurchases:
Class A................................................... (6,774,537) $ (99,847,334)
Class B................................................... (879,827) (12,919,631)
Class C................................................... (372,418) (5,449,750)
---------- -------------
Total Repurchases........................................... (8,026,782) $(118,216,715)
========== =============
</Table>
29
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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, 2005 and the year
ended September 30, 2004, 204,037 and 144,827 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, 2005 and the year ended September 30, 2004, 46,232 and
2,500 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, 2005, Van Kampen as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $38,600 and CDSC on redeemed shares of approximately $43,700.
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 $105,690,871 and $115,945,601,
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.
30
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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 futures contract. In this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
futures contract. Risks may arise as a result of the potential inability of the
counter parties to meet the terms of their contracts.
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 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, 2005,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2004........................... 575
Futures Opened.............................................. 540
Futures Closed.............................................. (921)
----
Outstanding at March 31, 2005............................... 194
====
</Table>
The futures contracts outstanding as of March 31, 2005, and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 2-Year Futures, June 2005 (Current
Notional Value of $206,891 per contract).................. 38 $24,786
U.S. Treasury Notes 5 Year Futures, June 2005 (Current
Notional Value of $107,094 per contract).................. 156 21,392
--- -------
194 $46,178
=== =======
</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
31
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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 up to 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 $2,592,900 and $185,900
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 the fees for the six months ended March 31, 2005, are payments
retained by Van Kampen of approximately $186,700 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $34,800.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, 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. The consolidated action also names as defendants certain
individual Trustees and Directors of certain 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 steer investors to the funds advised by the Adviser or its
affiliates 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 alleged efforts to steer
investors to these funds. The complaint seeks, among other things, unspecified
compensatory damages, rescissionary damages, fees and costs.
The Adviser and certain affiliates of the Adviser are also named as
defendants in a derivative suit which additionally names as defendants certain
individual Trustees of certain Van Kampen funds; the named investment companies,
including the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of proprietary mutual funds. The
complaint also alleges that the Van Kampen funds paid excessive commissions to
Morgan Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current Trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
complaint has been coordinated with the consolidated complaint described in the
preceding paragraph. Plaintiff has sought leave to file a second amended
derivative compliant that alleges that the Adviser permitted or recklessly
disregarded market timing and late trading in its proprietary mutual funds in
order to increase assets under management and fees. However, pursuant to an
agreement between
32
VAN KAMPEN MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
the parties, the plaintiff's proposed second amended derivative complaint was
withdrawn and the allegations regarding market timing and late trading asserted
therein were filed in a separate complaint and coordinated with other cases
related to market timing that have been centralized in a federal court.
The defendants have moved to dismiss these actions and otherwise intend to
defend them vigorously. While the defendants believe that they have 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.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
33
VAN KAMPEN MUNICIPAL INCOME FUND
BOARD OF TRUSTEES, OFFICERS 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* - President and Chief
Executive Officer
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
Executive Vice President and Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
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 REGISTERED
PUBLIC ACCOUNTING FIRM
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.
34
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC. 49, 349, 549
MIF SAR 5/05 RN05-01059P-Y03/05
(VAN KAMPEN INVESTMENTS LOGO)
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Intermediate Term Municipal Income Fund performed during the semi-annual
period. The portfolio management team will provide an overview of the
market conditions and discuss some of the factors that affected
investment performance during the reporting period. In addition, this
report includes the fund's financial statements and a list of fund
investments as of March 31, 2005.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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.
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 3/31/05
<Table>
<Caption>
A SHARES B SHARES C SHARES
5/28/1993 5/28/1993 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 CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 5.41% 5.11% 5.03% 5.03% 4.26% 4.26%
10-year 5.34 5.00 4.89 4.89 4.60 4.60
5-year 5.48 4.77 4.92 4.92 4.74 4.74
1-year 2.28 -1.04 2.07 -0.91 1.61 0.62
6-month 0.81 -2.47 0.99 -2.00 0.52 -0.47
- ---------------------------------------------------------------------------------------------
SEC Yield 2.87% 2.19% 2.22%
Unsubsidized SEC
Yield 2.77 2.09 2.12
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS 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.
Performance of share classes will vary due to differences in sales charges and
expenses. 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 up to 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 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 does not include any expenses,
fees or sales charges, which would lower performance. The index is unmanaged and
should not be considered an investment. It is not possible to invest directly in
an index. Index data source: Lipper Inc.
1
Fund Report
FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005
Van Kampen Intermediate Term Municipal Income Fund is managed by the Adviser's
Municipal Fixed Income team, which includes Timothy D. Haney, Vice President of
the Adviser.(1)
MARKET CONDITIONS
The six-month period ended March 31, 2005, was characterized by continued
short-term interest rate increases, and the specter of rising inflation
resulting from record-high crude oil prices. The Federal Open Market Committee
(the "Fed") raised the federal funds target rate 100 basis points during the
period through a series of four, "measured" 0.25 percent tightenings to 2.75
percent by the end of March. Although rates in the short and intermediate areas
of the yield curve shifted upward as the Fed tightened, long-term interest rates
fell as buyers did not seem deterred by the prospect of rising inflation. As a
result, the yield curve (which measures the difference in yields between short
and longer-term yields) flattened and the long end of the municipal market
handily outperformed the shorter end.
The municipal market posted positive overall returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a slightly negative showing. Within the investment-grade segment of the
market, yield differentials between BBB-rated municipals and AAA-rated
securities were flat to slightly wider, though BBB-rated securities still
outperformed high grades due to their higher coupons, while securities rated
below investment grade strongly outperformed as investors sought out their
higher yields.
The Fed's interest rate hikes did not dampen investors' appetites for municipal
bonds, as net inflows into municipal bond funds topped $700 million during the
period. The supply of new issues was modest during the closing months of 2004
(the first half of the period) before soaring in the opening months of 2005 as
long-term issuers rushed to bring securities to market in anticipation of
additional interest rate increases in the near term.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
The fund returned 0.81 percent for the six months ended March 31, 2005 (Class A
shares, unadjusted for sales charge). In comparison, the fund's benchmark index,
the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
<Table>
<Caption>
- --------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
0.81% 0.99% 0.52% 1.21%
- --------------------------------------------------------------
</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
INDEX DEFINITION.
The fund's underperformance relative to its benchmark was driven largely by its
emphasis on the short-to-intermediate segment of the market. While this
positioning tends to keep the fund's volatility at a modest level over longer
time periods, it can hamper returns over shorter periods when yields on these
securities rise more rapidly than those of longer-term bonds. That was the
pattern which dominated the market during the review period, and the fund's
returns suffered as a result. In fact, intermediate municipal funds as a group
underperformed their longer-maturity counterparts over the period.
In managing the fund, we continued to focus on trading between liquid, high-
quality securities which our analysis identified as compelling total return
opportunities. Our strategy involves buying these bonds when they are
attractively valued, and selling them when they reach our return targets in
order to reinvest the proceeds into bonds with greater future potential for
total return. Most of our trading during the six-month period occurred in the
10-to-15 year portion of the market. Our purchases were largely of securities
with 15-year maturities but which had more moderate interest rate exposure.
The fund remained focused on higher-quality securities. As of the end of the
reporting period, approximately 72 percent of the fund's portfolio consisted of
securities rated AA or better. We added selectively to the portfolio's holdings
of bonds rated BBB or lower in situations where our analysts' research showed
sufficiently compelling return opportunity. At the sector level, the fund
remained well diversified across the major segments of the municipal market. At
the end of the period, the three largest sectors represented in the portfolio
were public education, general purpose and public building.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the fund in the future.
3
<Table>
<Caption>
RATINGS ALLOCATIONS AS OF 3/31/05
AAA/Aaa 60.8%
AA/Aa 11.0
A/A 11.5
BBB/Baa 8.9
B/B 0.1
Non-Rated 7.7
<Caption>
TOP 5 SECTORS AS OF 3/31/05
Public Education 17.9%
General Purpose 13.9
Public Building 10.1
Higher Education 10.1
Health Care 9.6
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 03/31/05
Pennsylvania 11.4%
New Jersey 10.1
Ohio 7.2
Missouri 6.9
California 5.3
Illinois 5.2
Florida 5.0
Colorado 4.8
Oregon 4.5
Alabama 4.0
New York 3.0
Texas 2.7
Michigan 2.7
Arizona 2.3
Indiana 2.1
Kansas 2.0
Arkansas 1.9
South Carolina 1.8
Tennessee 1.5
North Carolina 1.5
New Mexico 1.5
South Dakota 1.3
West Virginia 1.2
Connecticut 1.2
Kentucky 0.9
Rhode Island 0.9
Nebraska 0.9
Oklahoma 0.9
District of Columbia 0.9
Maryland 0.6
Wisconsin 0.4
Massachusetts 0.3
Georgia 0.3
Montana 0.3
Louisiana 0.1
</Table>
<Table>
(continued on next page)
</Table>
4
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 03/31/05
(continued from previous page)
Minnesota 0.1
Utah --
-----
Total Long-Term Investments 97.7%
Short Term Investments 2.8
Liabilities in Excess of Other Assets -0.5
-----
Total Net Assets 100.0%
</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. Ratings allocations and sector
percentages are as a percentage of long-term investments. Securities are
classified by sectors that represent broad groupings of related industries.
Summary of investments by state classification are as a percentage of total net
assets. 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. Rating allocations based
upon ratings as issued by Standard and Poor's and Moody's, respectively.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public Web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's Web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
6
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 1-800-341-2911 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 AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our Web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
7
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charge on redemptions of Class B and Class C
Shares; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other Fund expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 10/1/04 - 3/31/05.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the second line
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your cost would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
-------------------------------------------------
10/1/04 3/31/05 10/1/04-3/31/05
Class A
Actual..................................... $1,000.00 $1,008.05 $4.71
Hypothetical............................... 1,000.00 1,020.23 4.73
(5% annual return before expenses)
Class B
Actual..................................... 1,000.00 1,009.89 4.21
Hypothetical............................... 1,000.00 1,020.73 4.23
(5% annual return before expenses)
Class C
Actual..................................... 1,000.00 1,005.23 7.70
Hypothetical............................... 1,000.00 1,017.23 7.75
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.94%, 0.84%,
and 1.54% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period). These expense ratios reflect an expense waiver.
Assumes all dividends and distributions were reinvested.
8
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
MUNICIPAL BONDS 97.7%
ALABAMA 4.0%
$1,260 Dothan Houston Cnty, AL Arpt Auth (AMT) (MBIA
Insd) (a)....................................... 5.400% 12/01/15 $ 1,350,418
2,005 Greenville, AL Wts Rfdg (XLCA Insd) (a)......... 5.000 01/01/18 2,136,247
1,000 Jefferson Cnty, AL Ltd Oblig Ser A.............. 5.000 01/01/07 1,032,070
255 West Jefferson Cnty, AL Amusement & Pub Park
Auth (Prerefunded @ 12/01/06)................... 7.500 12/01/08 269,953
------------
4,788,688
------------
ARIZONA 2.3%
1,000 Arizona St Univ Rev Sys Rfdg (AMBAC Insd) (b)... 5.000 07/01/20 1,058,750
30 Maricopa Cnty, AZ Indl Dev Auth Sr Living Fac
Rev Christian Care Mesa Inc Proj A.............. 7.250 04/01/05 30,000
1,000 Maricopa Cnty, AZ Uni Sch Impt Proj of 2002 Ser
B (FSA Insd).................................... 5.250 07/01/16 1,093,770
570 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig
Irvington Proj Tucson Ser A Rfdg (FSA Insd)..... 7.250 07/15/10 596,106
------------
2,778,626
------------
ARKANSAS 1.9%
1,000 Arkansas St Fed Hwy Grant Antic Ser A........... 5.500 08/01/06 1,036,450
1,200 University of Arkansas Rev UALR Cap Impt Ser B
(FSA Insd)...................................... 4.500 12/01/19 1,220,184
------------
2,256,634
------------
CALIFORNIA 5.3%
1,090 California Edl Fac Auth Rev Occidental College
Ser A (MBIA Insd) (a) (b)....................... 5.000 10/01/20 1,156,294
135 California Edl Fac Auth Rev Pacific Grad Sch
(a)............................................. 6.950 11/01/07 148,669
1,000 California St (AMBAC Insd) (c).................. 6.400 09/01/08 1,110,220
1,500 California St Dept Wtr Res Pwr Ser A
(AMBAC Insd).................................... 5.375 05/01/18 1,629,480
700 California Statewide Cmntys Dev Auth Rev
Daughters of Charity Hlth Ser F................. 5.000 07/01/08 729,547
385 Fairfield Suisun, CA Uni Sch Election 2002 (MBIA
Insd)........................................... 5.250 08/01/18 417,937
1,100 Santa Clara, CA Elec Rev Sub Ser A (MBIA
Insd)........................................... 5.250 07/01/20 1,189,320
------------
6,381,467
------------
COLORADO 4.8%
1,750 Adams & Arapahoe Cntys, CO Sch Dist 28 Ser C
(Prerefunded @12/01/06)......................... 5.200 12/01/11 1,854,177
180 Colorado Hlth Fac Auth Rev Sr Living Fac Eaton
Ter Ser A....................................... 6.800 07/01/09 186,638
1,560 Colorado Springs, CO Utils Rev Sys Sub Lien Impt
Ser A........................................... 5.000 11/15/19 1,648,265
1,000 Denver, CO City & Cnty Arpt Rev Ser D Rfdg (AMT)
(FSA Insd)...................................... 5.500 11/15/12 1,078,920
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$1,000 Weld & Adams Cntys, CO Sch Dist (FSA Insd)...... 5.000% 12/15/21 $ 1,055,410
------------
5,823,410
------------
CONNECTICUT 1.2%
1,000 Connecticut St Hlth & Edl Fac Auth Rev Griffin
Hosp Ser B (Radian Insd)........................ 5.000 07/01/11 1,057,020
145 Mashantucket Western Pequot Tribe, 144A--Private
Placement (Escrowed to Maturity) (d)............ 6.500 09/01/06 152,781
260 New Haven, CT Indl Fac Rev Adj Govt Ctr Thermal
Energies (AMT).................................. 7.250 07/01/09 260,445
------------
1,470,246
------------
DISTRICT OF COLUMBIA 0.9%
1,000 District of Columbia Rev Friendship Pub Charter
Sch Inc (ACA Insd) (a).......................... 5.000 06/01/13 1,043,170
------------
FLORIDA 5.0%
1,000 Brevard Cnty, FL Sch Brd Ctfs Ser B Rfdg (FGIC
Insd)........................................... 5.000 07/01/20 1,053,170
2,000 Broward Cnty, FL Arpt Sys Rev Ser E Rfdg (AMT)
(MBIA Insd) (c)................................. 5.375 10/01/13 2,125,940
500 Highlands Cnty, FL Hlth Fac Hosp Adventist
Hlth............................................ 3.350 11/15/32 501,520
190 Lee Cnty, FL Indl Dev Auth Econ Rev Encore
Nursing Ctr Part Rfdg........................... 8.125 12/01/07 191,455
80 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg....................... 8.125 07/01/06 82,908
250 Orange Cnty, FL Hlth Fac Auth Rev First Mtg
Orlando Lutheran Twr Rfdg....................... 8.625 07/01/20 272,097
1,500 Orange Cnty, FL Sch Brd Ctf Ser A (AMBAC
Insd)........................................... 5.250 08/01/14 1,637,490
210 Volusia Cnty, FL Indl Dev Auth Bishops Glen Proj
Rfdg (Escrowed to Maturity)..................... 7.125 11/01/06 216,930
------------
6,081,510
------------
GEORGIA 0.3%
300 Forsyth Cnty, GA Hosp Auth Rev Antic Ctfs GA
Baptist Hlthcare Sys Proj (Escrowed to
Maturity)....................................... 6.000 10/01/08 316,269
------------
ILLINOIS 5.2%
100 Bedford Park, IL Tax Increment 71st & Cicero
Proj Rfdg....................................... 7.000 01/01/06 101,164
1,325 Bedford Park, IL Wtr Rev Ser B (Escrowed to
Maturity) (AMT) (ACA Insd)...................... 6.000 12/15/08 1,430,019
250 Chicago, IL Tax Increment Alloc Sub Cent Loop
Redev Ser A..................................... 6.500 12/01/05 256,092
545 Clay Cnty, IL Hosp Rev (a)...................... 5.500 12/01/10 542,340
99 Huntley, IL Spl Svc Area No 7 Spl Tax........... 6.000 03/01/09 99,000
1,010 Illinois Fin Auth Student Hsg Rev MJH Ed
Assistance IV Sr Ser A (a)...................... 5.000 06/01/09 1,060,813
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$1,000 Illinois Fin Auth Student Hsg Rev MJH Ed
Assistance IV Sr Ser A.......................... 5.500% 06/01/19 $ 1,054,000
500 Lincolnshire, IL Spl Svc Area Sedgebrook Proj... 5.000 03/01/11 515,330
180 Peoria, IL Spl Tax Weaverridge Spl Svc Area..... 7.625 02/01/08 187,117
1,000 Round Lake Beach, IL Tax........................ 4.650 12/15/13 1,004,050
------------
6,249,925
------------
INDIANA 2.1%
1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg
(AMBAC Insd).................................... 5.500 01/01/18 1,085,540
1,400 Indiana Bd Bk Spl Prog Hendricks Redev Ser B
(Prerefunded @ 02/01/07)........................ 6.000 02/01/12 1,503,656
------------
2,589,196
------------
KANSAS 2.0%
500 Burlington, KS Envrn Impt Rev................... 4.750 09/01/15 514,850
1,000 Shawnee Cnty, KS Sch Dist 501 Topeka............ 5.000 02/01/20 1,044,920
320 Wyandotte Cnty, KS City KS Univ Brd of Public
Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/11 344,179
510 Wyandotte Cnty, KS City KS Univ Brd of Public
Utility Office Bldg Complex Proj (MBIA Insd).... 5.000 05/01/12 544,430
------------
2,448,379
------------
KENTUCKY 0.9%
1,000 Louisville & Jefferson Cnty, KY Ser C (AMT) (FSA
Insd)........................................... 5.500 07/01/17 1,081,450
------------
LOUISIANA 0.1%
235 Louisiana Hsg Fin Agy Rev Multi-Family Hsg
Plantation Ser A................................ 7.200 01/01/06 164,058
------------
MARYLAND 0.6%
625 Maryland St Econ Dev Corp Univ MD College Park
Proj............................................ 5.750 06/01/13 694,775
------------
MASSACHUSETTS 0.3%
65 Massachusetts St Indl Fin Agy East Boston
Neighborhood Proj............................... 7.250 07/01/06 64,875
245 Massachusetts St Indl Fin Agy Rev Gtr Lynn
Mental Hlth (Acquired 06/24/1998, Cost $245,000)
(e)............................................. 6.200 06/01/08 252,350
------------
317,225
------------
MICHIGAN 2.7%
1,000 Brighton, MI Area Sch Dist Rfdg (a)............. 5.250 05/01/18 1,075,990
1,000 Brighton, MI Area Sch Dist Rfdg................. 5.250 05/01/20 1,072,650
335 John Tolfree Hlth Sys Corp MI Mtg Rev Rfdg...... 5.450 09/15/06 340,263
500 Kent Hosp Fin Auth MI Rev Met Hosp Proj
Ser A (b)....................................... 5.000 07/01/09 520,625
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
MICHIGAN (CONTINUED)
$ 250 Michigan St Strategic Fd Ltd Oblig United Waste
Sys Proj (AMT).................................. 5.200% 04/01/10 $ 260,197
------------
3,269,725
------------
MINNESOTA 0.1%
90 Minneapolis, MN Multi-Family Rev Hsg Belmont
Apts Proj (AMT) (a)............................. 7.000 11/01/06 90,332
------------
MISSOURI 6.9%
610 Ferguson, MO Tax Increment Rev Crossing at Halls
Ferry Rfdg (a).................................. 5.500 04/01/14 628,099
1,350 Kansas City, MO Indl Dev Auth Plaza Lib Proj.... 6.000 03/01/16 1,415,907
1,000 Macon, MO Ctfs Partn (MBIA Insd)................ 5.250 08/01/17 1,064,570
830 Missouri St Dev Fin Brd Fac Rev Pub Safety Proj
Ser A (a)....................................... 5.000 03/01/11 868,114
2,125 O' Fallon, MO Ctfs Partn (MBIA Insd) (a)........ 5.375 02/01/18 2,293,470
2,000 Saint Charles, MO Ctf Part Ser B................ 5.500 05/01/18 2,107,180
------------
8,377,340
------------
MONTANA 0.3%
300 Crow Fin Auth, MT Tribal Purp Rev (Acquired
12/11/1997, Cost $300,000) (e).................. 5.400 10/01/07 311,505
------------
NEBRASKA 0.9%
1,000 Dodge Cnty, NE Sch Dist 001 Rfdg (FSA Insd)..... 5.000 12/15/18 1,061,940
------------
NEW JERSEY 10.1%
1,000 Casino Reinvestment Dev Auth NJ Hotel Room Fee
Rev (AMBAC Insd)................................ 5.250 01/01/20 1,086,360
1,400 Essex Cnty, NJ Impt Auth Lease Gtd Cnty
Correctional Fac Proj (Prerefunded @10/01/10)
(FGIC Insd)..................................... 5.750 10/01/30 1,565,634
460 Middlesex Cnty, NJ Impt Auth Street Student Hsg
Proj Ser A...................................... 2.500 08/15/06 455,556
1,005 Morris Union Jointure Cmnty NJ Ctfs Part (Radian
Insd)........................................... 4.000 05/01/08 1,023,371
1,000 Morris Union Jointure Cmnty NJ Ctfs Part (Radian
Insd)........................................... 5.250 05/01/20 1,058,560
265 New Jersey Econ Dev Auth First Mtg Winchester
Ser A Rfdg...................................... 2.600 11/01/05 263,723
400 New Jersey Econ Dev Auth First Mtg Winchester
Ser A Rfdg...................................... 3.000 11/01/06 395,772
1,500 New Jersey Econ Dev Auth Rev Cigarette Tax...... 5.500 06/15/16 1,626,915
800 New Jersey Hlthcare Fac Fin Auth Rev Christ Hosp
Group Issue (Escrowed to Maturity) (Connie Lee
Insd)........................................... 7.000 07/01/06 825,488
1,000 New Jersey Hlthcare Fac Fin Auth Rev St Clare's
Hosp Inc Ser A Rfdg (Radian Insd)............... 5.250 07/01/20 1,053,070
</Table>
12 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
NEW JERSEY (CONTINUED)
$1,000 New Jersey Hlthcare Fac Fin Auth Rev Virtua Hlth
Issue (FSA Insd)................................ 5.250% 07/01/10 $ 1,072,100
670 New Jersey St Edl Fac Auth Fairleigh Dickinson
Univ Ser D (ACA Insd)........................... 5.000 07/01/05 673,786
455 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.500 02/15/16 497,229
565 Rahway, NJ Ctfs Partn (MBIA Insd)............... 5.600 02/15/17 619,410
------------
12,216,974
------------
NEW MEXICO 1.5%
1,000 Jicarilla, NM Apache Nation Rev Ser A (Acquired
10/23/2003, Cost $1,020,380) (e)................ 5.500 09/01/23 1,055,200
700 Jicarilla, NM Apache Nation Rev Ser A (Acquired
10/23/2003, Cost $728,707) (e).................. 4.000 09/01/08 709,317
------------
1,764,517
------------
NEW YORK 3.0%
245 Brookhaven, NY Indl Dev Agy Sr Residential Hsg
Rev Woodcrest Estates Fac Ser A (AMT)........... 5.875 12/01/09 251,674
1,000 Long Island Pwr Auth NY Elec Gen Ser C.......... 5.500 09/01/17 1,082,120
750 New York City Indl Dev Agy Rev Liberty 7 World
Trade Ctr Proj Ser A............................ 6.250 03/01/15 760,650
480 New York City Ser A............................. 7.000 08/01/07 511,267
20 New York City Ser A (Prerefunded @ 08/01/06).... 7.000 08/01/07 21,427
5 Niagara Falls, NY Pub Impt (MBIA Insd).......... 6.900 03/01/20 5,067
1,000 Tobacco Settlement Fin Corp NY Ser C-1.......... 5.250 06/01/13 1,057,670
------------
3,689,875
------------
NORTH CAROLINA 1.5%
630 North Carolina Eastn Mun Pwr Agy Pwr Sys Rev Ser
D............................................... 6.450 01/01/14 697,454
1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 1,075,420
------------
1,772,874
------------
OHIO 7.2%
500 Athens Cnty, OH Hosp Fac Rev & Impt O' Bleness
Mem Ser A Rfdg.................................. 6.250 11/15/13 516,115
1,370 Cleveland, OH Non Tax Rev Cleveland Stadium Proj
Rfdg (AMBAC Insd)............................... 5.125 12/01/20 1,458,105
60 Cleveland-Cuyahoga Cnty, OH Port Auth Rev Dev-
Port Cleveland Bd Fd Ser B (AMT) (a)............ 6.500 05/15/05 60,172
500 Dayton, OH Spl Fac Rev Afco Cargo Day LLC Proj
(AMT)........................................... 6.000 04/01/09 484,195
2,675 Ohio Mun Elec Generation Agy Jt Venture 5 Ctfs
Ben Int Rfdg (AMBAC Insd)....................... 5.000 02/15/21 2,798,719
1,160 Sugarcreek, OH Loc Sch Dist Sch Impt Rfdg (MBIA
Insd) (a)....................................... 5.250 12/01/18 1,255,978
1,010 Toledo, OH Swr Sys Rev (AMBAC Insd)............. 5.000 11/15/18 1,070,893
1,000 University of Cincinnati Gen Ser C (FGIC
Insd)........................................... 5.000 06/01/18 1,057,600
------------
8,701,777
------------
</Table>
See Notes to Financial Statements 13
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
OKLAHOMA 0.9%
$1,000 University of Oklahoma Rev Multiple Fac
(MBIA Insd)..................................... 5.000% 06/01/19 $ 1,053,670
------------
OREGON 4.5%
2,575 Emerald Peoples Util Dist OR Ser A Rfdg
(FSA Insd) (a).................................. 5.250 11/01/16 2,802,913
1,485 Oregon St Dept Admin Svcs Lottery Rev Ser B (FSA
Insd)........................................... 5.000 04/01/18 1,583,025
1,000 Port Morrow, OR Pollutn Ctl Portland Gen
Ser A Rfdg...................................... 5.200 05/01/33 1,045,110
------------
5,431,048
------------
PENNSYLVANIA 11.4%
250 Allegheny Cnty, PA Redev Auth Rev Pittsburgh
Mills Proj...................................... 5.100 07/01/14 260,943
1,320 Canon McMillan Sch Dist PA Ser A Rfdg
(MBIA Insd)..................................... 5.000 12/15/15 1,423,211
1,000 Erie, PA Ser A (FSA Insd)....................... 5.000 11/15/18 1,062,330
500 Montgomery Cnty, PA Indl Dev Auth Rev Mtg
Whitemarsh Cont Care Proj....................... 6.000 02/01/21 508,265
1,000 Pennsylvania St High Edl Fac Auth Rev Univ PA
Hlth Sys Ser A.................................. 5.000 08/15/08 1,046,150
1,300 Philadelphia, PA Gas Wks Rev Eighteenth Ser (AGC
Insd)........................................... 5.250 08/01/18 1,377,116
900 Philadelphia, PA Gas Wks Rev Third Ser (FSA
Insd)........................................... 5.000 08/01/10 966,843
2,000 Philadelphia, PA Redev Auth Rev Neighborhood
Trans Ser A (FGIC Insd)......................... 5.500 04/15/16 2,189,480
1,500 Springfield, PA Sch Dist DE Ser A (FGIC Insd)... 5.000 03/15/20 1,580,190
1,090 Wilson, PA Area Sch Dist (FGIC Insd)............ 5.125 03/15/17 1,161,482
2,070 York Cnty, PA Sch Technology (FGIC Insd)........ 5.375 02/15/16 2,263,421
------------
13,839,431
------------
RHODE ISLAND 0.9%
1,000 Rhode Island St Econ Dev Grant Antic RI Dept
Trans Ser A (FSA Insd).......................... 5.000 06/15/15 1,074,370
------------
SOUTH CAROLINA 1.8%
1,020 Berkeley Cnty, SC Impt & Rfdg (FSA Insd)........ 5.000 09/01/17 1,084,750
1,065 Lexington, SC Wtr & Swr Rev & Impt Comb Ser A
Rfdg (MBIA Insd) (a)............................ 5.000 04/01/14 1,132,276
------------
2,217,026
------------
SOUTH DAKOTA 1.3%
1,515 Minnehaha Cnty, SD Ctfs Ltd Tax (FSA Insd)...... 5.000 12/01/18 1,606,718
------------
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- -------------------------------------------------------------------------------------------
TENNESSEE 1.5%
$1,050 Franklin, TN Spl Sch Dist Cap Apprec (FSA
Insd)........................................... * 06/01/15 $ 674,562
1,000 Gatlinburg, TN Pub Bldg Auth Rfdg (AMBAC
Insd)........................................... 5.750% 12/01/11 1,122,780
------------
1,797,342
------------
TEXAS 2.7%
740 Austin, TX Util Sys Rev Comb Ser A Rfdg (MBIA
Insd)........................................... 5.375 11/15/05 742,605
395 Brazos River Auth TX Pollutn Ctl Rev Adj TXU
Elec Co Proj Ser C Rfdg (AMT)................... 5.750 05/01/36 420,304
500 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc
Proj............................................ 5.000 08/15/13 502,350
350 Hidalgo Cnty, TX Hlth Svcs Mission Hosp Inc
Proj............................................ 5.000 08/15/19 341,054
1,000 Lower Colorado Riv Auth TX LCRA Svcs Corp Proj
Rfdg (FGIC Insd)................................ 5.000 05/15/17 1,044,670
300 San Antonio, TX Hsg Fin Corp Multi-Family Hsg
Rev Beverly Oaks Apt Proj Ser A (a)............. 7.500 02/01/10 284,688
------------
3,335,671
------------
UTAH 0.0%
45 Utah St Hsg Fin Agy Single Family Mtg Mezz Ser A
(AMT) (FHA/VA Gtd).............................. 7.150 07/01/12 45,958
------------
WEST VIRGINIA 1.2%
1,500 West Virginia St Hosp Fin Auth (MBIA Insd)...... 6.100 01/01/18 1,503,765
------------
WISCONSIN 0.4%
500 Wisconsin St Hlth & Edl Fac Beaver Dam Cmnty
Hosp Inc........................................ 5.500 08/15/14 489,480
------------
TOTAL LONG-TERM INVESTMENTS 97.7%
(Cost $116,418,898)....................................................... 118,136,366
SHORT-TERM INVESTMENTS 2.8%
(Cost $3,400,000)......................................................... 3,400,000
------------
TOTAL INVESTMENTS 100.5%
(Cost $119,818,898)....................................................... 121,536,366
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%)............................... (604,885)
------------
NET ASSETS 100.0%.......................................................... $120,931,481
============
</Table>
Percentages are calculated as a percentage of net assets.
* Zero coupon bond
(a) The Fund owns 100% of the bond issuance.
(b) Securities purchased on a when-issued or delayed delivery basis.
See Notes to Financial Statements 15
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
(c) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(d) 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.
(e) 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 1.9% of net
assets.
ACA--American Capital Access
AGC--AGC Insured Custody Certificates
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FHA/VA--Federal Housing Administration/Department of Veterans Affairs
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
Radian--Radian Asset Assurance
XLCA--XL Capital Assurance Inc.
16 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $119,818,898)....................... $121,536,366
Cash........................................................ 10,547
Receivables:
Interest.................................................. 1,617,873
Investments Sold.......................................... 1,067,480
Fund Shares Sold.......................................... 276,213
Other....................................................... 119,996
------------
Total Assets............................................ 124,628,475
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,742,996
Fund Shares Repurchased................................... 391,432
Distributor and Affiliates................................ 113,457
Income Distributions...................................... 108,956
Variation Margin on Futures............................... 72,437
Investment Advisory Fee................................... 41,379
Trustees' Deferred Compensation and Retirement Plans........ 169,740
Accrued Expenses............................................ 56,597
------------
Total Liabilities....................................... 3,696,994
------------
NET ASSETS.................................................. $120,931,481
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $118,610,932
Net Unrealized Appreciation................................. 1,863,363
Accumulated Net Realized Gain............................... 275,559
Accumulated Undistributed Net Investment Income............. 181,627
------------
NET ASSETS.................................................. $120,931,481
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $86,469,850 and 8,147,172 shares of
beneficial interest issued and outstanding)............. $ 10.61
Maximum sales charge (3.25%* of offering price)......... .36
------------
Maximum offering price to public........................ $ 10.97
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $18,256,423 and 1,708,862 shares of
beneficial interest issued and outstanding)............. $ 10.68
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $16,205,208 and 1,529,011 shares of
beneficial interest issued and outstanding)............. $ 10.60
============
</Table>
* On sales of $25,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 17
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 2,628,447
-----------
EXPENSES:
Investment Advisory Fee..................................... 303,400
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $105,993, $14,922 and $71,593,
respectively)............................................. 192,508
Shareholder Services........................................ 33,530
Registration and Filing Fees................................ 30,627
Legal....................................................... 21,358
Trustees' Fees and Related Expenses......................... 11,214
Custody..................................................... 5,948
Other....................................................... 72,235
-----------
Total Expenses.......................................... 670,820
Investment Advisory Fee Reduction....................... 60,680
Less Credits Earned on Cash Balances.................... 1,288
-----------
Net Expenses............................................ 608,852
-----------
NET INVESTMENT INCOME....................................... $ 2,019,595
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 72,001
Futures................................................... 295,272
-----------
Net Realized Gain........................................... 367,273
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 3,336,877
End of the Period:
Investments............................................. 1,717,468
Futures................................................. 145,895
-----------
1,863,363
-----------
Net Unrealized Depreciation During the Period............... (1,473,514)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,106,241)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 913,354
===========
</Table>
18 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, 2005 SEPTEMBER 30, 2004
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 2,019,595 $ 3,767,410
Net Realized Gain/Loss............................... 367,273 (116,827)
Net Unrealized Appreciation/Depreciation During the
Period............................................. (1,473,514) 436,427
------------ ------------
Change in Net Assets from Operations................. 913,354 4,087,010
------------ ------------
Distributions from Net Investment Income:
Class A Shares..................................... (1,450,168) (2,540,540)
Class B Shares..................................... (260,960) (599,449)
Class C Shares..................................... (225,906) (538,322)
------------ ------------
(1,937,034) (3,678,311)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares..................................... (111,173) (559,167)
Class B Shares..................................... (25,082) (168,772)
Class C Shares..................................... (21,027) (151,088)
------------ ------------
(157,282) (879,027)
------------ ------------
Total Distributions.................................. (2,094,316) (4,557,338)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... (1,180,962) (470,328)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................ 22,529,535 35,464,587
Net Asset Value of Shares Issued Through Dividend
Reinvestment....................................... 1,514,215 3,315,608
Cost of Shares Repurchased........................... (16,831,431) (38,885,321)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS... 7,212,319 (105,126)
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS................ 6,031,357 (575,454)
NET ASSETS:
Beginning of the Period.............................. 114,900,124 115,475,578
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $181,627 and
$99,066, respectively)............................. $120,931,481 $114,900,124
============ ============
</Table>
See Notes to Financial Statements 19
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, --------------------------------------------
2005 2004 2003 2002 (b) 2001 2000
---------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD................................... $10.72 $10.76 $10.86 $10.42 $10.14 $10.22
------ ------ ------ ------ ------ ------
Net Investment Income.................... .18 .37 .38 .42 .49 .46
Net Realized and Unrealized Gain/Loss.... (.10) .04 (.03) .44 .23 (.05)
------ ------ ------ ------ ------ ------
Total from Investment Operations.......... .08 .41 .35 .86 .72 .41
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income................................. .18 .37 .40 .42 .43 .49
Distributions from Net Realized Gain..... .01 .08 .05 -0- .01 -0-
------ ------ ------ ------ ------ ------
Total Distributions....................... .19 .45 .45 .42 .44 .49
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........ $10.61 $10.72 $10.76 $10.86 $10.42 $10.14
====== ====== ====== ====== ====== ======
Total Return* (a)......................... 0.81%** 3.84% 3.33% 8.48% 7.19% 4.13%
Net Assets at End of the Period (In
millions)................................ $ 86.5 $ 76.5 $ 70.1 $ 53.5 $ 29.1 $ 26.6
Ratio of Expenses to Average Net
Assets*.................................. .94% .93% .84% .85% .77% 1.44%
Ratio of Net Investment Income to Average
Net Assets*.............................. 3.39% 3.50% 3.55% 4.08% 4.78% 4.65%
Portfolio Turnover........................ 26%** 60% 35% 75% 106% 85%
* 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................................ 1.04% 1.03% 1.04% 1.14% 1.23% N/A
Ratio of Net Investment Income to
Average Net Assets.................... 3.29% 3.40% 3.35% 3.79% 4.32% N/A
** Non-Annualized
</Table>
(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 0.50% may
be imposed on certain redemptions made within eighteen months of purchase.
With respect to shares purchased prior to December 1, 2004, 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
20 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, --------------------------------------------------------
2005 2004 2003 2002 (b) 2001 2000
------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................... $10.75 $10.78 $10.84 $10.41 $10.13 $10.20
------ ------ ------ ------ ------ ------
Net Investment Income................ .18 .30 .32 .35 .42 .38
Net Realized and Unrealized
Gain/Loss.......................... (.10) .04 (.01) .42 .22 (.04)
------ ------ ------ ------ ------ ------
Total from Investment Operations....... .08 .34 .31 .77 .64 .34
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income............................. .14 .29 .32 .34 .35 .41
Distributions from Net Realized
Gain............................... .01 .08 .05 -0- .01 -0-
------ ------ ------ ------ ------ ------
Total Distributions.................... .15 .37 .37 .34 .36 .41
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD..... $10.68 $10.75 $10.78 $10.84 $10.41 $10.13
====== ====== ====== ====== ====== ======
Total Return* (a)...................... 0.99%**(d) 3.15%(d) 2.96%(c) 7.61% 6.42% 3.46%
Net Assets at End of the Period (In
millions)............................ $ 18.3 $ 20.3 $ 23.9 $ 17.1 $ 11.1 $ 8.6
Ratio of Expenses to Average Net
Assets*.............................. .84%(d) 1.67%(d) 1.59% 1.60% 1.52% 2.20%
Ratio of Net Investment Income to
Average Net Assets*.................. 3.50%(d) 2.76%(d) 3.08%(c) 3.34% 4.02% 3.90%
Portfolio Turnover..................... 26%** 60% 35% 75% 106% 85%
* 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............................ .94%(d) 1.77%(d) 1.79% 1.89% 1.98% N/A
Ratio of Net Investment Income to
Average Net Assets................ 3.40%(d) 2.66%(d) 2.88%(c) 3.05% 3.56% N/A
** Non-Annualized
</Table>
(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 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 B Shares, resulting in an
increase to the Ratio of Net Investment Income to Average Net Assets and
Total Return of .28%.
(d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect actual 12b-1 fees of less
than 1% (See footnote 6).
N/A=Not Applicable.
See Notes to Financial Statements 21
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, --------------------------------------------------------
2005 2004 2003 2002 (b) 2001 2000
------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD................................ $10.70 $10.73 $10.82 $10.40 $10.12 $10.20
------ ------ ------ ------ ------ ------
Net Investment Income................. .15 .30 .30 .34 .42 .39
Net Realized and Unrealized
Gain/Loss........................... (.10) .04 (.02) .42 .22 (.06)
------ ------ ------ ------ ------ ------
Total from Investment Operations....... .05 .34 .28 .76 .64 .33
------ ------ ------ ------ ------ ------
Less:
Distributions from Net Investment
Income.............................. .14 .29 .32 .34 .35 .41
Distributions from Net Realized
Gain................................ .01 .08 .05 -0- .01 -0-
------ ------ ------ ------ ------ ------
Total Distributions.................... .15 .37 .37 .34 .36 .41
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD..... $10.60 $10.70 $10.73 $10.82 $10.40 $10.12
====== ====== ====== ====== ====== ======
Total Return* (a)...................... 0.52%**(d) 3.17%(d) 2.69%(c) 7.52% 6.42% 3.36%
Net Assets at End of the Period (In
millions)............................. $ 16.2 $ 18.1 $ 21.4 $ 13.2 $ 8.6 $ 6.4
Ratio of Expenses to Average Net
Assets*............................... 1.54%(d) 1.66%(d) 1.59% 1.60% 1.52% 2.20%
Ratio of Net Investment Income to
Average Net Assets*................... 2.80%(d) 2.77%(d) 2.84%(c) 3.33% 4.02% 3.90%
Portfolio Turnover..................... 26%** 60% 35% 75% 106% 85%
* 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............................. 1.64%(d) 1.76%(d) 1.79% 1.89% 1.98% N/A
Ratio of Net Investment Income to
Average Net Assets................. 2.70%(d) 2.67%(d) 2.64%(c) 3.04% 3.56% N/A
** Non-Annualized
</Table>
(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 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%.
(d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect actual 12b-1 fees of less
than 1% (See footnote 6).
N/A=Not Applicable.
22 See Notes to Financial Statements
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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. The Fund registered Class I
Shares on December 30, 2004. There were no sales of Class I Shares for the
period ended March 31, 2005.
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 U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services are valued at fair value
using procedures established in good faith by the Board of Trustees. 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.
Legal expenditures that are expected to result in the restructuring of or a plan
of reorganization for an investment are recorded as realized losses. 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. Purchasing securities on
this basis involves a risk that the market value at the time of delivery may be
lower than the agreed upon purchase price resulting in an unrealized loss. 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, 2005, the Fund has $2,742,996 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
incremental transfer agency costs which are unique to each class of shares.
23
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income, if any, to
its shareholders. Therefore, no provision for federal income taxes is required.
At March 31, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $119,774,141
============
Gross tax unrealized appreciation........................... $ 2,212,527
Gross tax unrealized depreciation........................... (512,766)
------------
Net tax unrealized appreciation on investments.............. $ 1,699,761
============
</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,
2004 was as follows:
<Table>
Distributions paid from:
Ordinary Income........................................... $444,464
Long Term Capital Gain.................................... 437,594
--------
$882,058
========
</Table>
As of September 30, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $157,502
</Table>
F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's
custody fee was reduced by $1,288 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, 2005, the Adviser waived $60,680 of its
investment advisory fee. This represents an annualized rate of .10% of its
average daily net assets. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.
For the six months ended March 31, 2005, the Fund recognized expenses of
approximately $7,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide services as legal counsel to the Fund.
24
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, 2005, 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, 2005, 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 also
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 $106,200
are included in "Other" assets on the Statement of Assets and Liabilities at
March 31, 2005. 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.
3. CAPITAL TRANSACTIONS
At March 31, 2005, capital aggregated $85,693,034, $17,221,547 and $15,696,351
for Classes A, B and C, respectively. For the six months ended March 31, 2005,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 1,918,549 $ 20,603,448
Class B................................................... 79,030 854,656
Class C................................................... 99,772 1,071,431
---------- ------------
Total Sales................................................. 2,097,351 $ 22,529,535
========== ============
Dividend Reinvestment:
Class A................................................... 111,216 $ 1,191,829
Class B................................................... 15,931 171,757
Class C................................................... 14,077 150,629
---------- ------------
Total Dividend Reinvestment................................. 141,224 $ 1,514,215
========== ============
Repurchases:
Class A................................................... (1,014,447) $(10,891,952)
Class B................................................... (279,101) (3,010,916)
Class C................................................... (273,989) (2,928,563)
---------- ------------
Total Repurchases........................................... (1,567,537) $(16,831,431)
========== ============
</Table>
25
At September 30, 2004, capital aggregated $74,789,709, $19,206,050 and
$17,402,854 for Classes A, B and C, respectively. For the year ended September
30, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 2,439,175 $ 26,096,448
Class B................................................... 442,461 4,732,358
Class C................................................... 433,331 4,635,781
---------- ------------
Total Sales................................................. 3,314,967 $ 35,464,587
========== ============
Dividend Reinvestment:
Class A................................................... 228,163 $ 2,436,459
Class B................................................... 42,299 453,007
Class C................................................... 39,974 426,142
---------- ------------
Total Dividend Reinvestment................................. 310,436 $ 3,315,608
========== ============
Repurchases:
Class A................................................... (2,054,862) $(21,954,065)
Class B................................................... (808,689) (8,651,743)
Class C................................................... (781,197) (8,279,513)
---------- ------------
Total Repurchases........................................... (3,644,748) $(38,885,321)
========== ============
</Table>
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, 2005 and the year
ended September 30, 2004, 82,098 and 36,615 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, 2005 and the year ended September 30, 2004, 61,678 and 0 Class C
Shares converted to Class A Shares, respectively, and are shown in the above
tables as sales of Class A Shares and repurchases of Class C 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
26
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>
Class B Shares purchased on or after June 1, 2005 are subject to the
following CDSC schedule:
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
YEAR SINCE PURCHASE -------------------
First....................................................... 4.00%
Second...................................................... 4.00%
Third....................................................... 3.00%
Fourth...................................................... 2.50%
Fifth....................................................... 1.50%
Sixth and After............................................. 0.00%
</Table>
For the six months ended March 31, 2005, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $10,000 and CDSC on redeemed shares of approximately $21,100.
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 $37,046,404 and $30,158,479 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, 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.
27
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
Securities 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, 2005,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2004........................... 157
Futures Opened.............................................. 466
Futures Closed.............................................. (425)
----
Outstanding at March 31, 2005............................... 198
====
</Table>
The futures contracts outstanding as of March 31, 2005, and the description
and unrealized appreciation/depreciation were as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 2-Year Futures June 2005 (Current
Notional Value of $206,891 per contract)................ 64 $ 41,744
U.S. Treasury Notes 5-Year Futures June 2005 (Current
Notional Value of $107,094 per contract)................ 134 104,151
--- --------
198 $145,895
=== ========
</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.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and up to 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.
At March 31, 2005, there were no distribution expenses incurred by Van Kampen
and not yet reimbursed ("unreimbursed receivable") for Class B and Class C
shares, respectively. Any unreimbursed receivable may be recovered from future
28
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 ended, are payments made to Morgan Stanley DW
Inc., an affiliate of the Adviser, of approximately $16,400.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, 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. The consolidated action also names as defendants certain
individual Trustees and Directors of certain 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 steer investors to the funds advised by the Adviser or its
affiliates 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 alleged efforts to steer
investors to these funds. The complaint seeks, among other things, unspecified
compensatory damages, rescissionary damages, fees and costs.
The Adviser and certain affiliates of the Adviser are also named as
defendants in a derivative suit which additionally names as defendants certain
individual Trustees of certain Van Kampen funds; the named investment companies,
including the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of proprietary mutual funds. The
complaint also alleges that the Van Kampen funds paid excessive commissions to
Morgan Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current Trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
complaint has been coordinated with the consolidated complaint described in the
preceding paragraph. Plaintiff has sought leave to file second amended
derivative complaint that alleges that the Adviser permitted or recklessly
disregarded market timing and later trading in its proprietary mutual funds in
order to increase assets under management and fees. However, pursuant to an
agreement between the parties, the plaintiff's proposed second amended
derivative complaint was withdrawn and the allegations regarding market timing
and late trading asserted therein were filed in a separate complaint and
coordinated with other cases related to market timing that have been centralized
in a federal court.
The defendants have moved to dismiss these actions and otherwise intend to
defend them vigorously. While the defendants believe that they have meritorious
defenses, the ultimate outcome of these matters is not presently determinable at
this early stage of litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of these matters.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
29
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN* - President and Chief Executive Officer
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
Executive Vice President and
Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and
Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
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 REGISTERED
PUBLIC ACCOUNTING FIRM
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
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC. 138, 338, 538
INF SAR 5/05 RN05-01079P-Y03/05
(VAN KAMPEN INVESTMENTS LOGO)
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, 2005.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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.
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 3/31/05
<Table>
<Caption>
A SHARES B SHARES C SHARES
7/29/94 7/29/94 7/29/94
- ---------------------------------------------------------------------------------------------
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 CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 6.41% 5.93% 5.90% 5.90% 5.69% 5.69%
10-year 6.38 5.87 5.83 5.83 5.61 5.61
5-year 6.82 5.79 6.03 5.79 6.05 6.05
1-year 2.74 -2.16 1.98 -1.98 2.04 1.05
6-months 0.67 -4.12 0.30 -3.65 0.36 -0.63
- ---------------------------------------------------------------------------------------------
30-Day SEC Subsidized
Yield 3.16% 2.57% 2.57%
- ---------------------------------------------------------------------------------------------
30-Day SEC Yield 2.92% 2.32% 2.32%
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS 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.
Performance of share classes will vary due to differences in sales charges and
expenses. 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 up to 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 seven years after purchase. The since inception
returns for Class C shares reflects 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 does not include any expenses,
fees or sales charges, which would lower performance. The index is unmanaged and
should not be considered an investment. It is not possible to invest directly in
an index. Index data source: Lipper Inc.
1
Fund Report
FOR THE 6-MONTH PERIOD ENDED MARCH 31, 2005
Van Kampen New York Tax Free Income Fund is managed by the Adviser's Municipal
Fixed Income team.(1) Members of the team include Dennis S. Pietrzak and John R.
Reynoldson, Executive Directors of the Adviser; and Timothy D. Haney, Vice
President of the Adviser.
MARKET CONDITIONS
The six-month period ended March 31, 2005, was characterized by continued
short-term interest rate increases, and the specter of rising inflation
resulting from record-high crude oil prices. The Federal Open Market Committee
(the "Fed") raised the federal funds target rate 100 basis points during the
period through a series of four, "measured" 0.25 percent tightenings to 2.75
percent by the end of March. Although rates in the short and intermediate areas
of the yield curve shifted upward as the Fed tightened, long-term interest rates
fell as buyers did not seem deterred by the prospect of rising inflation. As a
result, the yield curve (the difference between short and longer-term yields)
flattened and the long end of the municipal market handily outperformed the
shorter end.
The municipal market posted positive overall returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a slightly negative showing. Within the investment-grade segment of the
market, yield differentials between BBB-rated municipals and AAA-rated
securities were flat to slightly wider, though BBB-rated securities still
outperformed high grades due to their higher coupons, while securities rated
below investment grade strongly outperformed as investors sought out their
higher yields.
The Fed's interest rate hikes did not dampen investors' appetites for municipal
bonds, as net inflows into municipal bond funds topped $700 million during the
period. The supply of new issues was modest during the closing months of 2004
(the first half of the period) before soaring in the opening months of 2005 as
long-term issuers rushed to bring securities to market in anticipation of
additional interest rate increases in the near term.
New York continued to be one of the most active markets in the nation for new
issuance during the period, although economic conditions were not uniformly
strong. New York's economy continued to improve, and its credit rating was
upgraded thanks to a guardedly optimistic outlook for New York City's fiscal
health. The city continued to issue Liberty bonds to fund reconstruction efforts
at the site of the World Trade Center. By contrast, the northern part of the
state continued to struggle economically.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
The fund returned 0.67 percent for the six months ended March 31, 2005 (Class A
shares, unadjusted for sales charge). In comparison, the fund's benchmark index,
the Lehman Brothers Municipal Bond Index, returned 1.21 percent for the period.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
LEHMAN BROTHERS
CLASS A CLASS B CLASS C MUNICIPAL BOND INDEX
0.67% 0.30% 0.36% 1.21%
- ----------------------------------------------------------------
</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
INDEX DEFINITIONS.
One of our key strategies in managing the fund was to position it for rising
interest rates. This approach was largely the result of our analysis of interest
rates, which remained relatively low by historical standards even after rising
from their multi-decade lows earlier. We effected this positioning in two ways.
First, we kept the fund's duration (a measure of interest-rate sensitivity)
below that of its benchmark. Second, to limit the fund's exposure to areas of
the market that would be most likely susceptible to rising rates, we also
trimmed the fund's shorter-maturity bonds. We reinvested the proceeds from those
sales into bonds with premium coupons and maturities between 25 and 30 years. In
addition to offering relatively attractive income streams, these securities
positioned the fund to benefit from any future flattening of the yield curve.
We kept the fund's exposure well diversified across the major sectors of the New
York municipal market. Much of our relative-value trading activity was focused
on selling issues that had been pre-refunded and purchasing more attractive
securities in sectors such as water and sewer and public education. The fund
remained focused on investment-grade securities, with more than 97 percent of
the portfolio rated BBB or higher at the end of the period.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the fund in the future.
3
<Table>
TOP 5 SECTORS AS OF 3/31/05 RATINGS ALLOCATIONS AS OF 3/31/05
General Purpose 21.7% AAA/Aaa 51.1%
Higher Education 20.0 AA/Aa 27.5
Public Education 9.6 A/A 14.4
Water & Sewer 8.4 BBB/Baa 4.0
Health Care 8.2 NR 3.0
</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
total 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.
Rating allocations based upon ratings as issued by Standard and Poor's and
Moody's, respectively.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public Web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's Web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
5
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 1-800-341-2911 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 AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our Web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
6
Expense Example
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing cost (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 10/01/04 - 03/31/05.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, and $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the second line of the table is useful in
comparing ongoing costs, and will not help you determine the relative total
costs of owning different funds that have transactional costs, such as sales
charges (loads), and redemption fees, or exchange fees.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
--------------------------------------------------
10/1/04 3/31/05 10/01/04-3/31/05
Class A
Actual.................................... $1,000.00 $1,006.69 $3.65
Hypothetical.............................. 1,000.00 1,021.33 3.68
(5% annual return before expenses)
Class B
Actual.................................... 1,000.00 1,003.00 7.39
Hypothetical.............................. 1,000.00 1,017.53 7.44
(5% annual return before expenses)
Class C
Actual.................................... 1,000.00 1,003.60 7.04
Hypothetical.............................. 1,000.00 1,017.93 7.09
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.73%, 1.48%,
and 1.41% for Class A, B, and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period). These ratios reflect an expense cap.
Assumes all dividends and distributions were reinvested.
7
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
MUNICIPAL BONDS 97.2%
NEW YORK 96.2%
$1,290 Albany Cnty, NY Indl Dev Agy Indl Dev Rev
Albany College of Pharmacy Ser A............ 5.625% 12/01/34 $ 1,341,974
330 Bethlehem, NY Indl Dev Agy Sr Hsg Rev Van
Allen Proj Ser A............................ 6.875 06/01/39 309,853
1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City
of Buffalo Proj (FSA Insd).................. 5.750 05/01/21 1,388,612
1,250 Erie Cnty, NY Indl Dev Agy Sch Fac Rev City
of Buffalo Proj (FSA Insd).................. 5.750 05/01/22 1,388,612
1,250 Hempstead Town, NY Indl Dev Adelphi Univ
Civic Fac................................... 5.750 06/01/22 1,363,512
500 Islip, NY Cmnty Dev Agy Cmnty Dev Rev NY
Institute of Technology Rfdg (Prerefunded @
03/01/06)................................... 7.500 03/01/26 531,670
1,290 Islip, NY Res Recovery Agy Res 1985 Fac Ser
E (AMT) (FSA Insd).......................... 5.750 07/01/22 1,416,794
1,250 Long Island Pwr Auth NY Elec Sys Rev Gen Ser
A (AMBAC Insd).............................. 5.500 12/01/09 1,365,325
2,000 Long Island Pwr Auth NY Elec Sys Rev Gen Ser
C........................................... 5.500 09/01/19 2,158,380
1,000 Metropolitan Trans Auth NY Rev Ser A Rfdg
(AMBAC Insd)................................ 5.500 11/15/19 1,104,920
1,000 Metropolitan Trans Auth NY Svc Contract Ser
A Rfdg...................................... 5.125 01/01/29 1,029,810
1,000 Monroe Cnty, NY Indl Dev Agy Nazareth
College Rochester Proj (MBIA Insd).......... 5.250 10/01/21 1,062,660
1,155 Monroe Cnty, NY Indl Dev Agy Saint John
Fisher College Proj (Radian Insd) (c)....... 5.375 06/01/09 1,239,061
1,320 Montgomery Cnty, NY Indl Dev Agy Lease HFM
Boces Ser A (XLCA Insd)..................... 5.000 07/01/34 1,353,317
295 Nassau Cnty, NY Interim Fin Auth Sales Tax
Secd Ser A1 (AMBAC Insd).................... 5.375 11/15/16 322,777
750 Nassau Cnty, NY Swr & Storm Wtr Fin Auth Sys
Rev Ser B (MBIA Insd)....................... 5.000 10/01/19 793,890
470 Nassau Cnty, NY Swr & Storm Wtr Fin Auth Sys
Rev Ser B (MBIA Insd)....................... 5.000 10/01/23 491,517
2,425 New York City Fiscal 2003 Ser I............. 5.750 03/01/15 2,683,578
1,500 New York City Hlth & Hosp Corp Rev Hlth Sys
Ser A (FSA Insd)............................ 5.500 02/15/18 1,637,250
1,000 New York City Hlth & Hosp Corp Rev Hlth Sys
Ser A (FSA Insd)............................ 5.500 02/15/19 1,091,500
1,000 New York City Hsg Dev Corp Ser A (AMT)...... 5.500 11/01/34 1,019,020
475 New York City Indl Dev Agy Civic Fac Rev
Cmnty Res Developmentally Disabled.......... 7.500 08/01/26 483,688
500 New York City Indl Dev Agy Civic Fac Rev
College of New Rochelle Proj................ 5.750 09/01/17 524,120
</Table>
8 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 500 New York City Indl Dev Agy Civic Fac Rev
YMCA Greater NY Proj........................ 6.000% 08/01/07 $ 532,000
1,015 New York City Indl Dev Agy Fac Rev Royal
Charter-NY Presbyterian (FSA Insd).......... 5.250 12/15/11 1,113,871
1,405 New York City Indl Dev Agy Fac Rev Royal
Charter-NY Presbyterian (FSA Insd).......... 5.375 12/15/16 1,546,273
500 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Proj Ser A.................. 6.250 03/01/15 507,100
500 New York City Indl Dev Agy Rev Liberty 7
World Trade Ctr Proj Ser A.................. 6.500 03/01/35 510,835
1,440 New York City Indl Dev Agy Spl Fac Rev
Terminal One Group Assn Proj (AMT).......... 6.100 01/01/09 1,454,083
500 New York City Muni Wtr Fin Ser B............ 6.000 06/15/33 565,045
825 New York City Muni Wtr Fin Ser B
(Prerefunded @ 06/15/10).................... 6.000 06/15/33 938,165
2,500 New York City Ser A......................... 5.500 08/01/20 2,687,250
1,000 New York City Ser A Rfdg.................... 5.250 03/15/14 1,082,490
1,000 New York City Ser A Rfdg.................... 5.250 03/15/15 1,079,780
1,000 New York City Ser B (MBIA Insd)............. 5.875 08/01/15 1,117,970
2,390 New York City Ser G......................... 5.000 12/01/28 2,447,838
1,000 New York City Transitional Fin Auth Rev
Future Tax Secd Ser A Rfdg (a).............. 5.500/14.000 11/01/26 1,095,900
1,500 New York City Transitional Fin Auth Rev
Future Tax Secd Ser C (AMBAC Insd).......... 5.250 08/01/21 1,609,395
1,000 New York City Transitional Fin Auth Rev
Future Tax Secd Ser D (MBIA Insd)........... 5.250 02/01/19 1,075,770
1,540 New York City Transitional Future Tax Secd
Ser B....................................... 5.500 02/01/15 1,685,653
2,000 New York St Dorm Auth Lease Rev Court Fac
Ser A....................................... 5.500 05/15/20 2,149,480
510 New York St Dorm Auth Lease Rev Insd St
Judicial Inst At Pace (AMBAC Insd).......... 5.500 07/01/09 555,074
1,060 New York St Dorm Auth Lease Rev Master Boces
Pgm (FSA Insd).............................. 5.250 08/15/22 1,138,058
1,500 New York St Dorm Auth Lease Rev Muni Hlth
Fac Impt Pgm Ser 1 (FSA Insd)............... 5.500 01/15/14 1,640,655
1,000 New York St Dorm Auth Lease Rev St Univ Dorm
Fac (Prerefunded @ 07/01/12)................ 5.375 07/01/16 1,074,330
1,000 New York St Dorm Auth Rev City Univ Cons
Third Ser 1 (FGIC Insd)..................... 5.250 07/01/25 1,051,780
1,230 New York St Dorm Auth Rev City Univ Ser D
Rfdg (FSA Insd)............................. 5.750 07/01/12 1,370,687
750 New York St Dorm Auth Rev City Univ Sys Cons
Ser A....................................... 5.625 07/01/16 843,915
1,000 New York St Dorm Auth Rev City Univ Sys Cons
Ser B....................................... 6.000 07/01/14 1,127,560
</Table>
See Notes to Financial Statements 9
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,890 New York St Dorm Auth Rev Dept Ed........... 5.250% 07/01/21 $ 2,002,757
1,000 New York St Dorm Auth Rev Insd Brooklyn Law
Sch Ser B (XLCA Insd)....................... 5.375 07/01/23 1,086,010
1,000 New York St Dorm Auth Rev Insd NY Univ Ser 2
(AMBAC Insd)................................ 5.000 07/01/41 1,017,370
1,055 New York St Dorm Auth Rev Insd NY St Rehab
Assn Ser A (AMBAC Insd)..................... 5.500 07/01/13 1,165,575
1,040 New York St Dorm Auth Rev Insd NY St Rehab
Assn Ser A (AMBAC Insd)..................... 5.500 07/01/15 1,138,353
1,500 New York St Dorm Auth Rev Mem Sloan-
Kettering Ctr Ser 1 (MBIA Insd)............. 5.000 07/01/20 1,571,115
415 New York St Dorm Auth Rev Mental Hlth Svcs
Ser B (MBIA Insd)........................... 5.250 08/15/31 433,808
190 New York St Dorm Auth Rev Mental Hlth Svcs
Ser B (Prerefunded @ 08/15/11) (MBIA
Insd)....................................... 5.250 08/15/31 207,984
1,200 New York St Dorm Auth Rev Miriam Osborn Mem
Home Ser B (ACA Insd)....................... 6.375 07/01/29 1,309,200
750 New York St Dorm Auth Rev Nursing Home
Menorah Campus (FHA Gtd).................... 5.950 02/01/17 787,388
1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm
Ser C (MBIA Insd)........................... 5.250 10/01/16 1,086,720
1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm
Ser D (MBIA Insd)........................... 5.500 10/01/17 1,104,890
1,000 New York St Dorm Auth Rev Sch Dist Fin Pgm
Ser I (MBIA Insd)........................... 5.750 10/01/18 1,123,100
1,000 New York St Dorm Auth Rev Secd Hosp North
Gen Hosp Rfdg (MBIA Insd)................... 5.750 02/15/17 1,106,110
1,000 New York St Dorm Auth Rev Secd Hosp North
Gen Hosp Rfdg............................... 5.750 02/15/18 1,094,170
1,000 New York St Dorm Auth Rev Second Hosp
Interfaith Med Cent Ser D (FSA Insd)........ 5.750 02/15/08 1,069,260
1,000 New York St Dorm Auth Rev St Univ Ed Fac
1989 Res (MBIA Insd)........................ 6.000 05/15/15 1,124,380
1,140 New York St Dorm Auth Rev St Univ Ed Fac Ser
A (FSA Insd)................................ 5.875 05/15/17 1,322,833
1,000 New York St Dorm Auth Rev St Univ Ed Fac Ser
A........................................... 5.250 05/15/21 1,091,180
1,665 New York St Dorm Auth Rev St Univ Ed Fac Ser
B (FSA Insd)................................ 5.250 05/15/13 1,834,114
500 New York St Energy Resh & Dev Auth Gas Fac
Rev Brooklyn Union Gas Ser B (Inverse Fltg)
(AMT) (b)................................... 11.592 07/01/26 563,555
2,500 New York St Environ Fac Corp St Clean Wtr &
Drinking Revolving Fds...................... 5.000 06/15/21 2,637,275
1,890 New York St Environ Fac Corp St Clean Wtr &
Drinking Revolving Fds Ser B................ 5.000 12/15/21 1,981,967
</Table>
10 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,000 New York St Environ Fac Corp St Clean Wtr &
Drinking Revolving Fds Pooled Fin Pgm I..... 5.250% 09/15/19 $ 1,085,180
1,250 New York St Hsg Fin Agy St Econ Dev Hsg Ser
A (FGIC Insd)............................... 5.000 09/15/34 1,286,325
1,000 New York St Hsg Fin Agy St Personal Income
Tax Rev Econ Dev & Hsg Ser A................ 5.250 09/15/19 1,068,820
2,280 New York St Loc Govt Assist Corp Ser E
Rfdg........................................ 6.000 04/01/14 2,622,752
1,000 New York St Mtg Agy Rev Homeowner Mtg Ser 71
(AMT)....................................... 5.400 04/01/29 1,017,590
870 New York St Mtg Agy Rev Homeowner Mtg Ser 82
(AMT)....................................... 5.650 04/01/30 895,883
995 New York St Mtg Agy Rev Ser 101 (AMT)....... 5.400 04/01/32 1,013,925
1,885 New York St Ser C Rfdg...................... 5.000 04/15/19 1,981,041
460 New York St Twy Auth Svc Contract Rev Loc
Hwy & Brdg.................................. 5.500 04/01/16 505,448
500 New York St Urban Dev Corp Rev Correctional
Fac Ser A Rfdg.............................. 5.500 01/01/14 544,210
275 Oneida Cnty, NY Indl Dev Agy Civic Fac Saint
Elizabeth Med Ser A......................... 5.875 12/01/29 252,098
200 Port Auth NY & NJ Spl Oblig (AMT)........... 7.000 10/01/07 210,828
1,000 Rensselaer Cnty, NY Indl Dev Agy Indl Dev
Rev Franciscan Heights LP Proj Ser A (AMT)
(LOC: JP Morgan Chase)...................... 5.375 12/01/36 1,036,390
1,000 Rockland Cnty, NY Solid Waste Ser B (AMT)
(AMBAC Insd)................................ 5.000 12/15/23 1,027,280
1,000 Rondout Vly Cent Sch Dist NY Accord Ser A
Rfdg (FGIC Insd)............................ 5.000 03/01/19 1,052,770
1,320 Sodus, NY Cent Sch Dist Rfdg (FGIC Insd).... 5.125 06/15/18 1,411,661
825 Suffolk Cnty, NY Indl Dev Agy Civic Fac Rev
Family Svc League Suffolk Cnty (LOC: Fleet
National)................................... 5.000 11/01/34 841,657
100 Syracuse, NY Hsg Auth Rev Sub Proj Loretto
Rest Ser B.................................. 7.500 08/01/10 100,546
250 Syracuse, NY Indl Dev Agy Rev First Mtg
Jewish Home Ser A........................... 7.375 03/01/21 263,953
2,000 Tobacco Settlement Fin Corp NY Ser C-1...... 5.500 06/01/22 2,155,840
2,000 Triborough Brdg & Tunl Auth NY Gen Purp Ser
A........................................... 5.250 01/01/18 2,153,220
1,000 Triborough Brdg & Tunl Auth NY Gen Purp Ser
A........................................... 5.000 01/01/32 1,020,880
1,000 Ulster Cnty, NY Res Recovery Agy Solid Waste
Sys Rev Rfdg (AMBAC Insd)................... 5.250 03/01/18 1,066,940
1,000 Upper Mohawk Vly Regl Wtr Fin Auth NY Wtr
Sys Rev (AMBAC Insd)........................ 5.750 04/01/20 1,101,320
</Table>
See Notes to Financial Statements 11
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$ 310 Utica, NY Indl Dev Agy Civic Fac Rev Utica
College Proj Ser A.......................... 5.750% 08/01/28 $ 305,663
500 Westchester Cnty, NY Indl Dev Agy Mtg Kendal
on Hudson Proj Ser A........................ 6.375 01/01/24 508,425
1,000 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty
Dev Ppty Yonkers Inc Ser A.................. 6.625 02/01/26 1,074,200
------------
113,566,756
------------
U.S. VIRGIN ISLANDS 1.0%
1,000 Virgin Islands Pub Fin Auth Rev Gross Rcpt
Taxes Ln Nt Ser A........................... 6.375 10/01/19 1,129,810
------------
TOTAL LONG-TERM INVESTMENTS 97.2%
(Cost $110,252,901)......................................................... 114,696,566
SHORT-TERM INVESTMENT 1.5%
(Cost $1,800,000)........................................................... 1,800,000
------------
TOTAL INVESTMENTS 98.7%
(Cost $112,052,901)......................................................... 116,496,566
OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%................................... 1,526,620
------------
NET ASSETS 100.0%............................................................ $118,023,186
============
</Table>
Percentages are calculated as a percentage of net assets.
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(b) 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 unrealized appreciation/ depreciation. Upon
disposition, a realized gain or loss is recognized accordingly.
(c) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
12 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 2005 (UNAUDITED) continued
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
Radian--Radian Asset Assurance
XLCA--XL Capital Assurance Inc.
See Notes to Financial Statements 13
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $112,052,901)....................... $116,496,566
Cash........................................................ 156,639
Receivables:
Interest.................................................. 1,591,217
Fund Shares Sold.......................................... 153,672
Investments Sold.......................................... 40,000
Other....................................................... 74,572
------------
Total Assets............................................ 118,512,666
------------
LIABILITIES:
Payables:
Distributor and Affiliates................................ 101,971
Income Distributions...................................... 99,866
Variation Margin on Futures............................... 47,125
Fund Shares Repurchased................................... 38,436
Investment Advisory Fee................................... 22,222
Trustees' Deferred Compensation and Retirement Plans........ 115,351
Accrued Expenses............................................ 64,509
------------
Total Liabilities....................................... 489,480
------------
NET ASSETS.................................................. $118,023,186
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $112,753,906
Net Unrealized Appreciation................................. 4,520,763
Accumulated Net Realized Gain............................... 432,387
Accumulated Undistributed Net Investment Income............. 316,130
------------
NET ASSETS.................................................. $118,023,186
============
MAXIMUM OFFERING PRICE PER COMMON SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $63,829,427 and 3,891,457 shares of
beneficial interest issued and outstanding)............. $16.40
Maximum sales charge (4.75%* of offering price)......... .82
------------
Maximum offering price to public........................ $17.22
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $36,259,549 and 2,213,784 shares of
beneficial interest issued and outstanding)............. $16.38
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $17,934,210 and 1,093,789 shares of
beneficial interest issued and outstanding)............. $16.40
============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
14 See Notes to Financial Statements
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 2,762,014
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $78,533, $189,745 and $83,600,
respectively)............................................. 351,878
Investment Advisory Fee..................................... 292,226
Shareholder Services........................................ 34,082
Legal....................................................... 16,985
Trustees' Fees and Related Expenses......................... 11,291
Custody..................................................... 5,796
Other....................................................... 72,853
-----------
Total Expenses.......................................... 785,111
Investment Advisory Fee Reduction....................... 148,518
Less Credits Earned on Cash Balances.................... 881
-----------
Net Expenses............................................ 635,712
-----------
NET INVESTMENT INCOME....................................... $ 2,126,302
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 592,171
Futures................................................... (38,832)
-----------
Net Realized Gain........................................... 553,339
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 6,592,748
-----------
End of the Period:
Investments............................................. 4,443,665
Futures................................................. 77,098
-----------
4,520,763
-----------
Net Unrealized Depreciation During the Period............... (2,071,985)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,518,646)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 607,656
===========
</Table>
See Notes to Financial Statements 15
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, 2005 SEPTEMBER 30, 2004
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 2,126,302 $ 4,310,048
Net Realized Gain/Loss................................. 553,339 (66,314)
Net Unrealized Appreciation/Depreciation During the
Period............................................... (2,071,985) 1,112,866
------------ ------------
Change in Net Assets from Operations................... 607,656 5,356,600
------------ ------------
Distributions from Net Investment Income:
Class A Shares....................................... (1,185,086) (2,401,423)
Class B Shares....................................... (575,740) (1,205,741)
Class C Shares....................................... (272,635) (545,278)
------------ ------------
Total Distributions.................................... (2,033,461) (4,152,442)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (1,425,805) 1,204,158
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 10,866,375 17,546,428
Net Asset Value of Shares Issued Through Dividend
Reinvestment......................................... 1,432,389 2,852,349
Cost of Shares Repurchased............................. (11,078,084) (25,202,533)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... 1,220,680 (4,803,756)
------------ ------------
TOTAL DECREASE IN NET ASSETS........................... (205,125) (3,599,598)
NET ASSETS:
Beginning of the Period................................ 118,228,311 121,827,909
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $316,130 and $223,289,
respectively)........................................ $118,023,186 $118,228,311
============ ============
</Table>
16 See Notes to Financial Statements
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 MARCH 31, ------------------------------------------------
2005 2004 2003 2002 (a) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $16.60 $16.40 $16.49 $15.76 $14.91 $14.94
------ ------ ------ ------ ------ ------
Net Investment Income........... .32 .65 .69 .74 .73 .77
Net Realized and Unrealized
Gain/Loss..................... (.21) .17 (.10) .73 .88 (.07)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .11 .82 .59 1.47 1.61 .70
Less Distributions from Net
Investment Income............... .31 .62 .68 .74 .76 .73
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $16.40 $16.60 $16.40 $16.49 $15.76 $14.91
====== ====== ====== ====== ====== ======
Total Return* (b)................. 0.67%** 5.13% 3.69% 9.63% 10.97% 4.91%
Net Assets at End of the Period
(In millions)................... $ 63.8 $ 62.2 $ 63.6 $ 47.5 $ 43.5 $ 29.0
Ratio of Expenses to Average Net
Assets*......................... .73% .76% .55% .38% .53% .61%
Ratio of Net Investment Income to
Average Net Assets*............. 3.92% 3.94% 4.19% 4.68% 4.74% 5.26%
Portfolio Turnover................ 10%** 15% 27% 43% 30% 58%
* 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................... .98% 1.09% 1.06% 1.07% 1.13% 1.32%
Ratio of Net Investment Income
to Average Net Assets........ 3.67% 3.60% 3.68% 3.99% 4.14% 4.56%
</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 eighteen months of purchase. With
respect to shares purchased prior to December 1, 2004, 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 do
include Rule 12b-1 fees of up to .25% and do not reflect the deduction of
taxes that a share holder would pay on Fund distributions or the redemptions
of Fund shares.
See Notes to Financial Statements 17
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 MARCH 31, ------------------------------------------------
2005 2004 2003 2002 (a) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $16.58 $16.38 $16.47 $15.74 $14.90 $14.92
------ ------ ------ ------ ------ ------
Net Investment Income........... .26 .52 .56 .62 .62 .66
Net Realized and Unrealized
Gain/Loss..................... (.21) .18 (.09) .73 .86 (.06)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .05 .70 .47 1.35 1.48 .60
Less Distributions from Net
Investment Income............... .25 .50 .56 .62 .64 .62
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $16.38 $16.58 $16.38 $16.47 $15.74 $14.90
====== ====== ====== ====== ====== ======
Total Return* (b)................. 0.30%** 4.36% 2.93% 8.83% 10.09% 4.17%
Net Assets at End of the Period
(In millions)................... $ 36.3 $ 38.6 $ 40.5 $ 40.5 $ 35.0 $ 28.8
Ratio of Expenses to Average Net
Assets*......................... 1.48% 1.51% 1.29% 1.13% 1.28% 1.36%
Ratio of Net Investment Income to
Average Net Assets*............. 3.17% 3.19% 3.45% 3.92% 3.99% 4.51%
Portfolio Turnover................ 10%** 15% 27% 43% 30% 58%
* 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................... 1.73% 1.84% 1.80% 1.82% 1.88% 2.07%
Ratio of Net Investment Income
to Average Net Assets........ 2.92% 2.85% 2.94% 3.24% 3.39% 3.81%
</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 Rule 12b-1 fees of up to 1% and do not reflect the reduction
of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares.
18 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 C SHARES MARCH 31, ------------------------------------------------
2005 2004 2003 2002 (a) 2001 2000
--------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $16.59 $16.39 $16.48 $15.75 $14.91 $14.92
------ ------ ------ ------ ------ ------
Net Investment Income........... .27 .52 .56 .62 .60 .68
Net Realized and Unrealized
Gain/Loss..................... (.21) .18 (.09) .73 .88 (.07)
------ ------ ------ ------ ------ ------
Total from Investment
Operations...................... .06 .70 .47 1.35 1.48 .61
Less Distributions from Net
Investment Income............... .25 .50 .56 .62 .64 .62
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD.......................... $16.40 $16.59 $16.39 $16.48 $15.75 $14.91
====== ====== ====== ====== ====== ======
Total Return* (b)................. 0.36%**(d) 4.36% 2.92%(c) 8.83% 10.09% 4.24%
Net Assets at End of the Period
(In millions)................... $ 17.9 $ 17.5 $ 17.7 $ 12.0 $ 7.3 $ 4.6
Ratio of Expenses to Average Net
Assets*......................... 1.41%(d) 1.51% 1.30% 1.13% 1.30% 1.36%
Ratio of Net Investment Income to
Average Net Assets*............. 3.24%(d) 3.19% 3.45%(c) 3.92% 3.97% 4.52%
Portfolio Turnover................ 10%** 15% 27% 43% 30% 58%
* 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................... 1.66%(d) 1.84% 1.81% 1.82% 1.90% 2.07%
Ratio of Net Investment Income
to Average Net Assets........ 2.99%(d) 2.85% 2.94%(c) 3.23% 3.37% 3.81%
</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 contingent deferred sales charge 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 do
include Rule 12b-1 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 .03%.
(d) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income to Average Net Assets reflect actual 12b-1 fees of less
than 1% (See Footnote 6).
See Notes to Financial Statements 19
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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. The Fund registered Class I Shares
on December 30, 2004. There were no sales of Class I Shares for the period ended
March 31, 2005.
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 U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Future 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
payments is made. At March 31, 2005, 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
incremental 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 Subchapter M of the Internal Revenue Code applicable to regulated investment
companies
20
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
and to distribute 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, 2004, the Fund had an accumulated capital loss
carryforward for tax purposes of $78,198 which will expire on September 30,
2009.
At March 31, 2005, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $112,091,147
============
Gross tax unrealized appreciation........................... $ 4,515,572
Gross tax unrealized depreciation........................... (110,153)
------------
Net tax unrealized appreciation on investments.............. $ 4,405,419
============
</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,
2004 was as follows:
<Table>
<Caption>
2004
Distributions paid from:
Ordinary Income........................................... $11,294
Long-term capital gain.................................... -0-
-------
$11,294
=======
</Table>
As of September 30, 2004, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $271
</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.
F. EXPENSE REDUCTIONS During the six months ended March 31, 2005, the Fund's
custody fee was reduced by $881 as a result of credit earned on cash balances.
21
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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.......................................... 0.60%
Over $500 million........................................... 0.50%
</Table>
For the six months ended March 31, 2005, the Adviser voluntarily waived
$148,518 of its investment advisory fees. This represents .25% 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, 2005, the Fund recognized expenses of
approximately $5,600, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Fund, of which a trustee of the Fund
is a partner of such firm and he and his law firm provide legal services as
counsel to the Fund.
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, 2005, the Fund recognized expenses of approximately $20,300 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, 2005, the Fund recognized expenses of approximately $25,500
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 also
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 $59,643 are included in
"Other" assets on the Statement of Assets and Liabilities at March 31, 2005.
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.
22
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
At March 31, 2005, capital aggregated $61,791,868, $33,507,576 and $17,454,462
for Classes A, B and C, respectively. For the six months ended March 31, 2005,
transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 473,657 $ 7,875,189
Class B................................................... 63,168 1,043,848
Class C................................................... 117,451 1,947,338
-------- ------------
Total Sales................................................. 654,276 $ 10,866,375
======== ============
Dividend Reinvestment:
Class A................................................... 50,516 $ 837,314
Class B................................................... 23,918 395,957
Class C................................................... 12,014 199,118
-------- ------------
Total Dividend Reinvestment................................. 86,448 $ 1,432,389
======== ============
Repurchases:
Class A................................................... (380,373) $ (6,300,339)
Class B................................................... (199,384) (3,301,807)
Class C................................................... (88,775) (1,475,938)
-------- ------------
Total Repurchases........................................... (668,532) $(11,078,084)
======== ============
</Table>
At September 30, 2004, capital aggregated $59,379,704, $35,369,578 and
$16,783,944 for Classes A, B and C, respectively. For the year ended September
30, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 776,337 $ 12,757,760
Class B................................................... 132,445 2,181,681
Class C................................................... 158,253 2,606,987
---------- ------------
Total Sales................................................. 1,067,035 $ 17,546,428
========== ============
Dividend Reinvestment:
Class A................................................... 99,436 $ 1,632,645
Class B................................................... 50,889 834,539
Class C................................................... 23,478 385,165
---------- ------------
Total Dividend Reinvestment................................. 173,803 $ 2,852,349
========== ============
Repurchases:
Class A................................................... (1,007,240) $(16,370,851)
Class B................................................... (330,464) (5,404,452)
Class C................................................... (210,103) (3,427,230)
---------- ------------
Total Repurchases........................................... (1,547,807) $(25,202,533)
========== ============
</Table>
23
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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, 2005 and the
year ended September 30, 2004, 43,990 and 15,022 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, 2005 and the year ended September
30, 2004, 27,326 and 0 Class C 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 C 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, 2005, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A Shares of
approximately $17,200 and CDSC on redeemed shares of approximately $43,200.
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 $12,175,070 and $11,583,337,
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.
24
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (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 or to 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, 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.
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, 2005,
are as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at September 30, 2004........................... -0-
Futures Opened.............................................. 220
Futures Closed.............................................. (104)
-----
Outstanding at March 31, 2005............................... 116
=====
</Table>
The futures contracts outstanding as of March 31, 2005, and the descriptions
and unrealized appreciation are as follows:
<Table>
<Caption>
SHORT UNREALIZED
CONTRACTS: CONTRACTS APPRECIATION
U.S. Treasury Notes 5-Year Futures June 2005 (Current
Notional Value of $107,094 per contract).................. 116 $77,098
=== =======
</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.
Annual fees under the Plans of up to .25% of Class A average daily net
assets and up to 1.00% each for Class B and Class C average daily net assets are
accrued daily. The annual
25
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
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 $446,400 and $2,700 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 the fees for the six months ended March 31, 2005, are payments
retained by Van Kampen of approximately $162,900 and payments made to Morgan
Stanley DW Inc., an affiliate of the Adviser, of approximately $24,300.
7. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser, 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. The consolidated action also names as defendants certain
individual Trustees and Directors of certain 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 steer investors to the funds advised by the Adviser or its
affiliates 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 alleged efforts to steer
investors to these funds. The complaint seeks, among other things, unspecified
compensatory damages, rescissionary damages, fees and costs.
The Adviser and certain affiliates of the Adviser are also named as
defendants in a derivative suit which additionally names as defendants certain
individual Trustees of certain Van Kampen funds; the named investment companies,
including the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of proprietary mutual funds. The
complaint also alleges that the Van Kampen funds paid excessive commissions to
Morgan Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current Trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
complaint has been coordinated with the consolidated complaint described in the
preceding paragraph. Plaintiff has sought leave to file a second amended
derivative compliant that alleges that the Adviser permitted or recklessly
disregarded market timing and late trading in its proprietary mutual funds in
order to increase assets under management and fees. However, pursuant to an
agreement between the parties, the plaintiff's proposed second amended
derivative complaint was withdrawn and the allegations regarding market timing
and late trading asserted therein were filed in a separate complaint and
coordinated with other cases related to market timing that have been centralized
in a federal court.
26
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 2005 (UNAUDITED) continued
The defendants have moved to dismiss each of these actions and otherwise
intend to defend them vigorously. While the defendants believe that they have
meritorious defenses, the ultimate outcome of these matters is not presently
determinable at this early stage of litigation, and no provision has been made
in the Fund's financial statements for the effect, if any, of these matters.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
27
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN* - President and Chief Executive Officer
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
Executive Vice President and
Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and
Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEPHANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRET
Chief Financial Officer and Treasurer
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 REGISTERED PUBLIC ACCOUNTING FIRM
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.
28
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC. 235, 325, 425
NYTF SAR 5/05 RN05-01061P-Y03/05
(VAN KAMPEN INVESTMENTS LOGO)
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. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. 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 12. 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 19, 2005
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 19, 2005
By: /s/ James W. Garrett
--------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: May 19, 2005